DOS Cable on EB-5s Held Pending Review
[Reprinted with Permission)
State Department Cable (No. 97-State-241877)
To: All Diplomatic and Consular Posts
Date: December 10, 1997
Subject: Suspension of Visa Processing in Certain EB-5 Cases
Ref: State 132704 (notal)
1. Summary. This cable instructs posts, as an interim measure, to suspend visa processing in certain immigrant investor (EB-5) cases which are the subject of a pending review by INS’s Office of Programs. The instructions contained in this cable supersede those contained in reftel. The Visa Office anticipates that additional instructions regarding the cases in question will follow shortly. End summary.
2. The Visa Office has been informed that the Office of Programs at INS Headquarters is undertaking a review of some of the provisions of various types of investment and partnership agreements which many applicants have used to obtain petition approval in the EB-5 category. The review will focus on whether such provisions comport with the existing regulations of the INS.
3. The provisions in question include the following: guaranteed interest payments to the investor; buy and sell options at a fixed price other than fair market value and other such "debt" arrangements whereby the partnership is or may become indebted to the investor; provisions which limit the risk of the investor, such as depositing the alien’s capital investment in a bank account rather than directly into a business (presumably for the purpose of guaranteeing repayment of the invested funds to the alien), the use of promissory notes with large final "balloon" payments combined with the option previously mentioned for the alien concurrently to "sell" his/her interest in the business or the partnership to buy the alien’s interest at a fixed price other than market value, or combined with a provision which permits the alien to withdraw all of his/her funds prior to the final "balloon" payment, and termination of the alien’s obligations under the agreement in case of default or bankruptcy of the partnership.
4. In view of the pending INS review, the Visa Office is of the opinion that, because there appear to be significant questions being raised as to the continuing legal validity of many already approved petitions, it is prudent to suspend visa processing of any case in which one or more of the cited provisions is a part of the investment or partnership agreement which forms the basis of an alien’s investment. This is a temporary measure inasmuch as we fully expect to receive further definitive instructions from INS when its review is completed. At this time posts should not/not take any action to return petitions to INS based upon this instruction. Posts should take reasonable steps to notify applicants scheduled for interviews who fall within this instruction that further processing of their cases is suspended pending final guidance from INS.