3djh ri - eb-5 updates · specfic eb-5 requirements • spencer enterprises, inc. v. u · 229 f....

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IIUSA DOC#0042012: USCIS EB-5 Training Materials (2012) Obtained by IIUSA via FOIA 10/2012 - www.iiusa.org

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Upholding the AAO Precedent Decisions

• In R.L. Investment Limited F.Supp.2d 1014, (D. H court distinguished Ruan concluded that the · , preced

. \ did not involve rule · g. ''The issue in Ruangsw / g .· c tained criteria (a $10,000 ~v stm t, experience or qua 1ifie. tra · in g), petitioner had cle y et ....

vision t bjec ve,

y far's hichi the

Page 106 of 1078


R. L.l. P. cont.

• There 'simply [was] no room for interpret the regulation a ................ requirement.' [Citation. mitted.] in applying the precede .' · · INS did not add any r · ment. ''

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contrast, re, the. ·,

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Page 107 of 1078


Golden Rainbow

• Golden Rainbow Freedom Fund Case No. C99-0755C ( . . . 14, 2000).

• Although it is clear ~ this plaintiff designed its pfro am ba different interpreta o~ the

i

regulations than tha apJI>lied y _

on Sept.

that · !

I upon; a

I •/ vem1ng

Page 108 of 1078


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Golden Rainbow cont.

• . . . and although the plaintiff receiv feedback · from the Servi . design, the law is clear t the ''pri simply represented the A cy's prior interpretation of the statu f . .. [which] was free to change." ief bati Shalala, 118 F.3d 1327, 3 4 ( Cir. 1

program approvals ort live e Agen fficers

Page 109 of 1078


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Golden Rainbow cont.

• That court specifically noted that been no long-standing · r us binding decisions from . hich an · · onal departure would not be ~ owed.

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Page 110 of 1078


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Golden Rainbow II

• Golden Rainbow Freedom Ashcroft, No. 00-3602 ~~ 2001).

• ''No doubt, Golden Rainb and the did rely on the non- prece tial positi and tnay suffer on that ac _. But ther fortnal determination at e titne, and know that any initial ap o' al \yas cond could be no closure til/ there, had petition for retnoval o · thd condi ·on, of cotnpliance was re uire at tha time.

1186b c 1 & d

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• j I \ Investor~

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f the INS; .·. \ d been rio \

had/to: al. Tb/ere ·

secbnd a sho~ing · e 8 U.s.c.:

Page 111 of 1078


,__. ,__. ,__.

Golden Rainbow II cont.

• . . . The long and sho~ of it is that gatnble that Golden approach would tnanage get throu process. The INS finally_ ac- to preven -of the program contetnpl IL ___ ..__._\ in the sta regulations. The tnisc · e that was

\ outweighed any detri to \Golden anyone else. In other i tro inappropriate.''

financing the whole ·

• pervers1 sand ided ar j

or' l

not' I

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Page 112 of 1078


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Specfic EB-5 Requirements

• Spencer Enterprises, Inc. v. U · 229 F. Supp. 2d J025 I. 2001), aff'd. 345 F.3d 83 (9th . 2003) .

Page 113 of 1078


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Spencer (cont.)

• An a,pplication or petition that fails with the technical requir be denied by the AAO ev does not identify all of th grounds the initial dec,ision. Id a ·1· 43 ..

• The AAO, however, wil t phold a based on a ground th~t as een ov where another groun~ ists. ut in the initial decision1. Best to ck i

enial in · \ ' \

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i . . / ISIOn /

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me I ! I

raised

Page 114 of 1078


Spencer (cont.)

• Lawful source of funds. • The regulatory requir to

demonstrate the path . f the fun provide tax returns~ 1ve year hypertechnical requi .m nts to valid government i es · i.e. t that the funds Utili · e . in t e p not of suspect ori in.1' Id ·. t 10

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nfirrri e

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I-" I-" Ul

Spencer (cont.)

• Employment • ''The AAO did not ab ·

cOnstruing full-time e ploy~en continuous, permane , employ at 1039. l

I

• Intermittent constr c~ion ·obs, a . 35 hours or more ur ng a giv

not qualifying.

• on 1n · mean t. II lei.

ugh ek, are

\ '

Page 116 of 1078


Spencer (cont.)

• Targeted Employment Area • While requirements t

"hypertechnical," "the _ NS has i strict compliance wit . · i~ rules a should have expect . tO\ meet t requirements." \

\ • Pages 1041-1042 mplet

discussion.

ay be ste.d on pia inti,

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Page 117 of 1078


Spencer (cont.)

• APA issues: • "The precedent decisi

with any prior publish~\'-"411 They do not constitu Rather, the decision guidance."

• Id. at 1044.

·nflict

Page 118 of 1078


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Use of Proceeds

• DeJong v. INS, 6:94 CV 850 1997). INS - a corpor; legal entity, thus, the investm proceeds from the co ration, removal and taxatio ,. s not a investment for whi he personally and pri a ly li found no abuse o~ di cr .

was

Page 119 of 1078


Kenkhuis

• Kenkhuis v. INS, 2003 WL 22 Tex. Mar. 7, 2003)

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Page 120 of 1078


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Kenkhuis (cont.)

• The issue in this case was wh capital investment reqr· met by leaving earnings within t

· business enterprise, df; \must be t with . an infusion of new c ~it~l. If \

• Involved a sole pro ri~to~ hip. ~

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Page 121 of 1078


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Kenkhuis (cont.) ..

• "The AAO's construction is consistent with an everyd 'invest,' meaning to put money or capital into citing Mirriam-Webster Online omitte the legislative history indicating th of the to encourage infusions of new capi I in order to c Senate Report on the legislation tw. refers to inve capital" that will promote job g S. Rep. 55, 1 Sess. 5 21 (1989). [Footnote p g some of th omitted.] The AAO's constructio a consistent remarks of Sen. Simon in the flo on the quoting those remarks omitted. as the AA Kenkhuis' contrary constructio rmit the a capital over years; that would e to the I that the job creation resultin fro within a reasonable time, in ost

• Id. at *3.

nt with program is

jobs. The ents of "new Cong. 1st port the

Footn_-

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AI-Humaid v. Roark ·

• A/-Humaid v. Roarcl, 2010 WL (N.D. Tex. Jan. 26, 2

• Petitioner contributed placed $800,000 in a a money market ace· · the court that the C were reserve acco

• Court agreed with were not at risk .

'hich he ,000 in befor ark

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Page 123 of 1078


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AI-Humaid (cont.)

• Court looked at the followin • Alien was the sole dir n • Bylaws allowed for ad. ector to a

reserve accounts. • Business plan does

will utilize the rese

older. sh any

Page 124 of 1078


AI-Humaid (cont.)

• Credibility of the business plan creation. The courts t@@l.

clear that re that th e qualifyi

. s1ness At the

Page 125 of 1078


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l-829s

• Chang v. United States, 327 F. (9th Cir. 2003).

• The government's con ntion th approval proceeds ab,. itio-and approval therefore , ot be r

. as setting forth a pi n/ th t, if fol will lead to I-829 a p~ov -is no

. sustainable. ·I

-• 327 F. 3d at 927 I

1-829 t 1-52 d upo ed,

Page 126 of 1078


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Chang (cont.)

• "The government provides no believe that the comb· .a · approval, successful e· ecution o approved plan, and a~~ence of misrepresentation in 1t~~ I -526 p characteristics that ~ppellants c to them-was not ar-,l e~ceUent pr I -829 approval up 1Un~il th~ pr decisions appeared." 1 Id (Emp added.)

6 he terial tion-a~ app~y

I · ,~ .... """" r 0 f t I

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Chang (cont.)

• Circuit Court did not ''fault th determining that its ear~ p 526 petitions interpre~d the EB program in waysthat/~tguably contravened Congre¥~io~al inte Assumed "arguendO" tha~ prece were justified. Di I nqt re~ch and comment clai s.l lei. at 92

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Is of I-

ts tic

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FEDERAL EB-5 CASES 2011

Upholding the AAO Precedent Decisions · In .R,.h.J.!JY.~tment Li.illl~<LP..9JJo .. w, 86 F.Supp.2d I 014,

(D. Hawaii 2000) the district court distinguished .RY.~~JYi!I!g and concluded that the AAO precedent decisions did not Involve rule making. "The provision at issue in R.Y9JJ.&S~a_ng contained 'objective criteria (a $1 0,000 investment, and one year's experience or qualified training), which the petitioner had clearly met .•..

R.L.I.P. cont. · There 'simply [was] no room for the agency to interpret

the regulation so as to add another requirement.' [Citation omitted.] By contrast, in applying the precedent decisions here, the INS did not add any requirement."

818

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Golden Rainbow

· {igJ.!J..e.r.L.~i!.ltt~..Q\Lf.n:gQ.g.!Jl.Jl!n.ILv~.J9.n.eLRgJ1Q, Case No. C99·0755C (W.O. Washington Sept. 14, 2000).

· "Although it Is clear to this Court that the plaintiff designed Its program based upon a different interpretation of the governing regulations than that applied by llYmli,

· • • . and although the plaintiff received prior positive feedback from the Service regarding Its program design, the law is clear that the "prior approvals simply represented the Agency's prior (short lived) interpretation of the statute •• • [which] [t]he Agency was free to change." {;;!Jl.ef ~!:.Q.I:!.!ttl.9Jl..Q.ffK~fS...Y,._$.h~J!lJ;!, 118 F.3d 1327, 1334 (9th Cir. 1997.)

Golden Rainbow cont. · That court specifically noted that there had been no long· standing history or previous binding decisions from which an irrational departure would not be allowed.

Golden Rainbow II · GQJ.~J;0nJs9;~_jl*9N~~<;J ... ~.W)..!l.-''-'~Qlm_A.s.b£~.:Qfi, No. oo-36v"' ( · ... rr. ~~ov • .t.o1 .t.vvl ).

• "No doubt, Golden Rainbow and the alien investors did rely on the non· precedential position of the INS, and may suffer on that account. But there had been no formal determination at the time, and they had to know that any initial approval was conditional. There could be no closure until there had been a second petition for removal of the condition, and a showing of compliance was required at that time. See 8 U.S.C. § 1186b(c){ 1) & (d){ tl ....

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Golden Rainbow II cont.

· ..• The long and short of it is that they lost their gamble that Golden Rainbow's creative financing approach would manage to get through the whole process. The INS finally acted to prevent a perversion of the program contemplated in the statutes and the regulations. The mischief that was avoided far outweighed any detriment to Golden Rainbow or anyone else. In other words, retroactivity was not inappropriate."

Specific EB"5 Requirements · Spencer Enterprises, Inc. v. United States, 229 F. Supp.

2d 1025, 1043 (E.D. Cal. 2001), affd. 345 F.3d 683 (9th Cir. 2003).

Spencer 2001 (cont.)

·An application or petition that fails to comply with the technical requirements of the law may be denied by the AAO even if the Service Center does not identify all of the grounds for denial in the initial decision. /d. at 1043.

820

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• The regulatory requirements to demonstrate the path of the funds and provide tax returns for five years "are hypertechnical requirements to serve a valid government interest; i.e. to confirm that the funds utilized in the program are not of suspect origin." /d. at 1040.


· "The AAO did not abuse its discretion in construing fulltime employment to mean continuous, permanent employment." /d. at 1039.

· Intermittent construction jobs, although 35 hours or more during a given week, are not qualifying.


• The Fresno County Board of Supervisors was not documented to be a body of state government and CA had not advised that the Governor had delegated TEA authority to the board. 229 F. Supp. 2d at 1 041-42

·While requirements to show TEA may be "hypertechnical," "the INS has insisted on strict compliance with its rules and plaintiff should have expected to meet those requirements." 229 F. Supp. 2d at 1042. ·

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· APA issues:

• ''The precedent decisions do not conflict with any prior published INS decision. They do not constitute APA rulemaking. Rather, the decisions provide interpretive guidance." 229 F. Supp. 2d at 1044


• Discrepancies -

· The AAO relied on Matter of Ho, 19 I&N Dec. 582. 591·92 (BIA 1988) .in rejecting the credibility of the business plan based on discrepancies and inconsistencies in the record.

· The AAO did not abuse its discretion in finding that based on the various discrepancies and inconsistendes, these documents lacked credibility. 229 F. Supp. 2d at 1038.

Spencer Enterprises, Inc. v. INS, 345 F. 3d 683 (9th Cir. 2003). · The alien investor withdrew her first petition and re-filed. The court noted that "her current petition was not even filed, let alone approved, before the precedent decisions were issued. Even if the current petition could be said to 'relate back' to the original petition, however. under RL/LP the precedent decisions can be applied to petitions that were filed before the issuance of the decisions: 345 F. 3d at 693.

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· The court reiterated the requirement in Matter of Ho, 22 I&N Dec. 206, 210 (Comm'r 1998) that the business plan must be credible. 345 F. 3d at 694.

• "A few errors or minor discrepancies are not reasons to question an alien's credibility. [Citation omitted.] Numerous errors and discrepancies, however-especially where INS is evaluating the credibility of a business planraise serious concerns about the viability of the enterprise." 345 F. 3d at 694.

Use of Proceeds

· O.~; .. J.9..09.x • .JN$ .. 6:94 CV 850 (E. D. Texas 1997). · INS concluded that a corporation was a separate legal

entity, thus, the reinvestment of proceeds from the corporation, w/out removal and taxation, was not an investment for which the petitioner was personally and primarily liable.

• The Court found no abuse of discretion in that determination.

Kenkhuis v. INS, 2003 WL 22124059 (N.D. Tex. Mar. 7, 2003) · The issue in this case was whether the capital investment requirement can be met by leaving earnings within the business enterprise, or must be met with an infusion of new capital.

• Involved a sole proprietorship.

· USC IS concluded that the retention of earnings was not an investment of capital by the petitioner.

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Kenkhuis (cont.) · 'The AAO's construction is consistent with an everyday usage or

'invest,' meaning to put money or capital into a venture. [Footnote citing Mlrriam..Webster Online omitted.] It is also consistent with the legislative history indicating the purpose or the EB·5 program is to encourage infus1ons of n~N cap•tal in order to createl'obs. The Senate Report on the legislation tvfice refers to inves ments of "new capital' that will promotej'ob growth. S. Rep. 55, 101st Cong. 1st Sess. 5, 21 (1989). (Foo note pro'Jiding some of that report omitted.] The AAO's construct. on is also consistent with the remarks of Sen. Simon in the floor debate on the statute. [Footnote quoting those remarks omitted.] Finally, as the AAO noted, Kenkhuis' contrary construction would petmit the accretion of capital over years: that would be contrary to the legislative intent tha the job creation resulting from the infusion of capital take place within a reasonable time, in most cases not longer than six months.'

• ld. at '3.

AI~Humaid v. Roark, 2010 WL 308750 (N.D. Tex. Jan. 26,2010) ·The petitioner contributed $1 mil. of which he placed $800,000 in a CD and $140,000 in a money market account. Claimed before the court that the CD and money market were reserve accounts.

·Court agreed with USC IS that the funds were not at risk.

AI-Humaid (cont.)

· The court looked at the following factors:

· The alien was the sole director and shareholder.

· The bylaws allowed for a director to abOlish any reserve accounts.

• The business plan doas not anticipate costs that will utilize the reserve funds.

824

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AI-Humaid (cont.) • Credibility of the business plan re: job creation. The court stated:

Defendants have made dear that USCIS has an interest In making sure that the business plan, If followed, would be qualifying. At the Form 1-829 stage, whether the planned activities in the business plan are qualifying cannot be adjudicated because such considerations are made at the Form 1.-526 stage. See Chang v. United States. 327 F.3d 911 927 (9th Cir.2003l.

l-829s · Chang v. United States, 327 F. 3d 911 (9th Cir. 2003).

· [l]f 1-526 approval is decoupled from 1-829 approval, then pemioners whose 1·526 petitions had been approved would have no reasonable reliance that the rules set out in 8 C.F.R. § 216.6 would not change in midstream. If, on the other hand, approval of the 1-526 petitions was an official provisional approval of the petitioner's plan, contingent on its effectuation, then a retroactivity analysis is required. 327 F. 3d at 927

· The government's contention that 1-829 approval proceeds ab initio-and that 1-526 approval therefore may not be relied upon as setting forth a plan that, iffollowed, will lead to 1-829 approval-is not sustainable. 327 F. 3d at 927

Chang (cont.)· • "The government provides no reason to believe that the combination·of 1-526 approval, successful execution of the approved plan, and absence of material misrepresentation in the 1-526 petition-a// characteristics that Appellants claim apply to them-was not an excellent predictor of 1-829 approval up until the precedent decisions appeared." /d. (Emphasis added.)

825

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Chang (cont.) · The Circuit Court did not "fault the INS for determining

that its earlier approvals of 1-526 petitions interpreted the EB-5 program in ways that arguably contravened Congressional intent." Assumed "arguendo" that precedents were justified. Did not reach APA notice and comment claims. /d. at 929.

What to Take Away From This Discussion of Federal Case Law:

• The key "Take-Away" that the Office of Chief Counsel (OCC) wants all EB-5 adjudicators to remember is that although cases may be raised by applicants, attorneys, or even by fellow adjudicators, ALWAYS consult your supervisor (who may in-turn check with SCOPS & OCC) concerning the legal relevance and/or impact of a particular federal court decision to your particular adjudication.

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