EB-5 Investors Can Use IOU to Gain Residency

By David North on March 8, 2013

It is now apparent that an immigrant investor in the EB-5 program can secure at least some immigration benefits without actually investing any money.

The EB-5 program seems to demand a (modest) $500,000 investment in some American economic activity that promises to produce 10 full-time jobs. As a reward, the government will issue a full set of two-year conditional resident cards to the investor, his or her spouse, and all under-21 members of the family. Everyone in the family can then work legally in the United States. Later, if things go well, all the conditional cards will be converted into green cards.

The 10 jobs, incidentally — and it is hard to visualize a half-million investment that could create 10 jobs in anything but a 1990s garment factory — do not have to go to 10 individual workers that you can name and see and touch; in other words, to real people. There is a formula for the indirect creation of jobs that USCIS has invented to meet the statutory 10 jobs requirement.

The program has been criticized as a way that whole families of aliens can buy their way into the United States when they could not secure admission in any other way. That criticism was based on the assumption that the $500,000 would actually be invested in the U.S. economy, usually in an EB-5 real estate development, before the cards were distributed.

That assumption is apparently wrong.

According to a draft Policy Memorandum (PM) issued by USCIS, now subject to comment through April 1, 2013, the trade-off is not quite so open-and-shut.

In order to obtain the set of conditional resident cards, the investor must have an approved I-526 form. To get that approval, according to p. 19 of the PM, the investor must:

[D]emonstrate his or her commitment to invest the capital but need not establish that the required capital already has been invested; it is sufficient if the immigrant investor demonstrates that he or she is actively in the process of investing the required capital. [emphasis added]

One might interpret "in the process of investing" to mean that one really, really intends to make such an investment, and maybe the would-be immigrant has even put his or her intentions in writing. It sounds very much like a carefully written, nicely typed out, maybe even notarized, IOU.

The draft memorandum is only slightly firmer about the actuality of the $500,000 investment at the next level, when an approved I-829 form is needed before the full set of green cards is distributed to the family. The PM says that evidence is needed that:

[T]he immigrant investor invested or was actively in the process of investing the required capital.... At this stage the immigrant investor need not have invested all of the required capital, but must have substantially met that requirement.

This seems to say that part of the $500,000 needs to be invested at this point, but, again, part of it could be in the form of an IOU.

It should be noted that the EB-5 document is marked "the draft does not constitute agency policy" but it must reflect agency thinking. Further, the "in the process of investing" terminology shows up in many places in other, older agency documents.

Selling sets of green cards for a measly half million-dollar investment — other nations charge more in similar programs — is bad enough if real money is collected up front.

Selling legal residence in the United States for an IOU is a travesty.

Readers are encouraged to tell USCIS that these lax standards are inappropriate, and may do so by e-mailing a comment on "Draft EB-5 Adjudications Policy Memorandum" to [email protected] by April 1.

For more on this program generally, see the CIS Backgrounder "The Immigrant Investor (EB-5) Visa: A Program that Is, and Deserves to Be, Failing".