With one week to go before the election, the final days have been marked by heated arguments over the proper role of government.  In the prime battleground state of Ohio, the Presidential candidates have crisscrossed virtually every county, arguing over whether and when government should intervene to save or create jobs.

Political comic, Jon Stewart, recently offered his usual sarcasm-saturated take on the topic, pointing out that — whether the choice is made by government or the private sector — consistently investing in winners while passing on likely losers is hard.

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The same debate is playing out in microcosm on both coasts. In Washington and Laguna Niguel, officials of U.S. Citizenship and Immigration Services (USCIS) at the agency’s DC headquarters and its California Service Center struggle and temporize over the selection of victorious and vanquished EB-5 Regional Centers. 

The EB-5 “employment-creation” immigrant visa category — despite its 22-year, topsy-turvy history — is finally beginning to capture the attention of U.S. dealmakers who seek project-financing alternatives to the nation’s banks, which remain skittish about approving loans. Wealthy foreigners, however, still see America as attractive. The lure of green cards has produced a bumper crop of non-citizens willing to invest here, especially in Regional Centers, which are allowed by Congress to count both direct and indirect job-creation. 

So, in this land of caveat emptor and moral hazard, where the EB-5 regulations require that funds be “at risk,” and Congress allows USCIS to approve Regional Center designations based merely on “general predictions . . . concerning . . . the jobs that will be created directly or indirectly as a result of . . . [EB-5] capital investments,” why is USCIS falling down on the job?  Why is the agency requiring reams of detail, elaborate econometric reports, and extensive financial plans and projections, yet is still not quickly approving applications for new or amended regional center designations? Why too is USCIS seemingly usurping the investor-protection role of the Securities and Exchange Commission rather than merely up-or-down adjudicating requests for immigration benefits in prompt fashion as Congress intended? 

I raised these questions in a colloquy with senior USCIS officials at a recent EB-5 stakeholders engagement, suggesting that the more evidence the agency demands, the more likely that foreign investors will infer that approved regional centers are government-vetted, -approved and -endorsed. Wouldn’t it be better, I asked, that USCIS disabuse investors of any such inferences by following Congress’s design?  The EB-5 is a two-stage process involving classification of investors first for conditional green cards, and then 24 months later, taking another look when a petition to remove conditions on permanent residence is filed.  Thus, if the jobs are not created or the investment is not sustained at the two-year check-in, then why not merely deny the petition to remove conditions? 

Here is the essence of USCIS’s response – ”Open Questions from Room, Q2″ (which, to me, is unsatisfying):

  • Conditional green cards confer precious rights;
  • USCIS has a duty to find by a preponderance of the evidence that a reasonable basis has been shown allowing the agency to infer that ten jobs per investor will likely be created;
  • USCIS has a duty to protect American job seekers and foreign investors from sketchy investment deals;
  • Denying petitions to remove conditions on residence would disrupt the lives of investors and create adverse financial consequences for many parties;
  • The agency therefore must ask for all the evidence it needs and take sufficient time to reach the conclusion that however many jobs a regional center predicts will be created will in fact result.

In a perfect world, this explanation might be plausible; but in the real world of business, deals can’t wait months and months to determine if EB-5 investor financing will be permitted.  Congress declared that regional centers merely submit “general predictions” that the required “jobs . . . will be created directly or indirectly as a result of . . . [EB-5] capital investments . . .”

I offered USCIS a compromise solution:  If a regional center predicts that 300 jobs will result from an aggregation of EB-5 investors’ funds, but USCIS believes the evidence only establishes 250 reasonably likely jobs, why not approve the regional center designation and only allow investments capped at the amount needed to support this lesser number of jobs?  The reflexive USCIS initial response was that such a finding might be interpreted as an endorsement by the government that the creation of 250 jobs is assured.  Fortunately, however, the USCIS official leading the stakeholder engagement agreed to give further thought to the suggested compromise.

If USCIS adopts the suggested practice of capping the amount of permitted investments by issuing a decision that permits but does not require a prescribed number of reasonably foreseeable jobs to be created, then a virtuous cycle ensues: 

  • Regional centers and prospective EB-5 investors would be given the freedom to exercise their respective business judgment and independently decide whether or not the deal still makes sense; 
  • If the scaled-back deal seems sound and investors still invest, they place their funds “at risk,” as Congress intended;
  • Each investor, rather than the government, picks the hoped-for winner, as the god of Capitalism intended;
  • The rule of law would be honored by USCIS more in the observance than the breach, and
  • Immigration stakeholders would be one step further removed from living in a bureaucratically contrived Nanny State.