Lipstick on a Pig in Immigrant Investing

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Lipstick on a Pig in Immigrant Investing

  1. 1. Lipstick on a Pig in Immigrant Investing By Joseph P. Whalen (September 22, 2013) “Lipstick on a pig” is a reference to a futile effort to dress something up to appear to be more than it really is. This is an inherent danger in the realm of EB-5 investment offerings. Many investment opportunities are simply unsuitable for EB-5 purposes and no amount of window dressing will make it any more suitable. This unsuitability may be for a variety of reasons. The main flaw is the likely failure to create enough jobs for the investors. Some offerings may involve seasonal, transient, or temporary job creation. Some may be in businesses that normally rely almost exclusively on a part time workforce. We have recently seen cases being denied due to “overcapitalization” that is, the start-up or troubled business, or existing business to be expanded or restructured does not actually require the full minimum EB-5 investment thereby creating excessive “reserves” or in other words the investors money is not “at risk” in a legitimate effort to create (or preserve) jobs and might actually be locked up in certificates of deposit, stocks, or bonds in addition to, or instead of, “on-hand” or even just sitting in a bank account rather than being put to use to create jobs for qualified U.S. workers. Some offerings seek too many investors for the number of jobs being created, while others offer zero buffer on the number of jobs that MIGHT be created in a best case scenario. Some EB-5 offerings have absolutely no other investors involved. That is, no domestic investors and/or the developer and/or Regional Center have absolutely no “skin in the game”. They have so little confidence in their own offering that they fail to partake in the “promised” success of that project. Some small percentage of potential development projects or structured offerings are likely to involve fraud. That is a strong impetus to be sure to conduct proper due diligence. If you as the EB-5 investor or as a Regional Center are incapable of conducting such due diligence on your own then, hire someone to do it for you, it is money well spent. Whether you are the poytential EB-5 investor, a dealer-broker, or perhaps a Regional Center lloking to partner with a developer, I can help you examine the EB-5 suitability aspect of an investment vehicle. e-mail the author at: joseph.whalen774@gmail.com

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