EB5 Investors Magazine Volume 2 Issue 1 | Page 21

Interagency monitoring of the EB-5 program
Since the recent SEC cases , there has been strong interagency cooperation amongst USCIS , the FBI and U . S . intelligence agencies in addressing issues facing the EB-5 program :
• Beginning in July 2013 , U . S . Senator Charles Grassley , ranking member of the Senate Judiciary Committee , circulated several letters on the EB-5 Regional Center program . These letters were addressed to the director of USCIS , the secretary of the Department of Homeland Security , the director of the FBI , the director of the SEC , and fellow legislators on the U . S . Senate Judiciary Committee , as well as members of the Select Senate Committee on Intelligence . These letters were made available to the public and addressed issues such as allegations of securities fraud , Ponzi schemes , money laundering , wire fraud , and interstate and foreign transportation of stolen property ;
• In August 2013 , the Financial Industry Regulatory Authority ( FINRA ) issued an interpretive letter for broker-dealers that market securities to foreign investors in relation to EB-5 projects . This letter provided guidance on the applicability of the suitability rule when placing foreign investors in EB-5 offerings ; and
• In October 2013 , federal authorities began investigating the financial dealings of South Dakota Regional Center , which steered EB-5 funds into the now bankrupt Northern Beef Packers processing plant .
Reasons for project denials
The cases and events mentioned above are important illustrations of reasons for EB-5 project denial . Some of the primary reasons for project denial , which played a role in the above cases , include :
• Tenant-occupancy : In the February 2012 RFEs , USCIS raised issues related to the “ tenant-occupancy ” methodology for establishing job creation in EB-5 cases . USCIS sought evidence that the projected jobs attributable to prospective tenants would represent newly created jobs , and not jobs that the tenant had merely relocated from another location ;
• Petitioner ’ s failure to place capital “ at risk :” The immigrant investor cannot be guaranteed a return of a portion of his or her capital investment ;
• Failure to obtain independent verification of the offering documents ; and
• Fraud
Because of the threat of fraud and the willingness of USCIS to deny applications and petitions , it is important that both the regional center and the individual investor conduct the appropriate due diligence . The regional center must conduct due diligence on the project it will be sponsoring , which includes research on the project ’ s principals , independent verification of the project documents , background checks , Dunn & Bradstreet reports , and other available avenues to ensure the overall viability of the project .
The investor must exercise due diligence as well , including conducting research on the individuals behind the regional center and project , the economic methodology used to predict jobs , the site of the project itself , and ensuring that the capital is placed at risk . For a more complete list of due diligence considerations , please visit EB5Investors . com .
The joint investor alert
In October 2013 , the SEC and USCIS issued a joint investor alert to warn individual investors about fraudulent investment scams that exploit the EB-5 program .
The investor alert identified warning signs of fraud , which include :
• Promises of immigration results ;
• Guaranteed investment returns or no investment risk ;
• Overly consistent high investment returns ;
• Unregistered investments ;
• Unlicensed sellers ; and
• Layers of companies run by the same individuals
Proposed meeting between USCIS and Congressman Goodlatte
Congressman Bob Goodlatte , Chairman of the House Judiciary Committee on Immigration , had a scheduled meeting with USCIS on Nov . 15 , 2013 to discuss the EB-5 program . Chairman Goodlatte was prepared with detailed inquiries regarding the state of current EB-5 applications and USCIS adjudication policies . Unfortunately , USCIS postponed the meeting the day before it was slated to take place , with no explanation or make-up date . We hope to have an update for readers in our next article in this series .
Current I-526 and I-924 processing times
To date , USCIS ’ s published processing time for the I-526 petition is 19.8 months . This is significantly beyond USCIS ’ s national goal of eight months . In our practice , the actual I-526 processing times for our recent cases range from 7-12 + months for regional center investor cases , and around 8-12 months for direct investor cases . We are optimistic that processing times will improve .
As late as January 2014 , USCIS has showing published processing times for the I-924 application online . According to this information , the published processing time is nine months for the initial I-924 regional center designation application and 10 months for a regional center amendment application . This , again , is significantly beyond USCIS ’ s national goal of four months set forth for both types of applications . In our practice , actual processing times for I-924 applications are generally around 12 months .
With the creation of the new office in Washington , D . C . to oversee the administration of the EB-5 program , we are hopeful that processing times will speed up . USCIS plans to first transition I-924 regional center applications to Washington , D . C . and then follow with I-526 individual investor and I-829 petitions . To date , we have experienced I-924 applications and I-526 RFE
responses being adjudicated in the Washington , D . C . office .
Continued on page 20 www . EB5Investors . com 19
Interagency monitoring of the EB-5 program Since the recent SEC cases, there has been strong interagency cooperation amongst USCIS, the FBI and U.S. intelligence agencies in addressing issues facing the EB-5 program: • Beginning in July 2013, U.S. Senator Charles Grassley, ranking member of the Senate Judiciary Committee, circulated several letters on the EB-5 Regional Center program. These letters were addressed to the director of USCIS, the secretary of the Department of Homeland Security, the director of the FBI, the director of the SEC, and fellow legislators on the U.S. Senate Judiciary Committee, as well as members of the Select Senate Committee on Intelligence. These letters were made available to the public and addressed issues such as allegations of securities fraud, Ponzi schemes, money laundering, wire fraud, and interstate and foreign transportation of stolen property; • In August 2013, the Financial Industry Regulatory Authority (FINRA) issued an interpretive letter for broker-dealers that market securities to foreign investors in relation to EB-5 projects. This letter provided guidance on the applicability of the suitability rule when placing foreign investors in EB-5 offerings; and • In October 2013, federal authorities began investigating the financial dealings of South Dakota Regional Center, which steered EB-5 funds into the now bankrupt Northern Beef Packers processing plant. Reasons for project denials The cases and events mentioned above are important illustrations of reasons for EB-5 project denial. Some of the primary reasons for project denial, which played a role in the above cases, include: • Tenant-occupancy: In the February 2012 RFEs, USCIS raised issues related to the “tenant-occupancy” methodology for establishing job creation in EB-5 cases. USCIS sought evidence that the projected jobs attributable to prospective tenants would represent newly created jobs, and not jobs that the tenant had merely relocated from another location; • Petitioner’s failure to place capital “at risk:” The immigrant investor cannot be guaranteed a return of a portion of his or her capital investment; • Failure to obtain independent verification of the offering documents; and • Fraud Because of the threat of fraud and the willingness of USCIS to deny applications and petitions, it is important that both the regional center and the individual investor conduct the appropriate due diligence. The regional center must conduct due diligence on the project it will be sponsoring, which includes research on the project’s principals, independent verification of the project documents, background checks, Dunn & Bradstreet reports, and other available avenues to ensure the overall viability of the project. The investor must exercise due diligence as well, including conducting research on the individuals behind the regional center and project, the economic methodology used to predict jobs, the site of the project itself, and ensuring that the capital is placed at risk. For a more complete list of due diligence considerations, please visit EB5Investors.com. The joint investor alert In October 2013, the SEC and USCIS issued a joint investor alert to warn individual investors about fraudulent investment scams that exploit the EB-5 program. The investor alert identified warning signs of fraud, which include: • Promises of immigration results; • Guaranteed investment returns or no investment risk; • Overly consistent high investment returns; • Unregistered investments; • Unlicensed sellers; and • Layers of companies run by the same individuals Proposed meeting between USCIS and Congressman Goodlatte Congressman Bob Goodlatte, Chairman of the House Judiciary Committee on Immigration, had a scheduled meeting with USCIS on Nov. 15, 2013 to discuss the EB-5 program. Chairman Goodlatte was prepared with detailed inquiries regarding the state of current EB-5 applications and USCIS adjudication policies. Unfortunately, USCIS postponed the meeting the day before it was slated to take place, with no explanation or make-up date. We hope to have an update for readers in our next article in this series. Current I-526 and I-924 processing times To date, USCIS’s published processing time for the I-526 petition is 19.8 months. This is significantly beyond USCIS’s national goal of eight months. In our practice, the actual I-526 processing times for our recent cases range from 7-12+ months for regional center investor cases, and around 8-12 months for direct investor cases. We are optimistic that processing times will improve. As late as January 2014, USCIS has showing published processing times for the I-924 application online. 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