EB-5 Redeployment Transactions on the Defense: Lawsuits, Breach of Fiduciary Duty Claims and Consent Issues

By Ronald Fieldstone, Rohit Kapuria and Catherine DeBono Holmes

Redeployment has become a major component of the EB-5 program given the significant retrogression that has occurred in China, as well as the more recent retrogression in India and Vietnam.  Due to long time delays in the EB-5 visa process, it is now common that the proceeds of repayment of the original loan or equity capital invested in an EB-5 project are required to be maintained at-risk pursuant to the June 14, 2017 USCIS Policy Memorandum.

There are many options for a new commercial enterprise (NCE) to navigate this critical area and select appropriate solutions to mitigate the risk of litigation or claims brought by unhappy EB-5 investors.  Usually, the obligation to redeploy in a manner that will satisfy both the financial and immigration goals of the EB-5 investors rests with the general partner/manager of the NCE.  In many cases, the general partner/manager of the NCE has conflicts of interest in making the redeployment investment selection, either because the general partner/manager is affiliated with the owner of the redeployment project or the general partner/manager seeks to retain the same level of compensation from the redeployment project as it received from the investment in the original project. Many EB-5 investors, on the other hand, did not anticipate that their EB-5 investment would need to be redeployed at all, or at least for such a long period of time after their original investment is repaid to the NCE. This has especially impacted EB-5 investors from China who invested after 2014, since the priority date for those investors is now May 15, 2015 according to the U.S. Visa Bulletin for March 2020, which means these investors may have to wait years until their priority dates are reached.


  • Receiving a very low rate of return on their EB-5 investment for an extended period of time, which they did not anticipate at the time they made their investment.
  • Additional risks of losing their EB-5 investment incurred as a result of being required to have their investment reinvested in one or more new projects over which they have no control.
  • Suspicion that their agents, the general partner/manager of their NCE and the developers of their original EB-5 investment have conflicts of interest and therefore are not protecting the EB-5 investors’ interests in selecting each new investment for redeployment.


  • A significant degree of litigation has arisen as a result of these redeployment issues, focusing on the following claims:
  • Lack of disclosure regarding redeployment issues and risks in the original EB-5 investment offering.
  • Failure to obtain appropriate EB-5 investor consent under the NCE’s governing documents to approve a redeployment investment.
  • Failure to provide adequate disclosure with respect to the redeployment opportunity itself when seeking EB-5 investor consent.
  • Breach of fiduciary duty by the general partner/manager of the NCE in selecting one or more reinvestments due to conflicts of interest, resulting in investments that do not offer the best terms or the best protection for the EB-5 investors’ capital.
  • Lack of disclosure regarding the compensation received by the general partner/manager of the NCE and/or the agents in connection with the reinvestment.


In light of these potential claims against the general partner/manager of the NCE and agents, it is recommended that the following factors be considered and undertaken in connection with every redeployment made by an NCE:

Use an independent review process and an independent investment adviser to select the reinvestment

 An independent review of each proposed reinvestment can help mitigate the conflicts of interest inherent in the reinvestment decision. In addition, the suspicions of EB-5 investors can be addressed by demonstrating the fairness of the redeployment selection process using an independent third party to evaluate the merits of each reinvestment. The process may not be perfect, but a good faith effort to consider the concerns of EB-5 investors can assist in maintaining their trust in the general partner/manager of the NCE and agents.

If a project by the same developer as the original project is available, consider the benefits of that investment to the EB-5 investors

Many EB-5 investors selected their EB-5 investment on the basis of their confidence in the developer of the original EB-5 investment project. These EB-5 investors may therefore prefer that their capital be reinvested in a project with the same developer, because of their familiarity with the developer.

Consider and compare other reinvestment opportunities

The general partner/manager of an NCE should consider whether there are other reinvestment opportunities that are reasonably available that would better protect the interests of the EB-5 investors.

Review the NCE’s governing documents and follow the procedures required by those documents for reinvestment 

If the NCE’s partnership agreement or operating agreement does not address reinvestment at all, an amendment to the agreement may be necessary to authorize the reinvestment. If reinvestment is contemplated in the agreement, the selection and approval requirements for the reinvestment must be followed in accordance with the agreement.

Provide written disclosure to EB-5 investors prior to reinvestment of the material terms of the reinvestment

Whether or not an amendment is required to approve a reinvestment, the general partner/manager of the NCE should provide written notice to EB-5 investors prior to every reinvestment, informing them of the repayment of the original investment and the details of the proposed reinvestment.

Offer EB-5 investors an opportunity to withdraw prior to redeployment 

Although usually not required in the NCE’s partnership agreement or operating agreement, in view of the unanticipated delays for EB-5 investors now subject retrogression, EB-5 investors should be offered a right to withdraw their capital if they have determined to withdraw from the EB-5 visa process. This does not mean that every EB-5 investor should have a right to withdraw whenever they choose, but only when the NCE receives repayment of its original investment, before redeploying into another investment, the NCE should offer those EB-5 investors who have withdrawn a right to receive a return of their capital from the repayment proceeds. Offering this ability to withdraw capital if an EB-5 investor has withdrawn from the visa process provides every EB-5 investor with some degree of control over their investment, which can assist in retaining the confidence of EB-5 investors in the fairness of the general partner/manager of the NCE.

Review the EB-5 fund distribution provisions and modify if necessary to allow for staggered payments to EB-5 investors

The partnership agreement or operating agreement of many NCEs contemplated a single repayment event for all EB-5 investors.  However, because of the lengthy time delays for those investors subject to retrogression, it is likely that some EB-5 investors will qualify for repayment of their capital earlier than others. However, the NCE cannot make earlier payments to some EB-5 investors unless their agreement allows them to do so.  In that case, the NCE should consider an amendment to its partnership agreement or operating agreement allowing for repayment of eligible EB-5 investors when the NCE have available proceeds from each investment.

Following best practices for redeployment should protect EB-5 investors and reduce litigation risks for EB-5 sponsors 

The EB-5 reinvestment requirement imposed by USCIS has resulted in EB-5 investors having reasonable concerns about the manner in which their capital is being reinvested.  EB-5 fund sponsors must appropriately address these concerns to fulfill their duties to the EB-5 investors, and thereby mitigate the potential risks of litigation. Using the above redeployment practices will protect the interests of EB-5 investors and help EB-5 fund sponsors to avoid potential litigation risks associated with reinvestment.

Ronald R Fieldstone

Ronald R Fieldstone

Ronald R. Fieldstone, chair and partner of Saul Ewing Arnstein & Lehr LLP’s Global Immigration and Foreign Investment Practice, routinely serves as corporate/securities/real estate counsel in EB-5 immigrant visa investor offerings for an array of industries. Both developers and regional centers rely on his advice in these deals, resulting in his track record of handling more than 400 EB-5 projects with a combined capital raise in excess of $8 billion. He is chair of the firm's Opportunity Zones and Qualified Opportunity Funds Practice. Fieldstone received his undergraduate degree and his MBA from the Wharton School of Business and his law degree from the University of Pennsylvania.