Unabridged Op-Ed on some questions raised during USCIS EB-5 stakeholder engagement of September 10, 2014
Unabridged Op-Ed On Some Questions Raised During USCIS EB-5 Stakeholder Engagement-September 10, 2014.
by Joseph P. Whalen (September 23, 2014)
USCIS held a Quarterly Engagement with EB-5 Stakeholders on September 10, 2014. I was one of the many who called-in and listened but I did not speak. While we all await the Executive Summary and Q&A that will likely be posted by USCIS eventually. Various other pundits in the EB-5 world have already begun to write summaries, synopses, and have posted recordings of the stakeholder call, etc. One item of note was published on IIUSA’s website (I subscribe to their blog.) It is entitled: “Summary and Partial Analysis of 9/10/2014 USCIS Stakeholder Call” and was written by Robert C. Divine (Vice President, IIUSA) and Melanie Walker of Baker, Donelson, Bearman, Caldwell, & Berkowitz, P.C1. That article, inter alia, does a decent job of reiterating the major questions brought up during the call but not answered on the spot by USCIS. I enjoy a challenge so will throw out some possible answers that might come along in the future. I will point out that while this is merely speculation on my part, I have guessed a few things correctly in the past and do have certain insights and angles working for me. For instance, I posted an article a mere two days before the USCIS stakeholder call in which I stated:
“……………………………………………………..Unfortunately, I have a bad feeling that a significant percentage of the nearly 600 currently USCIS-Designated Regional Centers will not be able to hold out for more than a year or two without getting some seriously needed momentum going on at least an initial project. I think that their nest eggs will have been eaten up by then. ….”2
Of course as we now know, USCIS did issue many Notices of Intent to Terminate (NOITs) for failure to file the I-924A and additional NOITs for cause, i.e. failure to, or continue to, promote the objectives of the EB-5 Regional Center Program. The first group should be taken in the same vein as an SEC Order Instituting Proceedings (OIP) for being delinquent with periodic filings. In other words, it can easily be fixed. On the other hand, the responsible government agency has taken notice and if there is no reply then a Final Termination Notice can be short and fast to issue. The notice of “intent” to whatever is the place where the issue(s) is/are clearly delineated and (a) potential solution(s) or course(s) of action is/are to be spelled out. A failure to respond can lead to an easy final termination without any fuss. The notice of intent will generally be incorporated by reference. In the grand scheme of things, I think that is a shame because, unlike the SEC OIPs which, are posted because they are issued by ALJs (administrative law judges), NOITs are not posted because they are written by USCIS Adjudicators in a private matter. IF a final termination is challenged THEN the decisions of the AAO as an administrative appellate body may eventually be posted albeit, redacted. I do wish that Notices of Intent and underlying Decisions were appended to final AAO Decisions. Perhaps AAO will consider making that a permissible or routine course of action via its impending and overdue rulemaking. Actually, I don’t believe that it is impermissible now, but rather, it just isn’t a standard procedure.
1 See https://iiusa.org/blog/government-affairs/uscis-government-affairs/summary-partial-analysis- 9102014-uscis-stakeholder-call-robert-divine-melanie-walker/
2 See http://www.slideshare.net/BigJoe5/no-deference-regional-center-game-plans
Immediately below is a list of deferred questions and observations/comments, lifted from the IIUSA article, verbatim but for my numbering them and adding some potential answers (best guesses).
Q1. “Can a loan from the NCE be paid back by the JCE before the end of conditional residence, and would it help in this regard if the NCE re-invested the repaid funds in other job- creating activity? This hugely important question, which has been asked for years in stakeholder meetings and always punted, was asked and again deferred for a later date.”
A1. It depends. The law states that one must sustain their investment during the period of conditional residence. The slowdown in the issuance of Immigrant Visas due to a high volume of demand could deter some investors from getting involved in the actual project prematurely. This possibility would not sit well with the developers seeking EB-5 money.
The adjudication of the USCIS Form I-829 for Removal of Conditions from LPR Status is controlled by INA § 216A (d)(1) but incorporates by reference INA § 203(b)(5). Perhaps someone will make a study of the statute and make an argument that USIS will accept but it would probably be better to lobby Congress for specific changes to INA § 216A once someone can figure out the best way to change it (after careful study of all the potential offshoots and programmatic parameters).
INA 216A (d) Details of petition and interview. (1) Contents of petition
Each petition under subsection (c)(1)(A) of this section shall contain facts and information demonstrating 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 alien's residence in the United States; and (B) is otherwise conforming to the requirements of section 203(b)(5) of this title.
* * * * *
INA 203 (b) Allocation of immigrant visas. (5) Employment creation
(A) In general
Visas shall be made available, in a number not to exceed 7.1 percent of such worldwide level, to qualified immigrants seeking to enter the United States for the purpose of engaging in a new commercial enterprise (including a limited partnership)— (i) in which such alien has invested (after November 29, 1990) or, is actively in the process of investing, capital in an amount not less than the amount specified in subparagraph (C), and (ii) which will benefit the United States economy and create full-time employment for not fewer than 10 United States citizens or aliens lawfully admitted for permanent residence or other immigrants lawfully authorized to be employed in the United States (other than the immigrant and the immigrant's spouse, sons, or daughters).
Within the Regional Center context diversification is a bit easier IF diversification is planned for upfront and one keeps an eye on the details (TEA vs. non-TEA locations). To a somewhat lesser degree in the Direct Investment context, USCIS recognizes diversification through a “holding company” which may allocate investments among “wholly-owned subsidiaries” and then add-up and allocate full-time employees to the EB-5 investors who are partners in the holding company which will be both the NCE via the parent (holding company) and JCE through its subsidiaries.
Until now, the 2-year conditional period has sometimes been considered too short because there was very little wait for the always available EB-5 visas. The only hold ups had to do with processing times for background checks or admissibility issues (often those two were interrelated). Now that there is a heavy volume of visa petition filings and there will be cut-off dates on the Visa Bulletin, the 2-year period in question is not being decried for its length but instead for its even further distant future start date. Congress may need to weigh in on this. That being the case, USCIS has a role to play by studying the situation and brining it forward to Congress. YOU can help by making well thought out and detailed studies and assessments and offering realistic suggestions that USCIS can bring to Congress. YOU can also lobby Congress directly or through an industry organization.
Q2. “Can an EB-5 investor make two separate EB-5 investments in two different NCEs and file two I-526 Petitions, with the idea that he/she will withdraw the second one after the first is approved? [This seems like the answer would be a straightforward YES, but the panel added this question to the list of “we’ll get back to you on this” items.]”
A2. While this is legal to do (merely unethical), it is nonetheless, an expensive and unwise course of action. Also, it may be viewed as deceptive by the Regional Centers or non-Regional Center Project Developers. It will also raise red flags at USCIS. Some who have done this have been caught playing tricks with the money. They have been caught trying to double count the cash and have confusing and extra long paper trails. See (AAO JAN272014_01B7203) wherein this AAO non-precedent dismissal tells the cautionary tale of two I-526s and an I-140 with an I- 485, filed by the same dishonest person who came up with three mismatched stories and contradictory sets of documentary evidence. The end result was a Denial and an Administrative Finding of Willful Material Misrepresentation by AAO for an attempt to procure a visa through these deceptive practices. That means that if the opportunity to immigrate ever presents itself again in the future, a waiver will be required for that willful material misrepresentation.
Specifically, section 212(a)(6)(C) of the Act provides:
Misrepresentation. - (i) In general. - Any alien who, . by fraud or willfully misrepresenting a material fact, seeks to procure (or has sought to procure or has procured) a visa, other documentation, or admission into the United States or other benefit provided under this Act is inadmissible.
A waiver may be available for certain intending immigrants but generally not through an employment-based visa. The waiver under INA § 212(i) requires the existence of a qualifying relative who is a United States Citizen (USC) or lawful permanent resident (LPR) and is either a
spouse or parent and that relative would suffer “extreme hardship” if the waiver is not granted. If a relative were available then an EB-5 visa would probably not have been sought in the first place. It makes little sense. There is the extremely unlikely remote possibility of seeking asylum or refugee status or VAWA, T, or U statuses. Again, that is highly unlikely if you first sought to be classified as millionaire investor or entrepreneur. That makes even less sense.
If you were a project developer would you do business with someone who stands a 50% chance of pulling out unexpectedly, abruptly, and without notice and for no good cause? I think that any practitioner that aided investors in such foolish shenanigans would be quickly blacklisted. That then leaves the investors to grope around in the dark, unrepresented, and on their own if seeking to “join” a project whether through a RC or a non-RC venture. The final alternative would be to file two completely independent Direct Investment Petition packages which really makes no sense if truly independent because one can have more than one business as their independent Direct Investment. The long and short of it is that the question asks for permission to try to screw project developers. No sane person would advocate for that option.
Q3. “If the physical address for the JCE is intended ultimately to fall within a TEA, but the specific street address of JCE is not yet known because a specific parcel cannot be contracted until capital is released from escrow, is this a problem for I-526?”
A3. For an I-526 EXEMPLAR filed via an I-924 Amendment Application, it is more of a realistic prospect that USCIS would approve the Application but for a REAL I-526 Petition, yes this is a real and truly major-league problematic issue which would likely NOT be tolerated by USCIS. Remember that ultimately, USCIS’ acceptance of the TEA designation is tied to (1) the actual investment date, or (2) I-526 Petition filing date, by the intending immigrant, him or herself. Upon filing, the investor must either have already created the jobs which won’t happen when you have not secure a “place of business”—OR—submit a Matter of Ho compliant Business Plan. I think that lacking an actual address to set up shop would not be viewed as “comprehensive, detailed, and credible” as per Ho. Also, in order to be compliant in conjunction with a REAL I-526, you have to have an address in order to secure the TEA designation so that the self-petitioner only needs to prove the lower investment amount. Don’t forget that it is a “trade-off”! As to the specific problem cited—simply skip any escrow!
Escrow is NOT a legal requirement under the EB-5 laws. Escrow came into being in EB- 5 in order to allow the petitioner demonstrate that their money was “committed” to the investment project or venture. Escrow has since evolved into a marketing tool. If and when escrow would be more of a hindrance than a help—skip it! If the investment is good and sound then someone with real business acumen will still invest in it without escrow.
In addition, the mere “intent to invest” is not acceptable to USCIS in 2014, any more than it was to the BIA and the various INS Commissioners decades ago. Under the earlier versions of the regulatory investment option for an exemption from the labor certification requirement created in 1966, based on an undefined “special immigrant” category for “other qualified immigrants” in the Immigration Act of 1965, the amount of investment was initially undefined but grew over time. I mention the investment amount criterion because if you didn’t know about it you’d be confused by the cases cited below. Regardless of the minutiae, the basic concept of
commitment to the investment has been there from the start and safeguards against fraud have only gotten stronger over time. I previously wrote about this is in my “A Survey of the Immigrant Investor Visa…” in June 2011. The following is adapted from that (link in footnote).
In Matter of Shon Ning Lee, 15 I&N Dec. 439 (BIA 1975), Decided by the Board August 26, 1975, aff’d, Shon Ning Lee v. INS, 576 F.2d 1380 (9th Cir. 1978) or No. 77-2681 (June 13, 1978); Lee claimed that she was “looking for a suitable investment” and by that mere assertion she should be viewed as “actively in the process of investing”. She claimed that on the advice of her attorney she should only commit to an investment after obtaining her LPR status. Neither the INS, BIA, nor 9th Circuit agreed with her “attorney’s advice” or that interpretation of the investor visa eligibility requirements.
See also Matter of Liu, 15 I&N Dec. 206 (BIA 1975), Decided by the Board March 13, 1975, held:
In order for an alien to qualify for exemption from the labor certification requirement of section 212(a)(14) of the Immigration and Nationality Act as an investor under 8 CFR
212.8(b)(4), he must be actively in the process of investing at least $10,000 in a business.
Conditional intent to make the investment is not sufficient under the regulation. The record is remanded to the immigration judge for further proceedings to permit respondent [an] [sic] opportunity to further document his claim. [Emphasis Added.]
That case is summed up as follows:
The IJ DENIED adjustment for an insufficient amount of investment in his landscaping and yard service business in Hawaii and for not being actively investing. The alien claimed to be “actively in the process of investing” however, he had held back investing until and unless he was granted adjustment of status. He put forth a bank statement indicating that he has enough to invest in additional equipment that would bring his full amount over $10,000.00.
In addition, since he filed early enough, he could be considered under the prior regulation that did not specify any minimum amount. The prior regulation also allowed for one to be “actively in the process of investing” but he was affirmatively withholding further investment impermissibly conditioned on attaining adjustment of status. This decision made clear that that type of arrangement would not be honored under Heitland and Ahmad as idle funds do not equate to an investment. The case however, was remanded for further fact-finding [probably accompanied by a wink and a nudge to “put up or shut up”.]
See also: Matter of Lee, 15 I&N Dec. 408 (BIA 1975) for more about the related early determination on the unacceptability of a promissory note that was conditioned on attaining resident status first.3
Q4. “What happens if a conditional resident files a new I-526 while an I-829 is pending? (How) can he file for adjustment after the second I-526 is approved, since he already is still a permanent resident unless and until the I-829 were denied?”
3 See: http://www.slideshare.net/BigJoe5/a-survey-of-the-immigrant-investor-visa-1966-2011-june-27-2011-jw
A4. Case law allows for the relinquishment of currently held conditional status in favor of action on a new adjustment application in this situation. While this situation has been addressed in the context of a conditional resident whose status was obtained through a family-based petition, the December 2009, EB-5 Policy Memo addressed this possibility in the EB-5 context. I wrote about this issue previously back in August 2011, see here,4 and the following excerpt from same.
“…..… Re-adjustment is
supported by an early BIA Precedent decided in the wake of the creation of
conditional status, albeit in the marriage based realm. INA § 245 (f) is akin to (d).
Matter of Stockwell, 20 I&N Dec. 309 (BIA 1991) 5
(1) An alien holding conditional permanent resident status is prohibited by section
245(d) of the Immigration and Nationality Act, 8 U.S.C. § 1255(d) (1988), from
adjusting his status under section 245(a).
(2) Section 245(d) of the Act does not prohibit an alien whose conditional
permanent resident status has been terminated from adjusting his status under
(G) Eligibility Requirements for the Review of a Form I-526 Petition that
Seeks Consideration of a Business Plan that Differs from the Business Plan
in a Previously Approved Form I-526 Petition.
Some EB-5 aliens may encounter difficulties when unforeseen
circumstances cause the achievement of the requisite job creation outlined in
the Form I-526 petition to be cast in doubt. This may occur when the job
creating capital investment project or commercial enterprise that was relied
upon for the approval of the Form I-526 petition fails or otherwise cannot be
completed within the alien’s two-year period of conditional residence. The
structure of the EB-5 program is inflexible in that the capital investment
project identified in the business plan in the approved Form I-526 petition
must serve as the basis for determining at the Form I-829 petition stage
whether the requisite capital investment has been sustained throughout the
alien’s two year period of conditional residency and that at least ten jobs 2
have been or will be created within a reasonable period of time as a result of
the alien’s capital investment. The business plan in the Form I-526 petition
may not be materially changed after the petition has been filed. In addition,
USCIS may not act favorably on requests to delay the filing or adjudication
of Form I-829 petitions beyond the timeframes outlined in 8 CFR 216.6(a)
4 See: http://www.slideshare.net/BigJoe5/on-removal-of-conditions
5 See: http://www.justice.gov/eoir/vll/intdec/vol20/3150.pdf
The harsh inflexible stance expressed by USCIS in the not-so-distant past has since been reversed and softened immensely. However, there will still be times when “re-adjustment” may become necessary. Perhaps a new business completely fails and time is up for the job creation showing and there is no way of salvaging it so the investor will just have to either go home or try again from the beginning. This is where the simple use of the I-407 to document relinquishment of currently held conditional status can mean the difference between seeking a new visa from abroad versus adjustment of status in the U.S. There are some problems with re-adjustment. First, the Form I-407 has not been officially renewed as a USCIS Form. It is still available from various State Department websites at various embassies and consulates which all seem to link back to a document library, see here.6 Second, in the foreseeable future, at least for folks from Mainland China, visas will probably be unavailable such that filing for adjustment won’t be feasible. Investors from other countries may be able to secure an I-526 approval soon enough to file for adjustment while still in a status that is considered lawful for adjustment purposes. USCIS might simply refrain from terminating status nor issue any NTA simply as a matter of prosecutorial discretion whether by policy or on a case-by-case basis; a sort of “EB-5 deferred action” perhaps. It is within the realm of possibility but whether that would or will happen is pure speculation.
Q5. “How does the job creation within 2.5 years work when a Chinese investor may not have even entered the US to begin conditional residency within 2.5 years of filing? Will this timeframe/clock be adjusted if there is a 24+ month retrogression for Chinese EB-5 applicants?”
A5. First of all, the 2.5 year window is being misinterpreted. It was put forth by USCIS-HQ in an effort to defeat the “Culture of NO!” mentality on the part of the adjudicators who were being overly demanding on EB-5 Business Plans during the I-526 adjudications. It was meant to allow for greater flexibility by attempting to add-in “processing time” and by mentally “starting the clock” via envisioning that conditional status is likely to begin six months from date of I-526 approval. If one adds in the post-filing waiting time before the petition is touched by an adjudicator and realizes that the 2-year clock actually starts upon entry with an immigrant visa and obtaining a stamp from the CBP Inspector, or an I-485 approval from USCIS then the Business Plan could easily contain a 3.5 year timetable for job creation and still be a safe bet. The bottom line on this is that it is not now, nor was it ever intended to be, a “hard-and-fast” rule. Rather, it was envisioned as a step in the right direction towards flexibility in planning and adjudication. The policy was set in recognition of the realities of the situations faced in both doing business in the real world and with the government simultaneously. In light of oversubscription for EB-5 visas, timetables for job creation may need to stretch even further into the future. Too bad they already built the Hoover Dam!
Q6. “Why can’t we split out the processing times into more useful data? Couldn’t we at least split Initial Designation of a Regional Center [from] [sic] Regional Center amendments? It seems like I-526 petitions filed as direct investment or with regional centers could also be a useful distinction. An average processing time can be misleading in the marketplace.”
6 See: http://photos.state.gov/libraries/164203/dhs/I-407.pdf
A6. One needs to have a deeper understanding of what USCIS has at its disposal to work with. For the past however many years that EB-5 applications and petitions have been data entered into a computer database please understand that in 2014 USCIS is currently dealing with at least three databases: CLAIMS, MFAS, and ELIS. Some form types will exist in more than one of those at the same time during the ongoing transition. It will likely be a few years before systems capabilities are sufficiently fine-tuned to obtain information quickly and neatly. In the meantime, please also be aware that data sweeps through system are based on the data fields available and those derive from the forms themselves. Step one is deciding the sub-populations for which statistics are sought and desired per form type. Then redesign the forms and if necessary change the computer programming to accept any new data fields. As you consider the underlying utility of the data, consider the practical steps needed in order to make it happen. With all of that in mind, please make comprehensive written suggestions to USCIS.
As an example of the diversity of data sources for statistics, see page 5 of Office of Immigration Statistics’ report at: http://www.dhs.gov/sites/default/files/publications/ois_rfa_fr_2013.pdf
One last thought on this topic is my personal suggestion, which I have voiced previously, that USCIS post all I-924 Approval Notices and Terminations on its website. That way folks could check to see if a Regional Center is actually USCIS-Designated and when dealing with an older Notice, check to see if it remains USCIS-Designated and see any changes that have been made to its scope—operational parameters.
Q7. “Are the recent RFE challenges to the friends and family method of transferring funds out of China becoming a common practice or unique to the case stakeholders heard about? [There was a unique fact reference to certain friends’ funds being misclassified in some transfer-related documents as “for study,” which may have triggered the RFE at issue in the specific case mentioned, but there are occasional reports of similar challenges to this commonly used Chinese funds transfer method. The questioner was asked to submit an email to the Public Engagement team, and we can only hope USCIS will share with everyone any critical answer provided.]”
A7. This, like so many issues really is fact-intensive and case-specific. Even with so few AAO EB-5 Decisions to glean through, this situation has arisen several times. There have been cases of attempted fraud where funds were shuffled about in seemingly bizarre circles. There are major discrepancies in account numbers, transfer dates, checks written then cashed and then cash deposits made in various unrelated accounts then reappearing in other accounts with major gaps and double counting. Some of the fact patterns are dizzying even when fully laid out, but when clouded by the heavy redactions; it becomes even more mind-bending. The EB-5 Stakeholder community is just going to have to give USCIS the benefit of the doubt on certain issues where too much disclosure would give away warning signs or worse, actually encourage someone to try one of these inappropriate courses of action. This is just such an issue where the stakeholders have to police themselves and not worry about the few screw ups who drive USCIS to extremes. If you are not doing anything shady or underhanded (on the verge of criminal) then what have you got to worry about? For honest people, this is not an issue.
ABOUT THE AUTHOR
I tell you what you NEED to hear, not what you WANT to hear!
Joseph P. Whalen, Independent EB-5 Consultant, Advocate, Trainer & Advisor 238 Ontario Street | No. 6 | Buffalo, NY 14207 Phone: (716) 604-4233 (cell) or (716) 768-6506 (home) E-mail: email@example.com
web http://www.slideshare.net/BigJoe5 or http://eb5info.com/eb5-advisors/34-silver-surfer
DISCLAIMER: Work is performed by a non-attorney independent business consultant and de facto paralegal. 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, immigration attorneys, 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 when I 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.
NOTE: I have over a decade of experience as an adjudicator for INS and USCIS and direct EB-5 Regional Center Adjudications experience having been instrumental in reviving, greatly enhancing, and expanding the EB-5 Regional Center Program for USCIS.
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