USCIS Mandates New Petition Filing When H-1B Employees Move

April 13th, 2015 by William Stock

Last Friday, the USCIS Administrative Appeals Office (or AAO) issued a precedent decision in a case called Matter of Simeio Solutions, LLC.  The decision involved the revocation of an H-1B petition for an employer which had failed to list the locations of actual employment of an information technology consultant on its H-1B petition.  The AAO used its decision upholding this revocation to enunciate a broad rule applicable to all H-1B employers: “A change in the place of employment of a beneficiary to a geographical area requiring a corresponding LCA be certified to DHS with respect to that beneficiary may affect eligibility for H−1B status; it is therefore a material change” that requires filling a new H-1B petition.

As a decision designated as precedent, this new rule is “legally binding on the DHS components responsible for enforcing immigration laws in all proceedings involving the same issue or issues,” as explained by the USCIS website, and therefore future adjudicators will have to regard the movement of any H-1B employee to a new geographical area as requiring the submission of an amended H-1B petition, even if there are no other changes in the terms and conditions of employment, and regardless of whether the employer’s salary exceeds the required wage in the new geographic area.

Employers should review their practices with regard to H-1B employees, including tracking when they are assigned to new worksites not previously covered by a Labor Condition Application, and how many geographic locations of potential employment they identify in their H-1B petition filings.  To comply with the new rule, it is not clear whether it is enough for an employer to have a pre-existing LCA covering the location of employment, and pay the H-1B employee in accordance with that LCA.  Having such an LCA and paying the employee under it would satisfy the Department of Labor regulations on LCAs, but it may no longer satisfy USCIS, given the broad language of this precedent decision.

H-1B employers and their H-1B employees may wish to challenge this rule.  If challenged in court, USCIS will likely assert that the Simeio decision merely interprets an existing regulation.  Employers can point to cases in which courts have distinguished between “interpretations” (which do not require advance notice to the public) and “substantive rules” (which require notice and public comment according to the Administrative Procedures Act).  Where a formal, binding decision like this one changes an agency’s policies, courts have held that notice and comment by the public is necessary for the rule to be valid.

Employers who would like a review of their H-1B practices should feel free to contact a Klasko Immigration Law Partners attorney.

China EB-5 Market: 2015 (Part 2) – What’s New and Hot in the China EB-5 Market

April 1st, 2015 by H. Ronald Klasko

In my last blog, I discussed a number of factors that are having and could have an impact on the market for Chinese EB-5 investors. In this blog, I will list and discuss hot topics and new developments regarding EB-5 projects and agents in China.

  1. Types of projects – While hotels remain at or near the front of the line, the hottest projects appear to be health care-related projects (hospitals, ALFs), residential and multi-family and infrastructure projects or any projects with government money or government support.

  2. Escrow – Among the major agents, there is near-uniform understanding that traditional escrow is no longer feasible given government processing times of 14 months and higher. There is greater receptivity to release of funds upon I-526 filing or at least release of some percentage of the funds with the others held back until I-526 and/or exemplar approval. However, a credible developer guaranty of return of the funds to the investor if the I-526 petition is denied is critical.

  3. Geography – Manhattan is hotter than ever. It is followed closely by Los Angeles and San Francisco. Seattle is also very hot. The next tier includes Las Vegas, Florida (mostly Miami and Orlando), Houston and Dallas. Chicago still lags. However, most agents agree that a strong project with a strong developer trumps the lack of a first tier location.

  4. Chinese developers – Many of the major Chinese developers are getting into the U.S. EB-5 market. It is interesting that there are strong differences of opinion regarding the interest of Chinese investors in investing in projects developed by Chinese developers. Some think there is an added comfort level, while others prefer investing in the U.S. with U.S. developers.

  5. Administrative fees – Like everything else, they may be going up. While the market is still $45,000 to $50,000, some projects are moving forward at $55,000 or $60,000. It is not yet clear whether these projects with increased administrative fees will meet resistance in the market or become the new norm.

  6. Timing of EB-5 – One theme shared among many agents is a preference to have EB-5 money come into the project after construction has already started. This adds a level of assurance that the project will actually go forward. This ties into a related theme that agents and investors like to invest in projects that would go forward with or without EB-5 money.

  7. Private equity investments – Agents and EB-5 investors are more interested than ever in considering private equity investments instead of or in addition to EB-5 investments on desirable projects.

  8. Multiple EB-5s – While most of the impact of impending EB-5 quota retrogression in China is negative, one positive impact for the EB-5 market is that some investors, at the urging of agents, are filing multiple EB-5 petitions based on multiple investments where their children would likely age out because of the quota retrogression.

  9. Returning money – It is interesting that there are differing opinions in the Chinese market regarding the importance of projects returning money to the investors. Some view this as a critical element for the future of the EB-5 program, while others seem to assume that many projects will not return the money and that this will not have a major impact on EB-5. All agree that the number one priority is that investors get their conditions removed.

  10. Big name regional centers – Multiple agents commented on the decline of some of the biggest name regional centers in the China market. It’s not clear why this has occurred, whether it is related to rumors of SEC investigations or otherwise.

  11. Taxes – For whatever reason, Chinese agents and Chinese investors appear to be more concerned about U.S. taxation issues than ever before. The pattern of having the investment in the name of the spouse (usually the wife), having the spouse and child immigrate and having the principal breadwinner remain in China and use a multiple entry visitors visa to enter the U.S. remains a strong trend. However, some investors whose family are in the U.S. as permanent residents have had trouble obtaining B-1/B-2 visas.

I have not attempted to recount many of the developments in the China market that I have covered in previous blogs. However, many of those factors remain prevalent in 2015. I would urge the readers of this blog to refer to those previous blogs for further information.

EB-5 RFE Trend: USCIS Searches of Public Business Registration Records in China

March 31st, 2015 by F. Oliver Yang

In the December 5, 2014 USCIS EB-5 Stakeholder Engagement, Immigrant Investor Program (IPO) Chief Nicholas Colucci mentioned that one of the agency’s top priorities is to collaborate with law enforcement and regulatory organizations to help prevent fraud and develop new ways to further enhance confidence in the EB-5 program. According to Mr. Colucci, USCIS intends to strengthen program integrity by (1) conducting more site visits both domestically and abroad to validate supporting documentation; (2) utilizing new commercial and government databases; (3) expanding the Fraud Detection and National Security (FDNS) team; and (4) providing additional training to the FDNS team on combating money laundry and fraud.

While Mr. Colucci did not elaborate on the details of the new initiatives, we think they will inevitably lead to an increase of Requests for Evidence (RFE) on lawful source and path of funds documentation. In fact, investors have witnessed a sizable increase in the number of RFEs on source and path of funds since late 2014. A close look at those recent RFEs suggests that USCIS has indeed been implementing new measures to validate source of funds documentation submitted by EB-5 investors.

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U.S. Naturalization for the Global Traveler

March 31st, 2015 by William Stock

Many green card holders or Lawful Permanent Residents (LPRs) travel frequently for their employment or to spend time with extended family outside the United States.  We have two resources on our website for individuals in that situation, covering how to avoid losing your green card and how to be eligible for naturalization.

We get a fair number of questions from LPRs who have traveled frequently about how to calculate when they will be eligible to apply for naturalization.  In making those calculations, there are actually three separate presence-related requirements: never having abandoned LPR status, having enough physical presence (no more than ½ of the required time outside the United States), and having “resided continuously” in the US during the 5 (or 3) years of continuous residence, which is the requirement that causes the most confusion about how to calculate. 

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China EB-5 Market: 2015 (Part 1) – Factors Affecting the Market

March 27th, 2015 by H. Ronald Klasko

Having returned from another trip to China and having met with many of the top migration agents in China, I would again like to share my thoughts in this blog on the state of the China market for EB 5 investors at the present time. In my next blog, I will discuss hot topics and new developments regarding EB-5 projects and agents in China.

2015 is an unusually pivotal year for EB-5. Many events are expected to occur in 2015 that could significantly impact the market. Here is how it looks to me based on my many meetings with agents:

  • The single biggest issue affecting EB-5 in 2015 is clearly the impending quota retrogression. Some agents view the quota retrogression as a reason to step back until the impact becomes clear. More agents realize that it is important to get their investors to establish their place in line as soon as possible and have reported that the quota backlog is not a drag on the market.

  • The impact on children is having multiple effects. Some investors are filing sooner while their children are age 18 or younger. Some investors are gifting the money to the child and having the child be the investor. Other investors are making two investments – one for the parents and one for the child.

  • Some agents expressed concern about the expiration of the regional center program on September 30, 2015. Most agents are aware that the program has been extended many times and that the chances of extension again in 2015 are extremely good. Mostly, this is not a drag on the market.

  • There are rumors in China that the minimum investment amount will increase from $500,000 to $800,000. Most agents with whom I spoke are not too concerned with this. If anything, it would be a reason for investors to expedite their investments. Most agents believe that investors would be willing and able to invest an increased amount if necessary.

  • I discussed with a number of agents the impact of the availability of ten year multiple entry B 1/B-2 visas for Chinese nationals. Although some thought there could be an impact on EB-5 and perhaps was an impact on EB-5 in late 2014, in the end it appears to have very little impact on investors who would otherwise be interested in EB-5 investments.

  • Two items of expected bad news in 2015 are the SEC investigation of major regional centers and immigration attorneys and the expected release of the U.S. GAO report on EB-5. Of course, no one knows for sure what the impact of these two events will be, but the feeling is that, on top of a lot of negative publicity from major media sources, there could be a negative impact on investors.

  • The closing of the Canadian program has resulted in many “orphan” EB-5 investors. This has had a positive effect on the EB-5 market.

  • The Chinese real estate market has experienced a decline, especially in the four largest cities. Reactions among the agents are mixed as to the impact that this is having and will have on EB-5 investors.

  • The Chinese government has instituted an “anti-corruption campaign”. Although I had heard that this could have an impact on Chinese EB-5 investment, all agents denied that this would lead to fewer EB-5 investors.

In summary, there are signs that 2015 could be a tumultuous year for EB-5. However, the consensus is that, as long as the quota backlog does not become too long, the Chinese EB-5 market will remain a healthy one.

USCIS Stakeholder’s Meeting – Source and Path of Funds

February 27th, 2015 by Anu Nair

On February 26, 2015, USCIS held a Stakeholder’s Meeting to discuss EB-5 source of funds issues. The speakers included Ebony Turner – Relations Officer, Julia Harrison – USCIS Deputy Chief, and several USCIS EB-5 SPOF adjudicators. I appreciate USCIS taking the time to hold the meeting and listen to the questions posed by Stakeholders and hope that USCIS considers the feedback received from Stakeholders seeking consistent adjudication of I-526 petitions.

USCIS focused on three major sources of funds: (i) income accumulation (salary, bonuses, dividend distribution); (ii) personal property (using sale of property or home equity loan); and (iii) company equity. For each of the three sources of funds listed above, the officers reviewed the type of documentation generally required, major issues, and possible RFE triggers. There was little mention of path of funds.

For the most part, USCIS did not deviate from the document checklist and RFE triggers that our firm has been providing to our clients for years. But there were three interesting points where USCIS was clearly deviating from their previous adjudications:

1.  According to USCIS, administrative fees do not need to be sourced as USCIS does not have a “legal basis for requiring the . . . administrative fee . . . [to have] a lawful source.” Instead, USCIS only requires proof of administrative fee payment as confirmation that the administrative fee was not deducted from the $500,000 or $1 million investment.

This is a clear change from previous USCIS adjudications and policy. In a prior Stakeholder’s Meeting, Alejandro Mayorkas, then director of USCIS, confirmed that the administrative fees must be sourced. More importantly, in cases where the administrative fees were not sourced, USCIS has routinely issued requests for evidence requiring investors to source the administrative fees.

Our firm has previously argued that the regulations do not require administrative fees be sourced. So while this is a welcome change, it highlights a bigger issue that EB-5 attorneys and investors face every day: USCIS deviates from long-held policy and adjudication practices with no prior notice. Accordingly, until there is clear guidance from USCIS in writing, our firm will continue to recommend that administrative fees be sourced.

2.  USCIS noted that it was re-visiting its current policy on personal loans. Specifically, in cases where the investor uses private property as collateral for a personal loan from a family member, friend, or business associate, USCIS is debating whether to require the private lender to source the funds of the loan in addition to the source of the investor’s collateral.

Currently, USCIS only requires the investor to source the funds used to purchase the collateral and does not require the private lender to source the loan proceeds. If there is to be a change in policy, we hope USCIS will issue a public notice confirming the change in policy and, more importantly, not apply the new standard to pending cases.

3.  For property cases, USCIS noted that the collateralized property/sale of property must either be owned by the investor or the proceeds of the sale/loan must be gifted by the owner to the investor.

It is common practice in Asian culture, especially in China and India, for parents to purchase a property and register it in the names of their children. Subsequently, when making an EB-5 investment, one parent will obtain a loan using the property as collateral and use the loan proceeds as the source of the investment funds.

Over the past several years, USCIS has routinely approved these types of cases. However, USCIS recently began issuing NOIDs and denials on exactly these types of cases – again with no prior notice to the public.

Without set guidance from USCIS, we rely on previously approved petitions to determine whether a source of funds for subsequent petitioners will be successful, with the expectation of USCIS deference for adjudication of such cases. Conversely, USCIS appears to be applying new guidelines to pending petitions, without prior notice of policy change.

These inconsistent adjudications are causing uncertainty in the EB-5 space at a time when, with the establishment of the new IPO, it is reasonable to expect more transparency and consistency with no drastic changes in policy. We hope USCIS takes note of Stakeholder’s concerns in the February 26 call and offers clear and timely responses to the questions raised.

Preview of the Invest In America Summit

February 25th, 2015 by H. Ronald Klasko

Many readers of this blog are considering whether to sign up for the Invest In America Summit, which this year will be held in Shanghai (March 14 & 15), Shenzhen (March 18) and Beijing (March 21). At several levels, this is a very worthwhile event. As the largest annual EB-5 conference and trade show held in China, it brings together regional centers, developers, attorneys, economists, over 100 migration agents, large numbers of individual Chinese investors and Chinese government officials involved with the EB-5 migration program. For this reason, many of our clients will be exhibiting in one or more of these three cities, hoping to capitalize on networking opportunities with investors and agents.

In addition, I believe this year’s program will be the best ever. By way of full disclosure, I do not state that as an impartial source. This year, I have been asked to prepare the program, together with two other well-known EB-5 immigration lawyers (Steve Yale-Loehr and Bernie Wolfsdorf). I want to take this opportunity to highlight the topics we have chosen for the program and the reasons for choosing those topics.

  1. Impacts of Quota Retrogression – This is perhaps the hottest topic, since quota retrogression will likely occur for Chinese investors in the summer of 2015. We will be discussing the impacts of quota backlogs on investors, investors’ children, project developers and agents, as well as strategies for lessening the impact of quota backlogs. We will also discuss prospects for legislative or other relief.

  2. Choosing a Project – Due Diligence Issues for Agents and Investors – We will be discussing who should perform due diligence, which issues affect approvability of the I 526, which due diligence issues affect condition removal and due diligence issues affecting marketability of the project. This topic is especially critical given the increased scrutiny being given to projects by the SEC and other U.S. government agencies.

  3. What Investors Need to Know About Permanent Residence Status – We have included this topic because it is among the most frequently asked questions that we receive from investors. Investors want to know how much time they need to spend in the U.S., the impact on other family members if the investor abandons permanent residence status, the benefits granted by permanent resident status and possibilities of becoming a U.S. citizen.

  4. Direct vs. Regional Center Investment – Although regional center investments are clearly the most popular, especially in China, there are both an increasing number of investors who are interested in direct EB-5 investments and an increasing number of direct EB-5 projects, including pooled direct EB-5, available in the market. This panel will discuss the types of direct projects, advantages of direct and regional center projects, differences in each at the condition removal stage and legal issues in direct and regional center filings.

  5. Escrow Arrangements from the Viewpoints of the Investor and the Developer – Because of the unprecedentedly lengthy I-526 processing times, traditional escrow is often not an option. This has spawned various types of hybrid escrow arrangements. This has everything to do with when money will be made available to the project. As such, it is a critical issue in 2015.

  6. Source and Path of Funds – Within the last year, USCIS has faced greater scrutiny on source of funds issues. Recent media outlets have questioned EB-5 investors’ source of funds. In addition, the government of China has, within the last year, reduced the options for currency exports. For all of these reasons, this is a topical subject.

  7. Everything You Need to Know About TEAs – Unemployment rates around the country have decreased significantly within the past year. Areas that were once TEAs may no longer be TEAs in 2015. The issue of how TEA areas are determined, when they are determined and how changes in TEAs during the middle of the marketing of a project can affect developers and investors are critical issues.

  8. Securities Laws and EB-5 – Myths and Realities – One of the hottest topics of 2015 is the increased involvement of SEC in EB-5. This expanding role will be discussed in this panel. Included in the discussion will be securities issues in marketing of projects, PPM disclosure issues, accredited investor issues, broker-dealer issues and other related topics.

  9. New Developments and Hot Topics in EB-5 – This panel will be an opportunity to discuss hot topics that are not discussed in other panels. Included in the discussion is likely to be I-526 and I-829 processing times, prognosis for regional center program extension, other legislative changes on the horizon, RFE trends and anything else that is hot at the time of the program.

We think we have put together an excellent and highly topical program. I expect that I will see many of you in China in March.

The ABC Fallout – Time for the EB-5 Industry to Take the Offensive

February 12th, 2015 by H. Ronald Klasko

Once again the EB-5 industry has been slammed by a major media source. Once again the “news” is not news at all but rather rehashing of discredited stories that are years old. Once again the EB-5 industry is put in a position to react defensively to justify a program that should be held on a pedestal as a sample of how a Congressionally-established government program can really work to further a public interest at no cost to the public.

Unfortunately, this cycle will likely continue unless the EB-5 industry mounts an offensive in a concerted fashion to make the public aware how the EB-5 program has contributed billions of dollars to the U.S. economy and hundreds of thousands of jobs to the U.S. workforce. Sure, there have been some positive press in local media. However, major national and international media, such as Fortune Magazine and ABC News, feature negative stories about EB-5 that resonate with the public, with the media, with government officials, with investors overseas, with banks providing financing on projects with EB-5 money, with developers considering using EB-5 money.

I suggest that, right now, this is among the most urgent issues confronting the EB-5 community. It is past time for regional centers, project developers, local community officials, regional centers and developers to mount a major media offensive telling the easily-told stories of how EB-5 has contributed to the economy, to job creation, to community development. This may take some commitments of money and resources. It is not something that can be done by attorneys. The EB-5 industry fails to do it at its own jeopardy. Rest assured, Senator Grassley and other opponents of the program will continue their efforts to bring the program down.

The ABC “expose” focuses on allegations made by Senator Grassley in 2012 and 2013 in his ongoing attacks against then-USCIS Director Mayorkas for his support and leadership of the agency administering the EB-5 program. Senator Grassley’s allegations at that time – and ABC News’ recounting of those allegations years later – focuses mostly on the SLS Hotel in Las Vegas, one of the largest EB-5 projects. I was proud to be immigration counsel for that project for which EB-5 money was an important part of the capital stack used to build the largest new casino hotel on the Las Vegas strip.

Senator Grassley’s allegations in 2012 and 2013 – repeated almost verbatim by ABC News in 2015 – revolves around two issues:

  • That there is something somehow illicit about USCIS granting an expedite request; and
  • That Director Mayorkas forced USCIS officials to approve EB-5 investor petitions for investors with serious criminal or security problems in their background.

There is no basis whatsoever for either allegation.

First, let’s look at the expedite issue. There is nothing illicit about an expedite application being made or being approved. USCIS has long had published expedite criteria for all applications filed before it – not just EB-5. USCIS has long approved many such expedite applications for many different types of visas and permanent resident applications. In my opinion, the SLS application requesting an expedite was one of the strongest expedite applications that I have seen, and it was not at all surprising that it was approved. Senator Grassley was obviously disturbed that Majority Leader Reid actively supported the expedite. There is nothing either wrong or unusual about a Senator or Congressman supporting an expedite request.

What does an expedite mean? It means that certain applications will be reviewed in advance of other applications. It does not mean that the review will be less extensive than otherwise would be – just sooner.

It certainly doesn’t mean that security checks will be circumvented. In fact, in every expedite of every type of immigration application, full security checks are completed before adjudication.

In fact, in the SLS case, the review was very thorough. USCIS issued a very extensive RFE, which received a very thorough and extensive response. The so-called “expedite” resulted in EB-5 petitions being approved seven months after filing. Interestingly, the expedites took longer than the normal I-526 processing time only a few short years ago, which remain the USCIS target for I-526 processing time.

The ABC News account details the allegations of anti-Mayorkas “whistleblowers”, who stated that they were pressured to approve investors with criminal backgrounds, fraudulent documents and unlawful immigration histories. Again, there are at least two problems with these allegations, neither of which are discussed by ABC News.

The first problem is that these allegations resulted in scores of approved EB-5 petitions being returned from the National Visa Center to USCIS to reconsider the approvals to consider the published allegations. In 100% of the applications, a further review resulted in re-approvals of the applications.

Even more troubling is the fundamental misunderstanding of the immigration process manifested in the ABC News story. The story makes it seem that EB-5 is a convenient way to short circuit normal security and criminal processing that bars unsavory immigrants from U.S. shores. In fact, the EB-5 program has more levels of review of an immigrant’s background than any other method of immigrating to the U.S. With family and employment-based immigration, there is only one level of criminal/security review, which occurs at the time of application for adjustment of status to permanent residence or application for immigrant visa at a U.S. Consulate. For EB-5 immigrants, the security review process is far more extensive. First, USCIS performs a meticulous review of the investor’s lawful source of funds. USCIS also performs security reviews prior to approving an I-526 petition. When the I-526 is approved, the U.S. Department of State conducts extensive criminal and security checks as part of its admissibility review for issuing the conditional immigrant visa to the investor. With EB-5 – unlike with most immigrants – there is yet a further security check at the condition removal stage before the immigrant becomes a full permanent resident of the U.S.

The “expedite” only relates to the I-526 petition. There is no expedite procedure for the criminal and security checks performed by the U.S. Department of State after the I-526 petition is approved.

The allegations of the whistleblowers simply make no sense. Even if one could believe that USCIS knowingly approved the EB-5 petitions on the first level of review despite available evidence of criminal problems, fraud problems and security problems, and even if one could believe that USCIS re-approved after re-review the very same petitions, there is no conceivable way that an independent agency – the U.S. Department of State – purposely overlooked or disregarded the supposed discoveries of the “whistleblowers” in issuing immigrant visas in 100% of the cases.

It’s getting a bit old defending a win-win-win government program (a rarity in itself) and continuing to find the EB-5 industry on the defensive. It is well past the time for the EB-5 industry to tell its story loud, clear and with pride.

What’s So Special About Our EB-5 Seminar?

January 23rd, 2015 by H. Ronald Klasko

A number of our readers and clients have inquired as to how we chose the two main topics for our inaugural EB-5 seminar on February 10th in Philadelphia. The short answer is that we chose two topics that (a) are very hot and uppermost in our clients’ minds and (b) are least discussed in other seminars and other written forums. These two topics are the EB-5 marketing process, most especially in China and India, and the compliance responsibility of regional centers and project developers, most especially with respect to condition removal.

As I have written about on numerous occasions, and as I constantly discuss with my clients, the fully-compliant EB-5 project will only be successful if it is marketable. The morning of the seminar will be devoted to project marketability. Featured speakers will include prominent migration agents from China and India, as well as the General Manager of EB-5 Market Connect, which is a company (with full disclosure, of which I am a principal) that matches EB-5 projects with overseas migration agents.

The marketing panels will feature:

  • presentations on successfully marketed projects in China;
  • helpful advice from agents on the Chinese and Indian markets;
  • characteristics of a project that affect marketability;
  • how best to relate to an overseas migration agent;
  • cost of capital considerations;
  • changes in marketable escrow arrangements; and
  • other issues affecting marketability.

The afternoon will be focused on compliance, including annual reporting, condition removal and securities law compliance. Our invited guest speaker will be Reid Thomas from NES Financial. NES is the largest escrow agent in the EB-5 realm and is also the creator of the leading software product to enable regional centers and project developers to monitor investments, construction expenditures and job creation. Our firm will discuss its industry-leading compliance team, which includes a lawyer, a paralegal and an auditor for each of our client’s projects. The panelists will discuss creation of systems, databases, software, personnel needs and best practices regarding both the I-924A annual compliance process and the I-829 condition removal process.

There are three other aspects to the seminar that are worthy of note. A one-hour EB-5 fundamentals program will be offered in the morning before the regular program commences. The luncheon program will feature hot topics in EB-5, including forecasts of legislation, new regulations, regional center program renewal and USCIS policy making. Finally, the program will end with a networking reception at which our attorneys and guest speakers will be available and at which all of the attendees will have an opportunity to share questions and experiences.

We are excited to be hosting this event, and we look forward to seeing many of you in Philadelphia on February 10th. Register Now!

Open Letter to Director Rodriguez and Chief Colucci

January 6th, 2015 by H. Ronald Klasko

I was heartened by the remarks of Director Rodriguez at the recent EB-5 stakeholders engagement in which he extolled the virtues of the EB-5 program and emphasized the importance of USCIS’s role in maximizing the benefits to the U.S. economy as Congress envisioned when it created the EB-5 program.

At the same time, I was struck by the inconsistency between these laudable goals and the continuation of procedures that do not further these goals but rather, in many ways, thwart the efficient processing of EB-5 petitions.

I have on many occasions suggested changes in policy and in legal interpretation that would improve the EB-5 program. That is not the purpose of this letter. Rather, the purpose of this letter is to suggest purely procedural processing improvements that could, without expending additional resources, significantly improve the EB-5 program in ways that would benefit investors, regional centers, project developers and the U.S. economy. Indeed, I would venture to say that the suggestions below would be beneficial to all parties, including USCIS, and detrimental to none. As such, I sincerely hope that you would reconsider implementing some, if not all, of the below suggestions.

Here is my list:

  1. USCIS must reduce processing times for project applications. This is absolutely critical for the success of the program. There is no question that it is to everyone’s benefit – USCIS, project developers, investors – to have USCIS adjudicate an approved project before investors invest and file I-526 petitions. However, this goal will never be achieved if project developers have to wait 8 months, 10 months, 12 months or longer for project approvals before investors can invest and file. It is the rare project that can afford a delay of that length before bringing investment funds into the project. If project developers are not assured of a consistent 4 month processing time, USCIS will continue to double its workload by forcing project developers to proceed to market the project, resulting in investors filings I-526 petitions, while at the same time filing I-924s with exemplar petitions. USCIS then must adjudicate the exemplar projects on I-924s, adjudicate the same projects on I-526s, issue RFEs on I-924s and issue perhaps hundreds of the same or inconsistent RFEs on the project on I-526s. This is the present system in which no one wins, and everyone loses. Eliminating these multiple filings and multiple RFEs would realize a significant saving in manpower and resources, which could enable USCIS to meet the 4 month processing goal without having to add additional staffing.

  2. USCIS should expedite I-526 processing for investors in an approved project. In order to encourage project developers to use the I-924 process to obtain project approval, there should be some benefit to the project and its investors. A logical benefit would be to have investors in such projects receive I-526 adjudications far more promptly than investors in other projects. This not only serves the benefit of motivating developers to obtain project pre-approval. It also recognizes that the adjudication process for such investors is far more streamlined and straight forward.

    The most time consuming aspect of the I-526 processing is the adjudication of the qualification of the project. Once this is completed, a separate dedicated staff of adjudicators whose only role is to adjudicate source and path of funds should be able to complete the adjudication in 3 to 4 months. It only makes sense that these petitions should have a prompter processing time than petitions that require full project adjudication. In fact, if the only issue is source and path of funds, USCIS should be able to reconsider the availability of premium processing for such petitions. Premium processing, in turn, would increase fee revenue, which could produce funds for more adjudicators. This procedure would put EB-5 in line with other family-based and employment-based petition processing since employer I 140 petitions and family I-130 petitions are adjudicated separately from permanent residence applications of alien beneficiaries.

  3. USCIS should process all project I-526s together. USCIS has been inconsistent in its application of two different concepts. On the one hand, USCIS at various times has stated that it will process all project I-526s together as a matter of processing efficiency. In fact, there were many examples where later investors in a project were processed far more quickly than earlier investors because all project issues were resolved.

    More recently, it appears that this laudable objective has fallen by the wayside in favor of a strict FIFO processing objective. This has resulted in processing inefficiencies whereby adjudicators are looking at investors in a project over a period of many months or sometimes even more than a year. This is also detrimental to many projects which require approval of a certain number of investors before any money can be released to the project. The result is that projects may be held in abeyance until it becomes clear that a minimum number of investors have been approved and their funds released from escrow.

  4. A separate processing queue should be implemented for investors who are subject to quota retrogression. This is another change that would have all winners, and no losers. Investors subject to quota retrogression gain no benefit upon the approval of the I-526 petition. Many suffer a detriment because longer processing times could enable their children to immigrate with them under the provisions of the Child Status Protection Act.

    Investors not subject to quota retrogression would also win because their petitions could be adjudicated far more expeditiously, and they can actually benefit from the adjudications of the petitions by being able to immigrate to the U.S. sooner.

    USCIS would benefit by devoting its resources in a manner that maximizes benefits to its stakeholders without any need to expand its resources. Such a procedure would not be novel since USCIS has long delayed processing of family-based I-130 petitions in categories with long quota backlogs simply as a matter of allocation of resources.

  5. USCIS should have a separate processing line for direct EB-5 investors. Up until the last year, when USCIS has tried to implement a straight I-526 FIFO processing scheme, direct EB-5 petitions were adjudicated far more promptly than regional center applications. This system made a lot of sense for some of the same reasons mentioned above with respect to I-526 petitions for investors in approved projects. Why should a direct EB-5 investor have to wait in line behind hundreds of investors in projects that require complex adjudication? By contrast, most direct EB-5 projects involve far fewer issues for the adjudicator to deal with.

    There is another reason why direct EB-5 investors should be in a separate – and shorter – queue. Unlike regional center investors, whose presence in the U.S. is not necessary for the development of the investment project, often the direct EB-5 investor is the hands-on manager of the investment project. As such, his presence in the U.S. is critical on a far more expeditious basis.

  6. The attorney for the investment project or the regional center should be recognized by USCIS. There are clearly two parties to an I-526 petition – the project developer and the investor. In many cases, the attorney for the project developer is different than the attorney for the investors. USCIS’ present modus operandi, which recognizes only the investor’s attorney on an I-526 petition, creates various anamolous results. The attorney for the investor has to file a petition consisting mostly of information about a project for which the investor’s attorney is not responsible and often has no knowledge of its veracity. If USCIS has questions about the project, it is in the anamolous situation of issuing an RFE to the investor, who does not know the answer. The project developer is in the anamolous situation of having to hope that the investor or the investor’s attorney sends the information to the project developer. The project developer is reliant on the investor’s attorney to submit its response, unaltered, even though the attorney does not represent the project developer. The present procedure invites different responses from different attorneys to the same RFE about the same project.

    Of course, this result would be obviated if USCIS adopts the earlier suggestions in this letter that would result in project issues being dealt with at the I-924 stage – a petition for which the developer’s attorney has filed a G-28. However, unless and until that happens, USCIS should act consistently with other employment-based petitions. In all of the employment-based petitions, USCIS recognizes that the employer may have different counsel than the employee. The I-526 petition is the only example in which USCIS forces two completely independent parties to have the same attorney, to the detriment of everyone.

    If USCIS recognizes the project developer as a separate party in the I-526 process, it would only be required to issue one RFE for the project instead of, for example, one hundred RFEs for one hundred investors in the project. This is clearly lose lose.

  7. ELIS is an example of a laudable goal with a seriously flawed implementation. ELIS should be implemented in such a manner that there is one set of project documents available to investors and their attorneys online. The almost total lack of usage of the system as implemented is proof positive of the user-unfriendly nature of the system as presently implemented. USCIS should work together with stakeholders to develop a system that meets the needs of USCIS and stakeholders. In this situation, those needs should be co-existent.

  8. USCIS should create an I-829 exemplar process. Less attention has been paid to the I-829 process, largely because only a small percentage of investors have reached the point of I-829 filing. As more and more such applications are being filed, the same kind of processing inefficiencies that have reared their ugly heads in the I-526 process are manifesting themselves in the I-829 process.

    Take a project with 100 investors. 100 different petitions with possibly 100 different attorneys are filed containing documentation of which the investors and their attorneys know very little and cannot certify the veracity. Virtually 100% of the I-829 petition involves documentation that is only available to the regional center and the project developer. Hopefully – but not definitely – all 100 I-829 petitions will contain the same information about the project and its job creation. If USCIS has questions about the job creation or the issue of whether the investors have sustained their investments, USCIS would need to issue 100 Requests for Evidence. Is all of this necessary? Does it really make any sense?

    This writer believes that the answer to both questions is in the negative. What makes more sense is to have an I-829 exemplar process whereby USCIS can adjudicate all issues relating to the project. This would be filed by the project and its attorney. Any issues specific to the investor could be filed on the I-829 by the investor’s attorney when his filing window is reached. Any issues relating to the project should be adjudicated before most investors file their I-829 petitions.

    Of course, there may be some instances in which there are enough jobs for the early investors at the time they file their I-829 petitions and then more jobs are created by the time later investors file their I-829 petitions. This can be dealt with through a procedure to update or supplement the I-829 exemplar petition.

  9. USCIS should provide a procedure for an I-829 exemplar petition to be filed immediately for projects that have been subject to material changes. When there is a material change in a project after the approval of conditional residence, the investor has to wait 21 to 24 months to learn whether the changed project will be sufficient for condition removal. A more efficient system for all concerned would be to have a procedure whereby USCIS could adjudicate the new materially-changed project for EB-5 compliance. If necessary, this would give the investor the opportunity to make a different investment or effectuate whatever changes would be necessary to enable him to remove conditions.

  10. USCIS should make information available to the public. Although this doesn’t clearly fit within the rubric of increasing processing efficiency, it does fit within the theme of no cost win-win fixes. USCIS is rightly concerned with protecting the public against investing in fraudulent projects. Why, then, would it deny the public necessary factual information that would enable investors to make a more informed decision regarding an investment project? Why would USCIS deny investors information regarding which projects have received approvals, and which projects have received denials? Why would USCIS deny investors factual information regarding how many investors have filed I-526 petitions in a project, how many have been approved and how many have been denied? Information could also be supplied regarding regional center statistics, although there is a possibility that such information could be misleading since investors invest in a project and not in a regional center.

I appreciate your consideration of these suggestions to make the EB-5 program a more efficient one, a more user-friendly one and a program that is more responsive to the public policy goals of Congress when it enacted the program, all without sacrificing any of USCIS’ important anti-fraud and national security concerns.

Respectfully yours,

H. Ronald Klasko

       
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