NYC EB-5 presentation April 27th 2012

• I am Joseph P. Whalen and have years of experience in immigration adjudication. I am most known for growing the EB-5 Regional Center (RC) Program from obscurity into a thriving USCIS “product line” . • I am the guy who wrote the very first practical and useable Regional Center Proposal “How to Apply” Instructions for USCIS. I grew the number of Regional Centers from barely a dozen to over 60 as the lone USCIS RC Adjudicator. • I personally wrote the initial RC adjudication training materials and trained the first batch of the CSC RC adjudicators.

Joe Whalen’s EB-5 Roundup at April 27, 2012, EB-5 Investment Summit: Dealmakers Conference

1 NOT FOR SALE-I OFFER THIS FREELY-NOBODY IS ALLOWED TO SELL THIS!

1. Create Business

Plans

2. Select Econometric

Model & Inputs

3. Prepare Economic Analyses

4. Submit Regional Center

Proposal

5. Obtain Regional Center

Approval

4. Include: EB-5 Compliant Standard Investor Documents, Due Diligence Plans, RC Sponsor’s Funding Source(s), Promotional & Marketing Plans, Investor Services and Fee Structure.

5. Beware! Do Not Claim Approval in Advance of Approval! It is OK to Say you are Seeking Approval until you get it. If an Amendment is needed, don’t market it yet as if it were ALREADY approved.

6. Seek EB5 and Domestic Investors

1. Don’t be Vague or Stingy at this step! Be Proactive and plan for Contingencies. The Comprehensive, Detailed, & Credible Plan will Guide Selection of the Econometric Model and Data Inputs for the Economic Analysis!

2. This choice WILL affect the I-829 Evidence Needs and the EA’s Job Creation Projections/Predictions.

3. The EA Will Project Direct & Indirect Jobs Created & Determine the No. of EB-5 Investor Slots Available and; Should Include Domestic Investors and Benefits to U.S. and/or Regional Economies.

My Recommended Approach to RC Applications (I-924s)


Select or Create Project Specific

Business Plan

Select or Create Project

Specific Economic Analysis

Execute EB-5 Compliant

Documents & Agreements

Add Investor’s Financial Evidence

Regional Center

Affiliated

I-526

EB-5 Visa Petition

Approval

Investor & Family File for Visas or AOS

Better Prepared I-526s Should NOT get an RFE!

Creating Project Specific Plan & EA Can be Skipped IF Vetted Plans & EA’s Are Already in the RC’s “Exemplar Library”!!! Minor changes might be needed.

Many RC’s Vet the Funds Before this Next Step!

Better Prepared RC Investments Begin Here for the Investor.

Many RC’s Vet the Funds Before the Previous Step!

What the EB-5 RC Investor Should Expect


This REALLY Happened!

• An attorney, claiming to be involved in EB-5 already, asked my opinion on something and it scared the hell out of me!

• “How detailed of an economic analysis (EA) do my non-RC investors need with to submit with their I-526 applications?”

• This person claimed to already have filed for EB-5 clients! SCAIRY THOUGHT!

• WOW! I replied that: • The I-526 is a visa petition,

not an application. • The EA is used to predict

indirect jobs within the RC. • Non-RC petitioners show: • 1.) Jobs, or • 2.) a Matter of Ho

compliant, detailed, comprehensive, and credible Business Plan without any EA at all.


Tenant-Occupancy Methodology • I was asked for input on the following:

– 1. What could be the economic theory or theories that USCIS is relying on re: excess demand; in RFEs?

– 2. What form of evidence would you suggest would prove excess demand?

• Here is my take on this:

• It is not economic theory that drives USCIS on this but rather it is reality. They expect sound business decisions to drive EB-5 financed projects. They expect that a huge project will not be contemplated, let alone commenced without a damn good reason. (Picking the pockets of rich aliens is not a damn good reason.) (cont’d….)


Tenant-Occupancy Methodology

• (cont’d….) The damn good reasons should be laid out blandly and bluntly in the Matter of Ho compliant, comprehensive, detailed, and credible Business Plan.

• That plan should be where underlying factual data (such as from statistically sound surveys) is stated (with sources cited–such as BEA, BLS, DOL, Census, a specific state office or program, chambers of commerce, industry-specific interest groups; or a think tank, or policy institute, universities, PEW Institutes, etc…).

• A feasibility study may have been done for that particular project; or a local government (usually with state and/or federal support) may have produced a regional study to support legislation or an economic growth plan and/or grant applications for federal or state funding.


Two Key Elements for RC Proposals

• Business Plan (BP): • Comprehensive, Detailed

and Credible. • What kinds of commercial

enterprises will your Regional Center offer to ALL of your investors?

• NAICS Codes: North American Industry Classification System (Try not to exceed 4 digits.)

• Maximize Flexibility

• Economic Analysis (EA): • What Econometric Model

will you use for that economic analysis?

• RIMS II • IMPLAN • REMI • REDYN [Regional Dynamics] • Other/Customized? • Job Count determines

number of EB-5 investors


Two Key Elements for RC Proposal

• Business Plan (BP):

• This project specific plan will be the source of data categories for input into an Econometric Model to produce an Economic Analysis (EA).

• Actual or Exemplar:

• Is it REALISTIC?

• Got NEXUS?

• Economic Analysis (EA):

• The BP determines categories of input but may or may not provide actual numbers to plug into the Model used to produce the final JOB CREATION Projections.

• Garbage In-Garbage Out

• Got more NEXUS?


Transparent Complexity

• Failing to Plan equals Planning to Fail

• Putting USCIS On Notice

• [R]evolving Investments

• Diversification

• Contingency Plans

• Preserve Flexibility

• Secure Deference to a reasonable extent

• Material Change

• Authorized Modification

• Chang makes USCIS accept the predictions that it approved, if the plan was followed.

• BUT does not force the investor to be limited to only that original plan.


Chang v. U.S., 327 F.3d 911, 927 (9th Cir. 2003)

• If the alien investor is seeking to have the conditions removed from his or her status based on the business plan contained in the Form I-526, USCIS may not revisit certain aspects of the business plan, including issues related to the economic analysis supporting job creation.

• It is more beneficial for an immigrant investor to utilize the business plan contained in the Form I-526.


Material Change Invites Re-Evaluation

• If, however, the immigrant investor is seeking to have his or her conditions removed based on a business plan not consistent with the approved I-526, the Chang decision does not foreclose USCIS from requiring or requesting evidence to prove the element of job creation.

• This may include revisiting issues previously adjudicated in the Form I-526, such as the economic analysis underlying the new direct and indirect job creation.


Within the Scope

• If an investor must alter plans after I-526 approval, then results are what matter in the I-829 adjudication.

• Did the legally required full amount of capital get invested?

• Did the minimum number of jobs get created?

• Is the altered plan in the approved geographic area?

• Does the dollar amount match the final project area (TEA vs. non-TEA)?

• Are “Indirect” jobs estimates in an approved industry and supported by the RC’s approved econometric model?


Beyond The Scope—Not Fatal • ORIGINAL Approved Plan • In RC’s Geographic Area

– TEA or Not TEA?

• Minimum $$$ predicted • Initially Planned Industry

Category • Economic Analysis (EA)

supports sufficient jobs by Approved Methodology

• EA Dictates needed I-829 evidence to prove the Stated Assumptions

• FINAL Effectuated Plan • In RC’s Geographic Area

– TEA or Not TEA?

• Minimum $$$ invested • Same or Similar or another

vetted RC Industry Category • NEW Economic Analysis

follows previously Approved Model & shows enough jobs

• If beyond the scope, then only DIRECT Jobs count and you need Specific Evidence


Required Evidence • Preponderance of the

Evidence Standard? • “More Likely than Not” >50% • Matter of Chawathe, 25 I&N

Dec. 369 (AAO 2010) • Chawathe’s Prong (3) states: • In most administrative

immigration proceedings, the applicant must prove by a preponderance of evidence that he or she is eligible for the benefit sought. See footnote #7.

• Most ≠ ALL

• Specific Evidence in the regs?

• 8 CFR § 204.6 (j) (4)(i)(A): • tax records, Form I–9, or

other similar documents for ten (10) qualifying employees (for I-526)

• 8 CFR § 216.6 (a)(4)(iv): • payroll records, relevant tax

documents, and Forms I–9 (for I-829)

• If one strays “outside the scope” of the RC, then only EB-5 DIRECT Jobs can count and specific evidence applies!


http://www.justice.gov/eoir/vll/intdec/vol25/3700.pdf

Specific Evidence • Matter of Chawathe, 25 I&N Dec. 369 (AAO 2010): Sometimes

the critical parts are hard to find, such as this:

• FN 7 The standard of proof should not be confused with the burden of proof. The burden of proving eligibility for the benefit sought remains entirely with the applicant. Section 316(b)(2) of the Act; see also section 291 of the Act, 8 U.S.C. § 1361 (2006).

• Additionally, the “preponderance of the evidence” standard does not relieve the petitioner or applicant from satisfying the basic evidentiary requirements set by regulation. There are no regulations relating to a corporation’s eligibility as an “American firm or corporation” under section 316(b) of the Act. Had the regulations required specific evidence, the applicant would have been required to submit that evidence. Cf. 8 C.F.R. § 204.5(h)(3) (2006) (requiring that specific objective evidence be submitted to demonstrate eligibility as an alien of extraordinary ability).


http://www.justice.gov/eoir/vll/intdec/vol25/3700.pdf

Nexus until Now

• Izummi tells us that: • “Especially where indirect

employment creation is being claimed, and the nexus between the money and the jobs is already tenuous, [USCIS] has an interest in examining, to a degree, the manner in which funds are being applied.

• The full amount of money must be made available to the business(es) most closely responsible for creating the employment upon which the petition is based.”

• Easy Sell: • The Regional Center and its

investors control the entire project.

• Hard Sell: • The EB-5 financed project are

too peripheral, insignificant, and/or too distant in terms of the money-to-jobs nexus

• The Usual Challenge: • RC Project(s) + Closely

Associated and Collateral Projects = EB-5 Direct, Indirect, (& Induced) Jobs & Beneficial Economic Impacts (for nexus).


What is NEXUS? • “A connection or series of connections linking two or

more things; or A connected group or series; or A causal link”. [USCIS desires a causal link for nexus.]

• It is useful to think of it in terms of a broad relationship that clearly shows a palpable connectivity amongst group members.

• In this instance “palpable” is defined as: “Able to be touched or felt: Tangible; esp. of a feeling or atmosphere; So intense as to be almost touched or felt;

• [and my particular favorite]: easily perceptible by the mind: Noticeable and/or Manifest. [Leaps from page!]

• Address the Regional Center’s Overall Project!


What is NEXUS? • Are the third-party employees who are being counted

for EB-5 purpose, actually working in a business that has a direct connection (palpable nexus) to the overall project in which the Regional Center is committed? Are they really a part of the project? Are they really within reach? Are they so distant, peripheral, and/or disconnected that there is no realistic nexus, which is easily perceptible to any rational mind? Are they the employees of a “customer” rather than the employees of a “partner (even a distant partner) in the project”? In this sense, I am not confining the inclusion of only partners that can be traced on paper. Papers can be faked. [Think bigger than you have so far.]


What is NEXUS?

• A realistic nexus is not something that can be faked. The concept of a fake or false nexus is an oxymoron.

• A nexus can be: strong vs. weak, or clear vs. vague, or sufficient vs. insufficient, etc....

• While nexus cannot be faked it may be difficult to explain or hard to see.

• If any relationship is supported by fake paperwork, then that is fraud, which may also qualify as criminal behavior. However, it is quite possible for a real relationship, which is not supported by a paper trail to be clearly seen with the naked eye.


What is NEXUS? • In summary, nexus can be straightforward and obvious,

complex, convoluted, or tenuous.

• In any of those cases, it is there to some degree.

• Exactly at what point it is too tenuous to count towards EB-5 indirect job totals is fact-specific and case-specific.

• Sufficient Nexus will ultimately be a finding-of-fact by the adjudicator based upon all of the evidence presented as to whether it counts or not.

• The number one advantage of participating in the Pilot Program is counting indirect jobs created by others via a clear nexus within the same USCIS Approved and Designated Regional Center’s Overall Project.

• The connection needs a reasonable/realistic explanation. 20

NOT FOR SALE-I OFFER THIS FREELY-NOBODY IS ALLOWED TO SELL THIS!

How Do You Demonstrate NEXUS? • Indirect job projections must be based on clearly

defined assumptions. At the end of the process you need to establish that the conditions precedent underlying the stated assumptions have been fulfilled or are on the cusp of being achieved within a reasonable period of time.

• You need to know exactly what actual physical evidence at the end will support the assertions you made up front.

• I call this a back-end burden of proof.


“the employment upon which the petition is based”

• Nexus must be shown between the EB-5 money and the job-creating commercial enterprise(s).

• How close is close enough and how distant is too distant to count?

• Must put USCIS on notice of contingencies.

• Did you confine the RC investment too much?

• Contingency Plans make the difference.

• Advance Planning can save an EB-5 investor from a failing project.

• Swap and shift EB-5 investors between projects that are within the scope of the RC.

• Gross mismanagement will bury you!


Broadening NEXUS

• Early Commitment

• The Regional Center cannot hang back and shop around for a done-deal and expect to get any credit for jobs created by someone else’s risk and success!

• See: 8 CFR § 204.6(g)

• “Overall Project” Plan

• IF your RC Plan is too damn narrow (like falling for the CSC trick of making you be too detailed and constricted in order to submit an actual “shovel-ready” application) THEN YOU LOSE broad NEXUS!


8 CFR § 204.6(g)

• (g) Multiple investors — • (1) General. The establishment of a new commercial enterprise

may be used as the basis of a petition for classification as an alien entrepreneur by more than one investor, provided each petitioning investor has invested or is actively in the process of investing the required amount for the area in which the new commercial enterprise is principally doing business, and provided each individual investment results in the creation of at least ten full-time positions for qualifying employees.

• The establishment of a new commercial enterprise may be used as the basis of a petition for classification as an alien entrepreneur even though there are several owners of the enterprise, including persons who are not seeking classification under section 203(b)(5) of the Act and non-natural persons, both foreign and domestic, provided that the source(s) of all capital invested is identified and all invested capital has been derived by lawful means.


8 CFR § 204.6(g)

• (g) Multiple investors — • (2) Employment creation allocation. The total number

of full-time positions created for qualifying employees shall be allocated solely to those alien entrepreneurs who have used the establishment of the new commercial enterprise as the basis of a petition on Form I–526. No allocation need be made among persons not seeking classification under section 203(b)(5) of the Act or among non-natural persons, either foreign or domestic. [USCIS]shall recognize any reasonable agreement made among the alien entrepreneurs in regard to the identification and allocation of such qualifying positions.


8 CFR § 204.6(g) • (g) Multiple investors —(1) General. The establishment of a new commercial enterprise

may be used as the basis of a petition for classification as an alien entrepreneur by more than one investor, provided each petitioning investor has invested or is actively in the process of investing the required amount for the area in which the new commercial enterprise is principally doing business, and provided each individual investment results in the creation of at least ten full-time positions for qualifying employees. The establishment of a new commercial enterprise may be used as the basis of a petition for classification as an alien entrepreneur even though there are several owners of the enterprise, including persons who are not seeking classification under section 203(b)(5) of the Act and non-natural persons, both foreign and domestic, provided that the source(s) of all capital invested is identified and all invested capital has been derived by lawful means.

• (2) Employment creation allocation. The total number of full-time positions created for qualifying employees shall be allocated solely to those alien entrepreneurs who have used the establishment of the new commercial enterprise as the basis of a petition on Form I–526. No allocation need be made among persons not seeking classification under section 203(b)(5) of the Act or among non-natural persons, either foreign or domestic. The Service shall recognize any reasonable agreement made among the alien entrepreneurs in regard to the identification and allocation of such qualifying positions.


•Is YOUR RC the actual Project Developer? •Does YOUR RC only facilitate the formation of EB-5 investor Limited Partnerships (LPs) instead? •Is YOUR RC the General Partner in those LPs? •Does that LP join another entity in a larger project?

•Has YOUR RC taken on the primary role of matching those EB-5 LPs’ funds to “others”? WHO?

How does your RC make the money available to the job-creating commercial enterprise(s)?


How does your RC make the money available to the job-creating commercial enterprise(s)?

Is it the case that those “others” to whom YOUR RC: 1.) loans money to or 2.) makes an equity investment in –

are found among the following? a.) An intermediary lender who will in turn make loans to project developers who in turn will construct facilities for use by the owners/operators of job-creating commercial enterprises; or b.) An intermediary lender who will make loans directly to owners/operators of job-creating commercial enterprises; or c.) The project developers who construct, expand, or remodel/refurbish a facility for the owners/operators of job-creating commercial enterprises; or d.) The owners of job-creating commercial enterprises directly.


When your Regional Center hands EB-5 money over to an intermediary lender or a developer make sure YOU know what

THEY will do with it and be sure that you inform USCIS Up-Front.

•You need to include a description of money pathways in your Investor Agreements (PPM & LP Agreements, etc.) that are or will be used as prima facie evidence in support of the I-526 petitions. •Standard transaction documents should be vetted in the I-924 and preferably the EXEMPLAR I-526 as an I-924 Amendment. •This will “put USCIS On Notice” of the intended use of funds to create jobs, or to claim jobs created via earlier bridge financing. You can be creative at this stage with your standardized transaction documentation but you must be forthcoming about it.


Mind The Money Trails

• Bridge funding must be presented in the I-924 first! • You cannot shift funds from their intended use to

another purpose that was not identified and claimed up front in the EB-5 investor’s I-526 visa petition.

• Misdirecting funds in such a manner is a “bait and switch” tactic that USCIS will catch and will make you suffer greatly for.

• Izummi was all about catching the RC promoter in the act of altering the investment mechanisms and transaction documentation as well as pocketing the money instead of creating jobs. That was the true nature of the original prohibited material change.


RC’s Due Diligence Plans Are Critical

• If their money stinks—your project sinks!

• If your investors can’t qualify for a visa—they will bad mouth you because of their problems. – Past Immigration Violations (previously removed)

– Current Unlawful Presence or Status Violations mean that they cannot adjust status and once they depart the U.S. they are barred from re-entry for three or five+ YEARS!

– Criminal Histories may mean Inadmissibility!


RC’s Due Diligence Plans Are Critical • ALL Project Partners must be vetted!

• If your partners have problems, your RC may be encumbered with those problems.

• Full Disclosure is required in the PPM!

• Study the South Dakota lawsuit: Zhen v SDRC

• http://eb5info.com/system/documents/209/original/Zhen_v_SDRC.pdf?1331404066


http://eb5info.com/system/documents/209/original/Zhen_v_SDRC.pdf?1331404066

http://eb5info.com/system/documents/209/original/Zhen_v_SDRC.pdf?1331404066

Shovel Ready for Initial I-924?

• I think it is generally a bad idea!

• It encourages being TOO NARROW and CONFINED—stay out of this straight-jacket!

• Only a broad, multi-faceted PROJECT is safe.

• IF a single narrow 1st PROJECT fails, THEN, without any options the REGIONAL CENTER likely collapses!

• EXEMPLAR PROJECTS as contingencies are a safety net that can save the Regional Center.


I-526 as I-924 Amendment

• Flexibility in Finalizing Project-Specific Details • An I-924 is NOT a visa petition. As such, the RC

applicant is NOT seeking to secure a priority date for visa allocation purposes (obtaining an actual Immigrant Visa abroad or filing for Adjustment of Status domestically).

• Because it is NOT a visa petition, it is wide open for modifications.

• I-526 Exemplar Approval as a Marketing Tool • Once one has received an approval for the project

specific I-526 exemplar, that approval is a marketable commodity. It promotes investor confidence!


Issue Preclusion • I-526 EXEMPLAR approval locks in a job methodology. • Oyeniran v. Holder, No. 09-73683(9th Cir. March 6,

2012), explains: • Collateral estoppel applies to a question, issue, or fact

when four conditions are met: – (1) the “issue” at stake was identical in both proceedings

(Job Prediction Methodology & money pathways); – (2) the issue was actually “litigated and decided” in the

prior proceedings (EXEMPLAR I-526); – (3) there was a “full and fair opportunity to litigate” the

issue (RFE and response); and – (4) the issue was “necessary to decide the merits”

(Exemplar I-526 was approved for $ path & methodology).


Issue Preclusion • An EB-5 Regional Center Proposal demands a large quantity of

information and a high level of detail. The exacting standards employed lead to a very solid settlement of many hypertechnical matters and issues. This is a standard, general and basic basis for reasonable reliance on the approved financing approach and job creation prediction methodology.

• Going that extra mile and securing a Project Specific EXEMPLAR I-526-I-924 approval which locks in USCIS acceptance of the indirect job-creation methodology is the safest approach, if you stick close enough to that plan.

• This is the basis for an even greater degree of reasonable reliance. This proposition is supported by Chang v. United States of America, 327 F. 3d 911 (9th Cir. 2003).


Issue Preclusion

• Once the approach & methodology have been deemed reasonable and have been accepted by USCIS; and

• EB-5 aliens have invested millions of dollars into a large project;

• USCIS cannot conscionably disallow the predicted indirect job creation of a successfully accomplished, previously approved plan when adjudicating the I-829 requests for removal of conditions on status.

• AAO has already blocked CSC on this basis in the same way that the Ninth Circuit blocked INS from reneging on such a “contract-like” agreement in Chang v. United States of America, 327 F. 3d 911 (9th Cir. 2003).


No Backpedalling Allowed

• Siddiqui v. Holder, Nos. 09-3912, 10-1282 & 10-3221 (7th Circuit, January 12, 2012), is important for the:

• The Seventh Circuit’s statement that they were “.... unable to affirm the AAO’s conclusion[s] .... because .... AAO’s decisions lack[ed] individualized analysis and.... [did].... not identify particular deficiencies in the substantial evidence submitted ...”

• Additionally, the Court found that AAO impermissibly applied statutory changes retroactively and contrary to the terms of a settlement agreement.


The Victorville Regional Center Termination Case in the DC District Court set a briefing schedule with the following deadlines: Administrative record January 17, 2012 (This was met early by USCIS.) Dispositive motions March 2, 2012 Responses to dispositive motions April 2, 2012 Replies April 16, 2012

However, Victorville filed for “Voluntary Dismissal” before USCIS could file anything further and cut-off any actual Court Decision! The CSC Decision of May 24,2011, which Dismissed the Motion brought against its October 20, 2010 Termination, was incorporated by reference and Affirmed by AAO on Certification. In addition, the new and futile issues raised by Victorville in response to CSC’s Notice of Certification were specifically addressed in the final AAO Decision of December 21, 2011.

There are NO Regional Center Specific PRECEDENTS to date.


Joseph P. Whalen Independent EB-5 Consultant, Advocate, Trainer & Advisor

51 Ashton Place | Buffalo, NY 14220-2107 Phone: (716) 604-4233 Fax: (716) 822-1860

E-mail: [email protected] or [email protected] Visit me on the web at: http://www.slideshare.net/BigJoe5

or http://eb5info.com/eb5-advisors/34-silver-surfer

DISCLAIMER: Work is performed by a non-attorney independent business consultant. It is the client's responsibility to have any and all non-attorney work

products checked by an attorney. I provide highly-individualized training based on consultation with my clients. I serve Regional Center Principals and their counsel. I am

not an attorney myself although I have trained numerous attorneys and INS/USCIS adjudicators in complex issues within immigration and nationality law. I do not prepare forms, write business plans, or create economic analyses. I do review them for clients prior to submission and suggest corrections and/or modifications to run by their

attorneys and investment advice professionals. NAICS Code: 611430 Professional and Management Development Training


mailto:[email protected]

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