Monday, November 19, 2012

Proliferation of EB-5 "Funds" Spells Trouble for Developers

There is one indisputably clear "job creation" impact of this whole EB-5 business:  it is sure opening one heck of a lot of new collateral businesses within and without the U.S.  Consider:
  • While there were but a handful of immigration attorneys creating complex EB-5 Regional Center structures just a few years ago, we suddenly have hundreds of self-proclaimed experts all to happy to put together an RC.
  • China has the only organized, government-licensed (if somewhat less than ethically pristine) immigration agency structure on earth, but there are suddenly of "immigration agents" in Russia, Brazil, you-name-it aggressively marketing their proven EB-5 results (??) to U.S. EB-5 projects
  • The notion that there is this big, long-line of prospective EB-5 investors lined out the door of each of us who work in this business has triggered a rapid growth in mezzanine debt providers who claim they can use EB-5 investment "pools" to provide short term venture capital to desperate U.S. developers.
I'm not going to get into the cornucopia (hey, give me a break, it's almost Thanksgiving and I never get to use that word) of SEC violations associated with the notion of collecting money from an investor as the law requires (i.e., via a Reg D or Reg S exemption to registration) and putting that money elsewhere.  I won't dwell on the notion that you can raise venture capital via a private placement without fulling disclosing the specific use of the funds under U.S. securities and state blue sky lies (you CAN'T.)  And I won't harp on the AMPLE adjudicatory history, stakeholder dialogue, and regulatory guidance which makes it crystal clear that USCIS wants to see a specific EB-5 investor's money go into a specific, USCIS-approved EB-5 project and NOT into some vague, general-purpose capital stack distributed for multiple, unrelated projects.

I will simply leave you with a blog entry from my friend Boyd Campbell, who finds this whole mess as downright absurd as I do.  Be careful out there, my sophisticated developer friends, the investors in China aren't the only ones getting bamboozled. 

Boyd Campbell's excellent blog about USCIS policy wavering

1 comment:

  1. Hi Jose,

    Your opening bullet point resonated with me the most. I have had a lot of enquiries over the past 18 months from attorneys, investors, developers, realtors, all wondering whether I can create a business plan for their new EB-5 RC. This is not my specialty, so unfortunately I had to turn down the requests, but it certainly made me aware of the surge in RCs being created in the U.S. I focus on immigration business plans for the E-2 Visa, L-1 Visa, and EB-5 Direct Investment Visa/Green Card. I know the direct investment is more restrictive on the applicant, but quite a few people are still prepared to go through the process of investing $500,000 or $1M and directly employing 10 people. Boyd has very kindly referred some clients to me too.
    Jason Coles
    JDC Consultancy
    Immigration Business Plan