Sam Silverman:
Hi everyone. This is Sam Silverman, Managing Partner of EB5AN. Thank you for taking some time out of what I’m sure is a busy Monday for a lot of people on this call. So today we’re going to talk about the most recent federal court ruling and the upcoming lapse of the EB-5 Regional Center Program that’s happening in just a few days from today. We’re very excited to have Ron Klasko, one of the top ranked EB-5 immigration attorneys, with us. Ron just returned from his vacation, and we were able to get him to join us on very short notice. So today we’re going to spend a few minutes going through some questions and some background on what the implications are for these recent judicial activities and legislative changes that are happening and have happened in the last week or so.

First a quick background on EB-5 Affiliate Network. We are a national EB-5 regional center operator and fund manager with almost 2,000 investors from more than 60 different countries. We’ve been in this space for about eight years now, and we’ve worked together with Ron and his team on many projects over the years. Again, we’re excited to have him with us. Ron, I’ll let you jump in and just quickly introduce yourself.

Ron Klasko:
Sure. Thanks very much. And thank you very much for inviting me and I look forward to talking to everybody about the breaking news. So I’m Ron Klasko, and I’m the Chairman of Klasko Immigration Law Partners. We’re about a hundred people doing U.S. immigration law. A major part of our firm is our investor practice dealing with EB-5 and EB-2, and for five years I was the chair of the EB-5 committee of the American Immigration Lawyers Association. As part of our EB-5 team, we have many lawyers who are well-known around the country who work with me on the EB-5 cases. Many of you have read my blogs on EB-5 and I look forward to addressing the developments of the last week.

Sam:
Perfect. Thank you, Ron. So as I mentioned earlier, I’m Sam Silverman, one of the managing partners at EB5AN. I’m on the left side of the screen. A little bit about my background. I studied at Yale, then worked at the Boston Consulting Group for a bit. MBA from Stanford. And I’ve got my partner, Mike Schoenfeld, who’s in the middle and I’ll let Mike jump in quickly and share a little bit about himself.

Mike Schoenfeld:
Hi everyone. Thanks for taking the time to join us today in what’s a very affected week for everybody in the EB-5 industry. So as Sam mentioned, we launched EB-5 Affiliate Network about eight years ago. Prior to that, I was working at a large private equity firm in leveraged buyouts and at the Boston Consulting Group before that. What we’ve tried to bring to the industry is a level of institutional finance, knowledge, and sophistication to help ensure that we structure projects that are in the best interest of our investors.

Sam:
Thanks, Mike. So quick overview of where some of our investors have come from over the years. Most importantly, is that investors from a wide variety of backgrounds have consistently found value in our investment approach under the EB-5 visa program. As Ron mentioned, we’re going to spend a few minutes talking about breaking news that’s happened in the last week. So main point number one—just a few days ago, the EB-5 Regional Center Program vote, a critical vote in the U.S. Senate, did not happen. So the program will not be extended past June 30, 2021. EB-5 investor petitions should arrive there this week. Ron will talk about that a little bit more when we get into the questions. And last thing, just given the short timeframe this year, we are accepting investors with a partial investment who want to file their I-526 petition to meet this deadline. If that is something that you’re interested in, we do still have capacity and we have a number of attorneys who do have all the binders and documents printed out ready to go so there’s still a little bit of time to get in. If that is something that you’re interested in, please email us immediately at info@EB5AN.com and we can share some additional details.

Mike:
There’s lots of different blog posts and perspectives on what is going to happen after June 30th and I’m sure Ron will discuss how we’ve been in this temporary short-term extension patterns since 2015. We’ve gone through this many times, although this is one of the first ones that’s been decoupled from the standard extension package with the fiscal budget. So it’s a little bit different and that’s something needs to happen as a standalone with EB-5, which is part of the reason why we are expecting this temporary lapse after June 30th. Now there’s many different directions it could go, but the program does have bipartisan support. There’s a lot of pressure to get something done, although it looks like there will at least be a temporary lapse after June 30th. With that, we’ll hand it over to Ron.

Sam:
Yes, these are the first couple of questions we’re going to cover. And just with one quick disclaimer that this presentation is not legal advice, and you should consult with your own attorney. However, Ron is going to share his general views on these questions. Go ahead, Ron.

Ron:
Thanks guys. If we were to put a title to this, I would call it unprecedented opportunity but proceed with caution, because there are risks. The focus of what I want to talk about is going to be mostly the issue of the $500,000 investment amount and the court decision. I’ll address the expiration of the regional center program on June 30, mostly as it relates to the $500,000 issue.

Spoiler alert on what I think is going to happen. I think that the regional center program, which you know is a temporary program, has lapsed approximately 20 times already and has been extended each time. I think it will be extended again. However, I think we will have a longer lapse than we’ve had in the past. Congress doesn’t even come back from recess until the middle of July. This is probably not the first thing they’re going to do when they come back from recess. So I think we may have a significant lapse, but I’m very confident the program will be extended. So, what happened? Those who have listened to me are not surprised by either of the developments of the last week. The fact that the program was not extended by June 30 to me is not a surprise. I expected that, and I think, as I said before, I think it will be extended. But there was no consensus around any of the pieces of legislation that would change the EB-5 program, and they were not able to get a straight extension.

So, the court decision which surprised a lot of people, I have been suggesting for a long time is very likely to happen. The court decision we’re talking about is the Behring Regional Center case decided by a judge in federal court in the Northern district of California. What the judge said is that the November 2019 regulation that increased the investment amount from $500,000 to, in most cases, $900,000 and in some cases, $1.8 million, and that also changed the definition of targeted employment area. That regulation was invalid because the secretary of DHS who signed off on it, Kevin McAleenan, was never properly appointed by President Trump and he was appointed in violation of something called the Federal Vacancies Reform Act. Because he wasn’t properly appointed and couldn’t sign off on it legally, the regulation is invalid, and the regulation was never valid. And so we revert back to where we were before the regulation in November of 2019. The reason that that decision did not come as a surprise to me is because there have been many other cases where decisions, regulations, and policies of USCIS have already been overturned by the courts because of the invalid appointment of Kevin McAleenan, of Chad Wolf as DHS secretary and of Ken Cuccinelli as USCIS director. In fact, our firm has three cases in federal court now challenging aspects of the EB-5 program based on the improper appointment of Cuccinelli. So for that reason, I’m not surprised at the decision, and I think it is a correct decision.

So the big question then is how long will this window of opportunity to invest at $500,000 last? I don’t think it’s permanent. I pretty much think it’s a temporary opportunity. So there are three possibilities for how the $500,000 is going to be changed back to $900,000 or some other amount. First possibility—Congress, when it extends the EB-5 Regional Center Program, may decide to include in the legislation, the investment amount, which could be as I said, $900,000 or something more or something less than that at this point. It’s unclear if or when that will happen, and if and when it happens, it almost certainly will not be retroactive which means that people who invest today when the amount is $500,000, if Congress in August decides to increase the investment amount, it should not apply to cases filed before Congress does that.

That’s one possibility. Second possibility—USCIS passes another regulation, and this time does it legally and that regulation may simply be reinstating the November 2019 regulation and the $900,000 and $1.8 million numbers and the TEA definition. Now it is not at all clear how this will happen or how quickly it will happen. So one version would be they can simply issue a new regulation tomorrow that is effective immediately and what’s called an interim final regulation, simply reinstating the old regulation. I don’t think that’s going to happen and I think it’s unclear if they have to now do new notice and comment before they issue a new regulation, if they can issue it as what’s called interim final effective immediately. If they do that, that may be subject to a separate court challenge. I think the immigration service has not yet decided what it wants to do about that, but certainly one possibility is that in the fairly near future, there will be a new regulation that will look like the November 2019 regulation. Again, if that happens, it would not be retroactive. It would not affect investors who invested prior to the date of the new regulation. And if it were retroactive, I think that would definitely be subject to challenge in federal court.

The third possibility is more problematic and more confusing. The third possibility is that the government appeals the case to the ninth circuit court of appeals. As of this moment, as far as I know, the government has not yet filed an appeal. And my guess is that they are reviewing the pros and cons of doing so. It may be that the government does not want a court of appeals decision on this issue. And it may be that the Biden administration doesn’t want to defend the Trump administration’s violations of the Federal Vacancies Reform act in a court of appeals. So we don’t know if they’re going to appeal. If they do appeal, they will request a stay of the court’s decision. What does that mean? That means they will request the federal court to stop the decision of the district court. Stop the invalidation of the regulation and make the regulation valid again until the court of appeals makes a final decision. It is very uncertain that the court of appeals would agree to a stay. If they did, that could happen relatively quickly within the next month or two or three. If the government, and there’s a lot of ifs here, if the government appeals, and if the court of appeals does not stay the decision, then the $500,000 remains effective until there is a final decision of the court of appeals which might be six months to a year from now.

If the court of appeals agrees with the district court, then nothing happens. The regulation is still invalid. Where it gets complicated is if the court of appeals overturns the decision of the district court and said it was wrong and the regulation is valid and always was valid. And if that happens, that certainly could have retroactive effect, because it’s basically saying the investment amount was always properly $900,000. Now all of this is highly speculative. We’re advising each of our clients on issues that they need to be aware of. But those are the different scenarios. So, can an investor file now at $500,000? The answer is definitely yes, they can. Remember that the expiration of the regional center program only applies to regional center EB-5s. So for direct EB-5s, there is no June 30 expiration, and you can invest at $500,000 even after June 30.

For the regional center program, you can definitely file at $500,000 today. You can file as long as it’s received by the immigration service by June 30. And please note that the $500,000 relates to the date that you file your petition, not the date you make your investment. So if you beat the June 30 expiration, you can definitely file. One question that we don’t have an answer to as of today is whether the immigration service will continue to accept EB-5 petitions based on the regional center program after June 30. We know that they will not be deciding/adjudicating/reviewing any regional center EB-5 case after June 30 until the program is extended. But we don’t know if they will be accepting I-526 filings after June 30 and then basically just putting them in their drawer until the program is extended. We will probably get information on that today or tomorrow.

Let’s talk a little bit about factors that investors should consider in choosing a regional center project if they will be availing themselves of the $500,000 investment amount based on the court decision. First of all, it’s important to make certain that all of the offering documents, the private placement memorandum, have been revised to take into account that they’re accepting investors at $500,000. There may be some reference in the private placement memorandum to what happens if the amount goes up and if they accept other investors at a higher amount, but one of the big issues is making certain that the private placement amount is consistent with what we’re talking about. Secondly, we know the $500,000 is based on the old definition of TEA. The old definition of TEA, of course, required a state letter confirming the TEA. And so we now go back to that situation where we will need state TEA letters.

The job creation numbers are different. It takes more investors to get to the same total investment amount if the investors are investing at $500,000 and not $900,000. Therefore, if there’s more investors, there have to be more jobs, obviously 10 jobs per investor, so we need to make sure that the economic report shows enough jobs based on the $500,000 number. The business plan is going to be revised based on this. So we want to look at that, and then investors need to look at what provisions are made escrow or otherwise, for what happens. If the investment amount of $500,000 is ultimately challenged in some way and that should be covered. The investor needs to make sure that they understand what’s going to happen in that contingency.

Another question we get asked a fair amount since this is really short notice. Can I invest less than $500,000 with the understanding that I will invest the remainder at a later date? I’m either going to invest $200,000 today and I’m going to sign a promissory note for the remaining $300,000 or even if I’m not signing a promissory note, I have proof that I have the other money available and will definitely invest it. So this is called actively in the process of investing and what I’m going to tell you is nothing new. It’s always been this way. We always tell our clients: the immigration service doesn’t necessarily like these cases, but under the law, if you invest less than the full amount; if you can show that you have a binding commitment to invest the remaining amount; and if you can show that you have the remaining amount available now; and you can do the source of funds for the remaining amount even if you’re not investing it yet, that those types of cases should be approved. But you know what? Most cases are not done that way. And if there’s a lot done right before June 30, we’ll have to see how the immigration service deals with it.

Next question would be what happens if the investment amount increases by regulation or by congressional act after I’ve made my $100,000 or $200,000 investment but I haven’t made the full amount. And the answer is that if you invest, let’s say $200,000 today, and you meet the actively in the process of investing standard, you should still be protected at the $500,000 level even if the investment amount increases before they adjudicate your case. This would apply if there’s a later regulation or if there’s a later congressional act. The only issue as I mentioned before, is that if the federal government appeals to the court of appeals and the court of appeals overturns the decision, then that may be a different situation.

So just to conclude, my crystal ball is certainly less than clear as to where we’re going with all this. I’ve done educated guesses in recent times that have been correct so I will give you my educated guesses now with the understanding that we should all have; that it’s not based on any insider information. And it’s simply my educated guess as somebody who’s been involved in this field from the beginning. Number one educated guess is I think the regional center program will be extended. I don’t think it will happen really quickly. I don’t think that we will see a major piece of legislation that changes the EB-5 program. I think instead at some point this summer; we will probably see an extension of the program until September 30. And then we are back where we’d been in past years where the EB-5 program is treated the same as other temporary immigration programs that usually get extended year to year, just to guess. Number two, on the $500,000, I’m not telling you this based on any authoritative information. I think the government may be somewhat gun shy about appealing the decision and I think they may decide that the best course of action is to fast track a new regulation that will increase the investment amount and that will be effective immediately under what’s called interim final regulation. If that happens, I think it could happen within a month or two. So Mike and Sam, those are my very cloudy crystal ball projections of where we’re going and my analysis of where we are.

Mike:
Perfect. Thanks, Ron. I’m sure everybody was very excited to hear all that information and get your perspective on all that. One question that we’ve been getting a lot, and I think you’ll have a good perspective on it, and you touched on some of it. So a lot of people are in a rush right now to get things filed before June 30th in case the program lapses and things could change afterwards. So of course, putting together a whole petition in a week is impossible. You’ve done a lot of these. It can’t be a perfectly done petition. So how would you think about somebody filing with all the information available to them and in the process of investing, but it’s not what you would say is a completely approvable petition on the day of filing? Would you then suggest doing an interfiling or what’s your thought on doing as much as you can in a short time but knowing that it’s not a hundred percent.

Ron:
Yeah. So actually there was a little noticed but very important decision made by the immigration service, maybe a couple of weeks ago where they got rid of the Trump-era rule that said that these cases that are properly filed can be denied straight out. And they reverted to the pre-Trump rule that says, as long as the application is properly filed, signed, filed in the right place, and has the right filing fee; they have to issue an RFE rather than just straight out deny. I think that’s significant so that if you have an application you filed that’s not as complete as you would do if you had a month to prepare it, but it’s properly filed. I think the chances are much better today than they might’ve been a month ago that the government will come back and not deny it, but say, here’s all the things you need to do before we can approve it.

Mike:
Okay. And what do you think about the difference of interfiling after you file originally versus waiting for that RFE to come?

Ron:
Yeah. We do a fair amount of interfilings if we think they’re critical and we want the information to be available before they make a decision. Technically the immigration service rule is that it has to be approvable when filed and something you file afterwards does not affect the issue of whether it’s approvable when filed. But we do in various circumstances interfile, especially when you have cases that are pending two and three years or more. Lots of things changed. So we do interfile in a lot of cases. Yes.

Sam:
Got it. Thank you, Ron. So in your general opinion, if an investor does have funds available to do a partial investment and the application itself can be properly formatted with the fees and arrive on time in the next couple of days; what would your general advice be? To file now and then supplement with the additional more detailed tax returns and items later or advise the client just to wait and see what happens in three or four months, then potentially having to put in a lot more money.

Ron:
Yeah. So I think it is certainly possible that before the regional center program is extended, the investment amount may go up. So if an investor wants to take the risks that we’re talking about but wants to make certain that they can invest at the $500,000 amount, then I think they need to do it very quickly in the next day or two. And all I can say is the investor needs to understand that even if they don’t have a complete filing when they file; they will be judged by whether the application was approvable on the date they filed. So again, just to make it clear, if an investor is putting in $200,000 and is not going to have all the documentation that they’d like to have about the rest of their money, they still, when they get an RFE, will have to prove that on June 29th they had the money available, and that money was lawfully sourced. So if they’re prepared to prove that at a later date, the application can be approved. A situation that is the opposite of that, that’s no good, is if we have an investor who says, look, I don’t have $500,000 now and I don’t have any ability to prove collateral for a promissory note, but I’m going to be arranging over the next couple of months to get gifts and more money. That’s not a good case, and that shouldn’t be filed because then the investor will not be able to meet the legal standards of actively in the process of investing. On the date of investment, if the investor had all the necessary money but didn’t invest all of it, that’s different from the investor who didn’t have all the necessary money and hoped to get it in the future. So I hope that’s clear.

Mike:
That’s extremely helpful. And one other thing that would be helpful for some clarity is: when does the application actually need to be received by, based on your past experience with these types of deadlines?

Ron:
Based on my past experience, it has to be received by June 30th. Obviously we’re down to the last day or two. The safest thing is to send it out today for receipt tomorrow. Otherwise you are at risk of issues with FedEx or weather-related problems that create delays. I mean, we’ve all seen many different situations where there have been delays caused by natural and other kind of events. It’s always better if you can give it a day leeway, but it has to be received by June 30th.

Mike:
That makes sense. So what I’m hearing is if it’s in there by midnight on June 30th, technically that works but better to be safe than sorry. And get it in in a day or a week, just to make sure that there’s no mailing delays. Thanks again, Ron, for adding so much clarity to a very unclear situation that we’re in right now. So we’ve been following the court case and we’re thinking that there was a chance of the investment amount being dropped to $500,000 though we did not expect that it would happen with under a week left until the expiration of the program.

Sam:
And with that, we know everyone has a very busy day today, so we’ll leave the remarks there. For those that are interested in getting more information about EB-5 Affiliate Network, please reach out to us at info@EB5AN.com and we’ll be happy to send it out immediately. And as Ron said, we really have kind of two days here: today and tomorrow. Last petitions out could be mailed tomorrow night to arrive on the 30th, although it is preferred if the packages can be mailed out today so that we can avoid any last-minute FedEx or weather delays. So with that, Ron, again, thank you very much. Hope it wasn’t too hard coming in after your short vacation. We really appreciate you sharing your perspective and experience on both the EB-5 side and on the federal court litigation side of the equation as well. Please take a minute and share any final thoughts that you have as well.

Ron:
Thank you Mike and Sam for inviting me. You guys do a great job of keeping everybody up to date and we’ve had the pleasure of doing quite a number of these webinars with EB-5 Affiliate Network. I guess the conclusion is everything we’re talking about now is day to day. So whoever you rely on for your information on EB-5, you should be checking literally on a daily basis because we may be seeing changes both on the issue of the extension of the regional center program and also on the issue of the amount of investment. We are certainly in frequent contact with all of our clients on all of these issues all the time. So thanks again and I look forward to future opportunities to work together.

Sam:
Thank you Ron. Yes, if there are any major developments, we’ll definitely make sure to have you back on to share your experience. Thank you everybody.