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Step Up Your EB-5 Legal Representation
Immigration • Project Finance • Securities / Corporate • Fund Formation • Real Estate • Tax • Securities Litigation / Defense
For more information please contact:
John D. Tishler 858.720.8943 | direct jtishler @ sheppardmullin. com
With offices across the U. S., Europe and Asia. www. eb-5opportunities. com www. sheppardmullin. com
While it can be difficult for regional center clients to accept the impossibility of predicting actual outcomes of the future, the reality is that the practitioner community will remain largely paralyzed in performing immigration due diligence unless and until USCIS adopts a regime of policy and regulatory stability, and returns to processing EB-5 matters expeditiously and consistently.
“ Advising clients on non-immigration issues in the context of EB-5 representation is the most problematic area for the EB-5 practitioner.”
Advising on non-immigration issues
Advising clients on non-immigration issues in the context of EB-5 representation is the most problematic area for the EB-5 practitioner. Unlike EB-5 investors, most regional centers will have a team to prepare and conduct the necessary research and studies to propose a development project. The individual EB-5 investor, on the other hand, will likely turn to the immigration practitioner for guidance on all aspects related to securities, tax and finance.
The challenge for many EB-5 investors is that they are unfamiliar with even the basics of conducting due diligence on the soundness of a regional center’ s business plan. Absent licensure and training in securities, tax and finance, the immigration practitioner will find herself in a precarious situation when advising an EB-5 investor on whether a particular regional center project will ultimately produce the 10 jobs necessary and be able to generate enough revenue to return their initial capital investment. The conflict of interest in this scenario is obvious. Can the immigration practitioner, who also represents the regional center, competently advise the EB-5 investor on the risks of investing in that particular regional center?
Moreover, unless the practitioner possesses the proper securities licenses, providing socalled investment advice on the particulars of an EB-5 project is not only challenging, but poses many professional liability risks since the EB-5 practitioner may not possess the full knowledge of corporate and securities law or modern finance and tax laws.
Mitigating this risk requires the practitioner to ally with qualified professionals to support their EB-5 practice. The savvy EB-5 practitioner may consider hiring an in-house“ business and tax specialist” for the purpose of scrutinizing the business aspects of an EB-5 deal, for example. However, any in-house specialist providing investment or tax advice to EB-5 investors without the proper licensure should limit their advice to what questions the EB-5 investor should ask project developers in clarifying the terms and conditions of their deal. This would provide a value-added service to help EB-5 investors independently conduct non-immigration due diligence on a regional center project.
Multiple parties in EB-5 process: can clients waive the conflict?
EB-5 projects frequently include many parties: investor, new commercial enterprise( and occasionally outside principals), regional center( and its principals), project developer( and its principals), non-EB-5 investors, escrow agents, banks, migration agents, and so on. All would benefit from legal guidance, but there are limits on how many of these can be adequately represented concurrently by the same attorney. In many ways, the goals of all parties are aligned in that they all benefit if the project moves forward smoothly and successfully. Beyond that, however, some interests are in direct conflict.
Practitioners must carefully analyze whether the potential conflict of interest is actually waivable, because some are not. Of course, any such waiver should be explicitly spelled out and agreed to in writing by both parties. Even if the potential conflict might be waivable, immigration practitioners should carefully weigh the risks against the benefits. In many cases, a practitioner might actually end up better off by referring one party to other competent counsel, who may in the future refer similar work back.
30 EB5 Investors Magazine