Successfully reported this slideshow.
We use your LinkedIn profile and activity data to personalize ads and to show you more relevant ads. You can change your ad preferences anytime.
Page 1 of 7
EB-5.2 WHAT I WANT TO SEE NEXT
By Joseph Patrick Whalen (Saturday, March 19, 2016)
INTRODUCTION
EB-5 is under ...
Page 2 of 7
helpful. I think that they charge too much for annual dues1 for a new niche service
provider who is just start...
Page 3 of 7
(5) In order to demonstrate that the new commercial enterprise will create not
fewer than 10 full-time positio...
Page 4 of 7
(6) An alien may not enter into a redemption agreement with the new commercial
enterprise at any time prior to...
Page 5 of 7
(5) A petitioner who acquires a pre-existing business must show that the
investment has created, or at least h...
Page 6 of 7
it rewrote the Iranian Transaction Regulations8 (ITRs). Treasury also maintains lists9 of
prohibited people an...
Page 7 of 7
7. Mandatory advance filing for every non-Regional Center (EB-5 Direct) “pooled
investment” exceeding a certai...
Upcoming SlideShare
Loading in …5
×

EB-5.2 WHAT I WANT TO SEE NEXT

342 views

Published on

EB-5.2 WHAT I WANT TO SEE NEXT -- If I can get anyone talking and thinking about these topics, then it was worth writing.

Published in: Investor Relations

EB-5.2 WHAT I WANT TO SEE NEXT

  1. 1. Page 1 of 7 EB-5.2 WHAT I WANT TO SEE NEXT By Joseph Patrick Whalen (Saturday, March 19, 2016) INTRODUCTION 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 plummeted. ADDITIONAL BACKGROUND 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
  2. 2. Page 2 of 7 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. REFRESHER 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. 1 The minimum is $2,500.00, see: http://iiusa.org/us/membership-application/
  3. 3. Page 3 of 7 (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 holder. (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.
  4. 4. Page 4 of 7 (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. § 204.6(e). (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 period. (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 extensions. (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 commercial enterprise. (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 entity. (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.
  5. 5. Page 5 of 7 (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 "troubled business." 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 2 See: https://travel.state.gov/content/visas/en/news/announcing-nvc_s-eb-5-investor-assistance-desk.html 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. 3 http://www.silive.com/news/index.ssf/2012/08/fbi_arrests_ofer_biton_who_hel.html http://www.slideshare.net/BigJoe5/usa-v-ofer-biton-eb5-visa-fraud-complaint-8132012 http://failedmessiah.typepad.com/files/criminal-complaint-us-v-ofer-biton-8-2012.pdf 4 https://www.sec.gov/ and http://secsearch.sec.gov/search?utf8=%E2%9C%93&affiliate=secsearch&query=eb-5 5 https://www.sec.gov/about/offices/ocie/national-examination-program-priorities-2016.pdf 6 http://www.finra.org/industry/interpretive-letters/august-26-2013-1200am 7 https://www.treasury.gov/about/organizational-structure/offices/Pages/Office-of-Foreign-Assets-Control.aspx
  6. 6. Page 6 of 7 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 children.]13 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 upward periodically? 6. Mandatory advance filing for every Regional Center sponsored project. 8 https://www.treasury.gov/resource-center/sanctions/Programs/Documents/fr77_64664.pdf 9 https://www.treasury.gov/resource-center/sanctions/SDN-List/Pages/default.aspx 10 http://www.bea.gov/international/di1fdiop.htm 11 http://selectusa.commerce.gov/investment-incentives/eb-5-visa-immigrant-investors.html 12 http://blog.bea.gov/tag/rims-ii/ 13 https://en.wikipedia.org/wiki/Nuclear_family
  7. 7. Page 7 of 7 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 Memo.]14 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 various services.] 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! 14 https://www.uscis.gov/about-us/directorates-and-program-offices/administrative-appeals-office-aao/adopted- aao-decisions Digitally signed by Joseph P. Whalen DN: cn=Joseph P. Whalen, o, ou, email=joseph.whalen774@gmail.com, c=US Date: 2016.03.19 18:37:53 -04'00'

×