Your Money Is Good Here, Judge Tells EB-5 Visa Seeker

By Suzanne Monyak

Law360 (February 1, 2019, 5:12 PM EST) -- A Chinese citizen’s investment of loan proceeds in the U.S. counts as a cash investment that can qualify her for the EB-5 visa program, a D.C. federal judge said Thursday, rejecting the federal government’s stance that money from a loan should be classified as debt rather than cash.

U.S. District Judge Trevor N. McFadden held that U.S. Citizenship and Immigration Services’ denial of graduate student Siqing Wang’s EB-5 visa petition — based on the agency’s read of a federal regulation that the $500,000 she had invested was "indebtedness," not qualifying capital — was arbitrary and capricious in violation of the Administrative Procedure Act.

"USCIS' action here conflicts with the language of the regulation, and it is unsupported by the regulation's history and USCIS' own precedential decisions," the judge said in his ruling.

The case turns on the issue of whether loan proceed are classified as "indebtedness" or "cash" under regulations for the EB-5 program, which provides a path to U.S. permanent residency for foreign citizens who invest at least $500,000 in a qualifying enterprise that creates at least 10 American jobs.

Wang had invested $500,000 into the renovation of a historic hotel in New Orleans and was initially approved for the EB-5 visa. The funds stemmed from loan proceeds secured by property owned jointly by Wang and her father, according to the opinion. But two months after USCIS approved Wang's petition, the agency issued a notice to revoke, finding that her investment counted as indebtedness and that she did not meet the $500,000 requirement because she didn't own a sufficient interest in the property securing the loan.

Wang told the agency that her father had gifted her his loan proceeds so the entire $500,000 she invested counted as her own capital, the opinion says. But USCIS maintained that that the investment was classified as indebtedness, and ultimately denied her motion to reopen or reconsider.

Wang then sued the government in D.C. federal court in October 2016. The court trimmed down the suit in January 2018, and both sides moved from summary judgment in June. Those filings are not publicly available.

In Thursday's decision, Judge McFadden partially granted Wang's motion for summary judgment and punted her case back to USCIS for reconsideration.

The judge first ruled that the court was not obligated to defer to the agency's interpretation of the EB-5 regulation, noting that USCIS' briefing on the "ambiguous" regulation "appears to be nothing more than an agency's convenient litigating position."

The court then turned to the regulatory definitions, concluding that loan proceeds are not indebtedness because cash simply means "ready money," regardless of the source.

"Cash — even if obtained from a loan — is still cash," the judge said.

Thursday's ruling comes just two months after a different D.C. federal judge came to the same conclusion in a similar lawsuit, known as Zhang v. USCIS. In December, U.S. District Judge Emmet G. Sullivan granted class certification and summary judgment to a group of foreign investors who were denied EB-5 visas based on USCIS' interpretation of "cash" in its regulation.

In that decision, the judge also held that proceeds from third-party loans should be considered cash and remanded the case to USCIS to rethink its denials of the class members' petitions.

The government filed a notice to appeal that decision to the D.C. Circuit on Jan. 28, leading the D.C. federal court to decide to rule on Wang's case now rather than wait to see if she falls within the Zhang class, the judge said.

"Judge McFadden's decision is another important step toward requiring agencies to conform to the Administrative Procedures Act and provide rational, not arbitrary, interpretations of legislation and their own regulations," Ira J. Kurzban of Kurzban Kurzban Tetzeli & Pratt PA, an attorney for Wang, said in a statement to Law360 on Friday.

A USCIS spokesperson declined to comment.

Wang is represented by Edward F. Ramos and Ira J. Kurzban of Kurzban Kurzban Tetzeli & Pratt PA.

The government is represented by Glenn M. Girdharry of the U.S. Department of Justice's Office of Immigration Litigation.

The case is Wang v. USCIS et al., case number 1:16-cv-01963, in the U.S. District Court for the District of Columbia.

--Editing by Aaron Pelc.