Hello EB-5 investors. This is Floyd Mitchell with the EB-5 Investor Portal; the leading resource for information regarding the EB-5 visa. I publish articles based upon my interviews with leading US immigration attorneys and other EB-5 professionals which are produced as podcasts to educate EB-5 investors. Our podcasts are syndicated around the world on search engines, social media, YouTube, Google Podcasts and our own Apple News Channel – “EB5 Investor Portal”.
So, this is not a forum, or a blog post based upon personal opinions or experiences. It is information taken from my many, many hours of interviews with licensed immigration and securities attorneys, securities professionals and others.
This is the second of two articles titled Applying for an EB – 5 visa as an H1-B Applicant or visa holder (2 of 2). Our special guest is immigration attorney Sam Newbold formerly with Barst Mukamal & Kleiner and now a partner at Chiesa Shahinian & Giantomasi PC in New York City.
Sam heads CSG’s EB-5 practice group representing individual investors regional centers and developers. Sam has counseled hundreds of individual EB-5 investors and their families through the entire EB-5 process and has one of the highest approval ratings in the industry. Mr. Newbold is a well-established speaker on immigration law topics in New York City and throughout the country. He often presents on topics involving complex immigration issues. Mr. Newbold also serves on the board of directors for the Safe Passage Project, a nonprofit that provides pro-bono legal aid to accompanied minors in the immigration process. He holds degrees from New York Law School and Elon University. He’s admitted to practice law in New York and New Jersey. He’s a member of the American Immigration Lawyers Association, American Bar Association and the New York State Bar Association. Mr. Newbold has been listed in the 2015, 2016 and 2017 Super Lawyers rising star publication which recognizes New York City’s top attorneys under the age of 40.
We covered a number of topics – How do I find a good regional center project? What is the EB5 Investor Portal? What is Proxy Capital Partners? Should I use a licensed broker dealer? Discuss foreign students in the United States and their visa options?
I said to Sam that the EB-5 industry tends to be very focused on real estate in terms of opportunities for the petitioner to invest. It’s not always real estate and there are other options. How can EB5 investor find a good project to invest in?
That’s, the million dollar or the five hundred thousand dollar question that we always get with clients is you know, “How do I find a good project?” “Where do I invest?”. “How do I get that information?”, so on and so forth. As immigration attorneys you know we’re not financial advisers we’re not licensed to recommend particular investments, but we do have a duty of service and loyalty to our clients to try and point them in the best direction possible so that they can make the best decisions that they can in ways that they can find out projects are for example working with a broker dealer here in the United States.
Should an investor use a broker dealer when evaluating projects?
There are broker dealers out there who have projects that they’ve vetted themselves to provide licensed recommendations and information specifically about that project and talk to the investor about the pros and cons of a particular project and meet their risk tolerances and so on and so forth. There’s new things popping up that are really cool such as the EB-5 Investor Portal for example where investors can go online and look at projects that are on the portal and learn about those, speak to a broker dealer and find out information about those and then investors can ask their attorneys that they’re working with to perhaps make an introduction to someone at the project.
For example if they want to look at a specific project they just make a general introduction to the person at that projects and then let the investor and their financial advisors work with the contact at the project about finding out information and then the immigration attorney is really lying in the wait, they’re there to answer questions related to the project that might be immigration related and to help that part of the process as well so, we’re really good facilitators in that regard. The investor sort of comes to us to give them a general you know road map as to what do they go to next to find that project. And we sort of just hand them off and make key introductions to people and professionals that are able to provide that advice.
Sam, here at the EB5 Investor Portal, our goal is to simplify the process as much as we can. We work with immigration attorneys like yourself, we work with a firm called Proxy Capital Partners. We work with a broker dealer who is an investment banker. Can you talk a little bit about the various professionals that will be helping the investor on this journey?
It can be pretty daunting and seem like a very complicated process. And here at the EB-5 Investor Portal, we like to do a lot of hand holding, really make sure that the investor understands all of these very key professionals essentially that are going to be surrounding them and working with them through this process. Can you talk a little bit about that Sam and specifically Proxy Capital Partners and why that firm working in tandem with the EB-5 Investor Portal and an immigration attorney like yourself could be of value and very helpful to the investor?
Yes, sure. The EB-5 process can be overwhelming and trying to understand all the moving parts. You’re dealing with immigration law, securities law, corporate law, finance, investments, things of that nature that can be quite confusing and convoluted and really at the end of the day if you’re contemplating an EB-5 investment, you’re looking to make sure that you can get your principal back at some point and that you can get the green card and you might be happy with that. If you can make a little bit of money along the way, fantastic.
You know, but we understand that an at risk investment is just that – there’s always a chance that a project could fail. You may not get your money back, you may be able to keep your green card or get a green card at all initially. You need to pick a project but you may not necessarily know how to look for the right things. What do the different professionals in the process do?
What we do as immigration attorneys, is we boil a project down to its immigration components and then your financial advisers and a financial team such as a broker dealer can boil the projects down to their financial characteristics and then just essentially telling you what’s going on in the project from an immigration perspective from a financial perspective, so that you feel like you’re making the best decision possible under the circumstances that will help you achieve your immigration and financial goals. Companies like Proxy Capital Partners for example are third party monitors and managers of EB-5 projects and what they provide the investor in the EB-5 ecosystem is an independent obligation so to speak to make sure that the funds that are being placed into these projects by the investors are being used exactly how they’re supposed to be used. That the money’s being tracked. That job creation is being tracked. That expenditures are being tracked and providing access via a portal for the investor to be able to get real time information as to how their money is being used in a project that they can actually have some peace of mind as to what’s going on.
What role does Proxy Capital Partners play?
I think what’s happened frequently in the past with the EB-5 program and the EB-5 industry is that money is collected by investors and there’s very little contact or relationship moving forward between the project and the investor. Companies like Proxy Capital Partners try to create a better more seamless ongoing relationship with the project, the professionals involved and the investors can make sure that they understand what’s going on. They’re getting updates, they’re getting the appropriate documents that they need, whether it’s tax documents or disclosure documents, in real time, as they’re going through the lifecycle of their investment which could be easily five years or more. Those types of service providers are out there and they’re involved in projects they help give investors and other stakeholders in the EB-5 space, comfort that there is a proper third party administration going on in projects to make sure that the goals that everybody is trying to achieve are actually achieved. So that’s kind of what is going on right now.
I think everybody in the industry that really involved in EB-5 support integrity measures with the program nationally. I know that in Washington with proposed legislation this is something that’s at the forefront of everyone’s minds. I think everybody supports that and the EB-5 ecosystem is responding to that. Finding more ways to be accountable with the program, finding ways to make it more organized, more efficient. Now companies like Proxy Capital Partners are providing those services. Immigration attorneys and firms such as BMK have always been conservative in making sure that we’re making the best decisions possible for our clients and you’re finding that regional centers and developers are also being much more involved and organized on how they assemble their teams of who’s involved with the projects. So I think that the EB-5 industry is improving and you know we make sure that our clients know what’s going on and that we’re here to help them along the way.
Proxy Capital Partners has put together protection tools for the EB-5 investor?
I think protection tools is a good way to describe it, how you said it. What made a lot of these EB-5 fraud stories possible is that a lot of deals in the past were assembled such that there was a lot of conflicts of interest in the deals meaning that the regional center was the same person or group of people that was the developer and the issuer was the same person as a regional center and the developer and they were all the same people and it was like left hand giving money to right. And I think for these unscrupulous actors who are looking to take advantage of that, it just made it very, very easy to defraud investors or to misappropriate funds inappropriately and Proxy comes in to help eliminate that and also in conjunction with that the advent of more broker dealers coming into the space and encouraging the EB-5 actors such as regional centers, developers to eliminate some of these conflicts of interest have really helped improve the investment environment within the EB-5 program and what Poxy’s main purpose is, is to come in and to be an independent third party service provider that has the authority to monitor and help manage the EB-5 capital flow process from intake to deployment and back. These are the types of companies that are able to provide an immediate value-add to an offering because the issuer of these securities able to say “look we have a third party that we don’t control, who has the authority to oversee how this money is going to be used. They’re going to update you on how this money is going to be used. We get in trouble if we don’t use it correctly and they’re able to build a catalog of statistics and data and documents that we can use to make ourselves more compliant with USCIS, to respond to potentially USCIS audits to a SEC or FINRA audits and that we can use to give you continuous updates as to the performance of your investment the use of your funds and how you’re moving along through the process of making an investment and trying to make a return.” So I think that’s what the space is moving towards. So companies like Proxy are specializing in those types of projects that we feel like are the most valuable in the market here at BMK.
The main purpose of a client’s investment in this program is to create 10 jobs, 10 new jobs. And if those jobs aren’t being tracked properly, if you’re not showing proof that those jobs, (not you as the attorney but) the regional center is not showing that those jobs were created properly and are not being tracked properly, that could cause a problem that could prevent the petition from being approved. So, Proxy Capital Partners help essentially track how the funds are being dispersed as you mentioned and they make sure that the developer or the regional center that that money is being used properly essentially to create those jobs? Can you talk a little bit about how all of these professionals working together can help track the jobs and help make sure that these really critical aspects of the petition are being handled properly and when all is done right should result in the investor getting a green card when done wrong they will almost always result in a denial?
Absolutely. There is an ongoing requirement that the regional center file annual reports to update immigration as to how the regional center is promoting economic activity to the benefit of the U.S. and they hope to make those filings every year on those forms. They have to report how many jobs have been created in the fiscal year. And on top of that they have to also report to potential USCIS audits so to speak that might be coming up down the road, and site visits and be able to report that information to USCIS firsthand and then as well the investor has to demonstrate that their money is being put to work to employ U.S. workers and when they file their 829 petitions they have to show that their investment has resulted in the creation of at least ten full time jobs for qualified U.S. workers. In order for them to keep their green card. So what happens if the investor can’t prove that? Or the project is so unorganized that they can’t really demonstrate that those jobs have been created or documented correctly or presented correctly etc. Well that investor has their 920 denied and they’re going to receive a notice to appear in immigration court to face deportation. So it’s a huge deal all because of lack of organization or mismanagement of information and you have an investor there who might be deported because of that so what broker dealers, third party fund administrators like Proxy Capital Partners and a good team of professional immigration attorneys financial advisers so on and so forth they help streamline and organize the process, not only for the investor but for regional centers and issuers and developers to make sure that things are running smoothly. It’s not a conflict, everybody wants the same goal. You know, the investor wants the project to move forward and do what it’s supposed to do so that they can get their green card and make a return on their investment and continue to live in the United States. You know, the developer wants to build the projects so that they can profit off of their project and they want to be able to repay their debts and the EB-5 loans are part of those debts. The Regional Center wants to make sure that you know that flow is being done correctly and that they’re able to you know oversee and administer the specific project for investors and everybody is moving towards the same goal, they all want success. But there’s better ways to do it than other ways and having a team of people together that can monitor and track how things are going and be able to generate reports in real time to whoever needs them adds more accountability to everybody involved, adds more peace of mind that everything is moving correctly and that it makes it more likely that the project is going to be successful in the end.
Changing topics for a moment, there are over 1 million foreign students here in the United States. How does EB-5 compare to H1-B for foreign students?
It’s definitely an option. I look at it this way. EB-5 isn’t for everyone – obviously you know it’s a lot of money. There’s a level of sophistication that’s required in the process. There’s a lot a of documents that are important to read and review and you know for the right student it might be the right opportunity for them. I think if a person is over here from a different country and they’re studying here in the United States and they’re looking to stay and work here beyond being a student, find a job and things like that. The first place that they start is the H1-B. But like I said before, the H1-B is not a guarantee and the odds of being selected in the lottery system that we have right now are not favorable and oftentimes students are left scrambling and families back home are very frustrated with the lack of employment options in the United States especially for citizens of China and India where they don’t have other valuable options for entrepreneurs like E visas and things like that. It could be very difficult to figure out a path upon graduation as to how to get a job, stay here and actually make that educational investment pay off. For example if most foreign students are paying tuition in cash and that cash typically comes from their parents or someone from back home, and let’s say that they’re going to a school, you know that’s going to cost them two hundred thousand dollars over the course of four years in terms of tuition and board anything else that’s being paid out there. When they spend that two hundred thousand dollars on their education, you know their child comes out at 21, 22 years old or whatever and they can’t get a job because they’ve used their OPT, their one year of work authorization that they get as a result of being a student here or they used their OPT extension if they have a STEM degree but at some point they’re going to have to find a long term solution if they want to work in the United States and live in the United States. And it’s H1-B right? Sometimes you have to try over and over and over again, if you’re able to do that. You might not be able to get that and it’s very frustrating. So there’s a lot of uncertainty with that.
One potential cure that EB-5 can provide, if you know early on that it could be difficult to get a work visa upon graduation, you might be able to bypass that by participating in the EB-5 program. You know if you’ve spent 200,000 or 300,000 dollars in cash on your child’s education, maybe there’s a way for the student to make an investment under the EB-5 program to make sure that they have a green card when they graduate and get to get a job and work wherever they want. Part of the limitations with the H1-B is that it’s employer specific, you can only work for that employer and if you want to switch jobs that new employer has to file a change of employer petition and absorb those costs and it’s just sort of cumbersome some and it’s very fluid. With the green card you can work wherever you want, live wherever you want, on a company if you want. Can’t really start your own company under an H1-B visa so it’s pretty hard to be entrepreneurial and it’s a great way to sort of get the flexibility of the American dream. Be able to do whatever you want upon graduation, you know we would advise students who might be looking to do that. Obviously they have to make sure that they’re accredited and they qualify for the program. But if they do, you know try to do something in their sophomore year for example that way that gives them enough time to process their paperwork. Their petitions get their green card application filed. So that while they’re in OPT upon graduation they might be able to adjust their status and get a green card. Then that solves the whole H1-B problem and they can work wherever they want. Again, obviously it’s not for everyone, as we’re talking about a large investment and things like that but the right applicant EB-5 is a great option for those people that can meet the qualifications.
Well, we thoroughly covered a range of topics! I am happy I was able to share to share what I think is great advice, guidance and strategies for EB-5 investors. You can hear the full podcast by clicking on the following link which features the podcast series on the EB-5 Investor Portal https://www.eb5eb5.com/eb-5-podcast/. Please remember that the information in this article and the podcast series is for informational purposes only and should not be used as a substitute for individualized advice from qualified immigration counsel.