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EB-5 REGIONAL CENTER PROGRAM - WHAT HAPPENS NOW?

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EB-5 REGIONAL CENTER PROGRAM - WHAT HAPPENS NOW?

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EB-5 REGIONAL CENTER PROGRAM - WHAT HAPPENS NOW?

  1. 1. EB-5 REGIONAL CENTER PROGRAM - WHAT MIGHT HAPPEN NEXT? - 1 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Joseph P. Whalen 238 Ontario St., No. 6 Buffalo, NY 14207 joseph.whalen774@gmail.com IMMIGRANT INVESTOR PROGRAM OFFICE (IPO) UNITED STATES CITIZENSHIP & IMMIGRATION SERVICES (USCIS) DEPARTMENT OF HOMELAND SECURITY (DHS) VIA E-MAIL: IPOSTAKEHOLDERENGAGEMENT@USCIS.DHS.GOV POSITION PAPER Corrected 10/04/2015 ) ) ) ) ) ) ) ) ) ) EB-5 REGIONAL CENTER PROGRAM - WHAT MIGHT HAPPEN NEXT? I. INTRODUCTION Congress, at the last moment, extended the EB-5 Regional Center Program, without change, as one part of a Continuing Resolution through December 11, 2015, in order to avoid a “government shutdown”. There are multiple bills floating around Capitol Hill that would make changes to the Program. The big question on many minds is; what will Congress do next with, about, or to the EB-5 Regional Center Program? I am going to makes some guesses, please join me in that effort. Some members of Congress want to do nothing more than extend it again. Others would make it a permanent part of the Immigration and Nationality Act (INA) without any “sunset date”. Many members of Congress and stakeholders support an increase in the minimum investment amount; altering statutory language regarding targeted employment areas (TEAs); requiring background checks on Regional Center applicants, as well as employees and all persons
  2. 2. EB-5 REGIONAL CENTER PROGRAM - WHAT MIGHT HAPPEN NEXT? - 2 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 involved in projects or connected to them in any significant way; greater oversight by USCIS over Regional Centers, including site visits to Regional Center offices, and development project worksites. My personal favorite suggested change is to demand greater demonstration of competencies by Regional Center applicants up-front. Speaking of which, please see the AAO Non-Precedent Appeal Dismissal of a Regional Center Application (I-924) dated July 9, 2015, which focused primarily on the poor showing by the applicant of the necessary knowledge, skills, and ability (KSAs) or “competencies” required to effectively operate a Regional Center. In the next section, I will explore some of the major topics of interest and importance to many stakeholders, USCIS, EB-5 and domestic investors, and members of Congress, alike. Here we go! II. MAJOR POINTS OF CONTENTION A. Minimum Investment Amount The current base investment amount is $1,000,000.00 (one million dollars). If the investor places their funds in a project or business located in an area meeting certain criteria, the minimum amount is slashed in half. The lower amount is dependent upon the investment being located in a targeted employment area (TEA). Currently, a TEA is either a rural area or an area of high unemployment, both are defined in the law. EB-5 law also allows for an upward adjustment from the base amount if the investment is located in an area of low unemployment or high employment (they are merely two ways of saying the same thing). No upward adjustment has ever been implemented or taken seriously. Perhaps it should be re-examined as a viable alternative?
  3. 3. EB-5 REGIONAL CENTER PROGRAM - WHAT MIGHT HAPPEN NEXT? - 3 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 B. TEA Definition Targeted employment areas are the favored areas for investments because of the lower required investment amount. That said, many TEAs are the product of “gerrymandering” by State officials desperate for economic recovery as well as to fight urban blight and flight. Serious proposals to reform the criteria include the acceptance of a variety of “zones” defined for the same basic purpose but by different criteria. There are State or Municipally defined “empowerment”, “redevelopment”, or “revitalization” zones, and maybe “historic restoration” or “tax credit” zones. I think that any such zone, if it makes sense within its own context should be considered for TEA designation. C. TEA Validity Period The way that current EB-5 law controls TEA designation made sense when it was first established but has lost its validity over time. In addition to the “definition” or “eligibility criteria”, the validity period needs adjustment. In keeping with the realities of: USCIS processing times, BEA updates to RIMS II, and the time needed for a ton of compliance issues during project development and execution; TEA designations should be locked-in early in the project planning stage. TEA designation should be tied to the soon-to-be mandatory filing of a Project-Specific I-924 Application; perhaps up to six or nine months before filing. I prefer to call this filing a Dummy I-526 because it contains all the common project-specific documentation that will later be supplemented by each investor’s evidence of lawful source and path of
  4. 4. EB-5 REGIONAL CENTER PROGRAM - WHAT MIGHT HAPPEN NEXT? - 4 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 funds with their Real I-526 petition. Some TEAs might need to last two, three, or five years. It depends on project specifics. D. Advance Vetting Of Investment Vehicles-Provisional Approval v. Preapproval While I prefer that this process be called an Advance Vetting and its result be called a Provisional Approval, in keeping with reality; others insist on calling this a Preapproval. I believe that the term Preapproval is misguided and misleading, and will undoubtedly be misrepresented and misused. But what could I possibly know about that! [I hope you recognize my sarcasm.] It appears that if Congress fails to mandate Project-Specific I-924 Application filing as a Dummy I-526, then the agency will do it through a regulatory rulemaking. A legislative fix would be faster. I believe that the process will become mandatory soon and that gun-shy EB-5 investors already expect it and demand it. An Advance Vetting makes the best sense but USCIS must speed up the adjudication process in order to make it feasible and viable. E. USCIS’ Level Of Administrative Oversight Over Regional Centers In order to speed adjudications, a fee increase is likely. However, I believe that some of the necessary fee increase should be earmarked for site visits. If any corners are cut upfront in adjudications (for the sake of speed) and if USCIS gives any “benefit of the doubt” then site visits are a means of verifying compliance and if they are timely, terminations will be swifter. Also, if a Regional Center affiliated investor has put money at risk, early government intervention could help protect EB-5 investors from swindlers. I also believe that USCIS should invite counterparts from the SEC, FTC, FinCEN, FBI,
  5. 5. EB-5 REGIONAL CENTER PROGRAM - WHAT MIGHT HAPPEN NEXT? - 5 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Commerce, etc.… to join in site visits of select EB-5 Regional Centers and development projects. USCIS should not try to perform the duties of any other government agencies itself, they need proper help, support, and expertise. F. What Are Reasonable Methodologies? In the Regional Center context, the investment vehicles must “concentrate pooled investments”. In this same context, most jobs will be indirect jobs forecasted through an Economic Impact Analysis (EIA). There are several readily accepted “Input-Output” (I-O) models in use that have been used in the EB-5 Regional Center realm quite successfully for years. Two of them were created at the behest of agencies of the United States Government. The central issue with regard to these models is the validity of the assumptions underlying an analysis and the suitability of inputs used in them. These critical components rest on the veracity and verifiability of the details in the Matter of Ho compliant Business Plan.1 The bottom line is that it must make sense. G. Regional Center Competencies (KSAs) You might expect this subject-matter to be a “no-brainer” but it is far from anything quite so simple. It would seem to make sense that anyone contemplating the operation of something as complex as an EB-5 Regional Center should bring the necessary Knowledge, Skills, and Abilities (KSAs) to do the job. Unfortunately, such is not the case. Mistakes have been made all around, inside and outside of government in the EB-5 Regional Center context. 1 Matter of Ho, 22 I&N Dec. 206 (AAO 1998) describes the expectations for a business plan.
  6. 6. EB-5 REGIONAL CENTER PROGRAM - WHAT MIGHT HAPPEN NEXT? - 6 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Proper care must be taken by folks contemplating seeking a Regional Center. Do you have the right stuff? However, there have also been some lies told by shady people. USCIS needs to be stricter within this part of the application. H. Regional Center Operator Background Checks It seems that the expansion of vetting, due diligence, and background investigations has become clearly necessary in the EB-5 Regional Center context. I know I am not alone in holding this viewpoint. Exactly how deep and far this process needs to go, I am unsure. Are there other indices out there that USCIS can rely upon? Some serious investigation, consultation, and contemplation needs to be done at USCIS and especially, IPO in order to decide this. Congress needs to back-off and resist the urge to micromanage. I. Regional Center’s Obligations & Responsibilities To EB-5 Investors As I have stated many times, Regional Center designation is actually a form of licensure. The Secretary of Homeland Security through USCIS’ IPO have examined the assertions and qualifications of applicants and designated certain entities as EB-5 Regional Centers. Designation has to mean something substantive. It cannot merely be a label to trump up a poorly run shill organization that seeks to dupe alien investors into investments without regard for the alien’s immigration needs. While some investments might be financially sound, stable, or lucrative; there are overarching considerations in the EB-5 immigration context. Without possessing the necessary KSAs to track information, data, and specific documentary evidence over the years-long investment process, the EB-5 investors will not get
  7. 7. EB-5 REGIONAL CENTER PROGRAM - WHAT MIGHT HAPPEN NEXT? - 7 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 conditions lifted from status. USCIS has a responsibility to the EB-5 investors who invest through a USCIS-Designated EB-5 Regional Center. I believe that USCIS made a critical error when it swelled the ranks of “No Deference” Regional Centers. J. Regional Center Securities Compliance Large development projects are not a new concept. EB-5 Regional Center involvement in them is a relatively new circumstance. Unfortunately, too many people began to work outside their areas of expertise. The worst of them did not even know they had done so, or did know but did not care. Too many folks with too little knowledge about EB-5 requirements spent too much effort learning that part along the way such that they completely ignored the SEC, OFAC, and various other compliance issues. The worst ones have been dragged into court by the SEC or FBI, etc…. some are getting a new view of life, from behind bars. K. What Diligence Is Due? By Whom? Regarding What? It seems that the concept of Due Diligence first dawned on many folks in the EB-5 world when details of the Chicago Convention Center fraud began to emerge. I found that situation (the utter cluelessness) shocking since I had been writing about Due Diligence for years before. Investors also have a responsibility to use caution before sinking their money into any project. The various parties to an investment need to be forthright about themselves and ask questions of the others involved. If the stakeholders will not determine
  8. 8. EB-5 REGIONAL CENTER PROGRAM - WHAT MIGHT HAPPEN NEXT? - 8 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 best practices on their own, then they will have no right to complain when they are imposed by Congress or USCIS. III. CONCLUSION Whatever Congress finally decides, I see no advantage to anyone in not making the EB-5 Regional Center Program permanent or, at the very least, providing a five-year extension. In that the investment amount was established a quarter of a century ago, it has to increase. Also, given the poor, or non-existence of, records of accomplishment for the overwhelming majority of EB-5 Regional Centers, steps must be taken to protect investors and help ensure the likelihood of achieving overall program goals. If certain generous provisions such as not counting family members against the cap of ten thousand EB-5 visas; are passed into law; then the potential impact of EB-5 investments could reach ten billion dollars per year from the aliens alone. Please remember that most big projects limit EB-5 to one-third of the capital stack - maximum, so EB-5 related projects should meet or exceed thirty billion per year. Remember that each investor has to create ten jobs, and investors expect a buffer of extra jobs. That means that instead of the one hundred thousand jobs needed by ten thousand investors, it could easily reach one-half million new jobs or more, per year from this relatively small immigrant investment program. Not too shabby, hmmmm? That’s my two-cents, for now! Dated this 4th of October, 2015 _______________________ /s/ Joseph P. Whalen Digitally signed by Joseph P. Whalen DN: cn=Joseph P. Whalen, o, ou, email=joseph.whalen774@gmail.com, c=US Date: 2015.10.04 15:06:58 -04'00'

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