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  • Article: EB-5 SUIT FILED ON WHETHER INVESTORS’ LOANS FROM OWN COMPANIES WERE LAWFUL SOURCE OF FUNDS. By Alan Lee, Esq.

    EB-5 SUIT FILED ON WHETHER INVESTORS’ LOANS FROM OWN COMPANIES WERE LAWFUL SOURCE OF FUNDS

    by


    On June 23, 2015, suit was filed in the U. S. District Court for the District of Columbia by 2 EB-5 applicants, Huashan Zhang and Masayuki Hagiwara, whose cases were denied by U.S.C.I.S. on the basis that they were not personally liable for the loans that they received from their own companies as the loans were not collateralized by their personal assets. They complained in Huashan Zhang v. U.S.C.I.S., 1:15-cv-00995, that U.S.C.I.S. denied them through a new collateralization rule for loans which was effected without publication in the Federal Register and applied retroactively to their cases – that the petitions were denied on the sole basis that the loan agreements between plaintiffs and the entities from which they borrowed the cash were not adequately secured by assets personally owned by the plaintiffs. In Zhang’s case, he and his wife owned 100% of Shaanxi Textile which executed a loan resolution that the money was to be repaid through his future payable benefit allocation in the company. Plaintiff #2 Hagiwara owned 81.25% of a corporation and borrowed the money from it. In answer to an RFE that he demonstrate that the loan was secured by his personal assets, he explained that he had paid his capital contribution with real money and there was no basis for U.S.C.I.S. to treat his investment as indebtedness. The suit appears to have merit, but this writer notes that even if the plaintiffs prevail, future treatment of such loans will most likely accord with the government’s view as the pending EB-5 legislation, S 1501, provides that loans would have to be secured by the investor’s personal funds and be obtained from reputable banks or lending institutions that are properly chartered or licensed under laws of that country.

    Reprinted with permission.


    About The Author

    Alan Lee, Esq. The author is an exclusive practitioner of immigration law based in New York City with an AV preeminent rating in the Martindale-Hubbell Law Directory for 20+ years, registered in the Bar Register of Preeminent Lawyers, on the New York Super Lawyers list (2011-12, 2013-14, 2014-2015), and recognized as a New York Area Top Rated Lawyer. He has written extensively on immigration over the past years for Interpreter Releases, Immigration Daily, and the ethnic newspapers, World Journal, Sing Tao, Epoch Times, Pakistan Calling, Muhasba and OCS; testified as an expert on immigration in civil court proceedings; and is a regular contributor to Martindale-Hubbell's Ask-a-Lawyer program. His article, "The Bush Temporary Worker Proposal and Comparative Pending Legislation: an Analysis" was Interpreter Releases' cover display article at the American Immigration Lawyers Association annual conference in 2004; his 2004 case in the Second Circuit Court of Appeals, Firstland International v. INS, successfully challenged Legacy INS' policy of over 40 years of revoking approved immigrant visa petitions under a nebulous standard of proof, although its central holding that the government had to notify approved immigrant petition holders of the revocation prior to the their departure to the U. S. for the petition to be able to be revoked was short-lived as it was specifically targeted in the Intelligence Reform Act of 2004 (which in response changed the language of the revocation statute itself). Yet Firstland lives on as precedent that the government must comply with nondiscretionary duties established in law, and such failure is reviewable in federal courts. His 2015 case, Matter of Leacheng International, Inc., with the Administrative Appeals Office of USCIS (AAO) set nation-wide standards on the definition of "doing business" for multinational executives and managers to gain immigration benefits.


    The opinions expressed in this article do not necessarily reflect the opinion of ILW.COM.

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