Thursday, December 23, 2010

Extensive Reuters EB-5 Investigation Quotes Latour and Gibson

Folks, a few weeks ago I was interviewed extensively both on and off camera by Reuters reporters doing a comprehensive investigative piece on the EB-5 Immigrant Investor Visa.  My good friend Michael Gibson, along with a number of other attorneys and principals in the EB-5 sector, were also interviewed.

As happens with investigative journalism, the several hours of interviews they had with me were reduced to a few quotes.  I want to address one quote in particular, lest it is taken out of context.  In extensive Q & A regarding the enforcement roles of the SEC and USCIS, I expressed repeatedly that I believe that USCIS was doing a solid job of adjudication and, after prior INS failures, had established substantial domain expertise on the visa via their EB-5-dedicated unit in Laguna Niguel.  I told them that recent I-829 denials were, IMHO, consistent with the letter and spirit of the EB-5 legislative language; others interviewed in the article characterized some of these decisions as unreasonable, a view which, in the majority of cases I have reviewed, I do not share.

My comment regarding the USCIS doing a good job was, however, tempered by my responses to their questions regarding what role, if any, the SEC is having in enforcing the securities aspects of EB-5 visas.  I again expressed my sincere view: to date, the SEC has not gotten involved in any significant way.  I further stated that in lieu of the many flawed projects being marketed in China (with an increasingly concerned Chinese government watching carefully), the EB-5 sector needed to establish a proprietary code of conduct and ethical standards for industry.  Like existing EB-5 organizations, membership would be voluntary; but it would at least give prospective investors an opportunity to choose between an EB-5 Regional Center that has agreed to be truthful about denials as WELL as approvals and subscribes to enumerated ethical protocals...and one which does not.

Finally, I stated that if the EB-5 sector does NOT establish this form of self-policing, it is only a question of time, in lieu of the recent BMW decision cited in the article, before the SEC comes looking at the sector from a securities law enforcement angle.  That eventuality would only result in sanctions for those Regional Centers violating securities laws, but it would have a chilling effect on the overall EB-5 Investor Visa program during a time where EB-5 capital is one of the few growing investment income streams in our still-faltering economy.

Enough said: here's is a VERY THOROUGH look at important EB-5 issues and concerns...

Reuters Article Quoting Jose and Mike Gibson


Monday, December 13, 2010

Senators Kerry and Lugar's Proposed New EB-5: Fundamental Problems

Greetings...and my apologies for my recent silence!  Since returning from Dubai last month things have been quite hectic: lots of clients coming and going, my annual monastic retreat to Massachusetts (heaven sent and much needed this year) and, sadly, my 88 year old mother had a bad fall earlier this week.  (She didn't break anything and is recovering well, thankfully.)

As a result of all this, the newspaper clippings and online snippets I collect continuously to share with you have been accumulating!  Other commentators long ago have discussed the Wall Street Journal editorial from - gads - October 12, but it is important enough for me to tell you about it.  The piece, entitled "A Visa for Job Creators", borders on the simplistic for those of us who live and breathe the topic of immigration.  However, given the Journal's broad readership in centers of power, the opinion piece was well crafted to draw distinctions that need distinguishing.

For many Americans, even fairly educated ones, the word "immigrant" conjures up border-fence-jumpers and, possible, African cabbies in the Northeast.  Few of us see the full spectrum of that word today, which encompasses the preceding but also speaks to the thousands of degreed professionals who come to America to fill health care and technology jobs which American graduates simply don't want.  And, most relevant to our area of discussion in this blog, it applies to foreign investors who come to the U.S. to build a business, build jobs...while building their dream of a safe and prosperous life in America.

The editorial opinion offered some important stats:

  • Start-up business are responsible for the bulk of new jobs created in the U.S.

  • Immigrants are almost 30% more likely to start a business than are people who are NOT immigrants.

  • The average U.S. start up company begins with about $31,000, making the "low", TEA-dependent EB-5 threshold of $500,000 about 16 times higher than said average (!)

  • Less than 3700 people -- including dependents -- obtained EB-5 visas in 2009.

If you've read my thoughts about the subject of reducing EB-5 thresholds in the past, you know I've been against it.  Why?  Because prior discussions of dropping the figure to $250,000 still required the creation of 10 new U.S. jobs.  As someone who is a bit, uh, IMMERSED on the subject of bona fide job creation, I can tell you that it is VERY difficult to create provable 10 direct, indirect, or induced jobs with a $500,000, now matter how optimistic the developer's projections and how pretty the econometrics report; the notion that 10 jobs can be provably created with a $250,000 investment is non-sense, unless we seek to build an economy of minimum wage positions...and we don't, trust me.  The gap between the wealthy and the poor in the U.S. is beginning to look more and more like the norm in South America and Indian subcontinent.

But now Senators John Kerry (he of the presidential candidacy and ketchup in-laws) and the highly-regarded Richard Lugar have introduced legislation which drops the figure to $250,000 as previously contemplated...but creates two different options for job-creation compliance:

  1. The creation of five new full time jobs OR

  2. Reaching $1 million in revenues by the end of year one.

Obviously, the first option addresses my concerns; realistically, the creation of 5 direct jobs via an individual $250,000 investment would create five fast-food/hair-net/"would you like fries with that?" jobs, but they would be created.  The second option, as intriguing as it sounds, concerns me.  I've been dealing with high net worth individuals both in and out of the U.S. long enough to know that maneuvering -often LEGAL maneuvering -- which can be used to calculate gross revenues.  It would be pretty easy for a powerful business to create a U.S. affiliate showing $1M in gross revenues and getting the "investor" his or her green card...without the creation of a single U.S. job, particularly in today's digital world.

The WSJ editorial quotes Stuart Anderson, "a former INS official", who now is with the National Foundation for American Policy.  Mr. Anderson proposes a much more pragmatic and realistic approach to investment-based immigration: discard arbitrary capital requirements, have the investor submit a business plan to the SBA (which, presumably, could develop the same internal domain expertise that USCIS Laguna Niguel has done with the EB-5), and see if it flies.  If so, X number of jobs would need to be created with a set period of time...but the rigid numerical standards which ignore the way start ups REALLY happen in America would be eliminated.

As the editorial concludes, "a visa for job creators is a political and economic winner all around". 

Wednesday, December 1, 2010

A Little Escape from the Matrix

Folks, I'm doing my annual retreat and will be "radio silent" for the next few days.  Take a look: