I didn't want to blog about this matter before I decided what I really wanted to say about it. This action on the part of USCIS is so serious, in fact, that it could spark lawsuits by investors and invalidate securities offerings, putting EB-5 project developers and regional center principals in danger of federal and state criminal prosecution.
On February 17, 2012, USCIS issued a memorandum on "Tenant Occupancy". This was the "mystery issue" that was holding up I-924 applications for new regional centers. To boil it down, the newly hired USCIS economists say they don't see the job-creation connection between office space or shopping centers and "tenant jobs." The memo said RFEs were coming and it didn't take long.
"After reviewing the tenant-occupancy methodology presented thus far," one RFE said, "USCIS observes that the nexus between the investment and the job creation is either too attenuated or too incomplete to constitute a reasonable economic methodology. Consequently, the existing record presents USCIS with a justification to recognize only those employment impacts that could be attributed to [the project] such as those resulting indirectly from the construction activity and, if applicable, the ongoing building management activities that will be required to maintain the building."
Most regional centers -- certainly a majority, probably a lot more than that -- are built precisely around creation of tenant jobs and this economic methodology. Because USCIS -- your federal government -- has taken this astounding position, I predict there will be a rash of lawsuits due to invalidation of securities offerings, and possible federal criminal charges brought against EB-5 project developers and regional centers by the federal and state securities commissions. The EB-5 business plan and the economic methodology are part of the securities offerings.
This is your federal government making big trouble for this job-creation program. I do see that in order to successfully navigate this minefield, EB-5 economists are going to have to go to school about how to put together a report that satisfies whoever this is inside USCIS.