U.S. EB-5 Program

“If I were to vacate it because I find it was invalid, it goes back to the secretary who could reimpose it if he agrees with it,” U.S. Magistrate Judge Jacqueline Scott Corley said during a virtual court hearing Thursday.

Congress established the EB-5 program immigrant investor program in 1990 to encourage foreign investment and job creation. It allows non-citizens that invest in job-creating projects to obtain visas to enter and stay in the United States.

According to the case, Department of Homeland Security (DHS) issued an “arbitrary and capricious” rule in November 2019 which makes it harder for immigrant investors to qualify for the EB-5 immigrant investor program. The rule raised required investments levels from USD $500,000 to USD $900,000 for targeted employment areas (TEAs) and from USD $1 million to USD $1.8 million for non-targeted areas. Targeted employment areas (TEAs) are designated areas with high unemployment for which foreign investment is incentivized by lower spending requirements.

The rule also gave DHS sole authority to designate Targeted employment areas (TEAs), eliminating the role of individual states in deciding where to prioritize investments. According to the case, the changes also favor rural areas by making cities and towns with 20,000 or more in population ineligible for Targeted employment area (TEA) designation.

The government says changes to Targeted employment area (TEA) designation are intended to make the process more transparent and less subject to “political whims” and “political pressures” in each state.

“That was in response to the gerrymandering that DHS found where states were designating Targeted employment areas (TEAs) Justice Department lawyer Vanessa Molina told the judge.

The government says the rule did not eliminate Targeted employment areas (TEAs) in urban areas. It simply limited the size of Targeted employment areas (TEAs) to smaller plots of land established as “tracts” by the U.S. Census Bureau.

“There could be designated areas of Targeted employment area (TEA) within Oakland, but perhaps not of Oakland,” Molina said. “To say it’s only available to rural areas that have 20,000 or less in population is incorrect.”

Judge Corley asked a few probing questions about the Targeted employment area (TEA) designation changes but turned most of her focus to another issue — whether two acting DHS secretaries who were never officially appointed to the role had authority to issue the rule.

The proposed rule was first issued in July 2019 under acting DHS secretary Kevin McAleenan. The final rule was issued on Nov. 21, 2019 under acting DHS secretary Chad Wolf, who had assumed the role two days earlier after McAlennan resigned.

Multiple courts and a congressional watchdog have found that McAleenan and Wolf were improperly elevated to the role of acting secretary. According to the U.S. Government Accountability Office, the job should have gone to Christopher Krebs, who was then director of the Cybersecurity and Infrastructure Security Agency, when the Trump administration’s last confirmed DHS secretary, Kirstjen Nielsen, resigned in April 2019.

On Thursday, Corley asked if any court has found McAleenan’s appointment valid.

U.S. Justice Department lawyer August Flentje acknowledged that no federal court has made such a finding.

Noting that the secretary’s legitimacy is a purely legal question that involves no factual disputes, Corley said she would convert the request for a preliminary injunction into a motion for summary judgment on that issue.

“That then sends it back to the secretary who’s going to have to take another look at it and decide what they want to do with it,” Corley said.

Justice Department lawyers asked to submit further arguments on the “de facto officer doctrine,” which they say allows the rule to stand even if it was issued under an illegitimate secretary.

The doctrine is intended to prevent “chaos that could result if a defect in an officer’s appointment required the mass invalidation of the officer’s past acts,” according to the government’s written arguments.

The government also requested an opportunity to file written briefs on what the proper remedy would be if the court finds the rule is invalid.

“Vacating the rule would be disruptive,” Flentje said. “People are preparing their investments based on the current standard.”

Corley hinted that she would not be easily persuaded by that argument.

“I don’t know how that disrupts any expectations because it just makes it broader,” Corley said. “Someone who couldn’t apply under the new rule now could apply.”

Corley ordered both sides to submit briefs on the “de facto officer” doctrine and remedy issue through April 22, and she set a tentative hearing date on the remedy for May 6.

Immigrant investor programs are programs designed to attract foreign capital and business people by providing the right of residence and citizenship in return. The reputation of the United States as target destinations for migration is the reason why the investment immigration programs in United States is among the world’s most popular.

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Source:Courthouse News