Inductive reasoning in a qualitative analysis for EB-5 purposes


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Inductive reasoning in a qualitative analysis for EB-5 purposes

  1. 1. Contact me at: or 716-604-4233 or 716-768-6506 Page 1 Inductive Reasoning In A Qualitative Analysis For EB-5 Purposes By Joseph P. Whalen (May 23, 2014) Introduction Investopedia explains 'Qualitative Analysis' While most investors and analysts rely largely on quantitative measures, metrics such as the debt-to-equity and price-to-equity ratios, supplementing the analysis with qualitative analysis increases the insight into the company. Using qualitative factors will often give analysts an edge since key factors, such as management, does not show up in quantitative analysis. Tohelp you remember, qualitative = qualities of a company. * * * * * Definition of 'Qualitative Analysis' Securities analysis that uses subjective judgment based on nonquantifiable information, such as management expertise, industry cycles, strength of research and development, and labor relations. This type of analysis technique is different than quantitative analysis, which focuses on numbers. The twotechniques, however, will often be used together. [Underline Added] Above from: Inductive reasoning (as opposed to deductive reasoning) is reasoning in which the premises seek to supply strong evidence for (not absolute proof of) the truth of the conclusion. While the conclusion of a deductive argument is supposed to be certain, the truth of the conclusion of an inductive argument is supposed to be probable, based upon the evidence given. [Emphases Added] Above from: The raw conceptsintroduced aboveareessential to crafting a winning businessplan (BP) and economic impact analysis(EIA) for EB-5 purposes. Let’s expand uponthese themes and try to hone in on exactlyhow they help you in your pursuit of USCIS’ I-924 approvaland perhapsdeferenceto a specific project insubsequent I-526sand ease in achieving I-829 approval.
  2. 2. Contact me at: or 716-604-4233 or 716-768-6506 Page 2 Quantitative Analysis in One’s Approach to EB-5 RegionalCenter (RC) “proposals” for initialdesignationcanbebased on “hypothetical” or “actual” projects. Somewould argue thedistinctionof, and inclusionof, an “exemplar” projectaswell. I feel that an “actual” project should only be identified assuch in an initialRC designation packageand subsequent approvalnotice. I am of the opinionthat an “actual” projectinan initialI-924 isthe same thing (or should be the same thing) as an “I-526 exemplar” filed as an I-924 amendment; or the dreaded “I-526 test case” for a specific project. Regardlessof the type of project being put forth, an EB-5 applicant or petitioner, or someone hired for the purpose, must design and produce required supporting documents. Thisincludesthe BP (applicabletoany EB-5 case where sufficient jobshave not been created yet), EIA, and the organizationaland/or transactionaldocumentation, asappropriate for that filing, i.e. RC-affiliated “actual”or “I-526 exemplar”project. Oncethe specific project isselected then the assumptionsand variables must be stated and selected, appropriatelyfor the level necessaryto achievethe desired outcome. That meansasking and answering some basic question such as:  Are we merely seeking quick RC designation at thistime? o If yes, then we canassemble an applicationpackageat a lower level of specificitybased on “hypothetical” projects that we might develop further in the future.  Thismeans we will be submitting “hypothetical” BPs and EIAs to demonstrateour knowledge, skills, and abilities(KSAs) toproducesuch items.  Thisalso meansthat we will be submitting a generalproposal containing generalpredictions.  Thisadditionallymeansthat USCIS will not review any organizationalor transactionaldocumentstobe used with EB-5 investors. Instead they will only look at such itemsthat show that theentity that applies “legally exists”.  Lastly, this meansthat we get ZERO deferenceto our BP and EIA but should be better positioned since we have demonstrated basicKSAsand submitted anaccepted “reasonablemethodology” for projecting thenumber of jobs to be created.
  3. 3. Contact me at: or 716-604-4233 or 716-768-6506 Page 3 o If no, then we have much more work to do and deeper questionsto ask and answer such as the following.  Are we seeking at least one “actual” project approval in our initialRC designationrequest? o If yes, then we must produce at least one Matterof Ho- Compliant BPand a more detailed EIA.  If the “actual” projectisapproved we canexpect deference.  We mayalso submit additional“hypothetical” BPs and EIAs to demonstrateour knowledge, skills, and abilities(KSAs) toproducesuch itemsin areas (NAICS Codes) beyond that covered by the “actual” project. Thosedon’t have to be as complex or detailed.  The reason for us doing theextra “hypothetical” projectsisto get more informationintoour RC DesignationLetter for marketing purposes. We don’t want to be seen as a “one trickpony”.  Are we already a USCIS Designated RegionalCenter seeking an advanced vetting ofan “I-526 exemplar” project?One might alsothink of this as a Provisional Approval of a Specific Project’s shared documentation. The worst descriptionofthisscenariothat has ever been uttered is that a “project” is“pre-approved”! There ain’t no such animal as a pre-approved anything in EB-5! The absolutebest you canget is a “preliminarydetermination”. Even the beloved concept of “deference” comeswith strings attached. Doyou know why? It is becausein the past people tried to pull “fast-ones” by using “bait-and-switch”tacticswith project documentationand don’t forget the old standby, plain old attemptedfraud. o If yes, which approach shallwe take? Weas the RC, could file an I-924 Amendment consisting ofan “I-526 exemplar” package ORlet an eager EB-5 investor file a real I-526 visa petition. What arethedifferences? Is one way better thanthe other? Let’s consider these options.  An I-924 is an “application”. It is not a “visa petition” which meansthat it does not involve any “prioritydate” and thereforeneed not be letter-
  4. 4. Contact me at: or 716-604-4233 or 716-768-6506 Page 4 perfect upon filing. It can besupplemented, corrected, or in other words, “perfected after filing”.  An I-924 Approval addressed tothe Regional Center comes as a detailed writtendecisionthat states point blank the nameof the specific project thatwas reviewed and found acceptablealong with certain other very specific details. It will also clearly state preciselywhat will receivedeference in subsequent adjudicationsand the conditionsnecessarytoget that deference.  The I-526 is an actual“visa petition” and assuch it must be “approvablewhen filed” and demonstrate “eligibilityat timeoffiling”. It cannot be materially changed after filing in the way that theI-924 can.  The reason for thisheightened standard isthat the filing date of an approved preferencevisa petition transformsintoa “prioritydate” for visa application or adjustment ofstatusfiling purposes.  The StateDepartmentissuesa month “Visa Bulletin” that indicatesifa particularvisa category is current or has a backlog. If the categoryis not current thenthe abilityto file will be based on the “prioritydate” for the approved visa petition.  Some categoriescanbebacklogged for decades. EB- 5 has not yet reached its full potentialso therehas never been a “backlog”, yet. EB-5 investorshad been lulled into a false sense of securitybut lately, it has been predicted that EB-5 investors and entrepreneursmight facea backlog soon.  Additionally, theactualvolunteer EB-5 investor’s personalized qualificationscould delay approvalof the “specific project”. Theinvestor must produce evidence to demonstratethesourceand path of his or her lawful personal investment funds. Depending on thesource of funds and the source country, that canbe a difficult task.  In a worst case scenario, theinvestor’s I-526 is DENIED due to factorsunrelated tothe specific investment project and the processwill have to be started all over again.
  5. 5. Contact me at: or 716-604-4233 or 716-768-6506 Page 5  If a REAL I-526 is denied, would you as the RC Principalforget that approach and simplyfile Exemplar via an I-924 in order to get rid of the uncertaintyor baggagethat theindividualinvestor bringsto the equation?  In addition, ifa REAL I-526 is approved, that approvalnoticefor the individual’sI-526 is a generic computer generated form letter without any specific, pertinent, or useful detailsabout the project. It also does not even specify the Regional Center with which the investor is affiliated.  Who is going to be convinced by that generic form letter lacking in detailsin the wake of all that horriblefraud not too long ago?  The meager differencein cost between filing an EXEMPLARI-526 as an I-924 Amendment and a REAL I-526 is SO SMALL that tothink it could even be a considerationbogglesmymind. Arewe really dealing with millionaires? Do these folks really meet the criteriafor the SEC’s “qualified investor” for exemptionpurposes?  As an EB-5 Investor, I would expect that ifsomeone is trying to tell me that a specific investment project has been “pre-approved” or more accurately “provisionallyapproved”, Iwould expect better evidence of that fact.  I am, or we are, not affiliated with a Regional Center, how do these considerationsapplyto me? o In what has come to known as an “EB-5 Direct Investment”1 , if the jobs have not yet been created then, a Matterof Ho-Compliant BPis absolutelyrequired. 1 I have long used the term “stand-alone” investment for real entrepreneurs going it alone or have written about “Non-RC-Affiliated EB-5 Groups”. EB-5 Direct encompasses both of my subsets. However, Non-RC-Affiliated Groups sometimes get tricked or are too naïve to realize their limitations and try to act like a Regional Center and think they can count “indirect jobs” and just make “loans” to developers. I really would prefer that folks distinguished these vast differences better. Stupid facilitators screw alien investors and sometimes investors screw themselves. SEE: petition
  6. 6. Contact me at: or 716-604-4233 or 716-768-6506 Page 6 o The stated premisesand assumptionsmust beof the highest qualitytomeet these heightenedthreshold requirements2. o There is no place for an EIA in the I-526 filing because ZERO indirect jobscount. o Loan models are unacceptablebecausetheEB-5 investor or entrepreneur canonly count direct employeesand MUST have an ownership/equityinterestinthe job- creating enterprise(JCE). Theeasiest path isfor the new commercialenterprise(NCE) and theJCE to be one and the same. The EB-5 investor can be a junior or limited partner inthe business and still meet the “involvement” element of EB-5. o There arelimited possibilitieswheretheNCE and JCE are not one and the same3. The NCE could be a holding companyor perhapssimply a much bigger entity that wholly owns theJCE as a subsidiary.  Unlike some other visa categoriesthespecific relationship betweenthesetwo (NCE and JCE) is extra limited.  Don’t get confused with some irrelevant legal definition4 that hasnothing to do with this visa category. Inductive Reasoning As Applied to EB-5 As the reader likely alreadyknows, EB-5 demandsa minimum investment amount; and minimum job creationlevels. As you also know, if the jobshave not been yet created asEB-5 direct jobs; or if EB-5 indirect jobs arebeing claimed (when allowed), then an EB-5 Matterof Ho-BP is required. WhenEB-5 indirect jobsarea factor thena highly detailed EIA is also needed. Theaforementioned BP is thesource of informationtobeused to build the EIA. If theBP is solid enough it will yield actualnumberstobe used as input intoan econometric modelto producethe EIA. If the BP is not up to that challengethen it will at least provide valid premisesand assumptionsand steer the economist in the right direct toselect appropriatedata categoriesfor modeling purposes. 2 SEE: 3 See this L-1A AAO Appeal Dismissal for a bunch of EB-5 non-qualifying business relationships and know that virtually 99% does NOT work for EB-5. MAY082014_06D7101.pdf 4 SEE: MAR212014_01B3203.pdf regarding inappropriate out of context definitions.
  7. 7. Contact me at: or 716-604-4233 or 716-768-6506 Page 7 In cases like those just described, meaning that the jobs and other economic impacts have not yet been realized and are still only theorized, the success or failure of the EB-5 case in its dealings with USCIS will hinge upon skillful utilization of available information through inductive reasoning. As I described this in may last article5, I am talking about the art of manipulation! Conclusion Finally, please, think back to the definitions at the beginning of this article. Get ready to synthesize the distinct points made in the preceding pages. In short, you will need to skillfully utilize all credible information available, including those derived from a basic quantitative analysis of the [hopefully Matter of Ho-Compliant] BP. Additionally, you will need to use subjective judgment based on nonquantifiable information while discussing qualitative factors such as management, i.e. KSAs, in order to show that the truth of your conclusions via your inductive argument is probable, based upon the evidence given. In using the additional nonquantifiable factors to round out yourEIA, you have bolstered youroverall credibility and hopefully satisfied the USCIS economists, lawyers, business analysts, and especially the adjudicator who must sort through and collate all of those expert opinions and make the official adjudication decision. That’s my two-cents, for now. Joseph P. Whalen, Independent EB-5 Consultant, Advocate, Trainer & Advisor 1348 Ridge Rd | PMB 36 | Lackawanna, NY 14218 Phone: (716) 604-4233 E-mail: web or DISCLAIMER: Work is performed by a non-attorney independent business consultant. It is the client's responsibility to have any and all non-attorney work products checked by an attorney. I provide highly-individualized training based on consultation with my clients. I serve Regional Center Principals and their counsel, potential EB-5 investors, and project developers. I am not an attorney myself although I have trained numerous attorneys and INS/USCIS adjudicators in complex issues within immigration and nationality law whenI was an adjudicator there for many years. I do not prepare forms, write business plans, or create economic analyses. I do review them for clients prior to submission and suggest corrections and/or modifications to run by your attorney and investment advisor. NAICS Code: 611430 Professional and Management Development Training 5 SEE: with-or-rather-than-quantitative-analysis or Required-Mindset-For-Performing-Qualitative-Along-With-Or-Rather-Than-Quantitative- Analysis-By-Joseph-P-Whalen