EB5 Investors Magazine Volume 2 Issue 1 - Page 73

The regional center program is undoubtedly central to the EB-5 program — with some 90 percent of investors investing their capital through regional centers , and nearly 450 EB-5 Regional Centers in existence , it is no wonder that regional centers have become the face of EB-5 . Despite their prevalence , the history of the pilot program that created the EB-5 Regional Center is not commonly known . Here we will trace the EB-5 Regional Center from its establishment , through the turbulent years , to today and beyond .

The EB-5 Regional Center was born as an extension of the original U . S . Immigrant Investor Program ( EB-5 ), first established by Congress in 1990 . ¹ The program was established to stimulate the economy , spur job creation , and dually benefit American citizens and immigrants . In exchange for a capital investment of at least $ 500,000 that leads to the creation of 10 U . S . jobs , foreign nationals are welcomed to the United States . Despite the enormous potential of EB-5 , interest in the program lagged in the early years . To ensure that the benefits of EB-5 were being realized , Congress enacted the Immigrant Investor Pilot Program , more commonly known as the regional center program , in 1992 . ²

The EB-5 Regional Center is an officially designated organization that sponsors investment projects for EB-5 investors . EB-5 Regional Centers not only do more leg work for the investor , but also allow investors to pool their money together to invest in larger projects that create more jobs . Because regional centers allow for the counting of indirect jobs , it is easier for projects to qualify as EB-5 compliant in this regard .” The regional center program may have changed the face of the industry , but sustained interest in the program would not come about until a decade later .

The early days

The industry often describes the early years of the program as the days of the Wild West . While not an entirely laissez-faire environment , getting designation as a regional center was nowhere near as involved as it is today . Developers interested in the not-yet-coveted regional center designation could attain it by writing a letter to the Immigration and Naturalization Service ( INS )— the predecessor of USCIS — explaining their project and attaching documentation , including an economist report and a business plan ( the I-924 application would not be put to use until 2010 ). Despite the ease of the program , only a handful of regional centers were established in the early 90s . People did not fully understand the possibilities of regional centers , or did not

1

See http :// www . uscis . gov / working-united-states / permanent-workers / employment-based-immigration-fifth-preference-eb-5 / eb-5-immigrant-investor

2

See 610 of Public Law 102-395 ( October 6 , 1992 )

want to risk it . Nonetheless , the program crawled along , and as interest in the program grew , processing times in Washington increased — you might say history repeats itself .

The relaxed atmosphere in the EB-5 program made the program a perfect target for misuse and abuse . Less scrupulous actors took advantage of the program and got investors green cards while only committing a fraction of the required investment amount , with virtually no money going to actual projects . The placid early days would quickly give way to controversies that shuttered the program for years .

The turbulent years

The lack of strict regulations in the early 1990s provided the perfect opportunity to test the waters of EB-5 . Although the program required a minimum $ 500,000 investment , some actors found a way to bring investors to the United States with only $ 125,000 , accounting for the remaining amount through promissory notes . While the two most infamous companies participating in such schemes — AIS and InterBank — would later be investigated for ( and in the case of InterBank , convicted of ) fraud , INS allowed such practices at the time . Paul Virtue , then executive associate commissioner of INS , made the practices official in two legal opinions issued in 1993 and 1995 , allowing for investment requirements to be met through the use of promissory notes , and permitting investors to pool their money into limited partnerships . ³ Lax regulations piqued interest in the program , and groups such as AIS took advantage , bringing many investors to the United States with a fraction of the required investment amount .

AIS was supported by a group of politically connected individuals — bankers , developers , a former president ’ s sibling , and an ex-INS commissioner . Rather than asking for a $ 500,000 or $ 1 million investment , AIS marketed EB-5 to the middle class — structuring their deals such that investors only had to put up $ 125,000 in cash , with the rest accounted for in promissory notes . Investors bit , oftentimes believing the investments were a safe , and even guaranteed , path to U . S . citizenship . After AIS took fees off the top , a small amount of money trickled down to the actual business , enough to keep it alive just long enough for INS to remove conditions on investor green cards . Upon receipt of their permanent green card , investors could cash out of their partnerships . ⁴ Such maneuvering , while not illegal , shifted the program ’ s priority from creating jobs and stimulating the U . S . economy to providing green cards at bargain prices .

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3

See http :// articles . baltimoresun . com / 2000-02-20 / news / 0002220371 _ 1 _ investor-visa-program-immigration-program-immigration-laws / 3

4

See Newman , Barry . “ INS Clampdown on Visa Program for the Rish

Creates Controversy .” The Wall Street Journa . 26 Feb . 1999

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