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SEC, Homeland Security Launch Probes in EB-5 Visa Application Practices

US_Permanent_Resident_CardTwo separate federal agencies have, in recent weeks, begun investigations looking into the way applications for EB-5 foreign investor visas are handled and approved. According to Bloomberg, the Securities and Exchange Commission probe centers on some attorneys who collected improper fees related to the visas, and the Department of Homeland Security is checking into certain applications that were approved despite the existence of “red flags” from the FBI and other agencies related to the applicants, ABC News reported.

The EB-5 program provides legal residency status to foreign investors whose investment amounts to $500,000 or more and create 10 or more jobs. The current SEC investigation relates to a rule regarding what kind of assistance attorneys can provide EB-5 applicants and what fees they can collect related to that work. Specifically, the problems can arise when a developer, who is seeking to raise capital for a project, looks for EB-5 investors to help fund the project and enlists the aid of an attorney to find those investors.

The law requires that lawyers who serve as brokers in these EB-5 transactions be licensed securities broker-dealers in order to collect transaction fees relating to the acquisition of these EB-5 investors. Using an unlicensed broker-dealer, even if that broker is a licensed attorney, can have significant negative consequences, not only for the attorney, but also for the EB-5 investor. For the investor, these could include impacts on future financing and disclosure requirements. According to the Bloomberg report, the SEC is looking into roughly two dozen attorneys who accepted broker fees without first getting licensed as broker-dealers.

Working with legal counsel you can trust when dealing with an EB-5 visa is important for a number of reasons. Among these reasons is assistance differentiating legitimate investments from scams. One of the SEC’s previous involvements with the EB-5 program related to a hotel project in Chicago. The developer sought 300 EB-5 investors to fund the project, but the deal never came to completion, since the SEC identified the project as a $158 million fraud.

On the Homeland Security side, the ABC report indicated that, under the direction of then-USCIS director Alejandro Mayorkas, the agency allegedly approved EB-5 applications even if the applicant’s background revealed problems, which sometimes included fraud, money laundering, espionage, and profiting from child pornography.

One thing the DHS Inspector General’s investigation is not expected to affect is the status of EB-5 regional centers. Even if an EB-5 regional center business is believed by DHS to be engaging in improper activity, the department has little authority to end a business’ regional center status. The department told ABC that it “only has the authority to terminate a regional center if there is evidence the center is no longer promoting economic growth,” and not due to improper or illegal activity.

In order to give yourself and your EB-5 application the best chance of success, you should retain skilled and experienced immigration counsel to help guide you through the process. For representation you can rely upon, consult the experienced Florida immigration law attorneys at Stok Folk + Kon.

Contact us online or by calling (305) 935-4440 to schedule your consultation.

More blog posts:

Federal Judge Puts Temporary Halt to Expanded Immigration Programs, Florida Business Lawyers Blog, Feb. 26, 2015

New Agency in Miami-Dade Using Lure of Immigration to Draw Investors to Area, Florida Business Lawyers Blog, Jan. 8, 2015