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IS THERE A LEGITIMATE CLAIM OF ENTITLEMENT OR NOT? What process is due to Regional Center applicants?

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  1. 1. Page 1 of 9 IS THERE A LEGITIMATE CLAIM OF ENTITLEMENT OR NOT? By Joseph P. Whalen (Monday, October 12, 2015) This past Friday, October 9, 2015, I happened upon a new case decision involving, inter alia, the issue of entitlement. More specifically, the court endeavored to address the level of process that is due for a participant in one particular immigration program which is handled by the Department of State. The Exchange Visitor Program (EVP) allows foreign nationals to participate in temporary cultural and educational exchange programs in the United States. One participation program in the EVP was found to be in violation of program regulations and was sanctioned. While the DOS did follow its regulations, the court found that the process they afforded was lacking. The court stated that, while the Due Process Clause in the 5th Amendment did not dictate that the Department must afford participants a “trial-like” proceeding1, its current system of sending a notice and allowing only ten days to respond, was insufficient. The 9th Circuit sent the case back to the District Court for further proceedings and to address the issues in the case in the first instance. See: ASSE Int'l, Inc. v. Kerry, __F. 3d__ (9th Cir. 2015) No. 14-56402 October 9, 2015. For the proposition that, in a due process claim, in order “to have a property interest in a benefit, a person clearly must have more than an abstract need or desire for it. He must have more than a unilateral expectation of it. He must, instead, have a legitimate claim of entitlement to it.”, the court cited to Bd. of Regents v. Roth, 408 U.S. 564, 577, 92 S. Ct. 2701, 33 L. Ed. 2d 548 (1972). Here is a pertinent excerpt from which I followed to a case cited therein, just below. “Certain attributes of 'property' interests protected by procedural due process emerge from these decisions. To have a property interest in a benefit, a person clearly must have more than an abstract need or desire for it. He must have more than a unilateral expectation of it. He must, instead, have a legitimate claim of entitlement to it. It is a purpose of the ancient institution of property to protect those claims upon which people rely in their daily lives, reliance that must not be arbitrarily undermined. It is a purpose of the constitutional right to a hearing to provide an opportunity for a person to vendicate [sic] those claims. Property interests, of course, are not created by the Constitution. Rather they are created and their dimensions are defined by existing rules or understandings that stem from an independent source such as state law—rules or understandings that secure certain benefits and that support claims of entitlement to those benefits. Thus, the welfare recipients in Goldberg v. Kelly, supra, had a claim of 1 See Mathews v. Eldridge, 424 U.S. 319, 96 S. Ct. 893, 47 L. Ed. 2d 18 (1976).
  2. 2. Page 2 of 9 entitlement to welfare payments that was grounded in the statute defining eligibility for them. The recipients had not yet shown that they were, in fact, within the statutory terms of eligibility. But we held that they had a right to a hearing at which they might attempt to do so.” Bd. of Regents v. Roth, 408 U.S. 564, 577, 92 S. Ct. 2701, 33 L. Ed. 2d 548 (1972) “ 'The fundamental requisite of due process of law is the opportunity to be heard.' Grannis v. Ordean, 234 U.S. 385, 394, 34 S. Ct. 779, 783, 58 L. Ed. 1363 (1914). The hearing must be 'at a meaningful time and in a meaningful manner.' Armstrong v. Manzo, 380 U.S. 545, 552, 85 S. Ct. 1187, 1191, 14 L. Ed. 2d 62 (1965). In the present context these principles require that a recipient have timely and adequate notice detailing the reasons for a proposed termination, and an effective opportunity to defend by confronting any adverse witnesses and by presenting his own arguments and evidence orally. These rights are important in cases such as those before us, where recipients have challenged proposed terminations as resting on incorrect or misleading factual premises or on misapplication of rules or policies to the facts of particular cases.” Goldberg v. Kelly, 397 U.S. 254, 90 S. Ct. 1011, 25 L. Ed. 2d 287 (1970) Returning to the primary question; “Is there a legitimate claim of entitlement or not?” In the new 9th Circuit case, DOS tried to hide behind the discretionary aspect of the privilege, as opposed to a right, of participating in the EVP at all. That argument failed because DOS had promulgated regulations pertaining to the issue of “sanctions”. In the regulations, DOS proscribed a process which allowed the court to discern a “meaningful standard” of review of DOS’ exercise of discretion in sanctioning an EVP participant. As mentioned above, the court did not like what it saw. The issue of a legitimate claim of entitlement can crop up in all sorts of benefit proceedings. This next excerpt packs a powerful punch. It tells us plain and simple that DOS is charged with establishing the EV Program. “…. The authorizing statute vests the State Department with discretion to create and fund exchange programs to the extent that the Department “considers that [they] would strengthen international cooperative relations.” 22 U.S.C. § 2452(a). The decision whether to establish a particular exchange program lies purely within the Department’s discretion and is a policy question as to which there is no law for us to review. See id. §§ 2451, 2452(a). ….” ASSE Int’l Inc., slip at 13. I will take the above described concepts and attempt to apply them to the EB-5 Regional Center Program. USCIS has been directed through statute to “set aside visas for a program to implement the provisions of…” section 203(b)(5) of the Immigration and Nationality Act (8 U.S.C. 1153(b)(5)) [the EB-5 visa] …and… “shall
  3. 3. Page 3 of 9 involve a regional center …. for the promotion of economic growth”. …. “A regional center shall have jurisdiction over a limited geographic area, which shall be described in the proposal and consistent with the purpose of concentrating pooled investment in defined economic zones.”; with “general predictions, contained in the proposal, concerning the kinds of commercial enterprises that will receive capital from aliens, the jobs that will be created…,” “and the other positive economic effects such capital investments will have.” See § 610(a). Furthermore, pursuant to § 610(c) USCIS.…“shall permit aliens admitted under the program described in this section to establish reasonable methodologies for determining the number of jobs created by the program, including such jobs which are estimated to have been created indirectly….”. “(a) Of the visas otherwise available under section 203(b)(5) of the Immigration and Nationality Act (8 U.S.C. 1153(b)(5)), the Secretary of State, together with the Secretary of Homeland Security, shall set aside visas for a program to implement the provisions of such section. Such program shall involve a regional center in the United States, designated by the Secretary of Homeland Security on the basis of a general proposal, for the promotion of economic growth, including increased export sales, improved regional productivity, job creation, or increased domestic capital investment. A regional center shall have jurisdiction over a limited geographic area, which shall be described in the proposal and consistent with the purpose of concentrating pooled investment in defined economic zones. The establishment of a regional center may be based on general predictions, contained in the proposal, concerning the kinds of commercial enterprises that will receive capital from aliens, the jobs that will be created directly or indirectly as a result of such capital investments, and the other positive economic effects such capital investments will have. * * * * * (c) In determining compliance with section 203(b)(5)(A)(iii)[(ii)] of the Immigration and Nationality Act [8 U.S.C. 1153(b)(5)(A)(iii)[(ii)]], and notwithstanding the requirements of 8 CFR 204.6, the Secretary of Homeland Security shall permit aliens admitted under the program described in this section to establish reasonable methodologies for determining the number of jobs created by the program, including such jobs which are estimated to have been created indirectly through revenues generated from increased exports, improved regional productivity, job creation, or increased domestic capital investment resulting from the program.” IMMIGRATION PROGRAM Pub. L. 102–395, title VI, §610, Oct. 6, 1992, 106 Stat. 1874 , as amended by Pub. L. 105–119, title I, §116(a), Nov. 26, 1997, 111 Stat. 2467 ; Pub. L. 106–396, §402, Oct. 30, 2000, 114 Stat. 1647 ; Pub. L. 107–273, div. C, title I, §11037(a), Nov. 2, 2002, 116 Stat. 1847 ; Pub. L. 108–156, §4, Dec. 3, 2003, 117 Stat. 1945 ; Pub. L. 111–83, title V, §548, Oct. 28, 2009, 123 Stat. 2177 ; Pub. L. 112–176, §1, Sept. 28, 2012, 126 Stat. 1325 as amended.2 2 This Program is presently continued via the Continuing Appropriations Act, [FY] 2016, until December 11, 2015. Public Law No. 114-53, §131 (September 30, 2015).
  4. 4. Page 4 of 9 Just as DOS was tasked with creating the Exchange Visitor Program (EVP), so to, was Legacy INS [now USCIS] tasked with creating the EB-5 Regional Center Program. The authorizing statute was light on instructions but heavy on responsibility. The statutory program parameters are loose and vague. Due to the paucity of direction from Congress, the former INS promulgated some rather harsh, strict, and stringent regulations back in 1993. AAO issued four EB-5 Precedent Decisions in 1998, and the Program languished for close to a decade, mired by litigation and Congressional interference through some difficult to understand and implement ameliorative legislative “amendments” to § 610. Until late 2007, and early 2008, the regulations and Precedents were all there was to guide applicants seeking Regional Center Designation and most of them were unaware of the Precedents. When I was assigned to EB-5 Regional Center Proposal Adjudications at USCIS Headquarters, if memory serves me correctly, there were technically eleven regional centers but only six were doing much of anything. I wrote some unofficial “How to Apply for a Regional Center” instructions in 2008, which led to rapidly increased interest and a huge influx of Regional Center Proposals. I increased the number of USCIS- Designated Regional Centers to approx. 75 or 80, with close to a hundred in the queue which necessitated increasing the staff and centralizing processing of all things EB-5 in a single location which was initially at the California Service Center. That situation also necessitated that the agency finally create a form and start charging a fee. Fast forward to October 5, 2015, and; Form I-924 costs $6,230.00 (the largest fee in agency history); there are, 745 USCIS-Designated Regional Centers; and a dedicated Immigrant Investor Program Office (IPO) with a staff of approximately 125 or so, is in its own Headquarters location. That is quite a huge difference in a rather short time. With all that rapid growth and so many new employees assigned to IPO, it has taken a big toll on processing times as new staff are trained and the program parameters are continually refined. As IPO adjudicates more cases, there are more denials which means that AAO has to adapt. Unfortunately, USCIS is in the painfully slow process of re-writing EB-5 regulations. And just when that process is slowly wending its way behind the scenes at USCIS, the Secretary has responded to Congress about some of the potential changes that could come via either statute or regulation. In other words, the whole thing is a big mess. That precarious situation hampers AAO from doing too much and prevents it from
  5. 5. Page 5 of 9 going so far as to issue any further Precedent for any part of EB-5. However, when AAO does move forward, will it have a “meaningful standard of review” for EB-5 RCs? Similar to the case of DOS and its Exchange Visitor Program, USCIS has the EB-5 Regional Center Program regulations promulgated by INS, and barely changed since, as a starting point. AAO could do as the Ninth Circuit did and seek something within the statute, regulations, earlier Precedents, and the I-924 form instructions in order to discern a meaningful standard of review for EB-5 Regional Center appeals. Part of the pertinent language for the EB-5 Regional Center Program statute is shown above, but there is more than that; 8 CFR § 204.6(m) implements Regional Centers via form I-924. The EB-5 visa is authorized in the INA as is conditional status and requirements for lifting those conditions. INA §§ 203 (b)(5) and 216A and their corresponding regulations at 8 CFR §§ 204.6, (a)-(k), and 216.6, which relate to forms I-526 and I-829, respectively. The I-526 and I-924 are appealable to AAO. The regulations do not mandate that one must first appeal to AAO, however, the courts almost universally demand full exhaustion of administrative appeals before filing anything with them. Very narrow exceptions do exist but they are very hard to justify. An agency must have decided the same issues in the same way uniformly before a court is likely to address any issues as being fundamentally unfair, an incorrect interpretation of law, as ultra vires, or some form of warped political posturing. EB-5 Regional Center appellate reviews are still in their relative infancy, making it highly at this time for any court to easily accept an APA challenge without administrative exhaustion first. The I-526 is a visa petition. USCIS and AAO have tons of experience with visa petitions so, there is no point in wasting time on that. The I-829 also has a long history so, there is no point in wasting too much time on this either. That said, the I-829 has grown and continues to grow in complexity while the I-526 becomes easier to adjudicate in the Regional Center context. The I-924 is the biggest and most complex EB-5 adjudication because it (ideally) demands the most information. The proper I-924 amendment package for a Dummy I-526 contains a project-specific Business Plan (BP), directly derived/associated Economic Impact Analysis (EIA), and the organizational and transactional documents needed for that specific project or investment vehicle. In the ideal EB-5 investment scenario, each pooled investment vehicle or project will be
  6. 6. Page 6 of 9 submitted as an I-924 amendment (I-526 Exemplar). Once all the details are hammered out to the satisfaction of IPO, the investors will be free to file their I-526s en masse, and will only need to supply documentation of their own sources and paths of lawful funds. As the investment/project progresses over a multi-year period, the Regional Center must oversee and coordinate efforts in support of the EB-5 investors. Those efforts will necessarily be directed towards tracking information and data as well as collecting documentary evidence. The Regional Center will need information in order to comply with annual reporting to USCIS on the form I-924A. The Regional Center will need to supply documentary evidence to its EB-5 investors for their I-829s. The tricky part is identifying the conditions precedent that will validate the assumptions from the BP underlying the job creation projections in the EIA; and collecting the correct documents to support the needed findings-of-fact to prove those conditions precedent. That is a tall order which requires certain specific and often highly specialized knowledge, skills, and abilities (KSAs). I am a believer that the demonstration of KSAs are of paramount importance in an initial I-924 adjudication regardless of whether it contains a project- specific Dummy I-526 or not. Until recently, AAO has resisted addressing the KSA issue but change might be in the air concerning this subject-matter, be forewarned. The next question is what meaningful standard of review can be crafted or should be adopted for use in performing a KSA-assessment in the first instance or later, on appellate review? There are several standards from which to choose. If an I-924 Denial were upheld by AAO it could be further challenged in U.S. District Court pursuant to Administrative Procedures Act (APA) Review. Under APA review the overall favored standard of review is for an abuse of discretion, plus the clearly erroneous standard for findings-of-fact, while legal interpretations are subject to full de novo review. 5 U.S.C. § 706. Scope of review To the extent necessary to decision and when presented, the reviewing court shall decide all relevant questions of law, interpret constitutional and statutory provisions, and determine the meaning or applicability of the terms of an agency action. The reviewing court shall- (1) compel agency action unlawfully withheld or unreasonably delayed; and (2) hold unlawful and set aside agency action, findings, and conclusions found to be- (A) arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law;
  7. 7. Page 7 of 9 (B) contrary to constitutional right, power, privilege, or immunity; (C) in excess of statutory jurisdiction, authority, or limitations, or short of statutory right; (D) without observance of procedure required by law; (E) unsupported by substantial evidence in a case subject to sections 556 and 557 of this title or otherwise reviewed on the record of an agency hearing provided by statute; or (F) unwarranted by the facts to the extent that the facts are subject to trial de novo by the reviewing court. In making the foregoing determinations, the court shall review the whole record or those parts of it cited by a party, and due account shall be taken of the rule of prejudicial error. ( Pub. L. 89–554, Sept. 6, 1966, 80 Stat. 393 .) AAO reserves full plenary power and can review everything de novo. Even though AAO can do that, should they do so? I think it is a dangerous position to always review everything de novo. I believe that it only serves to confuse the adjudicators making the initial decisions. Without any clear boundaries, we may get anarchy and a potential lack of restraint. In addition, the frontline adjudicators may feel as though everything they do is just going to be second-guessed and thus may be hesitant and lacking in confidence. Such situations lead to poor quality decisions that are either too permissive or more likely, too restrictive. In short, it is a breeding ground for the “Culture of NO!” EB-5 cases are dangerous to decide incorrectly. If a “bad deal” gets the OK from USCIS, when it is eventually revealed to be the dud that it is, or worse, a fraud and does not produce the jobs, then a lot of money can be lost and the program gets a black-eye. If a “good deal” is delayed to the point of critical-mass and ultimate failure; then the agency is blamed and attacked in the press and in Congress. Getting it wrong is a painful lose- lose situation best avoided. One key to success in EB-5 pooled investments is competence within the Regional Center. Demanding a full demonstration of KSAs is, in my opinion, the best and safest course of action in the initial I-924, as well as, any amendment necessitated by a change in ownership and control, especially in terms of administration and oversight. The question of KSAs is best addressed by referring to the form instructions which, while not perfect, offer the best insight at the present time. For instance, please refer to the excerpts from the I-924 form instruction reproduced below:
  8. 8. Page 8 of 9 Initial Evidence Requirements, No. 3 ….. Note: A business plan provided in support of a regional center application should contain sufficient detail to provide valid and reasoned inputs into the economic forecasting tools and must demonstrate that the proposed project is feasible under current market and economic conditions. The form of the EB-5 investment from the commercial enterprise into the job creating project (equity, loan, or some other financial arrangement) should be identified. The business plan should also identify any and all fees, profits, surcharges, or other like remittances that will be paid to the regional center or any of its principals or agents through EB-5 capital investment activities. ****** The application should be supported by a statement from the principal of the Regional Center that explains the methodologies that the Regional Center will use to track the infusion of each EB-5 alien investor's capital into the job creating enterprise, and to allocate the jobs created through the EB-5 investments in the job creating enterprise to each associated EB-5 alien investor. The anticipated minimum capital investment threshold (either $1,000,000 or $500,000) for each investor should also be identified. ****** No. 4 Provide a detailed description of the past, current and, future promotional activities for the regional center. Include a description of the budget for this activity, along with evidence of the funds committed to the regional center for promotional activities. Submit a plan of operation for the regional center which addresses how investors will be recruited and how the regional center will conduct its due diligence to ensure that all immigrant investor funds affiliated with its capital investment projects will be obtained from lawful sources. ****** No. 6 The application must fully describe and document the organizational structure of the regional center. In addition, it is helpful for the regional center to show that the capital investment offering instruments, business structure, and operating agreements of the proposed commercial enterprises that will be affiliated with the regional center are compliant with the EB-5 statutory and regulatory requirements, as well as the binding EB-5 precedent decisions. ****** Given the information requested in the I-924 form instructions, the applicants’ KSAs should become discernible. Whether KSAs are proven through “demonstration” in the evidence submitted or if they are claimed in resumes, it should be readily apparent which KSAs are common in Regional Centers, generally and which ones are tied to the specific project. In that most pooled investments will take the form of securities, it would be helpful to have associates such as: securities attorneys, broker-dealers, registered investment advisors, corporate counsel and litigators, on the team. Beyond securities, the foreign money should be checked against anti-money laundering safeguards and OFAC’s SDN Lists. Additional issues might be in need of resolution depending on scope and nature of projects; i.e. environmental impacts, or mitigation of disturbance of cultural resources. It ultimately boils down to the specifics of the individual investment vehicle/project. Regional Centers will also need tax and financial management KSAs in order to determine which documents to collect as evidence in
  9. 9. Page 9 of 9 addition to traditional tasks. While most RCs will probably hire contractors to prepare economic analyses, they should also consider hiring seasoned technical writers for business plans. That said, I have found that too many Regional Center principals start out overconfident in their own writing skills. They tend to waste precious time producing substandard documents and have to scramble later in the process and may have to pay extra for rush jobs. Worst case scenarios may lead to project failure, I-924 Denial, or both. The bottom line on KSAs is two-fold. The final judgement entails: (1) the quality of the application package and, (2) believability of claims made regarding the expertise of the applicant(s). It may be helpful to think of the demonstration, or at least the documentation, of KSAs like either an audition or preparing for a job interview. In the agency’s assessment of KSAs, they will examine whatever evidence is put forth to demonstrate them and the rest of the application package whether the applicants realize it or not. That means that the quality of the Business Plan, Economic Impact Analysis, and other documents will be examined on at least two levels. First, does the project seem viable? Second, are the documents of professional caliber or obviously amateurish? In addition, if someone’s resume or curriculum vitae is submitted and claims expertise which is not reflected in the project related supporting evidence then that circumstance will cast doubt on the accuracy and veracity of everything. It may be helpful to stick to basics. That means asking questions of oneself before submitting anything. Does the evidence support necessary findings-of-fact that will enable the reviewer to draw reasonable inferences to support the desired conclusion in the exercise of sound judgement? There are many buzz-words in that last sentence but they are for real. What process is due applicants seeking Regional Center Designation? The attainment of designation as an E-5 Regional Center is potentially very valuable. Designation has benefits. Such benefits are a “property interest” and evoke a claim to entitlement of adequate due process. The agency and the industry need to work out the substantive procedural details. I do not have the answers, I just wanted to get folks thinking about these questions. That’s my two-cents, for now!