2012/10/16 -- USCIS EB-5 Stakeholders Meeting/Teleconference

The below are my personal notes I took during the call. Everyone at USCIS did a good job moving along the meeting and teleconference, but they could not answer when RFE'd cases involving "tenant-occupancy" issue will be decided and when Director Mayorkas' draft or provisional memo will be issued, except to say another "Conversation with Director Mayorkas and Rob Silvers" will take place soon. Also, I am guessing here, but it seemed to me that Mr. Rob Silvers did not quite realize the extent of delays being encountered by I-526s and I-924s, even where there was no "tenant-occupancy" issue. There were many "We will review this issue and get back to you." answers to several very important questions.

My two concerns/complaints are as follows:

1. EB-5 Unit still seems to be a long way off on deciding on its policy on the "tenant-occupancy" issue. In the meantime, what are people supposed to do?

2. I have no issue with USCIS "suddenly" raising this tenant-occupancy issue, I really don't, because if you read what I wrote in the past, my attitude is that USCIS can change its policy if it wants to (that's their prerogative). However, what they should have done is not penalize EB-5 projects which already commenced and/or submitted their I-526s and now are screwed big time. They should say something like: "Any project whose I-526s are submitted starting on *** date will face a strict scrutiny on tenant-occupancy issue which we are looking at more carefully." I guarantee you then there will be less complaint about any change in USCIS policy because the market will find other viable ways to do EB-5 projects.

In conclusion, the EB-5 Unit should treat RCs as any good parents would treat their children: Clear advance warnings should be given, but good parents should not penalize the children who acted in good faith based on what the parents said in the past. If USCIS takes this "common sense" approach in setting and implementing their EB-5 policies, then all RCs will be well behaved. RCs are just business people, but now days, RCs are forced to be business people, financial advisors, attorneys and fortune tellers to succeed. And if a few RCs do not behave even with clear instructions, then USCIS can kick them out by decertifying them; this is something that normal parents cannot do to their children.

October 16, 2012 USCIS EB-5 Stakeholders Meeting/Teleconference Unofficial Notes:

Panels: Rob Silvers, Senior Counsel; Rose Prince, Kevin Bazaire, Claudia Salem (?), John Miles, Rosemary Melville, Blake Goto and Kevin Cummings.

Rose Prince:

New Section Chief for EB-5 and two upgraded supervisory officers, meaning 6 teams for EB-5 Unit. Federal economists and contracted economist and corporate and business attorneys. Tries to streamline EB-5 adjudications. Back-log in adjudications exist for pending RC cases for multiple investors common to NCE.

In-take teams for I-924s to go over economic issues. Review Board composed of Supervisory Officers and Economists. NOIDs and invitation for interviews.

Processing Times: FIFO manner generally. Operational short-term holds for first cases for the same NCE to address the entire group of cases for the same NCE. Also, if an amendment is filed, then a hold will follow for I-924 team and adjudicators to work together.

Rob Silvers:

Conversation with Mayorkas and Rob Silvers to follow next week regarding new "wholesale" policy and draft memo to address many issues and processing times in light of increased work load. I-526s number of adjudications doubled from last year. I-924 adjudication processing times is a key focus, especially involving "tenant-occupancy" issues. USCIS received number of RFE responses which raise different and sometimes conflicting issues for different projects. These are being discussed with other agencies, such as economic agencies, to be decided. USCIS will approve where they believe jobs will be created and will deny where they believe jobs are not being created. One important issue touching upon integrity of EB-5 Program is their SEC compliance, namely solicitation of Units within the United States requiring registration with SEC or state agencies. USCIS will exercise appropriate vigilance and work with SEC and refer cases. Other issues exist and USCIS will work with "other" regulatory agencies. USCIS has not been holding adjudication due to this extension of the RC Program.

Rose Prince:

Questions submitted in advance. Multiple RFEs and time sensitivity of EB-5 projects. But RFE responses sometimes may generate new issues, so that's why multiple RFEs are necessary. All RFEs are reviewed by supervisors. NAICS codes: how many digits are required? Four digit is good level of detail to evaluate projects. Additional specificity may be required, and I-924 approval notice will list NAICS codes. More numbers mean more details. Construction projects: Burden of proof on how to meet more than 2 years of construction activities can be met by expenditures and localized conditions over the 2 years timeline. Date of construction commences when the hard construction begins. Architectural and soft costs need to be separated out from "hard" construction costs. If not, RFEs will follow.

Kevin (Policy Officer):

Troubled Business: Pre-investment number of full-time jobs (not same jobs) must be maintained. What if the escrow account is used? AFM provisions should apply to troubled business as well. No distinction between full-time or part-time employees, which means part-time employees cannot be laid off either. It's net loss for all employees, not just full-time. Outside US employees are irrelevant, so reduction of these employees are allowed.

NCE must show new direct jobs in TEA and geographic boundary of RC. But does not apply to indirect jobs, i.e., can be outside TEA.

Two NCE entities existing before Nov 1990 can merge into one company after Nov. 1990 -- not allowed to count as a NCE, without substantial restructuring or reorganization.

Derivative spouse or children: Follow-to-join for derivatives if PA's I-829 is approved. Age-out issue is not connected to capital investment issue.

John Miles & Claudia: Bridge loans and Sustaining Investment and Job Creation Timing. Limits to use of bridge loans? No clear line can be given. EB-5 law contemplates prospective jobs, so nexus is the key. Use of bridge loan stretches the nexus, but bridge loan can be used. Some sort of contemplation should be evidenced in deal docs and business plan. Simple refinancing of long-existing loan by EB-5 money will not be allowed because the "nexus" does not exist. Contemplation of using EB-5 money to pay off the initial funding is the key. What is the relevant date for sustaining investment? Statutes say CPR period, but regs say 2 years of CPR period. But this is not the reality because it may take longer than approval of I-829. Selling or liquidating investment before approving I-829 is not fatal. It's the connection between sustaining of the investment and job creation that is important, i.e., investment should be sustained until job-creation is completed. Even if jobs were terminated before I-829 for good faith purpose, i.e., bankruptcy, etc., I-829 can still be approved. Fact-specific.

Rob Silvers: More policy issues. Whether and when is it appropriate for deal structure to return condos or time share interests to investors rather than cash? Cannot pre-adjudicate these issues. Such arrangement can "theoretically" be possible, but in practice, USCIS has not seen "approvable" cases because some sort of "at-risk" requirement is important, even though it doesn't have to be very risky investment. All investment amount must be theoretically at risk, but if the investors are lined up to receive condos, then this is not in compliance with this requirement. These kinds of structures have been denied and will probably be denied. Second issue is on RFEs. USCIS wants to issue only one RFE and then approve or deny. But sometimes multiple RFEs are necessary because RFE responses may involve a re-working of the original economic modeling that was submitted, which raises a de novo adjudication. The new model may satisfy all concerns, but sometimes new questions may arise because of the change in economic model, which would raise additional RFEs and more months. USCIS is considering issuing NOIDs rather than RFEs in some situations. USCIS tries to catch all issues in one RFE.

Open Questions from Room:

Q1: Can employees be located outside the census tract or TEA as long as the business is in TEA? As long as the principal place of business is in TEA, it's ok. What if HQ is in TEA but branches are outside TEA? Direct employees of NCE must be in TEA, but what if direct employees are one mile away from the TEA? USCIS may consider this issue.

Does construction begin when the building is demolished or when a majority of construction work can begin.

Q2: Why doesn't a general business plan for RC suffice anymore, rather than requiring too much details? What is the basis? I-924 need not be completely specific for all details, that much is true. However, whether I-924 comes to USCIS with skeletal outline or general outline, USCIS has an obligation to see by preponderance of evidence to be convinced that jobs number will be created. USCIS is responsible that green cards will be issued only where jobs will be created more likely than not, which is the preponderance of evidence standard. If I-924s for sketchy RC, then USCIS is doing a disservice to individual immigrant investors who sign on. Therefore, job creation and protection of investors play a role in USCIS' looking at the evidence. Reasonable economic methodology is the key.

Q3: Will a RC with a hypo project rather than actual project be quicker? Yes, according to Blake Goto, for I-924 stage, but not at I-526 stage. When a hypo project is approved, then the underlying economic model is also approved, so that if the model changes, then of course I-924 amendment would be required.

Q4: If there are direct jobs, then RIMS II expenditures model be no longer used per USCIS economist argument? Demand multiplier vs. expenditures final demand multiplier. USCIS will review this issue.

Q5: Premium processing for I-526 and checking I-829 online status being worked on? No for the first question. For 2nd issue, maybe in future.

Q6: How long to decide I-924 RC designation? USCIS will work on speeding up. Public Engagement email may be another avenue.

Q7: Return of real investment concern has to do with a legal requirement that the money be "at risk".

Q8: Tenant occupancy issue: What is the basis for USCIS for raising this issue? USCIS just wants people to submit thoughts but has not yet decided what to do.

Questions from Phone:

Q1: Unknown tenants -- how to write down 4 digits NAICs for retail tenant but not specific type of retail tenant? USCIS is going to address next month.

Q2: Decisions on tenant-occupancy cases will be held until when? USCIS doesn't know the answer but understands the need for quick action.

Q3: USCIS deference policy announcement. What kind of training provided to assure predictability? It was a reiteration, not a new issue.

More Questions from Room:

Q9: What factors cause USCIS to refer cases to SEC? USCIS has been working with SEC for sometime (one year) involving SEC issues. SEC has agreed to provide staff who will appear at future EB-5 Engagement, so the questions like this should be addressed to SEC rather than USCIS. USCIS does not want to get too deep into providing what factors cause USCIS to refer to SEC.

Q10: Real estate investment given to investors. Past statement said developer can have an option, not investors can demand it. USCIS says this kind of arrangement is not so good.

Q11: How long for "exemplar" project amendment? USCIS just says they will try to speed up.

Q12: Why is Mayorkas' draft memo being delayed? Any timeline? Need to hone in further at another Conversation with Mayorkas, but another draft memo will be coming out "soon" after that.

Q13: Deference Policy and its application. Exceptions: fraud, material change in facts or material error on prior decision. How are these being applied? If the prior adjudication was an error, then if USCIS keeps on re-adjudicating, then when is it appropriate to apply the due deference policy? Case-specific decision.

Q14: Whether tourism or hospitality jobs are being stricken from all RCs per se? USCIS will review and get back.

Q15: Why are I-526s pending even after 1 year, and why was this not communicated that this "hold" would be in effect? USCIS just says it tries our best, etc.

Q16: Sustaining investment issue clarification: Usually, the two year CPR is the minimum, but it takes time to adjudicate I-829s, and there may be litigation, etc. What if NCE holds the money in a loan investment model? Can the money sit at NCE before I-829? USCIS will take a look this legal and policy dimension.

Q17: If USCIS finds SEC violations with a RC, will USCIS itself consider a punitive action or just refer to SEC for investigation, i.e., decertify a RC? USCIS doesn't want to get into this because it's case specific. USCIS will not exclude a possibility of de-certifying.