A Critical Analysis of DHS Secretary Johnson’s EB-5 Proposals

May 20th, 2015 by H. Ronald Klasko

Much of the focus of publicity and advocacy relating to EB-5 has been with the U.S. Senate. The Administration had been largely silent on EB-5 at least in the public context. That changed on April 27, 2015 when DHS Secretary Johnson issued a letter to Senate Judiciary Committee Chairman Charles E. Grassley and Ranking Member Patrick J. Leahy. This letter sets out the Administration’s agenda on EB-5.

Not surprisingly, DHS advocates for expanded authority to monitor and to sanction regional centers and regional center and project principals for reasons of alleged criminal activity, national security concerns or fraud-related concerns.

Much of what the Administration is proposing would not likely be opposed by most in the EB-5 industry and might actually be wholeheartedly endorsed. It is in the interest of regional centers, developers and investors to have USCIS monitor regional centers and projects with the goal of weeding out and sanctioning bad actors and preventing fraudulent programs from ever being the recipient of EB-5 investor funds. For example, many or most would agree that regional center or project principals who commit criminal violations, fraud-related violations or security-related violations, or who have such a history, should be barred from the program. Many or most would agree that USCIS should have sufficient funding to underwrite audit and site visits, even if that were to require the DHS-proposed $20,000 per year fee to be charged to regional centers. While somewhat more controversial, the DHS proposal to require that all regional center principals be U.S. citizens or permanent residents has support among many in the EB-5 community.

The biggest concern with this series of proposals is if USCIS is authorized to act without due process. Any standards developed for regional centers or regional center principals, any standards developed for termination of regional centers, any standards developed for sanctions against regional centers or principals should be clearly articulated and should provide the affected parties the ability to rebut the allegations with a review mechanism in the event that the rebuttal is unsuccessful. Allowing DHS to take such actions on a discretionary, non-reviewable basis would be a denial of due process with a serious impact on individuals and companies who may have invested millions of dollars in creating and operating a regional center. Termination of a regional center can also very seriously impact investors in projects in that regional center. Based on such unreviewable action, such investors may lose their ability to remove conditions in the absence of an approved regional center.

The same caution applies to DHS’ proposal to expand its authority to deny or revoke an I-526 or an I-829 petition due to fraud, misrepresentation, criminal misuse or threats to national security. One might agree that DHS should have authority in all of those instances, but only with articulable legal standards, due process and rights of review.

Secretary Johnson urges that USCIS should be authorized to require regional centers to certify continued compliance with U.S. securities laws and to disclose pending litigation, details of how investor funds were utilized in the project, details of the direct and indirect jobs created and the progress towards completion of the investment project. He advocates that these annual reports should be publicly disclosed.

Many in the EB-5 community – myself included – consider the I-924A annual reporting to be seriously deficient. Generally, I am in favor of enhanced annual reporting proposed by Secretary Johnson. I am specifically in favor of public disclosure of non-protected and non-confidential information to enable investors to make more educated decisions. My main hesitation is with the suggested “accounting of the direct and indirect jobs created” since it is very difficult to calculate indirect and induced job creation in the middle of a project. For example, direct construction jobs cannot even be counted until a project has completed two years of construction. Revenues may be insignificant until a project reaches stabilized occupancy. Many other examples could be cited.

Secretary Johnson proposed “improving the integrity of TEAs”. This could be the most controversial of his proposals. Although he provides no specifics, he proposes “limiting TEAs to a specified number of contiguous census tracts.” As with all of these proposals, the devil is in the details. Simply picking an arbitrary number of contiguous census tracts is poor public policy. Significant studies are required to determine appropriate standards to utilize if the definition of TEA is to be changed. Rather than choosing an arbitrary number of census tracts, it would make more sense to tie TEAs to commuting distances, supply chains, possibly MSAs and CMSAs or possibly other concepts used by government agencies such as the U.S Department of Labor.

Secretary Johnson proposes that the minimum investment amount be increased, noting that there has been no increase since the inception of the program 25 years ago. He adds that, even if Congress does not do this, USCIS might exercise its existing authority to increase the minimum investment amounts. While some might balk at an increase, most would consider an increase of the minimum investment amount to be inevitable.

Secretary Johnson also requests Congressional authority to require regional centers to file “investment proposals” (presumably exemplar petitions) in advance of individual investor filings. I have previously advocated that such a change is meritorious, so that investors know that they are investing in an approved project. However, such Congressional authorization would have to be accompanied by a Congressionally-imposed time limit for USCIS to adjudicate the exemplar petition. Otherwise, it would simply add a year or more to an already unrealistically long process that puts the entire EB-5 program in jeopardy. Creating a process that simply adds time to the existing process would make the process nonviable for many, if not most, project developers.

The remainder of Secretary Johnson’s proposals relate to limitations on contact by USCIS officials with the public. While I am in favor of limitations on any activities that could create a perception of favoritism or impropriety, I do think it is important that groups such as IIUSA and the American Immigration Lawyers Association, which represent large numbers of stakeholders, should be in a position to advocate their positions to USCIS in forms that are subject to full public disclosure. The present stakeholders meeting format provides no opportunity for discussing, airing and debating complex legal issues that can only be the subject of fruitful discussion in smaller group settings. In addition, with the stakes as high as they are both for investors and the public, USCIS should create a more formal system for issuing advisory opinions, so that stakeholders can obtain necessary information to plan transactions going forward without having to resort to Congressional assistance.

In conclusion, Secretary Johnson’s letter contains a number of proposals that could improve the EB-5 program. It also contains a number of controversial proposals that should be subject to serious discussion and debate. What is not debatable is that it provides perhaps the best vision to date of the thinking of the Administration regarding the future of the EB-5 program.

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!

       
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