Divine's Tweaks to Klasko's EB-5 Process Proposals


I appreciate Ron Klasko's suggestions posted yesterday for procedural improvements to USCIS' administration of the EB-5 program. For the sake of USCIS' consideration and stimulating further discussion, I lodge publicly and to USCIS my reactions to those suggestions.

Most importantly, I agree with suggestions 1, 2, 3, 7, and 8. USCIS should shift resources to adjudicate within 3 months (not 4) an exemplar petition for the approval of a project. This should be filed electronically to form the basis of a "deal package" through a process that needs improvement from the cumbersome present mechanics. If USCIS has questions, it can ask them to the right party once on the front end, not to 100 investors who already subscribed. Upon approval, the "new commercial enterprise" (NCE) can market the approved project and subscribe investors whose petitions should be filed electronically to link to the approved "deal package" and should be expedited because they only need review of source and path of that investor's funds. make it easier for regional centers to post "deal packages." Yet, USCIS should allow investors to file I-526 petitions and link to deal packages without waiting for project approval if they want, and any systematic expediting of the petitions could be implemented electronically when the linked deal package becomes approved.

The same approach needs to be applied to I-829 filings to save thousands of trees. Because early-immigrating investors can end up filing I-829 petitions long before others and while the project is still developing, the electronic system needs to facilitate layered updating of the "deal package" equivalent for the I-829 stage in order to allow the developer to show an ever-increasing job count to cover the increasing number of investors as they file their I-829s corresponding to the project package.

These proposals are not new, and for the most part USCIS in fact already included them in a "Proposal for Comment" published on May 19, 2011 with fanfare and introduced by then Director Alejandro Mayorkas himself (now DHS Deputy Secretary). USCIS proposed to adjudicate "shovel ready" projects in 4 months and to allow "premium processing" (3 weeks for extra $1225) for related I-526 petitions. Other parts of that proposal-- regarding email communications about regional center filings and a review board before regional center project denials-- have been implemented. It seems plain that USCIS held back on the rest in the swirl of program leadership and location changes and allegations of favoritism and national security vulnerabilities in the meantime. Three weeks might be too fast given some security vetting USCIS may conduct, but generally expediting such petitions would encourage everyone to use the sensible exemplar process. USCIS has not even referred to the proposals in any ensuing stakeholder meeting. They need to get back to it and get it done.

Proposal 4-- for USCIS to deliberately hold petitions of investors with children subject to age out until their visa number would be available-- is intriguing but much trickier to implement than it sounds and therefore deserving of more comment by others. First, many projects hold funds in escrow until I-526 approval, and this proposal would frustrate the funding needs of such projects. Developers would need a way to require investors choosing for delayed adjudication to forego escrow. Second, the availability of visa numbers is an ever-shifting phenomenon, and USCIS has no control over the advancements and retrogressions that tend to occur, so it is unclear how USCIS could know how long to hold an I-526.

I disagree with proposals 5, 6, and 10.

As to proposal 5, the law actually gives USCIS authority to speed regional center-sponsored petitions over others, not the other way around, and USCIS should not reverse enacted congressional policy. Instead, USCIS should be more reasonable in its requirement of "substantial steps" taken by investors in small investor-managed projects before filing an I-526 petition in light of the inability of the investor to be here to manage them. As long as the requisite investment funds are committed and a business plan to use them for job creation is shown, that should be enough. USCIS should quit extending the import of the first section of the precedent Matter of Ho decision (22 I&N Dec. 206 (BIA 1998)) beyond its actual holding-- that a deposit of funds in a corporate account and signing an assignable lease without any credible plan for how to spend the requisite capital in the job-creating business is not enough.

At times I have argued for proposal 6, but as Ron says if USCIS implements proposals 1, 2 and 3 the need for separate representation of regional center and investor in an I-526 essentially goes away. And one can argue that the NCE, which might be quite separate from the regional center, has at least as much stake in the I-526 and should be able to be represented as well. Let's avoid the complication by doing the most sensible things.

I think proposal 9-- to provide a procedure for premature I-829 exemplar filing for approval of material changes-- is unnecessary in light of USCIS' policy in its May 30, 2013 memorandum that changes at I-829 stage are not deemed "material" and don't prevent I-829 approval if the changed project meets the ultimate investment and job creation requirements of the EB-5 program. The more substantive problem to be fixed is what happens with "material" changes that occur before an investor immigrates as a conditional resident, because USCIS says that results in denial or revocation of the I-526 petition and prevents conditional residence. There needs to be a way to determine whether or not a change is considered "material" in the early stages so that an investor facing some change can know whether the change requires starting over or not. Such a review process even should offer an advisory opportunity, so that investors (and their project developers) could seek review before making the change and avoid the change if it might be found material. As with later-stage changes, USCIS should clarify that the question for materiality of pre-immigration change should be whether the revised plan actually meets EB-5 requirements or not, not whether the changes could affect eligibility. And the implications of change to a plan that originally was not ineligible should not include loss of priority date and consequent loss of a child's immigration due to age-out, so USCIS stop denying and revoking changed approvable petitions and should by policy and regulation at least recognize the same priority date preservation rule for subsequent EB-5 petitions that it does for subsequent EB-1, 2 and 3 petitions.

Proposal 10-- to publish regional center statistics-- sounds more attractive in the abstract than in reality. Most importantly, regional centers are not the NCEs, and increasingly are not in charge of NCEs, so a track record of the regional center is not necessarily reflective of the investment enterprise, good or bad. An NCE might need to use a regional center uniquely approved for the project's location, and could be unfairly disadvantaged in marketing by the regional center statistics. Perhaps more importantly, the statistics would be confusing. Some regional centers who encountered one of USCIS' infamous hard-line approaches to the "no redemption" requirement might have experienced massive denials followed by swift approval of all of the same investors, skewing the statistics in an unfair direction. Others who faced the same problem might have withdrawn petitions and re-filed, so the same essential results would look very different in approval rates. An investor can ask a regional center or developer about past success and should get meaningful answers. The rules prohibit securities issuers from misrepresenting such things as regional center track records, and that's enough, especially if the SEC spot checks some issuer claims. I'm usually for transparency, but proposal 10 would do more harm than good.

Reprinted with permission

About The Author

Robert C. Divine Robert C. Divine has represented and assisted employers and other parties in some of the largest immigration enforcement investigations and prosecutions as well as private RICO actions. He provides strategic advice and training for employers in their immigration compliance efforts. Mr. Divine also has litigated significant business matters, including contract, commercial, product liability, antitrust, ERISA benefits and business torts (including RICO, misrepresentation, Consumer Protection Act).

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