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