The EB-5 Regional Center program has helped foreign investors to immigrate to the United States, created work places for local residents, and helped US economy grow. Unfortunately, however, not all project developers are acting in a “good faith.” There have been many documented cases in which EB-5 investors have received false information and unfounded promises from managers of Regional Centers (RCs), and there are virtually no remedies available to investors who are victimized by these fraudulent enterprises.
At present, the US government does not have any regulatory schemes established to protect EB-5 investors against fraud. The fact that the RCs receive approvals from the USCIS does not mean that the US government has somehow reviewed or approved the investment options presented to the foreigners.
In order to protect himself against potential fraud, there are several important questions that an investor should raise before starting cooperation with any Regional Center:
Has the Regional Center been approved by USCIS?
This can be easily checked at the USCIS’s website (www.uscis.gov) under the updated list of current Regional Centers. If the RC’s name cannot be found on this website, a potential investor should ask Regional Center to present a copy of the USCIS designation letter. If the Regional Center cannot provide a designation letter, an investor should view this as a highly negative sign regarding the validity of this entity. The designation letter can also confirm that the Regional Center has been approved for the relevant industry or geographical area.
An investor can also request copies of the Forms I-924 (submitted by RC at the beginning of the project to obtain USCIS’s approval and designation) and Form I-924A (information collection supplement which RC has to submit every year to report its activity) if he wants additional information about the RC before making an investment.
What should be done to conduct a Due Diligence Assessment?
There are several important steps towards it:
Ø Start with a detailed examination on whether the project complies with EB-5 requirements and USCIS’s rules;
Ø Request written copies of project related materials (business plan, memorandum, etc.) and compare it with other developers in the same business segment;
Ø Verify the identities of the people who are managing the Regional Center/Project in order to check their previous business background and records;
Ø Check the financial guarantees given to the project, such as bank loans, collaterals, etc.; and
Ø Find out if the developers invest their own funds to the project, as this can be a good indicator on their view of the future of the project.
What are the “red flags” for investor?
EB-5 Regional Center program has been active for over 20 years, and there have many documented fraud cases that we can learn from. Investors should be very careful if they encounter anything approximating the situations described below.
Be wary of guaranteed returns
The general rule is that foreign national cannot invest in a business that guarantees a 100% (or even higher) return. An EB-5 investor must be ready to lose part, or even the whole, capital. An investor has to be very careful and selective in the event that someone guarantees full or partial investment return.
Be wary of guarantees of permanent resident status within the US
In order to get conditional and later lawful permanent residency in US, an investor’s case has to be reviewed and approved by USCIS. USCIS will only issue a green card to an investor after it checks to ensure that all eligibility requirements have been met. Investor should be suspicious of anyone who insists that investing through EB-5 automatically guarantees an immigrant visa and permanent residency.
Seek help in reviewing your options before investing
As mentioned above, investors do not have any protections against fraud in EB-5. The only feasible way for an investor to ensure that an investment is sound is to ask licensed specialists to guide him or her through the whole investment process. If your EB-5 investment turns out to be in a fraudulent securities offering, you may lose both your money and your path to lawful permanent residency in the United States. Carefully assess any EB-5 option before investing your money and your hope of becoming a lawful permanent resident of the United States, and react with skepticism if a Regional Center tries to rush you to make an investment before you have had an opportunity to conduct due diligence.