Indebtedness As Capital For An EB-5 Investment
People are always asking me if an alien can get a loan and invest the proceeds from that loan into a project and have that count for EB-5 purposes. My initial reaction is extremely practical. I first ask, who in their right mind would make a "loan" of $500,000.00 or a full one-million dollars to be used as an "at risk" investment? I then tell them that it would be easier for someone to give the money as an outright "gift" to the intending EB-5 immigrant. The persistent folks will always have "solutions". I then have to remind them of the fundamentals of EB-5.
The investment has to be a real investment and not some bogus arrangement merely contrived in order to obtain an immigrant visa. With that main point laid out on the table, I point out that USCIS is geared towards detecting and fighting against fraud. Therefore, anything that looks fake will be attacked as fake even if it is not truly "legally and technically" fake. The reliance on a presumption accorded by law or merely meeting the bare minimum presentation of initial evidence or a prima facie showing leaves open the potential for legitimate challenges to the proof offered in support of the petition. See Matter of Brantigan, 11 I&N Dec. 493 (BIA 1966). This "legitimate challenge" is often overstated by zealots as a required "burden shifting". It is not. There is no burden shifting requirement when the initial evidentiary showing is not met in the first place. A prima facie showing is a presumption which may be challenged it is not necessarily a showing of full eligibility and it never was.
Corroborating evidence and substantiation through the production of probative and credible evidence, viable and reasonable explanations, and valid legal arguments laid out in a brief may be demanded when valid concerns are raised by USCIS. In the paper-based and faceless adjudications performed at USCIS Service Centers, these inquisitorial adjudications are akin to the "arguments on briefs" approach relied upon in the courts when rendering summary judgments. Unsubstantiated assertions, improbable inferences, and unsupported speculation are not competent summary judgment evidence. See Forsyth v. Barr, 19 F.3d 1527, 1533 (5th Cir.), cert. denied, 513 U.S. 871 (1994).
The following excerpt is a handy summation of how a court would handle a case that could be decided without the need for a hearing or trial. An appeal of a decision reached through summary judgment is always reviewed de novo. AAO always retains the plenary power to review any decision under the de novo standard and likens its relationship to USCIS Field Offices (especially Service Centers) as being similar to the relationship between a Court of Appeals over a District Court.
Summary Judgment Standard
AAO often cites to the various above principles in its current decisions such as a relatively recent H1-B petition appeal for example as follows.
"Going on record without supporting documentary evidence is not sufficient for purposes of meeting the burden of proof in these proceedings. Matter of Soffici, 22 I&N Dec. 158, 165 (Comm. 1998) (citing Matter of Treasure Craft of California, 14 I&N Dec. 190 (Reg. Comm. 1972))."
Specifically in the EB-5 context, and in recognition of Congressional intent as it relates to the qualifying requirements for a valid capital investment, INS explained in the first final rule to address it, published in 1991, as follows.
"... To qualify as capital, indebtedness must be secured by assets owned by the alien entrepreneur, provided that the alien entrepreneur is personally and primarily liable and that the assets of the new commercial enterprise upon which the petition is based are not used to secure any of the [indebtedness] . This requirement is designed to ensure that, by investing capital, the alien entrepreneur has placed funds or other capital assets directly at risk." 56 FR at 60902 (November 29, 1991)
Under the holdings in Izummi, INS [now USCIS] put the EB-5 community on notice of many strict requirements when it come to what will count as an investment. That decision addressed redemption agreements, reserve funds, and promissory notes among other things but many of the same concepts will leak into the "loan proceeds as an investment" approach.
(10) Under 8 C.F.R. § 204.6(e), all capital must be valued at fair market value in United States dollars , including promissory notes used as capital. In determining the fair market value of a promissory note, it is necessary to consider, among other things, present value. At pp. 169-170
Matter of Izummi, 22 I&N Dec. 169 (AAO 1998).
The concept of loans in EB-5 was specifically addressed in yet another Precedent Decision. Soffici involved a situation where the alien transferred his EB-5 investment funds directly from his corporate account rather than his personal account however I would take this as a cautionary tales despite the slightly different context. I would urge folks to strive to meet these challenges up front for their own protection.
Matter of Soffici, 22 I&N Dec. 158 (AAO 1998) held, in pertinent parts:
Matter of Hsiung, 22 I&N Dec. 201 (AAO 1998) held, in pertinent parts:
Matter of Ho, 22 I&N Dec. 206 (BIA 1998) held, in pertinent parts:
2Petition for a Nonimmigrant Worker
3 Word was misspelled in original, corrected herein.
3 Bold added for emphasis from this point forward within quoted text.
Joseph P. Whalen is not an attorney. He is a former government employee who is familiar with the INA. His education is in Anthroplogy with a concentration in Archaeology and has both a BA (from SUNY Buffalo) and an MA (from San Francisco State University) in Anthroplogogy. He previously worked as an Archaeologist for the U.S. Forest Service before becoming an Adjudicator with INS which became USCIS.
The opinions expressed in this article do not necessarily reflect the opinion of ILW.COM.