Ronald Klasko, one of the country’s leading EB-5 attorneys, joins EB5 Investors’ Ali Jahangiri to talk about the latest EB-5 and United States’ immigration developments and other updates about America’s immigration policy that impact EB-5 investors.
Ron Klasko: The most extreme right and the most extreme left agree on one thing, and that is our immigration system is completely broken. The only problem is everyone’s solution is different. And the one thing they also know is if they legislate on immigration, they will lose votes no matter what they do.
Ali Jahangiri: This is The Voice of EB5 by EB5 Investors Magazine. Each week we sit down with experts in the EB-5 investment space to get valuable insights and the latest EB-5 news. Good afternoon, everybody. This is Ali Jahangiri, The Voice of EB5. I’m very excited to have a special guest with us. Ron Klasko, one of the original guys who you have heard his name before. He’s the EB-5 king. He started in 1991, built his firm. He has about 105 people at his firm. The firm’s name is Klasko. Very appropriate. And we are talking to Ron Klasko. So, Ron, welcome to The Voice of EB5, which is the number one EB-5 investors podcast.
Ron Klasko: I’ll be very happy to be part of this and look forward to our discussion.
Ali Jahangiri: So, Ron, let’s do a little background about your firm. I know it’s a multidisciplinary immigration firm. What does that mean and what do you guys do over there?
Ron Klasko: Yeah, it means we do every type of immigration law involving people coming to the US on investor visas. Of course we do. A big part of our practice is EB-5. We also represent multinational companies, start up companies, we represent universities, we represent hospitals. So basically we do every type of immigration law. And I head up the EB-5 part of the practice, which is a big part of our firm also.
Ali Jahangiri: After knowing you for a few years, I know that you’re a good organizational structure. You set up the correct structure and you grow things. I know your firm has grown larger over the years, but why is that? Is there a growth in, like H-1B business? Is there a growth in, like, family, immigration, business? What’s the growth been in?
Ron Klasko: You know, Ali, it’s been interesting. A lot of times when the corporate part of the practice is maybe leveling off. EB-5 has boom times over the last several years, up until about 2022. EB-5 had some down years and those were really boom years for our corporate and university practice. So for us, one of the secrets is we keep adding good new people, we keep adding good new clients and thank goodness we don’t lose clients. So that’s a pretty good recipe for success, I think.
Ali Jahangiri: So it’s kind of been all over the place, right, with corporate.
Ron Klasko: You’re saying we’ve grown now to 115 people and we started at 35, so we’ve grown quite a bit and that’s really been across the board. EB-5 started out with me, ended up with about 25 people doing EB-5. But the biggest part of our practice is still the corporate representing companies. We represent some of the world’s largest companies, transferring people and hiring foreign nationals. And we also have which a lot of firms don’t have a big part of our practice representing universities and hospitals.
Ali Jahangiri: Yeah, well, it’s a big deal talking to Klasko Law, now that you guys are a world name here in immigration. So let’s talk about EB-5 a little. Ron, I know you started early in the days of the few regional centers that were there. They’re always – Tom Rosenfeld always references you saying, Oh yeah, he’s the – Ron did this for me back in. Tell me a little about the history. I think people all there’s a lot of listeners that are part of the EB-5 industry here. What was going on back then in 91?
Ron Klasko: Well, 91 there were no regional centers and basically it was just this new program that said if you invest money in some sort of business in the US, it’s going to create ten jobs. You’re going to get a green card. And Ali, you know, I’m pretty entrepreneurial. And what I did in November 29th, 1990, the new law passes in 91. I’m in China and Hong Kong and Singapore and Thailand and actually working originally with one of the big four accounting firms. And the idea we had is that both the accounting firm and we had lots of contacts in Asia and other places interested in investing in the US. And we also had and we put together a book of kind of mid-level businesses that were seeking capital. And between the accounting firms, businesses. And at that time I was with one of the big international law firms. We had a book of businesses seeking capital, and we went off to Asia looking for investors who might be interested in investing in these businesses and getting a green card. And that’s where it all started.
Ali Jahangiri: Nice. And then from there, I know some stuff happened and then he came back. So what year did it really come back for you? The big rush?
Ron Klasko: Yeah, for us, it came back. I’d have to think back. We were largely out of the space because I honestly didn’t like a lot of what I saw in EB-5 later into the 90s and I came back probably around the early 2000s and started getting back into EB-5 after giving it up for maybe three, 4 or 5 years. But I’ve been very actively immersed in EB-5 now for certainly the last 15 to 20 years.
Ali Jahangiri: So let’s just go back 15 to 20 years, puts us at around 2009, 2008. Is that when it started picking up really did you see it around.
Ron Klasko: 2008 was an interesting time, but I would say before that is when it started picking up my crystal ball works better going forward than it does looking backwards. So I don’t remember exactly what was going on in 04 or 05, but I think it was around those years that I started to see some real promise in EB-5.
Ali Jahangiri: Yeah, but you know, these days around there’s not too many people we talk to that have been around since those years. So it’s good for you to reflect a little bit and share your knowledge. People want to know about it.
Ron Klasko: Certainly the onset of the regional center concept was important. The original EB-5 had a few players who were not taking this program where it should go, and they put together different investment vehicles with balloon payments. At the end. It never got paid and it really was a program that maybe it met the letter of the law, but it certainly didn’t meet the spirit of the law. There really was not a lot of job creation going on, and it was just a program I was not comfortable or happy with. And I decided I did not want to be a part of it after the Immigration Service. I forget when it was, but I guess the late 90s came out with a four precedent decisions, the most well known of which is matter of Izumi. And there was actually a freeze in the EB-5 program when while they were trying to sort things out, it took me a while after that to decide that I think this is a worthwhile and interesting program, but once I did, we’ve gone through ups and downs as a program. I hope we’re now at a boom time and I think the Reform and Integrity Act, while it has flaws, I think it’s on balance a good thing. And I think it does address some of the fraud issues in the program and does give investors more confidence that they’re investing in a program. Rendered viable. We’ve clearly gone through up and ups and downs as an EB-5 program, but I think we’re in an up period right now.
Ali Jahangiri: So you brought up a matter of Izummi and that let’s just fast forward to today, and I know this is somewhat relevant. It might not be the right, but I know that you’re a man of the law and you’re very technical. I’ve heard you on panels. You go in deep. I’ve been hearing about a couple of regional centers recently on that lend the money or perhaps you get a third party lender to put in half is a matter of Izummi kind of touch on that point. I heard a couple of regional centers recently that use third party lenders for half the EB-5 funds and I was confused, said, well, I didn’t know this was going on. Have you heard about this going on?
Ron Klasko: I don’t think it’s really so much a matter of Izummi issue, but I’ve advised many clients on this and I think without getting too technical, Ali, if it’s done right, it I think it’s perfectly legal. There’s nothing that prevents you from acquiring some of your EB-5 funds through a loan. The Reform and Integrity Act says, you know, recognizes you can acquire funds through the loan. You do have to prove the lawful source of funds of the lender unless the lender is a bank. I’ve seen third party lenders that are and are not banks. And if they’re not banks, we need to do source of funds. But if it’s structured properly, it is okay and it is being used out there by a number of different regional centers and projects.
Ali Jahangiri: How many you think? I mean, this is a hot topic.
Ron Klasko: I couldn’t begin to tell you. I can tell you a lot of my clients are, but I have no idea about everybody else’s clients.
Ali Jahangiri: Okay. So they’re using the partial loan. Partial cash payment?
Ron Klasko: Yes. Well, no, no. The money coming into the project is all cash. But the question is, where did the investor get the cash from? And in some cases, the cash is coming from a third party lender. But it goes as a loan to the investor who invests cash into the project.
Ali Jahangiri: Is that a personal guarantee from the investor?
Ron Klasko: I think it’s best if it is.
Ali Jahangiri: Okay. And then if that lender is affiliated with the project, how does that work? If have an.
Ron Klasko: Ali, that’s an optics issue more than a legal issue. I think it is better optically if you know what, when I advise my clients alley what I what I don’t want to see. Is something where, you know, to give you the extreme example, where the project lends the money to the investor who gives the money back to the project. All right. That that is something that my clients hopefully are not doing. But there’s nothing that says that that the project can’t arrange to have some third party lender lend some of the money on a on a bona fide loan. I’m assuming we’re going to have loan documents and it’s going to be in every way a bona fide loan. There’s going to be default provisions. Hopefully there’s going to be collateral, just like any bona fide loan. And the fact that the money comes, you know, let’s say half of the 800,000 comes to the investor by way of a loan from a third party lender. There’s no problem with that if it’s done right.
Ali Jahangiri: So, yeah, I mean, this sounds pretty new to me. Obviously, this may be happening in the last 60 days or so or 90 days. I haven’t heard much about it, but what do you think about it? If the you know, there is a personal guarantee on this and the lender forgives the loan, the 400 K or whatever it is, 200 K or I don’t know how big these loans are, you know, because they got to go after the person. So either, you know, either I’ve just never heard of this lending arm that’s open is so if they forgive the loan and there’s an affiliation between the bank and the project, is that okay, Ron, if there’s a, you know, some kind of affiliation and that third party lender says, hey, don’t worry about that for 100 grand we gave you that went to the project.
Ron Klasko: Yeah, I think that’s that is definitely, you know, in my opinion, this it is perfectly fine. There’s no matter how many ways you want to ask the question, it’s perfectly fine to have a bona fide loan going to the investor. Now, if you’re saying, well, it’s a wink and a nod and you really never have to pay the money back, then it’s not a bona fide loan. The Reform and Integrity Act adds two things to the previous law. One is the previous law. When they said loans were okay, never said it had to be bona fide. Well, that means something. I don’t know what, but it means something. And secondly, the RIA says for the first time that the loan can’t be I forget the exact language designed to circumvent the requirements of the law or something. So if you’re doing something that sounds like a loan is not really a loan and it’s we’re going to wink and you never really have to pay it back, then you violated the fact that it’s not a it’s not a bona fide loan and it is to circumvent the law.
Ali Jahangiri: Your real loan. It’s got to have real teeth. Yeah.
Ron Klasko: Yeah. When I’m involved, I like to see actual loan documents with default provisions, with everything you’ve seen a loan with enforcement provisions with collateral. You know, that’s how I advise my clients.
Ali Jahangiri: Yeah. So just take me through the transaction. So the, the EB-5 investor takes the half $1 million loan or whatever that is, call it 400K and then puts their own 400K into the project. And let’s say the project defaults on paying the EB-5 investor back the whole amount and the EB-5 investor defaults on the loan. So does that mean the lender has a security interest in the project? Does it flow right through to the project?
Ron Klasko: Yeah, I’d have to see the loan documents. You know, security interests are created, you know, just out of the out of the blue. I’d have to see what, what the collateral is and what the loan documents say.
Ali Jahangiri: Yeah, It’s just. It’s so hard to get these loans from banks. I’m just curious how that’s even done. You go to a bank and you try to get a loan.
Ron Klasko: It’s tough and a lot of these lending entities may not be banks. And if they’re not banks, as I said before, then we do have to prove the source of funds of whatever this lending entity is. And this lending entity may or may not be interested in providing source of funds, documents. And if they’re not, then we can’t do it.
Ali Jahangiri: Got it. Well. I guess it’s ever evolving. We’ll see what happens. But thank you for explaining that to me, Ron. I didn’t understand what was going on. I’ve seen some of the documents recently, some emails go back and forth about groups. So another hot topic, hot topics with Klasko here. What do you think about the recent change in demographic with like rural versus urban in China? Has that 10% or 20% set aside been reached? Has it not been reached? Should a Chinese person invest in urban to or should they focus on rural? What do you know about that?
Ron Klasko: Yeah. So from everything I know, the problem with the urban is two things. Number one is there’s far fewer numbers available for urban areas than there are for rural areas. And number two, there’s far more investors and demand on urban projects than there are in rural. So it seems to me that if you invest in an urban area, you are much more likely to have a much longer backlog than if you invest in a rural to what’s either one. And I divide investors alley into those who are in the US and eligible to file for adjustment of status in the US and those who are not. So right now, if you’re in a reserved category, whether it’s urban, whether it’s rural, whether it’s infrastructure, the quota is current. And the reason the quota is current is because nothing’s being approved. And if nothing’s being approved, none of the numbers are being used. So no matter how many people are filing, it’s still current until they start approving some stuff. And if they have five year processing times, it may be five years where it stays current. That’s a very big deal for people who are in the US because it means for a long time, whether they do urban or rural, they will be able to concurrently adjust status and remain in the US. And if you’re, let’s say you’re a Chinese person who’s on an one visa in the US and you’re otherwise you’re going to have to look at having to get practical training, then get an employer sponsor, then to file for an H-1b and go into the H-1b lottery.
Ron Klasko: And the chances of being selected are less than 20%. Well, that’s kind of a dead end. And you can get out of that whole dead end and reliance on employer sponsorship and everything else. If you file an EB-5 and a concurrent adjustment, even if it takes a long time for you to get a green card, in the meantime, you’re legally in the US. You can get an employment document, work anywhere you want, you don’t need employer sponsorship, you can get a travel document, travel in and out of the US as much as you want and live your life. And eventually, even if it’s a while down the road, get a green card. If you’re an Indian H-1b and you want to get out of EB-2, EB-3 and a 50 year wait, you do an EB-5. In an urban or rural, it’s current. You can file for concurrent adjustment, get an EAD, get a travel document, and out of all of a sudden you’re out of the, you know, the EB-2 forever wait. So it’s a very big deal for people eligible for concurrent adjustment of status. If you’re outside of the US, then you should have your eyes open to the fact that, you know, especially if you do an urban TEA, that there’s probably going to end up even in the new reserve category being a long backlog.
Ali Jahangiri: So, you know, I rarely run I rarely compliment people on stuff. You know, that I’m usually throwing a couple jabs here and there, having fun. You did a great way explaining this. I mean, this was eloquent. I understand. I understand what you’re saying. So as we’re on this topic, take me one step deeper. What is that concurrent filing like? I’m on an F-1. Do I go to the local office in Los Angeles or Chicago? Where do I go and how long does that take to get that status over to EB-5? Is that a six month wait? Is that after invest? Can you go a little bit in the details?
Ron Klasko: Sure. So you don’t go anywhere, you or your lawyer file a bunch of papers and send it by courier.
Ali Jahangiri: There’s a consular processing that used to be overseas. Is that-
Ron Klasko: So there’s two different things when we’re talking adjustment of status. That’s only if you’re in the US. That’s a valid nonimmigrant status. If you’re outside of the US, you’re still going to do consular processing. If you’re in the US in legal status, you can file both the I-526 or the I-526 e the EB-5 petition and the green card application at the same time, all part of one package. Out together.
Ali Jahangiri: What if I’m just traveling and I’m here legally as a traveler?
Ron Klasko: Right. When you’re talking about traveler, we call it B-1/B-2. It’s a visitor’s visa. As much as I’d love to give you a direct answer to that, I’m going to give you a lawyer’s answer, which is the only correct answer. So the answer is maybe here’s how it works when you apply for adjustment of status in the US. You have to be. And you’re doing it on a B-1/B-2 visa.
Ali Jahangiri: Which is a visitor visa.
Ron Klasko: It’s different if you’re an H-1b. It’s different if you’re an E-2, it’s different if you’re an F-1, but you’re here on a visitor’s visa. You weren’t visiting your family or visiting Disney World. Okay. You have to show that when you entered the US, you intended to visit and you did not intend to apply for a green card. So let’s give you a ridiculous example. You come in as a visitor on a B-1/B-2 visa on Tuesday and you file for EB-5 on Wednesday. Well, probably you didn’t tell the truth when you came into the country and you said I was just coming to visit grandma, not stay permanently. All right. Now, the farther it gets away from the day you entered the country, the better your chance of being able to show. Well, yeah. When I came in three months ago, I really just intended to visit. But then I heard about EB-5 and my friend said he’d lend me some money, and then I changed my mind. If you can show that, then you can do this in the US as a general rule. Ali, we do not like to see our clients doing this less than 90 days after their arrival in the US. That gives them a period of time to legitimately show that they changed their mind because otherwise if they do it sooner and the Immigration Service four years from now gets to looking at the case, they can say, Well, the EB-5 is fine, but we think you lied when you came in and said you were just visiting and you can get denied.
Ali Jahangiri: So how long are these B-1/B-2s last? 90 days? 100?
Ron Klasko: Usually. Usually. So there’s two different types. One is people coming on Esta, which means they’re without a visa and then they can enter for up to 90 days. But if they do that, they can’t adjust status. In the US, you can only adjust status in the US if you come with a B-1 B-2 visa and then you’re usually admitted for six months.
Ali Jahangiri: Okay, so six months time is a B-1/B-2. What’s the difference between a B-1 and B-2?
Ron Klasko: B-1 is a visitor for business. B-2 is a visitor for pleasure to visiting. Disney World is a B-2. My company overseas sending me to the US to scout out some business opportunity or to discuss a contract. That’s B-1.
Ali Jahangiri: Very, very interesting. And okay, so now what if you’re so you’re a European person, do they get a B-1 or is that just they get to come in?
Ron Klasko: Europeans don’t need a B-1 to come to the US. They can come on esta without a visa, but then they can’t change status in the US.
Ali Jahangiri: Okay, so when you hear about a European having visa free access to the US, that’s, that’s Esta okay.
Ron Klasko: And so they don’t need a visa to come here. They can come for 90 days without a visa, but they can’t do this concurrent adjustment that we’re talking about.
Ali Jahangiri: That’s really unique. So this just happens with folks that have to file a B-1 or B-2, countries that have to file a B1 or B2.
Ron Klasko: Right now, some people from Europe, even though they don’t need a visa, still have a visa. And then they can do this.
Ali Jahangiri: So that is that’s interesting. So you got this B1 and B2 situation going, you got H1-B, you got the F’s, which are the student visa and you have the group of L’s, correct? There’s the L ones. So there’s a lot of options, right, to do this concurrent change.
Ron Klasko: Yeah. So if you’re on an H visa or an L visa, then there’s no problem. You can do this the day after you arrive in the US. Okay. If you’re on we talked about the B1, B2, if you’re on a student visa usually and you’re coming to study and you really are studying, usually there’s not going to be a big problem. So it depends very much on what visa you’re on. And this is really the kind of thing that you should get individualized advice from your lawyer. And the advice may have to do, you know, we have lots of our clients are on E-2 visas, So should they do this concurrent adjustment? Well, it depends. Do you understand that if you do this, you may not be able to travel out of the country for 6 or 9 months. Do you understand that you may not be able to work in the US for seven.
Ali Jahangiri: After you. Adjust, after you adjust.
Ron Klasko: After you file the paperwork.
Ali Jahangiri: Concurrent, the concurrent filing?
Ron Klasko: Using E-2 as an example? Yeah. Actually anything other than an H visa or an L visa. Yeah. If you do concurrent adjustment, you will not be able to travel outside of the US. I don’t care if it’s a family emergency or what it is, you will not be able to travel outside of the US unless and until you get an advance parole travel document.
Ron Klasko: Parole travel document? In the good old days, it took two months. Then it was up to about a year. Now it seems to be 6 to 9 months to get. But if you’re doing this, you better understand that you’re not going anywhere. You’re staying in the good old USA.
Ali Jahangiri: So you’re on the you’re. Like on a B1 or B2, You do concurrent filing, let’s say, at the four month period from that four month, when you do the concurrent filing, you’re not going to leave until you have a parole, like you said. So you’ve got 6 to 9 months from that period. You file the 526, right? Yes. And so is that that 526 is filed with the cache as well? Correct. You send the money out there and then you file it. You invest first and then you file it. Yes. So the moment that file hits, what you’re saying is you better call your lawyer and say, hey, I want a parole. I got to go visit my family in Vietnam or whatever. I need a parole document.
Ron Klasko: Well, the lawyer should be talking to you before you file. We know we’re going to file the I-526 for your EB-5. The question is, are we also going to file the I-485 for the green card? If so, it’s all going to be part of one big package and part of the same package will be the travel document application. Yeah. And part of the same package will be the work document application.
Ali Jahangiri: All together
Ron Klasko: In one, one Fedex.
Ali Jahangiri: Now, Ron, you know, we get a lot of incoming calls and, you know, for everything these days and I see a lot of that. 485 Is that the form you’re talking about?
Ron Klasko: Yeah, that’s what We’re talking about. Yeah.
Ali Jahangiri: So I see a lot of that come through like, Oh, hey, I just did my 485. So when they’re saying this, that means their lawyer has filed a conditional green card with their 526.
Ron Klasko: That means the lawyer has filed with the 526 an application for the conditional green card at the same time.
Ali Jahangiri: Ron, Is that what they always do, though? Isn’t that part of the EB-5 process?
Ron Klasko: No. Before the Reform and Integrity Act, you couldn’t do this. That’s one of the big, big benefits of the RIA before the Reform and Integrity Act. You could do this with EB-1, you could do it with EB-2, you could do it with EB-3, but you couldn’t do it with EB-5.
Ali Jahangiri: Now I know why these questions are coming in. So the four is a big deal. It’s a very, very big 526.
Ali Jahangiri: Yes, 45 in the 45 is what you call a concurrent. That’s the concurrent.
Ron Klasko: One. It’s the concurrent adjustment of status application.
Ali Jahangiri: Concurrent adjustment of status application. Okay. So now you can do it. That’s why I see so many questions coming in about 485 and 526.
Ron Klasko: Is a big deal. Yeah.
Ali Jahangiri: Okay. So hot topics with Ron Klasko. We should do this once a week. Ron, I’m learning a lot.
Ron Klasko: How about once a day?
Ali Jahangiri: This is going to get syndicated, so everyone’s going to get the same knowledge I’m going to get, which I like. We’re going to educate people. So how about Ukrainians that are here? Didn’t we allow a bunch of them to come here on.
Ron Klasko: Some of them are here on on visas like the B1-B2 and then the same rules apply there. Some of them may have been paroled into the US, which is a separate basically the government can bring to the US anyone they want to bring, even if they don’t have a visa. And those are called parole programs.
Ali Jahangiri: How many of those are there? Ron, Is there a bunch of those parole programs?
Ron Klasko: There are a handful that are usually very country specific. And under the law, if you are to do this adjustment of status, you have to be inspected, which means you can’t sneak into the country.
Ron Klasko: And you have to be either admitted on a visa or paroled. And so if you’re, for example, a Ukrainian who was paroled into the US and you didn’t sneak in, you can do this concurrent adjustment.
Ali Jahangiri: And paroled is another form of a way to legally have status in the US, right?
Ron Klasko: Yes.
Ali Jahangiri: It’s called a parole application. What’s it called?
Ron Klasko: Yeah. Yeah. So there’s some there’s programs called humanitarian parole. So, you know, it could be that somebody we brought to the US because they were, you know, escaping a very difficult situation. And you can there’s applications you can make for humanitarian parole. We can do it for entire groups of people like Venezuela.
Ali Jahangiri: There’s 150,000 Venezuelans that came through.
Ron Klasko: Yeah, most.
Ali Jahangiri: They’re in New York now. What’s they paroled? What’s going on?
Ron Klasko: There’s a separate program that we haven’t talked about that applies to some of these countries, which is called TPS. Okay. That’s temporary protected status. And the issue of whether you can do this adjustment of status in TPS is actually a very, very hot issue right now. And a lot of us think that that is perfectly proper, that if you if you are doing an EB-5 and you’re on TPS from one of those countries, Guatemala or Honduras or, you know, there’s various countries that have TPS that you should be able to do concurrent adjustment. But that’s actually one of the hot issues not in EB-5, but in immigration law generally.
Ali Jahangiri: That we’re touching on it. Ron, I’m glad we’re getting into the weeds. Okay, so you’re in. So TPS is I mean, you’re legally there or you’re illegally there. Yeah.
Ron Klasko: Oh, you’re very legally here.
Ali Jahangiri: How do I get TPS? I’m a Guatemalan or a Venezuelan. How do I get each?
Ron Klasko: First of all, it’s very country specific and it has to be renewed periodically. And in each TPS, we say what the rules are. So it could be for one country. We say in order to be eligible for TPS, you have to have been in the US since I’m picking a date March 17th, 2017. And that that says who’s eligible?
Ali Jahangiri: Okay, these rules, the CPS rules. How do I read about TPS?
Ron Klasko: It would be in the regulations and it would also be in the USCIS policy manual.
Ali Jahangiri: Okay, So now we covered this topic. This is my first time I’m doing a topic on the podcast for Concurrent in this depth, so we’ll definitely make sure our users and our listeners know we’re doing this concurrent filing topic. So you got this TPS, you have parole, you have the B-1, B-2 visitors, then you have the whole set of employment ones. E-1, Ls. There’s another employment one, right? H1-B. Right. H, L and E and then what am I missing? One here. Is there another category here? Other than the ones I mentioned?
Ron Klasko: There’s everything from from A to V.
Ali Jahangiri: Okay. But.
Ron Klasko: But most of them don’t apply to hardly anyone.
Ali Jahangiri: So out of the popular ones. What am I missing here? We talked about.
Ron Klasko: The popular ones. There’s also the J1, which is an exchange visitor that’s so very often going to be doctors. It might be students. In some cases it might be teachers, it might be trainees. There’s various categories of J1 and when you’re dealing with a J1, you have an issue that you have to look at that you don’t have to deal with for any other visa. And that is that some people on J1 visas have a requirement to return to their home country for two years before they can apply for the I 45 green card. And so we have to figure out if our J1 client has that two year return requirement. And if so, in some cases we can get it waived, forgiven and then we sometimes will try to do that. So what?
Ali Jahangiri: Or is it the United States requirement?
Ron Klasko: It’s a US requirement.
Ali Jahangiri: So why would they require someone to go back to their country for two years?
Ron Klasko: It goes back to the days of the brain drain and the concept in the brain drain. Now, in my mind, the big issue is competing with other countries for the top talent in the world. But if you go back 30 years ago, the big issue is the US doesn’t want to steal talent from other countries and we want other countries to know if they send their people to study in the US that we’re going to force them to go back because we’re not going to steal your talent.
Ali Jahangiri: Who’s going to change this law for us, Ron? Who’s going to go in there and rally and say that’s not the case today? This is archaic?
Ron Klasko: Ali, I’ve been at this for a long time, and there’s a whole variety of stuff that I remember saying when I first started. Well, by the time I retire, this will change. As you as I as I count now my years of experience in decades, I realize that a lot of this stuff ain’t changing. The one thing we know about immigration, Ali, is that everyone agrees. Everyone, the most extreme right and the most extreme left agree on one thing, and that is our immigration system is completely broken. The only problem is everyone’s solution is different. And the extreme right has a very different solution than the extreme left and everybody in between. And the one thing they also know is if they legislate on immigration, they will lose votes no matter what they do. So we go through a situation where decade after decade we say, God, these immigration laws make no sense. And they don’t change. And that unfortunately, may not be that may be a story we’ll be telling ten years from now.
Ali Jahangiri: That’s interesting. So a lot of these immigration laws like these sound like they have an archaic twist to them. So have we gone over the major ones? Yeah, those.
Ron Klasko: Are the major categories of people coming to the US and doing EB-5.
Ali Jahangiri: We talked about temporary visas converting to. Before EB-5. Okay. What are you hearing out there other than like the stuff I brought up about the loan and then also about all this concurrent stuff.
Ron Klasko: I’d say one of the. Biggest issues right now in EB-5 is the government processing times. And how long is this actually going to take? That’s a difficult subject because the government is really way, way, way too slow in processing these cases. We can debate and I don’t know exactly why that is.
Ali Jahangiri: Are you also involved on the corporate side, like doing regional center applications?
Ron Klasko: By all. Means. Yeah.
Ali Jahangiri: So tell me now, tell me about why it’s taking so long for these RC applications to get approved. Is that.
Ron Klasko: So there’s a simple reason the you know, so when you say an application. So there’s two main types of regional center applications. One is the I 956, which is the, the designation for approval as a regional center and the other is the I 956F, which is for approval of a project for investors to invest in. Now, we don’t care about the processing time of the I-956F because investors can invest and file 526 seconds the minute the the project application, the I-956F is filed. So the key there is just getting it filed. And then if it takes a year or two years or three years, we can still be marketing for investors. Having invest, having 526 is fine.
Ali Jahangiri: In that in that project filing fee is how much on that F.
Ron Klasko: I think it’s 17,795. I believe it’s a very high number.
Ali Jahangiri: It went up, right?
Ron Klasko: It went up, Yeah. Well, not only did it go up, I believe 17,795 is the right number. And there’s a proposed increase. The government has put out a notice in the Federal Register proposing to increase it by, I think about 300%. Wow. Which is nuts. But anyway, so on the regional center side, so that you asked me why the I-956 the regional center application takes so long. One of the reasons is because every one of the 630 regional centers has to file this I956F So there were, I think 630 was the number who were approved under the old law. And all of those regional centers continue to stay or can continue to stay in business. But the government says you need to file this I-956. We don’t have a deadline yet. We don’t know exactly when it has to be filed. They originally said by December of 2022, then they extended it. Right now, there’s no deadline date. But if all these are going to file plus if I’m filing for a new regional center, I’ve got to do this thing. So in the old days when they would get a handful of these things before the new law, it could take them two years. So now if they’re getting hundreds, it may take more than a couple of years.
Ali Jahangiri: 956, the one we’re talking about is the regional center, a new regional center, right?
Ron Klasko: The I956 is for designation as an approved regional center.
Ron Klasko: If you were not if you are not a regional center before. Yes. Then you have to get that approved before you can sponsor.
Ali Jahangiri: You’re saying that’s in the same line you’re saying that’s on this in the same line as the 956F as well?
Ron Klasko: Those are different lines.
Ali Jahangiri: They’re different. So is it quicker to get a 956 approved than an F right now?
Ron Klasko: Right now, we’re we haven’t seen hardly any of either approved, so we don’t know exactly.
Ali Jahangiri: Wow. Okay. So. We barely have seen approvals. How about the how about the expansion of these regional centers? What application is that? What’s that called and how is that taking long as well?
Ron Klasko: What do you mean by an expansion?
Ali Jahangiri: So there’s, call it, you’re in Dallas and the regional center files an expansion of an area.
Ron Klasko: Geographical expansion.
Ron Klasko: Sure.
Ali Jahangiri: Yes. What’s that called?
Ron Klasko: The bad news on that is that, as I said, the preexisting regional centers can continue to do business even before the I-956 is approved. However, if they want to expand their geography, they can’t do that until the I-956 to expand the geography is approved. So a regional center that wants to expand has a couple of choices. One is file the I-956 request the expanded area and wait may be years for the approval before they can sponsor a project. Or the second option is to buy a regional center that already covers the geographical area. And then if they purchase it the next day, they can sponsor a project. And that’s the reason, as as I think you know, why there’s a big market right now for purchasing regional centers and for selling regional centers.
Ali Jahangiri: Because the wait time for the expansion. Right. And you can’t file your F unless you expand first. Okay. So have you heard of any of these expansions getting approved?
Ron Klasko: Yes, but not many. You know, there’s the processing times are slow. Remember, all this stuff we’re talking about is new. And you couldn’t do this until 20 I forget the date when it was in 2022. But, you know, we’re not seeing a lot of a lot of adjudications yet on these things. Like I’m seeing a lot of denials. We have seen some approvals and we have seen the immigration service be, I would say, liberal in the in in the geographical areas that they’re allowing to be approved. And we are seeing many multi state regional centers being approved. So, yes, we’ve seen some of them approved, most of them that, you know, are still pending.
Ali Jahangiri: Now, doesn’t it make more sense? Ron, I know you represent regional centers a lot, and I know that’s a lot of your business and I know you’re in the business world and this stuff very deeply. So is there a. You know, is there a system or a way that you can access these regional centers and the areas you want or without getting as a developer? Now I’m shifting as a developer, but without getting gouged on the price of a rental of an affiliation. Is there a way to get access to a regional center without paying, you know, large basis points on an affiliation? Meaning do you have a network of people willing to sell these? Do you have a group of a bucket of folks that are willing to reasonably sell these?
Ron Klasko: I can tell you what I have created, which I think, you know, I’ve created a separate company which is separate from the law firm. It doesn’t provide legal services called Regional Center Marketplace. www.regionalcentermarketplace.com. And basically what that does is it matches regional centers that are looking to sell the regional center because they’re not interested in doing business under the new law for a variety of reasons. Matches them with developers that are looking to establish a have a regional center and with regional centers that are looking to expand to new geographical areas and want to purchase. So we’re kind of a matchmaking business that brings the two together. We also work with projects that are seeking regional center sponsorship and we are often able to match the project with a regional center sponsor. And every there is no quote, market value that I know for regional center sponsorship. Every regional center, you know, some regional centers don’t want to do it, some do. And how they what what their standards are for what types of projects they would sponsor are very greatly how hands on the regional center will be on the project varies greatly how the regional center charges for its sponsorship varies greatly. So that’s not something I can say, well, here’s the market.
Ali Jahangiri: There’s no consistency in the market because it’s very fragmented. It’s kind of what you’re saying.
Ron Klasko: I think that’s very true and there’s certainly no place I know that you can go that says, Well, you know, here’s a one stop shop that you’ll get, you know, all the regional centers that are available and what they charge, that doesn’t exist, to my knowledge.
Ali Jahangiri: How many active ones are there now, Ron? How many you got disqualified and how many do we have left?
Ron Klasko: I think the number is around 600, but I don’t know for sure.
Ali Jahangiri: Okay.
Ron Klasko: So now that’s a different issue from how many of them are going to continue to exist. So there’s some I would say hundreds of that group that are not going when the government says you must file this 956 to continue in business. There may be hundreds of them that say we’re not going to do that because we don’t want to do any new projects. But until that happens, all the ones that existed before still exist. And I think that’s over 600.
Ali Jahangiri: What do you think of the same sense if someone has a project, an old project and a regional center and they’re trying to sell it, let’s just say Regional Center A has done one project for 20 million bucks four years ago and now says, You know what, we really don’t want this. We really don’t want to pay the fees. And it’s still an active project. They just want to sell their regional center. Do you think there’s a liability associated with that? What’s your advice on those deals? Is it be careful, don’t buy anything with projects in it or is it, hey, just get an indemnification on the current project?
Ron Klasko: Yeah, well, first of all, Ali, I don’t want to pretend to be something I’m not. I am not a commercial transaction lawyer. I’m not negotiating the deal. I’m not preparing the contract. And you want to have a damn good corporate lawyer doing all that. But if you’re buying a regional center, by all means, there’s potential liabilities. And you better look at them very closely and you better have protection in your contractual documents to deal with that. But it’s like, you other ways it’s like buying any business, All right, if I’m buying a gas station or I’m buying a nursing home, there’s potential liabilities. So I’m buying a business.
Ali Jahangiri: A regional center in your marketplace. There’s got to be regional centers that have deals. Older deals.
Ron Klasko: Sure.
Ali Jahangiri: So what do you do?
Ron Klasko: If I’m matching the seller with a buyer, I am saying you should make sure you have a contract lawyer who’s going to negotiate the deal and look at all these issues. I may be able to help you with some of the immigration issues, but basically this is a contract to purchase a business and you’re not going to hire an immigration lawyer to do a contract to purchase a business. That’s not my role. I may be able to advise the contract lawyer on the EB-5 issues, but you’re buying a business and like any other business, you better have, you know, cover a lot of bases, including your liabilities and your risks.
Ali Jahangiri: Interesting. I always wondered what you do when there’s I don’t want to call it a dirty regional center, but assuming a clean one has nothing in it. The opposite of clean is dirty. It has a project in it. What do you do? Do you advise your clients against it, or do you say, Hey, just maybe take the risk, but indemnify yourself of the potential hazards of this?
Ron Klasko: I mean, there’s a lot of potential issues, Ali. If there’s fraud, are you going to face investor lawsuits? Are you going to face the government terminating the regional center and you end up buying something and getting nothing? There’s a lot of issues that you have to look at.
Ali Jahangiri: Well, how could there be fraud if you’re the buyer and someone else committed the fraud.
Ron Klasko: If the fraud existed, if the regional center that you purchased engaged in either acts of commission or omission that results in, you know, it could have been something that happened four years ago. And I buy this regional center today and tomorrow. The government says we’re going to give you a notice of intent to terminate the regional center for what was done four years ago. The government doesn’t care that the ownership changed. They’re still going to terminate the regional center. And if I’m the buyer, I better have done very good due diligence on the history of the regional center to make sure. I think they call it a pig in the poke. But I’m buying something that’s worth something and it’s not going to be terminated tomorrow.
Ali Jahangiri: Yeah, that’s good to know. Thanks, Ron. That’s a good lesson for people to hear. Some amazing information. Look forward to seeing you. I hope soon. And please feel free to say it right now before we terminate the podcast. Is there anything you have to say to the EB-5 Investor Group?
Ron Klasko: What I would say is the EB-5 program can be a very, very good program. You have to be careful in deciding where you’re going to invest, but there are a lot of great regional centers out there that have done a lot of great projects. If you invest in a good project with a good regional center, it can be really a life changing situation because there are so many people who have no other options under US immigration laws for themselves and their kids and their families. And EB-5 is the only option available and it can result in getting a green card for you and your family and it becomes a win win situation. It enables US businesses to expand. It enables buildings to be built that may not otherwise have sufficient capital. It creates jobs and it creates green card opportunities for people who come to the US and contribute to America. So for a lot of reasons, I think it’s a really good program as long as people don’t screw it up.
Ali Jahangiri: Thank you, Ron. My pleasure. Wonderful to talk to you and we’ll see you at the next event we have or overseas. Thanks.
Ron Klasko: Look forward to it. Take care.
Ali Jahangiri: This has been The Voice of EB5 by EB5 Investors magazine. To learn more about this episode, please visit EB5investors.com/podcast. To stay up to date with the latest EB-5 discussions, be sure to subscribe to the show wherever you listen to the podcast. And if you like the show, please consider leaving us a five star review. It helps us out a lot. See you next week.