Federal Court Rules in Favor of Immigrant Investors

Wednesday, May 09, 2001

Judy Golub
AILA Senior Director of Advocacy
202-216-2403;  Fax: 202-371-9449

Federal Court Rules in Favor of Immigrant Investors

Washington, D.C.-A federal court has ruled that the U.S. Immigration and Naturalization Service (INS) may not automatically apply new rules retroactively to certain immigrant investors.  Rather, the INS must allow investors a chance to prove that retroactive application of the new rules would hurt them.  The May 3, 2001 decision by Federal District Judge George H. King in Chang v. United States, No. CV-99-10518-GHK (AJWx) (C.D. Cal. May 3, 2001), “is a victory for immigrant investors and proves that the INS must follow due process when it changes the rules of the game,” said Stephen Yale-Loehr, chair of the Investors Committee of the American Immigration Lawyers Association (AILA).

The Chang case involves more than 200 foreign investors and their family members who sued the U.S. government in federal court in San Francisco in 1999, alleging that the INS illegally changed its rules governing the immigrant investor visa category.  The case is the largest of almost a dozen lawsuits filed against the INS over its mishandling of the immigrant investor visa program. 

The investors all obtained conditional green cards by investing in U.S. companies.  The plaintiffs allege that after the INS granted them conditional resident status, the INS abruptly changed its rules interpreting the immigrant investor program in mid-1998, and is applying the new restrictive rules retroactively.  Because of the INS’ changes, the plaintiffs could now be deported from the United States, even though they complied with the rules in effect when they invested their money.  The plaintiffs claim that the INS’s actions violate their constitutional due process rights, the Administrative Procedure Act, and the U.S. immigration statute.

Judge King 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. 

But the judge held that the INS could not “change[] the rules of the game” by automatically applying its new, more restrictive interpretations retroactively to investors who had already received conditional green cards and who are now trying to have those conditions removed.  Instead, the agency must allow such investors an opportunity to show how such a retroactive application would hurt them.

Ira Kurzban of Miami, Florida and Marc Van Der Hout of San Francisco, California represent the plaintiffs.  According to Mr. Kurzban, “We hail Judge King’s ruling on the retroactivity issue.  The INS cannot arrogantly decide to secretly change the rules for an entire visa program in mid-stream and then apply them retroactively, hurting hundreds of innocent people.”

Attached is a backgrounder summarizing the immigrant investor visa category and detailing the problems caused by the INS.  For more information or press interviews, contact Judy Golub, Senior Director of Advocacy and Public Affairs at AILA (ph: 202-216-2403; email: jgolub@aila.org), or Stephen Yale-Loehr, Chair, AILA Investors Committee (ph: 607-273-4200; email: SYL@twmlaw.com).


The INS Hurts the EB-5 Immigrant Investor Program

Background.  Congress created the employment-based fifth preference (EB-5) immigrant visa category in 1990 for immigrants who invest in U.S. companies that benefit the U.S. economy and create at least 10 full-time jobs.  The basic amount required to invest is $1 million, although that amount is reduced to $500,000 if the investment is made in a high unemployment area or rural area.  When investors first make their investment, they get a “conditional” green card good for two years. At the end of that time they must prove that they have satisfied the requirements of the law before the Immigration and Naturalization Service (INS) will remove the condition and make them regular green card holders.

The requirements to get an EB-5 green card are strict.  Although 10,000 EB-5 green cards are available each year, at most only about 1,000 investors and their families have immigrated in this category each year.

The Problem. The INS is not familiar with handling complex investment programs.  Worried that some investors were not investing their full money up front (even though the law does not require that, and the INS has never proven fraud in the program), in 1998 the INS issued four precedent decisions that significantly restricted eligibility for EB-5 status.  To make matters worse, the INS is applying the new restrictions retroactively to terminate the conditional green cards granted to foreign investors who made their investments in good faith based on the rules in effect before the 1998 decisions.  About 850 investors are caught in this dilemma.

The American Immigration Lawyers Association (AILA) believes that the retroactive application of these four decisions violates the rulemaking requirements of the Administrative Procedure Act.  Moreover, since 1998 the INS has issued numerous nonprecedent decisions that make it even more problematic to use the EB-5 program.  It is estimated that currently, the INS is approving only about 15-25 percent of the few EB-5 petitions that are still being filed. 

The INS’s actions have effectively gutted the EB-5 program.  AILA estimates that over $400 million in potential investments have been lost since 1998 because investors are unwilling to  engage in such an uncertain process.  But for the INS’s actions, at least 10,000 U.S. jobs would have been saved or created, many in high unemployment areas such as rural communities and urban areas.

For more information, contact Judy Golub, Senior Advocacy Director at AILA (ph: 202-216-2403; email: jgolub@aila.org), or Stephen Yale-Loehr, Chair, AILA Investors Committee (ph: 607-273-4200; email: SYL@twmlaw.com).



Cite as AILA Doc. No. 01052380.