The chances of a stand-alone EB-5 bill gaining consensus with lawmakers on Capitol Hill are low. With the GOP failing to repeal the Affordable Care Act, lawmakers may be spending time readjusting priorities in unexpected ways for the remainder of 2017. The EB-5 Program is unlikely to be a priority. Also, stand-alone EB-5 legislation has not proven to be a successful way for lawmakers to achieve reforming the Program. As we approach 2018, odds are that lawmakers won’t spend political capital on an EB-5 bill. Check out our recent Advisory.
As we head into the summer, there is no certainty that we will see changes to the EB-5 Program. Lawmakers may simply not act, which may result in EB-5 being included in Continuing Resolutions alongside other immigration programs that are temporary, at least in the near future. We also don’t know the fate of the EB-5 rulemaking process underway at the Department of Homeland Security (DHS). The EB-5 ecosystem is in limbo.
That said, regional centers and developers can’t be ignoring that change to fundamental aspects of EB-5 could happen quickly. In this environment, regional centers and other recipients of EB-5 capital have to gear up for changes to deals that could take effect midstream, while offerings are on the market.
Now is a good time for regional centers and issuers to develop plans for accommodating potential changes to deals that are on the market or being launched this summer. Having a solid plan of action before the law changes is sensible. Continue Reading Getting Ready for Change in the EB-5 Ecosystem
Our colleagues at ML Strategies have just published a helpful alert about the status of the EB-5 Program, which is awaiting an extension as we gear up for a lame duck session of Congress.
This afternoon, a draft of the Continuing Resolution (CR) began circulating in Washington, DC. The CR, which Congress will likely pass early next week, will keep the federal government running through the November election. According to Alexander Hecht, Vice President of Government Relations at ML Strategies, upon enactment, the EB-5 Regional Center Program will be extended through December 9, 2016 – the length of this current CR. “Since EB-5 was contained in last year’s Omnibus appropriations bill, it is automatically extended by a Continuing Resolution for its duration. There was no need for legislators to specifically mention EB-5 in this Continuing Resolution,” stated Hecht. Stakeholders should continue to monitor developments related to the CR, but according to Hecht, “passage in both chambers seems very likely early next week, as legislators on both sides of the political aisle are anxious to get home to focus on campaigning for the November elections.”
The extension of the reauthorization for the EB-5 Investor Visa Program may lapse on September 30, 2016. Whether lawmakers will invest time in EB-5 this coming month is an open question, but it is more probable than not that we will see no movement. Every day, it becomes less likely that EB-5 will be on the agenda of lawmakers. Despite inroads to advance legislation to introduce integrity measures to the Program, there is no indication that lawmakers will act. Anything is possible, and lawmakers could surprise us. But there is little time for reaching any consensus on changes to the Program in the coming weeks. With the presidential election looming in the background, EB-5 won’t be near center stage. For now, the status quo may continue for many months and into 2017. Continue Reading EB-5 Reauthorization Heading into Lame Duck Session of Congress
On August 11, 2016, USCIS published new processing times for I-829 petitions. The news is not good for EB-5 investors. USCIS is now taking in excess of 21 months to adjudicate I-829 petitions. This means that EB-5 investors may wait more than one or even two years for final approval of an I-829 from USCIS. The delays are unconscionable.
For those less familiar with EB-5 terminology, the term I-829 refers to the form number of the petition that an EB-5 investor files within 90 days of the expiration of his or her conditional green card status. An investor’s I-829 is supported by proof that, among other things, there has been sufficient job creation to support his or her green card case. At the I-829 stage of the process, an investor must also evidence that his or her investment has been sustained. For thousands of investors, what should be a relatively ministerial process of verifying facts has turned into a bottleneck. Continue Reading I-829 Delays Reach All-Time Record: Thousands of EB-5 Investors in Limbo at USCIS
According to data recently supplied by USCIS, there are more than 20,000 I-526 petitions pending adjudication as of the end of March 2016. This is a massive backlog of cases. What are the implications of this backlog to investors, and will processing times improve?
What does this backlog mean for EB-5 investors?
The current I-526 backlog translates into long delays for I-526 decisions by USCIS. In other words, many if not most investors may wait close to or beyond 16 months for their I-526 cases to be approved.
This backlog of I-526 petitions is unprecedented in the short history of the EB-5 Investor Visa Program. If you contrast the current statistics with the data supplied for past fiscal years, the increase in the number of pending EB-5 cases at USCIS is striking. At the end of fiscal year 2015, there were more than 17,000 pending EB-5 petitions at USCIS. Fiscal year 2012 closed with just 5,000 pending EB-5 petitions in the hands of adjudicators. That is a massive increase in a compressed period of time.
USCIS simply isn’t properly staffed to manage this increase in the agency’s EB-5 caseload. The agency’s backlog has quadrupled since 2012. In light of this shift in I-526 backlogs, EB-5 investors need to be prepared to wait well beyond one year for a petition to even be assigned to an officer at USCIS. Continue Reading I-526 Processing Delays Expected to Continue into 2017
EB-5 regional centers and issuers take heed. The Securities and Exchange Commission (“SEC”) is pursuing litigation against parties in several EB-5 deals. We expect the SEC to increase efforts to prosecute regional centers, issuers and broker dealers who don’t play by the rules in the EB-5 investment industry. Mintz Levin’s EB-5 Financing Practice just released an alert on limiting securities litigation risks in EB-5 transactions. This is go-to reading for anyone in the EB-5 industry. Here are the highlights of the article, along with a few of our thoughts about concerns that borrowers need to have before accepting direct proceeds in loans from EB-5 regional centers. Continue Reading Securities Law Risk Mitigation in EB-5 Offerings
For alleged EB-5 fraudster Lin Zhong there is a cold winter ahead. A deep freeze. As we expected when news of the case recently broke, the Securities and Exchange Commission (SEC) obtained a court order freezing Zhong’s assets as well as those of her company EB-5 Asset Manager LLC. It is alleged that under the guise of the EB-5 regional center program, Zhong raised at least $8.5 million for EB-5 projects. Zhong is accused of diverting nearly $1 million to purchase luxury personal items such as a boat, a BMW and a Mercedes. Zhong is the latest alleged EB-5 fraudster to be stopped in her tracks by the SEC.
It is clear that the SEC is now focused on prosecuting EB-5 market participants and issuers who violate the antifraud provisions of Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5. The allegations here are similar to those alleged in recent cases – the SEC has alleged material misrepresentations and omissions to investors by Zhong. According to the SEC’s website and recent press release, the Commission also obtained a court order appointing a receiver to administer and manage the business affairs and assets of the company and its subsidiaries for the protection of investors. Continue Reading SEC freezes assets of EB-5 Asset Manager LLC and Alleged Fraudster Lin Zhong
USCIS updated its online list of terminated EB-5 regional centers on October 22, 2015. In the coming two months, regional centers are required to comply with the requirement to file their Forms I-924A in order to update USCIS on relevant job creating activity over the past year. We expect that USCIS will terminate more regional centers in the next six months where there are credibility issues over data supplied by regional centers in these filings, or where regional centers simply fail to update the agency through filing a Form I-924A. It would be fully within the realm of reasonable expectations to see at least 100 or more terminations initiated within the coming year. As USCIS uses more resources to tighten up administration of the EB-5 regional center program, and with lawmakers looking closely at the program, dormant or non-compliant regional centers may find their designations revoked. Continue Reading Don’t End Up on a USCIS List of Terminated EB-5 Regional Centers: Be Creative and on Time with your I-924A Filing