Comment: Attorney Risks

There are at least three distinct factors that go into the decision to make an EB-5 investment, and there are three distinct kinds of licensed experts that can advise investors about them.

1) Financial Evaluation (including Suitability & Location): Investment advisers licensed by FINRA are trained to evaluate the question of suitability of an investment for a particular investor. To make this judgement, the investment adviser needs to look at the entire portfolio of the investor--which an immigration attorneys are generally not aware of. How do you choose a location of a real estate investment? Location has to evaluated with respect to the price--a "great" location which is overpriced can be worse than "poor" location at a low enough price. Only someone with real estate experience can evaluate a real estate investment. Furthermore, analysis of financial projections is a specialty which most immigration attorneys are not trained to do.

2) Structured Finance: Structured Finance is a field of expertise in its own right and is needed to evaluate an EB-5 investment. Expertise in that field is needed to understand EB-5 investments qua investments--and that should be left to those who have the expertise to untangle the agreements, the clauses, the terms, the structures and the assets and their relationship to an EB-5 investor to be able to recommend an EB-5 security to an investor. This requires understanding of various entities in a specific deal which would affect investors, underlying assets in the deal terms/structure and inter-credit agreements including subordinate clauses.

3) Immigration Risks: Immigration attorneys can certainly evaluate the job cushions for the project, calculate how many jobs have been created based on the models used etc. They can distinguish projects based on whether the job cushion is 400% or 4% etc.

Probably the optimal structure is the financial adviser quarterbacking the advice--bringing in experts in Structured Finance and Immigration law when needed. By attempting to usurp all three functions, and advising clients on the choice of EB-5 investments, or giving clients a short list of "reputable" projects or Regional Centers, immigration attorneys risk their law licenses, expensive litigation, and their personal assets by violating the SEC laws against investment advise. Advising investors on suitability of an investment without having a FINRA license is a violation of SEC laws, and such violations are not covered by standard malpractice insurance policies most attorneys carry. Though Chinese investors have not been litigious, that is not the case the Indian or other nationalities that dominate today's EB-5 market. Taking this large a risk for a relatively small legal fee such as $25,000 makes no sense, since the risks are more than 20 times larger than that.

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Focus: Attorneys Don't Pay

Whenever there is an EB-5 event anywhere in the world, the primary reason investors or agents come to the event is to hear from immigration attorneys. While other players such as Regional Centers present material of interest to the attendees, the primary content value is provided by immigration attorneys. Because EB-5 is primarily an immigration program, and immigration is the fundamental reason why investors look to EB-5, it is not a surprise that the audience considers immigration attorneys the best source about EB-5 information. Those who agglomerate audiences, like ILW and its competitors, must identify that immigration attorneys are the key part of the program of any conference.

The economic value of an investor to an immigration attorney is a relatively modest amount of $25K. But for Regional Centers, the lifetime value of an investor is much higher as roughly estimated in the chart below:


Therefore, the revenue for Regional Center from each investor is 3 to 20 times that of immigration attorneys. While immigration attorneys bring the primary content value to events they get less value from the event; therefore it is only fair that Regional Centers bear the cost of the events and not immigration attorneys.

Two years ago, knowing immigration but not finance, we did not grasp this point, and we charged attorneys on par with Regional Centers. We realized the above economic point in 2017, and slashed our fee to attorneys by 75%. We are happy to note that our competitors followed suit by reducing the amount they charged to immigration attorneys, creating a two tier price structure for industry events--a higher price for RCs and a lower price for attorneys. In early 2018, we completely eliminated fees charged to attorneys. This is true for both group events and custom events. All attorneys need is to be nominated by a Regional Center that is participating in the ILW event. Attorneys don't pay.

We encourage immigration attorneys to ask the Regional Centers they work with to nominate them to participate in ILW events. Should an immigration attorney decide to speak at or attend any event of our competitors, we suggest you insist on a fair deal, wherein attorneys don't pay.

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