7/12/16 2016 New York EB-5 & Investment Immigration Convention EB-5 Attorney Workshop Ethical Considerations in EB-5 Practice Bill Gresser, EB-5 New York State Regional Center Cyrus D. Mehta, Cyrus D. Mehta & Partners PLLC Moderated By: Chad Ellsworth, Fragomen Worldwide Structuring Engagement Letters • When structuring engagement letters, be mindful and clearly express to the client that as their immigration attorney, you have not and will not advise: – Which Regional Center or project to invest in (you have and will advise, if requested, information regarding the immigration approval history of I- 526 and I-829 petitions for specific Regional Centers or projects if available) – On rate of return on client’s investment, security of client’s investment, timing of return of client’s investment, or any tax or financial aspects of client’s investment – U.S. or Foreign Country Securities Law Issues – Foreign Country Currency Laws and Restrictions – Whether any Regional Center is a better investment than any other Regional Center or investment the client will make Source: AILA Model Legal Services Fee Agreement for EB-5 Clients 1
7/12/16 Referral Fees to Attorneys • The SEC’s recent enforcement actions against attorneys across the country centered on the major issue when attorneys steer individuals to specific Regional Center projects and receive referral fees without registering as brokers in violation of Section 15(a)(1) of the Securities Exchange Act of 1934. • Various EB-5 regional centers or their managers paid commissions to the attorney or law firm for each new investor they successfully sold limited partnership interests to. • These payments were separate from legal fees received to provide legal services to the same clients. The lawyers and firms engaged in activities necessary to effectuate the transactions, such as recommending one or more EB-5 investments, acting as a liaison between the regional center and the investor, or facilitating the transfer or documentation of investment funds to the regional center. ( See SEC Press Release, SEC: Lawyers Offered EB-5 Investments as Unregistered Brokers, Dec. 7, 2015) Referral Fees to Attorneys (cont’d) • In the Matter of American Life, Inc. and Henry G. Liebman , File No.: 3-17285 (June 13, 2016) – respondents ordered to cease-and-desist and pay civil penalties over 1.2 million in violation of Section 15(a)(1) of the Securities Exchange Act • Securities and Exchange Commission v. Hui Feng, et al. , Civil Action No. 2:15-cv-09420 (Central District of California, Complaint filed December 7, 2015) – complaint seeking permanent injunction, disgorgement, and civil penalties in violation of Section 15(a)(1) of the Securities Exchange Act, and other regulations • Be wary of receiving any transaction-based compensation and th the appearance of any broker-dealer relationships 2
7/12/16 What About Attorneys Who Are Registered SEC Brokers? • NYSBA Ethics Opinion 1015 (8/4/2014) in the context of lawyers who are also real estate brokers may provide some guidance: • The Opinion affirms it would be a non-consentable conflict if the broker’s fees are contingent • However, if the broker’s fees are fixed, it might then be a waivable conflict • Therefore, if the SEC broker charges a fee from the client for independently evaluating EB-5 investments along with a fee for immigration services – probably okay • If the SEC broker relies on the EB-5 Regional Center project to pay a commission, and the broker also represents the client as an immigration attorney – more problematic Referral Fees to Others • The SEC’s enforcement actions against others who are unregistered broker-dealers in violation of Section 15(a)(1) of the Exchange Act • Cease-and-desist orders, disgorgement, civil penalties and potential criminal liability • In the Matter of Wisteria Global , Inc. and Hiroshi Fujigami, File No.: 3-16675 (July 6, 2015) – respondents ordered to cease-and- desist and pay disgorgement around $1.7 million with prejudgment interest • In the Matter of Ireeco, LLC and Ireeco Limited, File No.: 3- 16647 (March 24, 2016) – respondents ordered to cease-and-desist and pay disgorgement around $3.1 million with prejudgment interest 3
7/12/16 Conflicts of Interest – Dangers of Dual Representation in EB-5 • Dual representation arises when an immigration attorney represents both the Regional Center and the individual investor • Limitations on dual representation where conflict of interests may arise per ABA Model Rule 1.7: Immigration attorneys should not engage in dual representation when: (1) the representation of one client would presently be directly adverse to another client; or (2) there is a significant risk that the representation of one or more clients will be materially limited by the lawyer’s responsibilities to another client, a former client or a third person or by a personal interest of the lawyer in the future. Conflicts of Interest – Dangers of Dual Representation in EB-5 • ABA Model Rule 1.7 provides a limited circumstance where a conflict may be waived: (1) the lawyer reasonably believes that the lawyer will be able to provide competent and diligent representation to each client; (2) the representation is not prohibited by law; (3) the representation does not involve the assertion of a claim by one client against another client; (4) each affected client gives informed consent, confirmed in writing. • If the above factors are not met, even a client’s informed consent in writing will not allow a lawyer to continue representing both clients and representation must be terminated 4
7/12/16 Conflicts of Interest – Dangers of Dual Representation in EB-5 • Conflicts are not aligned at the outset – Regional Center’s main objective is to obtain financial funding for its projects while Investors’ main interest is to obtain immigration benefits • The lawyer’s duties of loyalty, confidentiality, and competent representation may be compromised: – Regional Center project’s weaknesses – Timing of release of EB-5 funds – Disclosure of facts – Age-out considerations – Project fall-out or fraud When to Withdraw As Counsel • Attorney-Client Relationship • ABA Model Rule 1.16 – Declining or Terminating Representation • Consult your respective state’s version of the ABA’s Rule 1.16 • Rule 1.6 of New York Rules of Professional Conduct is even more extensive 5
7/12/16 When to Withdraw As Counsel • It is always easier to decline representation before the start of the case than to terminate representation after case has started • Considerations to consider before taking on a case – Fraud, case duration, and client’s ability to pay, etc. • Make sure you clearly c communicate when you decline to represent a client Continue to Represent? • Mandatory Grounds of Withdrawal – ABA Rules 1.16(a)(1)-(3) • Permissive Grounds of Withdrawal – ABA Rules 1.16(b)(1)-(7) • Seeking Permission of the Tribunal Before Withdrawing – ABA Rule 1.16(c) • Safeguarding the Interests of the Client – ABA Rule 1.16(d) 6
7/12/16 Mandatory Grounds of Withdrawal ABA Rules 1.16(a)(1)-(3) (a) Except as stated in paragraph (c), a lawyer shall not represent a client, or where representation has commenced, shall withdraw from the representation of a client if: (1) the representation will result in violation of the rules of professional conduct or other law; (2) the lawyer’s physical or mental condition materially impairs the lawyer’s ability to represent the client; or (3) the lawyer is discharged. Permissive Grounds of Withdrawal ABA Rules 1.16(b)(1)-(7) (b) Except as stated in paragraph (c), a lawyer may withdraw from representing a client if: (1) withdrawal can be accomplished without material adverse effect on the interests of the client; (2) the client persists in a course of action involving the lawyer’s services that the lawyer reasonably believes is criminal or fraudulent; (3) the client has used the lawyer’s services to perpetrate a crime or fraud; (4) the client insists upon taking action that the lawyer considers repugnant or with which the lawyer has a fundamental disagreement; (5) the client fails substantially to fulfill an obligation to the lawyer regarding the lawyer’s services and has been given reasonable warning that the lawyer will withdraw unless the obligation is fulfilled; 7
7/12/16 Permissive Grounds of Withdrawal ABA Rules 1.16(b)(1)-(7) (cont’d) (6) the representation will result in an unreasonable financial burden on the lawyer or has been rendered unreasonably difficult by the client; or (7) other good cause for withdrawal exists. Seeking Permission of the Tribunal Before Withdrawing – ABA Rule 1.16(c) (c) A lawyer must comply with applicable law requiring notice to or permission of a tribunal when terminating a representation. When ordered to do so by a tribunal, a lawyer shall continue representation notwithstanding good cause for terminating the representation. 8
Recommend
More recommend
