The EB-5 employment-creation immigrant investor visa category continues to transcend its chutes-and-ladders early history. This 24-year-old program — like many young adults of the same era — seems at last to be maturing in healthy ways. Foreign investors have become more savvy. Regulators are more attuned to the need for greater investor protection, as well as clear, consistently enforced rules and predictable adjudicative outcomes (including swift justice for law violators). Seasoned dealmakers and developers, accustomed to raising substantial project capital from private equity markets, are now entering the field and bringing with them a set of industry practices that include robust law compliance as an inherent element of the fundraising business model.
Yet one practice lingers. Immigration lawyers continue to wear too many hats. The Bible and law school teach that serving two (or more) masters is a recipe for trouble. So why then do so many reputable immigration lawyers think they can simultaneously represent the investor, the regional center and the project developers all in the same EB-5 transaction (while possibly also receiving finder’s or consulting fees on the side for procuring investors)?
The answers are only partly governmental.
U.S. Citizenship and Immigration Services (USCIS) and the State Department perpetuate the practice by allowing only one lawyer to submit a Form G-28 (notice of entry of appearance of attorney) in any given EB-5 benefits request, whether that be the request for approval of a regional center (Form I-924), the request for amendment of a regional center designation (Form I-924A), the EB-5 investor’s petition seeking classification as a conditional permanent resident (Form I-526), the application to register permanent residence or adjust status to conditional permanent resident (Form I-485), the immigrant visa application (Form DS-230), or the investor’s petition to remove conditions on residence (Form I-829).
This governmental practice is unhealthy and unnatural. Most federal agencies outside of the immigration world recognize that parties with distinct legal interests to protect deserve to be heard and represented by the respective legal counsel of their choice. The Securities and Exchange Commission, for example, would never mandate or likely countenance that an investor’s counsel represent the interests of an issuer of securities, or vice-versa. Indeed, the adversarial system of justice is founded on the principle that the truth will out and justice will best prevail when conflicts of interest are minimized and each party to a controversy exercises the right to present evidence and legal argument in support of a particular position asserted before a neutral fact-finder/judge determining the truth and deciding on the correct legal outcome. Not so, the immigration bureaucracy. As I’ve blogged before, the government needs to stop forcing members of the bar and the several “publics” they serve to rely on only one lawyer to carry the legal water in a single immigration case where several distinct interests hang in the balance.
But archaic immigration rules don’t really explain why EB-5 lawyers practicing immigration law too often tend to represent multiple parties. Immigration attorneys can readily serve distinct parties in an EB-5 case quite well by developing lawful work-arounds through multi-counsel collaboration agreements. Thus, the immigration attorney representing the project or the regional center, with client consent, can provide to investor’s counsel submitting the Form I-526 or Form I-829 all of the deal- or project-related documents and data needed to establish eligibility for the particular immigration benefit sought. Moreover, investor’s counsel, likewise with client consent, can and usually does undertake to provide the immigration lawyer representing the project or the regional center with timely notice and copies of all petition filings and any USCIS request for additional evidence, notice of intention to revoke petition approval or final decisions in a particular EB-5 investor’s petition. Similarly, immigration deal counsel or regional center counsel can and should provide the immigrant investor’s counsel with any USCIS actions or correspondence involving regional-center designation or amendment.
So why then do immigration counsel wear so many EB-5 hats? Is it some misguided paternalism (the desire to make sure all parts of the process are controlled by a single, control-freak lawyer/strategist)? Is it a belief that the EB-5 project and its attendant investors are best served by the perceived efficiency and cost efficacy of using only one immigration lawyer or firm? Or is it merely bottomed on a rapacious desire to squeeze out the largest dollar value of legal fees from each and every EB-5 deal?
I disclaim any clairvoyant ability to read the hearts and minds of my colleagues and thereby discern their underlying motivation for embracing joint client representation. Instead, my purpose in posting is merely to suggest that multi-party immigration representation in EB-5 cases is foolhardy and dangerous.
If a deal fails, if EB-5 benefits are not achieved, or if one or more EB-5 investors fail(s) to receive green cards because too few jobs are created, then — as sure as the night follows the day — disappointed and disgruntled parties will engage successor counsel to point the finger of blame at whomsoever has pockets that seem deep enough to pay amends and thereby effectuate some form of retributive economic justice. (For more on this topic, check out an article co-authored by securities lawyers, Gregory L. White and Mark Katzoff, and me, “Hot Topics in EB-5 Financings,” published in Forming and Operating an EB-5 Regional Center: A Guide for Developers and Business Innovators (ILW, 2014; Eds., L. Batya Schwartz Ehrens and Angelo A. Paparelli). Even if the multiple-fingers-in-multiple-pies immigration lawyer somehow prevails after all the finger-pointing exercises have been resolved, the process of deposition, discovery, settlement or trial will be enervating.
So, my esteemed and beloved colleagues, it is folly to think that your artfully crafted disclosures and mutual consents to joint representation will withstand close scrutiny and protect you.
Instead, just say no! Don’t ever agree to represent more than a single party (or perhaps at most a class of similarly situated investors) in any multi-party EB-5 transaction, whether it be a pooled investment involving direct job creation, or a syndicated investment made through a regional center. In my own case, the need for blissful sleep (and retention of my bar license) compel me to choose sides. I shall only represent the project or the regional center in any syndicated investment (prospective client referrals without referral fees paid are gladly accepted) and I’ll look to my many talented sisters and brothers at the bar to represent the interests of the investor(s).
We can do this together while practicing separately — that is, by each of us undertaking to represent only one party in any pooled EB-5 investment.