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The Application For A Regional Center Invites Material Change To Perfect That I-924: The Role Of Transparent Complexity In Preserving Investment Flexibility

by Joseph P. Whalen

Acknowledging and Inviting "Material Changes":

Aside from the four EB-5 Precedent Decisions [1] decided by the AAO in 1998, I could only find one actual BIA decision dealing with an older investor classification. That older case was in a slightly different context. Interim Decision # 2581 or Matter of Heidari [2], 16 I&N Dec. 203 (BIA 1977) [specifically May 4, 1977] dealt with a student who overstayed his student visa and began a business and sought to Reopen and later to Reopen and Reconsider a deportation order. After he was already order deported, he sought that relief in order to take advantage a new immigration classification which required an alien to invest $40,000 and be the principal manager of the business and employ at least one USC or LPR employee (excluding self, spouse, and children). In that case, the BIA refused to consider new evidence that came into being after the fact, long after the filing of the initial petition and after he was ordered deported. The prohibition against making a "material change" and the requirement for "eligibility at time of filing" specifically within the immigrant investor context goes back to 1977, long before Izummi in 1998. However, that too was a decision involving a visa petition rather than an I-829 seeking to lift conditions, or an I-924 for a Regional Center neither of which yet existed.

I urge USCIS to specifically distinguish the I-924 as an application which does not require an applicant to be completely "eligible at time of filing" and is not prohibited from making material changes post-filing. It seems that USCIS is moving that way but has not stated it in plain language. This sentiment is expressed in the Background section of the May 19, 2011, EB-5 Proposal [3] as:

"'Actual' applications are supported by specific business plans and economic analysis, the actual capital-investment structures and documentation for the investment offering, the anticipated regional economic impacts, and the Regional Center's operating plan and structure. The review of the specific documentation to be provided in I-526 petitions for projects that can be started immediately after the approval of the I-924 application promotes efficiency and predictability within the EB-5 immigrant petitioning process as issues can be identified and resolved within the I-924 application prior to the filing of any I-526 petitions."

Transparent Complexity to Achieve Desired Flexibility:

One must understand also that once an I-526 is approved that an individual alien investor is pretty much locked in to a plan that needs follow through. Guidance on the limits to a Regional Center's (RC's) plans and structure of investments are crucial but limitations need not merely be restrictive, limits can also be expansive and inclusive.

The AAO non-precedent Decision of April 23, 2010 [4] (excerpts below) involves a Regional Center limited partnership that initially chose to invest in the expansion of Tommy D's, a home improvement supply store, and then switched to a restaurant, Butcher & Singer. That Decision has some points to be considered for further development. This decision relates to an I-829 but does discuss Regional Center issues as well, and perhaps it is even more pertinent to an I-924.

"The business plan stated that the objective of the partnership would be to operate as an ongoing series of investments that serve the best interests of the limited partners and in a manner that furthers the economic development of Philadelphia. The plan references a PIDC advisory agreement with the Partnership that requires PIDC to recommend investments to the Partnership..." (At p.5)

There would appear to be a certain amount of flexibility built in to the referenced "Advisory Agreement". USCIS should not move away from that flexibility but rather embrace it and define it appropriately within the forthcoming revised form instructions. That same decision goes on to state:

"The full amount of the requisite investment must be made available to the business most closely responsible for creating the employment upon which the petition is based. Matter of Izummi, 22 I&N Dec. 169, 179 (Comm'r. 1998). While counsel notes on certification that the job creating enterprise and the new commercial enterprise are not always the same and notes that Matter of Izummi does not preclude prospective investments, nothing in that decision suggests that the alien is free to move his investment from the prospective project presented to USCIS in support of the Form 1-526 to a project that USCIS has never reviewed in any respect." (At p.11) [Emphases added.]

Pay close attention to the phrase "employment upon which the petition is based " and remember that the certified denial of an I-829 that involves proving the jobs. Working from that position, the value in the use of "exemplars" is made quite clear. In order to preserve the desired flexibility to shift to a different project or supplement an investment portfolio with an additional previously only "prospective investment" requires sufficient advanced planning. The Regional Center desiring such flexibility needs to have an inventory of "prospective projects" in the form of sufficiently "USCIS-vetted exemplars" on-the-shelf from which to choose. Planning ahead for a variety of contingencies is a wise move for any Regional Center. That case also involved shifting from a TEA to an area not shown to be a TEA. The RC cannot afford to lose sight of any pertinent detail in their specific investment maneuvers and the advanced planning for those possibilities or contingencies.

It would also be incumbent upon the Regional Center to invest the needed resources in creating a sufficiently variegated business plan that is well supported with exemplar projects and economic analyses with reliable and credible job projections based on a valid econometric model.

This previous point is where a broad, credible, comprehensive business plan that is wide-ranging in scope and breadth submitted at the Regional Center (RC) Proposal (I-924) stage is critical. If a RC asserts a flexible investment approach and builds such flexibility into its written supporting documentation with a certain amount of specificity sufficient to put USCIS on notice, then shifting from one vetted "actual" project to another project based on a "previously vetted exemplar" project remains a possibility. Preserving such flexibility is not a simple task.

The RC applicant must invest great effort into the planning in order to retain such flexibility for its prospective investors. The "general proposal" based on "general predictions" allowed by the statute [8 USC 1153 Note] must be presented with sufficiently detailed information "concerning the kinds of commercial enterprises that will receive capital from aliens" as allowed and envisioned all in that same statute. Congress also directed the agency to write regulations and to establish "reasonable methodologies". Well, those mechanisms are there in the regulations at 8 CFR 204.6(m)(3). It is up to the RC applicant to comply with those requirements from the very beginning. The Regional Center investor is no freer to abruptly change midstream than USCIS, however, if the possibility is already built into the plans in advance of a shift, then it is not an impermissible material change outside the I-526 approved plan.

While USCIS must set certain limits to such flexibility it would be to the detriment of the success and survival of the EB-5 Immigrant Investor Program to cut off any possibility of flexibility. I urge USCIS to address this concept in the anticipated revised I-924 and I-526 form instructions and any planned regulatory update.

Transparent Complexity "Up Front" Is Key To Reasonable Reliance On The Prospect Of Enjoying Future Deference Within EB-5 Based on Regional Center Affiliation

Flexibility can be built into a complex Regional Center Proposal supporting the I-924 if it fully embraces each and every aspect of the implementing regulations and statute, as amended.

If one reads 8 CFR 204.6(m)(3)(i-v) like this and thinks outside the box, then the successful Transparent, Complex, and Flexible Proposal will be one that:

"Clearly describes how the regional center focuses on a geographical region of the United States," It is essential to choose a realistic statistical universe to work within (geographically speaking), amendments can be made later that refine and/or replicate what has thus far proven successful in order to expand the RC's reach and scope. This part of the planning process establishes a workable basis for the econometric model and dictates the appropriate inputs for the variables needed for use in the chosen model/methodology [5] (RIMS II, IMPLAN, REMI, REDYNE, other) when creating the actual or exemplar "economic analysis".

"...and how it will promote economic growth through.....improved regional productivity, job creation, and increased domestic capital investment;" This part underlies the necessary comprehensive and credible business plan or plans [6] . These should focus on the particular "kinds of commercial enterprises that will receive capital" as dictated by the statute to be identified up front. This is where one must chose their types of projects and flesh out their desired commercial enterprises that are expected to create the required jobs. This is where one looks to the NAICS [7] codes.

Once again, it is critical to be specific enough to get appropriate inputs for the economic model yet try to leave some wiggle room by choosing the right category at a wide enough level to retain sufficient flexibility. Be specific enough to satisfy USCIS up front with an exemplar project but build in enough flexibility to be able to tailor the previously vetted and approved economic model to an actual project based on a previously USCIS-vetted exemplar project plan without getting too far away from where you started. This is for each "kind of commercial enterprise" identified. There is no limit to the different kinds of projects the RC can plan ahead for.

If an actual project falls into a category of investment that was previously vetted as an exemplar then submitting an I-924 amendment or even an "I-526 Regional Center "exemplar" Project" should be a straight-forward exercise of that flexibility to ensure a quick response to the amendment application or exemplar petition request, with the proviso that the actual alien investors' supporting financial documentation is always separate and apart from the RC filed application or petition.

This would be a safe way of ensuring that a strong prima facie case could be presented with each investor's I-526 petition, en masse. It is not yet an absolute requirement that any final project chosen that is based on a previously vetted exemplar must be submitted as an amendment (or exemplar petition) but it would be a wise move when possible. If the flexibility has been presented up front through the use of transparent complexity then additional previously only "prospective investments" that had been planned for as contingencies and/or possibilities can become realities. These can be added into an evolving and/or revolving investment structure or possibly even substituted in place of a failing project. It is key that a substitute or addition has already been vetted by USCIS at the very least as an "exemplar" that is similar enough to the "actual" project that it is not interpreted and branded as "a project that USCIS has never reviewed in any respect."

Having a sufficient variety of possible project types is a key component for any Regional Center. Some developer may approach a Regional Center at any time and if the RC already has a previously vetted and approved exemplar similar enough on hand, then the "actual" project can get underway quicker. If an I-924 amendment is needed to cover some kind of commercial enterprise never previously vetted in any respect it will slow things down. Consider the preparation time before submission as well as the adjudication time after filing. An amendment of a new project that is a "close match" to a previously vetted "exemplar" should speed the process and turnaround time for both the RC and USCIS.

In the April 23, 2010, PIDC case, Tommy D's as a "discount seller of close-out or discounted building materials used for home improvement" might have fit into one or more of the following NAICS codes.

  • 44 Retail Trade
  • 444 Building Material and Garden Equipment and Supplies Dealers
  • 4441 Building Material and Supplies Dealers
  • 44411 Home Centers
  • 444110 Home Centers
  • 44412 Paint and Wallpaper Stores
  • 444120 Paint and Wallpaper Stores
  • 44413 Hardware Stores
  • 444130 Hardware Stores
  • 44419 Other Building Material Dealers
  • 444190 Other Building Material Dealers

Butcher & Singer as an "upscale supper club" would probably have fit into one or more of these NAICS codes:

  • 72 Accommodation and Food Services
  • 722 Food Services and Drinking Places
  • 7221 Full-Service Restaurants
  • 72211 Full-Service Restaurants
  • 722110 Full-Service Restaurants

"Provides in verifiable detail how jobs will be created indirectly...;" This part speaks to the level of detail required for the project plan and the economic analysis based on that plan. It also speaks to the quality of data used as inputs in the economic model to produce the economic analysis and job creation projections gleaned from it. Of course, when speaking of quality of data used as inputs one must ensure that reasonable and reliable data is chosen and that it is appropriate to the particular econometric model or methodology being used. Once again this all harkens back to the business plan. Is that plan realistic and based on current accurate data?

"Provides a detailed statement regarding the amount and source of capital which has been committed to the regional center, as well as a description of the promotional efforts taken and planned by the sponsors of the regional center;" This part is specific to the operation of the entity that applied for Regional Center designation. How will these folks fund and advertise the RC? How will they recruit? Will they be charging alien investors for services, which services? This may be addressed in a business plan specific to the operation of the RC alone or may be less formal correspondence which often includes a budget. This information may be contained in an Operating Agreement, Subscription Agreement, Partnership Agreement, Bylaws, Articles of Incorporation, an Organizational Agreement, or a Charter as examples.

"Contains a detailed prediction regarding the manner in which the regional center will have a positive impact on the regional or national economy in general..." This part also harkens back to the prior requirement and the first under (m)(3). This is an overall statement as to the good to potentially come from the establishment of the Regional Center in a particular geographic area as well as the various alien investor projects it will help get started. These effects should be quite clearly obvious and jump out of the business plan and economic analysis.

" reflected by such factors as increased household earnings, greater demand for business services, utilities, maintenance and repair, and construction both within and without the regional center;" This part gives a laundry list of specifics for the economist to address in the economic analysis. Amazingly, these are often overlooked because the economists are not provided with the actual regulations that their work product (the economic analysis) is supposed to support. The economists would produce better analyses if they knew what their analyses were supposed to specifically include. Many economic analyses blather on about poverty levels, taxes, user fees, property values and socio-economic stratification based on educational levels of the demographic composition of the population. Interesting if you are addressing Congress for funding a project in a community but irrelevant to EB-5. EB-5 economists need to stick to the direct, indirect and induced job creation and general economic benefits of the actual project or exemplar project type proposed as the new commercial enterprise to receive EB-5 funds.

"Is supported by economically or statistically valid forecasting tools, including, but not limited to, feasibility studies, analyses of markets for....the goods or services....., and/or multiplier tables." This part reiterates and emphasizes that the credible, comprehensive business plan and the economic analysis as well as the job creation projections must be sound and based in reality. "Economically and statistically valid" is crucial for the inputs being used as well as the economic model and/or methodology being used as a forecasting tool. The economic models may employ "multipliers" and the selection of the appropriate multiplier is crucial. The preparation of, or reliance on, "feasibility studies" and "analyses of markets" are paramount to the foundation of the business plans/proposals for the various "goods and services" to be offered through the "new" "commercial enterprises".

In the April 14, 2011, AAO non-precedent Decision [8] pertaining to a South Dakota failed Dairy Farm Regional Center affiliated I-829 case provides some analysis invoking the reasoning of the Ninth Circuit in the Chang case as to the inability of USCIS to go back and re-adjudicate an I-526 at the I-829 stage.

"The Ninth Circuit, in Chang v. United States of America, 327 F. 3d 911 (9th Cir. 2003), held that, during the adjudication of a Form I-829, USCIS could not review whether the initial plan submitted with the Form I-526 was qualifying, only whether the alien sustained that plan. Specifically, the court stated that the Form 1-526 approval may not be "decoupled from [Form] I-829 approval." Id. The court further stated that Form I-829 approval is predicted by Form I-526 approval and "successful execution of the approved plan." Id. As noted by the court in Chang, 327 F. 3d at 927, far more evidence is required in support of the Form I-526 petition. In fact, as stated above, the regulation at 8 C.F.R. 204.6(j)(4)(iii) expressly requires the submission of reasonable methodologies for determining indirect job creation at the Form I-526 stage. At the Form I-829 stage, the petitioner is not required to submit such evidence, although the petitioner must use the methodologies approved at the Form I-526 stage to demonstrate that his investment has created the requisite employment.

Under the reasoning of Chang, the director erred in revisiting the appropriateness of the multiplier. The director approved the Form 1-526, which disclosed that the petitioner would be using the 2.66 multiplier for the location of the dairy. The petitioner did not materially change the location of the proposed employment creation and the director does not identify information that was misrepresented or not disclosed at the Form 1-526 stage that would warrant a new evaluation of the multipliers used. Thus, the petitioner should be able to rely on the 2.66 multiplier as an acceptable means of demonstrating total job creation, including indirect jobs. The AAO withdraws the director's concern that the 2.66 multiplier is not appropriate." (At p.15)

A Regional Center that starts with too narrow a scope has already painted itself into a corner from which there is nowhere to go and is likely doomed to fail. Based on that same reasoning from Chang, upon which the Ninth Circuit blocked INS from re-adjudicating an I-526, and upon which AAO blocked CSC from re-adjudicating an I-526, the act of a petitioner's full, honest, and accurate disclosure in the I-526 is paramount to success at the at the I-829 stage if coupled with successful execution of the plan or a showing that one is on the cusp of achieving the goals.

Therefore, through the well thought out and skillfully crafted Plan(s) put forth up front i.e., presentation of a plan constructed with transparent complexity, one can build in any amount of flexibility it chooses to expend the effort to produce through solid business plans and economic analyses with a verifiable and detailed basis.

8 CFR 204.6 Petitions for employment creation aliens.

(e) Definitions. As used in this section:

Commercial enterprise means any for-profit activity formed for the ongoing conduct of lawful business including, but not limited to, a sole proprietorship, partnership (whether limited or general), holding company, joint venture, corporation, business trust, or other entity which may be publicly or privately owned. This definition includes a commercial enterprise consisting of a holding company and its wholly-owned subsidiaries, provided that each such subsidiary is engaged in a for-profit activity formed for the ongoing conduct of a lawful business. This definition shall not include a noncommercial activity such as owning and operating a personal residence.

New means established after November 29, 1990.

The law changed after the regulations were written and have done away with certain restrictive requirements. The investor need not "establish" a truly "new" business. The investor may join in after a business has already begun. The alien investor can contribute towards and grow the relatively new business and be considered as having had a hand in its establishment. The alien may buy a business and restructure it into something considered "new". The alien may invest in a business to expand it significantly to 140% or more of what it was when (s)he joined it in terms of net worth and employment (it is unclear but I think the net increase in employment should be 10 new jobs per EB-5 investor with the proviso that the RC investor can include new indirect jobs). An alien investor can help save a troubled business and preserve at least 10 jobs (each) without losing any jobs. Some of these last few points above may still be open to a challenge.

8 CFR 204.6 Petitions for employment creation aliens.

(e) Definitions. As used in this section:

Troubled business means a business that has been in existence for at least two years, has incurred a net loss for accounting purposes (determined on the basis of generally accepted accounting principles) during the twelve- or twenty-four month period prior to the priority date on the alien entrepreneur's Form I-526, and the loss for such period is at least equal to twenty percent of the troubled business's net worth prior to such loss. For purposes of determining whether or not the troubled business has been in existence for two years, successors in interest to the troubled business will be deemed to have been in existence for the same period of time as the business they succeeded.

(j) Initial evidence to accompany petition......

(4) Job creation......

(ii) Troubled business. To show that a new commercial enterprise which has been established through a capital investment in a troubled business meets the statutory employment creation requirement, the petition must be accompanied by evidence that the number of existing employees is being or will be maintained at no less than the pre-investment level for a period of at least two years. Photocopies of tax records, Forms I-9, or other relevant documents for the qualifying employees and a comprehensive business plan shall be submitted in support of the petition.

Having fun with funds:

Just how much transparent flexibility can one work into the financial arrangements? We've all heard the terms "creative bookkeeping" and "cooking the books". That is a dangerous game to play, just ask Al Capone and Bernie Madoff. However, when full disclosure is made of complicated arrangements in terms that an actual human being can understand then complexity is not only acceptable but can be one's salvation. It is once again critical to be transparent in that high level of complexity needed to ensure flexibility.

Can you use EB-5 money to pay off a loan? The answer to that question is a qualified "yes". However, a quick reading of the CFR definition of the word "invest" might make you say "no" and stop your inquiry. That would be a bad move, read the CFR more slowly and then read the statute. A former co-worker of mine used to say (about practically everything): "It's just not that simple." She could be frustrating but she was wise.

8 CFR 204.6 Petitions for employment creation aliens.

(e) Definitions. As used in this section:

Invest means to contribute capital. A contribution of capital in exchange for a note, bond, convertible debt, obligation, or any other debt arrangement between the alien entrepreneur and the new commercial enterprise does not constitute a contribution of capital for the purposes of this part.

One has to take a step back and consider the actual prohibition. There can no simple assumption of debt between the alien entrepreneur and the new commercial enterprise. Nor can one alien investor simply buy-out another alien investor and have BOTH count the same jobs, ridiculous! Domestic investors and bridge loans that created unallocated new jobs are another matter.

Now for a harder question: "How do you use EB-5 money to pay off a loan?" The way to make it possible is to use a mix of domestic and foreign investments and to make it even easier, structure a project in phases. Alien investors can enter and exit projects at different times so timing the infusion of certain alien investors' funds is a key component to success. You cannot double count jobs or allocate the same jobs to more than one EB-5 investor. If the jobs will come into existence in a piecemeal fashion then so should the infusion of alien investor funds.

The earlier alien investors can get the fewer jobs that get created up front. Suppose that a new factory will be built. There is a construction phase required before the first part of the factory will become operational. The early construction jobs cannot be counted in this particular project or at least not immediately, they require more proof of longevity to overcome the expectation that most construction jobs are temporary, seasonal, intermittent or transient in nature [9]. The EB-5 funds have, at this early stage, created indirect jobs (which are labeled as the indirect and induced jobs in the economic analysis) that are based on the initial construction only phase of the project and can be safely allocated to the early investors.

Now, bring in more EB-5 investors as the factory starts producing the widgets [10]. Now that the factory is open, there are factory workers, assemblers, delivery truck drivers, warehouse and office staff etc.., and the indirect/induced jobs based on them to be allocated. There are now more and different jobs to allocate to the EB-5 investors.

Now suppose that there are some domestic investors also involved and bridge loans that have built up. As long as there are enough new direct or indirect jobs to be allocated in sufficient numbers, then new alien investors can buy into the project and displace or join with domestic investors or pay down some bridge loans. In this sense, the buy-in is generally in the form of joining the investor group that is supplying financing to the developer rather than direct ownership of the factory which is the new commercial enterprise than is creating jobs. This is especially OK if the bridge loans from lenders or short-term domestic investors were obtained because of EB-5 money known to be in escrow or on the way due to aggressive Regional Center marketing efforts known to the domestic investors and/or bridge loan sources. But wait, that's not all, if, as had originally been predicted, a certain number, of certain types of the construction jobs have in fact lasted long enough to count for EB-5, then they too can be allocated for EB-5 investors. The originally predicted construction jobs should be held in reserve until they have lasted long enough to count but should be identified up front and allocated as quickly as possible once they are deemed sufficient and substantial enough to count.

8 CFR 204.6 Petitions for employment creation aliens.

(g) Multiple investors - (1) General. The establishment of a new commercial enterprise may be used as the basis of a petition for classification as an alien entrepreneur by more than one investor, provided each petitioning investor has invested or is actively in the process of investing the required amount for the area in which the new commercial enterprise is principally doing business, and provided each individual investment results in the creation of at least ten full-time positions for qualifying employees. The establishment of a new commercial enterprise may be used as the basis of a petition for classification as an alien entrepreneur even though there are several owners of the enterprise, including persons who are not seeking classification under section 203(b)(5) of the Act and non-natural persons, both foreign and domestic, provided that the source(s) of all capital invested is identified and all invested capital has been derived by lawful means.

(2) Employment creation allocation. The total number of full-time positions created for qualifying employees shall be allocated solely to those alien entrepreneurs who have used the establishment of the new commercial enterprise as the basis of a petition on Form I-526. No allocation need be made among persons not seeking classification under section 203(b)(5) of the Act or among non-natural persons, either foreign or domestic. The Service shall recognize any reasonable agreement made among the alien entrepreneurs in regard to the identification and allocation of such qualifying positions.

Who can count which jobs?

The option to pool investments is NOT restricted to Regional Centers only. A group of aliens can join forces independent of a Regional Center however, non-Regional Center-affiliated alien investor groups cannot take advantage of "indirect jobs" as predicted by an "economic analysis" based on any forecasting tools such as economic models and multipliers etc.... ALL of their jobs MUST be direct employees on-the-books, full-time, and permanent. These employees MUST all be "qualifying employees". The alien investors, spouses, sons and daughters are NOT included in the total. No illegal aliens count in the total. Part-time positions do not count. A "job-sharing arrangement" does count but is a rare thing in general. Job-sharing means that two (or more) people share one full-time job. That means that they are NOT co-workers working side-by-side. They share one 35 to 40 hour per week job. They both (or all) only equal one full-time POSITION when added together. The non-Regional Center-affiliated alien cannot add up two or more part-time jobs and call it one full-time POSITION*. Any job that is temporary, seasonal, intermittent, or transient in nature does NOT count.

When non-Regional Center investors pool their funds, they EACH have to have ten (10) full-time permanent employees, on-the-books and present EVIDENCE to USCIS. However, for the RC investor an Economic Analysis is utilized. It must be based on a sound Econometric Model that uses the information provided in, or inspired by, the credible comprehensive Business Plan. Numerous Models are in existence and recognized for their validity, there is no mandate to use any particular Model. Popular choices have been from among: IMPLAN, RIMS II, REDYNE, and REMI, but others may exist or come into fashion. RC investors rely on the Economic Analysis supported by the Business Plan. The non-RC investors will only rely on the Business Plans. In either case, evidence is evidence but that evidence usually varies greatly. Regional Centers and their investors have to prove fewer, if any, actual "direct" on-the-books, permanent, full-time jobs for "qualifying employees".

The jobs that are predicated for RC investors through the for-profit business activities of the new commercial enterprise must eventually be backed up with verifiable evidence. When dealing with the evidence to be produced to back up and prove the predictions about job creation, consider the nature of the investment scheme and the ease or difficulty of producing the required evidence. If the one predicts "indirect jobs" (which in the lingo of economic models will be labeled as both indirect and induced but for EB-5 these are both "indirect jobs") based on "direct jobs", consider whether these are also "indirect jobs" in relation to the alien investor. If they are then that MUST be satisfactorily explained up front in the Regional Center plans and the Economic Analysis. These might be labeled as hypothetical or base levels or some such economist-speak terminology in relation to the EB-5 RC investors.

One might build a retail department store and lease it out but that person won't be hiring the store cashiers, stock clerks, delivery drivers, secretaries, bookkeepers, personnel specialists, buyers, accountants, and janitors. The developer of a mall won't be signing the paychecks for the guy selling pizza and milkshakes in the food court, selling movie tickets, or plowing the snow or painting the lines in that parking lot. All of those folks will be "indirect" in relation to the alien investor.

Is it even a possibility for five non-RC affiliated aliens each investing one million dollars to create a business that would require fifty full time employees in the U.S. today? I don't think five million would go far enough to get the required results. Perhaps one one-million dollar investor could achieve 10 jobs by the end of the conditional residence period but I am skeptical that even two such alien investors could get the required jobs.

A further thought about evidence:

Whatever the final decision is as to the econometric model/methodology used for determining a basis to calculate indirect jobs, and in whichever frame of reference, RC or stand-alone investment (stand-alone not being based on any "model"), one should take into account, up front, the evidentiary requirements that will be needed to prove job creation at the I-829 stage.

For the RC investors, will the Analysis demand that the alien investor will have to come up with proof of actual "direct employees"? In any case, then the alien whether, through the Regional Center, in a group, or alone, will have to come up with W-2s, quarterly wage and tax reports, and/or I-9s, all of which must be verifiable as true. DHS runs what is likely the premier forensics document laboratory in all of the U.S. and probably the entire world and they can check with State tax agencies as well as IRS investigators and don't forget that USCIS itself runs E-Verify.

Proving "direct-like" jobs may be achieved in different ways depending on the specifics involved. When the Economic Analysis bases and ties its projection as to indirect job creation on a base level of newly created jobs attributable to the alien's investment in a particular commercial enterprise rather than simply to the dollar amount of the investment, it is critical to differentiate between "direct employees" on the alien's payroll vs. "direct employees" of a third party who are "indirect employees" for EB-5 purposes. Third party direct employees used as "direct jobs" in terms of input into the Economic Model may be termed as "hypothetical" or "base level jobs" or some other terminology that clearly distinguishes them as not on the alien's payroll. This is critical at the I-829 stage as to the evidence that will be required to lift conditions on residence. The classic and easiest example that illustrates this is "mall tenants' employees" while another could be "factory workers" when the alien is loaning money to an industrialist in order to let that other person or entity build, convert, or expand a factory. Simply basing the job creation projections on amount of investment may be easier to prove but both should be considered as the end result in net new jobs may vary.

Application of multipliers at the back end of the immigration processing (I-829):

In the same April 14, 2011, AAO non-precedent Decision, in determining first that even if indirect jobs could have counted as a base for applying a previously approved multiplier to arrive at a total number of indirect jobs, there simply were not enough. AAO went on to state that it concurred with the Service Center Director that it would not be permissible to allow that approach as it is in clear contradiction to Congressional intent. AAO acknowledged that the lifting of two previous investors' conditions was a mistake and USCIS is not bound by past errors, in general, and AAO is not bound by past mistake of the Service Center Director, specifically, in that it is the appellate authority with the power to overrule a decision below.

"The petitioner's evidence regarding its direct qualifying employees is not relevant, probative or credible. Doubt cast on any aspect of the petitioner's proof may, of course, lead to a reevaluation of the reliability and sufficiency of the remaining evidence offered in support of the visa petition. Matter of Ho, 19 I&N Dec. at 591. The submitted evidence in this matter is so flawed, that there is no established number of direct jobs that can be used for the multiplier.

Even if we were to consider the claims in a light most favorable to the petitioner, and apply the 2.66 multiplier to the non-qualifying direct jobs, the resulting number would not satisfy the statutory minimum. The petitioner has not submitted consistent, probative, and credible evidence that Mr. and Mrs.[redacted] worked as direct employees; therefore, the petitioner has only established 14 direct jobs. Applying the multiplier to 14 direct jobs results in 37.24 jobs. As the multiplier represents total job creation (direct and indirect), we must subtract the 13 direct jobs filled by non-qualifying employees for a total of 24.24 jobs. As noted by the director, two alien investors already removed conditions based on these indirect jobs; therefore, we must subtract the 20 jobs that have been allocated to them. Thus, we could not allocate more than four of the indirect jobs to the petitioner. See 8 C.F.R. 204.6(g)(2).

With respect to the other two alien investors who have removed conditions, the AAO is not required to approve applications or petitions where eligibility has not been demonstrated, merely because of prior approvals that may have been erroneous. See, e.g., Matter of Church Scientology International, 19 I&N Dec. 593, 597 (Comm. 1988). It would be absurd to suggest that USCIS or any agency must treat acknowledged errors as binding precedent. Sussex Engg. Ltd. v. Montgomery, 825 F.2d 1084, 1090 (6th Cir. 1987), cert. denied, 485 U.S. 1008 (1988)." (At p.16)


"Finally, there are serious legal concerns about allowing an enterprise to calculate indirect job creation based on the actual employment of unauthorized aliens. In the certified decision, the director stated that "allowing this practice may be contrary to the spirit of the law as the statute is designed to encourage job creation for qualifying employees." The AAO concurs that allowing the application of a multiplier to non-qualifying jobs would likely result in eligibility for petitioning aliens who are unable to document the creation of any jobs for qualifying employees. This outcome is inconsistent with Congressional intent to create jobs for qualifying employees. See 136 Cong. Rec. S17106-01,17107,1990 WL 165401" (At p.17)

One final thought on the meaning of "a Job" or "POSITION":

*Economic Models that predict indirect jobs do not distinguish between multiple part-time jobs and full-time jobs. They deal in Full Time Equivalents (FTEs), i.e., one full-time POSITION. USCIS had difficulty wrapping its head around that concept at first but seems to have come to realize that that is OK after all because of the leeway provided by Congress in the statutes creating and amending the Regional Centers in the Immigrant Investor Program and the Congressional intent made clear in examining the Congressional records when passing them.

1 In 1998, the AAO (attributed to The Associate Commissioner, Examinations) through the BIA, issued four EB-5
Precedent Decisions, but they are for the Immigrant Investors' I-526s, not Regional Centers (I-924s), and not I-829s.
Matter of Ho see here
Matter of Hsuing see here
Matter of Izummi see here
For the I-924, the most pertinent part of the 13 part holding is number
"(9) The Service does not pre-adjudicate immigrant-investor petitions; each petition must be adjudicated on its own merits." However, the AAO inappropriately applies number "(3) A petitioner may not make material changes to his petition in an effort to make a deficient petition conform to Service requirements."
Matter of Soffici see here
2 see here
3 see here
4 see here
5 An economic or econometric "model or methodology" speaks to the selection of a viable scientific and mathematical approach to be applied though the selection of appropriate input categories and values based on location and industry. The result of the calculations is the "economic or econometric analysis". That is the economist's work product which contains the job creation prediction or projections and is submitted as evidence. The selections of the model/methodology and the suitable inputs are dictated by, or inspired by, the credible, comprehensive business plan. Remember: garbage in = garbage out.
6 Id.
7 see here
8 see here
9 see here
10 In many economic models, something considered typical or representative, as of a manufacturer's products: the widgets coming off the assembly line.

About The Author

Joseph P. Whalen is not an attorney. He is a former government employee who is familiar with the INA. His education is in Anthroplogy with a concentration in Archaeology and has both a BA (from SUNY Buffalo) and an MA (from San Francisco State University) in Anthroplogogy. He previously worked as an Archaeologist for the U.S. Forest Service before becoming an Adjudicator with INS which became USCIS.

The opinions expressed in this article do not necessarily reflect the opinion of ILW.COM.