Investors Win Appellate Reversal Of EB-5 Visa Denial

A federal appeals court in Washington has ruled that U.S. Citizenship and Immigration Services (USCIS) unreasonably denied a group of investors’ petitions for EB-5 visas on the basis that their investment didn’t comply with the rules of the program.

The D.C. Circuit determined that the five immigrant investors’ financial contributions to a senior living facility were indeed risky enough for them to qualify for EB-5 visas. According tot he panel of three judges, USCIS has failed to sufficiently explain why these immigrants’ investments in Mirror LakeVillage LLC’s facility in Washington state did not meet the criteria for an at-risk investment.

In their ruling, the judges stated that the investors’ sell-back options are dependent on the company’s financial performance and that as a result, they were at risk for losing their investment if the company doesn’t have the available cashflow to buy back their interests.

In the ruling, Circuit Judge Merrick B. Garland wrote for the panel that the possibility that the business would succeed did not negate the risk of loss if it did not. He added that if this were the case, one could argue that even the purest stock investment was not at risk as investments by their very nature are based on both the possibility, and the hope, that a business will succeed.

In their argument, USCIS reasoned that the sell-back options eliminated the investors’ risk. Still, the panel found this explanation to be lacking, and contradictory to the agency’s definition of at-risk, where they state that for capital to be at risk, “there must be a risk of loss and a chance for gain.”
Even though the investors had pointed out that the sell-back options were dependent on the company’s financial performance, USCIS failed to address this argument on appeal.

Additionally, the circuit court rejected the government agency’s attempt to support its position by citing court precedent in an unrelated case. This case, the Matter of Izumi (PDF), centered around an EB-5 investor whose visa petition was denied because his sell-back option wasn’t dependent on the company’s financial performance.

The judges found that USCIS had misinterpreted the Izummi case to mean that any agreements in which investors can get their money are prohibited. However, this case only concludes that agreements in which investors are guaranteed a return on their investments do not meet the current definition of at-risk. This opinion is somewhat groundbreaking being the first circuit court decision to define an at-risk investment and guaranteed redemption with regard to the EB-5 immigrant investor program.

USCIS said it is reviewing the judges’ decision and declined to comment further.