Proposal to Reauthorize EB-5 Program through September 30, 2017

Posted on May 2nd, 2017 by Brian Garcia

 

A proposal to extend the EB-5 Regional Center Program without change through September 30, 2017 is part of a bipartisan omnibus spending bill passed by the Appropriations Committee of the House of Representative.  The proposed legislation is expected to be approved by the House and Senate prior to the short-term deadline of Friday, May 5th.

It is very likely that Congress will reconvene this year to address a long-term extension of the EB-5 program and various reforms, including increasing the investment thresholds, restricting the use of targeted employment areas and increasing Regional Center compliance.

EB-5 Program Reauthorized through December 9, 2016

Posted on October 4th, 2016 by Brian Garcia

On September 29, President Obama signed a Continuing Resolution that extends the authorization of the EB-5 Regional Center program through December 9, 2016 which takes effect immediately and does not change the program.  The Continuing Resolution was approved earlier by the U.S. Congress and was necessary in order to provide short-term federal spending legislation to prevent a government shutdown at the start of the new U.S. fiscal year on October 1.

It is very likely that Congress will not reconvene until after the federal elections to address a long-term extension of the EB-5 program and has proposed various reforms, including increasing the investment thresholds, restricting the use of targeted employment areas and increasing Regional Center compliance.

Over the last 10 years, the EB-5 Regional Center program has been credited with generating over $15 billion in foreign investment and creating in excess of 100,000 new jobs during that period.

Massive Fraud Alleged at Jay Peak Inc.

Posted on April 15th, 2016 by Brian Garcia

The Securities and Exchange Commission and Vermont on Thursday filed civil fraud charges against Jay Peak, Inc. owners Ariel Quiros and Bill Stenger accusing them of misusing more than $200 million from EB-5 investors.  Long the darling of the EB-5 industry, the SEC and Vermont allege the fraud by the two owners started in 2008 with the purchase of the Jay Peak ski resort.  Quiros also owns the nearby Q Burke resort which was seized by the authorities.

‘‘The alleged fraud ran the gamut from false statements to deceptive financial transactions to outright theft,’’ said Andrew Ceresney, director of the SEC’s Division of Enforcement. ‘‘As alleged in our complaint, the defendants diverted millions of EB-5 investor dollars to their own pockets, leaving little money for construction of the research facility investors were told would be built and thereby putting the investors’ funds and their immigration petitions in jeopardy.’’

Investors were told they were investing in one of several projects connected to Jay Peak, the SEC said.  ‘‘Instead, in Ponzi-like fashion, money from investors in later projects was misappropriated to fund deficits in earlier projects,’’ the SEC said.

“Quiros orchestrated and Stenger facilitated an intricate web of transfers between the various Defendants and Relief Defendants to disguise the fact that the majority of the seven projects were either over budget or experiencing shortfalls,” reads the complaint. “These shortfalls were due in large part to Quiros pilfering tens of millions of dollars of investor money for his own use.”

The federal complaint states one of the projects, the AnC Bio research facility, has from the beginning been “rampant with fraud” and is now years behind schedule.  Federal investigators allege Quiros and Stenger made “bogus claims” to investors by saying they had applied for Food and Drug Administration approval for the facility’s biomedical products, such as artificial organs and a liver replacement device.  In reality, according to the allegations, the businessmen had failed to submit any products for FDA approval.  “Quiros has secretly used most of the money raised for the research facility’s construction to pay off and pay down a margin loan and to misappropriate approximately $30 million for his own use,” the complaint states.

A federal judge granted the SEC’s request to temporarily freeze Quiros’ assets and prohibit Quiros and Stenger from participating in projects associated with the EB-5 program while the litigation is pending. A receiver has been appointed to oversee the Jay Peak and Q Burke resorts.

The SEC and Vermont allege that Quiros misappropriated an additional $50 million of investor funds for his personal use, including more than $2 million to buy an apartment in Trump Place in New York, millions of dollars to pay personal income taxes and other expenses and more than $20 million to buy Jay Peak and the Q Burke ski resorts.

The Vermont Department of Financial Regulation alleges that an unrestricted pool of money was transferred between projects indiscriminately and ‘‘was used as a personal piggy bank,’’ said DFR Commissioner Susan Donegan.

Quiros with the help of Stenger bought the Jay Peak resort in 2008 and embarked on years long development relying on EB-5 investments totaling $350 million used to upgrade the resort, building hotels, a golf course and water park. Quiros and Stenger embarked on a series of other developments in Vermont also relying on EB-5 investors to finance the developments.

Vermont Governor Peter Shumlin said ‘‘We all feel betrayed. It’s a dark day for Vermont.”

 

EB-5 Program Extended Through December 11, 2015

Posted on September 30th, 2015 by Brian Garcia

Today Congress passed a Continuing Resolution that, among other things, extends the EB-5 Program through December 11th.  This should give Congress sufficient time to consider any legislative changes and a multi-year re-authorization of the EB-5 Program.  Although the EB-5 Program has strong bipartisan support, legislative changes are being considered to strengthen the oversight and integrity of the EB-5 Program in addition to an increase in the threshold investment amounts and placing limitations on the gerrymandering, or aggregation, of census tracts to obtain a TEA designation.  It appears that an increase to the investment threshold is almost certain, however, heated debate is expected on changes to how TEA’s are determined.

Prospective EB-5 investors should not be complacent about the December 11th extension as Congress can act at anytime to change the EB-5 Program.  EB-5 investors who file I-526 Petitions prior to the implementation of any changes to the EB-5 Program will be grandfathered under the old rules and regulations and will not be subject to increased investment requirements or any other changes that are adopted by Congress.

Chinese Nationals Face EB-5 Cut-Off Date

Posted on April 23rd, 2015 by Brian Garcia

The long anticipated announcement by the U.S. Department of State to establish a cut-off date for Chinese nationals participating in the EB-5 program is finally here.  Effective as of May 1, 2105, the EB-5 China immigrant category will face a cut-off date of May 1, 2013.  Only Chinese nationals with a priority date of May 1, 2013 or earlier will be eligible to receive immigrant visas until such time as the cut-off date is revised.  The USCIS receipt date of Forms I-526 filed by the EB-5 investor establishes the priority date for all EB-5 applicants.  Therefore, Chinese nationals should check their priority date to determine how the cut-off date will impact their immigrant visa processing.  As a result of this action by the U.S. Department of State, immigrant visa interviews at the U.S. Consulate in Guangzhou are being cancelled for those Chinese nationals with priority dates that do not qualify under the new cut-off date.

Because the cut-off date for Chinese nationals is subject to change on a monthly basis, it is advisable that interested applicants closely monitor the U.S. Department of State Visa Bulletin which is available here.  The monthly Visa Bulletin will disclose if the cut-off date has changed and what priority dates are eligible for an immigrant visa that month.  The cut-off date only applies to an EB-5 applicant’s country of birth referred to as the country of “chargeability” and not the county of citizenship.  Accordingly, only EB-5 applicants born in mainland China are subject to the cut-off date.  EB-5 applicants born in Hong Kong, Macau or Taiwan are not subject to the cut-off date.  Under certain rules known as “cross-chargeability” Chinese nationals that are otherwise subject to the cut-off date but have a spouse with a country of birth other than mainland China, can qualify under the spouse’s country of birth and avoid the China EB-5 cut-off date.

The establishment of an EB-5 cut-off date for Chinese nationals will have a significant impact on the processing of Forms I-824.  The U.S. Department of State and USCIS have announced that they will provide guidance on this subject as soon as possible.

Finally, we previously reported on President Obama’s proposed immigration reforms which if implemented would alleviate this issue.  The President has proposed recapturing unused immigrant visa numbers from prior years and allowing them to carry over year after year thereby increasing the number of available immigrant visas each year.  Because the EB-5 category has never reached the maximum of 10,000 immigrant visas allocated per year, recapturing a portion of the unused immigrant visas would alleviate the need for a cut-off date.  The President also proposed eliminating the current practice of counting all derivative family members against the 10,000 immigrant visas. Eliminating this requirement and only counting the principal investor against the EB-5 immigrant visa cap would the need for a cut-off date would no longer be necessary.

We will continue to monitor these issues and provide updates as they become available.

Top EB-5 Countries for FY 2014

Posted on January 29th, 2015 by Brian Garcia

Recently, the Department of State issued preliminary Immigrant Visa Statistics for the 2014 fiscal year, including regional center related EB-5 immigrant visas.  The following is a chart of the top 20 countries receiving EB-5 Immigrant Visas with comparisons to the prior fiscal year.  Once again, China has the top spot by an overwhelming margin.

 

Country

FY 2014

FY 2013

China

8,308

6,250

South Korea

162

309

Taiwan

99

113

Vietnam

92

33

Iran

72

82

Russia

56

39

India

55

35

Mexico

44

63

Nigeria

37

17

Japan

35

70

Venezuela

30

35

Great Britain and Northern Ireland

25

52

Egypt

21

22

Canada

18

20

Hong Kong

15

16

South Africa

13

8

France

9

2

United Arab Emirates

9

1

Kazakhstan

9

5

Brazil

6

11

 

 

 

 

Immigration Attorneys Charged with Defrauding EB-5 Investors

Posted on September 23rd, 2014 by Brian Garcia

 

In yet another cautionary tale, on September 3, 2014, the Securities and Exchange Commission charged Los Angeles attorney Justin Moongyu Lee, his wife Rebecca Taewon Lee, his law firm partner Thomas Edward Kent and five companies controlled by Mr. Lee, with conducting an investment scheme to defraud EB-5 investors.  The U.S. Attorney’s Office for the Central District of California also filed criminal charges against Mr. Lee.

The SEC alleges that Mr. Lee and Mr. Kent operated a regional center in Kansas that was used to raise $11.5 million in EB-5 funds for the construction of an ethanol plant that was never built and was no longer a viable project by mid-2008.  Despite this, the Lees and Mr. Kent continued to promote the project and distributed materials to EB-5 investors falsely representing that construction was ongoing and the plant would be in operation by November 2011.  The group also submitted false documents to USCIS to conceal the failure of the project.

According to the SEC complaint, the EB-5 funds were misappropriated for other uses.  It is alleged that Mr. Lee withdrew funds from the EB-5 investor escrow accounts without their knowledge and misused several million dollars.    The SEC press release can be read here.

This matter illustrates the importance of EB-5 investor due diligence prior to making an investment decision.  It also demonstrates the inherent conflicts of interest in regional center owned projects.  It is no surprise that greater scrutiny is being given to the EB-5 program by the SEC and other governmental agencies.

 

Immigration Reform Delayed

Posted on September 9th, 2014 by Brian Garcia

 

After we reported in late-August that action on immigration reform by President Obama was imminent, the White House announced that it will delay a decision until after the mid-term elections in November.   In June of this year, the President stated that he was prepared to act unilaterally via an Executive Order by the end of the summer if Congress refused to address immigration reform.  Under heavy pressure from Republicans and Democrats alike, the President delayed his decision.

The President announced his decision to delay action personally during an appearance on Meet the Press this past Sunday.  The President stated that he preferred to enter into a dialogue with the Nation on the need for immigration reform and the actions he is determined to take.  The President also stated that his decision was not related to the concerns that a conservative uproar could impact Democrats in the upcoming mid-term elections.

Whatever the reason, the President’s decision disappointed immigration advocates who vowed to continue pressuring the White House for action.

White House Considers Sharp Increase in Legal Immigration

Posted on August 27th, 2014 by Brian Garcia

 

In an article appearing in today’s Washington Post, the White House is considering proposals from business and immigrant rights groups to provide hundreds of thousands of new green cards for legal immigration.  This news comes on the heels of the U.S. State Department announcement that the EB-5 visa preference category has become unavailable to Chinese nationals for the remainder of FY2014.  Should the White House follow through with such a proposal, this action would provide much needed relief to Chinese nationals participating in the EB-5 program and greatly enhance the popularity of the program.

In recent months, the Obama administration has announced a number of executive actions in other areas and the White House now appears prepared to take on immigration reform due to Congressional inaction.  With proposals being considered regarding undocumented immigrants, pressure is mounting on the White House to improve the legal immigration system by reducing backlogs and increasing the annual allotment of green cards.  The Washington Post reports that the White House is considering proposals that would more than double the 366,000 green cards now allotted for family and employment-based immigration.

Among the proposals considered are those that have long been supported by the EB-5 community and centers on changing how the issuance of green cards is counted against the annual allotment.  Under legislation established in 1990, each family member receiving a green card is counted against the annual allotment of available green cards.  The White House is considering counting only the principal green card holder in each case against the annual allotment of green cards and excluding family members from that count.  This change alone will significantly reduce huge backlogs and greatly increase the number of available green cards each fiscal year.

Altering how green cards are counted will greatly increase the number of available green cards allotted to the EB-5 visa preference category as well.  With a current limitation of 10,000 green cards per U.S. fiscal year, counting only the principal investor and excluding the accompanying family members from this allotment will increase the number of available green cards and enhance the EB-5 program as a whole.  With such a measure, our early report regarding the unavailability of EB-5 green cards for Chinese nationals would be moot.

The Washington Post reports that a decision from the Obama administration is expected by Summer’s end which is quickly upon us.

EB-5 Visas Unavailable for Chinese Nationals for Remainder of FY2014

Posted on August 27th, 2014 by Brian Garcia

 

The U.S. Department of State Immigrant Visa Control and Reporting Division recently announced that the EB-5 visa preference category has become unavailable for Chinese nationals for the remainder of FY2014 which ends on September 30, 2014.  As of October 1, 2014, the EB-5 visa preference category will again be available to Chinese nationals.  This action by the U.S. Department of State should not be mistaken to mean that the annual limit of 10,000 EB-5 visas has been reached.

This action means that the maximum number of EB-5 immigrant visas available for Chinese nationals has been reached for FY2014.  A sufficient number of EB-5 immigrant visas remain available for applicants from other countries in compliance with the visa allocation rules followed by the U.S. Department of State.  The visa allocation rules are designed to prevent nationals from one country from oversubscribing any particular immigrant visa category.  It is noteworthy, however, that this is the first time since the EB-5 program was created almost 25 years ago that EB-5 immigrant visas have become unavailable to applicants from one country.

The new allocation of 10,000 EB-5 immigrant visas will be available on October 1, 2014, and as a result there will be little impact whatsoever to Chinese EB-5 visa applicants.  This action by the U.S. Department of State demonstrates the strong demand among Chinese nationals for the EB-5 visa preference category.  Should such demand continue unabated, it is entirely likely that the unavailability of the EB-5 visa preference category to Chinese nationals will be routine.  As a result, this issue is sure to be monitored carefully by the EB-5 community and likely result on continued pressure on the Obama administration to lift the annual limitation of 10,000 EB-5 immigrant visas.