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EB-5 Insights

Where Government Policies and Business Realities Converge

Posted in EB-5 Program

The Bipartisan Policy Center will be hosting a panel discussion on Thursday, September 17, 2015 at its office in Washington, D.C. to discuss the EB-5 Regional Center Program, which, without congressional action, will sunset on September 30, 2015.  The panel discussion will review the successes and challenges the EB-5 program has faced as it has been put to use in states and localities in the United States.  Panelists will also discuss the benefits–and potential–of the EB-5 program in creating thousands of jobs and allowing important infrastructure and civic projects to be completed, often in areas that are in need of economic development.  The discussion will also touch on some misperceptions of the EB-5 program, some criticisms the EB-5 program has faced, and the proposed reforms from recent legislation that have the potential to address areas in need of improvement and enhance the program’s effectiveness.

Posted in Administrative Appeals Office

This article examines how Administrative Appeals Office handles a range of petition denial appeals, from applications to sponsor a foreign fiance to bids to bring over a temporary worker on an H-1B visa. However, according to statistics from U.S. Citizenship and Immigration Services, approval rates at the office are strikingly low, particularly when it comes to certain employment-related visa categories. According to Law360, the AAO is often reluctant to reverse denials for business immigration petitions. Shareholder Kate Kalmykov, along with several other expert attorneys, comments that refiling a case or heading to federal court is often a smarter choice, as judges may be more objective in weighing a case than AAO examiners. Kate states that taking the fight to court also frequently makes the government “much more willing to talk to you” and reach a settlement, even if the court doesn’t issue a ruling.

To read the full article, click here.

Posted in EB-5 Program

Yesterday, new FINRA Rule 2040 became effective.  The rule was approved by the SEC earlier this year.  Rule 2040(c) requires a broker-dealer who sells EB-5 securities disclose to investors the amount of fees paid to foreign finders.  In addition, a broker-dealer must receive written acknowledgement from an investor which shows that the investor is aware of the fees.   A document disclosing the total compensation paid by the issuer to the finder, and each investor’s acknowledgement of the same, must be retained and available for inspection by FINRA.  As noted in previous posts, FINRA rules only apply to broker-dealers. 

 

Posted in EB-5 Program

The U.S. Securities and Exchange Commission (“SEC”) filed a civil fraud suit on August 24, 2015 against a Seattle developer, who had raised $125 million under the EB-5 program.  The developer is also the Chief Executive Director of an approved Regional Center under the EB-5 program.  The Regional Center targets investments into real estate development around the Seattle, Everett, Kirkland, and Shoreline areas of Washington State.

Federal officials allege that the developer utilized $17.6 million of EB-5 capital for his own personal use, including the purchase of a home, personal investments, and for gambling purposes.  Judge James Robart in the U.S. District Court ordered a temporary injunction freezing the developer’s assets.

The SEC’s complaint alleges that the developer had plans to raise an additional $95 million under the EB-5 program, and that the asset freeze was necessary because he had been diverting money to foreign bank accounts.  The SEC order also required that any of the developer’s offshore assets to be transferred to the court’s custody.

The SEC has been targeting alleged misconduct by Regional Centers since the 2012. Following a high profile case in Chicago involving $145 million in investments and more than 250 investors, the SEC has stepped up inquiries into possible securities violations by Regional Centers.  The SEC’s increased involvement is essential in maintaining the strict compliance with applicable laws and regulations necessary for an effective program.  Laura Reiff and William Mack wrote about securities issues here.

As intended by Congress, the EB-5 program has increasingly proven to be a significant resource for the U.S. economy with a growing number of well-established companies turning to it for financing.   The program is meant to create U.S. jobs, infuse capital into the U.S. economy, and fund projects to assist areas in developing and growing local economies.  In exchange for the at-risk capital and creation of ten U.S. jobs, immigrant investors receive “conditional” permanent resident status, meaning that after two years, the immigrant investor must prove that the capital is still at-risk, and that the jobs were indeed created.  Only after these two checks, and after meeting other program requirements, will the immigrant investor receive permanent resident status.

The EB-5 program continues to be a true resource for the U.S. economy.  The program is meant to create U.S. jobs, infuse capital into the U.S. economy, and fund projects to assist areas in developing and growing. Please see recent study on the benefits of the EB-5 program: here.   In exchange for the at-risk capital and creation of ten U.S. jobs, these immigrant investors receive “conditional” permanent resident status, meaning that after two years, the immigrant investor must prove that the capital is still at-risk, and that the jobs were indeed created.  Only after these two checks will the immigrant investor receive permanent resident status.

Three bills introduced in the 114th Congress, H.R.616, H.R.3370, and S.1501 all contain strong measures to screen regional center operators, investors, and provide additional tools to USCIS to maintain program integrity.  For example, both S.1501 (introduced by Senators Charles Grassley and Patrick Leahy) and H.R. 3370 (introduced by Representatives Zoe Lofgren and Luis Gutiérrez) would require that Regional Centers conduct oversight and annually certify compliance with applicable securities laws and regulations.

Posted in Immigrant Visa

After months of online system accessibility issues that left potential visa applicants around the globe unable to submit their visa applications, make online payment, or even access their case status, the U.S. Department of State (DOS) and National Visa Center (NVC) has restored much of the functionality to the Consular Electronic Application Center. Nonetheless, applicants and practitioners continue to report problems with accessibility and confirmation of actions performed.

One of the more recently trending issues have been letters from the NVC stating that they will be terminating the immigrant visa application. The letters often site that there has been no contact to the NVC within one year so the case is being closed pursuant to INA §203(g). However, applicants and attorneys are receiving the notification despite having been in touch with the NVC on the case within the last year. The NVC has indicated that they are correcting this issue and are sending applicants follow-up emails to indicate that their cases will indeed continue to process and that the notice of termination was sent in error.   Continue Reading

Posted in EB-5 Program, Government Accountability Office (GAO), USCIS

In its report published on Aug. 12, 2015, the Government Accountability Office (GAO) identified three areas for improvement and provided recommendations to U.S. Citizenship and Immigration Services (USCIS) in relation to its administration of the EB-5 Immigrant Investor Program. We summarized the GAO’s report here.

This article will examine the way in which three pending bills in Congress address the GAO’s recommendations. The American Entrepreneurship and Investment Act (H.R.616), the EB-JOBS Act (H.R.3370), and the American Job Creation and Investment Promotion Act (S.1501) have overlapping policy provisions designed to enhance agency oversight authority, promote program integrity, and enhance data collection. These bills provide Congress with a menu of policy ideas that answer GAO’s recommendations. In its response letter to the GAO, USCIS concurred in all of the GAO’s recommendations and agreed to implement them. Pending legislation, however, provides lawmakers with the opportunity to further support USCIS in making the changes the GAO recommended.

In its report, the GAO recommended that USCIS: 1) conduct future risk assessments of the EB-5 Program; 2) expand information collection through petitioner interviews and revised forms; 3) report immigrant investor information collected by USCIS; and 4) include a discussion about program costs and reasons for exclusion of such costs from a forthcoming study on the program by the Department of Commerce. . For the purposes of this article, we will not address the GAO’s fourth recommendation.

In the discussion underlying the recommendation for USCIS to conduct future risk assessments, the GAO cites two areas in particular. First, the GAO describes the challenges adjudicators can experience in verifying an investor’s lawful source of investment funds. Second, the GAO discusses the challenges associated with evaluating the legitimacy of an investment entity and USCIS’ limitations in dealing with suspected fraudulent investments. Continue Reading

Posted in Immigrant Visa

Members of the American Immigration Lawyers Association (“AILA”) have reported several new or additional problems with information received from The National Visa Center (“NVC”). AILA members report receiving letters in error from the NVC. Some letters indicate that proceedings to terminate the immigrant visa application have commenced. Others state that the application is being terminated pursuant to INA §203(g) for failure to contact the NVC within one year of notification of the availability of a visa—even when the applicant or the attorney has, in fact, been in contact with the NVC within the one-year period. While §203(g) does provide for reinstatement of the visa registration if the applicant can establish that the failure to apply for a visa within one year was “due to circumstances beyond the alien’s control,” affected individuals need not worry about pursuing that avenue in connection with the present erroneous issuance of notices to terminate proceedings.

Indeed, as of July 30, 2015, AILA updated the information on its website with news from the NVC that it is “correcting the issue and is sending affected applicants a follow-up email to let them know that their case is still in process, and that they should disregard the email received on July 29, 2015.” Therefore, it appears that affected persons need not take any remedial action at this time, however AILA has said it has requested further clarification from the government on the matter. Those who have been affected and do not receive the email directing them to disregard the termination notice, should contact the NVC as soon as possible to ensure that your case does not fall through the cracks. 

A similar issue arose last year and was addressed at the November 2, 2014, AILA/Department of State (“DOS”) Liaison Meeting with the NVC (meeting minutes available here). At that time, the notices of termination of immigrant visa applications were likewise sent by NVC in error. The difference at that time was, the NVC indicated that it was unaware of such erroneous termination letters, thereby putting affected applicants in a much more difficult position of having to correct NVC errors, rather than simply being notified that NVA acknowledges its error and is proactively working to correct it.

Applicants must remember that it is not a requirement that the individual actually complete the immigrant visa processing within one year, rather, that he or she communicates with the NVC at least once per year while processing continues. As a general rule, anyone going through this process should maintain stringent records of all communications with the NVC, including but not limited to, the payment of immigrant visa fees, records of any calls, and all email communications with the agency.

In June, GT reported on the pervasive DOS system glitch that caused failures and the unavailability of visa services worldwide. A modernization overhaul seems to be long overdue at the DOS.

 

 

Posted in EB-5 Program, USCIS

On Aug. 13, 2015, USCIS held a stakeholder engagement for individuals interested in the EB-5 program in Los Angeles and via conference call. Our detailed summary of the engagement will be available on our partner site.

The engagement was attended by several leaders of the Immigrant Investor Program Office (IPO) of USCIS (including its Chief, Nicholas Colucci), who all emphasized USCIS’ prioritization on the integrity of the EB-5 program as well as its potential to create jobs in the U.S. In FY 2014, USCIS received nearly 11,000 I-526 Petitions, representing $5.5 billion in future potential investment. Already in the first three quarters of FY 2015 (Oct. 1, 2014 – June 30, 2015), there have been significant increases in the numbers of I-526 Petitions, I-829 Petitions, and I-924 Applications submitted to USCIS, likely due at least in part to the upcoming Regional Center program Sept. 30, 2015 expiration date (discussed further here).

Given the high rate of incoming cases, processing times are still not where the IPO or stakeholders would like them to be, currently estimated at:

  • I-526 Petitions: 13.4 months
  • I-829 Petitions: 13.6 months
  • I-924 Applications: 11.5 months

As the IPO noted, adjudication times can vary for several reasons, including if a case’s expedite request is approved. In order to improve the rate of adjudication overall, the IPO continues to increase its staff members, hiring experts in law, finance, business, economics, and banking.

The IPO representatives discussed several other topics during the engagement, highlights of which include:

Improved Communication with Stakeholders: The IPO strongly welcomed comments on its Aug. 10, 2015 Draft Policy Memo and has additional events planned and new strategies in place intended to provide good customer service and transparency.

Increased Regional Center Compliance: The IPO is developing a standalone team specifically dedicated to promoting compliance within the Regional Center industry, and plans to engage in additional activities to clarify regulations and ensure authenticity.

Clarification on Deference re: I-526 Petitions and RFEs: The IPO indicated that linking petitions to the same, approved NCE will create adjudication efficiency. Recommendations were provided on filing exemplar I-526 Petitions and submitting additional documents for related cases affected by an RFE.

Clarification on Job Creation Timing Requirements: In general, USCIS follows the job creation policy as outlined in its Dec. 11, 2009 Memo and still tends to expect job creation within 2.5 years of the Form I-526 adjudication, though it was stated at the engagement that this is not a rule. The IPO will continue to monitor the effect of immigrant visa retrogression on this issue.

Clarification on Sustainment of Investment: Comments on this issue in response to the Aug. 10, 2015 Draft Policy Memo were encouraged, as there were many questions regarding the period required for sustainment, especially when I-829s can take several months to be adjudicated.

Clarification on Single New Commercial Enterprise: The IPO confirmed that the EB-5 investment must be sustained in a single commercial enterprise, a requirement that will be examined at the I-829 stage.

Clarification on Material Change: The IPO indicated that the policy on material changes to a Form I-526 petition since the May 30, 2013 Memo has not changed: if there are material changes any time after filing while still pending, the petition cannot be approved.

Mr. Colucci also discussed the IPO’s positive response to the recently released Government Accountability Office (GAO) report (which we covered here) and his recent meetings with local officials and U.S. government employees in China.

The Aug. 13 engagement was useful, although stakeholders and IPO representatives alike continue to wait for further information on the anticipated Regional Center legislation (proposed bills are discussed here). As the status of the legislation becomes clearer, USCIS will provide guidance in the coming weeks. Our office will continue to provide updates on EB-5 trends, regulations, and policies.

 

Posted in EB-5 Program, Regional Center, USCIS

As previously reported, since January 2015 USCIS has maintained a webpage listing the EB-5 Regional Centers that have had their designations terminated. As of June 4, 2015, USCIS has terminated 34 Regional Centers.

A Regional Center’s participation in the EB-5 Immigrant Investor Program can be terminated by USCIS for several reasons under the regulations found at 8 CFR §204.6(m)(6), including when it (1) fails to submit Form I-924A to demonstrate its eligibility on an annual basis or on a cumulative basis and/or as otherwise requested by USCIS; (2) fails to promote economic growth as required; or (3) engages in fraudulent activities.

Form I-924A filings should include updated information demonstrating that the Regional Center is continuing to promote economic growth, improved regional productivity, job creation, or increased domestic capital investment on an approved geographic area. In September 2014, EB-5 Program Director Nicholas Colucci provided important tips for filing Form I-924A, such as including a statement, if applicable, as to why the Regional Center was inactive in the past year and how it had previously promoted economic growth and development.

In assessing the promotion of economic growth, USCIS may closely examine factors including how active the Regional Center has been (for example, USCIS has taken issue with a Regional Center having recruited only 2 investors over a 26-month period when its original economic report projected sufficient development for 476) and whether the Regional Center is actually creating jobs as per its original designation (for example, USCIS has terminated a Regional Center for engaging merely in job preservation, which is permissible only if demonstrated that the investors will be investing in a troubled business, as per 8 CFR §204.6(j)(4)(ii)). For those centers, that have not had an active market offering in the current fiscal year it is important to show activities involved with either: administration of previously raised funds or the review and diligence of upcoming investment opportunities that will be marketing by the Regional Center in the future.

USCIS may terminate a Regional Center due to fraud when the Regional Center engages in fraudulent securities offerings or investment schemes. Regional Centers’ scam activities such as false promises, misleading marketing materials, and misuse of funds can further lead to emergency enforcement action by the US Securities and Exchange Commission and have civil and criminal justice consequences.

As per the regulations, USCIS will issue a Notice of Intent to Terminate (NOIT) the participation of a Regional Center in the program setting forth its reasons; the Regional Center will have 30 days from receipt of the Notice to offer evidence in opposition, and then may appeal the ultimate decision within 30 days of its service. A Regional Center that has been terminated may no longer participate in the EB-5 program.

The termination of a Regional Center can result in the denial of a pending I-526 petition for a foreign national who has invested through that Regional Center and can terminate an investor’s permanent resident status if he or she has not yet removed the conditional basis of the status. While the USCIS Terminated Regional Center webpage is a valuable reference, USCIS updates the page only periodically and makes no claim that the published list is complete, timely, or accurate.

Posted in EB-5 Investment

The People’s Bank of China—the country’s central bank—devalued its notoriously tightly controlled currency (Chinese Renminbi) by 1.9 percent against the U.S. dollar between Monday night and Tuesday morning, Aug. 11, 2015. Such devaluation represents the greatest single-day markdown since 1994, following years of international political rhetoric concerning China’s exchange rate control.

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