How to avoid being defrauded by Regional Centers
In order to avoid getting defrauded by Regional Centers, investors, EB-5 advisers and immigration attorneys should always ask the following questions of Regional Centers.
a) How long has the Regional Center been operating?
b) How much of a capital loss have investors seen (minimum, maximum, median and mean)?
c) What is the exit strategy and how much will it cost investors to exit and is exit mandatory only through related entities?
d) Does the Regional Center have a STRICT arm's length policy for procurement of products and / or services in a competitive manner or do they procure products and / or services from related entities at inflated prices? If they do procure products and / or services from related parties, would they provide a full disclosure and difference between average market price and the inflated procurement price?
e) Do they regularly publish audited books of accounts for review by everyone?
f) Have they been or are they currently facing any criminal investigations or lawsuits?
g) Are they in full compliance with tax and securities laws or are they violating tax laws by having pass thru taxation and are they violating securities laws by offering securitiesfor sale overseas in violation of US and /or foreign laws?
h) What is the annual dividend? Is it paid regularly or sporadically? Is the dividend enough to let the investor and his / her family live comfortably?
I) How long is the investment locked in and can investors exit right after they get the I- 829 approved?
j) How many investors had petitions denied and if yes, on what basis?
k) How much are their fees and what is the breakdown? This is to identify the junk fees.
l) What is their money back policy?
m) How much equity have the promoters invested and how much money (salary / share of profits / benefits, etc.) are they getting?
n) Are officers and directors hired in an objective and open fashion or do they hire related persons in a nepotistic manner? is the compensation for promoters / officers / managers competitive or above market?
o) Have investors ever exited with a capital gain?
Investors / attorneys / immigration advisors need to ensure that they ask the Regional Center promoters to answer each question separately, and I can pretty much guarantee that most if not all, Regional Center promoters will REFUSE to honestly and completely disclose the above facts.
In contrast, when investors opt for Direct Investment businesses, they usually do not have to worry about being defrauded and not only do investors usually get a higher ROI with a significantly lower risk of loss of capital and loss of their EB-5 visas, they are usually able to support themselves and their families with at least a middle class lifestyle, if not higher. Moreover, investors in Direct Investment businesses actually
have capital gains when they sell their businesses, and can easily sell their business whenever they want to.