Defending EB-5 permanent residency: litigation strategies after an I-829 petition denial.

• Author: Tetzeli, Helena

Congress created the EB-5 immigrant visa program in 1990 to benefit the U.S. economy and create jobs by attracting investments from foreign investors seeking permanent legal status (a "green card") in the U.S. An EB-5 visa offers many advantages to foreign nationals who desire lawful permanent resident (LPR) status in the United States. High net-worth foreign nationals may obtain LPR status via the EB-5 route relatively quickly. Unlike other employment-based visa categories, no sponsorship from a U.S. company is required, and there is no day-to-day obligation to directly operate a business. Accredited investors with sufficient net worth may invest a minimum of $500,000 in a project, become a "limited partner," and delegate to professionals the day-to-day operational tasks of the qualifying business.

The multi-step process the EB-5 program creates, however, means that even privileged EB-5 investors sometimes face the harsh reality of the U.S. immigration system after immigrating here on an EB-5 visa. Under U.S. immigration law, every investor who immigrates to the United States through the EB-5 program receives "conditional" residency, which is valid for only two years. Before those two years expire, the investor must petition USCIS to grant unconditional permanent residency. When USCIS denies an I-829 petition, the results can be devastating: The investor and the investor's family lose their conditional residency and usually face removal proceedings.

This article addresses the administrative and judicial options available to investors whose I-829 petitions are denied.

Primer on the I-829 Petition

The EB-5 program differs from other employment-based preference categories in that a successful EB-5 petition does not lead immediately to full, permanent residency for the foreign investor. Instead, foreign nationals who file an I-526 petition and obtain EB-5 status are initially granted conditional residency for two years. (1) To maintain lawful status in the United States and to become a full, unconditional permanent resident, an investor must file a Form I-829 petition to remove the "conditions" on his or her permanent residency. The investor must file the I-829 petition within 90 days of the two-year anniversary of the investor's admission to conditional residency. If USCIS approves the petition, then the investor and any family members included on the petition become unconditional lawful permanent residents. (2) If the petition is denied, however, USCIS terminates the LPR status of the investor and the investor's family, and they become subject to removal from the United States. (3)

The substantive requirements for I-829 petitions are disarmingly and deceptively straightforward. An investor must establish that 1) the investor has "invested, or is actively in the process of investing, the requisite capital"; 2) this investment was "sustained throughout the period of the alien's residence in the United States"; and 3) the investor "is otherwise conforming to the requirements" of the EB-5 statute with regard to job creation. (4) The regulations governing I-829 petitions reiterate these basic statutory requirements and clarify that the investor need only establish "substantial" compliance with the capital investment requirement and that the investor may qualify for removal of conditions if the requisite jobs will be created "within a reasonable time." (5)

The apparent simplicity of the I-829 petition's substantive requirements, however, masks complexities resulting from the two-step nature of the EB-5 process, the need for fluidity of business decisions during an investor's period of conditional residency, and competing views regarding what precisely the purpose of the removal of conditions part of the process should be.

It is tempting to view the I-829 petition as a second bite at the apple for the government to decide if the EB-5 investment satisfies EB-5's statutory requirements. However, this view of the I-829 petition process was soundly rejected in the seminal judicial decision in the EB-5 area. In Chang v. United States, 327 F.3d 911 (9th Cir. 2003), USCIS's predecessor sought to deny the I-829 petitions of the plaintiff investors on the ground that their investments did not comply with EB-5 program requirements established by the three EB-5 Board of immigration Appeals (BIA) precedent decisions issued after the investors obtained their conditional residency. (6) There was no dispute that the petitioners' investments complied with the criteria in effect when their I-529 petitions were approved. The government argued that the investments were structured in a way prohibited by the BIA decisions and that, therefore, the investors' respective I-829 petitions must be denied because "I-829 approval proceeds ab initio" and "require[s] a 'fresh demonstration of compliance with statutory standards'" on the part of the investor. (7) The Ninth Circuit rejected this view of the I-829 petition process. It found the government's interpretation "not sustainable" in light of the text and structure of the EB-5 statute and regulations, and held inter alia that "[r]etroactive application of the new rules adopted by the 1998 precedent decisions to [a]ppellants' I-829 petitions is impermissible." (8)

The Ninth Circuit found that the I-829 petition is "a procedure intended to confirm that the petitioner fulfilled the plan set out in the I-526 petition." (9) On this view, if USCIS approves the investor's initial petition for EB-5 classification (the I-526 petition), then USCIS should remove the conditions and approve the I-829 petition if the investor followed the "plan" outlined in the I-526 petition. In other words, since USCIS approved the plan's EB-5 compliance at the initial I-526 petition stage, the later I-829 petition is simply intended to confirm that an investor "held up their end of the bargain by fulfilling the terms of their approved I-526 petition[]." (10)

Although the government once vigorously opposed the Ninth Circuit's view of the I-829 petition's purpose, it has since largely adopted it. USCIS's current official policy is that:

If the alien investor follows the business plan described in the Form I-526, USCIS will not revisit certain aspects of the business plan, including issues related to the economic analysis supporting job creation. Thus, during review of the Form I-829, USCIS will generally rely on the previous adjudication if the petitioner claims to have fulfilled the business plan that accompanied the Form I-526 petition. (11)

In other words, USCIS now recognizes that the I-829 petition is not a vehicle to second-guess its initial I-526 approval. If the investor establishes that the original business plan was "fulfilled" during his or her period of conditional residency, then USCIS's role in adjudicating the I-829 petition is simply to confirm the investor's claim.

Given the nature of EB-5 investments, however, it is not always clear what it means for an investor to "fulfill" the plan outlined in his or her I-526 petition. Consider the following hypothetical scenario:

A regional center project has pooled capital from multiple investors to finance the construction of a shopping mall that will then lease space to retailers. At the time the I-526 petition is filed, construction is just getting underway and no leases have been signed. In order to estimate the project's job-creation impact, the investor includes the developer's best guess as to the types of retail shops that will occupy the mall and estimates the number of employees that business in...