One EB-5 Lawyer With Too Many Hats?

Last week’s ILW EB-5 Continuing Legal Education Summit in Nashville, as I’ve already told you, was the best ever…sort of a Woodstock of EB-5 Stars. Okay, perhaps that is not the right analogy. (-:  But the point is that when you get the best minds on a given subject together in one room, the whole becomes greater than the sum of its parts, and that is exactly what Sam Udani has been able to consistently pull off with his EB-5 CLE events.

In ILW’s EB-5 event format, as in their new attorney’s EB-5 book — I’m a contributor — Sam constructs a logical flow of events ranging from the formation of an EB-5 Regional Center or Project to filing the investor petitions, to troubleshooting and preempting problems in all of the preceding.  The book is a hands-on, practical handbook for business immigration attorneys delving into EB-5 or wishing to quickly catch up with the myriad official and unofficial USCIS policy changes of these past few years, distinguishable from the many academic treatises hovering around assumptions, presuppositions and speculations as to how USCIS will act in any given situation when neither statutory nor regulatory guidance exists.

But if there is one thing the ILW book cannot do — in fact, no EB-5 treatise or practice manual could do — is educate the EB-5 practitioner on understanding the complex dynamics of the EB-5 process as they relate to both the “formal” and informal roles played by the practitioner…as interpreted by the client. 

To begin, leading EB-5 practitioners are clear on the fact that you cannot serve both God and mammon; that is, you have to either represent the Regional Center/Project OR the EB-5 investors, and there is a fundamental ethical conflict if you try to do both.  A Regional Center attorney, whether (as in my case with American Venture Solutions Regional Center) a principal in the Regional Center or simply as outside structuring counsel, can’t simply erase that conflict by asking a client on the other side of the world to sign a piece of paper acknowledging and accepting said conflict…any more that a fox can make his actions sacrosanct by having the hens sign of on his entry into the henhouse.  (Interestingly, given the much greater profitability in the business of representing investors in I-526/I-829 filings in comparison to the onerous, more rare, and ubercomplex task of putting together an EB-5  Regional Center or Project, it is easy to understand why a number of large national law firms are reaching out to me with clients needing RC formation; they know I won’t touch the investor filings, and a modest $20M raise equals 40 I-529s, 40 consular processing/adjustment filings, and 40 (hopefully!) I-829 submissions.  As Sam has often commented to me, that , my friends, is where the real money is for EB-5 practitioners.

Besides the fundamental conflict of representing a Regional Center vs. an EB-5 investor, the next issue is that of referral fees payable to attorneys.  We had a spirited debate on the subject in Nashville, led by Denyse Sabaugh.  As attorneys, we are know we are ethically bound to avoid even the “appearance of impropriety”.  While this is a complex subject in which I’ve expressed my opinion in a previous Immigration Insider blog posting I wrote on the subject of EB-5 Finders Fees and I won’t get into it again here, it is still an unresolved matter and one of which we need to be aware.  Until last week I was pretty comfortable taking a referral fee from a good Regional Center to whom I’d referred an investor, with the investors full knowledge and with me having no role in either the RC or investor visa filing.  After last week, my position is the same…but I view the issue with a bit more understanding.  [Note: the above referenced blog entry addresses the issue of whether an attorney can take a referral fee (in a non-EB-5 context) from the standpoint of securities regulations; the position that I take in the 2010 piece (and still take today) — that since successful and totally independant favorable USCIS adjudication of the 526 is a prerequisite to the payment of the referral/success fee, it is legally distinguishable from the BMW straight-referral-fee scenario prohibited by the SEC — has been the subject of considerable discussion within the EB-5 community.  To date, the SEC has not formally commented but, for what it is worth, a friend who is an SEC enforcement attorney (and who would KILL me if I use his/her name) concurred fully with my reasoning.]

Finally — and this is a new one to me — there can be an erroneous inference by the client that the attorney’s role makes him some sort of “partner” in the economic success of the EB-5 project he or she is structuring.  Let’s be clear: my retainer agreement explains in exhaustive detail both the work I WILL undertake as the immigration counsel structuring the EB-5 Regional Center or Project; MORE exhaustively in detailing what I DON’T do and what I am NOT (e.g., securities counsel, marketing person, business planner, etc.)  However, the fact that I am in the business of marketing various global migration programs through Private Placement Partners, my consultancy, I can’t rely on the clear language of the retainer agreement…I need to carefully explain to the client/developer what he or she is and is not retaining me to do.  If I am just structuring an EB-5 Regional Center or Project, they are engaging me as an attorney with a specific list of fees and responsibilities (which, in my case, includes the retention, supervision, and accountability for the other professionals involved in the structure, such as the economist, business plan writer, etc.)  If I am JUST being asked to market a project someone else built and got approved, then it is clear that Private Placement Partners would NOT be responsible for structural deficiencies resulting from another law firms legal work…right??

I just don’t know.   This week I had a client for whom I’m doing a simple, non-Regional Center pooled EB-5 structure ask me when I would be “beginning the seminars”.  Huh??  WHAT seminars?  Despite the clear language of my retainer explicitly stating that I was JUST being hired to structure the deal, he inferred that because I also operate Private Placement Partners, some sort of “free marketing” deal was in place.  It was resolved readily and amicably, and he understood, but it left me very uncomfortable that a sophisticated developer could make such an assumption despite the clarity of our communications.

These EB-5 waters are murky, my friends, and if there is one thing I can see in them through my incredibly cool new Italian-made Maui Jim polarized fishing glasses, it’s that it is up to US to make sure our clients understand exactly what our particular role is in realizing their objectives.

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