May 21

EB-5 Regional Center Visas – Complexities and Issues in 2014

EB-5 Regional Center Visas – Complexities and Issues in 2014

EB-5 Regional Center Visas – Complexities and Issues in 2014

The EB-5 Visa Market in China

by Christopher Peng

Having dealt directly with United States Citizenship & Immigration Services (USCIS) regarding I-924 Regional Center adjudications, as well as the client-side aspect of finding investors abroad, there is one clear development within the EB-5 industry – complexity.  Project specifics are requiring more detailed analyses, economists and business planners have been brought in by USCIS adjudications recently to scrutinize projects, and the sheer number of approved regional centers has created a market that requires guidance and research to find the proper fit.

The Numbers Don’t Lie

One need only take a look at the number of approved regional centers – and as a result, the number of available projects readily accepting EB-5 foreign investment – from February 2012 to April of 2014; a span just over 2 years.  During this time, USCIS approved regional centers have ballooned from 218 in February of 2012, to 480 as of April 1, 2014.  From April 1st through today, at least 24 newly approved Regional Centers have been added to the approval list by USCIS.  At the beginning of 2010, there were a mere 80 approved regional centers.

From 2010 to present day in 2014, we have seen a 630% INCREASE in the number of approved regional centers.  At the start of 2010, we had 80 approved regional centers and as of the day of the writing of this article, there are 504.  On the USCIS Approved Regional Center website, there are actually 615 entries on the approval list.

Four years of exponential growth has resulted in an increased number of I-526 applications as well.  For the first time since the inception of the Regional Center EB-5 Pilot Program by USCIS in 1992, there is speculation that USCIS may implement an I-526 quota cap to limit the number of applications filed, or even more specifically, filed from China.

There have also been sharp changes with regards to I-526 adjudications in the last 4 years, with I-526 receipts increasing steadily by year.  In 2009, 1,031 receipts, 2010 saw almost double that at 1,955 receipts, 2011 with 3,805 receipts, and fiscal year 2012 ending with a whopping 6,041 receipts.  This is unprecedented, as 2012 saw more I-526 receipts than the first 10 years of the program combined, and the last 4 years’ totals have exceeded the total amount of I-526 applications filed since the inception of the pilot program in 1992.

Why Do More Regional Centers Mean More Complexity?

Sheer numbers alone automatically equals more marketing, more solicitation, and as China has recently seen, a rapid increase in the number of “immigration consulting firms” that act as marketing agents and “finders” for the various EB-5 Regional Center projects.  This has created a market full of information, but the “asymmetry” is still as glaring as ever.  Regional Center’s always promote their own interests first, and are undoubtedly almost always working with an immigration law firm, office or attorney.  These firms not only handle the Regional Center and EB-5 I-924 filings, but also many times contract a large portion of the investors to perform legal work for their I-526 petition (of which the legal and filings fees are not covered by the Regional Center).

Self-interest, self-promotion, and a flooded market of eager “immigration consulting firms” abroad looking to score large commissions, has only widened the information gap between investor and regional center entity.  Taking China as an example, it is forbidden by law for any foreign entity (such as a law firm or Regional Center) to sign an investment or business agreement – especially for an immigrant visa to another country – within the borders of the People’s Republic of China.  This makes it absolutely necessary for Regional Centers or any EB-5 investment project to work with licensed, bonded, and government recognized immigration consulting companies in China.

This creates yet another area for self-interests to dilute and affect the investor, thus further widening the information gap.  Foreign Immigration Consulting Firms almost always promote the Regional Centers that are paying the largest commissions, as personal monetary business interests and market forces will necessarily dictate.  I have no incentive to sell a regional center project paying $20,000 in commissions per investor located, if another entity is willing to pay me $50,000 plus a certain percentage of “back-end” profits.  Of course there are the handful of reputable, established, and time-proven regional centers that still draw large waves of investment due to prior successful performance; but it is a fact that a vast majority of the 504 approved USCIS Regional Centers, have never even undergone the I-829 process.

Most of the I-924 approvals were handed down during the last 4 years, and as such, a 2 year operating period to show employment impacts and other projected benefits hasn’t been realized by most regional centers.  Additionally, incidents similar to those in Chicago’s “Intercontinental RC Trust of Chicago” scandal, detract from the legitimacy of the entire EB-5 program, much more than any successful project can add.  Chinese investors may not know very much of any of the 504 regional centers available to them for investment, but they almost all know about the Chicago EB-5 fraud scandal.  The scandal has become more synonymous with EB-5 investment than any other singular project, Regional Center, or development.

What Can be Done?  Bridging the Information Gap

Having worked personally in China, meeting with potential investors on behalf of an approved USCIS Regional Center, clients rely heavily on the information provided to them by people they have developed a “business relationship” with.  This leaves investors vulnerable, as rationality and business logic have taken a back seat to a business relationship, or “guan xi” as it’s called in Chinese.

Investors have to understand that a regional center representative, or an immigration consulting firm, will always place their own personal interests ahead of the investors’.  There are very few, if any, reputable immigration consulting firms in China, for example, that will always place the clients’ direct interests first.  If that was truly the case, there would only be a handful of Regional Centers that would ever receive investment.  Why would an investor want to invest with a brand new, unestablished startup venture, when they can invest in another proven entity – as the benefits they receive will be identical?  Why take a chance with my $500,000 with anyone other than someone that has already successfully been through this before?

We all know the market reality is very different, as new regional centers and ventures are constantly receiving investment not only from Chinese investors, but foreign nationals everywhere.  The marketing and promotion wheel continues to roll hard, and the only way to find out about the true viability of a Regional Center project is to evaluate the project specifics as well as the parties involved.  As immigration attorneys, we are asked very frequently by our clients if there are recommended regional centers with which to invest.  Of course, we know it’s unethical to suggest a particular regional center, but it’s important to always make our clients aware of the market trend, and how regional centers are marketing to investors.

It’s important that our clients or potential investors are given a broad range of regional centers and projects to choose from, and it’s always important to note whether or not the regional center itself has a performance history, or at the very least, if the developers and parties behind the project, have had similar successes before.  Severe and strict scrutiny of project proformas, projections, financial analyses, and exit structures need to be undertaken before a project can even be considered.  Finally, location (whether or not Targeted Employment Area “TEA” becomes an issue), population density, type of industry the project will operate in, and most importantly the economic impact analysis, need to all be heavily considered prior to investment.

Reports can be tailored to say anything – do job projection numbers look realistic?  Is the methodology used to calculate jobs realistic, and one accepted by USCIS?  Are job numbers possible in proportion to the population and density of residents in the area?  Finally, will the project undoubtedly pass the coveted “Targeted Employment Area” test during I-526 submission stage?  A Regional Center that has an approved I-526 exemplar from USCIS will always be in a more appealing investment position than one that will still need to wait the 15 months processing time for the I-526.  All of these are necessary and integral issues that need to be addressed prior to investment.

Finally, and this is perhaps the single most important bit of advice I can give through my personal experiences, and that is, for investors to contract their own EB-5 immigration attorney in the United States to represent them during their EB-5 search and eventual I-526 submission.  It is only a disinterested, fiduciary representative such as your own contracted attorney that can best protect your interests in this instance, without any fear of conflict of interest.  Remember – most attorneys associated with the EB-5 Regional Center in any way, will have some interests with that particular regional center, whether direct or indirect.  By finding your own attorney, they will be able to fully investigate and analyze your investment projects for you. What’s another few thousand, in an already huge $550,000+ investment, to ensure your attorney will only have your interests in mind?

Let Today’s EB-5 Market Work for You

A good regional center should NOT worry about who you choose to represent you through the I-526 period – as long as they are experienced and competent with regards to I-526 and Investment Immigration visas with USCIS.  A good regional center should NOT pressure you to use any single attorney to handle all of your immigration paperwork.  This is all too commonplace already with immigration consulting firms abroad, as many of them have their own self-interested reasons for sending you or recommending you to a particular attorney.  Finally, a good regional center should NOT be placing your money at risk, or in jeopardy in any way shape or form, until your I-526 application is approved.  For example, many Regional Centers have agreements that render your investment entirely “non-refundable” due to technical mistakes in your application, or for a filing deadline.  Some Regional Centers utilize your funds before your application is ever even approved (or in some cases filed).

Reputable, established Regional Centers that are doing business the right way, should not be desperate for your money – they should have a strong financial backing, and in some instances, additional non-EB-5 investors.  This blog article isn’t to deter investment from Regional Centers that have no track record, it is simply an opinion on what to look for, even in a new venture.  For those EB-5 Regional Centers that want to defend their “less-than-optimal” practices, my answer to investors is simple – “why bother, when there are literally so many other choices to choose from?”  There is absolutely no reason to force, or for anyone else to try and force your money or investment somewhere, when the market  does actually have real, reputable and legitimate regional centers to invest in.  The choice should be made by the informed investor and not the incentivized immigration consulting firm, agent, promoter or attorney.

Christopher Peng is a licensed attorney in the State of Texas that has worked on EB-5 issues both domestically and abroad in China.  Please visit for more information.

 This blog and associated article should not be construed as legal advice, advertising, solicitation, or events pertaining to specific factual situations.  This blog does NOT create an attorney-client relationship, expressly or implied.