What's Old is New Again - $500K EB-5 is Back (or is it?)

by Matt Gordon


On June 22, 2021, Judge Jacqueline Scott Corley of the US District Court Northern District of California granted summary judgement to the plaintiff Behring Regional Center in BEHRING REGIONAL CENTER LLC, v. Chad Wolf (Case No. 20-cv-09263-JSC) vacating the final rule promulgated by the Department of Homeland Security in July 2019 related to the EB-5 program. For a copy of the decision see this link:

https://v9b5q2c2.stackpathcdn.com/wp-content/uploads/2021/06/EB-5-Final-Rule-Invalidated-Without-Injunction-Summary-Judgement-6.22.2021.pdf

The EB-5 rule, most notably, had raised the minimum investment amount in the EB-5 program from $1 million to $1.8 million, increased the minimum investment amount for investments in Targeted Employment Areas (TEA) from $500,000 to $900,000 and made it much harder for a project to be considered located in a TEA. With a stroke of her judicial pen, Judge Corley declared that the rule is no more, or more precisely, never was in the first place and remanded to the agency for further action. 

The premise of plaintiff’s case was a simple as it was unbelievable in our modern overly lawyered age. The Trump administration had seen a rapid exodus of appointed and confirmed administration officials. In the Department of Homeland Security, there was a time when none of the top three spots were filled by executives who had been appointed by a President and confirmed by the US Senate. The court held that the Federal Vacancies Reform Act of 1998 was pretty clear in what was supposed to happen for there to be a person who could be considered the ‘Acting Secretary’ and that Secretary Kirstjen Nielsen had not done what the act required while she still served in that position. 

Apparently, Secretary Nielsen had amended an Order of Succession (which covered temporary situations of emergency or disaster) as opposed to the relevant executive order which would have covered her replacement in the event of resignation, death or incapacity. The net effect of this error or omission was that the parade of supposedly ‘acting’ Secretaries who had come after Secretary Nielsen were unintentional imposters who had no power to act as the Secretary and thus could not take the last crucial step of signing off on a rule in order to promulgate it. Thus, we have the case of the rule that never was (and probably a whole lot more cases of never-was rules). 

It is truly hard to believe that such an oversight could occur in this day and age, but it did. Although it will probably serve as additional fodder for deep state conspiracy theorists who will see it as another example of an attempt to sabotage President Trump and his legacy. Palace intrigue aside, the law is the law and as it now stands, the July 2019 Rule, which had become effective in November, 2019, is no more and never really was. Even current Secretary Alejandro Mayorkas’s attempt to ratify the 2019 Rule this past March was to no avail to the Judge as she reasoned that he could not possibly ratify what never existed in the first place. 

Accordingly, as of June 22, 2021, for new petitions and those filed previously, the EB-5 investment amount for good old-fashioned (gerrymandered) TEA located projects reverts back to $500,000. This may in fact be a saving grace for any late filers who petitions did not arrive at USCIS before the 2019 Rule was supposed to become effective. It also may be another bite at the apple for those who want to obtain lawful permanent residency at bargain basement prices.

A word of caution before everyone gets too excited and rushes off to their favorite migration agents or regional centers. While what is old is now new again, it also may prove to be too good to be true. Firstly, the Department may choose to appeal. In a way, while based on sound legal reasoning, the decision is kind of silly. No one is arguing that the Department’s process, in following the administrative procedures act painstakingly over years, was flawed. But for the final signature, the rule would have been promulgated and the current secretary has said he would support the rule, so we’re going to end up with this rule sooner or later. In between, the decision has the potential to up end a large number of cases, not only related to EB-5, but for each and every rule signed by the three non-secretaries who didn’t have the power to do so. It may have been more advisable for the court to stay the effectiveness of the decision allowing the Department the opportunity to clean up the mess procedurally. The court did in fact consider this request, but rejected it. It could well be a worthy point for the appellate courts to better elucidate when a Department should be able to clean up procedural/technical messes such as this. 

A second point before filing under the old rules is the risk that Congress reverses the court. Retroactively applied laws are always a little dicey, but there is precedent for them. It may even be possible for the Department to do something on a retroactive basis, although a Department action would be more problematic than a law in this regard. Lastly, even if the Rule’s invalidation sticks, USCIS may try to stick it to anyone who tries to (ab)use it, causing delays beyond the multi-year process that already exists. 

Counsel and investors should think long and hard about whether to act aggressively in this circumstance. If, for example, a foreign investor had or was about to invest at least $500,000 in a company that met the job creation criteria, was in a TEA, and wanted to try for a Green Card as a bit of a bonus, then sure, why not. I would be hesitant to recommend to a typical EB-5 investor to move forward on a $500K investment (if the immigration motive were the primary or only reason for investing) unless they were properly advised of the risk very loudly and clearly, and really didn’t have the additional funds to cover the difference. Note to counsel, update your risk factors and get a specific investor acknowledgment on this one. For the moment, it is important to watch what the Department does next, both in terms of a potential appeal an action on the rule. 

As a last note, I will point out that this decision, slashing the price of EB-5, did come out on Amazon Prime Day. A coincidence……or not. I will leave it to the readers to decide.


About The Author

Matt Gordon is a noted expert in the EB-5 field and is an authority on structuring EB-5 investments. Mr. Gordon's career spans business operations, finance and law. He is the editor of the EB-5 Book, the legal treatise on the EB-5 program and a frequent lecturer to immigration attorneys. Mr. Gordon has participated in policy events, including those hosted by the White House and Harvard University's Kennedy School of Government. Prior to found E3 Investment Group, Mr. Gordon was an investment banker for a decade and ran the US division of a Swiss multi-national corporation. Mr. Gordon is a licensed attorney, having practiced mergers and acquisitions law at the beginning of his career with the largest and most reputable Wall Street firms including Fried Frank and Sullivan & Cromwell. Mr. Gordon received his B.S. in Policy Analysis from Cornell University and his J.D., cum laude, from the University of Pennsylvania School of Law.


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