Recent Federal Court Decision in EB-5 Immigrant Investor Case
Posted Aug 21, 2000

As many readers are aware, sometimes immigration issues are raised in federal court lawsuits against the government. We take this opportunity to describe a recent case that may be of interest to readers of the MurthyBulletin.

The criteria for approving the "immigrant investor" (EB-5) Green Card program were, for a long time, in a state of flux. The INS became concerned by many investment arrangements that appeared to adhere to the written requirements of the law, but seemed to violate the intent of the law. The EB-5 category is often referred to as the "employment creation" visa category. It was meant for those willing to invest at least one million dollars (half a million dollars in certain listed, economically depressed areas in need of development) to create a new enterprise that would employ at least ten U.S. workers on a full-time basis. As with the E-2 temporary investor visa, for the EB-5 immigrant category the money must be "at risk." This means that the person has to put his or her own assets on the line. So, for example, an investor who obtains a bank loan financed by the assets of the business would not qualify, because the investor's own assets are not at risk. Rather, in such a scenario, if the business fails, only the assets of the business would go towards paying off the loan.

Various investment partnerships and companies were created, using a variety of methods to spread the risk across a group of individuals. Some of these arrangements allowed investors to later get their money back. Many cases were approved for persons involved in this type of investment partnership. The INS later reevaluated the situation, however, and began denying such cases, and even started revocation proceedings in cases approved earlier, leaving the legal status of many persons in limbo.

Recently, in the case of R.L. INVESTMENT Ltd. PARTNERS v. INS, the Federal District Court in Hawaii held that the INS had properly denied an EB-5 petition, even though it had previously granted substantially identical petitions. This suit was brought after an investor's petition was denied on the ground that the person was only lending money to the enterprise, not contributing any equity. The case involved an investment partnership that allowed the person to later get his money back. In effect, the investor was not risking any money in the venture.

Though the INS had approved similar cases in the past, before deciding this particular case the INS had issued four precedent decisions that set forth its new interpretation of the law. In the court's view, the INS is free to change its interpretation at any time in the process of deciding cases. No one has a guarantee or entitlement to an approval just because similar cases were previously approved.