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EB-5.2 WHAT I WANT TO SEE NEXT
By Joseph Patrick Whalen (Saturday, March 19, 2016)
EB-5 is under the microscope right now with Congressional hearings, GAO reports,
Ombudsman recommendations, and OIG snooping around, just to name a few issues.
Well, this article is not going to focus on any of that. Nope, I want to be completely self-
indulgent. I am going to focus on the Regional Center oriented part of the immigrant
investor program which comprises the vast majority of it. I am going to discuss pet peeves
and some wishes for the future of the program. It is not easy choosing a starting point.
I am not happy with those immigration practitioners who act like stereotypes.
Most of you know who you are, shame on you! The remainder who do not know who you
are, you will likely be brought up on charges or meet with failure soon enough, good
riddance to incompetent fools! I do not suffer fools gladly. Now back to the first group.
Does the word shyster mean anything to you? How about sleaze? Dirt bag? Scum ball?
How about the word crook? Can you see where I am going with this? No? well, I am angry
about things like: dishonesty, fraud, underhandedness, half-truths, misdirection,
obfuscation, always striving only for the minimum – never anything more, and thereby
seeking to lower the bar on Regional Center requirements even further than it has already
The EB-5 industry has spawned an ever growing legion of service providers. Some
of them are very good at what they do and continue to develop the best practices that are
then adopted by the rest of the honorable folks across EB-5-Land. However, not all of the
EB-5 service providers out there are competent. In fact, many are so incompetent that
they are detrimental to the projects, Regional Centers, alien investors, and let’s face it -
the entire EB-5 industry. IIUSA has become the EB-5 private sector organization with
the most influence across the industry. It has published “best practices” that are very
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helpful. I think that they charge too much for annual dues1 for a new niche service
provider who is just starting out. It would help the industry as a whole, if fledgling service
providers could get an initial free membership. The small players will not go away. They
will most likely continue to cause harm, without receiving proper guidance, and will go
unchecked by operating outside any system whatsoever. Given what I see now, there is
plenty I would like to see changed in the future, both inside and outside government.
USCIS-IPO needs to re-write the regulations and get tougher on Regional Center
applicants. The industry cannot continue to absorb an unending flood of new Regional
Centers, or more to the point, a flood of ill-equipped, unprepared, incompetent ones.
AAO will need to join this effort with regard to the EB-5 appellate process because I want
the entire EB-5 process to operate at accelerated speed across the board. In addition, AAO
will need to revisit the 1998, EB-5 precedent decisions. Much has transpired since 1998,
and some of the holdings are in need of revision. I am not going to offer any specifics at
this time because changes are forthcoming from both Congress and the agency anyway,
so it is not worth the effort to get too technical or bogged down in minutiae at this time.
Matter of Ho, 22 I&N Dec.206 (AAO 1998) held:
(1) Merely establishing and capitalizing a new commercial enterprise and signing
a commercial lease are not sufficient to show that an immigrant-investor petitioner
has placed his capital at risk. The petitioner must present, instead, evidence that
he has actually undertaken meaningful concrete business activity.
(2) The petitioner must establish that he has placed his own capital at risk, that is
to say, he must show that he was the legal owner of the invested capital. Bank
statements and other financial documents do not meet this requirement if the
documents show someone else as the legal owner of the capital.
(3) The petitioner must also establish that he acquired the legal ownership of the
invested capital through lawful means. Mere assertions about the petitioner's
financial situation or work history, without supporting documentary evidence, are
not sufficient to meet this requirement.
(4) To establish that qualifying employment positions have been created, INS
Forms I-9 presented by a petitioner must be accompanied by other evidence to
show that these employees have commenced work activities and have been hired
in permanent, full-time positions.
The minimum is $2,500.00, see: http://iiusa.org/us/membership-application/
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(5) In order to demonstrate that the new commercial enterprise will create not
fewer than 10 full-time positions, the petitioner must either provide evidence that
the new commercial enterprise has created such positions or furnish a
comprehensive, detailed, and credible business plan demonstrating the need for
the positions and the schedule for hiring the employees.
Matter of Hsiung, 22 I&N Dec.201 (AAO 1998) held:
(1) A promissory note secured by assets owned by a petitioner can constitute capital
under 8 C.F.R. § 204.6(e) if: the assets are specifically identified as securing the
note; the security interests in the note are perfected in the jurisdiction in which the
assets are located; and the assets are fully amenable to seizure by a U.S. note
(2) When determining the fair market value of a promissory note being used as
capital under 8 C.F.R. § 204.6(e), factors such as the fair market value of the assets
securing the note, the extent to which the assets are amenable to seizure, and the
present value of the note should be considered.
(3) Whether a petitioner uses a promissory note as capital under 8 C.F.R. §
204.6(e) or as evidence of a commitment to invest cash, he must show that he has
placed his assets at risk. In establishing that a sufficient amount of his assets are
at risk, a petitioner must demonstrate, among other things, that the assets securing
the note are his, that the security interests are perfected, that the assets are
amenable to seizure, and that the assets have an adequate fair market value.
(4) A petitioner engaging in the reorganization or restructuring of a pre-existing
business may not cause a net loss of employment.
Matter of Izummi, 22 I&N Dec.169(AAO 1998) held:
(1) Regardless of its location, a new commercial enterprise that is engaged directly
or indirectly in lending money to job-creating businesses may only lend money to
businesses located within targeted areas in order for a petitioner to be eligible for
the reduced minimum capital requirement.
(2) Under the Immigrant Investor Pilot Program, if a new commercial enterprise
is engaged directly or indirectly in lending money to job-creating businesses, such
job-creating businesses must all be located within the geographic limits of the
regional center. The location of the new commercial enterprise is not controlling.
(3) A petitioner may not make material changes to his petition in an effort to make
a deficient petition conform to Service requirements.
(4) If the new commercial enterprise is a holding company, the full requisite
amount of capital must be made available to the business(es) most closely
responsible for creating the employment on which the petition is based.
(5) An alien may not receive guaranteed payments from a new commercial
enterprise while he owes money to the new commercial enterprise.
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(6) An alien may not enter into a redemption agreement with the new commercial
enterprise at any time prior to completing all of his cash payments under a
promissory note. In no event may the alien enter into a redemption agreement
prior to the end of the two-year period of conditional residence.
(7) A redemption agreement between an alien investor and the new commercial
enterprise constitutes a debt arrangement and is prohibited under 8 C.F.R. §
(8) Reserve funds that are not made available for purposes of job creation cannot
be considered capital placed at risk for the purpose of generating a return on the
capital being placed at risk.
(9) The Service does not pre-adjudicate immigrant-investor petitions; each
petition must be adjudicated on its own merits.
(10) Under 8 C.F.R. § 204.6(e), all capital must be valued at fair market value in
United States dollars, including promissory notes used as capital. In determining
the fair market value of a promissory note, it is necessary to consider, among other
things, present value.
(11) Under certain circumstances, a promissory note that does not itself constitute
capital may constitute evidence that the alien is "in the process of investing" other
capital, such as cash. In such a case, the petitioner must substantially complete
payments on the promissory note prior to the end of the two-year conditional
(12) Whether the promissory note constitutes capital or is simply evidence that the
alien is in the process of investing other capital, nearly all of the money due under
the promissory note must be payable within two years, without provisions for
(13) In order for a petitioner to be considered to have established an original
business, he must have had a hand in its actual creation. Superseded by statute.
Matter of Soffici, 22 I&N Dec.158 (AAO 1998) held:
(1) A petitioner under § 203(b)(5) of the Immigration and Nationality Act cannot
establish the requisite investment of capital if he lends the money to his new
(2) Loans obtained by a corporation, secured by assets of the corporation, do not
constitute capital invested by a petitioner. Not only is such a loan prohibited by 8
C.F.R. § 204.6(e), but the petitioner and the corporation are not the same legal
(3) A petitioner's personal guarantee on a business's debt does not transform the
business's debt into the petitioner's personal debt.
(4) A petitioner must present clear documentary evidence of the source of the
funds that he invests. He must show that the funds are his own and that they were
obtained through lawful means.
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(5) A petitioner who acquires a pre-existing business must show that the
investment has created, or at least has a reasonable prospect of creating, 10 full-
time positions, in addition to those existing before acquisition. The petitioner
must, therefore, present evidence concerning the pre-acquisition level of
employment. Simply maintaining the pre-acquisition level of employment is not
sufficient, unless the petitioner shows that the pre-existing business qualifies as a
SOME OF THE OTHER GOVERNMENT PLAYERS
While USCIS is the primary federal agency with responsibility for administering
the Immigrant Investor (EB-5) Program it is not completely alone. The State Department
actually allocates the immigrant visas and on February 19, 2016, announced that it had
created a specialized EB-5 Unit of its own at NVC.2 The SEC and FINRA as well as the
FBI have also put their oars in the EB-5 stream. Meanwhile, OFAC, BEA, and Commerce
were more or less “conscripted” into the world of EB-5. Here are a few important points
about these agencies.
The FBI3 and SEC4 have brought charges against “bad actors” involved in shady
EB-5 deals. While much of the attention has been paid to dollar figures in civil
proceedings (including a huge whistleblower award), jail time has also been doled out.
The SEC has included EB-5 in its priority list5 in the coming year. FINRA issued
guidance6 to broker-dealers and investment advisers about including an assessment of
the likelihood of having a successful immigration process, on top of the usual review of
the likelihood of financial success. OFAC7, an agency in the Treasury Department, made
a point of addressing the import of personal wealth for use by the new immigrants when
Customers with questions related to an approved I-526 petition will soon be able to correspond with the National
Visa Center (NVC) using a dedicated e-mail address: NVCeb5@state.gov The newly created EB-5 Investor Assistance
Desk, which launches on February 22, is part of NVC’s continuing efforts to improve customer service.
https://www.sec.gov/ and http://secsearch.sec.gov/search?utf8=%E2%9C%93&affiliate=secsearch&query=eb-5
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it rewrote the Iranian Transaction Regulations8 (ITRs). Treasury also maintains lists9 of
prohibited people and institutions whose money cannot be touched by U.S. persons
without a license.
The Commerce Department has taken an interest in EB-5 when trying to attract
Foreign Direct Investment (FDI)10, at least in part through its program called SelectUSA11.
Commerce also houses the Bureau of Economic Analysis (BEA) which created the
economic analysis tool known as RIMS II12 which is one of the methodologies deemed
acceptable as a “reasonable methodology” for forecasting job creation and others
economic benefits through EB-5 investments. Now, let’s get back to the point of this
article, me and what I want to see happen in EB-5-Land.
MY WISH LIST FOR EB-5 REFORM
1. Number one on my wish list is for the Regional Center Program to be made
permanent. End the periodic uncertainty and anxiety which hampers foreign
investment and accompanying job creation for Americans.
2. Increase the number of investment visas. My preferred approach is to only
count the actual investors’ visas against the existing cap and allow their nuclear
families to accompany or follow to join, freely. [A nuclear family or
elementary family is a family group consisting of a pair of adults and their
3. Demand a greater demonstration of appropriate and necessary KSAs by
Regional Center applicants. [KSAs = Knowledge, Skills, and Abilities.]
4. I want there to be a way to easily check online for the current status of a
Regional Center. [In good standing, warned, sanctioned, suspended, intent to
terminate, terminated, or whatever the case may be.]
5. Set a single investment amount across the board, adjusted automatically based
on some accepted index. End the concept of the TEA. How about we split the
difference and start at $750,000 and adjust it upward only, in the same way
that Social Security benefits or government employees’ pay are adjusted
6. Mandatory advance filing for every Regional Center sponsored project.
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7. Mandatory advance filing for every non-Regional Center (EB-5 Direct) “pooled
investment” exceeding a certain number (TBD) of EB-5 investors, whether
offered as a security or not.
8. Mandatory advance filing for every replicable non-Regional Center (EB-5
Direct) “pooled or individual investment” whether offered as a security or not,
that is offered by a developer, broker, or any U.S. based entrepreneur, i.e.
“cookie-cutter” or “franchised” offerings.
9. There must be a requirement for administrative exhaustion of all appeals as of
right. AAO is allegedly looking at rewriting their regulations to include this in
all cases where an appeal is allowed. This would conform to the preference of
the federal courts.
10. AAO needs to issue further guidance. [As of this writing, it is noted that AAO
has resumed the practice of issuing “Adopted Decisions” whereby the agency,
“adopts” an AAO non-precedent decision under cover of a Policy Memo. Some
Adopted Decisions go on to become officially published as Precedents, some do
not. As far as I know, Adopted Decisions only carry the weight of a Policy
11. I want all Regional Center Approval Notices, including project-specific
amendments, posted online moving forward only, from a baseline posting of
initial and latest notices as of an implementation date.
12.I want an online filing system that works. The ELIS Document Library was a
good idea but needs vastly improved workability/functionality.
13.Voluntary registration, with USCIS, of EB-5 service providers. [Perhaps also
taking a “pledge” of some sort and agreeing to abide by a code of ethics, and/or
adhere to bylaws, follow best practices, or maintain minimum standards for
Please, give it some serious thought. I have said what I want. What do you want?
Dated this 19th day of March, 2016
/s/ Joseph P. Whalen
That’s my two-cents, for now!
Digitally signed by Joseph P. Whalen
DN: cn=Joseph P. Whalen, o, ou, email@example.com,
Date: 2016.03.19 18:37:53 -04'00'