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CONFLICTS-OF-INTEREST and DOUBLE-DEALING versus
ETHICS of IMMIGRATION LAWYERS and OTHER SERVICE
PROVIDERS in t...
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securities law, but to also collect improper commissions, finder’s fees, and legal
fees from one or both parti...
Page 3 of 3
“It could perhaps be argued that, when the owner of a corporation pays a
million dollars for shares in his bus...
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CONFLICTS OF INTEREST and DOUBLE DEALING versus ETHICS of IMMIGRATION LAWYERS and OTHER SERVICE PROVIDERS in the IMMIGRANT INVESTOR PROCESS

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CONFLICTS OF INTEREST and DOUBLE DEALING versus ETHICS of IMMIGRATION LAWYERS and OTHER SERVICE PROVIDERS in the IMMIGRANT INVESTOR PROCESS.

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CONFLICTS OF INTEREST and DOUBLE DEALING versus ETHICS of IMMIGRATION LAWYERS and OTHER SERVICE PROVIDERS in the IMMIGRANT INVESTOR PROCESS

  1. 1. Page 1 of 3 CONFLICTS-OF-INTEREST and DOUBLE-DEALING versus ETHICS of IMMIGRATION LAWYERS and OTHER SERVICE PROVIDERS in the EB-5 IMMIGRANT INVESTOR PROCESS By Joseph P. Whalen (Thursday, December 10, 2015) In light of the SEC’s enforcement actions and settlements against some immigration attorneys and their firms announced1 on Monday, December 7, 2015, (a new date that will live in infamy?), certain provisions in the current EB- 5 reform bill should be welcome news to the honest folks throughout the EB-5 industry. The “American Job Creation and Investment Promotion Reform Act of 2015”2 includes provisions requiring honesty through disclosure of conflicts-of-interest, among other things. There are a few folks out there that hate such provisions. I am not one of them. The quintessential conflict-of-interest, which I have warned about previously, is the problem of the same counsel representing parties who could potentially find themselves opposing each other in a lawsuit. Specifically, the attorney who assists with the I-924 in order to establish an EB-5 Regional Center and/or any amendments should not then represent the alien investors in their petitions and applications. If funds are mismanaged, embezzled, siphoned off through multi-layered bogus transactions, etc., or the project simply fails; investors might sue the Regional Center and the other companies who are involved in the unsatisfactory deal. It is even worse when the immigration attorney is a principal of the Regional Center. Lastly, as certain immigration lawyers and their firms found out the hard way, in order to recommend investments and/or facilitate the sale of securities, you must be legally allowed to do so. Investment advisors and broker-dealers must be properly registered with the Securities and Exchange Commission. It is bad enough for an immigration lawyer to suddenly profess to be an expert at 1 http://www.sec.gov/news/pressrelease/2015-274.html 2 http://www.grassley.senate.gov/sites/default/files/judiciary/upload/EB-5,%20Bipartisan,%20Bicameral%20agreement.pdf
  2. 2. Page 2 of 3 securities law, but to also collect improper commissions, finder’s fees, and legal fees from one or both parties without their knowledge is unethical. While the SEC may have only brought claims in civil proceedings; it is only a matter of time before criminal charges are brought against others. A sizeable segment of the EB-5 Regional Center industry, but still only a minority, is opposed to timely passage of the reform bill. There are those who shun due diligence and fear background checks. Others do not want to have to at least try to comply with labor laws. Some mourn the loss of the ability to gerrymander TEAs. Still others want more time to study the “technical” aspects of various provisions (and time to lobby?). Bullcrap! I read the hesitancy as fear of getting caught doing something they thought was probably improper but they did it anyway and now they are terrified for their future. In the last few years, I have performed consulting services. I have provided training, created training materials, and reviewed documents. I have provided legal research for attorneys in the role of a freelance paralegal. There have also been numerous requests for me to help match investors with projects. I have had requests from both sides of the deals, and from attorneys. I have always declined to do that because I am not a broker-dealer or investment advisor. I would be better off financially if I had, but I do not have to live in fear of the SEC going after me. I want to remind folks about the EB-5 Regional Center in Matter of Izummi, 22 I&N Dec.169 (AAO 1998). Izummi sought to obtain a visa through the American Export Limited Partnership (“AELP”) investor program. The EB-5 Regional Center in that case (American Export Partners, LLC (“AEP”)), made many mistakes. Their biggest mistake was thinking they could get away with attempting fraud against the former INS (now USCIS). “In a letter dated February 8, 1995, the Assistant Commissioner for Adjudications designated AEP a regional center and specified that individuals could file petitions with the Service “for new commercial enterprises located within the eight-county coastal areas, or Lowcountry, of South Carolina.” On June 14, 1995, the Acting Assistant Commissioner for Adjudications expanded the geographical area covered by the AEP regional center to include 22 other counties in South Carolina.” Id. at 172
  3. 3. Page 3 of 3 “It could perhaps be argued that, when the owner of a corporation pays a million dollars for shares in his business and earmarks the money for equipment, inventory, and working capital, some of the working capital will in fact be spent on initial salaries and expenses. In the partnership scenario, the new commercial enterprise is the partnership, and it too will need to spend money on initial salaries and expenses. The Service distinguishes these two situations in that, in the former example, the employment-creating entity is spending the money. In the latter example, the employment-creating entity never receives the money spent on the partnership’s expenses. Especially where indirect employment creation is being claimed, and the nexus between the money and the jobs is already tenuous, the Service has an interest in examining, to a degree, the manner in which funds are being applied. The full amount of money must be made available to the business(es) most closely responsible for creating the employment upon which the petition is based.7 The Service does not wish to encourage the creation of layer upon layer of “holding companies” or “parent companies,” with each business taking its cut and the ultimate employer seeing very little of the aliens’ money.” Id. at 179 [Bold in original.] ______________ 7. Whether or not $500,000 must be made available for the loans to export companies or whether $500,000 must merely be made available to the credit corporation extending the loans, it is clear that making $500,000 available to AELP is not sufficient. AELP’s primary purpose is apparently to locate potential alien investors. AELP does not extend the loans to the export companies and is not the entity most closely engaged in employment creation, indirect or otherwise. Id. at 179 [Bold in original.] The practice that was clearly identified as disfavored by the former INS in the mid- to late 1990s, was the creation of layer upon layer of businesses in the EB-5 money stream. These businesses were clearly bogus and meant solely as a mechanism to siphon-off the aliens’ money into the pockets of the EB-5 Regional Center “promoters”. Some of those “promoters” were immigration attorneys who were also principals of said shill companies. Similar to AEP Regional Center, the attorneys and firms who are the subject of the recent SEC enforcement actions, apparently have as their primary purpose the function of locating potential alien investors, for hefty fees. Beyond what may have happened approximately two decades ago, at least some the recent culprits were more surreptitious about it. Those who acted surreptitiously were clearly attempting to hide their activities from: the investors, the developers, the Regional Centers, and the government. Is it any wonder that there is some trepidation coursing through the EB-5 world? I find myself circling back to what I pointed out above, that there are probably some folks worried about something they did but were either “not sure about” or “were hoping they could get away with”. Shame on you!

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