 Welcome to St. Tech Hawaii, Asian Reveal. I am Johnson Choi, the host. The guest today is Benjamin Chan, attorney at law. Benjamin has been attorney, practicing law in Hawaii for almost 25 years. I have known Ben for at least 10 to 15 years. Today our topic is talk about immigration to the United States via investment. Ben, first of all, I want to find out how to reform us that wish to migrate to the United States. What are the means for them to do so? Well, immigration law is, as you know, it's a federal law and it's been in the books since the founding of the country. But the four basic ways that a foreigner can immigrate is, one, is family relationships. The second is through employment. The third is through investment. And then the fourth is through a visa lottery selection. I see. Maybe we can show the graph number one so people can take a look. As you can see on figure one, the number of immigrants that are coming to the U.S., 480,000 are through family-sponsored immigration. 140,000 through employment-based. And out of that 140 includes the immigrant investors visa, which we'll talk about a little bit later. And then lastly, it's through the visa lottery program, which is called the diversity program. Okay, maybe we can record the next graph. And in this table, you can see the actual number of people that immigrated to the U.S. Based upon the various categories. And of the 675, you can see that from 2010 to 2014, total number of investors through the various family employment diversity, and also the immigrant investors come out to about a million, 50,000. And then within the employment-based categories, you see there is the EB-1, which is through priority workers, the EB-2, which are professionals holding advanced degrees, and EB-3 skilled workers, and EB-4 religious workers, and special immigrants. And for EB-5 is where the immigrant investors make an investment in the United States, whether it be a million dollars for a direct job creation or through a $500,000 indirect job creation program. Okay, you mentioned about the three ways to come into America through family and primary investment. The three way, which way is the easiest and which way is the most difficult? The easiest is actually through the lottery selection. I think every year, the Congress allows several tens of thousands of people to come in 55,000 actually for this fiscal year to come into the United States through a visa selection. So basically, if you're selected, you're lucky, right? So you get it, you can come in and visa process at the country where you're at. The second easiest way would be through the family. Typically, you would have to just prove the family relationship, whether it's through a spousal relationship or through a children and parent relationship, and even brothers and sisters, which is like the fourth preference category. Then the third easiest, I guess the third way would be through employment. You would have to have a job offer by a U.S. employer who can petition you, and then the last would be the immigrant investors. I would say that's the most difficult and also the most risky. And yet, it's very, very popular now, especially among Chinese immigrants. Well, let's talk about the Immigration Investor Program, we call it, a committee referred that to EB-5. Has that been, in recent years, to be the most popular way to migrate to the United States? Can you tell us more about it? Sure. The EB-5 program, EB-5 stands for Employment-Based-5, and I think you saw that in the last table, which shows Employment-Based-5 category. Basically, it's a program that was created by Congress through the Immigration Act of 1990. And so this law has been on the books for over 25 years. And for the first 25 years, for the first 15 years, excuse me, the program was not as successful because the applicants were very few. So the program actually, at one point, was gonna be canceled. But within the last 10 years, the program has gotten a lot of attraction because primarily the Chinese applicants... The Chinese are coming. Right, so from 2005 to present, most of the applicants are from China. I see. And the rule, the basic rule for the immigration, this EB-5 program is investment of a million dollars and the creation of 10 jobs, full-time jobs, for qualified U.S. citizens and lawful permanent residents. And the second component to this investment immigration program is investment in what's called the Targeted Employment Area. Now, Targeted Employment Area in simplest terms would be where unemployment is high in areas of the United States. So an investment of $500,000 and the creation of 10 U.S. jobs would qualify somebody to obtain lawful permanent residents. That's how I have, and I'll take the regional center for the EB-5 investment. Okay, going to step back. Now, these Targeted Employment Areas now, through the EMACT 1990, allows the creation of certain regional centers. And these regional centers are economic units within a defined geographical boundary that is supposed to create employment opportunities for U.S. citizens and lawful permanent residents. So since 1993, the U.S. Immigration Service allows entrepreneurs to create these regional centers and then sponsor projects that are within these geographical boundaries, yeah. So in fact, my question, is there any of those regional centers right now in Hawaii? Yes, in fact, Hawaii itself as a state is a regional center that was established back in the late 1990s. And originally it was managed by the state of Hawaii through the Department of Business and Economic Development and Tourism, right. And more recently, I'd say probably the last 10 years, it's been managed by a private company and they have certain projects that they sponsor. But as of October this year, there are 12 regional centers that have been approved by the USCIS. In Hawaii, right. So I don't know a lot about the regional centers that are operating here. Some are actually sponsoring real estate projects. I know there's another one that's on the other islands that's doing a assisted living project. Yeah, okay. What kind of real estate development projects are being offered? And then can a developer offer EP5 investment unit for commercial office or mixed use building or even a hotel? Yes, a lot of the regional centers that sponsor, the sponsor projects involving real estate development. And that's been where most of the activity has been concentrated in real estate developments. So a project could be a office building and mixed use commercial and residential project, condominiums, housing developments, hotels, motels, and even some in the high tech industry. I know a client that actually invests in a restaurant which is a very high risk too. Yeah. So how can an investor or a EP5 visa purchaser understand the risk involved in a program like that, a project like that? For regional centers, the lot of most of these, like I said, are in real estate development. And the investor needs to understand the risks involved in investing in these types of projects. They're not buying a piece of real estate. They're not buying a condo. They're not buying the hotel. They're really investing in a securities interest in the, what's called the new commercial enterprise. Now in these regional center offerings, the investors investing in a share of securities in this new commercial enterprise, which is going to loan the money to the project entity. So it's not a purchase of real estate because the law doesn't allow you to redeem your investment for a say a unit in a condo development. So it's really important for the investors to understand real estate financing and also understand the capital stack that goes into a particular projects. Now, I know in Asia, particularly in China, a lot of these projects are promoted through migration agents. And these migration agents originally started out as mom and pop shops that assist clients with visa services and also helping their children go to summer camps and English language programs. But as the EB-5 program has gained popularity, a lot of these migration agents are now in the roles of investment advisors. And that becomes quite dangerous because a lot of them do not know or understand real estate financing and to inform the investor about the risks involved in the projects. The project is a program coming up here. You talk about where the EB-5 investment, where they place in the stack of investment. Maybe briefly explain the stack. Okay, yeah, sure. Where it fits me. Okay. Typically in larger projects, Johnson, office buildings, the developer usually has an equity in the land. And then with the land, the developer would go to a bank and get a loan, typically a hard-money loan secured by the land. So right there you have a first deed of trust that's already on the land. And subsequently the developer could go out and get a construction loan. And that construction loan is gonna likely be second in the stack. And of the projects that I've seen, the EB-5 stack typically is in the third position or in the fourth position. And so that becomes kind of dangerous for the investor because if the first deed of trust or the second deed of trust, the mortgage is defaulted, then everything else below gets wiped out. So it's very, very risky in that sense if the developer doesn't go through with the project. Okay. I guess one of the best way for a lot of people who own homes will be, you have your first mortgage. Right. And then you have a second mortgage where you want to send a key to half it. You have a third mortgage. Right, right. That's the meaning. So if going to default, the first mortgage get paid back first. And second and third. And then the EB-5 is there in the later position. So they may not have anything left. Somehow the poke went in welcome. That's right. And so the projects that are being marketed out there, in fact, I think there are hundreds of projects that are being marketed in China right now. And mainly they are larger real estate developments. Okay. We're going in commercial in about a minute. Where quickly does the investor has to go to what we call a migration agent to do it? Not necessarily. But in China, the typical practice is to go to a migration agent for help. But the migration agent's role can be of a conflict to the investor because the migration agents are also representing the project developers to market the project. So like a real estate agent represented by a seller. Right, the migration agent's basically a dual agent. So where are his or her loyalties? Is it to the developer or is it to the investor? So that becomes a source of conflict. Okay, let's go into a quick break. And then when we come back, we have more questions for Attorney Benjamin Chan. Aloha, my name is Mark Shklav. I am the host of Law Across the Sea. Please join me every other Monday to hear lawyers from Hawaii discussing ways to reach across the sea and help people and bring people together. Aloha. Thank you for watching Think Tech. I'm Grace Chang, the new host for Global Connections. You can find me here live every Thursday at 1 PM where we'll be talking to people around the islands or visiting the islands who are connected in various aspects of global affairs. So please tune in and Aloha and thanks for watching. Hey everybody, my name is David Chang and I'm the new host of a new show, The Art of Thinking Smart. I'm really excited to be able to share with you secrets on giving yourself the smart edge in life. We're gonna have awesome guests and great mentors of mine from the political, military, business, non-profit, you name it. So it's something for everybody. Welcome back to Think Tech Hawaii, Asia Review. I'm Johnson Choi, the host guest today is Attorney Benjamin Chan, Attorney General. We were talking about using agents in China and then the other question I heard a lot is if I invest in a project in California, if you find a project in the regional center, do I have to live in California? Well, I live in Hawaii, so what's the answer for that? The answer is no, you don't. You can invest in a, an investor can invest in a project in California and live in Hawaii. They can even invest in a project on the East Coast and live in Hawaii. So there's no restriction. Any objection to say, anyway. Right, there's no legal restriction on where you can reside after you've made an EB-5 investment. Okay, well you mentioned about the fraud and misrepresentation by agent in Asia. And are those cases, are there cases in U.S. that you may be able to share with us? Well, not necessarily saying that the migration agents commit fraud, but I'm saying that a lot of the information that potentially goes into the ears of the investors may not be what the developer had initially discussed with the migration agents because the migration agents are so driven by commissions to sell the investment unit that they can say almost anything to make the sale. And it's been well documented that a lot of the migration agents in Asia don't necessarily provide the accurate information. And so that's where problems could occur. Well, you mentioned conflict of interest, right? If I handle a project A in California, project B in Hawaii, the project A offered me, say, 75,000 commission to push it. And Hawaii only offered me 25,000. As a migration agent, well, as being a human being and wanting to make money, they will probably push. So there's no limit how much they charge on a project? I was in Shanghai about a month ago and one of the things I've discovered was that through my research and meetings with various interested parties, there's a number of migration agents are now taking up to handling five to six cases for developers and marketing them in China. And you touched upon the point is that there's also a conflict amongst the project offerings themselves because if a migration agent takes on six projects, which one is he gonna promote first? Obviously, you're gonna promote the one that pays you the most commission. And you're gonna do that to the detriment of the other four or five projects that you've also signed on. So there are quite a bit of problems with that. And I think that's something that projects will end up having to deal with that particular agent because there's just so many projects out there. In fact, as of October, there are over 850 regional centers in the United States. And you can imagine how many projects are out there competing for the dollar. Yeah. I guess those that are not raising money and need to close a project will be quite desperate to pay high fee. Sure. And there's articles that written about it this year talking about how the larger national developers are getting most of the action and the medium size to the smaller size developers are not getting any action because essentially is who's gonna pay the developer, I'm sorry, who's gonna pay the migration agent the commission that they want. Well, what's the status or the state of the EB-5 visa program now? At least then? Well, the September 30th was the deadline for either to extend the program permanently or discontinue it. Congress prior to September 30th agreed to extend the program till December 9th of this year. And this is called the reauthorization bill. And within the reauthorization bill, there are certain discussions among congressional members as to whether or not to increase the investment amount. Currently the $500,000 amount may be increased to 800 and for the direct investment could be increased from 1 million to 1.2. So that's something that Congress is still debating. The second issue is the definition of what is a target employment area. And through my participation in various immigration lawyer conferences and also discussions in the specialty of the EB-5 area, there's been complaints by regional centers that operate in smaller states and in rural states that are not getting the funding from through the EB-5 program. So Congress has now considered this problem and potentially could change the definition of what is a target employment area to actually benefit the rural areas. A lot of the action that was occurring are larger states like in California and New York and in Texas and Florida, but not so in the smaller states. So if that definition changes, then I think many of the projects that are on the market today could be affected. The third issue would be compliance because of a few of the larger cases in 2013 where there was fraud. I think in 2013, there was a Chicago case that was investigated in 2014. There was a Seattle case that was investigated. And more recently this year, there was a well-known East Coast regional center that was being investigated for fraud and misrepresentation. So given that, I think Congress is now very mindful of enforcement and compliance issues and all of those are being considered in this bill. So we'll see what happens in December 9th. I saw some of your, the cases, the problem case you mentioned. And I noticed they all fall at the same, the way they do it is they hide with high profile people as promoter in the United States. Sure. As the front and then, I mean, typical the old Chinese way is, thought someone that is seen in TV are popular and promote the program must be something good, but sometimes I turn out the other way. Right, unfortunately, yeah. So it's really not. So do your homework. I don't care who this guy is, how big shot he was or is, do your homework. Right. Since most of our viewers on this program, at least Asian reveal are in Asia. And I like to address the program and you would address the program and its impact on the Chinese investors. Well, Chinese investors, as I mentioned the top of the program now occupy 90% or more of the EB-5 activity. And I don't know if I mentioned this, but the number of visas that are allowed per year, per fiscal year on the EB-5 program is 10,000. So the Chinese applicants have now occupied more than 90%. So this impacts upon them the most. And the number, the sheer number of visa applications that are in the USCIS pipeline today are close to 10,000. So there's a backlog of cases that need to be worked on that need to be adjudicated by the USCIS. And currently it's taking 17 months just to adjudicate a conditional green card application. And that's not including the time that a Chinese investor has to wait for him to apply for the conditional green card, which could be another 24 months. So if you, yeah, you could essentially, the Chinese investor typically, given the current processing time and the weight involved, it could be up to four years before the investor actually obtains his conditional green card. Okay. Where do you see the EB-5 program is heading? Especially nowadays, there's already a lot of Chinese Western coming to the United States and there's a lot of hearing what the newspaper and also even some of the presidential debate. Afraid too many investment coming to the United States line up too many things. And there's a conspiracy theory and when you look at, say 90% of the EB-5 visa people are Chinese. Would that be after the election, maybe they will do something to encourage so many Chinese coming into America? Well, I think Congress extended the program this time to December 9th, probably to wait until after the election is over to see who gets in. Obviously that's gonna be whoever gets in is going to potentially dictate what happens to the immigration issue as a whole, not necessarily the EB-5 program. Also the mix of the Congress too. Of course, and that's important. So I think for the EB-5 program and as to where it's gonna go, it remains to be seen, but of course for investors, certainty is always important, right? So if policy catches up with the politics, then I think you can have some certainty as to what you can do as an investor in terms of business decision making. Currently, most of the blogs that I've seen in China, the immigration blogs, a lot of the investors are just sort of on the fence and waiting to see what happens. About the election? Potentially, and I think a lot of the investors are waiting to see whether or not this program, the EB-5 program gets extended permanently for five years. During this last round, it was only extended for one year. So in one year, there's not much certainty as to the program and then how it's gonna be funded and also the rules of the game needs to be addressed. So I think people are waiting. But I think as far as the program is concerned, it's a good program. It's brought in billions of dollars of investment money to help create jobs in the US, but it has to be done in a way that it's fair to not just the larger developers, but it's fair to everyone. Well, since the people who invest in projects could be in Wisconsin and could still live in California, New York, and Hawaii, I guess, it really doesn't matter. The main thing is to do the due diligence, make sure wherever you invest the money, it's a good investment. Notice your handle immigration cases and if someone call you from Shanghai and say, Ben, I'd like to come to America and what will you tell them? I want you to retain you as a client. I'm gonna send you $10,000 as a retainer fee, but you help me to, do you help the client? Sure, well, we'll evaluate the circumstances of the investor and go over the options, the various options with them. EB-5 may not necessarily be the route given today's climate, but there could be other investment, I'm sorry, immigration considerations, right? Okay, Ben, thank you for coming to our show today. Okay, thank you, Johnson. Looking forward to see you again in the future. All right, thanks, Johnson.