Friday, November 8, 2013

How To Avoid EB5 Denial?

Investment Vis is not foreign to foreign investors anymore. Investors are often led to invest in projects under companies designated by USCIS as regional centers who claim to be able to create 10 jobs for each investors. 
Many investors act upon leap of faith based on the facts the representative of the projects looks great, or so and so are approved. 

USCIS EB5 statistics shows that out of 13795 EB5 application since 2005, 81% were approved for conditioned green card, 68.4% were approved for permanent green card, which is 2887 families. The number is certainly not high enough based on the promises made by the projects. Obviously, the investors are not warned enough, instead, are mostly rushed into making decisions. 

The question is what caused the failure. The answer is multiple fold. The article will address a few most common possibilities, but does not promise the entire coverage of issues. 

First, it is under-stated by the greatest extent that a business is designated as a regional center by USCIS does not mean that USCIS has endorsed the project and has made a promise of green card to investors of such project. Instead, approval of a EB5 regional center is simply an approval on investment plan submitted by business owners to USCIS. 

Many project owners made vague or misleading presentation that the projects are partially owned by government. Even it may be true in some, it is not true in most. Most project owners are simply entrepreneurs who have experience to put all sources together. As a matter of fact, any claim that the project is 100% backed by government funds should raise first red flag. 

Secondly, it is possible that the project owners are running shams. As a matter of facts, some have already been caught.  The SEC and USCIS are aware of attempts to misuse the EB-5 program as a means to carry out fraudulent securities offerings.

SEC v. Marco A. Ramirez, et al., the SEC and USCIS alleged the USA Now regional center falsely promised investors a 5% return on their investment and an opportunity to obtain an EB-5 visa. The promoters allegedly started soliciting investors before USCIS had designated the business as a regional center. The SEC alleged that while the defendants told investors their money would be held in escrow until USCIS approved the business as eligible for EB-5, the defendants misused investor funds for personal purpose such as funding their Cajun-themed restaurant. 

SEC v. A Chicago Convention Center, et al., is another case which the SEC and USCIS coordinated to halt an alleged $156 million investment fraud. The SEC alleged that an individual and his companies used false and misleading information to solicit investors in the “World’s First Zero Carbon Emission Platinum LEED certified” hotel and conference center in Chicago, falsely claimed that the business had acquired all necessary building permits and that the project was backed by several major hotel chains. According to the SEC’s complaint, the defendants promised investors that they would get back any administrative fees they paid for their investments if their EB-5 visa applications were denied.  The defendants allegedly spent more than 90 percent of the administrative fees, including some for personal use, before USCIS adjudicated the visa applications.

As with any investment, it is important to research thoroughly any offering that purports to be affiliated with EB-5.

We will talk about other reasons for possible denials of EB5 application in blogs that follows.