Immigration Insider

Your Enforcement Dollars at Work

Listen up: recent chatter on AILA InfoNet as well as recent reports suggest a new targeted effort aimed at small company NIV petitioners.  Not only have there been recent adjudications which seem to ignore all prior policy on H-1Bs issued by companies in which the petitioner has an interest, but ICE is actually knocking on doors and investigating U.S. companies petitioning non-immigrant workers.

Makes you feel safe, doesn't it?

With the colossal immigration problems facing this country and the desperate need for comprehensive immigration reform, is it really sensible to deploy investigators to inspect on AMERICAN COMPANIES because they've gone through the giant ordeal of filing a non-immigrant visa?

What a waste of money for taxpayers...for everyone.

EB-5 Jeebies- Regional Center Investment Misinformation Abounds

Look, I'm TRYING HARD here, guys.  I'm not really interested in naming names or getting people angry but I'll tell you what: if some of the more BALONEY-laden EB-5 Regional Centers and lawyers don't get a grip on the nonsense they spreading, I'm going to start blogging about them.  How's this Miami Herald quote from a developer pitching the EB-5?:

"In the worse case scenario, this project will make a lot of money"

Well....no.  In the worst case scenario, the investor will lose his or her money, not get his/permanent residency, have to leave the U.S, and transplant their families back to their country after being led to believe that there was "no risk".

I first noted this whole thing when we were in Venezuela a few weeks ago.  Turns out a lot of other self-proclaimed EB-5 attorneys are going down there...and other Regional Centers, some approved, some not approved.  By day three in Caracas it was pretty clear to me that the rampant disinformation we were constantly correcting among our prospective clients was not the result of "I read it online so it must be so" Syndrome but, rather, the result of information gathered by folks at our seminar...from OTHER seminars presented by OTHER immigration attorneys and Regional Center marketers.  So let's just cut through the nonsense and clear up a few things:

-The higher the promised return, the higher the risk.  That is a fundamental fact of investing. Anyone who says otherwise is lying.

-Just because an EB-5 Regional Center investment predicts a teensy weensy annual return does not necessarily mean that the investment is "safer".  It could just mean the project managers are taking a big chunk of profits away from the investors.

-Exit strategies matter.  Don't believe otherwise.

-Yes, there are legitimate real estate opportunities in the belly-up U.S. real estate market, but just because prices are low does not necessarily mean it is a "great time to invest".  It depends on the specific property, plan, and investment managers.

-Developers are not investment managers, investment managers are not investors and immigration attorneys are neither.

-Banks make money when they lend on good projects.  While the banking sector has indeed reacted miserably to the credit crisis, that in and of itself does not create an "opportunity" for private capital.  If it was that easy, the banks would be lending.  With reward, put simply, comes risk.

-You CANNOT "cash out" on your EB-5 investment in "two years or less" AND have your green card.  Legally impossible and the people saying this are lying through their teeth.

-Think about it: $500,000 and 10 new jobs.  That's $50,000 per job, right?  Darn near impossible. The intelligently-structured Regional Centers are combining EB-5 funds with private U.S. equity and other non-EB-5 sourcing to insure that the per-investor job numbers materialize.

-Not all Regional Centers are intelligently structured.

-The initial petition I-526 looks at investor eligibility and origin of funds; the I-829 petition which makes the residency  of the EB-5 investor permanent focuses on confirming the job creation and fulfillment of business plans.  Just because a Regional Center is getting the first approved does not guarantee that the removal of conditions will sail through.  In fact, the catastrophic failures of EB-5 visas in the 90's mostly involved approved I-526s with I-829s subsequently denied.

Look, folks: there are some excellent and intelligent EB-5 Regional Programs out there, as well as some excellent attorneys working with the EB-5 category.  But the abundance of pure nonsense being fed to prospective investors both in the U.S. and abroad is making hard for folks to learn the truth.  And so I blog.

Like the guardian Knight of the Templar protecting the Holy Grail said to Indiana Jones:  "Choose wisely".

Not All EB-5 Regional Centers are Created Equal

In the past few months, I've had the opportunity to meet with a lot of folks with approved Regional Centers.  In the process, I've asked a lot of questions and spoken to some of the most sophisticated real estate developers, portfolio managers, and financial minds in the country.  I've learned a few things and I think they might be of interest to those of you who are considering an investment in an EB-5 Regional Center, as well as those of you who represent such potential EB-5 investors in one capacity of another.

For the purposes of today's blog, I won't name names.  I have in the past and I most certainly will in the future.  In fact, the more I learn about EB-5 Regional Centers, the more comfortable I feel with some...and less so with others.  So while I'll expand and get more specific in the coming days and weeks -- and will not doubt make some folks really angry (hey, it's been awhile) -- let's start with a pasty and generic look at three fundamentals I've observed:

1- The Government has approved and is approving a LOT of EB-5 Regional Centers.  In the second half of 2009, the number of approved EB-5 Regional Centers has soared from 40-something to over 70...pretty staggering when you consider that it took about a decade and a half for the first 40-something to be approved.

2- The rapid approvals have caught many of the new EB-5 Regional Centers unprepared.  Whether this is a function of unexpectedly fast processing or simply slow-moving entrepreneurship, a very significant number of the newest centers have nothing specific to offer EB-5 Investors right now.  It works like this: once an EB-5 Regional Center is approved, then and only then can they start offering an investment and comply with all the disclosure requirements relating to securities laws.  These are not prepared overnight and, in an ideal world, the RC team is working on the initial legwork during the pendency of the USCIS adjudication.  My impression (and that's all it is because I have only explored a fraction of the new centers) is that a lot of these newer centers were caught off-guard and are now scrambling to put together projects.  (If you are an investor, would you want your investment team to be hurrying to throw something together?  Not me.)

3- The better newer EB-5 Regional Center models (and some of the veteran ones) are increasingly debt-based vs. equity-based.  This means that in the pooling of the investor funds, the debt-based models operate as lenders to specific projects. Because the loans are often linked to governmental or quasi-governmental borrowers, bond secured, and finite --these structures, although more conservative on returns than the equity-based models, are increasingly appealing to many prospective EB-5 investors.  But don't get me wrong - some of the most successful programs are equity-based).

I guess the most important thing for EB-5 Regional Centers to keep in mind as the momentum continues to build is the trinity of top considerations echoed consistently, in the same order of priority, by the dozens of prospective EB-5 Regional Center investors I've spoken to recently:

1. Assurance of the approval of the permanent residency
2. Security of the underlying $500,000 capital investment and
3. Return on investment

Things are getting complicated and my impression is that very significant distinction exists not only between the fundamental structures of the new EB-5 Regional Centers, but between their underlying philosophical approach to how an EB-5 Regional Center should operate.  Those which understand the aforementioned trinity of priorities will inevitably lead the pack.

 

Taxation Without Representation

I've been representing foreign investors in the U.S. for 18 years.  So have many of my colleagues.  So why is it that the notion of "tax planning" is such a conundrum for most immigration attorneys?  The truth is that we, as immigration counsel, are "programmed" to steer most folks to legal permanent residency.  There are valid reasons, the primary one being that the majority of clients seek such status.  But a significant (and growing) number of foreign investors in the U.S. wish to preserve their foreign residence as primary...and have no desire on becoming subject to taxation in a country in which they do not intend to live permanently!

It seems like on an almost-daily basis I'm approached by a client with substantial offshore assets who is neither interested in U.S. permanent residency nor in abandoning his home country...but is being advised by immigration counsel that getting a green card is their sole option...not so!

I am hardly an expert on international taxation but I know the basics:

• whether you like it or not, the U.S. taxes worldwide income on anyone who is a "tax resident" within the meaning of the Internal Revenue Code
• tax residency is automatic for persons who get permanent residency
• tax residency is triggered by so-called "physical presence" tests which determine tax status based upon the amount of time a foreign national has been physically present in the U.S.
• In addition to worldwide taxation of all income anywhere, U.S. tax residency means estate taxes apply for assets worldwide (unless legal protective mechanisms, such as trust structures, have been established.)

All this adds up to one thing: for high-net-worth foreign nationals, a complete understanding of the income and estate tax implications is essential BEFORE they get their green card...or before they establish tax residency via physical presence.

What are the implications of this for immigration counsel?  Several important considerations:

1. It is critical to insure that the client receives competent tax counsel both in his/her home country AND in the U.S....before U.S. tax residency is manifested and the individual is subject to U.S. tax laws.
2. On many occasions, it is necessary to defer the U.S. permanent residency -- even prolongued presence in the U.S. -- until all of these issues are resolved under a tax planning arrangement most prudent for that individual client.

It's a shame to see the colossal financial damage which can occur to clients who have been given limited options by immigration counsel.  Once you are a U.S.tax resident like the rest of us, you have to cough it up, and that's what the law requires.  Before you are U.S. tax resident, however, you have a number of legal tools and options with which to minimize the financial impact of coming to the U.S.

Perhaps as immigration counsel we should step back and look beyond the next immigration step to consider the client's big picture.

To "L" in a Handbasket

A formidable number of weak L-1A visas were filed in Venezuela in the past decade, and it is small wonder the U.S. Nonimmigrant Visa team in Caracas casts a wary eye upon Intracompany Visa applications involving:

• a new U.S. enterprise with low job creation numbers
• a comparatively small Venezuelan parent/affiliate
• an entrepreneurial principal eager to see what he or she can do in the world's largest economy

To be blunt, the fraud was epidemic in the late 90's, and the only reason the situation has somewhat quelled is because most attorneys have come to belive that, with the above fact pattern, the consulate would likely deny the visa, notwithstanding the approved I-797.  (Not so, but more on that later.)

For me, this situation once again became a timely topic when we recently visited Caracas to discuss the E-5 Regional Center option with prospective Venezuelan clients.  As I mentioned in earlier posts, interest was strong -- how much of it was curiousity and how much was actual immigration planning remains to be seen.  But judging from the continuing buzz and follow ups, we certainly were not wasting our time there.  One recurring question, however, presented itself time and again:

"If I am ready to go to the U.S. now but the EB-5 approval will take close to a year, what can I do ?"

The answer to this question, of course, lies squarely in structuring of an appropriate non-immigrant visa.   But there are problems:

-Venezuela does not have a treaty of trade and commerce with the U.S., so the very useful E-1 and E-2 visas are not an option.

-Student visas, even for language studies, are subject to the Section 214(b) provisions requiring nonimmigrant intent...tough to prove when you have a pending EB-5 Immigrant Investor petition.

And so, we go back to the old reliable, 214(b)-free L-1 and H-1B (i.e., neither is subject to the applicant proving non-immigrant intent)...but they too have their problems:

-the H-1Bs remaining are flying the coop quickly and with a recovering economy, who says the 65,000 visas won't disappear on that next April Fools morning, as has been the norm till this past year?

-the L-1 abuse has left our legitimate small-company L-1 prospects in Venezuela wary and fearful of consular denials after getting their USCIS petition approved.

So here's what we are doing:  we are filing those small-company L-1s armed to the TEETH with bona fide evidence of legitimate business activity both in the U.S. and abroad, pre-empting the line of inquiry with powerful proof of the legitimacy of the enterprises...large OR small.  And we are getting them approved.

Sometimes showing the consular officer the Big Picture is all it takes...revolutionary!!

Broken water or Broken Visas...

When Roger, Melissa, and I got back to the office Monday from our incredibly exciting EB-5 Immigrant Investor seminar in Venezuela, I got a taste of the days of old.  We'd left Wednesday and returned Sunday afternoon, and none of us had gotten much sleep during and since the trip.  And despite the presence of a great team on top of the workload, upon our return to the office we were each bombarded with that unavoidable crush of activity which befalls each busy attorney who dares leave the office for a few days. 

I thought back to my own business immigration practice, which I sold six years ago to my partner and friend, Lorenzo Lleras.  Lorenzo had joined my firm right out of law school and had grown to manage the firm far better than I ever had by the time he bought me out.  But even with our cracker jack team and Lorenzo at the helm, Monday-o-phobia was part and parcel of my reality for many years.  I travelled a lot back then, more than immigration attorneys normally do, and our offices in Hong Kong and Manila were a full day's flight away.  The trips had to be for at least a week, week and a half, and it was before communications technology had evolved.  So my return to Florida, despite everyone's best efforts, invariably involved a bit of chaos.

I would get very frustrated.  I would say "But I'm not an obstetrician who has to run to the hospital in the middle of the night to deliver a baby...I don't even do deportations!  How can there be so many "emergencies??"  Of course, in fact, the actual emergencies were rare.  But when clients want to speak to "the man" (or "the woman"), no amount of delegation to even the most competent folks will ever suffice.

Seriously, when you think about it, the obstetrical analogy is hardly off-base:  like the newly pregnant parents,folks come to us with the growing "embryo" of a life in the U.S. seeded in their plans.  We sit here and structure their visa, advise them of their options, and send them to specialists (pre-immigration tax advisors instead of sonogram technicians) to insure the health of their "pre-natal" "baby".  We prepare them for the process (our version of LaMaze) and for the visa interview (which many compare to the birthing process in terms of excruciating pain.)  Finally, with the family here and visas in hand, the dream begins as they leave our office with their new business enterprise, hopefully, bundled in a blanket of wise counsel and high hopes.  (I won't even get into the even more accurate but disturbing parallel of what happens when our best counsel ignored and the best laid plans "miscarry" as a result of predictable obstactles of which we warned the client; invariably heartbreaking to us.)

So, during these years, I tried in vain to be "present" in the Far East offices without having to travel, but there was just no way.  I have always embraced technology, but this was WAY before Skype, way before global cell access...even before email was standard in business communications.  I remember spending thousands to buy a set of then-high-tech video phones, thinking I'd be able to video conference and save a few trips.  All Chinese and Filipino clients looked the same, probably as I did to them: two inch tall gray blobs and a poor voice signal, degraded by the routing of video through phone lines never designed for compressed data.

I used the phones as bookends for awhile, tried unsuccessfully to sell them without reserve on eBay, and, as I recall, they are now part of an artificial reef somewhere off Key Largo.

Today at Chez Roger, things are different.  I Skype with clients.  I scan business cards in with OCR software.   Our state of the art client management system is available anywhere we can get online.  But the essential physical presence of the attorney - that "give a damn lawyering" I wrote of several days ago -- is still the buckstop.

So by late Monday afternoon, Melissa had had five client appointments, Roger about a billion emails, and I was whooped.  (I very rarely get tired.)  As I was leaving the office, I went to say goodnight to Roger and he just looked at me and said something to the effect that we were paying dearly for our two-and-a-half-business-day absence.  In fact, there had been no emergencies or even pseudo-emergencies, and, besides, Linda and a veteran corps of business immigration and litigation attorneys had remained in Miami to deal with anything urgent.

As I walked down to the car I realized that whether it involves broken water or broken visa situations, "emergency" is defined in the eyes of the beholder.

TEA Time in the Florida Keys

No, I’m not talking “tee time” at Ocean Reef (or “tea time” at Ocean Reef, for that matter.)  I’m referring to the EB-5 Investor Visa definition for TEA: “targeted employment areas”.  A “TEA” refers either a geographical area which has an unemployment rate of at least 150% of the national average OR a rural area.  Of the 10,000 annual visas set aside for EB-5 Investors, 3,000 of them are set aside for TEA cases.  Why is this important?  Because TEA designation drops the required EB-5 investment amount from $1 million to $500,000.

And, as it just so happens, that wonderful paradise right in our own South Florida backyard, the Florida Keys (except for the City of Key West) meets the TEA definition, from the stretch connecting Key Largo to the tip of the Florida peninsual all the way to the city limits of the funky little city perched at the southwestern tip of my favorite archipelago, only 90 miles from the island where I come from…Cuba.

And this, my savvy readers, is a good thing for both the Keys AND prospective EB-5 Investors.  You see, the economic troubles we’ve seen in South Florida have not spared the island paradise, and just today The Miami Herald reported on the boom-to-bust reality of luxury developers who scarfed up campgrounds, trailer parks, marinas and dinky motels in hopes of turning them into uber luxury destinations and cashing in…only to watch it all fizzle.

According to the Herald article, “from Key Largo to Key West, at least 18 pricey projects screeched to a halt in 2007 and 2008.”  But it isn’t just about developers left holding the bag, as the sympathy factor would be pretty weak…it’s about what those developers left behind in their rapacious appetite for profits. Trailer parks that once housed retirees have been leveled and cleared.  Mom-and-Pop marinas where shuttered as developers tried unsuccessfully to change zoning density numbers with a wary Monroe County.  In the words of the Herald:

“Today, the legacy of the Keys' land rush is a list of foreclosures, bankruptcies and litigation, some of it so complicated that developments have been left in indefinite limbo. One of the biggest: the $220 million Marlin Bay Yacht Club in the Middle Keys. “

And it’s not like these developers were flush with cash.  They did exactly what we, as a nation of homeowners, did: they borrowed.  And borrowed.  And borrowed some more.  In fact, the Herald says that based on public records and disclosures by developers, those 18 high end projects previously mentioned in Keys collectively borrowed nearly$1 billion.    (Can you even fathom  the total figure if you add in all the speculative single family home construction which has failed just as spectacularly?)  The best quote in the article sums up the perspective of those who, like me, have lived or still live in the Keys:

``The rat bastards bought up our property and took our affordable housing,'' said backcountry fishing guide Capt. Dennis Robinson.

And so, like a knight in shining armor, the possibility of EB-5 investments stands as the most intelligent, feasible, and exciting recovery solution for both job creation AND affordable housing in the Keys.  TEA designation for Monroe County – again, excluding the City of Key West – permits those two most powerful benefits an EB-5 Regional Center can offer: a pool of diversified private investment funds combined with direct and indirect job creation in an area where tourism drives the economy…and tourists drive over the sea.

Who’s in?  Email me and let’s get busy in the Keys.

EB-5: It's About Job Creation, Stupid

Our immigration seminar in Venezuela went off without a hitch and we met some great folks.  Despite Venezuela’s political complications, it was interesting to see that whatever one’s leanings, the same pragmatism seems to permeate the private sector of what is still a thriving petro-dollar economy.

I’ll admit it:  I was a little concerned about the reception we’d get. It turned out to be quite the welcome mat, and not only from those who are unhappy with the current climate…but also from those who support Venezuela’s new agenda as defined by its current leadership.  We were met with intelligent questions by a sharp group of prospective U.S. investors from both sides of the political fence who view the U.S. EB-5 Regional Center program for what it is: an intelligent investment-based immigration option which works by creating jobs in the now-floundering greatest economy on earth.

An editorial posted by the Wall Street Journal yesterday was talking about why job tax credits are a bad idea but might as well been discussing the EB-5 program:

“Alarmed by the rising jobless rate, Democrats are scrambling to "do something" to create jobs. You may have thought that was supposed to be the point of February's $780 billion stimulus plan, and indeed it was…. The current [jobless] rate is 9.8% and is expected to rise or stay high well into the election year of 2010. Rarely in politics do we get such a clear and rapid illustration of a policy failure…

This explains why political panic is beginning to set in, and various panicky ideas to create more jobs are suddenly in play...

Alas, their new ideas are little more than political gimmicks that aren't likely to result in many new jobs…”

Gimmicks indeed.  Among the ironies:

-the EB-5 program was just extended for three years last week with bipartisan support, and that legislation creates American jobs which are neither funded by existing U.S. enterprises NOR simply more minimum wage jobs (but, rather, a representative cross section of across-the-board openings, both skilled and less skilled);

-the Democrats, historically unfocused on business/investment immigration due to their relationship with labor, now find themselves in the White House and with a Congressional majority…and seemingly still unable to grasp the staggering job-creation potential via the now-assured continuity of the EB-5 investment visa program.

-the combination of insanely high filing and concocted “related” fees charged to employers of H-1B visa professionals has triggered a dramatic drop in the use of the category, with U.S. employers instead outsourcing these tech jobs overseas…not protecting a single America job but instead accelerating the decline of existing U.S. jobs via the resulting decimation of collateral support positions reliant upon  healthy H-1B visa utilization.

It is all so dumb.  Last quote from that same article in the WSJ:

The lack of U.S. job creation is a big problem, but the quickest way Washington could help would be to stop imposing more financial burdens on hiring.

Did anyone seriously believe that by making H-1B employer fees obscenely high U.S. jobs would be created?  Did Congress honestly imagine that U.S. technology companies would be able to continue to do business in the U.S. without the core numbers of foreign tech professionals...and not outsource??  Finally: was there a single person in Washington who believed that the H-1B process -- already a nightmare of bureacracy even before the imposition of todays outlandish filing fees -- was something any U.S. employer would willingly step into but for a bona fide need for skilled foreign workers?

Thinking about all this over the weekend in Caracas, it is incomprehensable that the world’s largest economy can fail to see the obvious while our prospective investor clients in Venezuela - even those who aren't great fans of our politics -- see the naked truth:  Current unemployment figures in the U.S.,  bargain real estate prices, dramatic increases in infrastructural spending by USG and a green card for the investor combine to make one of those  exceedingly rare “win-win” situations.

It’s about the jobs, Stupid.  

Email me if you want to know more about what we at Bernstein Osberg-Braun & de Moraes are doing to make the EB-5 opportunity a reality for qualified foreign investors.

EB-5 Regional Center Forum Debuts

Yesterday, Bernstein Osberg-Braun and De Moraes' first EB-5 Immigrant Investment Forum went off without a hitch in our Miami headquarters.  In addition to some pretty stellar performances by Karen Caco (of counsel to the firm and one of the country's most experienced EB-5 attorneys), Roy Norton (of the Florida Overseas Investment Center ) and Kraig Schwigen (of the CMB Regional Centers), the event was notable for what did not occur:

-no Powerpoint or other computer glitches;

-no questions we couldn't answer;

-we did not run out of food (in fact, the kitchen remains adorned with enough Panini stuff for a New Testament "multitude");

-Roger, Melissa, and I all stayed pretty much on point and, most astonishingly...

-I made it through lunch without getting anything on me.

One should never fail to appreciate the little miracles.

Our three hour presentation - which I had feared might be a big longish -- proved to be quite adequate, flowing nicely from topic to topic and ending with a good Q & A series.  We would like to send our thanks to our guests and participants for giving us their morning, their feedback, and sending us off to Venezuela with our road show well defined.

Next up: Update from Caracas

 

"Give a Damn" Lawyering

If you count my time as a visa officer in the State Department, I have been immersed in immigration law for 22 and a half years now.  I was thinking about the lawyers I've met over that time, and they range between the Jedi Masters of immigration law to public menaces who should be disbarred retroactively.

Among the skilled immigration attorneys, I've noted a subtle distinction in the underlying qualities which in effect define them, to me, as "good attorneys".  They boil down to two camps:

1- Those motivated by a sense of justice and

2- Those motivated by fear of malpractice/getting in trouble

I should note immediately that despite the obvious innuendo in the distinction I am drawing, legal competence does not appear to be limited to either of these camps of  "skilled immigration attorneys".  Nor am I saying that those I view as "fear-based" give less of a "damn"; some of the very best attorneys I've met operate out of what I would call "fear-based" excellence...a desire for justice underwritten by a very internalized CYA perspective.  Conversely, some lesser skilled but still competent immigration attorneys are all the better for their clients because of their innate appetite for demanding fair results.  Both categories of skilled immigration attorneys are zealous advocates and get the job done, but the former, I submit, accomplish something greater. Robert Kennedy put it this way at a speech at Day of Affirmation at the University of Capetown:

 "Let no one be discouraged by the belief that there is nothing one man or one woman can do against the enormous array of the world's ills -- against misery and ignorance, injustice and violence... Few will have the greatness to bend history itself; but each of us can work to change a small portion of events, and in the total of all those acts will be written the history of this generation...It is from the numberless diverse acts of courage and belief that human history is shaped. Each time a man (or a woman) stands up for an ideal, or acts to improve the lot of others, or strikes out against injustice, he (or she) sends a tiny ripple of hope, and crossing each other from a million different centers of energy and daring, those ripples build a current which can sweep down the mightiest walls of oppression and resistance." [Emphasis added.]

Ultimately, achieving the desired results for the client is the immediate objective, but it sure is cool to think that one's actions might actually cause that ripple effect which could lead to a tsunami of justice.  I suppose that the Yodas of our profession, people like Ira Kurzban, have done precisely this through their Supreme Court victories...they've swept "down the mightiest walls of oppression and resistance."

Besides this element of the greater good, there is the simple fact that fear-based decision making is rooted in anxiety and negative karma, no matter how brilliant the lawyering.  Getting indignant, spitfire, smoking-out-the-ears mad like Regina does now and then certainly seems more fun...and a bigger splash/ripple in the big Immigration Pond of Life.

I must say that it is nice to once again be in the company of kindred spirits.