Cautionary Tale for EB-5 Investors

The SEC has sued Seattle developer Lobsang Dargey, alleging that he misappropriated $17 million from investors in his EB-5 program, and announcing a freeze of Dargey’s assets at the same time.

The EB-5 program allows foreign nationals who invest $1,000,000 ($500,000, in certain high unemployment or rural areas) in qualifying businesses in the U.S. and create 10 jobs for U.S. workers to obtain permanent residence in the U.S.

A “qualifying business” means:

  • The creation of an original business;
  • The purchase of an existing business with simultaneous restructuring or    reorganization such that a new commercial organization results; or
  • Expansion of an existing business created after November 1990 through the investment of the required amount such that the net worth is increased by at least 40%.

The EB-5 program has drawn much interest from Chinese investors over the last several years looking for business opportunities. Unfortunately, it also has drawn interest from individuals, who seek to take advantage of EB-5 investors, as Dargey is alleged to have done.

According to the SEC, Dargey raised at least $125 million from 250 Chinese nationals seeking permanent residence through the EB-5 program. The money was to be used in two of Dargey’s Seattle-area real-estate projects, but he misappropriated millions for his own use. Whether or not the investors will be able to process their permanent residence or recoup their investment is yet to be determined. The SEC’s civil suit was filed August 25 in federal court in Seattle.

Dargey’s case is similar to a 2013 case in which the SEC alleged that Anshoo Sethi, a Chicago area real estate developer, “fraudulently sold more than $145 million in securities and collected $11 million in administrative fees from more than 250 investors primarily from China.” As with the Dargey case, the investors were seeking permanent residence in the U.S. through the EB-5 program. Fortunately, the SEC was able to facilitate the return of the invested funds.

While the SEC investigates such cases and is working diligently to prevent the type of fraud alleged, potential EB-5 investors should exercise proper due diligence and engage knowledgeable counsel to ensure that they do not fall victim to these schemes.

Jackson Lewis attorneys are available to provide counsel to anyone interested in the EB-5 program.

Ever Evolving L-1B Adjudication Standards

Immigration law practitioners have been receiving Requests for Evidence (RFEs) on most L-1B (Intracompany Transferee-Specialized Knowledge) petitions for new issuance as well as L-1B renewals. These RFEs, requiring burdensome responses, in fact may misinterpret the term “specialized knowledge.”

  • In March, 2015 USCIS, in an effort to clarify adjudication standards, issued a draft L-1B Adjudication Policy Memorandum (PM-602-0111), soliciting comments from the public as well as stakeholders.
  • On July 17, 2015, USCIS issued a Request for Comments on Draft RFE Template for Form I-129 involving L-1B Intracompany Transferees-Specialized Knowledge.
  • On August 17, 2015, the final policy memorandum was published.

So how could an RFE template be proposed when an interpretive memorandum on which it is based has not been published in its final form? Moreover, has USCIS even considered the comments it solicited on the Draft Memorandum and Draft RFE Template in these proceedings?

The Draft RFE Template appears to be based upon language in the draft (now final) memorandum which was still the subject of considerable comment from stakeholders when the Draft RFE Template was issued. All of this leads to more confusion, ambiguity, and uncertainty in the application process. This also gives rise to a need for burdensome and generally unnecessary documentation at the initial filing in response to an RFE, or both.

The L-1 saga will continue.

2008 STEM Extension Dealt a Setback

The 2008 Department of Homeland Security (DHS) rule allowing certain F-1 visa students with Science, Technology, Engineering or Math (STEM) degrees to extend their stay for an additional 17 months of training related to their degrees in the U.S. is deficient, a federal judge for the U.S. District Court for the District of Columbia has held. The judge concluded the DHS rule was not properly subjected to public notice and comment. However, the judge permitted the rule to remain temporarily in effect. Washington Alliance of Technology Workers v. U.S. Department of Homeland Security, No. 1:14-cv-00529 (D. D.C. Aug. 12, 2015).

F-1 student visa holders are eligible to extend their visa status to work in the U.S. for up to 12 months following their graduation. Their employment during that time, known as optional practical training (OPT), must be related to their field of study. Prior to 2008, after the expiration of their OPT, such visa holders, regardless of their academic field, had to change to some other nonimmigrant visa status to work and remain in the U.S. If not, they would have to depart the U.S. after the expiration of their post-F-1 grace period.

The DHS STEM extension in this case allowed F-1 student visa holders who had earned STEM degrees to extend their OPT in their STEM field for an additional 17 months. The STEM extension has been useful and popular both for F-1 student visa holders and their employers, and employers have utilized the extension to further train and hire such foreign nationals and to evaluate these trainees and plan for possible sponsorship of nonimmigrant visa status and permanent employment.

Under the Administrative Procedure Act (APA), federal agencies must provide notice to the public of any proposed rulemaking and give them the opportunity for comment prior to the rule becoming effective. An agency is exempt from the notice-and-comment period only if it can establish that an emergency excused it \ from complying with the procedural requirements. In concluding the rule was procedurally deficient, the judge found the emergency exemption did not apply to the STEM extension rule.

The judge did not immediately vacate the rule, however, acknowledging that this would be “seriously disruptive” to those taking advantage of the extension. She stayed the vacatur until February 12, 2016, giving DHS time to submit the STEM extension rule to the notice-and-comment period as required by the APA.

Individuals currently employed pursuant to a STEM extension still maintain valid employment authorization. Assuming DHS initiates the notice-and-comment period for the STEM extension rule, as the judge concluded it should have done, there should be no long-term impact on STEM employees or their employers.

Jackson Lewis will provide comment, guidance, and updates as events warrant. Employers of STEM employees should contact their Jackson Lewis immigration attorneys with any questions regarding these developments.

BALCA Clarifies Regulatory Requirements for Newspaper Selection in PERM Cases

Finding that a DOL certifying officer (CO) had erred in finding the employer failed to advertise a job opportunity in a newspaper in the area of intended employment, as required by regulation, and denied a permanent labor certification, the Board of Alien Labor Certification Appeals (BALCA) has reversed the denial. Matter of Hoffman Enclosures In., d/b/a Pentair Technical Products, BALCA No. 2011-PER-01754 (Aug. 5, 2015).

The Employer advertised using the San Antonio Express (“Express-News”) for its Sunday newspaper advertisement requirement, 20 CFR 656.17(e)(1)(i)(B)(1). The job was located in Pharr, Texas, a town about four hours away from San Antonio. After the DOL’s denial, the employer requested review or reconsideration and submitted information confirming that the Express-News was circulated in Pharr, Texas. The employer maintained that it chose the Express-News because it was the largest metropolitan area newspaper with general circulation. The CO found that those reasons were not sufficient because, despite the wide circulation, San Antonio is four hours away from Pharr and outside a normal commuting distance.

The Board stated that “the CO improperly conflated the issues of where a newspaper is published and where it is circulated.” Since the Express-News is a newspaper of general circulation in the area of intended employment, the fact that it was published in San Antonio is irrelevant. The regulatory requirement is satisfied if the employer advertises the job opportunity in “a newspaper of general circulation in the area of intended employment.” The newspaper does not have to be the newspaper with the highest circulation nor does it have to be the newspaper published with the closest geographical proximity to the job offered.

The Board noted that the CO did not raise the issue of whether the newspaper was the “most appropriate” newspaper and the Board also did not reach that issue. Instead, its decision was based on whether the employer had placed a newspaper advertisement in the area of intended employment – the CO found it did not and the Board reversed.

This decision means that employers may choose among newspapers that have circulation in the area of intended employment. The Board left open the question of the “appropriateness” of the selection. Employers are required to place “an advertisement on two different Sundays in the newspaper of general circulation in the area of intended employment most appropriate to the occupation and the workers likely to apply for the job opportunity and most likely to bring responses from able, willing, qualified and available U.S. workers.” Thus, while it appears the newspaper with the largest circulation does not have to be selected, this decision should not be read to mean that just any newspaper with a Sunday edition with circulation in the area of intended employment would comply with the requirement.

USCIS Accepting Premium Processing Requests for H-1B Extension of Stay Petitions

USCIS has resumed acceptance of Form I-907, Request for Premium Processing Service, for all H-1B extension of stay petitions. Premium Processing Service had been suspended by USCIS for this type of filing as of May 26, 2015, in anticipation of a large number of applications for employment authorization by H-4 nonimmigrants under new regulation allowing for employment authorization for H-4 dependent spouses of certain H-1B employees. USCIS later announced that current workloads permitted earlier-than-anticipated resumption of the premium processing service.

In addition to H-1B extension of stay filings submitted after July 13, 2015, being eligible for premium processing service, pending H-1B extension requests filed prior to July 13, 2015, may be upgraded to premium processing by filing Form I-907 and submitting the USCIS filing fee of $1,225.00 to the USCIS Service Center where the H-1B petition is pending.

Premium processing service is offered by USCIS for certain types of filings. When a request for premium processing service is submitted by the petitioning company or by the beneficiary, USCIS must issue a decision or a Request for Evidence (“RFE”) within 15 calendar days. USCIS also noted that only the new version of Form I-907, with edition date of January 29, 2015, will be accepted. All previous editions of the form will be rejected.

More I-9 Confusion for Employers from Three-Year DACA Card Recall

President Barack Obama’s executive order expanding Deferred Action for Childhood Arrivals (DACA) eligibility and work authorization met a another roadblock when a federal District Court threatened to sanction the Secretary of Homeland Security and senior DHS officials for issuing three-year Employment Authorization Documents (EADs). The court previously enjoined implementation of expanded DACA, including issuance of EAD’s valid for three instead of for two.

In May 2015, U.S. Citizenship and Immigration Services (USCIS) began sending letters to the approximately 2,000 three-year EAD recipients instructing them to return the EADs to USCIS and stating that they would be issued a two-year card instead. During the week of July 6, 2015, USCIS sent a second letter to those who had not yet returned the EAD. This letter provided, “USCIS must receive your EAD by July 17, 2015. Failure to return the invalid EAD without good cause may affect your deferred action and employment authorization.” USCIS also indicated that its officers will begin visiting individual homes to retrieve erroneously issued three-year EADs not otherwise returned.

With all the drama surrounding these events, little attention has been given to the effect the recall has on individuals relying on Form I-9 verification using a three-year EAD. Since USCIS has stated that these documents are invalid, the documents cannot be accepted for I-9 verification as a List A document. Employees initially verified using a three-year EAD may present a newly issued two-year EAD. Employers will need to update the existing Form I-9 to reflect this. The government has not yet provided additional guidance to employers as to how this update is to be recorded on Form I-9.

If an employee previously presented an EAD with a three-year expiration date and has not notified you that he or she has a new EAD, you should contact legal counsel.

USCIS Issues Final Guidance on When to File an Amended or New H-1B Petition

Following the decision of the Administrative Appeals Office (AAO) of USCIS, USCIS has issued a new Policy Memorandum to its employees outlining when an amended H-1B petition must be filed.

On April 9, 2015, AAO clarified that an employer must file an amended or new H-1B petition when a new Labor Condition Application (LCA) for nonimmigrant workers is required due to a change in the H-1B worker’s place of employment. Matter of Simeio Solutions, LLC, 26 I&N Dec. 542 (AAO 2015). The decision stated:

  •  “A change in the place of employment of a beneficiary to a geographical area requiring a corresponding LCA be certified to the Department of Homeland Security (DHS) with respect to that beneficiary may affect eligibility for H-1B status; it is therefore a material change for purposes of 8 C.F.R §§214(h)(2)(i)(E)and (11)(i)(A)(2014).”
  • “When there is a material change in the terms and conditions of employment, the petitioner must file an amended or new H-1B petition with the corresponding LCA.”

Accordingly, a petitioner must file an amended or new H-1B petition if the H-1B employee changes his or her place of employment to a location that requires a corresponding LCA, even if a new LCA is already certified with the Department of Labor.

A petitioner does not need to file an amended petition if a) there is a move “within the intended area of employment,” b) the placement is short term, and c) the H-1B employee is going to a non-worksite location. Each of these exceptions is discussed in detail in the Policy Memorandum.

The USCIS will exercise its discretion to varying degrees to accommodate petitioners. For petitioners whose H-1B employee moved to a new area on or before April 9, 2015, USCIS will generally not pursue new adverse actions. For petitioners whose employees move after that date, USCIS has created a chart in the Policy Memorandum to provide more specific instructions.

Customs and Border Protection to Begin Collecting Exit Data on Certain Foreign Nationals

U.S. Customs and Border Protection (CBP) has announced that it will begin collecting biographic and biometric data from some foreign national travelers in a test program when they depart the United States at Atlanta’s Hartsfield-Jackson International Airport

The biometric and departure data will be collected through use of an “enhanced mobile device” that will allow CBP to record exit information efficiently and streamline inspection queries for foreign national travelers. All test passengers will have their fingerprints and passports scanned by a CBP Officer using the mobile device on the loading bridge of selected flights departing the U.S. Each traveler’s departure data will be matched to the digital biometrics information that was collected when he or she arrived in the country. This information will be stored and managed by the U.S. Department of Homeland Security (DHS). Only non-U.S. citizens will have their information collected and processed.

The test program is expected run through June 2016, eventually expanding beyond Atlanta into the following major air travel ports: Chicago, Dallas, Houston, Los Angeles, Miami, Newark, New York, San Francisco, and Washington-Dulles. Jackson Lewis’ Immigration attorneys will continue to monitor CBP and DHS procedures for arriving and departing foreign nationals. We are available for questions and support as your employees navigate these requirements.

Arguments in Appeal of Texas Federal Court Injunction on Immigration Reform Executive Actions

The U.S. Court of Appeals for the Fifth Circuit, in New Orleans, heard arguments on July 10 as to whether a preliminary injunction on the implementation of President Barack Obama’s executive actions to defer deportation and grant work authorization to certain undocumented individuals presently in the U.S. should be overturned. The programs were enjoined by U.S. District Judge Andrew Hanen on February 16, 2015, and the injunction was upheld by the Fifth Circuit Court of Appeals on May 26, 2015.

During the July 10 hearing, the government argued that the executive actions are legally permissible as an exercise of prosecutorial discretion. The government maintains that because it is not able to deport the estimated 11 million undocumented individuals, it exercises discretion in targeting for deportation individuals with criminal records or other aggravating factors. Providing “deferred action status” and work authorization is a reasonable exercise of prosecutorial discretion, it asserted.

The plaintiffs are 26 states that originally challenged the administration’s actions by suit originally filed on December 3, 2014, claimed that the administration violated the “take care clause” of the Constitution (Article II, § 3, clause 5), and notice-and-comment requirements under the Administrative Procedures Act.

Judge Jerry Smith and Judge Jennifer Walker Elrod, two of the three appellate judges who affirmed the injunction against the government on its appeal of the injunction, appeared skeptical of the government’s position. In particular, the judges questioned whether issuance of work authorization for individuals granted deferred status is a benefit unlike prosecutorial discretion.

There is no timetable for issuance of a decision by the Fifth Circuit. The issue is ultimately expected to be decided by the Supreme Court.

Appeal of Injunction on Immigration Reform Executive Actions Set for Arguments

A three-judge panel of the U.S. Court of Appeals for the Fifth Circuit, in New Orleans, will hear arguments on July 10 as to whether a preliminary injunction on the implementation of President Barack Obama’s Executive Action policies affecting certain foreign nationals should be overturned.

“Deferred Action for Parents of Americans and Lawful Permanent Residents (DAPA)” and a policy that would expand the “Deferred Action for Childhood Arrivals (DACA)” were announced by the President in November 2014. Later that month, the Department of Homeland Security announced instructions for implementing DAPA and the expanded DACA.

Texas and 25 other states filed suit to stop these policies from being implemented. Judge Andrew Hansen, of the U.S. District Court Judge for the Southern District of Texas, granted the injunction in February 2015. The Fifth Circuit in May refused the government’s request for a stay of the injunction pending appeal, stating, “Because the government is unlikely to succeed on the merits of its appeal of the injunction, we deny the motion for stay and the request to narrow the scope of the injunction.”

The policies in question would provide a stay of deportation and work authorization opportunities to an estimated 4.3 million foreign nationals in the U.S. Jackson Lewis P.C. will continue to monitor this case and provide updates.

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