More fuzzy thinking, courtesy of USCIS HQ

During the last EB-5 stakeholders call, USCIS HQ issued a Q&A that contained this gem, twice:

Q. If jobs are created on an indefinite full-time basis and then lost (such as by downturn of the business) after all EB-5 capital has been plowed into the business, but before the end of CPR status, can they be counted?

A. Jobs created as a result of the EB-5 investment must be maintained through the entire two-year period of conditional permanent residence. INA 216A(d) and 8 CFR 216.6(c)(iv).

Q. If jobs must last to the end of CPR, what is the critical moment: filing of I-829 (which might precede end of two years of CPR by up to 90 days), end of CPR (two years), or approval of I-829?

A. The job created as a result of the EB-5 investment must be maintained through the entire period of conditional residence. The conditional residence ends when the conditions are removed, at the time of approval of the I-829.

Who knows when jobs will be created or lost? Conditions change, the economy falters, growth is slow. Some EB-5 new commercial enterprises go forward without full funding. Some don't. Some go forward but cannot afford to hire enough workers to have 10 workers for each investor at their individual I-829 petition stage or maybe all 10 workers were not on the job during the investor's two-year conditional residence period, but are on the job when the investor's I-829 petition is filed.

How is it in the interests of USCIS to deny the investor's I-829 petition because all 10 jobs did not exist at the time the investor entered the United States or adjusted status if in the United States. That's an arbitrary date that the investor has little, if any, control over. And, typically, the investor has no control over the new commercial enterprise.

USCIS is essentially making the investor responsible for job creation, and that is patently unfair.

Comments like these out of HQ betray lack of knowledge on the part of this agency and failure to take into account business realities. If the jobs are there at the time the I-829 petition is filed with USCIS, I say approve it.

I'm tired of this fuzzy thinking when the focus should be on job creation, stupid!

Baker's Dozen

Robert Divine (partner with Baker Donelson, Chattanooga, former Acting Director of USCIS, fellow member of the EB-5 Investors Committee of the American Immigration Lawyers Association, and a personal friend) asked me to prove what USCIS has said and done to show its hostility toward the EB-5 Program.

It was too easy. All of the following issues below come from my file of USCIS misinterpretations of the law or regulations, from official USCIS memos, official requests for additional evidence, or from USCIS stakeholder conference calls and USCIS reports on those calls.

Here's my baker's dirty dozen list.

1. The two-year rule on full investment and creation of jobs for purposes of removal of conditions, which USCIS snatched out of the marriage fraud amendments, without any apparent basis in reality. Why two years? Could have been four or five, if the goal is job creation. Done.
2. First USCIS said constructions jobs did count (2007) then said they didn't (2009), then said construction jobs must last two years (another two-year rule pulled out of the marriage fraud amendments, without any apparent basis in reality). Why not five years? Why not six months? Said.
3. First USCIS said we could have "rural areas" within MSAs, then it said we couldn't. Said.
4. Capital from sole proprietorships is not "personal assets" for purposes of investment. Said and Done.
5. First USCIS examined regional center applications based upon the business plan and the industries and geographic areas requested. Now it is "project-centric" and requires real or exemplar investment projects for each industry or economic sector and each geographic area (looks like county level, not sure). USCIS analyzes and "adjudicates" or "pre-approves" exemplar projects that do not exist and when they are not even asked to adjudicate them, which is very strange. In short, ACFI's application for designation as a regional center would not be approved today because the agency fails to apply its own laws, regulations and official guidance in a manner in keeping with the congressional intent of this job-creation program. Done.
6. USCIS is denying almost one-third of I-829s. As a prospective investor in the EB-5 Program, if I knew there was a one in three chance that I would not get my permanent green card, I would not invest. Done.
7. Given a choice of allowing an amended I-526 or a new I-526 upon the event of a "material change" in an EB-5 investment project, USCIS chose "new petition". Done.
8. The California Service Center (CSC) adjudicates I-526 petitions with the presumption that the applicant is either a terrorist or a drug dealer. CSC adjudicates I-829s without giving weight to or recognizing the "reasonable time" regulatory standard for job creation. Done.
9. First USCIS said we couldn't count indirect jobs outside the boundaries of the regional center. Then it said we could (Mayorkas letter to Sen. Leahy). Then it said we couldn't count indirect or induced jobs outside a TEA (targeted employment area). Then it said we could. Said and who knows?
10. First USCIS said we couldn't gerrymander TEAs, then it said we could, but most recently said we couldn't. Said.
11. CSC immigration service officers are over-relying on the four Administrative Appeals Office (AAO) "precedent decisions" and under-relying on the law and regulations. Requests for additional evidence coming out of the CSC strongly indicate that CSC officers are not using the preponderance of the evidence standard that statute law and case law require them to apply. Instead, CSC officers are imposing the beyond a reasonable doubt evidentiary standard.
12. USCIS's stated goal is 90 days processing time for an I-526 petition. Current processing time often exceeds nine months or more. While the I-526 petitions are pending, in most cases the investment capital sits in escrow. EB-5 investment project developers cannot wait on the capital that long. Many good job-creating investment projects are dying on the vine. Said and Done.
13. In a "troubled business" scenario, in which jobs are preserved rather than created, USCIS has stated that indirect jobs are not considered preserved, then they said they were. Said.

I could have added four or five more issues to this Baker's Dozen, proving that USCIS is confusing the hell out of foreign investors, their lawyers, investment project developers, and people who run regional centers. I hope it is not viewed as hyper-critical of USCIS, which it is not meant to be. I hope it is viewed for what it is: A list of evidence that the agency has mismanaged the EB-5 Program for a very long time to the everlasting detriment of the people the agency's employees are sworn to serve.

I have lost hope that this trend will reverse itself.

Boyd Campbell
Vice President and General Counsel

America's Center for Foreign Investment, LLC
100 North Union St., Suite 682
PO Box 11032
Montgomery AL 36111-0032
Direct +334.832.9090
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USCIS Q&A reveals serious problems

On December 14, 2009, coming hard on the heels of an EB-5 Program memo issued by U.S. Citizenship and Immigration Services (USCIS), the agency issued responses to questions posed by the American Immigration Lawyers Association EB-5 Investors Committee and the Invest in the USA Association.
There was good news and bad news concerning these opinions issued by USCIS.
USCIS confirmed, for the first time, that an EB-5 alien investor may use funds unrelated to his or her EB-5 investment to purchase insurance from a third-party insurer which would be paid to the investor if the EB-5 enterprise fails to repay the investor. Surprisingly, USCIS said the investor could purchase an indemnity policy as long as the investor's capital is "at risk" and the indemnity policy does not constitute a redemption agreement or a guaranteed buy-back arrangement for the
alien investor's investment in the EB-5 enterprise.
A response concerning Targeted Employment Areas (TEA's), which are 150 percent of the national unemployment rate and are designated by a state agency, confirms what appeared in a December 11 USCIS memo concerning the EB-5 Program. USCIS stated that it could not confirm that "gerrymandering" -- a finding of an area of high unemployment by a designated state agency by cobbling together census tracts or political subdivisions -- "is an acceptable business practice for EB-5 purposes." This response is troubling. Designated state agencies are not "frustrating congressional intent," as the USCIS response states. There are huge areas of geography in the United States which, today, during this ugly recession, cannot qualify under the 150 percent of the national unemployment rate because the national rate is near or at 10 percent. This means that in an area not qualified as a TEA, the investor must invest the minimum $1 million, and most -- if not all -- investors
would rather invest the minimum $500,000 in a TEA. USCIS will not allow rural areas within Metropolitan Statistical Areas, designated by these state agencies, to qualify for the lower minimum investment amount of $500,000 either, thus frustrating congressional intent.
USCIS confirmed that there was nothing in the law or regulations to preclude a guarantee from a third party to repay the borrower "as long as the alien investor's capital is still 'at risk', and the arrangement does not constitute a redemption
agreement or a guaranteed buy-back arrangement ...."
Most troubling was the USCIS response on the creation of indirect and induced jobs, which can be used by regional centers to help investors reach the 10 jobs created per investor, a requirement of the EB-5 Program. USCIS has misinterpreted a bad 1998 precedent decision called Matter of Izummi, which recognized, as a factual premise, that direct jobs were being created outside the boundaries of the regional center. Not once did the decision mention "indirect" or "induced" jobs. However, USCIS has issued its opinion, relying upon Izummi, that indirect and induced jobs created outside the geographic boundaries of a regional center do not count for EB-5 purposes. This is outrageous!
"While the regulation at 8 CFR 204.6(m)(3) provides that each reagional center must describe 'how the regional center focuses on a geographical region of the United States,' " the response stated, "USCIS interprets the statutory and regulatory prescribed focus to mean that the economic analysis methodology used by regional centers should also be focused on job creation within the bounds of the regional center. [See also Matter of Izummi.] As a result, a regional center should file an amended proposal seeking an expansion of the geographic area of the regional center if it wishes to include job creation within its economic models in areas outside of the bounds of the regional center."
If this opinion is allowed to stand, it has the potential to kill this job-creation program.
But see the December 11 USCIS memo at page 9, where it states that "Regional Center Proposals must demonstrate the following EB-5 eligibility requirements in order to be approved: ... (iii) A detailed prediction of the proposed regional center's predicted impact regionally or nationally on household earnings, greater demand for business services, utilities, maintenance and repair, and construction both within and outside the geographic area of the proposed Regional Center." 8 CFR section 204.6(m)(3)(iv).
Those are the words, right out of the Code of Federal Regulations, which USCIS is bound by.

USCIS memo on EB-5 Program: Problems and Challenges

On December 11, 2009, U.S. Citizenship and Immigration Services published a memo whose subject was "Adjudication of EB-5 Regional Center Proposals and Affiliated Form I-526 and Form I-829 Petitions; Adjudicators Field Manual (AFM) Update to Chapters 22.4 and 25.2 (AD09-38". Whew!
The memo requires the filing of a new (or amended) I-526 petition if there is a change in the capital investment and job creation scheme. If the new I-526 petition is approved, the memo requires the immigrant investor to file a new I-485, application to adjust status, if in the United States. Current immigration law does not require the filing of an I-485 requesting re-adjustment of status.
The memo does set out a "pre-approval process" for regional center investment projects that is very welcome. Pre-approval, based upon a USCIS determinaton that the project is EB-5 compliant, will give investors putting their capital at risk some comfort. It will also have the effect of streamlining adjudication of individual I-526 petitions related to the pre-approved EB-5 investment project.
The memo interprets "direct construction jobs" to count as permanent jobs if they are created by the investment project and "are expected to last at least two years, inclusive of when the petitioner's Form I-829 is filed." The "two-year rule" is an arbitrary one lifted from the "marriage fraud amendments" and has no relationship to business, investment, or construction. Further, the construction industry relies upon "man-hours," not "jobs" or "positions."
The memo's description of Targeted Employment Areas (TEA's) -- areas of high unemployment -- is tortuous. That is why reform legislation needs to designate federally recognized Areas of Substantial Unemployment, currently pegged at 6.5 percent unemployment.

Why USCIS is hostile to the EB-5 Program

First, U.S. Citizenship and Immigration Services has no economic development mission. USCIS has no economist with experience in working with the EB-5 Program and the job-creation / economic impact methodologies typically used by U.S. economists.
Second, when USCIS issues an official memo concerning the EB-5 Program, we in the EB-5 world know that we are going to get whacked over the head by a two by four. USCIS has no job-creation mission, even though it is the will of Congress that EB-5 be a job-creation program.
So it was no surprise to read the latest memo on the EB-5 Program to emanate from USCIS. The result of its orders to adjudicators in California will put brakes on the program, restrict job creation, and frustrate the intent of Congress once again, in a time of great economic crisis and loss of millions upon millions of jobs across the United States. It's a shame.