INS Must Consider the Impact of Policy Changes in EB5 Cases
Posted May 25, 2001

A federal court ruled on May 5, 2001, in the case of Chang v. United States, that INS must consider the impact of a policy change on an immigrant investor who had already been approved for the conditional resident status. The EB5 immigrant investor in this case was filing to have the condition lifted, but INS denied this second petition because the type of business operation in which he invested was retroactively found to be contrary to the legal requirements.

As background, the EB5 investor program enables a person to qualify for a Green Card based upon an investment of $1 million ($500,000 if in certain designated areas) in a new enterprise that would create 10 U.S. jobs. The investor is approved for permanent resident status on a conditional basis, and then two years later files another petition to remove the condition.

There are a variety of specific requirements as to the nature of the investment and the investor's role in managing the company, etc. When this program was enacted, some U.S. businesspeople saw it as an opportunity to set up investment arrangements to attract foreign investors. Some of these investment companies were quite legitimate, while others unfortunately were not. For example, the founders of one major company of this type were criminally prosecuted for fraud and related offenses. Anyhow, these companies, both legitimate and illegitimate, took some of the risk out of the investment process. While this feature made these companies attractive to hundreds of foreign investors, it also meant that the arrangements may not have been strictly in compliance with the EB5 requirements of the law.

In 1998, after having already approved many EB5 cases involving such investment arrangements, INS decided to reevaluate the situation. A variety of interpretive decisions were then issued to clarify the legal requirements. Many people whose cases had initially been approved on a conditional basis were denied final approval. Others got through the whole process, only to have their approvals later revoked by INS, leaving them without status in this country.

In the case the court considered, an investor had the conditional approval and was then denied the final approval, based solely on the changes in policy. The INS decided retroactively that the previously-approved investment no longer qualified under the law. The judge directed INS to reconsider the case, in view of the hardship caused to the investor and his family.

The final outcome of that particular investor's case is yet to be determined, but this decision gives hope to other investors in the same situation. Still, INS frequently applies new rules retroactively. We hope that this decision is the beginning of a new system of justice where the legislature disallows retroactive application of changes in the law to adversely affect people, and the courts similarly disallow retroactive applications of new standards.