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REVISED Comments on draft EB-5 memo of 11-09-2011 rev 11-26-11


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REVISED Comments on draft EB-5 memo of 11-09-2011 rev 11-26-11

  1. 1. More Comments on Draft EB-5 Memo of 11-09-2011Preliminary Issue: A Strong FoundationIn the first part, I. Introduction, the draft memo appears to mischaracterize, inpart, the Congressional Intent of the two-year conditional status period. I feel thatas a foundational document it is imperative to be very clear and accurate so thatboth USCIS and its customers have the same understanding of this and otherfundamental concepts. ―.... Congress created the two-year conditional status period to help ensure compliance with the statutory and regulatory requirements and to provide a measure of predictability before meaningful investment activity is undertaken.‖ [Emphasis added.]The ―two-year period‖ is the period in which to achieve job creation as well asregional and/or national economic benefit goals and/or demonstrate the promiseof the investment activity such as to accept that the investment is on the cusp ofachieving the goals so that conditions may be lifted. To state that the two-yearperiod is a period in which ―to provide a measure of predictability beforemeaningful investment activity is undertaken‖ is incorrect. The ―measure ofpredictability‖ is a matter to be thoroughly vetted and settled up-front in theoverwhelming majority of cases across-the-board.The ―measure of predictability‖ is the accepted econometric methodology/model aspresented in support of and which was used to prepare the Economic Analysis(EA) in the Regional Center Designation Proposal application or a later exemplarproject-specific petition. In the alternative, the stand-alone or non-RC investorgroup that has not yet created the jobs will rely on its comprehensive, detailed, andcredible Business Plan (BP) alone as the ―measure of predictability‖.However, even the non-RC investor will likely also be relying on an EA as well. Itis a standard item used by any serious entrepreneur and/or investor in the course ofperforming its investment-related due diligence. The big difference is in the valueof the EA between the RC and non-RC investors. This difference is about its Page 1 of 11
  2. 2. acceptability for use as evidence in support of petitions and applications filed withUSCIS. Only the RC affiliated investor can utilize the indirect and induced jobsshown via the EA to satisfy the statutory job creation requirements. The non-RCinvestor on the other hand, can still utilize the EA as evidence of the viability ofthe BP and to support a finding that the BP proffered to USCIS is, in fact,comprehensive, detailed, and credible.On The Evidence Standard and Defining Statutory Evidentiary RequirementsThe next part of the draft memo is entitled: II. Preliminary Statement: ThePreponderance of The Evidence Standard. This part is too short and incompletein my opinion. I do agree with the ultimate conclusion expressed as ―... [t]hepetitioner does not need to remove all doubt from our adjudication, but mustinstead show that what he or she presents is more probable than not.‖ That said,more detail needs to be presented in order to reach that conclusion. See Matter ofHo, 19 I&N Dec. 582 (BIA 1988).INA § 203(b)(5)(A)(ii) calls upon the alien investor to ―benefit the United Stateseconomy and create full-time employment‖ through the investment as elsewheredescribed, mandated, and then modified.INA § 216A(d)(1) provides the basic statutory requirements for the lifting ofconditions such that the required petition form ―shall contain facts and informationdemonstrating that the alien (A)(i) invested, or is actively in the process of investing, the requisite capital; and (ii) sustained the actions described in clause (i) throughout the period of the aliens residence in the United States; and (B) is otherwise conforming to the requirements of section 203(b)(5) .‖So, what the lifting of conditions really entails is showing evidence of success orbeing on the cusp of achieving the goals previously expressed. Alternatively, in a Page 2 of 11
  3. 3. rare case, simply meeting the statutory minimum requirements of a set dollaramount invested plus ten (10) jobs created even if by different means is acceptable.8 CFR § 204.6(j) tells of the evidence required with the I-526 petition. For most I-526s, the financial documents are of paramount importance. (j)(4) speaks to thejob creation aspect and (j)(4)(i)(B) brings in the comprehensive business plan.Paragraph (j) also cross-references paragraph (m) as it pertains to the RegionalCenter investors. The BP was further fleshed out in the precedent decision: Matterof Ho, 22 I&N Dec. 206 (AAO 1998).8 CFR § 204.6(m)(3) goes into greater detail about the BP and EA requirements asthey relate to the I-924 but can be imputed to the RC affiliated investor’s I-526 aswell because that I-526 is reliant on the RC’s approved I-9241. The terms used inthis part of the regulation need clear definition within the proper context.  (m)3)(i) is fairly straight-forward in requesting information on how one will ―promote economic growth‖.  (m)(3)(ii) uses the term of art ―verifiable detail‖.  (m)(3)(iii) speaks of a ―detailed statement‖ and ―promotional efforts‖.  (m)(3)(iv) requests ―a detailed prediction regarding the manner in which‖ and then provides a laundry list of things to be addressed.  (m)(3)(v) has some of the most important terms of art of all: ―economically or statistically valid forecasting tools‖.Clearly discussing what USCIS expects from applicants and petitioners in order tosatisfy such requirements will help not only the customers but also theadjudicators. However, such discussions must be in the proper context asapplicable to the individual application or petition.The I-924 is not a visa petition. The I-924 is, in reality an application for a license.As the Licensing Agency, USCIS needs to treat the I-924 in terms applicable tolicensing. I have previously offered USCIS suggestions to examine 5 USC § 551(1)-(14). § 554, and § 555 among others. I have also suggested that USCIS police1 See USCIS’ I-526 Supporting Statement of 11-02-11, posted 11-16-2011 at:!documentDetail;D=USCIS-2007-0021-0024―Suggestions to have ―bulk‖ filing of documentation to support multiple filings.USCIS response: This suggestion has merit but due to system constraints will be saved forconsideration as part of USCIS’s Transformation initiative.‖ Page 3 of 11
  4. 4. itself and ask if it believes that its decisions would stand up to judicial challengesreviewed under 5 USC § 706. I will not elaborate again in this comment.8 CFR § 216.6(a)(4) describes documentary evidence for the lifting of conditionspetition (I-829). Two clauses in this section have some ―wiggle room‖ built-in. (iii) Evidence that the alien sustained the actions described in paragraph (a)(4)(i) and (a)(4)(ii) of this section throughout the period of the aliens residence in the United States. The alien will be considered to have sustained the actions required for removal of conditions if he or she has, in good faith, substantially met the capital investment requirement of the statute and continuously maintained his or her capital investment over the two years of conditional residence. Such evidence may include, but is not limited to, bank statements, invoices, receipts, contracts, business licenses, Federal or State income tax returns, and Federal or State quarterly tax statements. (iv) Evidence that the alien created or can be expected to create within a reasonable time ten full-time jobs for qualifying employees. In the case of a ―troubled business‖ as defined in 8 CFR 204.6(j)(4)(ii), the alien entrepreneur must submit evidence that the commercial enterprise maintained the number of existing employees at no less than the pre- investment level for the period following his or her admission as a conditional permanent resident. Such evidence may include payroll records, relevant tax documents, and Forms I–9.Lastly, the final statutory source relating to EB-5 is Pub. L. 102-395, title VI, Sec.610, which is codified outside the INA just alongside it within 8 USC. Theimmigrant investor program and regional centers find their home in 8 USC § 1153Note: Pilot Immigration Program, which simply presents § 610. The key words forthis topic are found in § 610-- (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 pilot program described in this section to establish reasonable methodologies for determining the number of jobs created by the pilot program, including such jobs which are estimated to have been created indirectly through revenues generated from increased exports, improved regional productivity, Page 4 of 11
  5. 5. job creation, or increased domestic capital investment resulting from the pilot program.It is important to remember that this statute was originally written before theregulations referenced. The Regional Center regulations were written in responseto § 610(c) and the actual regulations cited therein relate to other matters. The citedregulations pertained only to the non-RC stand-alone or group investors. Eventhose cited regulations have not stood still since the statutory provision came intobeing.Revisiting The BasicsI do not agree with the next part of the memo entitled: III. The Three Elements ofthe EB-5 Program. I think it misses the mark. Through the arduous path from the1990, enactment and then the scam period and reaction to that mess and finally2011’s current rethinking, some wires got crossed. The I-526 is a visa petition andas such, a petitioner is (unfortunately) stuck with the same basic underlyingrequirement for any other immigrant petition--to be eligible at time of filing inorder to secure a priority date.The relevant question is: ―What is the absolute bare-minimum statutorily-mandated evidentiary showing that must be made at time of filing the I-526 petition in order to capture a priority date?‖The prima facie eligibility demanded for securing a priority date is quite differentfrom the fulfillment requirements that must be demonstrated for the lifting ofconditions. The most important point of this policy memo, if it is to serve as afoundational treatise (as is seemingly being contemplated by USCIS), is toblandly and bluntly define the basic bare minimum eligibility qualificationsrequired to secure a priority date under EB-5.The alien truly only needs money and a pulse, or perhaps money and a dream. AsUSCIS would never acknowledge this, it then boils down to money and a plan. Page 5 of 11
  6. 6. If you objectively look at EB-5 as described in INA § 203(b)(5), the requirementsthat must be met at time of filing in order to secure a priority date are to: 1.) have enough clean money (lawful funds) available to invest, and 2.) have already started a business and created (or preserved) ten full-time jobs or be willing to take a stab at a business in which the alien will attempt to create (or preserve) ten full-time jobs, for legal U.S. workers.Most of what happens after the required prima facie evidentiary showing madeupon the filing of the I-526 is usually irrelevant and immaterial unless it involvesfraud or criminality; or the change is of a nature as to render the alien ineligible 2.This is so because as discussed above and as already begrudgingly acknowledgedby USCIS, IF the statutorily-mandated end result is produced and proven, THENconditions will be lifted even if the initial plan is not followed.Additionally, the plan which is first presented does not have to be fully feasible assubmitted. The initial plan may be perfected. The initially proffered Business Planis subject to modification after filing. Any plan should suffice to secure a prioritydate if accompanied by proof of funds to implement it once USCIS approves it.I will refer USCIS to my Immigration Daily article of July 29, 2011, entitled:Material Change vs. Authorized Modification-When Is SomethingAdministratively Final? Is Time of Filing or Time of Adjudication More Crucial?Found at:,%200729-whalen.shtmHere are a few of the points raised from that article:Matter of Ho, 19 I&N Dec. 582 (BIA 1988) held, in pertinent part: (2) Approval of a visa petition vests no rights in the beneficiary of the petition but is only a preliminary step in the visa or adjustment of status application process, and the beneficiary is not, by mere approval of the petition, entitled to an immigrant visa or to adjustment of status.2 This is a ―material change‖ for these purposes as originally addressed—invalid financialarrangement or maneuver to qualify as an ―investment‖ within a TEA, i.e. Tommy D’s withinPIDC RC in an April 2010, AAO Non-Precedent; and AEP within American Export LimitedPartnership (―AELP‖) investor program from Izummi,22 I&N Dec.169 (AAO 1998). Page 6 of 11
  7. 7. The second prong is applicable across the board. Merely because a ―relationship‖exists; or a beneficiary has the required educational or occupational experience, i.e.―qualifications‖; or an investment plan is presented and accepted; and therebyone has shown prima facie evidence of eligibility for the desired visa―classification‖; this does not pre-destine visa issuance to, or adjustment of statusfor, an alien who is inadmissible for some other reason. Nor does visa approvaland subsequent visa issuance or adjustment of status guarantee the lifting ofconditions on status later if conditions have not been fulfilled as required. ***** (6) It is incumbent upon the petitioner to resolve any inconsistencies in the record by independent objective evidence, and attempts to explain or reconcile such inconsistencies, absent competent objective evidence pointing to where the truth, in fact, lies, will not suffice.This sixth and last prong gets plenty of use across-the-board. As applied to an I-526 and a plan submitted in support, RFEs and NOIDs can be used to addressperceived problems with the plan and thereby allow the petitioner to perfect thepetition after filing. In either the I-526 or I-829 contexts, outright lousy,unsupported explanations should not be accepted.Matter of Al Wazzan, 25 I&N Dec. 359 (AAO 2010) held in pertinent part: (2) To be considered “valid” in harmony with related provisions and with the statute as a whole, the petition must have been filed for an alien who is “entitled” to the requested classification and that petition must have been “approved” by a U.S. Citizenship and Immigration Services (“USCIS”) officer pursuant to his or her authority under the Act.The second prong if applied to an I-526, would mean that one is entitled if theyhave put forth a plan and have enough lawful funds to invest. The I-526 and theplan submitted in support thereof would only be valid if approved. Approval ofthe I-526 is contingent on a USCIS Officer approving the plan submitted assupporting evidence. An Officer may request further evidence or issue a notice ofintent to deny and may consider any evidence and/or rebuttal received in response. Page 7 of 11
  8. 8. It is clear, therefore that a plan in support of an EB-5 investment can be filed,altered, and then approved. Only after it has been reviewed and approved will thealien be somewhat “locked-in‖ except as already provided for in the I-829regulations or as conceded by USCIS, for complete statutory fulfillment. (3) Congress specifically granted USCIS the sole authority to make eligibility determinations for immigrant visa petitions under section 204(b) of the Act. (4) An unadjudicated immigrant visa petition is not made “valid” merely through the act of filing the petition with USCIS or through the passage of 180 days. [Emphasis added.]The third and fourth prongs reinforce the propositions that filing alone is notenough to ensure approval and USCIS has the final say on petition approvals. Justremember that the Business Plan is merely a supporting document submitted asone piece of evidence in a grander immigrant classification petition context.Another point I have tried to impress upon those who would listen is:The major differences between the I-924 applicant (along with their EB-5 alieninvestors) and the stand-alone I-526 petitioner who has not already created therequired jobs at time of filing are: 1) The stand alone investor may not count any ―indirect jobs‖ but as part of their plan could include some market research perhaps even including an economic analysis with such job projections. This does not mean the investor would even need to show it to USCIS, or that USCIS would have to consider it in evaluating the business plan. (But hey, if it supports the business plan .... Why not show it and why not check it out?). 2) The Regional Center applicant does not have to show the lawful source and path of funds for the individual investors for the Regional Center sponsored/coordinated EB-5 job creating projects supporting the I-924. However, every EB-5 investor must show the lawful funds evidence for the entire EB-5 project, including non-EB-5 investors’ funds, with the individually filed I-526 petition. Page 8 of 11
  9. 9. 3) A Regional Center affiliated project would likely have the non-EB-5 funds presented by the RC on behalf of the EB-5 investors in such a project while each individual RC-affiliated EB-5 investor will be submitting their own financial evidence with their own I-526. Any EB-5 investor not qualified on this issue merely gets kicked out of the project.If I think of anything else, I’ll let you know.Joseph P. Whalene-mail: joseph.whalen774@gmail.comNovember 22, 2011 Punchline Revealed on EB-5 “Measure of Predictability” LanguageIn my prior comment, I tore apart the language used in the Introduction section ofthe Draft EB-5 Memo of 11-09-2011. That was to help prove a point which I willnow reveal. I believe that whoever wrote the passage that I challenged hadsomething completely different in mind but put in such a way that it could bewarped and misconstrued in probably more ways than the way I ranted about.As a reminder, I expressed disagreement with this passage: ―.... Congress created the two-year conditional status period to help ensure compliance with the statutory and regulatory requirements and to provide a measure of predictability before meaningful investment activity is undertaken.‖ [Emphasis added.]In attacking the above, I stated: ―The ―two-year period‖ is the period in which to achieve job creation as well as regional and/or national economic benefit goals and/or demonstrate the promise of the investment activity such as to accept that the investment is on the cusp of achieving the goals so that conditions may be lifted. To state that the two-year period is a period in which ―to provide a measure of Page 9 of 11
  10. 10. predictability before meaningful investment activity is undertaken‖ is incorrect. The ―measure of predictability‖ is a matter to be thoroughly vetted and settled up-front in the overwhelming majority of cases across-the-board. The ―measure of predictability‖ is the accepted econometric methodology/model as presented in support of and which was used to prepare the Economic Analysis (EA) in the Regional Center Designation Proposal application or a later exemplar project-specific petition. In the alternative, the stand-alone or non-RC investor group that has not yet created the jobs will rely on its comprehensive, detailed, and credible Business Plan (BP) alone as the ―measure of predictability‖.‖The real point that I believe USCIS was trying to make was probably somethinglike this: Congress afforded investors a two-year conditional period in which to implement, build, and grow their entrepreneurial enterprise. In other word, the conditional period is the timeframe during which the alien must at least make significant progress towards infusing the full amount of investment funds into their proposed business plan and make significant progress towards achieving their job creation requirement. The conditional period exists as a means to offer the alien investors a basis for reasonable reliance on, or ―have confidence in‖, the following proposition:  IF a proposed investment is successful or demonstrates sufficient progress by the end of the two-year conditional status period3,  THEN conditions may be lifted from lawful permanent residence status.I’m sorry if my approach to making this point seems obtuse (as in lacking indirectness), but I have found that thick skulls are rather difficult to penetrate. I feltthat this point could be better illustrated through example rather than directargument. I do agree that the conditional period serves a purpose in motivating thealien investor to choose the EB-5 pathway to LPR status and eventual citizenship. I3 This could easily be up to 3 ½ years after filing the I-526. Page 10 of 11
  11. 11. believe that the general uncertainty of the eternal Pilot Program status (coupledwith sunsets and threats thereof) along with a lack of that desired feeling ofconfidence (reasonable reliance) that have been the hallmark failures of theprogram since inception. This visa category has been consistently underutilized fora variety of all too real reasons. While some progress has been made on buildinginvestor confidence in EB-5, it remains fragile and tentative, at best, or elusive atworst.I offer one last observation on the alien investors’ perception of the two-yearconditional period. They seem to view it as either a sentence, a temporaryreprieve, or an almost insurmountable obstacle. These perceptions have stemmedfrom, and been perpetuated by, the tales of those who have failed in theirentrepreneurial endeavors and lost their green-card status along with their money.Where are the testimonials of the success stories? Someone needs to market theconditional period as the ―opportunity to make good‖ that it was intended to be. Inthat denial rates are a far lower figure than the approval rates, there MUST bebusiness ventures that did actually work. Someone needs to start bragging abouttheir success in order to counteract the naysayers. That’s my two cents. Page 11 of 11