Top 8 Regional Center Due-Diligence Questions Every EB-5 Investor Should Ask

In February 2013, the Securities and Exchange Commission (SEC) filed charges against a Chicago individual alleging he defrauded hundreds of EB-5 investors, mainly from China.  The 26-page complaint alleges a host of many wrongdoings by the Chicago man. As a result, the SEC has been urging EB-5 investors to actively research and confirm any promises made by a Regional Center before committing any funds to an investment.

It’s easy for the SEC to recommend that EB-5 investors conduct due-diligence, but what questions should an EB-5 investor be asking? What areas should an EB-5 investor be focusing?

From the many EB-5 petitions our office has helped EB-5 clients prepare over the years, many have invested in Regional Center projects.  Here are our top 8 recommended questions, but by no means is this list exhaustive.

  • Who are the Principals and the Sponsors of the Regional Center?  What background do they have in the line of business they are proposing and what is their reputation?
  • Has the Regional Center been designated by the USCIS and if so, do the proposed projects fall within the Regional Center’s original application?  If not, what amendments have been made to the USCIS?
  • What are the sources of the investment funding?  Are EB-5 investors the only source?
  • Does the Regional Center’s estimated development costs and spending appear reasonable?  Or has it been inflated, as compared to industry benchmarks, that would also inflate the number of jobs projected?
  • At what stage in the development is the project in which you express interest?  Has it broken ground?  What percentage has the project been completed?
  • Have the project developers obtained all the necessary permits and entitlements from the appropriate private and public agencies?
  • Are the job estimation projections reasonable?  Are they based on a reliable economic model?  Is there a safe cushion?
  • To what extent are all the business entities (i.e.: regional center, limited partnerships, project developers, sponsors and principals) the same individuals?  How will that impact the management of the project?

You’ll find that your specific needs and priorities may vary.  The best advice for any would-be EB-5 investor is to ally with a seasoned financial advisor who can provide a detailed analysis on the risks related to your investments.  Had the EB-5 investors in the Chicago case conducted due diligence and asked some of the questions (above), they may have discovered troubling answers that would have saved them time and money in the long run.

At Jatoi & de Kirby, A.P.C., we know how important it is for you and your family to get the most up-to-date information on the EB-5 Program.  If you need a referral to a skilled financial advisor experienced in evaluating EB-5 investments, we can help. Our immigration attorneys can refer you to a skilled financial advisor, as well advise you about the requirements of an EB-5 visa.  Contact us for more information.

Vaughan de Kirby
Connect with me
San Francisco California EB-5 Investment Immigration Attorney