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Fighting chance to make your case part II

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Updated on Aug 31, 2012, to correct some typos.

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Page 1: Fighting chance to make your case part II

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Fighting Chance to Make Your Case: Part II By Joseph P. Whalen (July 10, 2012)

In the first installment on this topic, I ended by touching on EB-5 and that is where I will resume. If you don’t know what the crucial questions are you cannot answer them. A major flaw in the May 2, 2011, Denied Request for Regional Center Designation was vagueness as well as some rather critical fundamental errors. It seems obvious to me that the applicant did not understand the issues or underlying questions asked of such applicants in order to provide satisfactory answers and sufficiently detailed information. The requirements for Regional Center Designation are primarily and somewhat clumsily spelled out in 8 CFR § 204.6(m)(3). The regulations are both broad and narrow in certain respects. The overarching goals of the statute that created the “Pilot Immigration Program” for EB-5 Employment Creation Visas are somewhat broad and vague on purpose. Congress did not want to hamstring those industrious individuals who are willing to make an attempt to create jobs in the U.S. The source statute, codified as 8 USC § 1153 Note: Pilot Immigration Program, has been supplemented with clunky regulations originally promulgated by a law enforcement agency (Legacy INS) with a perspective towards strictly controlling the inflow of immigrants as well as detecting and deflecting fraud. Unfortunately, the fear of fraud was, and remains, well-founded and solidly anchored in reality. Even acknowledging that reality, there is room for reinterpreting the statutory requirements and revising the regulations. The transformation of the government immigration infrastructure through the creation of the Department of Homeland Security (DHS) was a true paradigmatic shift1 rarely seen. We are still is the process of that shift. Processes and procedures involving “Immigration Enforcement” and “Immigration Benefits Adjudication” have greatly changed already, but the extent of that transformation 1 Paradigm shift: a radical change in underlying beliefs or theory; coined by T.S. Kuhn (1922--96), US philosopher of science and author. See The Structure of Scientific Revolutions (1962)

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has yet to be fully realized. EB-5 is on the cutting edge and may serve as a proving-ground for ideas or concepts that may have greater impact in still other contexts. The concepts of what is “reasonable” is variable to the context wherein it exists. EB-5 petitioners affiliated with Regional Centers and more precisely, the sponsors or applicants for Regional Center Designation, coordinate the evidence needed to show “reasonable methodologies” as to the broad economic benefits that the EB-5 projects will have and especially the overall job creation and/or preservation in sufficient quantity to fulfill the program requirements. That is a tall order and the means to achieving the goals are not static but are very dynamic. The Regional Center is the means by which multiple EB-5 investors and their non-EB-5 partners will “concentrate pooled investments” for the greater good. The avenues open to them is virtually as limitless as any and all potential businesses. Regional Centers must select the specific “kinds of commercial enterprises that will receive capital from aliens”. The statute is written in the plural in various places for specific reasons. A Regional Center is not meant to be a one-time mechanism used solely for a single project merely to facilitate a “capital raise” and do it by getting designated solely to count indirect jobs one-time in that single project. While the “shovel-ready” concept has promise and should warrant expedited processing, being overly narrow will defeat the overarching goal of creating a new constant component in a regional economic infrastructure. The single project developer who lacks vision beyond the current deal is not a suitable Regional Center sponsor. The Regional Center was conceptualized as being a new player in the regional economic infrastructure. Congress selected the “regional” concept so that the various members of both houses of Congress could help their different clusters and compositions of constituents. With the above in mind, hopefully those seeking Regional Center Designation will be better prepared to meet the challenge. To return to the major concept in the first installment2 on this topic, vagueness and specificity complement each other and are not truly exclusive concepts.

2 See: http://www.slideshare.net/BigJoe5/they-have-to-give-you-a-fighting-chance-to-make-your-case

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Vague responses to specific questions are generally fatal to making your case. On the other hand, a vague response to vague questions leaves room for hope when challenging a specific finding-of-fact. Any denial based on a finding that a “specific fact” was not proven cannot withstand scrutiny if the inquisitor failed to ask sufficiently detailed questions likely to elicit that “specific fact” in the first place. See Shunfu Li v. Mukasey, 529 16 F.3d 141, 147 (2d Cir. 2008) (“[A] finding of testimonial vagueness cannot, without more, support an adverse credibility determination unless government counsel or the IJ first attempts to solicit more detail from the alien.”).

While the implementing regulations leave something to be desired overall, they do contain some very specific points that must be addressed in the supporting documentation accompanying the Request for Designation as a Regional Center. One of the major stumbling blocks to a successful outcome is the basically open-ended number and variety of possibilities as the “kinds of commercial enterprises” that may be involved. Once the precise types of businesses or industries have been selected, the vagueness begins to be confronted but the narrowing does not end there. After selecting the industries, more precise questions may be properly formed and presented. When suitable specific issues are identified and appropriate questions are formed then the appropriate required data can be chosen and sourced. At that point supporting documentation can be assembled in the proper context. As an example, one of the industries chosen might be “manufacturing”. What will be manufactured? Where will the factory be located? Where will the raw materials come from? How will the raw materials be transported? How will the manufactured product be marketed? Is the item being manufactured a complete product ready for use or merely a component? Will the customers be assembly plants, wholesaler, or retailers? Will the market be domestic or foreign or both? As one can see, the Regional Center Applicant has to define itself within the parameters of the statute guided by the regulations, any pertinent precedents, and other interpretive materials in order to assemble and fully support the application package. However, it is a long journey to get from a vague idea to a specific fact or series of facts. Additionally, beyond mere factoids, there must be sufficient nexus and reasonable methodologies that are EB-5 compliant. The investment structure, financial pathways, sourcing of funds, standard business documents (agreements

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and contracts), and all other necessary considerations must be sufficiently identified and addressed. For instance, if you will produce kosher foods, you also have to consult the appropriate rabbinical authorities. If your factory has to be built from scratch, you may need to have an environmental impact study, report, and/or statement performed per NEPA and/or CEQA3 etc. If your new factory will disturb historic or archaeological sites, then you have to plan around it or mitigate it per NHPA4 in order to satisfy the SHPO5 just like any other project of similar size and scale. In sourcing the funds, you may need to check with the banking regulators, the SEC, and OFAC. When putting together the standard transaction documents you need an expert in contract law and SEC regulations.

I do not want to overwhelm the reader, so I will stop here but this is NOT the end of this subject matter. Do not fool yourself.

I will leave you with some EB-5 mantras:

It’s just not that simple. Failing to plan equals planning to fail. Deference to prior decisions has concrete limits. Don’t paint yourself into a corner, have an escape route. Remain within your approved scope and operating parameters. Transparent Complexity is needed in order to preserve flexibility. A material change is not impermissible if it was included as a contingency. Reasonable Reliance is contingent on successful execution of the approved plan.

That’s my two-cents, for now.

Joseph P. Whalen, Independent EB-5 Consultant, Advocate, Trainer & Advisor

51 Ashton Place | Buffalo, NY 14220-2107 Phone: (716) 604-4233 Fax: (716)568-8208

E-mail: [email protected] or [email protected] or twitter@JoeWhalen1 web http://www.slideshare.net/BigJoe5 or http://eb5info.com/eb5-advisors/34-silver-surfer

NUMEROUS TRAINING TOPICS AVAILABLE! DISCLAIMER: Work is performed by a non-attorney independent business consultant. It is the client's responsibility to have any and all non-attorney work products checked by an attorney. I provide highly-individualized training based on consultation with my clients.

I serve Regional Center Principals and their counsel. I am not an attorney myself although I have trained numerous attorneys and INS/USCIS adjudicators in complex issues within immigration and nationality law.

I do not prepare forms, write business plans, or create economic analyses. I do review them for clients prior to submission and suggest corrections and/or modifications to run by your attorney

and trusted investment advisor. NAICS Code: 611430 Professional and Management Development Training

3 National Environmental Policy Act or California Environmental Quality Act. 4 National Historic Preservation Act. 5 State Historic Preservation Officer, every State has one.