On Dec 03 2015 by Daniel B. Lundy
Path America Regional Center and Giving Innocent Investors a Way Forward
On November 20, 2015, USCIS issued a Notice of Intent to Terminate the Path America SnoCo regional center. USCIS seeks to terminate the regional center based on the fact that in light of the SEC’s allegations of fraud and misappropriation of funds, it no longer serves the interests of the program.
In the notice, USCIS claims that the regional center principals misappropriated or diverted funds from the purposes outlined in the business plan of the Path America Farmers Market project, and the regional center failed in its oversight responsibilities for allowing the misuse of the funds. USCIS based its allegations on SEC allegations and admissions by the regional center’s principals in the civil proceedings brought by the SEC in U.S. District Court for the Western District of Washington against the regional center and its principals. USCIS states that there are a total of 69 approved I-526 petitions for investors in this project, and another 12 pending. According to the receiver appointed by the Court to protect assets of the regional center and various related entities, the Path America Farmers Market project is approximately 95% complete, and could be finished with a small additional investment.
Pursuant to the regulations, the termination of a regional center would lead to the termination of all petitions affiliated with that regional center. This result would be extremely unjust, as the investors in this project invested in good faith, have waited, in some cases, for well over a year, and have been the victims of the acts committed or alleged to have been committed by the regional center’s principals. The investors have done nothing wrong, and the project is nearly completed as planned, meaning that the job creation requirements of the program are likely to be met, which means that investors are likely to be eligible to have their I-526 and I-829 petitions approved and to ultimately earn their unconditional permanent residence. In other words, the investors have done everything they are supposed to, in good faith, and their investments are likely to meet all the requirements of the program, but they stand to lose part of their investments and their hopes of becoming permanent residents of the U.S. because USCIS is going to terminate the regional center through which they invested for reasons that are outside of the control of any of the investors.
We believe that it is likely that USCIS will also issue a Notice of Intent to Terminate Path America’s other regional center, which is sponsoring the Path America Tower Seattle project. According to the receiver, this project is only in its early stages, and not anywhere near as close to completion as the Farmers Market project. However, there have been reports of a number of developers that are interested in taking over the project and completing it. If USCIS were to terminate this regional center, all of its investors I-526 petitions would be denied, and the investors would likely lose some or all of their investments.
In both cases, the investors are victims. In both cases, there is at least the possibility that the projects these investors invested into can be salvaged, and can create the jobs they were predicted to create. However, instead of providing a path forward for these investors, USCIS appears to be punishing them for being victims.
We believe this is a tragedy that can be avoided.
If USCIS will allow the investors or their representative to either take over the management of the regional center, or seek another regional center to sponsor these projects under the EB-5 program, there is a likelihood that both the projects and the investors’ immigration processes can be salvaged. However, from what we have heard, USCIS is refusing to even communicate with investors or the receiver about a path forward.
So what can investors do?
Based on my extensive experience in litigating immigration cases in federal court, I believe that that investors could bring an action for declaratory judgment against USCIS in the District Court in order to compel USCIS to allow the investors the opportunity to either take over the regional center or find a new regional center to sponsor these projects so that the investors can try to complete the projects according to their original business plans and prevent the loss of their investments and so they can achieve a positive immigration outcome. Our firm feels strongly that investors should not be penalized for being the victims of fraud, and we are currently seeking investors in either Path America project to represent in just such a lawsuit.
Given the number of SEC investigations and fraud allegations in the EB-5 industry, we are deeply concerned that current USCIS policy does not provide an avenue for investors who are the victims of fraud to take over a project or change regional centers so that they can protect their investments and continue to pursue their immigration goals. The termination of the regional center and denial of investor petitions based on factors outside the control of the investors seems to be a way of punishing the victims of fraud and deceit instead of providing protection for them. In fact, it appears that Congress shares this concern, as several of the draft EB-5 reauthorization bills include provisions that would allow relief for at least some categories of investors. However, these provisions only apply to investors that already have obtained conditional permanent residence, and leave investors with pending or approved I-526 petitions, but who have not yet acquired conditional residence, out in the cold. We think that this is an untenable solution.
We are hopeful that one outcome of a declaratory judgment action would include a change in USCIS policy that allows for the protection, and not punishment, of EB-5 investors that are the victims of fraud or bad acts by regional centers or project promoters. Such a change in policy would be welcome, and would show that USCIS cares about protecting innocent investors as part of its focus on program integrity.