I Told You So...

by Joseph Whalen

I hate to say “I told you so.” No, strike that, I don’t mind saying it, what I really mind is, having to say it at all. I can’t stand the insufferable blathering of some pundits who refuse to see the reality of the law in the EB-5 context (and various other contexts). Those folks who refuse to heed sound advice; and instead waste time and increase confusion; by refusing to let go of what cannot be better described as anything less than “utter nonsense”; piss me off! I will now list just some of the nonsensical notions than bug me the most. First I will address myself to those within the EB-5 stakeholder community that can’t seem to distinguish the realities of EB-5 law from their delusions and then I will address myself to USCIS and those adjudicators still stuck in the “Culture of NO!”

To EB-5 Stakeholders:

1. Regarding the “buying and selling” of Regional Centers.

This notion has been floating around for many years. Only recently has USCIS truly made any effort to answer the question as to whether or not it even is possible. The latest Regional Center Designation and Approval Notices clearly include the following language.

The regional center designation is non-transferable, as any changes in management of the regional center will require the approval of an amendment to the approved regional center designation.

Thanks for the clarification but it was NEVER a real issue. It was only ever a “pipe-dream” to begin with. The statute that created the EB-5 regional center has always bestowed the power and authority to designate a regional center on the head of the department in which the primary immigration benefits granting agency has resided. Initially, the authority was bestowed upon the Attorney General who delegated it to Legacy INS. Then the authority passed to, and remains with, the Secretary of the Department of Homeland Security who has delegated the responsibility to USCIS. Nowhere will you find any regulation, precedent, case-law, agency policy or other valid legal interpretive material or statement that could possibly be construed to bestow the legal authority to designate or re-designate regional center status and approval to the principal of an existing regional center. That, my friends, is EXACTLY what would be required for the selling and buying of regional center designation among non-governmental agents. It does not exist, never did and I will hazard a guess that it never will. To those “on-the fence” who are slowly backing away from the radical and ridiculous stance that it is OK to buy and sell regional centers, and are instead talking about “the jury is still out on that issue”, bull-crap, there never was any jury to begin with. See 8 USC § 1153 Note and read § 610(a) of Pub L. 102-395, as amended.

2. The notion of the non-existent “Pre-Approval”.

While there is a mention of EB-5 project pre-approval in a pending piece of legislation (that, in my opinion, would not survive into a final version or “enrolled bill”), it does not now exist nor has it ever existed in law, regulation, precedent, policy or any other lawful source material. This is yet another pipe-dream. The best one can get is the approval of an Exemplar or Dummy I-526 via the filing of that type of EB-5 Amendment via an I-924 Application. The actual form instruction clearly use the term “preliminary determination” NOT pre-approval. In fact, the concept of any type of iron-clad pre-approval is specifically barred by EB-5 centric Administrative Precedent. See Matter of Izummi, 22 I&N Dec. 160 (Assoc. Comm’r, Examinations (AAO) 1998) which held in pertinent part:

(9) The Service [now USCIS] does not pre-adjudicate immigrant-investor petitions; each petition must be adjudicated on its own merits.

3. Fast Food Franchises as suitable EB-5 Investments.

Far too many less competent practitioners are always looking for the “cookie-cutter” solution to an easily replicable investment offering for an “endless” supply of eager EB-5 investors. That, my friends, will never come to pass without an act of Congress, in other words, forget about it. It their zeal in this quest for the holy grail, many have fallen prey to the supersizing of America—the almighty fast food franchise! That is probably only a viable EB-5 option in an infinitesimally small percentage of cases.

My detractors would say (and have said): “Why, Joe, you think you know it all-you, why won’t it work? HMMM? Why, why why?”

To them and to you, I say: “Location is critical. In order for a business model that normally relies on a nearly exclusive part-time workforce, except for a manager here and there, to produce sufficient numbers of permanent full-time employees to satisfy the legal requirements of EB-5 then it MUST be in a such a high traffic area with such huge turnover of customers, which lasts a long enough period of time daily to actually support the required number of jobs before any EB-5 investor should bother even considering it. You cannot add up a bunch of part-time jobs and satisfy EB-5. There are enough entrepreneurs of the small business or franchisee variety among the regular influx of family-based immigrants (a bit over one-million per year) that such mundane investment vehicles should be excluded from EB-5 consideration as unworthy. They routinely turn out to be unworthy and unsatisfactory for the mandates of the EB-5 legislation.” I told you so…

Thus far, I have been addressing EB-5 stakeholders, now I shift my attention to the other half of the equation, the government.

To USCIS, both at Service Centers and AAO:

1. Demanding too much specificity for initial Regional Center Designation is Counterproductive.

It has taken a full two decades for the government agency in charge (Legacy INS and now USCIS) to finally come around to a correct approach to adjudications for Regional Center Designations. Lo and behold, it took a former prosecutor in the U.S. Attorney’s Office (USCIS Director Ali Mayorkas) and the AAO to finally get it right. The AAO has recently [1] released two rather recently dated decisions wherein CSC denials were overturned because CSC was demanding too much specificity and ignoring the plain language of the statue. The statute will allow for Regional Center Designation based on general predictions drawn from general proposals so long as they utilize reasonable methodologies. While the individual projects put forth in association with such a proposal (I-924) (i.e., hypothetical projects) will lack sufficient specificity to garner a shred of deference in later adjudications, the first and most critical hurdle (DESIGNATION) will have been cleared and the project-specific details can be worked out later. This is a sensible approach that I have espoused for quite some time now. [2]

2. Katigbak [3] and Izummi [4] continue to be incorrectly applied in certain EB-5 cases [5] , but progress continues.

The highly restrictive approach espoused in Katigbak has been inappropriately applied to Regional Center Proposal and I-924 Application adjudications but things may be improving. Katigbak stands for not allowing an employment-based immigrant visa to be awarded to someone if the visa petition is filed prematurely. When there are solid statutory requirements that must be met at time of filing in order to secure the filing date as a priority date for visa issuance or adjustment of status proposes, this is the best approach. However, that approach and that concept are inapplicable to the Regional Center application which involves no priority date and does not have quotas on such designations (licenses). Katigbak is only applicable to the I-526 immigrant petition filed by would-be EB-5 investors or entrepreneurs. Katigbak arose in the context of what today would be classified as an EB-3 “professional” who had not yet finished her education to become an accountant when the petition was filed. To allow her petition to be approved would have accorded her a priority date to which she was not entitled. Izummi, on the other hand, is a case that arose within the EB-5 context. It specifically involved a Regional Center affiliated investor’s I-526 and among its many issues is the concept of “prohibiting material changes” in the EB-5 realm. That concept was carried too far in later years. In reconciling the actual statutory requirements and what grew to be an onerous posture by INS/USCIS, we can easily see that the material change prohibition was taken beyond its intended limits. Thankfully, the May 30, 2013, EB-5 Adjudications Policy Memo has alleviated much of the problem. That said, the fewer restrictions that remain need study by practitioners in order to avoid harming their investor clients. Today, we must consider the timing of a change in the business plans and/or structure in concert with the level of materiality, indeed we must seriously examine the individual circumstances closely to determine if a change is in fact material.

Beyond EB-5:

3. In the EB-1, extraordinary Ability context (and certain similar and related contexts), AAO is finally applying Kazarian correctly.

Initially, AAO was going too far in applying the two-part analysis outlined in and drawn from the 9th Circuit case noted above. AAO was proceeding to a “Final Merits Determination” or, as I call it a qualitative analysis and evaluation, prematurely and unnecessarily. After receiving invited Amicus Briefs on the proper application of the Kazarian analysis; AAO eventually changed its approach. I am glad for that advancement in AAO appellate reviews and consequently front line adjudications at the various service centers. Oh, and be sure to check out my Kazarian Amicus Brief posted on the USCIS website [6] as well as on my slideshare pages [7] along with associated articles [8] . See especially an annotated copy of an AAO decision dated April 2, 2012, which demonstrates a much better application of Kazarian by AAO and takes my advice as to stopping without conducting the second part of the analysis when that is the prudent and logical course. [9]

4. AAO has improved its application of Matter of Sonegawa 12 I&N Dec. 612 (Reg’l Comm’r 1967) [10] in the analysis of a petitioner’s “ability to pay” the proffered wage in employment-based immigrant visa petition cases.

I have written separately about this issue and you can find that article with plenty of links here. These are but a few examples of my drum-beatings that have taken a long time to be heard. In parting, I leave you all with this parting shot: Compare the dates of articles and cases and then remember that I told you so… Ignore me at your peril!

That’s my two-cents, for now.

e-mail me at: joseph.whalen774@gmail.com

1Dated in June and July 2013.
3Matter of Katigbak, 14 I&N Dec. 45 (R.C. (AAO) 1971)
4Matter of Izummi, 22 I&N Dec. 160 (Assoc. Comm'r, Examinations (AAO) 1998)

About The Author

Joseph P. Whalen is not an attorney. He is a former government employee who is familiar with the INA. His education is in Anthroplogy with a concentration in Archaeology and has both a BA (from SUNY Buffalo) and an MA (from San Francisco State University) in Anthroplogogy. He previously worked as an Archaeologist for the U.S. Forest Service before becoming an Adjudicator with INS which became USCIS.

The opinions expressed in this article do not necessarily reflect the opinion of ILW.COM.