• Further, a conflict may arise between regional centers
is approved and the investor is waiting for an immigrant
Dual representation in the EB-5 context also presents an
It is our ethical responsibility as responsible professionals
and individual investors when it comes to the disclosure of
visa number to become available. Thus, it may be in the
issue due to the relative uncertainty of the laws and regu-
to set a good example in the EB-5 industry and promote
facts between the two parties. In the EB-5 context, almost
investor’s best interest to delay response to a Request for
lations in the industry. Since the regional center program
the continued viability of the EB-5 program. Therefore we
all offerings are structured by regional centers as private
Evidence (“RFE”) for the I-526 petition if one is received,
operates as a pilot program, it requires reauthorization for
suggest that an immigration attorney not engage in dual
placements, which qualify for Regulation D or Regulation S
in order to have the child’s age frozen for a longer period
its continued existence, with the next deadline set at Sep-
representation and carefully consider all potential ram-
exemptions under the Securities Act of 1933. Under these
of time. This may result in a conflict between the regional
tember 30, 2016. Although it is likely that the EB-5 regional
ifications to their personal and firm reputation, to both
provisions, the EB-5 investment is considered a private
center and individual investor in a few ways, as typically it is
center program will be extended, it is almost certain that
their regional center and individual investor clients, and
placement or an unregistered offering; therefore, these
in the regional center’s best interest to have I-526 petitions
there will be significant changes to regulations surrounding
the reputation of the EB-5 industry as a whole if they do.
offerings are exempt from registration with the SEC3. As
adjudicated as quickly as possible. For example, some re-
the EB-5 program and regional center submissions in the
Even the perception of impropriety that may arise from
a result, the usual protections of a registered offering may
gional centers have provisions in their offering documents
coming years.
dual representation should be avoided. We believe that
not apply to the EB-5 offering. Regional centers that are
which prohibit release of all or a portion of the EB-5 cap-
exempt must present information that is true and may
not omit any material facts, but they are not
required to make the same comprehensive
financial disclosures to investors as with
registered offerings . Thus, investors
4
may be exposed to greater risk of
as a matter of best practice, the regional center and the
ital until after approval of the I-526 petition. Addi-
These potential changes may further exacerbate conflicts of
investor should seek independent immigration attorneys
tionally, from a project marketing perspective,
interest issues between regional centers and individual in-
to zealously advocate their interests.
regional centers are incentivized to report
vestors. As an example, under the proposed EB-5 Integrity
the fastest average processing times,
Act of 2016, all applications for approval of an investment
based on past case adjudication, in
in a new commercial enterprise must disclose any existing
Austin Fragomen is chairman of the
or potential conflicts of interest among the regional center,
executive committee at Fragomen,
order to attract future investors.
the new commercial enterprise, the job-creating entity, or
Del Rey, Bernsen & Loewy LLP.
• A clear and direct conflict arises
principals or attorneys of any of these entities5. As such,
Over the course of his career in
ther compounded when the immigra-
in any litigation action between the
these proposed changes would make it even more difficult
immigration, Fragomen has served
tion attorney represents both the re-
individual investor and the regional
for an immigration attorney to represent both the regional
as staff counsel to the U.S. House
center, such as in cases where the pro-
center and an individual investor while fulfilling the duties
of Representatives Subcommittee on Immigration,
of loyalty, confidentiality, and competent representation.
Citizenship and International Law and as an adjunct
non-disclosure by regional centers.
We believe this dilemma may be fur-
gional center and the individual investor,
as it may be against the regional center’s
interest to disclose all known or potential prob-
ject falls through, the project loses all or
a significant portion of the investor’s capital
professor of law at New York University School of Law. He
fiduciary duty to both clients. Therefore, this may le ad to a
there was a misappropriation of funds or fraud perpetrat-
Potential Consequences of Dual
Representation
direct conflict between the immigration attorney’s duty of
ed by the regional center or project, or any other instance
There are several potential consequences when an immi-
series of immigration law handbooks. He attended
loyalty and confidentiality to the regional center and the in-
where the individual investor sues the regional center.
gration attorney represents both the regional center and
Georgetown University and received his law degree from
dividual investor.
Continued dual representation in this instance is specifi-
individual investor, and a conflict of interest arises. When
Case Western Reserve University.
cally prohibited under the ABA Model Rules, as it involves
a non-waivable conflict occurs after an immigration attor-
A conflict also cannot be adequately waived when there is a
the assertion of a claim by one client against another client
ney has been engaged, the immigration attorney must
Chad Ellsworth is a partner at
significant risk that an immigration attorney’s representation of
represented in the same litigation or other proceeding.
withdraw promptly from representation of both parties. If,
Fragomen, Del Rey, Bernsen &
lems to the individual investor but the attorney has a
contribution through mismanagement of the project,
issues, and is also the founding co-author of a renowned
subsequent to this withdrawal, separate counsel cannot be
Loewy LLP’s New York office.
• Further, conflicts of interest are more likely to transpire
quickly obtained leading to harm to the regional center or
His practice focuses on the
one client will be materially limited by the attorney’s responsibilities to another client during the course of representation.
has testified before Congress on a range of immigration
the longer the duration of representation. In EB-5 matters,
individual investor, the immigration attorney may be liable
representation of individual and
In the EB-5 context, there are several significant examples
additional conflicts may arise between the regional center
for monetary damages. Additionally, if dual representation
business clients on a wide variety
where interests are not likely to be aligned throughout the
and the investor during the lengthy wait, often several
was improperly entered into as an initial matter, the immi-
of corporate immigration and
entirety of the EB-5 relationship, as bulleted below:
years, before an investor is able to obtain U.S. permanent
gration attorney may also face malpractice issues, potential
related employment matters.
residence. In the case of Chinese investors, the wait time
sanctions by the state bar, additional lawsuits from the re-
Ellsworth has advised human
is even longer due to current immigrant visa availability.
gional center or individual investor, and reputational dam-
resource personnel, managers,
age leading to the loss of other clients.
executives, professionals and
• A conflict may arise between the regional center and
the individual investor when it comes to the timing of the
multinational corporations on a
adjudication of the I-526 petition, especially when there
are “age-out” considerations for dependent beneficiaries.
Historically, the practice of law has been largely self-regu-
variety of global immigration matters. His emphasis is
For example, an investor may be incentivized to delay the
lated based on our ethical responsibilities to our clients and
on the establishment and improvement of immigration
I-526 petition adjudication when there is a beneficiary who
the public. Again, due to the actions of a few bad actors,
compliant global mobility programs, including
is nearing the age of 21, as USCIS “freezes” the child’s age
the EB-5 industry’s reputation has recently suffered harm
jurisdictions with less formalized immigration
while the petition is pending, but not once the petition
based on instances of fraud and misrepresentation.
processes and procedures.
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3, 4: https://www.investor.gov/news-alerts/investor-bulletins/investorbulletin-private-placements-under-regulation-d
EB5 INVESTORS MAGAZINE
5: H.R. 4530 EB-5 Integrity Act of 2016 available at https://www.congress.
gov/bill/114th-congress/house-bill/4530/text
WWW.EB5INVESTORS.COM
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