Evidence of Source of Capital in Immigrant Investor Cases (Part III)
Challenges Based on Statute
Any agency action that violates or exceeds statutory authority can be set aside by a court.25 Therefore, Service adjudications of immigrant investor petitions must be consistent with INA § 203(b)(5). At the practitioner's disposal are arguments that: (1) the petitioner has complied with the statute; (2) the Service's regulations violate the statute; (3) the Service's interpretation of its regulations violates the statute; and (4) the statute requires the Service to present evidence concerning the investor petitioner's unlawful source of funds before it can deny a petition for immigrant investor classification.
a. Compliance with StatuteTo be eligible for immigrant investor classification, INA § 203(b)(5) requires the investor to prove the following:
The Supreme Court has stated that an administrative agency may not "make law" if Congress already has specified what the law requires. If Congress' intent on the precise question at issue can be ascertained by employing traditional tools of statutory construction, "the agency must give effect to the unambiguously expressed intent of Congress."27
The precise question at issue in EB-5 cases is whether, based on a reading of the language of INA § 203(b)(5), Congress intended that an investor-petitioner have the burden of proving that the source of the capital he invests in the enterprise is derived from lawful means or that he had a sufficient level of income that would support a conclusion that he has ample wealth to be able to invest the required amount of capital in the enterprise. The answer to that question is found directly in INA § 203(b)(5), and it is an emphatic "no" - Congress did not intend an investor-petitioner to have such a burden of proof.
In drafting INA § 203(b)(5) Congress was specific in articulating what an investor-petitioner must prove in support of a petition for immigrant investor visa classification: The investor must present evidence that he will be "engaging in a new commercial enterprise;" which the investor "has established;" in which the investor "has invested" or "is actively in the process of investing;" "capital" in the requisite amount; and "which will benefit the United States economy" and create ten full-time jobs.
The statute is by no means silent or ambiguous about what Congress expects an investor-petitioner to prove. Nor has Congress explicitly or even implicitly left legislative gaps for the agency to fill. Congress has directly and specifically addressed the issue of what the investor-petitioner must prove in filing a petition for the visa classification. Nothing in INA § 203(b)(5) specifies that the investor carries the burden of proving that the source of the capital he invests in the enterprise is derived from lawful means or that he has a sufficient level of income that would support a conclusion that he has ample wealth to be able to invest the required amount of capital in the enterprise. By specifying what a petitioner must prove in the filing of the I-526 petition, and by electing not to require evidence concerning the "lawful" source of petitioner's capital, Congress intended that the Service not require such proof from an investor who files an I-526 petition.
In instances where the Congress has delineated clearly what it requires, all agencies, including the INS, "must give effect to the intent of Congress" and not attempt to impose additional requirements not found in the statute.28 This result is dictated by the maxim of statutory construction expressio unius est exclusio alterius ("the explicit mention of one is the exclusion of the other").29
To infer from a reading of INA § 203(b)(5) that Congress intended that a petitioner has the burden of proving that the source of the capital he invests in the enterprise is derived from lawful means or that he had a sufficient level of income to be able to invest the required amount of capital in the enterprise is no different from also concluding, for instance, that the petitioner must prove that the new commercial enterprise must generate more than $10 million in annual revenues, or that the new commercial enterprise must be a fast-food franchise. Such additional requirements would require importing unusual and bizarre meanings into the words of the statute, rather than reading the statute based on the "ordinary meanings of the words used." No such intent can be inferred from the language of INA § 203(b)(5).
Congress has proven it is fully capable of specifying what is required to establish eligibility for a visa classification. For instance, outstanding professors and researchers must prove that they are recognized internationally as outstanding in a specific academic area, have at least three years of experience in the academic area, and seek to enter the United States to fill a tenured or tenure-track teaching position or research position.30 Congress did not limit the visa classification to just professors and researchers in the sciences, or to only those professors and researchers who could prove that their research was not used for purposes of controversial human embryo testing. It would therefore be illegal if the Service was to require petitioners to prove, by regulation or otherwise, that a petitioner's research had not been used for purposes of human embryo testing. Similarly, it is illegal for the Service to alter INA § 203(b)(5) by grafting into the statute a requirement that the petitioner must prove that the source of the capital he invests in the enterprise is derived from lawful means or that he had a sufficient level of income that would support a conclusion that he has ample wealth to be able to invest the required amount of capital in the enterprise.
Congress also takes care to specify who bears the burden of proof in adjudications of petitions. For example, Congress has explicitly stated that if the Service acts to terminate an investor's conditional permanent residence status during the two-year conditional residence period, the burden of proving noncompliance with INA § 203(b)(5) rests with the Service.31 If, however, a petition to remove the condition on residence is already filed, the petitioner has the burden to prove that he or she meets the requirements of INA § 216A.32 If the Service determines that the petitioner failed to sustain his burden of proof, the petition to remove conditional resident status should be denied. If the investor requests review of that determination before an immigration judge, the statute specifies that the burden of proof is on the Service to prove that the investor failed to comply with INA § 216A.33
It would violate the intent of Congress and therefore be illegal for the Service to impose a burden of proof on the conditional resident investor that is inconsistent with the statutory scheme of INA § 216A. Likewise, the Service would illegally alter the terms of INA § 203(b)(5) by imposing on the petitioner the burden of proving that the source of the capital he invests in the enterprise is derived from lawful means or that he had a sufficient level of income that would support a conclusion that he has ample wealth to be able to invest the required amount of capital in the enterprise.34
b. Regulations in Violation of StatuteIn denying I-526 petitions filed by investor petitioners, the Service's AAO and Service Centers cite INS regulations as authority for imposing on the petitioner the burden of proving that the source of the capital he invests in the enterprise is derived from lawful means or that he had a sufficient level of income that would support a conclusion that he has ample wealth to be able to invest the required amount of capital in the enterprise. However, the regulation is ultra vires, i.e., beyond the requirements of the statute. To mask the ultra vires act in the shape of a regulation does not lend legality to the ultra vires agency action. An agency cannot promulgate regulations that are beyond its statutory authority.35 Insofar as the Service's regulation at 8 C.F.R. § 204.6(j)(3) on its face is inconsistent with INA § 203(b)(5), the Service cannot insist that the investor petitioner comply with the regulation.
8 C.F.R. § 204.6(e) provides in pertinent part: "Assets acquired, directly or indirectly, by unlawful means (such as criminal activities) shall not be considered capital for the purposes of Section 203(b)(5) of the Act." 8 C.F.R. § 204.6(j)(3) purports to impose on the petitioner a burden of proof "[t]o show that the petitioner has invested, or is actively in the process of investing, capital obtained through lawful means." The regulation lists the categories of acceptable evidence, such as evidence of business registration and income tax returns.
Our review of immigrant investor decisions reveals that the Service's interpretation of its regulation also violates the statute. In the typical case, the Service Center cites the Service's regulations and the four precedent AAO decisions issued in summer 1998 concerning I-526 petitions.36 The precedent decisions purported to interpret the law concerning adjudication of I-526 petitions, i.e., INA § 203(b)(5) and 8 C.F.R. § 204.6. The AAO decision in Matter of Soffici37 involved a I-526 case filed by a petitioner who contended that the funds invested had come from personal savings and from the sales of a house and a business. Matter of Ho38 involved a I-526 case filed by a petitioner who contended that he had substantial liquid assets in the form of bank accounts and stock holdings and had earned a living from his work as a medical doctor. Matter of Izumii39 involved an I-526 petition filed by a 30-year-old petitioner who claimed that he had saved money as a result of his being in business for several years trading Levi jeans in Japan. The AAO cited 8 C.F.R. § 204.6(j)(3) in each of the three cases and concluded that the petitioners failed to prove their source of funds. The AAO ruled that the petitioners failed to comply with the literal requirements of the regulation. In dicta, the AAO also questioned whether the petitioners had sufficient levels of income to enable them to invest. But the AAO did not hold that a petitioner must prove a sufficient level of income to be able to invest.
All three precedent decisions can be distinguished from the vast of majority of cases we have reviewed. In the vast majority of cases, the investor petitioners present some kind of evidence that is indicated in the INS regulation. By contrast, the petitioner in Matter of Soffici presented absolutely no documentation concerning the house or business that were the alleged sources of his investment. The petitioner in Matter of Ho did not present any evidence regarding his working as a medical doctor or his level of income, and presented only bank statements for accounts that did not hold sufficient funds to enable him to make the $515,000 investment he claimed to make. In other words, Ho did not present any of the kind of evidence indicated in the regulation. The petitioner in Matter of Izumii presented only two years of corporate income tax returns, but no additional documentation as prescribed in 8 C.F.R. § 204.6(j)(3).
In most of the cases we have reviewed, the investor petitioner submitted foreign business records, individual or business income tax returns, or some evidence of a gift or inheritance. Those petitioners, in many cases, appear to comply with the letter of the INS regulation. If, as we have observed in its case adjudications, the Service interprets the decisions in Soffici, Ho and Izumii to impose obligations on petitioners in I-526 cases to prove that the capital invested was lawfully obtained and to prove a level of income that would justify such an investment, such an interpretation is inconsistent with INA § 203(b)(5). 49
c. The Burden of Producing Evidence of Unlawful Source of Capital is on the ServiceIt is axiomatic that the petitioner for a benefit or a visa classification under the immigration laws bears the burden of proving eligibility for the benefit or classification.41 But the petitioner does not have to prove every fact that the Service may consider relevant to its adjudication. Instead, the petitioner's specific obligations are prescribed by statute. Nothing in INA § 203(b)(5) supports imposing a burden on the petitioner to prove the lawful source of the capital invested. Contrary to the Service's decision to impose such a burden on investor petitioners, numerous statutory and regulatory authorities exist for imposing the initial burden of showing that an investor's funds were unlawfully obtained on the government rather than investor petitioners.
The first authority is the statute. As described above, INA § 203(b)(5) does not require the petitioner to prove lawful source of capital. The Service lacks the legal authority to impose that obligation through its regulations.42
The next legal authority is the overall statutory scheme for immigrant investors. According to the statute, if the INS approves a I-526 petition, the petitioner obtains "conditional" permanent resident status for a two-year period. Near the end of the two-year period the investor must file a I-829 petition to remove the condition. Congress specified the requirements for removal of the condition in INA § 216A(d)(1). In turn, the INS has specified the requirements for removal of the condition in 8 C.F.R. § 216.6.
Notwithstanding the argument above that Congress did not intend the Service to require the I-526 petitioner to prove that the source of capital was lawful, and that Congress did not intend the Service to require the I-829 petitioner to prove that the source of capital was lawful, the INS regulations concerning removal of the condition do impose a burden of producing evidence concerning lawful source of funds. That burden of presenting evidence is on the government. 8 C.F.R. § 216.6(c)(2) provides that if "it becomes known to the government that the entrepreneur obtained his or her investment funds through other than legal means (such as through the sale of illegal drugs)," the Service shall offer the alien the opportunity to rebut such evidence. The I-829 petition may be denied if the petitioner fails to overcome the Service's evidence. Absent evidence presented by the Service of criminal activity such as the sale of illegal drugs, no legal authority exists for requiring the I-829 petitioner to present evidence concerning source of funds, let alone to prove that the source of funds is from lawful means.
The requirement that the Service, not the petitioner, present evidence of criminal activity bearing on the source of petitioner's capital is consistent with 8 C.F.R. § 216.3, which imposes the burden of proof on the Service, by a preponderance of evidence, to demonstrate that petitioner obtained investment capital "through other than legal means (such as through the sale of illegal drugs)."43
Note that the sometimes-analogous body of law concerning the nonimmigrant E-2 investor visa category does not provide any authority for the Service to impose a burden of proof on the investor petitioner. INA § 101(a)(15)(E)(ii) imposes no duty on an E-2 visa applicant to prove the lawful source of his or her capital. The lengthy definition of "investment" in the Department of State regulations on E-2 visas does not refer to lawful source of capital, let alone a burden of proving lawful source of capital.44 The E-2 visa application form, the Optional Form 156E, includes a question concerning "source of investment capital" and "evidence of possession and control of funds," but the Department of State's official clarification of the basis for the question is that "[t]he investment must be the investor's personal risk capital under the investor's control."45 In other words, the question is directed to ensuring that it is the visa applicant's, not somebody else's, capital that is used in the underlying investment. The Service's E-2 regulations state that "[a]n investment is the treaty investor's placing of capital, including funds and other assets (which have not been obtained, directly or indirectly, through criminal activity), at risk in the commercial sense with the objective of generating a profit."46 But this language has never been interpreted to impose a burden of proof on the E-2 petitioner concerning the lawful source of the invested capital. The information is not even requested on the Service's Form I-129 Supplement E. And insofar as the Service did not provide notice and opportunity for public comment on this aspect of the regulation, it is highly doubtful that it could serve as authority for imposing a burden of proof concerning lawful source of funds on an E-2 petitioner.47 In practice, E-2 visa applicants are not required to present evidence to consular officers or to the Service that the invested capital was lawfully obtained.
Imposing on the government the burden of presenting evidence is consistent with other relevant statutory schemes. For example, to obtain entry to the United States an applicant must prove that he or she is not inadmissible under any ground provided in INA § 212(a). One ground of inadmissibility is INA § 212(a)(2)(C), which makes inadmissible an alien "who the consular officer or the Attorney General knows or has reason to believe is or has been an illicit trafficker in any controlled substance." In practice, to obtain a visa and entry to the United States, the applicant is not required to present any evidence to prove that he is not inadmissible under INA § 212(a)(2)(C). Instead, prevailing law clearly specifies that it is the consular officer or the Service who initiates the inquiry concerning this ground of inadmissibility. In such cases the consular officer must have "more than a mere suspicion - there must exist a probability, supported by evidence, that the alien is or has been engaged in trafficking"48 before the consular officer can deny the visa. The consular officer, in other words, must be in possession of the incriminating evidence before the applicant is required to present any evidence at all on the subject of this ground of inadmissibility.49
The ground of inadmissibility stated in INA § 212(a)(3)(A)(iii) relating to subversion of the U.S. government operates in the same manner. Admission may be denied if the Service or the consular officer "knows or has reason to believe" the alien seeks to enter the United States to engage in unlawful activity. The applicant is not required to prove that he is not intending to engage in unlawful activity. Instead, the consular officer must have at least a reason to believe the applicant is not admissible. The reason for such a belief must be based on "the completed visa application, the applicant's statement, the results of name checks and advisory opinion requests (when required), checks of post files, the CLASS system or microfiche, and any other outside information available."50 The consular officer must obtain a security advisory opinion from the Department of State "to ensure consistency and uniformity of interpretation and to allow input form other interested U.S. government agencies."51 Again, the government must present the initial evidence on this issue before it becomes material to the visa adjudication.
The immigration law includes many instances where the applicant nominally has the burden of proof, but in operation the Service has the initial burden of presenting incriminating evidence. This is true in all cases involving proof of "good moral character," such as in naturalization cases. The applicant nominally has the burden of proof,52 but in practice the Service bears the burden of producing evidence that the applicant is barred from proving good moral character. Congress has stipulated certain conduct that would bar the applicant from proving good moral character,53 such as being a "habitual drunkard," or deriving one's income principally from illegal gambling activities. But to prove that he has good moral character the applicant is not required to prove that he has not been a habitual drunkard, and he is not required to prove that his income is not derived principally from illegal gambling activities. In fact, the applicant is not required to present even a scintilla of evidence concerning his drinking habits or his gambling activities, beyond the applicant checking a box on the N-400 application form. Those habits and activities become relevant to the adjudication only if the Service first presents relevant incriminating evidence.54 Were the opposite true, and the applicant had the burden of production and persuasion concerning income from illegal gambling activities, every applicant for naturalization would be required to present to the Service with his N-400 naturalization application substantial financial and other documentation, sufficient enough for the Service to conclude that the applicant did not derive his income from illegal gambling activities. To avoid arbitrary and erroneous adjudication, the Service in turn would be required to conduct background investigations concerning the applicant's actual assets and true wealth, akin to an Internal Revenue Service audit, to measure and compare the applicant's actual wealth to reported income. That does not occur because the Service, not the applicant, has the burden of production on the issue of income from illegal gambling activities.55
The initial burden of production also rests with the government in cases of suspected misrepresentation. The burden of proof is on the applicant to prove that he is not inadmissible under any provision of the Act, including the provision proscribing willful misrepresentation to obtain an immigration benefit. But where there is no evidence that the alien presented fraudulent documents, or documents concerning material misrepresentations, to an authorized official of the U.S. government, the alien has sustained the burden of proof.56
In no circumstances, therefore, did Congress intend for the Service to impose on the investor petitioner the initial obligation of presenting evidence of, and/or proving, the lawful source of invested capital. That burden is put squarely on the Service. The Service's declaration that it has no interest in venturing beyond Congress's intent has a hollow ring when the Service seeks to impose on the investor petitioner the onerous burden of proving the lawful source of invested capital. The imposition of such burden of proof is inconsistent with INA § 203(b)(5) and due process.
© 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).
255 U.S.C. § 706(2)(C).
About The Authors
Lincoln Stone (Lstone@fms-law.com) is co-chair of the American Immigration Lawyers Association (AILA) Investors Committee, and is of counsel to Fainsbert Mase & Snyder, LLP (http://www.fms-law.com) in Los Angeles, California.
Stephen Yale-Loehr (email@example.com) 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 (http://www.twmlaw.com) in Ithaca, New York.