Monday, November 22, 2010

NYC Regional Center feeling the heat? Lawyer for firm recruiting immigrant investors for AY project launches shallow attack on unnamed "blogger" (AYR)

Apparently my criticism of the emerging effort by the New York City Regional Center (NYCRC) and Forest City Ratner to raise $249 million from 498 Chinese millionaires under the EB-5 immigration program has its backers concerned.

In an 11/11/10 post on EB5info.com, a web site devoted to EB-5 issues, an attorney for the NYCRC presents a tendentious, shallow attack on me.

In the post, headlined In Defense of the EB-5 Program, Miller Mayer attorney Carolyn S. Lee disserves readers by not pointing them to my original critique, as posted in the Huffington Post under the headline Green Cards for Sale? Atlantic Yards Backers Seek Chinese Investors.

That allows her to cherry-pick the evidence, evade full responses, and deny readers the opportunity to make evaluations on their own.

Notably, Lee ignores the rising tide of concern, well beyond my alleged "false and ill-informed statements," regarding the EB-5 program, which allows immigrant investors parking $500,000 in job-creating investments to get green cards for themselves and their families.

Broad dismissal

Lee begins:
When there is misinformation in the public about the EB-5 program, attorneys in the trenches of this area have a duty to set the record straight. To permit otherwise leaves our clients – investors and regional centers – having to defend themselves against individuals and organizations maligning the EB-5 program for other ends.

I have an individual in mind. The Internet has given this person a wide-reaching forum to vent his ire against a large urban development project. His medium is his blog. As with many projects of this scale, this one involves a partnership of private and public funds. EB-5 capital is a component. In a down economy hostile to immigration, the EB-5 program has become an easy target for this individual, who is dedicated to the downfall of the overall project and who has latched onto the EB-5 part of the project for his latest criticism.
Lee, without using my name, suggests that I'm venting amateur, rather than a journalist who's covered Atlantic Yards for a blog for more than five years and has been a critic credible enough to write for the New York Times and to co-write a law review article.

So too does the pointer blog on EB-5 Visa News, headlined New York Regional Center Coming Under Unfair Attack:
It’s one thing to have a discussion, but propaganda by a lone blogger is unfair.
Rather than focus on my arguments, they prefer to attack me. Meanwhile, lawyers representing the immigrant investors stand to earn $14,750 per client, while the NYCRC would earn a project issue fee of $38,000 per client.

That means Miller Mayer and the NYCRC have no small incentive to ensure the project succeeds. (Miller Mayer represents the NYCRC and immigrant investors.)

What's valid criticism?

Lee continues:
Valid criticism is helpful. Attorneys in the EB-5 bar have offered passionate well-reasoned critiques of USCIS’s [United States Citizenship and Immigration Services] administration of the EB-5 program. The goal has been to inform USCIS of the harmful effects of some of its interpretations, unfounded in the law. So the larger goal of what I’d call “valid criticism” is to improve the EB-5 program by bringing clarity and predictability, consistent with the law and regulations.

In contrast, the individual I have in mind criticizes the general EB-5 program as a way to deter a particular project. Not surprisingly, many things he has said about the program are false. These false and ill-informed statements, however, have real impact. They taint the public’s perception of the EB-5 program, which the federal government reported as bringing an estimated $1 billion into the U.S. economy back in 2005 (see the 2005 GAO Report at http://www.gao.gov/new.items/d05256.pdf).
Like other defenders of the EB-5 program, Lee wants it to work better. That's reasonable. There clearly are legitimate EB-5 projects.

But what if individual projects are questionable? I'm not the only one to suggest caution. As the Washington Post reported 1/9/10:
That immigrant investors are more focused on obtaining visas than maximizing profits -- combined with the government's limited capacity for oversight -- has caused even some avid proponents of the EB-5 program to worry that a profusion of fraudulent or ill-advised ventures might soon flourish alongside legitimate ones.
Similarly, in an 11/20/10 article headlined Wealthy investors seek quick path to U.S. residency, the Chicago Tribune cited the rapid growth of regional centers aiming to take advantage of the EB-5 program, warning:
But with the spurt of popularity have come concerns of fraud that hark back to the late 1990s, when brokers of some regional centers were caught trying to steal millions of dollars in investments.

"Frankly, I think there's fraud in a lot of these," said Anna Morzy, a Chicago-based attorney with Fragomen, Del Rey, Bernsen & Loewy, a world leader in immigration law. "A lot of these regional centers, I don't know if I'd recommend them" to her overseas investment clients.
Smearing reputations?

Lee continues:
They paint USCIS as lax guardians of immigration, when more astute observers have criticized the Service for its undue and arguably unlawful restrictions of the EB-5 program. They undermine investors’ confidence in the program, deterring capital and job creation in rural and high unemployment areas. Finally, they smear the reputations of conscientious regional center operators who work hard do everything right with one hand tied behind their back, partially blindfolded on treacherous terrain.

The regional center unfairly smeared in this instance is the New York City Regional Center, a client my firm has worked with closely for the past three years to obtain initial designation and subsequent amendments.
If the NYCRC were conscientious, wouldn't it be a little more transparent in its activities? Its managers don't answer questions. They don't post information about the Atlantic Yards deal on the NYCRC web site.

And, as I've argued--and will argue further--they mislead people. And, while Lee may cite "undue and arguably unlawful restrictions," note the Washington Post's observation regarding "the government's limited capacity for oversight."

Indeed, though regional centers have until recently faced little oversight, the USCIS recognizes there may be a need for more scrutiny, stating in an October 14, 2010 quarterly presentation to stakeholders: "Many USCIS External Stakeholders have expressed concerns regarding the potential for fraud and misrepresentation within the EB-5 program."

U.S. vs. Canada immigrant investor programs

Lee writes:
Here are just some things the blogger has gotten wrong:

1. “Not only does it look like the United States is selling visas, but the terms are easier than in other countries.”

Wrong. For example, the federal Canadian investor program has three basic requirements: (1) business experience, (2) minimum net worth of CN$800,000 (US$560,000), and (3) investment of CN$400,000 (US$281,000). There is no requirement that any jobs be created. The Canadian government holds the money for five years, after which it is returned to the investor without interest. The low threshold is responsible for the vast oversubscription of the Canadian investor program, resulting in a current three-year backlog.
I didn't say the terms were easier than in all other countries. I was merely quoting from her client, the NYCRC's Gregg Hayden:
Hayden also said that, unlike the immigrant investor programs in other countries which have "certain meaningful requirements," here investors need not speak English or intend permanent residency.
Also, Lee's comments about Canada's program deserve some analysis. First, the day she posted her response, Canada announced a doubling of its investment and net worth requirements, after not having revised the program in more than a decade.

According to Immigration.ca:
The Federal Investor program is passive in nature and requires an investment of $800,000 CAD which is deposited with the Receiver General of Canada and a personal net worth of $1.6 Million CAD with two years of suitable management or business experience. The investment bears no interest and must be maintained for five years.
Immigrant investors to the United States are not required to have any business experience, so that's a lower burden.

Guarantees in Canada

Moreover, there likely are other reasons that the Canadian immigration program was oversubscribed. Notably, investors receive government guarantees that they'll get their money back in five years, after the money's used in public works.

Under the Regional Center program authorized by the USCIS, there's no government guarantee the investors will get their money back from the private borrower (such as Forest City Ratner).

Indeed, Florida immigration attorney Jose Latour, in a 10/27/10 post on his Immigration Insider blog, warned:
Today, you have a virtual smorgasbord of lame projects from which to choose…and a handful of cherry-picked good Regional Centers.

...I suggest to my clients that they begin by separating immigration objectives from investment objectives. Today, I can show you a handful of EB-5 RC Programs which are proven and successful green card vehicles but terrible investments; I can also show you some pretty smart investment structures in terms of ROI and protection of the EB-5 Limited Partner's investment…but with questionable job creation logic and projections which are heavily academic (i.e., pretty unrealistic.)

How many EB-5 Regional Centers deliver on both fronts? Very few.
(Emphasis in original. Latour hasn't written specifically about the NYCRC.)

Misreading the controversy

Lee continues:
2. “The EB-5 controversy.”

Wrong again. In a Congress notable for partisan bickering, the EB-5 program is among the few that both Republicans and Democrats endorse. Senator Patrick Leahy (D-VT), Senator Jeff Sessions (R-AL), Representative Zoe Lofgren (D-CA) and Representative Steve King (R-IA) are all on record as EB-5 supporters. No one in Congress has criticized the EB-5 program.
Without a link to the original article, Lee's reference remains unmoored.

The section labeled “The EB-5 controversy” in my article refers to the EB-5 controversy with respect to the Atlantic Yards project.

Misreading "profit maximization"

Lee continues:
3. He quotes with disapproval an unnamed person related to the project who purportedly said or wrote that “[t]he costs of using investment funds are relatively lower than the costs of bank loans. … [W]e are in pursuit of profit maximization.” The blogger adds a condemning gloss: “That may impress potential investors, but sure seems to contradict the spirit—and perhaps the letter—of the EB-5 program.”

Wrong again. The law requires the EB-5 new commercial enterprise to seek a profit. Nonprofits are barred as proper recipients of EB-5 money in the regulatory definition of “commercial enterprise.” So both the spirit and the letter of the EB-5 program embrace the profit-making drive and in fact require it.
That ignores my point. The NYCRC's Hayden was asked why money from Chinese investors was needed in the first place, given the role of Russian billionaire Mikhail Prokhorov in the project.

He dodged the question. Given Hayden's essential non-answer, the transcript on the website of a Chinese immigration broker offered this dubious explanation, which was excerpted by Lee only in part:
The costs of using investment funds are relatively lower than the costs of bank loans. Although the NBA project funds are sufficient, business is business, and we are in pursuit of profit maximization.
Yes, the spirit and the letter of the EB-5 program require profit-making, as Lee writes, but if project funds are sufficient, there's no need for immigrant investors--and thus they wouldn't create any jobs.

My comment on whether it "seems to contradict the spirit—and perhaps the letter" of the program regarded not the issue of profit, but the need for immigrant investors to create jobs in the first place.

Need for scrutiny

Lee continues:
4. “That’s why the USCIS and the rest of the press should give this ‘project’ serious scrutiny.”

He apparently doesn’t know that USCIS did give this project serious scrutiny. The USCIS approved the project in an amendment filed by the regional center in question – a filing called an “exemplar” I-526 petition for pre-approval of a project. Or perhaps the blogger thinks that The Wall Street Journal is not serious enough press? The Journal recently covered the development project in an article dated May 10, 2010, including the EB-5 component.
Whether the USCIS pre-approval represents serious scrutiny remains in question, given the growing concerns about fraud and misrepresentation.

Should Lee be willing to make documents regarding the project available, we might be able to better evaluate it.

Regarding the Wall Street Journal, Lee refers to a 5/10/10 article, headlined Navy Yard Finds Green In Green-Card Program, which refers not to "the development project" at issue but a NYCRC project separate from Atlantic Yards.

A later Wall Street Journal article, on 9/21/10 and headlined Ratner Mulls Visa Financing, the article, clearly fed by the developer to undermine my longer article in preparation, offered no scrutiny of whether there would be sufficient job creation.

Proper administration

Lee closes by writing:
Everyone involved in the EB-5 program – regional center operators, investors, attorneys, advisors, and the USCIS– have much at stake in the proper administration of this program. When there are inaccuracies about the program, or the program as applied to certain projects, it harms everyone doing their best to contribute to a clean system. It’s one thing if we have disagreements about what the program should look like. It’s another thing when someone tries to tear down the program to further another agenda. Let’s at least agree to resist the latter.
The "inaccuracies about the program" could be clarified by Lee's clients, who've been acting in a somewhat opaque manner. Consider that the only project listed publicly on the NYCRC's web site involves the Navy Yard.

Why don't they want anyone other than Chinese investors, burdened by distance and language, to look closely at their "Brooklyn Arena and Infrastructure Project"?

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