RCBJ Retrospective: EB-5 Compliance-Preparing for Site Visits

11.11.16 | Archived

EB-5 Compliance: Preparing for Site Visits

by Lincoln Stone, Partner, Stone Grzegorek & Gonzalez LLP; Susan Pilcer, Senior Attorney, Stone Grzegorek & Gonzalez LLP ; and Josie Gonzalez, Partner, Stone Grzegorek & Gonzalez LLP

One pillar of proposed recent reforms of the EB-5 program is administrative site visits. Picture a government officer knocking at the front door of the business, announcing that today is the day for a comprehensive review of the workplace, employer-employee records and maybe financial documents too, and possibly a few impromptu interviews with certain personnel. That is an administrative site visit.

The introduction of administrative site visits to the EB-5 industry presumably enjoys bipartisan support in Congress. In last year’s Senate version of the proposed overhaul of the EB-5 program, the bipartisan American Job Creation and Investment Promotion Reform Act of 2015 (“S 1501”), the site visit is required annually and paid for with a new “EB-5 Integrity Fund” that is funded by a hefty $20,000 annual fee from regional centers. The House also featured site visits in its many formulations of EB-5 program reform, for instance, in the proposed EB-5 Integrity Act of 2016 (“HR 4530”).

Not to be overshadowed, USCIS has been beating the administrative site visit drum for much of the past year. Whenever Nicholas Colucci, Chief of the Immigrant Investor Program Office (“IPO”), speaks of initiatives to enhance EB-5 program integrity, he highlights the recent collaboration of IPO with the Fraud Detection and National Security Directorate (“FDNS”) and the expansion of the random site visit program to include EB-5 related adjudications. See Colucci’s stakeholder meeting remarks, https://www.uscis.gov/sites/default/files/USCIS/Outreach/Notes%20from%20Previous%20Engagements/PED_IPO_Chief_Coluccis_Remarks.pdf,  and Colucci’s testimony before the House Committee on the Judiciary, https://www.dhs.gov/news/2006/02/11/written-testimony-uscis-house-committee-judiciary-hearing-titled-%E2%80%9C-investor-visa.

While it is not clear that IPO has yet launched a comprehensive program for administrative site visits related to EB-5 adjudication, the pathway for doing so is clear. A central component of the mission of FDNS is to detect fraud in connection with certain applications for immigration benefits. See https://www.uscis.gov/about-us/directorates-and-program-offices/fraud-detection-and-national-security/fraud-detection-and-national-security-directorate. Since 2009, with the implementation of the Administrative Site Visit and Verification Program, https://www.uscis.gov/about-us/directorates-and-program-offices/fraud-detection-and-national-security/administrative-site-visit-and-verification-program.

FDNS has developed substantial expertise in employer site visits conducted in connection with employer petitions for workers in the H and L nonimmigrant visa categories.  Applying that expertise to the EB-5 industry should not rank among the IPO’s difficult challenges.

Mr. Colucci’s testimony confirms that IPO is sufficiently staffed and trained to direct the EB-5 adjudication related site visits and that FDNS is prepared to carry out its tasks. (Evidence of FDNS involvement is already apparent in the USCIS adjudications of individual I-526 petitioners’ lawful source of funds.) However, what may exist as a speed bump for the EB-5 site visit initiative of IPO are the basic questions of which businesses are the target of the site visit and what specifically is the FDNS officer looking for in the EB-5 related site visit. Mr. Colucci has not publicly commented on these details except to suggest a sweeping scope for such site visits in order “to ensure documents are authentic and projects are proceeding as planned; auditing financial records to ensure funds are spent in accordance with the offering documents, economic analysis and business plan; and holding accountable those regional centers that violate the law, regulations or policy.” See Colucci stakeholder meeting remarks in August 2015, https://www.uscis.gov/outreach/eb-5-immigrant-investor-program-stakeholder-engagement-los-angeles.

The proposed legislation if enacted would establish a tall task for IPO in terms of staffing and establishing priorities. There are some 800 regional centers, and perhaps twice as many commercial enterprises in the EB-5 program. HR 4530 proposed a site visit of the regional center, and also of the new commercial enterprise or affiliated job-creating entity. S 1501 proposed that the EB-5 Integrity Fund will be used for determining whether regional centers and associated commercial enterprises comply with the immigration laws and regulations (which could become voluminous if Congress enacts additional “integrity measures” concerning securities laws and other areas of compliance), and specifically mandates interviews of owners, officers, directors, managers, partners, agents, employees, promoters, and attorneys of regional centers and associated commercial enterprises. At the worksite level, S 1501 proposed to require a site visit to the job-creating entity as a prerequisite for the adjudication of the I-829 petition for removal of conditions. Both S 1501 and HR 4530 proposed that the site visit should occur sometime after the filing of an I-924 application for a particular commercial enterprise and should be linked to the adjudication of any related I-829 petitions. HR 4530 specifically references the need to review “evidence of direct job creation” as the central task of the employer site visit. Without congressional appropriations specifically for EB-5 site visits, IPO could be presently awaiting the clarification of funding for site visits. But once that is settled, it appears administrative visits could cover a very broad scope of matters including not only job creation data but also financial books and records of the business.

Based on experience with FDNS in connection with H and L nonimmigrant cases, the direction signaled by proposed legislation, and on what IPO has stated to date about EB-5 related site visits, the following considerations should inform the EB-5 compliance program designed to manage administrative site visits:

  • Visits are likely to be unannounced, and could include document review and copying, touring the premises, taking photos, and interviewing personnel. Planning and training, consequently, must occur in advance.
  • Just as employers need to have ready access to their Labor Condition Attestation documentation for H-1Bs and have a segregated binder for I-9s, it is advisable that employers create an electronic EB-5 compliance folder that can be promptly accessed.
  • Key people should receive training, including reception personnel, Human Resources staff, and designated personnel who would have an understanding of EB-5 requirements at least as to job creation and the obligations of a regional center, and of the core facts in terms of EB-5 investment in the particular business.
  • While it is advisable to call one’s immigration counsel for assistance and involvement during the site visit, the FDNS site investigators have made it clear that they have the authority to conduct the site visit without counsel and will not wait for counsel’s accessibility.
  • The designated personnel should be on-site at the employer location (new commercial enterprise or job-creating entity) and be prepared to handle the site visit. It should be clearly understood who are the designated personnel for the regional center offices. If the designated personnel are within reach, the inspector should be requested to wait for the designated personnel before conducting the review, or one may request that the inspector return on another date.
  • One should request identification of the inspector, accompany the inspector throughout the review, and include another employee who takes copious notes that contemporaneously record questions asked and responses provided. Notes should be provided promptly to senior management and to legal counsel after the inspection.
  • With the suggested emphasis on “direct jobs” and considering I-829 adjudications that require proof of job creation, it is likely an inspector would request review of original I-9s, E-Verify verification forms, quarterly wage reports and payroll documents. Note that certain documents relating to former employees must be maintained for a minimum of three years and one year after termination.
  • If the Forms I-9, the new hire document that evidences employment eligibility and identity, is not properly completed and updated, or if the supporting documentation reveals fraudulent documentation, it’s possible that a referral may be made to ICE investigators for a follow-up I-9 audit. Targeted training in anticipation of site visits can be very helpful in minimizing I-9 risk.
  •  Typical “interview” questions would revolve around the number of employees in the business and whether they are working full-time. Better to respond with “I do not know, but I can l get that answer for you” or some similar language, rather than guess or provide inaccurate information.
  • A broad directive to ensure “compliance with immigration laws” could lead to inspections that probe the financial details of how a job-creating business actually used EB-5 capital, which would point to the need for a Chief Financial Officer as a designated person rather than the HR Director, and the need for an entirely different set of documentation. Colucci’s remarks suggest the broadest scope is intended, but IPO has not clearly signaled that is what the inspectors in fact will be doing — which is driven typically by Xs and Os of feasibility and funding.
  • At the regional center level, the inspector could focus on any documentation that is relevant to annual attestations appearing on the I-924A (which could become far more numerous with the updating of the Form or upon enactment by Congress of new integrity measures) as well as the statements made by a regional center in connection with the I-924 filing for a specific commercial enterprise. It could encompass review of marketing materials. Unless specific guidance from IPO indicates such information gathering would have a limited scope, the breadth of the EB-5 related inspection of a regional center could be exceptionally broad. At the regional center level, it requires little imagination to see FDNS work forming the basis for regional center termination.
  •  The site inspector would submit a complete report of its findings to FDNS, which in turn would compare the information against what was submitted in support of the EB-5 petition or application. Discrepancies could lead to an administrative inquiry. Adverse determinations could be the basis for denials or even revocation of already-approved petitions or applications. If this occurs, USCIS could request additional information or possibly issue a denial or revoke an approved petition/application.

With the advent of EB-5 administrative site visits a lot is at stake. Ample notice has been provided. Stakeholders must get serious very quickly about preparing for a site visit in order to enhance their EB-5 compliance program.

Lincoln Stone and Susan Pilcher are in the EB-5 practice group at Stone Grzegorek & Gonzalez LLP in Los Angeles. Josie Gonzalez leads the worksite enforcement practice of the law firm, and is Editor-in-Chief of Worksite Enforcement & Corporate Compliance (AILA 2008).