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Evidence of Source of Capital in Immigrant Investor Cases (Part I)
by Lincoln Stone and Stephen Yale-Loehr


This article is written for immigration law practitioners with an interest in the law concerning immigrant investors. Substantial hurdles exist for practitioners representing immigrant investors, as legal standards appear to be evolving. An ever-higher hurdle is the government's insistence on voluminous evidence concerning the investor's "lawful" source of funds. Recent practice strongly suggests that the government has erected a de facto evidentiary presumption that all investor capital is not from a lawful source. This article attempts to present the arguments available to the practitioner who confronts these challenges.

Background of Immigrant Investor Law

In 1990 the U.S. Congress enacted legislation authorizing issuance of approximately 10,000 immigrant visas annually to aliens who invest substantial capital and create full-time employment for at least ten U.S. workers.1 This provision is contained in Immigration and Nationality Act (INA) 203(b)(5).2 It is known as the immigrant investor or EB-5 category. The Immigration and Naturalization Service (Service or INS) promulgated regulations implementing the immigrant investor category in 1991.3 The purpose of the immigrant investor law is to stimulate investment that would create jobs in the U.S. economy, by offering to foreign nationals the benefit of U.S. permanent residence.4 The authorizing legislation requires an investor to establish a new commercial enterprise, participate in the management of the enterprise, and invest capital so that the enterprise will employ at least ten qualified U.S. workers.5

In 1993 Congress enacted the immigrant investor pilot program.6 The purpose of the pilot program is to amass large amounts of capital and to concentrate the investment of capital in certain defined regional zones "to determine the viability of pooling investments in a region of the United States."7 Congress sought to achieve these economic development objectives by appealing to immigrant investors who invest in "regional centers." The statute authorizes such investors to establish eligibility for an immigrant investor visa based on the relaxed standard of indirect job creation. Congress has extended the pilot program twice, most recently in 2000.8 In doing so, Congress has increased the number of visas available under the pilot program to 3,000 visas annually, and has amended the statute to facilitate immigrant visa issuance to investors in regional centers.9

An immigrant investor files an I-526 petition with the Service. If that petition is approved the investor proceeds via immigrant visa processing or adjustment of status to obtain conditional permanent residence status. That status is conditional for two years.10 Before the expiration of the two-year period the investor must file a I-829 petition to remove the conditions.11

Since its enactment in 1990 the immigrant investor law has not proven to be the vehicle for many investor families to immigrate to the United States.12 Visa issuances to immigrant investors have dropped precipitously since the issuance of four precedent case decisions in 1998 by the Service's Administrative Appeals Office (AAO).13 Since then, standards employed by the Service to qualify investors for the immigrant investor visa classification appear to have tightened significantly, and just a trickle of cases have been approved.14 The Service's insistence on overwhelming evidence of the investor's "lawful" source of capital appears at the heart of many investor case denials.

The Problem: How to Prove to the Service's Satisfaction that Invested Capital is "Lawful"

In recent nonprecedent AAO decisions and in case decisions by INS Service Centers, the Service requires that the investor petitioner prove that the source of the invested capital is "lawful," and that the investor petitioner has a "level of income" or has accumulated sufficient wealth that would enable the investor to invest.15 While at first glance these requirements may appear to be innocuous and in furtherance of seemingly salutary objectives, substantial practical problems exist in meeting these requirements.16 The fact is that many law-abiding investors who have entirely legitimate wealth to invest, and who have presented substantial evidence of how that wealth was obtained, have nonetheless received petition denials from the Service.

Until the Service acts to encourage investment-based immigration, the key to turning the tide in these immigrant investor cases may be to challenge Service decisions by demonstrating that the Service imposes unsound principles of evidence, legal standards that lack a statutory basis, and requirements that are arbitrary and capricious.

© Copyright 2001 Lincoln Stone and Stephen Yale-Loehr. All rights reserved. Reprinted with permission. This article was originally published in 6 Bender's Immigration Bulletin 972 (Oct. 1, 2001).

1Immigration Act of 1990, Pub. L. No. 101-649, 121, 104 Stat. 4978 (enacting INA 203(b)(5), 8 U.S.C. 1153(b)(5)).
28 U.S.C. 1153(b)(5).
356 Fed. Reg. 30,713 (July 5, 1991), codified at 8 C.F.R. 204.6.
4The 1981 Select Committee on Immigration overwhelmingly supported a new immigrant visa category for investors. Select Commission on Immigration and Refugee Policy, U.S. Immigration Policy and the National Interest, 97th Cong., 2d Sess., Final Report (Comm. Print 1981). An investor proposal appeared in a 1982 bill, but that bill was defeated in response to the argument that a visa allocation for investors would have reduced the visa allocation for the backlogged family-based categories. That objection was overcome when the Immigration Act of 1990 substantially increased visa allocations in all categories. Section 203(b)(5) of the INA was first introduced as Senate Bill No. 258 in 1989. According to the Senate floor debate a primary purpose of the law is to create jobs. See 136 Cong. Rec. S7622, 7626 (daily ed. July 11, 1989).
5For an overview of the requirements of the immigrant investor law, see Stephen Yale-Loehr, EB-5 Immigrant Investors, in 2 American Immigration Lawyers Association, 2001-02 Immigration & Nationality Law Handbook 186 (Randy P. Auerbach et al. eds., 2001); 3 Charles Gordon, Stanley Mailman & Stephen Yale-Loehr, Immigration Law and Procedure 39.07 (rev. ed. 2001).
6Departments of Commerce, Justice, and State, the Judiciary, and Related Agencies Appropriations Act of 1993, Pub. L. No. 102-395, 610, 106 Stat. 1828; S. Rep. No. 102-918 (1992).
7S. Rep. No. 102-331 (1992). See also 59 Fed. Reg. 17,920-21 (Apr. 14, 1994).
8Visa Waiver Permanent Program Act, Pub. L. No. 106-306, 402(a), 114 Stat. 1637, 1647 (2000) (extending EB-5 regional center pilot program three years to 2003).
9Congress added language to clarify that reliance upon evidence of indirect job creation is not dependent exclusively on evidence that jobs resulted from increased export sales. Instead evidence of indirect job creation may be presented in tandem with evidence of other indicators of economic growth. Id. For further information on the pilot program, see Lincoln Stone, INS Decisions Cloud Future of Investor Pilot Program, 6 Bender's Immigr. Bull. 233 (Mar. 1, 2001).
10The regulations concerning conditional permanent residence status are found at 8 C.F.R. 216.6.
11INA 216A, 8 U.S.C. 1186b; 8 C.F.R. 216.6.
12The reasons are perhaps many, but an analysis of them is certainly beyond the scope of this article. The evidence of scant usage of the visa category is documented in a March 1999 INS report to Congress and more recently, in the INS's request to the Office of Management and Budget to reauthorize the I-526 form. In that request the INS estimated that only 1,368 persons use the form annually. 66 Fed. Reg. 39,206 (July 27, 2001).
13The precedent decisions are: Matter of Soffici, 22 I. & N. Dec. __, 19 Immigr. Rep. B2-25 (Interim Decision No. 3359, Assoc. Comm'r, Examinations, June 25, 1998); Matter of Izumii, 22 I. & N. Dec. __, 19 Immigr. Rep. B2-32 (Interim Decision No. 3360, Assoc. Comm'r, Examinations, July 13, 1988); Matter of Hsiung, 22 I. & N. Dec. __, 19 Immigr. Rep. B2-106 (Interim Decision No. 3361, Assoc. Comm'r, Examinations, July 31, 1998); and Matter of Ho, 22 I. & N. Dec. __, 19 Immigr. Rep. B2-99 (Interim Decision No. 3362, Assoc. Comm'r, Examinations, July 31, 1998).
14The nonprecedent case results of tightening standards have been summarized in Yale-Loehr, supra note 5. See also Lincoln Stone et al., Immigrant Investors Strike Out Again at AAO, 6 Bender's Immigr. Bull. 709 (July 15, 2001); Lincoln Stone et al., Recent AAO Decisions Continue Trend of Limiting Immigrant Investor Visas, 5 Bender's Immigr. Bull. 1031 (Dec. 15, 2000). As recent evidence of the paltry number of immigrant investor visa issuances, the State Department's Visa Office reports that in the last three fiscal years, out of 30,000 EB-5 visas available, only 672 were issued (fiscal year (FY) 1999 - 252 visas; FY 2000 -- 231 visas; FY 2001 -- 189 visas). This total includes all principal investors and dependents, in both consular visa and adjustment of status cases. Telephone interview between Lincoln Stone and Lorraine Lewis, Immigrant Visa Control and Reporting Division, U.S. Dep't of State (Oct. 2, 2001).
Of the hundreds of AAO EB-5 cases we reviewed, we are aware of only two immigrant investor cases approved by the AAO since 1998. One case involved the purchase of a ranch property to be used as a resort and dude ranch with facilities for dialysis patients. Matter of [name redacted] (AAO Apr. 13, 2001). The other case involved the restructuring of a business for horse breeding and training. Matter of [name redacted] (AAO July 11, 2001).
15Matter of [name redacted], WAC-99-210-51155, at 8 (AAO May 17, 2001) ("The petitioner's income cannot clearly account for the accumulation of $500,000 beyond living expenses."). See also Matter of [name redacted], WAC-99-227-51910 (AAO May 16, 2001); Matter of [name redacted], WAC-99-143-53245 (AAO May 10, 2001); Matter of [name redacted], WAC- 98-231-54300 (AAO Mar. 30, 2001); Matter of [name redacted], WAC-98-145-50004 (AAO Mar. 12, 2001). All these cases stand for the proposition that the petitioner must prove an accumulation of sufficient wealth over time.
16Most petitioners fail to present sufficient evidence to satisfy the INS. Notwithstanding the recurrent failure, the AAO -- owing perhaps to a world view that is understandably U.S.-oriented where income tax returns are de rigueur -- dismisses the objections advanced by petitioners to the onerous burden of producing source of funds evidence with the rejoinder: "It is a simple matter to satisfy this basic requirement of the alien entrepreneur provision." Matter of [name redacted], WAC-99-044-50107, at 6 (AAO Feb. 28, 2001).

About The Authors

Lincoln Stone ( is co-chair of the American Immigration Lawyers Association (AILA) Investors Committee, and is of counsel to Fainsbert Mase & Snyder, LLP ( in Los Angeles, California.

Stephen Yale-Loehr ( co-chairs the AILA Investors Committee with Lincoln Stone. He is co-author of Immigration Law and Procedure, published by Matthew Bender & Company, Inc. He also teaches immigration law and refugee law at Cornell Law School, and is of counsel at True, Walsh & Miller ( in Ithaca, New York.

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