EB-5 Investors File Lawsuit in California
September 13, 2012
A lawsuit was filed against USCIS by EB-5 investors in the Central District Court of California for declaratory and injunctive relief on September 13, 2012. The lawsuit arose after eighteen (18) I-526 petitions filed by foreign investors in the American Life Company were revoked (where previously approved) and denied.
The American Life project attracted twenty three (23) foreign investors and raised $11,500,000 towards the outright acquisition of real property in Riverside, CA, for the renovation and management of two (2) single-story buildings for commercial leasing.
USCIS first approved eight (8) I-526 petitions under the project in 2011. In April 2012, however, USCIS changed course and revoked these petitions while denying the rest due to a “tenant occupancy” issue. The agency ultimately determined that no renovation project could meet the employment creation requirement because jobs generated by tenants could not be counted.
In its revocation notice, USCIS stated that, ” there is no assurance that the entire amount of EB-5 capital will in fact be used to carry out the business of the commercial enterprise and placed at risk for the purpose of generating a return.” in support of its revocation and denial of the petitions, USCIS noted that the “record presents a number of discrepancies and/or material changes.” USCIS determined that there was a “material change” in the project based on the following facts:
(1) the new commercial enterprise’s (NCE’s) decision to invest $11.5 million instead of $12 million;
(2) the change from the initially forecasted (hypothetical) tenants to one actual tenant; and
(3)the decision to expand the project and use some funds to renovate an adjacent property
As USCIS’ determination is being challenged in court, the definition of “material change” remains undefined. The plaintiffs’ argument is essentially that USCIS imported the adjudicatory standards for I-829 applications into the I-526 petitions By doing so, it is argued that USCIS retroactively applied the relevant rules and acted ultra vires by “interjecting legally impermissible new criteria” in its determination. The entire EB-5 community is awaiting the outcome of this very important decision.