Discussion of Federal Court Decisions on EB-5 Issues
Spencer Enterprises, Inc. v. United States, CIV-F-99-6117, 22 (E.D. Calif. 2001), a district court decision is often cited by AAO decisions as holding that USCIS or AAO can ask for detailed documentary evidences on the ground that these “hypertechnical” requirements serve a valid government interest of confirming the funds utilized are not of suspect origin.
The 9th Circuit appellate decision for the same Spencer Enterprise case described above upholds the federal district court’s decision.
The 2003 Chang case is very important EB-5 9th Circuit Court decision which ruled in favor of EB-5 applicants on an issue related to I-829 petitions by holding that it is impermissible to apply changes in the EB-5 program to the adjudication of an I-829 petition to remove the conditions on permanent residency when these changes were made subsequent to the approval of the initial I-526 immigrant petition. The. U.S. government took an appeal on the Federal District Court case because it wanted to overturn the District Court’s holding but lost on the appeal, setting a significant precedent for I-829 purpose, at least in the 9th Circuit.
Chang v. U.S., No. 01-56266 (9th Cir. 4/29/03).
It was held that the INS could properly change its administration of the immigrant investor program by issuing administrative decisions rather than following the normal notice and comment rulemaking required by the Administrative Procedure Act. This decision seems to favor INS. However, it was also held that INS could not “change the rules of the game”by automatically applying its new, more restrictive interpretations retroactively to EB-5 investors who had already received conditional green cards and who are now trying to have those conditions removed through I-829 process. Instead, the INS (now USCIS) must allow such investors an opportunity to show how such a retroactive application would hurt them. Basically, the equity argument won over. It’s sort of hard to allow the deportation of 200 investors who relied on certain interpretations by the then INS.
Four AAO “precedent” decisions
There are four “precedent” decisions rendered by the Administrative Appeals Office (AAO) long time ago regarding EB-5 issues: Matter of Soffici, (A76 472 614 June 30, 1998); Matter of Izumii, (A76 426 873 July 13, 1998); Matter of Ho, (WAC-98-072-50493 July 31, 1998); and Matter of Hsiung, (A76 854 232 July 31, 1998). AAO stands for Administrative Appeals Office, formerly known as Administrative Appeals Unit, which acts as an administrative appellate review office for USCIS’ decisions (some would argue “rubber stamping” agency for USCIS decisions) on EB-5 related applications. “Precedent” signifies that these AAO decisions are binding, but it should be noted that some aspects of these “precedent” administrative decisions have been revised by statutes and/or regulations, while some aspects are still binding.
Believe it or not CSC and AAO will quote these AAO cases when they are advantageous to them. These four (4) precedent AAO cases set hazy parameters of EB-5 law and the requirements that must be met, such as the need to show:
(1) that he had invested, or was in the process of investing, the qualifying amount of capital;
(2) that he had established a “new” commercial enterprise;
(3) that his business had engaged in the employment maintenance or employment creation of 10 full-time jobs for U.S. workers;
(4) what activities the new commercial enterprise can engage in, i.e., allowing lending activity to qualify;
(5) what portion of the fund need to be spent in what activity;
(6) what constitutes the lawful source requirement;
(7) what constitutes the putting personal funds “at risk” requirement; and
(8) what evidences must be submitted to satisfy the employment-creation requirement.
These AAO decisions took place over 10 years ago, and some of the holdings were impractical and did not reflect certain commercial realities; but they will be relied upon to deny your EB-5 cases. We soon expect various USCIS guidances (note these guidances are not controlling in litigation) to clarify many of the outstanding issues. One thing is for sure: EB-5 law is not 100% established by any means. Hopefully, USCIS will not allow time-consuming litigation to set the parameters of EB-5 law, and will be reasonable to recognize when EB-5 law does not address certain issues.