Continued from page 71
As petitions filed in to U.S. consulates abroad, consuls
questioned the complex legalese that allowed investors to
receive a visa on the cheap. In 1997, with too little knowledge
to dissect the complicated documents, the consuls deferred to
INS headquarters in the United States. Then general counsel of
INS, David Martin, realized that little of the investor’s already
minimal investment was ever at real risk. He issued a memo
on December 19, 1997 clarifying that such techniques were in
violation of the law, effectively shuttering the EB-5 Regional
Center program.5 Countless investors were left in limbo.
The next year, INS issued a series of precedent decisions that
became hallmarks of the program. The decisions—matters
of Ho, Hsiung, Izummi, and Soffici—clarified regulations,
restricted the use of promissory notes, prohibited the promise
of returns to the investor, limited what qualified as capital toward the minimum investment amount, and required that the
investor be personally involved with the business, among many
other important decisions.6 They aimed to refocus the program
on its original goals of infusing capital into the U.S. economy
and creating U.S. jobs.
Nonetheless, the EB-5 world would soon be hit with yet another scandal. In 2001, James F. O’Connor and James A. Geisler, of
InterBank, were convicted of 48 counts of immigration, tax and
wire fraud, among other charges, in connection with their abuse
of the EB-5 program. The InterBank Group, LLC marketed
EB-5 projects to international investors by misrepresenting the
program. The con didn’t last long before Geisler and O’Connor
were investigated. According to court documents, the two “jointly devised a scheme” to market the EB-5 program to individuals
without the necessary funds to participate. Furthermore, they
falsified documents to convince INS that the investors had
made the requisite investment. From 1996 to 2000, InterBank
subscribed about 335 investors, none of whom invested the
full required amount, and collected about $21 million in EB-5
funds. Most of the investors involved lost all of their original
investment, and none were found complicit in the scheme.7
Unfortunately for investors, they not only suffered at the
hands of unscrupulous business, but also at the hands of INS,
who put the brakes on their pending immigration cases. The
guidelines established in the matters of Ho, Hsiung, Izummi,
and Soffici were applied retroactively, and halted cases that had
already passed hallmark obstacles of the EB-5 process, leaving
many investors stranded. In order to remedy this, Congress
passed a law in November 2002. This special EB-5 legislation
allowed investors who had filed their I-526 petitions between
January 1995 and August 1998 an additional two years to
fulfill the requirements of the program.8 Despite the legislation,
investors had to wait years for regulations to be put in place
while their immigration status remained uncertain.
See INS General Counsel Memorandum, HQCOU 70/6.1 & 70/9-P (Dec.
19, 1997).
See http://www.eb5immigration.com/library/files/00707899.pdf
7
See http://www.leagle.com/decision/20041043321FSupp2d722_1972.
xml/U.S.%20v.%20O’CONNOR
8
See 21st Century Department of Justice Appropriations Authorization Act,
§§ 11031-37, Pub. L. No. 107-273 (Nov. 2, 2002)
5
6
72
During this time, all petitions associated with regional centers were put to a halt. While INS was still adjudicating direct
investment cases, the flow of investors was a trickle at best, with
only 44 I-526s approved in 2001, and 69 in 2002—the lowest
approval numbers in EB-5 history.
The renewal
Despite the setbacks that plagued the young EB-5 industry,
proponents of the program recognized its potential. In the early
2000s, the program experienced a resurgence through regional
centers. These pioneering regional centers confronted negative
perceptions of the program, hesitation on the part of government
officials, and general ignorance of the program (for more on this,
see our interview with Tom Rosenfeld on page 50). Some of the
early regional centers that are still active today are American Life
Inc., Vermont EB-5 Regional Center, CMB Export Regional
Center, Seattle Regional Center, CanAm Enterprises, and
California Consortium for Agricultural Export. All of these regional centers have demonstrated the benefits of the program by
pooling $500,000 investments into projects that have spurred
economic growth in run-down areas of a city, county and other
metro areas by developing infrastructure, hotels, and other
commercial businesses to bring jobs into those areas. As USCIS
demanded stricter proof of job creation, as set forth in a USCIS
policy guidance memorandum on tenant occupancy dated Dec.
20, 2012, some of these pioneers encountered difficulties with
p