This is a follow-up to the USCIS Stakeholder Engagement held in Miami, Florida on July 28.
In attendance from USCIS were the following personnel:
- Nicholas Colucci, Director
- Jan Lyons, Economist
- Lori McKenzie, Deputy
- Julia Hanson, IPO Deputy
- Danielle Scott, Chief Intergovernmental Affairs
- Eddie Pearson, Division Chief
- David Leckenby, Division Chief
- Steve Koch, Deputy Director of Miami District Office
Director Colucci gave a general report on the industry and the policy and performance guidelines and compliance issues that were being undertaken by USCIS. From a statistical standpoint, he indicated the following:
- A total of $15.5 billion of EB-5 funding has been deployed through Fiscal Year 2015, creating an estimated 84,400 jobs.
- There are currently 83 Regional Centers in Florida, which is an increase of 13% just during Fiscal Year 2016, and an increase of 26 total commencing Fiscal Year 2015. There have been 521 I-526 approvals granted in 2015 for the state of Florida, all involving a variety of projects.
- There was a notation that the press office involved in legislative affairs could be contacted at (202) 272-1200.
- It was noted to the audience that, to the extent there are suspicious activities noted, that the agency will review and coordinate with other agencies, including the SEC, ICE, etc. on investigating any red flags that come to anyone’s attention. There will be regular site visits involving interviews for conditional releases.
- There is focus on integrity and transparency, and that the program is scheduled to sunset on September 30, 2016.
- The number of investors in Regional Centers has increased dramatically from approximately 200 Regional Centers five years ago to approximately 850 Regional Centers now. There were approximately 21,000 I-526 petitions filed for the last six months of Fiscal Year 2015 and the first six months of Fiscal Year 2016.
- In the last 18 months, approximately 11,900 I-526 petitions have been approved, involving $5.9 billion of new capital. During that time, approximately 2,300 I-829 petitions were approved.
- Economics and statistics for the years 2012 and 2013 are currently being evaluated by the Department of Commerce, who will issue a release in the near future. It was noted that evaluations may produce higher numbers given the methodology utilized in connection with the formula applied.
- He indicated there are challenges to the program based upon issuers and underwriters pocketing money for personal gain, rather than having money properly employed as the program mandates. There has also been movement of money between different projects without notice or consent of investors. It was noted that it was the Regional Center’s obligation to conduct due diligence, and provide proper oversight on the job creation factors, and monitor the project. This is kind of unique, given the fact that in many cases, as a practical matter, the Regional Center right now sometimes does not assume those responsibilities, but USCIS has taken the position that, ultimately, the burden falls on the Regional Center. If there are problems, the Regional Center may receive a NOIT and needs to submit information that confirms that it is either promoting economic growth, or confirms the potential concern by USCIS as to improprieties that may be cause of the NOIT. It was noted that self-policing is vital, and that many government organizations are involved in pursuing cases for malfeasance and fraud.
- It was noted that if any participant in the program perceives any fraud, then there should be notification, either on the website, or by calling a fraud alert number at (202) 357-9326.
- It was noted that the good outweighs the bad, i.e., the good parts of the program outweigh the bad, but many of the bad actors overshadow the program in general.
- There are currently 142 staff members with three currently being employed, and another 15-16 being interviewed. The goal is to have 171 employees by the end of the calendar year.
- It was noted that the backlog of I-526 petitions has been reduced by 12%, and the backlog of I-924 filings for new Regional Centers has been reduced by 8%.
- There are now two auditors on board that will audit Regional Centers, and site visits will be done either with or without notice. The site visits will be focused on the job creating entity (JCE) in an attempt to detect fraud based upon unannounced visits to project sites. The auditing process will be directed by a letter to the Regional Center that will be issued an engagement letter. It is anticipated that an RC audit could take up to one week.
- Forms I-924 and I-924(a) will be updated based upon the close of comments on July 6, and that the new Form I-526, With the period for comments closing out on September 9. It is also noted that a new data system is being analyzed for publication, and the data system may be translated into foreign languages.
- It was noted that there are new proposed draft regulations being proposed, along with the potential change in the law that is being considered by Congress.
Deputy Lori McKenzie spoke next, addressing the issues of TEA, Regional Center designations and dollar amounts, and policy issues related thereto.
- She noted that the forms, as noted above, are being revised and should be accessed since the formats are published of record. She went through briefly the differences in the new proposed forms compared to the current forms, with the understanding that the new proposed forms are much more extensive in providing information.
- It was also noted that the policy chapters are being amended and expanded, and will be published sometime, although no commitment was made as to when the same will take place.
Eddie Pearson, division chief, then talked about I-829 interviews, and the situation where if a spouse dies, the investment can be transferred to the beneficiary’s spouse and children who will be interviewed in the I-829 process. Evidence is required to show the investment has otherwise been sustained and the jobs have been created. It was noted that the interest could not otherwise be distributed or transferred, or have assets distributed that would violate the at risk rules of the EB-5 program.
- She noted that with respect to transfers to family members upon the death of the applicant, there would need to be proof, either by will or by operation of law, as to the rights of inheritance.
- It was noted, based upon a question asked, that if the EB-5 capital was provided by a loan, there was no requirement that the loan would otherwise have to be paid off for the I-829 to be issued.
Following Pearson was Economist Jan Lyons. He discussed the benefit of feasibility studies, which are helpful although not required. The standard is contained in Matter of Ho evi. In addition, it was important to tie in cash flow statements to the business plan to prove feasibility.
The next speaker was David Leckenby, who talked about children of minority age. He discussed children under 18 that may lack capacity and have contracts that are voidable, compared to children under 14, whereby a parent/legal guardian must sign the applications, and proof must be provided related thereto. After the conference took place, I personally talked to Mr. Leckenby about the proof required for minors. I inquired regarding the following:
- With respect to a minor under 18 years old, the parent/legal guardian would sign all documents and the child would sign as well.
- Mr. Leckenby thought that was appropriate, but wanted proof that the parent had authority, and proof that under the applicable state law of the jurisdiction that applied to the Subscription Agreement and Operating/Limited Partnership Agreement that the parent could likewise sign for the minor. This would be the Uniform Gift to Minors Act, and in most cases, any child under 18 years old would need to have the signature of the parent/guardian to cause financial contracts not to be voidable. Mr. Leckenby suggested that this evidence of state law and the relationship with the parent/guardian to the child be provided as evidence, along with the I-526 filing.
I separately addressed a question about redeployment, based upon the August 13, 2015 Stakeholders meeting. It was noted in that meeting that USCIS would get back with guidelines as to what was “at risk” based upon its policy memorandum of August 10, 2015. To date, those guidelines have not been established, and it was indicated that a draft policy memorandum will be distributed sometime addressing this and many other issues.
There were some questions in the audience that were responded to related to misappropriation of funds and what effect this would have on the innocent investor. It was indicated that the policy memorandum would address these issues, but there was no response to the status of those projects as of this date.
Other questions were asked, but I think this highlights the gist of the Stakeholders’ Conference.