On Jan 09 2014 by H. Ronald Klasko
The Story is Not the OIG Report
Immediately prior to resigning under a cloud of suspicion and investigation, the Deputy Inspector General of DHS issued his long-delayed report on the EB-5 regional center program. This blog will not focus on that report, which has a number of inaccuracies that others have pointed out, most especially because it is at best of historical interest only.
All of the findings and recommendations pre-date the May 30, 2013 Policy Memorandum, the establishment of the D.C. Investor Unit and the other significant reforms shepherded through by Director Mayorkas that render moot a substantial number of the major findings in the OIG report.
Rather, this blog will discuss new information that we have learned not from the Report itself, but rather from Director Mayorkas’ response to the Report dated November 4, 2013.
We have learned that USCIS intends to draft EB-5 regulations within nine months – by August 2014 – that will cover, among other things, differences between stand alone and regional center EB-5s; CIS authority to verify job creation; CIS authority to deny, terminate or revoke regional centers; and possibly much of what is contained in the May 30, 2013 Policy Memorandum. A few points should be made here. The EB-5 regulations are woefully in need of change – they are actually inconsistent with the statute in parts and completely disregarded in other parts. Second, my experience is that nine months in government time is likely to be far longer in real time. Nine months is the target to draft the regulations, after which they would go through an often interminable agency, Department and interagency review process. Finally, a new CIS Director and a new Manager of the EB-5 Program may have a different agenda. In other words, the new regulations might be welcomed, but do not hold your breath.
USCIS has also committed to completing two other projects within six months. One is to develop a formal interagency cooperation plan with the Department of Commerce and the SEC, and the other is to establish “quality assurance steps.”
We will attempt to ensure that these activities are collaborative processes.
We have learned a lot about the staffing of the new DC office and the transition of the EB-5 program from California to DC. Director Mayorkas states that the transition will be complete by May 2014. As of November, USCIS has more than eighty employees assigned to the EB-5 unit. Included within the employees are 22 economists; corporate and immigration attorneys; adjudicators; and, for the first time, full-time fraud and national security staff. Also for the first time, economists are in an adjudicatory role, not just a consulting role.
Director Mayorkas set out a strong defense of the “deference policy”, including reference to a “Deference Board” to deal with issues relating to when it is appropriate for the agency to reverse a prior approval. I assume, but have not yet verified, that this is the same concept as the Decision Board.
We have learned at least a little more than what was known previously regarding security checks within the EB-5 system and USCIS collaborations with other agencies. In addition to source of funds reviews, there are two levels of fraud and national security review within the I-526 process presently. On EB-5 fraud and security issues, USCIS collaborates with ICE, CBP, FBI, SEC, Department of Treasury and others within the intelligence community. For the first time, CIS is conducting security checks on both the regional center business and its executives and referring substantial numbers of EB-5 matters to its interagency enforcement partners.
Interestingly, Director Mayorkas agreed that, prior to the May 30 Policy Memorandum, USCIS applied its EB-5 policies inconsistently. One such policy was the need for a fully developed business plan. Director Mayorkas reconfirmed that the regional center does not need a fully developed business plan at the time of regional center designation but only at the time of I-526 filing. USCIS does want to see substantial evidence of how jobs will be created at the I-924 stage.
More interesting than surprising, Director Mayorkas acknowledged that USCIS receives “thousands” of Congressional EB-5 inquiries per year. He believes that if an inquiry brings to the attention of the agency an error in adjudication, it is appropriate for the agency to correct the error.
Finally, we have learned several issues on which USCIS will seek legislative reform. These include: expanded authority to deny, terminate or revoke a regional center for reasons of national security, and authority to oversee job-creating enterprises.
Although much will be made by Senator Grassley and others regarding negative aspersions on the EB-5 program coming from the OIG report, I believe the Mayorkas response provides both an excellent defense of the program and a path for future advocacy for further improvements to the program.