What's Wrong with the EB-5 Program?
By Carolyn S. Lee*
The interest in EB-5 immigrant investor cases has not
waned with either harsh economic times or the looming sunset (redux) of
the EB-5 regional center pilot program on March 6, 2009. So the
reasonably well-informed reader might question the appropriateness of my
offering’s title.
Alas, dear reader, your eyes have been clouded by “green sugar plum
fairies.” These are what my friend Angelo Paparelli has called the
dollar signs dancing before immigration lawyers seeking greener pastures
among high net worth foreign nationals. Who knew they existed in our
hippie, feel-good practice of helping immigrants achieve the Great
American Dream? These clients are not poor, tired, nor huddled – except
maybe in a Hermès boutique to snatch a Birken bag.
There are many key things wrong with the EB-5 program, particularly as
USCIS administers it. The Pilot Program authorizes the creation of
regional centers, through which approximately 90% of EB-5 petitions are
currently filed. We have the expansive law created in furtherance of
“economic growth,” whose few faults include an internal sunset
provision. We then have decent regulations that fairly clearly separate
the standard program rules from the Pilot Program. Then things start to
go terribly wrong – both at the FTIRCP level and among the adjudicators
at the Service Centers. The Foreign Trader, Investor and Regional Center
Program (FTIRCP) is the unit within USCIS HQ having jurisdiction over
the EB-5 program. California Service Center is, as of January of this
year, the regional service center having sole jurisdiction over EB-5
filings.
The primary problem – and I only have time this episode for one, kids --
is FTIRCP’s standard for job counting in regional center cases. It has
freely imposed the separately existing standard EB-5 program’s rules
onto the Pilot Program. The standard program requires at the I-526 phase
a showing that the required 10 jobs will be created within two years,
as shown in the comprehensive business plan. In the same vein, the I-829
regulations governing removal of conditions require proof of actual job
creation, such as I-9s and payroll records. This makes sense. For the
standard program, the investor must actually create 10 jobs for known,
qualified employees. The investor must produce documentation showing
that Mary, Jim, Bob and Helen now have full time jobs as a result of the
petitioner’s investment.
In contrast, the Pilot Program has a broader mission. The law creating
the Pilot Program sought to promote “regional productivity” and foster
“positive economic effects.” Accordingly, under the statute, job
creation may be satisfied by both direct and indirect means. In other
words, investors don’t need to prove that Mary, Jim, Bob, Helen and
their 6 co-workers were hired “directly” as a result of the EB-5
investment. Rather, under the regulations, the petition must prove job
creation by including “valid economic methodologies” projecting required
job creation, direct or indirect. By allowing the job creation
requirement to be satisfied by indirect means, Congress and the
regulations are saying that job creation may be reasonably inferred from
capital infusion, as long as statistically valid forecasting tools
support that inference.
The problem is that rather than auditing the validity of the economic
methodology used at the I-526 phase, USCIS is demanding I-9s and payroll
records – evidence of what it calls direct jobs, upon which the
projection of indirect jobs is based.
USCIS doesn’t buy the well-reasoned arguments put forth elsewhere,
notably by Lincoln Stone, that when economists use the term “direct
jobs” in their reports, they don’t mean direct jobs in the Mary, Jim,
Bob sense. Rather, the “direct jobs” themselves are projections forecast
from capital infusion and other input factors. So to ask for I-9s and
payroll records for employees who were never intended to be identifiable
in the first place is idiotic on my impatient days and stubbornly
unreasonable on my more contemplative days.
So what’s wrong with the EB-5 program? In a word: USCIS. Wrong on the
law, wrong in its approach (to make it clear – focus on the methodology,
guys, not I-9s), and wrong in its understanding of what “direct jobs”
mean to economists. Someone needs to remind USCIS to doff their cop hats
when dealing with the EB-5 Pilot Program. It’s good for America,
Gentlemen. It brings capital into our country when we’re experiencing a
suffocating capital and debt squeeze in the nation. It creates jobs when
we’re hitting historic and devastating unemployment rates. Not asking
for favors. Just apply the law and regulations as they stand. Is that
too much to ask? Not a rhetorical question.
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*Carolyn Lee is an immigration partner at Miller Mayer,
LLP, in Ithaca, NY. She has spoken on EB-5 issues at various
immigration conferences, including those sponsored by ILW.com. Carolyn
has written an article covering ethical issues in EB-5 practice
published at http://www.ilw.com/articles/2007,1120-lee.shtm. She is the
recipient of the 2008 recipient of AILA's Joseph Minsky Young Lawyer
Award. She is also listed in the International Who’s Who of Corporate
Immigration Lawyers. Please see her bio for more information.