Regional Center Terminations (Volume 3, Issue 1, March 2015, Pages 18-19)
By Robert C. Divine, Vice President, IIUSA, Shareholder, Baker, Donelson, Bearman, Caldwell, & Berkowitz, P.C.
Regional Centers are designated by USCIS to promote economic growth by fostering use of the EB-5 program in creation of direct and indirect jobs. USCIS has the authority to remove that designation, typically faulting the regional center for a wide range of sins that it categorizes under the broad heading of failing to promote economic growth. It has used that authority in waves over the years and is actively using it now. The consequences to sponsored investors could be unfairly severe.
Process
USCIS first issues a Notice of Intent to Terminate (NOIT), giving the regional center 30 days to respond (well, 33 days from date of the notice if mailed, as they usually are). It is important to have kept USCIS up to date on the contact information for the principal and the current counsel for the regional center, because USCIS normally sends notices to both people. In the typical NOIT for lack of activity, 30 days can be plenty of time to respond. In a complex situation, it can be a very short time.
If the NOIT generates no response, USCIS typically issues a Notice of Termination quickly. If the regional center files a response, USCIS can take more time, and sometimes much more time. If USCIS is persuaded not to terminate, it issues a notice of “Reaffirmation of Designation.” If USCIS terminates, it gives notice of the right to appeal to the Administrative Appeals Office. Because of the absence of a regulation requiring exhaustion of administrative remedies, a terminated regional center could choose to go straight to court with claims of “arbitrary and capricious” decision or other reasons, but administrative appeal and supplementation of the record in the process might be wise.
Reasons for Termination
Most terminations have been for lack of activity. I know from experience that several regional centers have responded successfully to NOITs about inactivity. Even when no I-526 petitions have been filed or sponsored by the regional center, USCIS has been reasonable in accepting evidence of good faith activity seeking to develop viable projects.
Some NOITs have been for failure to file form I-924A (sometimes combined with inactivity). Again, USCIS has accepted some reasonable excuses for failure to file, especially if the failures have been cured with interim filings.
Some terminations have been based on USCIS rejection of the model used for project development, particularly Victorville and Lake Buena Vista. Other terminations have followed revelations of blatant securities violations associated with symbiotic developments, including Intercontinental Regional Center Trust of Chicago (Sethi), El Monte (California), Mamtek (Missouri), and USA Now (Texas). For a review of terminations, see R. Loughran, History of Risk in the EB-5 Regional Center Context, Regional Center Business Journal, Issue #4, Dec. 2013. A very recent termination against Midwest EB-5 Regional Center has reflected a more aggressive approach when USCIS cited accusations of mis-reporting and mis-management of the regional center and its related projects, and if not successfully appealed this termination could have effects on pending or approved petitions.
Consequences of Termination
The consequences of termination of a regional center could be brutal for an investor who was sponsored by that regional center. The regulations do not say what happens to investors who have not yet immigrated, but it appears that USCIS would deny or revoke an I-526 petition that depended on the regional center’s sponsorship. A USCIS representative stated in a recent stakeholder meeting that USCIS would find a change of regional center to be a material change requiring denial and re-filing to use a new regional center’s sponsorship.
8 CFR 204.6(m)(9) states that where there has been termination of a regional center, USCIS will send notice of termination of status to a conditional resident “within the regional center” (sponsored by the terminated center) who has not obtained I-829 petition approval unless the alien “can establish continued eligibility” under INA 203(b)(5). It is not clear whether USCIS would find an investor capable of eligibility to use indirect arrangements (i.e., investment in a single purpose financing entity rather than into the job creating enterprise) or to count indirect jobs without the original regional center’s sponsorship. USCIS’ relaxed approach to material change for investors filing I-829s could be argued to apply also to change of a regional center sponsorship. So far, USCIS terminations have been for inactivity or for problems integrally related to the sponsored projects, but if a regional center were terminated for wrongdoing or reporting failures unrelated to a viable project, it would seem quite unfair for the investors to lose status on that account alone.
Legislative proposals to change the EB-5 program have included giving USCIS broader authority to terminate regional centers for reasons not limited to failure to promote the regional economy. USCIS already interprets that concept broadly when it wants to terminate. But regulations should be revised to provide an opportunity for investors in good projects to cure the termination of a regional center that happened to be the sponsor the project, and any legislation should do the same.
RCBJ Retrospective articles are reprinted from IIUSA’s Regional Center Business Journal trade magazine. Opinions expressed within these articles do not necessarily represent the views of IIUSA and are provided for educational purposes.
