Immigration Insider

The FBAR Side: IRS Ruling an Obstacle for Would-Be U.S. Investors

Despite the long-standing understanding that "if you own it, control it, or benefit from anything anywhere, you must tell the IRS", last week's IRS comments suggest that the plot has thickened substantially for offshore investors...especially those with an eye on U.S. residency.

In the world of offshore banking, there are technically a wide number of justifications for nationals of a given country to park their assets in a tax haven.  Despite this, the real reason comes down to asset protection...from income taxes, from estate taxes, from litigation, etc.

Last week, the IRS issued an opinion which formalizes the need for hedge-fund and private equity investors to disclose EVERYTHING they have offshore. The new position is consistent with the other stuff unfolding in Obama's Washington: the Securities and Exchange Commission (SEC) and Congress are proposing that hedge fund managers register with the agency, and the administration is proposing to end a tax break on compensation for private-equity managers.

While the latter two developments do not present immediate concern to private investors (who don't care whether or not their brokers are SEC-registered), the move does represents a departure in policy if not in regulatory language: while the IRS maintains that this requirement has ALWAYS been so (and the letter of the law supports that position to a certain extent by its amplitude), U.S. tax lawyers and fund managers are, well, panicking.  Why?  Because failure to communicate this requirement to high-net-worth clients (in a sort of fiscal "don't ask, don't tell" parallel) means malpractice...and communication of it could mean the loss of a lot of would-be U.S.-resident investments and the lucrative commissions that come with them.

The action by the IRS is no doubt related to the ongoing investigation of a number of UBS AG clients, who the IRS believes have been failing to report income from taxable assets offshore.  It's as if someone in Washington just figured out that people are putting money offshore to avoid taxes...imagine THAT!

What to do, what to do...well, very simple really: if you are already a U.S. tax resident, then you need to select your offshore structures and activities very carefully in order to comply with this development.  In other words, conduct a comprehensive offshore investment self-audit, be prepared to pay some taxes, and sleep well at night.  But if you are one of the many interested in opening a business in the U.S., the new ruling has profound implications: what may comply with your country's tax laws will NOT matter once you become a tax resident of the U.S...potentially exposing whatever you've parked offshore and making it taxable.

In the wake of Madoff, this kind of response to potential losses in the investment world is to be expected, I suppose.   But in reality, this latest clarification - which is what it really is when you chase down the regulatory language -- does not in any way impact how well-managed U.S.-origin investments offshore will be handled.  The creative combination of offshore tools ranging from trusts to insurance products available high net worth individuals interested in the benefits of tax haven investments.

I'm proud to be working with what I believe to be the very best team of international financial advisors, insurance representatives, and tax professionals in the country.  Email me jlatour@latourlaw.com if you want to make sure your offshore ducks are in a row.

The Madoff Reflex: Offshore Private Wealth Clients Flock to New Money Managers

While the headlines have been full of painful stories regarding those who lost millions to Madoff's Ponzi scheme, wealthy clients who did not invest with him are taking a fresh new look at their financial management teams...and deciding they can do better.

Last week, as reports of client defections from UBS were sifting through the Internet, Credit Suisse’s CEO, Walter Berchtold, told London's Financial Times that Credit Suisse had actually been attracting more “new wealth clients” so far in 2009 than anyone else.  The CEO has his “eyes set on besting UBS”, still considered to be the number one player in the sector.

According to another article on the subject of wealthy investors' response to the financial crisis,  42% of high net worth individuals  “are likely to review or switch wealth managers in the wake of the financial crisis”.  It would appear that these are precisely the customers Mr. Berchtold is wooing with CS' "OneBank" concept, an institutional effort to keep clients in-house as much as possible by offering collateral services beyond what has traditionally been handled by wealth managers. (To me it is remeniscent of the multidisciplinary efforts of the Big Eight accounting firms before the notion of full-function consultancies was the norm...but then again, I'm old...)

In yet another article in the International Herald Tribune last week, the single biggest complaint these very clients have about their current money managers: “the speed of response to crisis” and inadequate “levels of communication and contact"...the very issue most frequently raised in bar complaints filed by clients against their attorneys.  Meanwhile, those increasingly nervous bankers remain firmly out of touch with what their clients think about them: 75% of wealth managers believed their clients trusted them; in reality, only a third said they trusted their money managers. 

Bottom line: the wealth management industry is being reshaped by its investors, who believe that they have NOT been well-served by their managers as the current financial crisis has unfolded (and will continue to unfold).  The fact that Madoff's scam was invisible to most of these managers -- and to an SEC which ignored internal warnings and gave Madoff a thumbs-up more than half a dozen times -- has shaken the trust of those with most at stake, who are in the "there but for the Grace of God go I" mode.

Mr. Berchtold is seeing movement in his direction, but it is only the beginning.  If you fall in this category and are looking for a fresh, responsive, pro-active wealth management team, contact me at jlatour@latourlaw.com for some straight answers.

E-Verify Delay Means Time to Get I-9 House in Order

Delayed again: for the 4th time in 2009, the U.S. government has delayed the start of mandatory E-Verify compliance, extending the deadline from June 30 to at least Sept. 8.

The U.S. Dept. of Justice recently asked a federal court in Maryland for a stay, where the U.S. Chamber of Commerce has filed suit against the law, saying it needs more time to review the rule and its implications.  The stay was granted on Tuesday.

THE PROBLEM: delaying the inevitable.  As I continue to discuss I-9 compliance with dozens of employers and their attorneys, I am flabbergasted at how these extensions seem to take the wind out of the sails of those companies understanding the critical need to establish a compliance plan BEFORE E-Verify becomes mandatory.

THE SOLUTION: it remains my admittedly self-serving opinion (given that I have been conducting audits for the last decade and a half) that ALL U.S. EMPLOYERS should establish an internal I-9 compliance protocol beginning with a comprehensive audit, moving on to digitization of all paper I-9s, and integrating a turnkey application, such as I-9 Advantage, into the hiring process.

P.S.  I-9 audits are the single most boring thing I have ever done in practicing law, and a constant reminder of why I could have never followed my father’s footsteps in accounting…(-;

Washington or Bust?

The incomparably entertaining Rick Sanchez, former Miami news anchor, not only got a great gig with CNN , but he’s done quite well since being somewhat giggled out of South Florida.  Recently, Rick anchored a piece  covering the changes in immigration enforcement patterns being seen already in the Obama Administration.  It was a good story and I thought it was worth a mention.

Basically, as we all saw, the so-called “First 100 Days” of President Obama’s emerging legacy has been spent in large part with the dismantling of former President Bush’s hodge-podge of ill-conceived policies.  In the area of immigration policy, it is notable that Mr. Obama has not only looked “within” (as in with internal migratory policy) but also “without” (as in eliminating the mean-spirited and just-plane-stupid restrictions which kept my 87 year old mother from visiting her 89 year old cousin in Cuba because she was a cousin…not a sister; sadly, as I was looking into FINALLY taking my mother back to Cuba for one final visit, her cousin died, only days after the rule change.)

But what you care about . more than likely, is how Obama’s folks are handling the “within” immigration issues…especially in the area of enforcement.  As my employer clients are well aware, I have written quite often about the incongruity seen in Bush’s final months in office:  a supposedly-business friendly administration out on an aggressive “seek and deport” mission which left hundreds if not thousands of U.S. employers without the workers they needed…and facing massive fines.  Companies like Tyson Foods were rocked to the point of serious economic turmoil as a result of large scale raids targeting those undocumented evil chicken pluckers, here to steal jobs away from the American workers who covet them.

Trust me: you’ve eaten very few chickens which have been plucked and processed by someone not having a Hispanic or Asian last name.

Well, according to Rick and his guest expert, the raids are slowing down significantly and as the expert put it, it is “a good start”.  (I should point out that his opinion is in direct conflict with that of the corporate labor bar, which lives pretty in terror of the pro-worker policies they anticipate from the Obama Administration.)

But if Rick's expert was correct, it would appear that during this crisis of unemployment a reduction in enforcement raids is politically risky for our new President.  Regardless, it is certainly the right thing to do.  Our current chaotic rules linking E-Verify with random audits, nebulous I-9 enforcement policies and SSA “No Match” letters has devolved into that state which Jeff Foxworthy calls “sheer pandelerium”.  Ignorance of the law IS an excuse when those enforcing the laws don’t understand the law themselves, as is the case today.

Of course, the LAST thing the Obama administration wants is more hysteria by the Glenn Becks of the world, so a publised policy of curtailed raids will not be making the headlines anytime soon.  I have long said that if the government took half the money it spends prosecuting undocumented but otherwise hardworking unskilled laborers and leaving the businesses which have no choice  but to hire them and spent that money teaching employers how to readily comply, it would be the beginning of the end of the problem.

The great irony if a reduction in raids is indeed what will happen:  the President who has been absurdly accused of being "Marxist" by the most patently ignorant sectors of the neocon base has, with this subtle change in policy, squarely proven himself to be the true friend of beleaguered U.S. employers.

9 More Haitians Die en Route to the U.S.

The Miami Herald reported yesterday that 9 Haitian migrants (at least) died after their smuggler's boat capsized en route from Bimini to Miami.  This is the latest tragedy at sea and these tragedies will continue until the failed regional economic and immigration policies of past administrations - both Republican AND Democratic - are changed.  Specifically, the Obama team needs to:

-remove the disparity in the treatment of Haitian and Cuban refugees
-eliminate the absurd "wet foot/dry foot" policy
-commit to mitigating illegal migration from the Caribbean using the same tools we've used in Mexico for decades: trade incentives, tariff elimination, job stimulation programs and poverty reduction projects.

Haiti, our most desperately needy neighbor, gets as much U.S. attention as most distant African countries with similar poverty...out of sight, out of mind.  Cuba, with its catastrophic economic failures augmented by a 40+ year old U.S. trade embargo which has succeeded only in keeping U.S. interests from influencing the island (while Eurocapitalism,focused on tourism, cigars, jineteras and rum thrives).

Enough is enough already, Mr. President.  It is long past due time to get our regional house in order.

EB-5: Yes, I really think there are better choices...

Yesterday I apparently offended a few folks with my comments regarding the EB-5 Visa.  Most of the comments I got back are not printable -- hey, these ARE attorneys involved (-;.  One gentleman expressed himself courteously, and his comments merit a response.

Stephen Parnell is joint managing partner of Which EB5 (www.WhichEB5.com), an organization which describes itself in its press releases as "advocates of immigrant investors and have chosen to be independent from any regional center. They have worked with more than 800
families and more than 100 who have opted for an EB-5 regional center investment
visa". Mr Parnell wrote yesterday:

How on earth can you call the EB-5 a scam? Are you not aware of the numbers of investors who are currently seeing the return of their original investment? Yes, the investment is at risk which is why very careful consideration has to be given to the choice of regional center. Calling the program a scam is as you call it "a flat out lie".

Stephen, I'll take those as you raise them:

1- The number of successful EB-5 investors is paltry in comparison to the number applicants.  Honestly, how may of the 800 with whom you have worked have their permanent residency?  This is not a debatable point but, rather, the subject of a 2005 GAO Report to Congress entitled "IMMIGRANT INVESTORS: Small Number of Participants Attributed to Pending Regulations and Other Factors."
The title is pretty self-explanatory and you can view the report in its entirely at:

http://www.amlife.us/corp_info/EB-5.pdf

I respectfully submit that it is impossible to read that report and argue that 900 families who were in limbo for over 10 years were better off with an EB-5 than with self-managed L-1-to-EB-1 immigration paths.

2- I am NOT aware of the number of investors who are seeing the return of their investment and would invite you to share that with my readers, Stephen.  My experience is anecdotal -- and I suppose it is correct to assume that those who HAVE navigated the EB-5 program successfully would NOT be contacting me for help -- but that experience has been consistently my seeing people pour in a fortune into an investment and never seeing their green card.  I invite you to share this info with me and I'll publish it but please include the numbers of those who have NOT seen a return in their investment to make the comparison valid.

3- Agreed: some Regional Centers have delivered while others have not.  I am not aware of how this is being handled today, but in the 90's I was approached by a number of regional centers offering me "participation" in the form of hefty ($20,000+) fees if I "referred" clients.  I blasted this practice in editorials, steered my clients AWAY from this, and watched as who knows how many lawyers quietly violated their bar oaths by pretending to be disinterested referrers when, in fact, they were being paid by an RC to send clients.  Does that sound like a scam to you?  It does to me, Stephen, and if any RCs are still giving commissions to referring attorneys, the scammers are BOTH the RCs AND the attorneys accepting the money.

For the record, Ifiled one of the very first independent EB-5s when the initial regs came out.  The then-INS bungled and stumbled their way through it and while ultimately successful, it was apparent to me that it was NOT faster than a well-structured L and that the arbitrary establishment of both job creation and investment requirements.  I've since steered dozens of would-be EB5 clients to L-1-to-EB-1 green cards since that first experience and not a one of them has had to put up a $500,000 investment to get their green card. So I stand by my opinion that the L-1 is a better solution for the vast majority of would-be EB-5 investors in cases where the investor has a viable business abroad.

That being said, I certainly didn't mean to call the entire program and everyone involved with it dishonest, Stephen, and I do apologize if that was the impression my rant gave.  Ultimately, we are in agreement when you say that "very careful consideration has to be given to the choice of regional center".  Yes, the EB-5 program is not a "scam".  But there have been too many scammers, including commission-accepting attorneys, who have made the program problematic.  When I do an L-1 for a client, he/she does NOT have to worry about avoiding fraudulent purveyors of visas.  To me, the EB-5 remains the category of choice for those very limited number of clients who:

1- Have abundant liquidity
2- Have no active business in their home country and
3- Are not interested in doing business in the U.S.

Except for wealthy retirees, I haven't met many such clients.

The EB-5 "Guarantee"...here we go again...

In the early 90s, I expended a great deal of time and energy explaining to clients why the EB-5 was NOT the best solution for folks seeking to immigrate to the U.S. and having viable companies abroad.  The reasons are simple

1- The L-1 mechanism offers the same path to the green card at a fraction of the $500,000-$1,000,000 investment of the EB-5

2- The job creation requirements allow for vague interpretation by the government, as evidenced by the hundreds of cases where pilot program applicants were deemed NOT to have met said requirements and

3- The whole fundamental premise behind EB-5 pilot programs is a SCAM, and anyone who tells you that they can assure that your investment is not at risk AND meets EB-5 requirements is either totally ignorant of the statutory language or, in my experience with this category for the last 15 years, a flat out liar.

Save your money, folks.  Email me and I'll show you how we can "L" your way to America on a proven path with a small fraction of that investment.

Why Are There So Many CRUMMY Immigration Attorneys?

I haven't written here in awhile and I hate to get back in the saddle via a RANT, but I am seriously upset: in the past two days, I have been approached by not one, not two, but THREE prospective clients sharing the same basic problem: their otherwise straightforward immigration case has been disemboweled and trashed by a licensed Florida attorney with absolutely no fundamental understanding of U.S. immigration law.

This is all part of a dark trinity which South Florida immigrants have long faced:

1. The tragic belief that countrymen will not rip you off (when, in fact, it is most often Colombians who rip off Colombians, Chinese who rip off Chinese...the nature of the con game...remember: "con man" is short for "confidence", and upon this they prey.)
2. The legal pandemonium that is Miami, where immigration is perceived as a profitable sideline by attorneys who have not a shred of knowledge about federal immigration laws and
3. A population of illegal or semi-legal immigrants too eager to believe in "shortcuts" and "inside connections" as a result of their own cultural backgrounds.

The saddest part is that in each of these three cases, a competent immigration attorney would have easily obtained the needed approval.  Instead, I am facing three tangled Penn Senator reels of absolute incompetence, chaotic birds' nests of convoluted support letters, improper petitions, and gaps in status.

If I was Immigration Judge Dread Florida Bar licenses would be shredding like confetti these days.  Grrr.

A Day Without An Immigrant

You may have heard of the brilliantly conceived (if somewhat less brilliantly executed) film, "A Day Without A Mexican".  In the movie, Southern California awakens to an absence of Mexicans, and the world grinds to a stop because no one is there to provide the infrastructural support needed for society to operate.  I've seen real-life, miniature examples of this, such as when ICE raids on South Beach and in St. Thomas have temporarily closed entire shopping areas. 

If you've been reading what I write for awhile, you know that I am very much in favor of immigration controls and no apologist for those who ignore our immigration laws.  But that being said, I am also a pragmatist who understands the role these currently-illegal migrants play in our very wounded economy.

The Miami Herald reported yesterday on the Stewart Detention Center in Lumpkin, Ga., where some 20,000 illegal migrants pass annually, most en route to deportation.  A sort of reverse Ellis Island, if you will.  Immigrant advocacy groups protest that the Stewart facility treats these folks inhumanely, punitively.  The most common complaint - no surprise for those of us who have been dealing with immigration processing for awhile -- is "lack of information about the progress of their cases and unwillingness by deportation case officers to answer questions."

I am STUNNED.

Not.

The article mentions a guy who represents so many here in South Florida (and it is apparent to me that the article could have just been just as easily about Krome or any one of the many holding centers across the Land of the Free):  GIlberto Vazquez Olivares is a 34 year old from Mexico who is in federal custody at taxpayer expense for that most heinous offense, driving without a license because he can't GET one...because he's been illegally in the U.S. since 2004.  After his $400 a day taxpayer-funded imprisonment (my guess based on what I've read in the past, NOTmentioned in the Herald article), Gilberto will be flown back to Mexico at taxpayer expense, spend some time with his family, and, more than likely, be BACK across the border and at his U.S. job within a month, received with open arms by the U.S. employer who trusts and relies on him and who was adversely affected by Gilberto's arrest and detention.  In the words of Steely Dan, and for the Gilbertos of the world, there is no choice:

You go back, Jack, do it again...wheel turnin' round and round'...

A sensible immigration policy must:

1. Recognize the benign nature of the presense of illegal migrants like Gilberto
2. Distinguish people like Gilberto from criminal aliens, public charges, and other system-tappers and
3. Provide these hardworking, law-abiding undocumented workers with a means of living lawfully in the country which so depends economically upon their presense.

I went to the Everglades a few weeks ago, during this catastrophic economic period in our country where U.S. unemployment is rampant.  Guess how many non-Mexican laborers I saw in the fields? None.  Of course, you can't judge a book by its cover, so I called an old friend with tomato fields to inquire if the huge unemployment problem was making it easier to find American labor for his tomato harvest.

His answer:  "Are you KIDDING?? Jose, you said you drove past field after field of ripe and rotting tomatoes.  Do you think we plant them so they'll rot on the vine?  Americans don't pick tomatoes."

Until our national policy has a little brains to go with the Bush-era brawn, lushAmerican crop fields will continue to rot.

The Death of a Sickly Embargo

Having emigrated from Cuba in 1966, I have lived under the rules of the U.S. trade embargo of Cuba since resettling in the United States with my parents.  I grew up in South Florida, where the Cuban-American community sincerely believed for many, many years that the economic pressure imposed by the embargo would succeed in displacing Castro's communist regime.

As I grew up, this faith seemed more and more misplaced, and in this past decade, through several sanctioned visits to Cuba, I eventually came to the conclusion that the embargo had never been, and would never be, effective in achieving its purpose.  In fact, the embargo seemed to have become Fidel Castro's primary weapon for staying in power, a powerful tool for demonizing American interests and creating the "us vs. them" fictional dichotomy which has been essential in preserving order.  And George W. Bush certainly played into this strategy during his eight chaotic years.

Now, with a new President, a new BLACK President with a great big heart and a great big brain...Cuba isn't sure what to do.  On the one hand, if Obama does as promised and lifts the embargo - even if he only lifts the clearly unconstitutional travel ban prohibiting Americans from freely visiting Cuba (when they can party like a rock star in Iran, North Korea, and anywhere else)-- the financial repercussions are vast for Cuba.  The great sucking sound will be that of U.S. tourism FLOODING from other Caribbean and Central American destinations to Cuba, and the cruise industry will experience an astonishing mid-recession/depression renaissance as no travel industry player has ever seen.

On the other hand, the lifting of the embargo - even of the travel portion only - will place the Cuban government in an awkward position.  You see, Cubans adore Americans. Try as they have to demonize America, Castro and his minions have never been able to demonize more than the American government and poorly-thought-out policies, which, again, was greatly facilitated by Mr. Bush's policies and attitude.  But los Americanos are still for the most part loved by the Cubans, who remain as warm, expressive, and inviting as ever, despite 50 years of life under the failed "paradise" euphamistically called "socialism".

The Cuban government must be worried because when the Americans arrive on the island, the veil of coordinated BS falls.  The empty newstands --  bloated with the propaganda passed off as "news", i.e., Juventud Rebelde and Granma and nothing else -- will fill with magazines and while the Cubans won't have the $10 to fork over for the surtaxed Newsweek magazine sold at the Melia, you can bet last week's copy will be passed from hand to hand to hand for months to come.

Then and only then will the people of Cuba wake up and smell the lies they've been told.

Then and only then will the bountiful contracts signed by Cuba with European companies secretely controlled by Miami's loudest pro-embargo voices become public in the U.S., prompting outrage within the ferociously loyal exile community.

Then and only then will the sugar subsidies and systematic destruction of the Everglades and Florida Bay grind to a slow halt, as the efficiency of island-based sugar production is resurrected via modern, environmentally-friendly farming technologies, bringing new life to the salt-water-rusted and abandoned mills throughout the island.

To every thing, there is a season, and the season for the U.S. trade embargo on Cuba is, I am glad to say, finally over.