By now you many have figured out that EB-5 agencies in China are a bit like the Cuba Gooding character in the film Jerry McGuire. They tend to have one thing on their mind: “Show me the money.”
CAUTION: The unfortunate situation is that EB-5 agencies in China are more interested in how much they are going to be paid than they are in anything else, including the financial soundness of the investments that their investors may make. It is a reality that you are going to have to deal with.
They will talk a good game about wanting to know your reputation and experience, but, at the end of the day, it is probably going to come down to how much money you are willing to put into their hands. This is especially true with the larger EB-5 agencies. Many of those agents have become quite wealthy by using the EB-5 mechanism to extract large fees and commissions from U.S. Regional Centers who are willing to pay large sums of money in order to locate investors.
Rarely, if ever, do Chinese EB-5 Agencies do any due diligence into Regional Centers or the actual projects they sponsor. The fact is, they don’t care. They will arrange to make connections between investors and projects, take as much as they can get from the investors and the regional centers, and then not worry about whether the project is able to reach its full potential. If the project fails, it is not their fault. If you, as a client, complain that a project did not live up to your expectations, it will be your problem, not the Agency’s.
John Roth, an immigration attorney, financial advisor, and EB-5 consultant, visited several EB-5 Agencies in China to offer them due diligence services to investigate Regional Centers and their projects. He asked a mere $10,000 for his services. Not one agency was interested in his offer, despite it being a small amount compared to the millions of dollars large Chinese agencies are accustomed to handling.[i] He describes the situation as “A pernicious self-selection process going on in the China EB-5 market, [to the extent that] the more sophisticated and analytically-oriented investors are not likely to sign on with an emigration agent at all.” Having analyzed some of the major scams in the U.S. involving EB-5, he found that “all show the same pattern of small projects finding investors in China by paying very high fees to Chinese emigration agents, and no one performing even superficial due diligence.”[ii]
So, where does that leave us in terms of building a long-term relationship with a Chinese EB-5 Agency?
My editor had a saying when he was in business. “It’s not so important that the guy I’m working with is a snake. It’s much more important that I know that he is a snake. He is what he is. I just have to know what he is so that I know how to deal with him.”
IDEAS:
We have already discussed having documentation. We suggested that you not expose everything about your project, but rather do so bit-by-bit. Expand on that by not being in a rush to expose it all until you are certain that the agency is more interested in your project than your money. If you sense that it is more about the commission than about the project, walk away. The fact that they may not be inclined to perform due diligence is all the more reason for you to do so regarding them. You can save a lot of time and expense by checking with trusted friends in the U.S. who have dealt with specific agencies in China. Drill down for the facts. Don’t just look for big problems. Look for tainted histories. Sell your project, not your soul.Agencies will often be interested in your future projects as well as your current ones. Resist the temptation to discuss the future. You are not there yet and you don’t know any more about tomorrow than you did yesterday. Be honest to the extent of expressing your intent to be in the EB-5 business for a long time to come.
Regardless of whether your business is EB-5 or mowing lawns, long-term relationships are always built on trust and performance. Regardless of cultural differences between Americans and Chinese, trust and performance are still the fundamental building blocks of a long-term relationship. Prove your trustworthiness. Check theirs. Demonstrate your success. Investigate theirs.
Written contracts can certainly provide a sense of security regarding the term of your business relationship, but they need to be enforceable. This is where knowing Chinese emigration and U.S. immigration law and general business law is important. The issue will not be the length of the contract; it will be whether or not you choose to do business with a particular agency.
No matter how we try, it still comes back to the money. Trying to determine what is the right amount to pay for an agency’s services is like Joe Average trying to figure out what a new car is really worth compared to the sticker price. He’s never going to find out, so capitalism comes into play. He buys the car when the price gets to the point where he feels it is a good deal. Frankly that, aside from due diligence, is probably the best you can expect to do in trying to establish a relationship with a Chinese agency.
Know ahead of time what you are willing to pay, then don’t budge from that amount. Don’t do it. They will negotiate to get more, but do not budge. By holding firm, you will demonstrate your integrity. They may not like it, but you will soon discover which agencies are interested in establishing a long term relationship with you.
This is an extract from the book “How to Find Chinese Investors, Agents & Clients for Your EB-5 Projects & Services: A Practical Guide for Regional Centers, Attorneys, Developers and Businessmen”
More information: http://www.business-visa-usa.com/Book.htm