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Dirty Money and Tainted Investors Ruin EB-5 Projects


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Dirty Money and Tainted Investors Ruin EB-5 Projects

  1. 1. Dirty Money & Tainted Investors Ruin EB-5 Projects By Joseph P. Whalen (September 1, 2012)Each and every USCIS Form I-526, Immigrant Petition by Alien Entrepreneurfiled is required to demonstrate that ALL of the money pledged to the specificproject used as the basis for job creation and investment is comprised solely of“lawful funds”. Since the vast majority of EB-5 investments are Regional Centeraffiliated in order to take advantage of “indirect” job creation, the vast majority ofsuch projects consist of a “concentrate[d] pooled investment” as allowed by 8USC [Title 8 of the United States Code, Aliens and Nationality, Chapter 12,Immigration and Nationality (i.e., the INA, as amended and associated laws)] §1153 Note [§ 610(a) of Pub. L. 102-395, as amended]. Since Congress has enactedcriminal statutes against “money laundering” and various other money-related 1crimes under Title 18, Crimes and Criminal Procedure, and cross-referenced saidstatutes into various sections within Title 8, it is not a difficult task to figure out thesimple truth that dirty money cannot be used to finance any part of the projectused as the basis for EB-5 investments and the alien entrepreneur/investors’petitions.The lawfulness of the funds that were actually used will be revisited in the follow-up I-829, Petition by Entrepreneur to Remove Conditions. If you were not diligent,then do not be surprised if an earlier deception is revealed. The lawful source andpath of funds is an aspect that should have been tackled up front in order to avoidproblems later. Also, contrary to anyone’s misguided notions, the mereverification of evidence submitted in support of any application and petition isNOT an illegal “heightening of the standard of proof”. That is a ridiculousproposition!Regardless of the fact that the general standard of proof is by a “preponderance ofthe evidence” that does not relieve the applicant/petitioner from submittingtruthful, valid, genuine, and relevant evidence! Additionally, as a general rule,whenever “specific evidence” is spelled out in the statute or implementingregulations, said “specific evidence” should always be submitted not just with theexpectation that it might be verified but rather that it will be verified as “notfraudulent”. It is safest to assume that USCIS will check the veracity of everythinganyway, even if they do not check 100% of everything, 100% of the time. Becauseyou do not know if your evidence will be submitted to extra scrutiny, just assume1 Money laundering is used here merely as an example. There are also international political andforeign policy concerns such as the edicts from the State Department or President, and the issuestackled by the Office of Foriegn Asset Control (OFAC) among other concerns. Page 1 of 3
  2. 2. that it will. That is the safest approach. Of course, since you WILL ALWAYS besubmitting valid evidence, why worry? Instead, worry about the person you aredoing business with and check theirs too. Fraud and deception are so rampant thatUSCIS does not “let it go”. As new trends are discovered; and as new techniquesare discovered, invented, imported/borrowed, and employed; old cases arerevisited and reviewed. Never assume that you “got away with” anything, it willlikely come back to bite you in the behind later if you tried anything so stupid!Where any ambiguities on this topic of “lawful funds” were left in the statute, thegaps have been filled by implementing regulations. Please study the following.8 CFR § 204.6Petitions for employment creation aliens. * * * * *(e) Definitions. As used in this section: Capital means cash, equipment, inventory, other tangible property, cash equivalents, and indebtedness secured by assets owned by the alien entrepreneur, provided that the alien entrepreneur is personally and primarily liable and that the assets of the new commercial enterprise upon which the petition is based are not used to secure any of the indebtedness. All capital shall be valued at fair market value in United States dollars. Assets acquired, directly or indirectly, by unlawful means (such as criminal activities) shall not be considered capital for the purposes of section 203(b)(5) of the Act. * * * * *(g) Multiple investors — (1) General. The establishment of a new commercial enterprise may be used as the basis of a petition for classification as an alien entrepreneur by more than one investor, provided each petitioning investor has invested or is actively in the process of investing the required amount for the area in which the new commercial enterprise is principally doing business, and provided each individual investment results in the creation of at least ten full-time positions for qualifying employees. The establishment of a new commercial enterprise may be used as the basis of a petition for classification as an alien entrepreneur even though there are several owners of the enterprise, including persons who are not seeking classification under section 203(b)(5) of the Act and non-natural persons, both foreign and domestic, provided that the source(s) of all capital invested is identified and all invested capital has been derived by lawful means. Page 2 of 3
  3. 3. * * * * *(j) Initial evidence to accompany petition. A petition submitted for classification as analien entrepreneur [I-526] must be accompanied by evidence that the alien hasinvested or is actively in the process of investing lawfully obtained capital in a newcommercial enterprise in the United States which will create full-time positions fornot fewer than 10 qualifying employees. In the case of petitions submitted under theImmigrant Investor Pilot Program [Regional Center], a petition must be accompaniedby evidence that the alien has invested, or is actively in the process of investing,capital obtained through lawful means within a regional center designated by theService in accordance with paragraph (m)(4) of this section. The petitioner may berequired to submit information or documentation that the Service deemsappropriate in addition to that listed below. * * * * * (3) To show that the petitioner has invested, or is actively in the process of investing, capital obtained through lawful means, the petition must be accompanied, as applicable, by 2: (i) Foreign business registration records; (ii) Corporate, partnership (or any other entity in any form which has filed in any country or subdivision thereof any return described in this subpart), and personal tax returns including income, franchise, property (whether real, personal, or intangible), or any other tax returns of any kind filed within five years, with any taxing jurisdiction in or outside the United States by or on behalf of the petitioner; (iii) Evidence identifying any other source(s) of capital; or (iv) Certified copies of any judgments or evidence of all pending governmental civil or criminal actions, governmental administrative proceedings, and any private civil actions (pending or otherwise) involving monetary judgments against the petitioner from any court in or outside the United States within the past fifteen years.With all the above freshly churned up in your mind, ask yourself some questions.  Can I go it alone without any partners at all? Is that REALISTIC? Without any partners, can I really create ten (10) full-time jobs? And can I do it while excluding myself and my family from the mix?  If I do need partners (and I likely do), then what EXACTLY do I need to do to make sure that my partners’ money is clean? DUE DILIGENCE is critical!2 These items are among “specific evidence” for the I-526 but the I-829 has MOREREGULATIONs that list additional “specific evidence”. See 8 CFR § 216.6 Page 3 of 3