Comment: Upside Down In EB5

Many words have been written in recent months about several things negatively affecting the EB5 program, from many different perspectives. Among the criticisms are: USCIS inconsistencies in economic matters, opacity by Regional Centers, avarice on the part of intermediaries, etc etc. What all parties seem to share is a desire to see the EB5 program progress and prosper. We believe that perhaps the worst thing in the EB5 field is not being remarked on by almost any one - and it is one which, if unchecked, may lead to the collapse of the program - we refer to a dis-incentive created by an under-regulated market - a situation worthy of USCIS's attention.

What we describe here is a situation which currently affects just China, but one that could potentially affect any large EB5 market, such as Dubai or Korea, in the future. What has happened is that an entire ecosystem of intermediaries has popped up in China supporting efforts by Regional Centers and immigration counsel. This ecosystem performs a valuable function - that of ensuring trust, critical for an investment of $500,000, and that of disseminating information, educating people in China about the EB5 program, which education is a necessary, and often under-appreciated function. Unfortunately, however, most of these intermediaries, not satisfied by the already extremely high fees that they command, are ever seeking even higher fees for their services. The problem this creates is a subtle albeit simple one, a problem which attacks the EB5 program at its root. We describe the problem below, and propose a possible remedy for USCIS consideration and community discussion.

What happens briefly is this: Many healthy Regional Centers, especially those with several different financing sources, have a clear idea of what to pay to financial intermediaries, and refuse to pay more than a certain amount. It is the weakest projects, with marginal prospects, that have the greatest incentive to pay the most intermediary fees, since this ensures the loyalties of the Chinese intermediaries more than the financial prospects of the project. Moreover, beyond a certain point, excessive financial fees undermine the viability of the project itself, in addition to any pre-existing marginality. While failure is a feature, not a bug, of the US capitalist system, one must not lose sight of the fact that coupled to the failures of a weak Regional Center will be denials of I-829s, to say nothing of the US jobs not created. This would be a lose-lose situation, instead of the win-win that EB5 was intended by Congress to be.

Many of the other problems in the EB5 market stem from the fact that the financial success of Chinese intermediaries is not tied to the creation of US jobs. This conundrum is not unlike those faced by financial markets in the US – such “moral hazards” are endemic here too. However, unlike the US financial markets, USCIS is in a uniquely powerful position to clean the EB5 market up, using the regulators' traditional tools of disclosure and transparency, coupled with sparing use of targeted enforcement action. Among the things USCIS could do would be to require, along with each I-526 petition, a signed statement from the Regional Center to the investor disclosing all intermediary fees involved in that specific $500,000 transaction, such statement to be countersigned by the investor. Since all such statements would be under penalties of perjury under existing law, USCIS could regard the information thus gathered with a high degree of confidence as to accuracy – in any event, whatever problems may present themselves in an individual I-526 petition would be insignificant when USCIS collated the pattern in such disclosures per Regional Center. Such patterns, and patterns across different Regional Centers, would enable even minimal enforcement by USCIS to be targeted very narrowly to cases most likely to present problems in eventual job creation. Rather than tweaking economic analysis, USCIS would be better advised to see what traditional regulatory tools it can bring to bear in the US on markets on the other side of the Pacific Ocean. Share your thoughts by writing to

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Focus: The EB-5 Summit for Attorneys and Developers
The EB-5 Summit For Attorneys and Developers will be held on Friday, February 1, 2013 in Miami, FL. Speakers will include Jose Latour, David Appel, Edward Beshara, Boyd Campbell, Estelle McKee, Clifford Morris, Sam Udani, and Others To Be Announced. The curriculum is as follows:


  • Lawfully Advising on Choosing a Project
  • Economist Issues: TEAs, Job Creation Models, Tenant Occupancy Issues
  • Developing the 924 Petition

Lunch Presentation

  • 526 Petitions and Source of Funds Issues
  • 829 Petitions and Documenting Job Creation
  • The Regional Center Viewpoint
  • Current Trends In Finding Investors

For details on curriculum, speaker bios, and registration information, please see: here.
For the fax form, see here.

Don't delay, act today! The final registration deadline is January 29th!

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