Since its introduction in 1990, the EB-5 adjudication rules have undergone a number of major changes which have created an ebb and flow of foreign capital under the program in the United States. The biggest of such changes happened in the late 1990s:
Many of the EB-5 applications in the early 1990s involved limited partnerships that would pool multiple investors' money to be invested in a U.S. business but structured in a way that only a portion of the investor's capital reached the business enterprises by having much of the investment take the form of promissory notes of collateral that made it clear that a big portion of the invested capital was not at risk. In 1997, the Office of General Counsel issued an opinion that prohibited this practice, which in and of itself, was not a bad thing. The problem was, however, the Office of General Counsel directed legacy INS (the predecessor of today's USCIS) to previously approved I-526 petitions whose I-829s had not yet been approved. As a result, not only were all the I-526s filed before this change but not yet approved denied, but even worse, hundreds of people with conditional greencards through previously approved I-526 petitions were denied permanent greencards at the I-829 stage.
So what happened? Well, obviously, people sued. Without going into too much detail, in May 2001, a Californian district court ruled that the government cannot apply the standards retroactively to already approved I-526s and sent it back to the INS to review. They refused. Finally, in 2003, the Ninth Circuit Court of Appeals stepped in and said that what the INS was doing was "unfair" in its landmark decision Chang v. United States.
But note how long the process took: almost six years. And during this period, EB-5 numbers dropped sharply. You might think that other than the hundreds of people who were unfortunatly caught in the limbo why would it matter since new investors can just abide by the new rules? Well, most investors (or people who are closest to the investors, the local immigration consultants) do not keep up with judicial rulings or administrative rule changes. To many potential investors, the only thing they see are a friend or a family member investing a lot of money in a project to immigrate to the United States, sometimes even packing up to leave, then being told that everything is off. The program takes a huge hit of credibility and people are scared off. And then it takes a few years for the program to get back on its feet.
So what does history tell us and what exactly is the "tenant issue"?? To be continued…