In light of the SEC fraud complaint against the Intercontinental Regional Center Trust of Chicago (IRCTC) and its owner, people are asking me how to evaluate a regional center (RC) and conduct due diligence. This consists of two types of analysis. The first type concerns the economic risk of inadequate financial return or business failure. The second type concerns the immigration risks or likelihood that the RC will not provide an adequate basis for the investor to achieve the immigration goal of obtaining an unconditional green card.

I am an immigration expert and cannot advise on the economics of a project. Evaluating the RC immigration risk is quite complex, as it involves the following:

• analysis of job creation, including economic input/output models and the factors used for those inputs;
• the application of targeted employment area (TEA) regulations;
• review of the business plan for verifiable data to support the economic analysis, proper use of EB-5 capital and other requirements; and
• an analysis of the business instruments to ensure there are no disallowed provisions.

Usually this type of analysis can only be done by an immigration attorney very experienced with the EB-5 category.

Here are some, but not all, of the due diligence factors the investor can evaluate and should consider:

1. Is the RC approved by the USCIS or is the application pending? If the RC is approved, the investor should obtain a copy of the approval.
2. What are the RC’s USCIS approved industries, and do these cover the industries involved in the project? The investor should refer to the NAICS codes and industries in the RC approval letter and ensure they cover those in the business plan, which should match those in the economic analysis.
3. Is the project in an approved targeted employment area (TEA) at the time of investment? (Check for a state certification letter. Otherwise, there should be documentation from the Bureau of Labor Statistics or the Census Bureau, which should be reviewed by an economist or attorney familiar with TEA calculations.)
4. Does the economist report of direct and/or indirect job creation project sufficient jobs for all EB-5 investors? Is there a safety net margin?  Is the economist experienced with EB-5 matters?
5. When are the jobs forecast to be created? Within 2.5 years of the I-526 approval?
6. Has USCIS “approved” the project in an I-924 or another I-526 petition decision? Any I-829 approvals?
7. How many investors have invested to date?
8. What is the regional center’s track record with prior projects? (The investor should obtain the resumes of RC principals and/or developers.)
9. What is the expertise and experience of the RC in the project’s industry – i.e., is the project’s management experienced?
10. Is there non-EB-5 capital invested in the project? Look at the investment documents and, if possible, verify the investment.
11. Is the project’s business plan detailed and reasonable?
12. Does the RC have enough assets to reimburse the investor if the I-526 is not approved? If not, are the investor’s funds securely in escrow until I-526 approval?
13. Does the RC employ a successful and experienced EB-5 attorney?
14. How much is the RC paying migration agents, and is this amount reflected in the regional center’s investment documents, such as the offering memorandum, or disclosed otherwise?
15. Research the RC owners on the internet.
16. Ask for current photographs of the project.
17. Are the financials for the project reasonable? In the IRCTC case, the costs per room were far in excess of the industry standard.
18. If you cannot conduct your own due diligence analysis, hire a risk analyst, accountant, or business attorney to perform the due diligence for you.
19. Consider hiring an experienced immigration lawyer to assist you rather than solely relying on migration agents in China. Have the immigration lawyer review the project and the business instruments to determine whether they are compliant with USCIS policies.
20. If possible, visit the project and talk to the regional center owner.