While the EB-5 Immigrant Investor program has been in existence and granting green cards to qualified foreign investors for over 10 years, it has not been until fairly recently that the number of applicants through EB-5 has had a significant impact on US businesses. In the years since 2008, EB-5 visa issuance has grown in numbers by more than 600%. Additionally, the proportion of Chinese national investors receiving EB-5 green cards has increased from 25% to 80% (from 359 in 2008 to 6120 in 2012).

There continue to be increasing investment opportunities geared towards potential Chinese investors (as well as investors from other nations) but there is also, with increased economic impact of the EB-5 program, heightened US government concern over how EB-5 cases are processed. Additionally, increasing investment opportunities also mean that there are increasing reports of fraud, causing potential investors and the US government to scrutinize investment plans more thoroughly as popularity grows.

More Cautious and Wary Potential Investors

As with an immigration application EB-5 cases require careful planning and attention to detail to be successful. What makes the EB-5 category even more intricate than other immigration concerns is that a misstep in immigration decisions may have an impact on an alien’s financial capabilities, and vice versa. Rarely does immigration law involve such a stark example of immigrant and economic aspirations coinciding. The option to immigrate to the United States is a wonderful opportunity for many future immigrants, but with the EB-5 category more than just immigrant dreams are involved: there is also the wealth and financial wellbeing of the applicant to consider. For this reason it is very understandable that more and more EB-5 applicants are being more and more cautious in how, where and when they invest their money.

A recent Wall Street Journal article about the EB-5 program offered anecdotal evidence of the reservations investors are having with committing to the solicitation from EB-5 projects. Johannes Von Trapp, the youngest child in the Trapp Family Singers (the real life inspiration for the Broadway musical and film, The Sound of Music) has spent much of the last year trying to attract investors to improve the facilities at the Trapp Family Lodge in Vermont. With knowledge that the vast majority of EB-5 investors have come from China in recent years, Johannes has spent much of his time there reaching out to investors. Despite his notoriety and the high level of popularity his family holds worldwide due to The Sound of Music, Johannes has been hard pressed to find investors willing to commit funds to his project (he has received commitments of only $2.5 million, well short of his stated goal of $22 million). If a well known entertainer/businessman such as Johannes Von Trapp is having difficulty attracting investments in his family established business, it just goes to show how cautious investors have become about how their EB-5 funds are utilized.

Recent Developments, Concerns, and Lawsuits related to EB-5 Investment

With an increase in demand for EB-5 visas there has been a corresponding growth of EB-5 related legal issues and financial concerns as to the viability of making a profitable and beneficial investment. Earlier this year the US Securities and Exchange Commission (SEC) and USCIS worked together to identify and halt a fraudulent EB-5 project that collected nearly $145 million from roughly 250 investors with no plans to actually complete the development project and obtain green cards for the investors. For more information on this issue, please see our article here. This was the first time that the SEC has become legally engaged with an EB-5 project, but there are increasing examples of private investors, individually and as groups, filing lawsuits against EB-5 projects which did not handle their investments properly.

The potential loss of funds, as well as the overwhelming opportunity costs, involved in investing in the United States with an unreliable or fraudulent enterprise shows how important it is to work confidently with trusted business and immigration representatives throughout the EB-5 process.

Different Investment Options Carry Different Risks

The concerns arising over misuse of investor funds and the anxiety over whether a business will fail or not are most often associated with EB-5 investments made through regional centers. For an in-depth description of regional centers, please click here. In this investment scenario an investor has limited control over how individual funds are used in a project compared to direct investment. In direct investment an investor is the one directing his/her own business, investment, and development while in a regional center an investor’s money is used through a larger organization that disperses funds and creates employment without the investor’s direct input.

Regional centers offer investors the ability to not have to focus on the intricacies of project development and business management and may be more attractive to investors with a more passive style. However, the regional center investment method can also lead to a lot of uncertainty if the investor is not entirely sure of the credibility of the project involved. Immigration attorneys with proven business knowledge will be able to assist potential investors find a reputable regional center with a proven record of green card success as well as financial growth.

For aliens who would like to investment through the EB-5 program who do not have a lot of prior business experience but would still rather avoid the regional center investment method, there are options to make a qualifying investment through a franchise development. Franchise investment is becoming more popular since it allows an investor to control his/her own money more closely than in a regional center but still allows him/her to rely on the business experience of an already established franchising company. For a discussion of franchise investments, please see our related article here.

Conclusion

Not all potential investments will be economically viable and, unfortunately, as flows of investment capital from abroad increase, disreputable and fraudulent business ventures may likewise continue to target foreigners seeking a green card in exchange for their wealth. Selecting the right investment model, right business type, and right associates to work with throughout the green card process will ensure that an investment is profitable and that a visa application is successful. When investment is involved there will always be uncertainties, but when immigration depends on that investment it is advisable to eliminate any unnecessary risks and find the most reliable investment opportunity.

It is important to work with experienced and reputable representatives when seeking a visa through EB-5 investment. With the unique concurrence of financial, economic, and legal issues involved in successfully obtaining an EB-5 visa through investment in a sound business plan it is crucial that a potential investor work with someone they can trust. We recommend any potential investors -whether operating through a direct new business development, a franchise investment, or a regional center arrangement-  to contact an experienced and business knowledgeable immigration attorney for assistance and support in their green card application.

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Founded in 1996, Zhang & Associates, P.C. offers legal services to clients nationwide in all aspects of U.S immigration law. We have successfully handled thousands of immigration cases.

At Zhang & Associates, P.C., our attorneys and supporting professionals are committed to providing high-quality immigration and non-immigration visa services. We specialize in NIW, EB-1, PERM, and I-485 cases. In the past seventeen years, we have successfully helped thousands of clients get green cards. If you plan to apply for a green card, please send your CV to Attorney Jerry Zhang (info@hooyou.com) for a free evaluation.

Zhang & Associates, P.C.

Silicon Valley • New York • Los Angeles • Chicago • Houston • Austin • Seattle

Tel:	1-800-230-7040, 713-771-8433
Email:	info@hooyou.com
website:	http://www.hooyou.com

 

(04/15/2013)