June 8, 2001
U.S. IMMIGRATION & NATURALIZATION SERVICE
CALIFORNIA SERVICE CENTER
P.O. BOX 10526
LAGUNA NIGUEL, CA 92607-0526
ATTENTION : CSC 9417 WS 241 DIV I
RESPONSE TO REQUEST FOR EVIDENCE
I-829 PETITION BY : LAM LEUNG, FUNG PING LANA
ENTERPRISE : VON VERDE PACKING HOUSE LIMITED
FILE # : A 46 379 381 RECEIPT # : WAC 00 105 00076
We write in response to your Form I-797 request for evidence dated March 21, 2001. As
requested, we enclose the Form I-797 notice and attachment.
On September 3, 1997, Mrs. Lam Leung, Fung Ping Lana submitted a petition for alien
entrepreneur immigrant status classification based on a $500,000 capital investment she
made in Von Verde Packing House Limited Partnership, (hereinafter “VVPH”), a duly
organized Arizona limited partnership established on February 9, 1996. The Immigration
& Naturalization Service (“INS) approved her petition and Mrs. Lam Leung entered the
U.S. as a conditional lawful permanent resident on January 13, 1998.
On January 7, 1999, petitioner timely filed an I-829 petition to remove the conditional
basis of her permanent residence based on the same investment reviewed and approved
by INS in her original I-526 petition.
By way of background, the general partner of VVPH is Von Verde Limited Partnership
(hereinafter “VVLP”), an Arizona Limited Partnership which was formed on July 15,
1992 to create a vertically integrated citrus enterprise which would enable foreign
investors investing in that enterprise to become U.S. permanent residents pursuant to
Section 203(b)(5) of the Immigration & Nationality Act. In 1994, VVLP diversified into
investments in commercial and residential development in the Mesa Del Sol real estate
To finance its agricultural and commercial activities, VVLP limited partnership interests
were sold to a total of 90 limited partners for U.S.$500,000 each, that figure satisfying
immigration regulations because the commercial enterprise is located in Yuma, Arizona,
a designated high unemployment area.
In 1994, the Immigration and Naturalization Service (hereinafter “INS”) conducted an
exhaustive investigation of the activities of VVLP over a period of four months. The
investigation was prompted by the unfounded allegations of an INS officer in Hong Kong
where VVLP investors were applying for their immigrant visas on the basis of previously
approved petitions. Interestingly, the officer was later placed on “administrative leave”
in 1997 for alleged unethical or corrupt practices. We therefore suspect that the earlier
allegations about Von Verde were made by that officer in bad faith because the success
of the Von Verde project was interfering with that officer’s own “extracurricular”
During that investigation, the INS requested the return of 23 previously approved VVLP
petitions for review by its California Service Center (hereinafter “CSC”) (which has
jurisdiction over petitions filed for Arizona enterprises.). Adjudication of other petitions
was held up.
After an intensive review which included an audit of the books and records of the
partnership and an examination of the investment terms and structure, the INS
pronounced the partnership and its pooled investment program as being in full
compliance with the law and immigration regulations. Approval of the petitions returned
from Hong Kong was reaffirmed. Petitions held in abeyance were approved.
In reliance upon these affirmative results, VVLP continued to offer limited partnership
shares and the INS continued to approve petitions filed by its limited partners.
Beginning in April, 1995, VVLP investors began to file petitions for removal of the two
year conditional period of their resident status in accordance with INA §216A. The INS,
however, withheld adjudication of 16 such petitions, apparently because of internal
discussion among high level INS officials concerning the validity of certain features of
pooled investment programs.
After a substantial delay, the INS issued a request for further information including a
description of the enterprise, how the funds invested by the investors were “at risk”,
copies of payroll ledgers, I-9s, W-4s for all employees hired, proof of the capital assets
held by the partnership and a host of additional issues which had to be addressed in
In response to concerns expressed at the delay in such adjudication by counsel for VVLP
and questions from counsel for other pooled investment programs, the INS held a briefing
at its California Service Center (“CSC”) on September 15, 1995. Among those in
attendance were Terrance O’Reilly, then Chief of the Immigrant Branch at INS
headquarters in Washington D.C.; Michael Straus, then Senior Immigration Examiner of
the Adjudications Division at INS headquarters who was responsible for employment
creation immigrant regulations and policy; Joseph Thomas, then director of the CSC; Ken
Takeda, the CSC’s ombudsman; Mary Agnelly, then CSC Supervisory Immigration
Examiner; four immigration examiners; attorneys from Bryan Cave, then counsel for the
general partner of VVLP, and counsel for other pooled investment programs.
Central topics for discussion at the meeting were two recently published opinions of the
INS’s general counsel. One had been dated September 10, 1993 and the other June 27,
1995. In response to concerns expressed, Mr. Straus specifically stated in that meeting
that petitions and applications submitted in good faith and adjudicated favorably by INS
would not be denied at the removal stage because of a change in interpretation by the
then General Counsel, that several points in that General Counsel’s legal opinion were
incorrect on the law and that no one would be held to performance based on erroneous
interpretations of the law as stated in the General Counsel’s opinion. Mr. Thomas and
Ms. Agnelly further added that the General Counsel’s opinion was, in any event, advisory
and not binding on the CSC and petitioners would not be harmed by readjudication of
issues clearly considered and approved previously.
Mr. Michael Straus further disclosed at said meeting that the INS was then considering
the publication of revised regulations to take the impact of the general counsel’s opinions
into account and that such regulations, if adopted, would not be applied retroactively:
that is, they would not be applied to petitions approved prior to the publication of any
such regulations by investors who had in good faith followed then existing regulations
and INS interpretations. He also said that any other newly published INS interpretations
would not be applied to petitions approved before dissemination of any such new
interpretations. Joseph Thomas and Mary Agnelly said they would not re-adjudicate
previously approved investor petitions.
After that large meeting, Mr. Thomas met with counsel from Bryan Cave in a smaller
meeting to discuss the Von Verde project specifically. He called in Mr. Ken Takeda (the
Ombudsman) and Mr. Michael Straus and it was agreed that Von Verde would be
permitted to prepare one core response rather than to have to duplicate and respond to
each individual removal of conditions case filed. Mr. Thomas further directed that two
CSC adjudicators be assigned to review all Von Verde cases under the supervision of Ms.
Since the tax returns submitted to the CSC did not tell the full story of the extent of Von
Verde’s business activities, and in view of the voluminous documentation requested by
INS and to obviate the need to submit repetitive information for each petition then
pending, the CSC further agreed that the best way to review the Von Verde project was
for counsel for VVLP to make a “live” factual and legal presentation with respect to the
16 withheld removal of conditions petitions. All issues raised by the INS could then be
addressed in the give and take of a “live” discussion and additional documentation
submitted and explained.
The presentation took place on November 6, 1995 and included an update on all of
VVLP’s business activities, the submission of financial statements, aerial and ground
photographs of the citrus groves operated by VVLP, the commercial development, in
addition to federal and state tax returns for VVLP’s then three years of operations, and
other documentation confirming the good faith of its business activities, an explanation of
the viability of VVLP’s business projects, and lists of employees along with I-9s and W-
4s which confirmed the employment of at least ten U.S. citizens or lawful permanent
residents per immigrant investor. Specifically, schedules of full-time employees of Von
Verde Harvesting, Inc., the 100% subsidiary of VVLP as of October 22, 1995 were
presented along with a projection that full-time positions were slated to increase to 375
by the end of 1995.
During that presentation, VVLP provided the CSC with a comprehensive business plan
through 1999. Among other things, the plan pointed out that the entire Yuma, Arizona,
citrus industry had been devastated recently by a disease known as coniophora; and that,
as a result, VVLP would have to replant everything during the next several years and
would be establishing another partnership, VVPH, to raise critically needed new capital
for such planting and subsequent harvesting operations and to purchase, modernize and
operate a new citrus packing plant. As a result, VVLP pointed out that the Von Verde
ventures could not expect to earn income for at least four years and would be dependent
during that time on capital invested by prospective immigrants.
After that presentation, follow-up documentation was provided on November 15, 1995 to
the CSC about the full-time qualifying employees which had been hired by VVLP’s
100% owned subsidiary, Von Verde Harvesting, Inc., in a format agreed to with the CSC.
Specifically, because of the high employee turnover rate in the citrus industry, it had been
agreed with the CSC that in addition to the boxes of employees’ documentation already
submitted at the “live” presentation, it would be more manageable to present schedules of
full-time employees hired to date, allocating 10 full-time positions in support of each
investor seeking removal of conditions. After this additional submission, the INS found
VVLP’s pooled investment program in full compliance with the law and immigration
regulations under §203(b)(5) of the Immigration & Nationality Act and approved all 16
petitions on November 16, 1995.
As a result of the presentation and follow-up documentation requested by the CSC which
were submitted on November 15, 1995, the INS once again found VVLP’s pooled
investment program in compliance with the law and immigration regulations under
Section 203(b)(5) of the Immigration & Nationality Act. Accordingly, it approved all 16
petitions on November 16, 1995. As of December, 1997, the INS had removed the
conditions on the resident status of 66 immigrant investors in the VVLP program.
Relying on INS’s specific finding that its program was in compliance with law and
regulations after exhaustive reviews in 1994 and 1995 and in further reliance on INS’s
published interpretations and assurances made at various conferences and meetings as to
the acceptability of pooled investments structured as limited partnerships, Von Verde
Packing House Limited Partnership (VVPH) was formed on February 9, 1996 with
VVLP as its general partner and foreign investors as limited partners to raise additional
capital for the operations of a citrus fruit packing house, to replenish capital used to
replant citrus trees devastated by the coniophora disease, to acquire additional citrus
groves and other real property for investment and potential development and to contract
for the picking and harvesting of oranges, lemons, grapefruits, tangerines and other citrus
fruits for VVLP and other citrus growers.
From September, 1992, and continuing until November, 1997, the INS approved no less
than 90 petitions by limited partners in the VVLP and 65 petitions in the VVPH
partnership. As a result of these investments, capital was provided for the purchase of
citrus ranches, trees, equipment and vehicles, packing houses, development property and
other such ranch improvements assets such as wells, wind machines, fences and an
irrigation system and to create full time employment for qualifying employees.
As of December, 1997, the INS had removed the conditions on the lawful permanent
resident status of 66 immigrant investors in the VVLP program based on updated federal
and state tax returns and updated schedules of employees submitted in the agreed upon
format when they became available.
However, beginning in December 19, 1997, the INS began to stop further processing of
virtually all immigrant investor petitions and removal of conditions petitions on the
authority of a general counsel opinion issued that date concluding that certain investment
programs had features in their investment plans which did not meet the requirements of
Despite the INS’s long history of approving identical petitions filed by VVLP and VVPH
investors and the fact that the Von Verde project had none of the offending features
mentioned in the General Counsel’s opinion, and the fact that it had relied on substantive
and thorough reviews of its program instead of on the lobbying efforts of former
government officials which some other large “pooled investment” programs had relied
on, the INS stopped adjudicating the I-829 petitions filed by VVLP investors and the I-
526 petitions filed by VVPH investors.
On March 11, 1998, the INS Headquarters’ Office of Programs announced its decision to
implement the General Counsel’s Opinion on March 11, 1998 and to hold off on the
adjudication of certain petitions with the offending characteristics. INS Headquarters
also directed that previously-approved investor petitions which were then pending at
consular posts overseas be returned for review for compliance with its new requirements.
Prior to the decision to return approved petitions pending final processing at oversea
consular posts to INS for petitioner’s review, counsel had made submissions to the U.S.
Consulate in Hong Kong as well as to the Director of the Department of State’s Office of
Legislation, Regulations and Advisory Assistance and to the Legal Advisory Opinions
Section of the Visa Office that the General Counsel’s Opinion of December 19, 1997 had
no applicability to the Von Verde investment program and that the pending cases of
VVPH overseas investors should be released from the “hold” and immigrant visas issued.
The INS, however, decided to go ahead and recall all cases pending at the consulate for
review despite our submissions, and a total of twenty-two VVPH investors whose
petitions had been approved by INS but who had not completed processing their
immigrant visas were returned to the INS for review.
From March 13, 1998 onwards, lawyers hired by Von Verde had a series of extensive
meetings with senior officials at INS headquarters including Michael Beecraft, Chief of
Staff to then INS Commissioner Doris Meissner, David Dixon, INS Deputy General
Counsel, Derrick Smith, a lawyer in the General Counsel’s Office, Alan Ehrenbaum,
Director of the INS Office of Congressional Relations, and Jacqueline Bednarz, then
Acting Assistant Commissioner.
These series of meetings with senior officials at INS Headquarters culminated in a
memorandum issued by Jacquelyn A. Bednarz, Acting Assistant Commissioner on May
21, 1998 (HQ 40/6.1.3) that attorneys with cases which they believe not to be within the
“hold” order should write to the Deputy Director of the Service Center where their cases
were pending to request that their cases be removed from the “hold” and adjudicated.
From March 3, 1998 through June 24,1998, during the official “hold period”, the INS
approved seven VVPH “all equity” ($500,000) cash investors’ cases which had been put
on “hold”, out of which six investors and their families were later issued immigrant visas.
The remaining approved case involved an investor already in the U.S. who had to wait
for an interview to be scheduled with INS in order to adjust his status in the U.S. to
conditional lawful permanent resident status.
These approvals were a very positive development because it was at least a confirmation
that the project itself met the requirements of the law and that the only legal issue which
had to be settled was whether the capital contributed by each investor could be partly in
the form of “real property” or “debt” in favor of the partnership instead of “all cash”. As
the term “capital” is clearly defined in the regulations implementing the investor law and
by administrative interpretations since the inception of the law to include “cash”,
“tangible property”, and “debt”, VVLP and VVPH remained confident that investors in
the Von Verde programs would have their cases that had been held up approved in due
On July 23, 1998, relying on Acting Assistant Commissioner for Adjudications,
Jacquelyn A. Bednarz’s memorandum of May 21, 1998 (HQ 40/6.1.3) to all Service
Centers that attorneys who believe they have EB-5 petitions which should not be subject
to the “hold” may fax a request to the Deputy Director of the Service Center with
jurisdiction over their cases to request that their cases be removed from the “hold”,
counsel made a submission to the Acting Director of the CSC to explain to the CSC that
the Von Verde project did not have any of the features found objectionable by INS as
announced in its general counsel’s memorandum of December 19, 1997 and should
therefore be removed from the “hold”. A copy of that submission is attached in the
Appendix as Exhibit (1) for your easy reference.
On August 19, 1998, a supplementary submission was made by Roxana Bacon, Esq. of
Bacon & Merritt which presented documentary materials about VVLP and VVPH.
This submission included an application of funds schedule prepared as of April 30, 1998
explaining in detail how the investment funds from Von Verde investors have actually
been used, aerial and on the ground photographs of the citrus groves and other
photographs of the hard assets of the business and Von Verde’s workers; a summation of
the history of the project, and information about the Mesa Del Sol real estate
development project in which Von Verde has significant interests. It also reiterated an
on-going invitation for INS to visit Von Verde’s substantial operations to ensure its
A copy of Ms. Bacon’s letter which accompanied this documentary submission,
including an extra copy of the Von Verde Program Summary update through July, 1998
is attached as Exhibit (2).
In addition, we are incorporating by reference the documents which were sent along with
Ms. Bacon’s submission which are presently still on file with the CSC since those
documents were sent as a submission on behalf of all Von Verde cases on “hold”. In the
event this removal of conditions is denied and we have a need to renew our application
before an immigration judge or to seek review in the federal courts, these documents are
attached collectively here as Exhibit (3) and include:
An Application of Funds schedule accounting for the usage of the funds raised by
VVLP and VVPH through April 30, 1998.
1992 aerial photographs of the Von Santau Ranch.
Photographs of the original 840 acres of the Von Santau Ranch where diseased
trees have been replaced by new trees.
Photographs of 400 acres of barren land purchased in 1995 which have been
planted in 1996 with minneola trees and photographs of state land lease - 160
acres planted in 1997-1998 with lemon trees.
1996 aerial photographs of Von Santau Ranch.
1998 aerial photographs of Von Santau Ranch.
1996 aerial photographs of Ranch 1100.
1998 aerial photographs of Ranch 1100 and photographs of Ranch 1100 - tree
Photographs of Verde Growers Packing House.
Photographs of Von Verde Citrus Packing House and sketch of preliminary
changes and upgrades to existing facility.
Mesa Del Sol commercial/residential development aerial photographs taken in
Photographs of Rancho Del Oro and Unit 9 developments.
Photographs of Harvesting crews employed by Von Verde Harvesting Inc., VV
Harvesting, Inc. and Yuma Citrus Harvesting, Inc., all wholly owned subsidiaries
of VVLP and VVPH.
Map of proposed annexation by City of Yuma.
At about the time petitioner’s counsel submitted her request to have the Von Verde
investors’ cases removed from the hold, the INS’s Administrative Appeals Office (AAO)
published four precedent decisions to provide guidance in the adjudication of EB-5 cases:
Matter of Soffici, I.D.3359 (Assoc. Comm. Examinations, June 30, 1998); Matter of
Izumii, I.D. 3360 (Assoc. Comm. Examinations July 13, 1998); Matter of Ho, I.D. 3362
(Assoc. Comm. Examinations, July 31, 1998) and Matter of Hsiung, I.D. 3361 (Assoc.
Comm. Examinations, July 31, 1998).
On January 25, 1999, the CSC Director Dona L. Coultice wrote to the petitioner’s
counsel in response to her letter dated July 23, 1998 to advise that “A sampling of the
Von Verde cases subject to the hold have been re-reviewed to verify if the hold criteria
was correctly applied, and it was determined that they should remain subject to the hold”.
Ms. Coultice further noted that “A specially trained team of seasoned Adjudication
Officers have been and will continue to review those cases subject to the hold … [and
that] [u]pon completion of the extensive review and adjudication process by the team in
receipt number order, you be notified of any action taken”.
The instant request for further evidence (RFE) was received by petitioner’s counsel in
Hong Kong on March 27, 2001. While the RFE facially appears to be a good faith
attempt by the INS to seek additional evidence to clarify petitioner’s eligibility for
removal of conditions and does not refer specifically to the four AAO precedent
decisions which radically altered previous long standing INS policy, an examination of
most of the issues raised by the RFE reveals that the RFE is in reality an attempt by the
INS to apply the more restrictive new requirements announced in the four AAO
precedent decisions on a retroactive basis.
This Response will now address each of the issues raised in the RFE.
(1) PARTICIPATION IN THE ESTABLISHMENT OF A NEW
The first issue raised in the RFE is the imposition of the requirement first
announced in Matter of Izumii that the petitioner must either show that he
“participated in the establishment of a new commercial enterprise” or “show that
[his] investment has resulted or will result in the restructuring or reorganization of
the existing business” or show that his investment has expanded the enterprise’s
net worth or number of employees by 40 percent.
Since VVPH was established on February 9, 1996 and petitioner invested in the
partnership on September 2, 1997, the RFE concludes she has failed to show that
she “has established” VVPH and requests evidence that petitioner’s investment
has expanded VVLP’s net worth or number of employees by 40 percent.
Matter of Izumii and the other AAO precedents are binding on newly-filed I-526s.
They have also been applied retroactively by the INS to support the revocation of
I-526 petitions previously approved where the petitioners have not yet become
conditional permanent residents. They are not binding, however, on the INS in
the I-829 context, where petitioners have already become conditional permanent
residents prior to the publication of the precedents in reliance of past long-
standing INS policy interpretations.
If the INS is just beginning to implement the EB-5 program legislated by
Congress, we would not quarrel with the AAO conclusion that Section 203(b)(5)
of the Immigration & Nationality Act literally states that the employment creation
visas for qualified immigrants are to be provided to immigrants who seek to enter
the U.S. for the purpose of engaging in a commercial enterprise which the alien
has established (emphasis added) in which said alien has invested or is actively in
the process of investing the requisite statutory amount of US$500,000 or $1
However, the fact of the matter is that lawyers practicing in the EB-5 field have
had to rely completely on the interpretation which INS officials charged with
implementing the law have given and INS’s established practice for the past eight
years until the Izumii decision was published as a precedent.
To further the legislative intent to promote the infusion of capital and to create
jobs for U.S. workers, and perhaps in recognition of the fact that the person who
actually signs the formation or establishment documents of a business entity may
be a lawyer, paralegal, secretary, accountant or the like who is performing a
routine administrative task and may not be the person or persons actually involved
in the business later and that this ministerial task is really “form over substance”,
the former General Counsel, former Executive Associate Commissioner, former
Associate Commissioner for Examinations, former Assistant Commissioner, and
two successive Immigrant Branch Chiefs – the highest level officials of INS –
chose to interpret the “establishment” requirement flexibly to permit limited
partners joining pooled investments at varying periods of time to be regarded as
having constructively complied with the “establishment” requirement provided
that the dual congressional purposes of infusion of foreign capital and creation of
jobs are met.
8 CFR §204.6(g)(1), the implementing regulation which discusses petitions by
multiple investors, states:
“The establishment of a new commercial enterprise may be
used as the basis of a petition for classification as an alien
entrepreneur by more than one investor, provided each
petitioning investor has invested or is actively in the
process of investing the required amount for the area in
which the new commercial enterprise is principally doing
business, and provided each individual investment results
in the creation of at least ten full-time positions for
qualifying employees. The establishment of a new
commercial enterprise may be used as the basis of a
petition for classification as an alien entrepreneur even
though there are several owners of the enterprise, including
persons who are not seeking classification under §203(b)(5)
of the Act and non-natural persons, both foreign and
domestic, provided that the source(s) of all capital invested
is identified and all invested capital has been derived by
Nowhere in this regulation does the INS impose a requirement that the investor in
a multiple-investor commercial enterprise must play a participatory role in the
establishment of the new commercial enterprise. Instead, consistent with the
statutory intent of attracting investment capital into the U.S. economy and
creation of jobs for American workers, the regulation as promulgated flexibly and
simply states that “The establishment” (emphasis added) of a new commercial
enterprise may be used as the basis of a petition, not that each investor in a
multiple investor commercial enterprise must have “participated in the
establishment” of the enterprise.
The petitioner in the instant case and her counsel have had to rely completely on
the interpretation which the senior immigration officials charged with
implementing the law have consistently given to the adjudication of multiple-
investor EB-5 petitions and INS’s established policy that limited partners joining
a partnership over varying periods of time can be regarded as complying with the
requirement of having “established” the commercial enterprise he/she is investing
in so long as the dual congressional intent to promote the infusion of capital into
the U.S. economy and the creation of jobs are met.
Furthermore, 8 CFR§204.6(e), the INS regulation implementing §203(b)(5) of the
Act defines a “new” enterprise as a business enterprise established after
November 29, 1990 and Von Verde Packing House Limited Partnership was
established on February 9, 1996.
As stated earlier, 8 CFR Section 204.6(g) permits the establishment of a new
enterprise to be used as the basis of a petition for classification as an alien
entrepreneur by multiple investors, provided each petitioning investor has
invested or is actively in the process of investing the required capital amount and
provided that each individual investment results in the creation of at least ten full-
Because the business reality is that it is virtually impossible for businesses who
put together pooled investments such as a limited partnership to first secure a pool
of investors committed to go forward with an investment before joining together
to “establish” the business entity and because it is common business practice to
first establish the entity and then offer subscriptions to interested investors, the
Service has interpreted the “has established” requirement flexibly and concluded
that an investor meets this requirement and can thus qualify for alien entrepreneur
immigrant classification even though he/she is joining a new commercial
enterprise after its actual initial establishment as a business entity.
This interpretation has been the INS’s consistent view affirmed by its highest
officials over the entire history of the program. In reliance on this interpretation
and the INS’s consistent and established policy of approving petitions from
investors who are limited partners joining limited partnerships over varying
periods of time, limited partners such as Mrs. Lam Leung have invested in VVPH
and VVPH has made business commitments and spent millions in capital to
acquire and develop citrus groves, packing houses, wind machines, fruit
protection and irrigation systems and machinery and equipment for harvesting and
farming and to acquire other real estate for development purposes.
In addition to established practice and INS memoranda issued by the most senior
INS officials charged with implementing the law, Von Verde Packing House
Limited Partnership also relied specifically on INS clearances in 1994 and 1995.
In both 1994 and 1995, as already explained above, the Von Verde project was
scrutinized in detail. In each instance, after a substantial delay and intense
scrutiny, all pending cases were cleared and approved.
It should be further noted that unlike other large-scale projects which had never
been specifically scrutinized until the INS General Counsel’s opinion of
December, 1997, the INS clearances (in 1994 and 1995) were obtained only after
a thorough investigation and examination with input from the INS Central Office
To the extent there have been excesses and objectionable characteristics in certain
pooled investment projects, these have been adequately addressed by the General
Counsel’s Opinion of December 19, 1997 and the four AAO precedent decisions.
But the present interpretation of the “establishment” requirement as expressed by
the AAO in its Izumii decision is dicta totally unnecessary to the disposition of
the Izumii case and certainly ought not be binding in the removal of conditions
The “establishment” aspects of the Izumii decision is simply an unnecessary tool
to combat perceived abuses of the investor category by some programs. To
implement, especially on a retroactive basis, the “establishment” aspects of the
Izumii decision would be the death knell of all multiple-investor EB-5 projects
and akin to “throwing out the baby with the bath-water” for it would financially
ruin perfectly legitimate EB-5 projects which have acted in good faith and thwart
the legislative intent to attract investment capital into the U.S. economy and create
First of all, the “establishment” aspects of the Izumii decision are so inconsistent
with the INS’s previously expressed interpretation of the law and its own
regulations, it is violative of the Administrative Procedure Act unless the Service
enacts a regulation imposing such a requirement after due notice and opportunity
for public comment in the Federal Register. It should not be implemented as a
matter of law through ad hoc adjudication.
Secondly, Izumii does not bind the INS to conclude that a Von Verde petitioner
who has already had an I-526 approved and become a conditional permanent
resident must now meet the “establishment” requirement for purposes of removal
of conditions. This new interpretation can be applied only on a prospective basis
to I-526 cases filed after the publication date of the Izumii decision. As a matter
of basic fairness, it most certainly should not be applied to a case such as Mrs.
Lam Leung’s, whose original I-526 was filed and approved by the INS prior to
Izumii’s publication as a precedent.
While 8 CFR §103.3(e) states that INS precedent decisions are binding on all
Service employees in the administration of the Act, decisions which are
designated precedents only bind future cases. The Izumii decision and the other
three AAO precedent decisions do not state that they are to apply retroactively to
conditional residents who have already immigrated on the basis of I-526 petitions
approved before the precedent decisions were issued in mid-1998.
A. There Is a Violation of the Administrative Procedure Act if the Requirement
That the Alien Must Have Participated in the Establishment of the Business
Announced in Izumii Is Applied to This Case
The Administrative Procedure Act (APA), 5 U.S.C. § 552 et seq., requires that
before an agency may issue a rule1, it must first publish the proposed rule in the
Federal Register to provide the public with notice of the rule, permit interested
persons the opportunity to provide comment on the proposed rule and participate
in the rulemaking process, address and respond to each comment provided, and
incorporate in the rule a concise general statement of the rule‟s basis and purpose.
5 U.S.C. § 553(b), (c).
Only after the APA‟s “notice and comment” requirements are met may the agency
then issue the final rule. This rulemaking process under the APA is mandatory,
not discretionary. If an agency has violated the APA‟s rulemaking requirements
by issuing a rule in an adjudicative proceeding without notice and comment, the
rule is deemed invalid. Linoz v. Heckler, 800 F.2d 871, 878 (9th Cir. 1986).
It is well-settled that a statement, explanation, clarification, or interpretation is
deemed to be a “substantive” (or “legislative”) rule, which requires notice and
comment rulemaking, if it constitutes an agency statement of binding and general
or particular applicability and future effect, alters, changes or adds to existing
rules, policies, or interpretations, affects the rights and obligations of parties, adds
to the legal norm by creating new rights or duties, has widespread application,
and/or is inconsistent with a prior rule, policy, practice or interpretation. Alaska
Professional Hunters Ass‟n, Inc. v. FAA, 177 F.3d 1030, 1035 (D.C. Cir. 1999);
Syncor Int‟l Corp. v. Shalala, 127 F.3d 90, 93-96 (D.C. Cir. 1997); Yesler Terrace
Community Council, 37 F.3d 442, 448-49 (9th Cir. 1994); Ford Motor Co. v.
FTC, 673 F.2d 1008, 1009-10 (9th Cir. 1981); Bahat v. Sureck, 637 F.2d 1315
(9th Cir. 1981); Patel v. INS, 638 F.2d 1199 (9th Cir. 1980); Ruangswang v. INS,
591 F.2d 39 (9th Cir. 1978); NLRB v. Wyman-Gordon Co., 394 U.S. 759, 764-65
(1969); Linoz, 800 F.2d at 878.
By contrast, an “interpretive” or “adjudicative” rule is generally defined as a mere
agency explanation or clarification of an existing statute made to address specific
and narrow facts that arise in a single, isolated adjudicative proceeding. An
interpretive rule may be issued without notice and comment only if such rule: (1)
is not inconsistent with any prior rule, policy or interpretation; (2) does not affect
the rights or obligations of parties; (3) does not alter or add to existing rules or
interpretations; (4) does not have binding future effect of general or particular
applicability; and (5) does not add to the legal norm by creating new rights or
duties. Syncor, 127 F.3d at 93-96; Yesler, 37 F.3d at 448-49; Linoz, 800 F.2d at
878; Ford Motor Co., 673 F.2d at 1009-10; Patel, 638 F.2d at 1199; Ruangswang,
591 F.2d at 39; NLRB v. Wyman-Gordon, 394 U.S. at 764-65.
If the “interpretive rule” fails to meet any of these requirements, it by definition is
a “substantive rule” and is invalid if made without prior notice and comment. The
The APA defines a “rule”, requiring notice and comment, as “the whole or part of an agency statement of
general or particular applicability and future effect designed to implement, interpret, or prescribe law or
policy or describing the organization, procedure, or practice requirements of any agency.” 5 U.S.C.§551(4).
term “interpretive rule” is not synonymous with the word “interpretation.” The
latter is deemed a substantive rule if it meets the above definition, even if it
“interprets” an agency policy or rule. The interpretive rule exception is narrowly
construed. In determining whether a rule is “substantive,” the APA focuses on
the effect and impact the agency statement will have on all future adjudications
and requires the statement to be reviewed in conjunction with all prior rules,
interpretations and policies, to determine whether it is inconsistent with or has
added to or changed an existing rule, interpretation or policy. The agency‟s
rationale and purpose for making the statement is of no consequence to whether
the statement constitutes a substantive rule requiring rulemaking. “The primary
distinction between a substantive rule--really any rule--and a general statement of
policy, then, turns on whether an agency intends to bind itself to a particular
legal position.” Syncor, 127 F.3d at 94 (emphasis added).
Once a rule is deemed substantive, based on its future effect and/or inconsistency
with prior rules, interpretations, policy, etc., it is deemed invalid if issued in an
adjudicative proceeding. In NLRB v. Wyman-Gordon Co., 394 U.S. 759 (1969),
the Supreme Court invalidated a substantive rule that the National Labor
Relations Board (NLRB or Board) had created by adjudication. The Court held
that the NLRB could not promulgate a substantive rule under the APA without
notice and comment simply by claiming it was an adjudication:
The rule-making provisions of the Act, which the Board would
avoid, were designed to assure fairness and mature consideration
of rules of general application. See H.R. Rep. No. 1980, 79th
Cong., 2d Sess., 21-26 (1946); S. Rep. No. 752, 79th Cong., 1st
Sess., 13-16 (1945). They may not be avoided by the process of
making rules in the course of adjudicatory proceedings. There is no
warrant in the law for the Board to replace the statutory scheme
with a rule-making procedure of its own invention. Id. at 764.
Similarly, in Ford Motor Co. v. FTC, 673 F.2d 1008 (9th Cir. 1981), the Ninth
Circuit held that the Federal Trade Commission exceeded its authority by creating
a new law of general application through adjudication rather than by rulemaking.
The court held that “agencies can proceed by adjudication to enforce discrete
violations of existing laws where the effective scope of the rule‟s impact will be
relatively small; but an agency must proceed by rulemaking if it seeks to change
the law and establish rules of widespread application.” Id.. at 1009 (emphasis
added). The court found that the agency‟s new rule would not just apply to the
plaintiff, but would essentially change existing law and have widespread
application. As such, the agency was required to proceed by rulemaking. Id. at
In Pfaff v. HUD, 88 F.3d 739 (9th Cir. 1996), the Ninth Circuit invalidated a new
rule that the U.S. Department of Housing and Urban Development (HUD) had
announced by adjudication because the rule was found to be broad, general, and
retroactive in application, and because it was inconsistent with and departed
abruptly from HUD‟s previous interpretations.
The Pfaff case involved certain FHA regulations covering discrimination in
privately owned rental housing on the basis of family status. The Pfaffs were
landlords who refused to rent a house to a family composed of two adults and
three children. They had decided that the house was large enough for a family of
only four. Under a HUD policy, a landlord‟s restrictions on family size were
permissible if reasonable. But in the midst of their case, HUD came down with a
ruling in a particular case to the effect that a landlord had to show a compelling
business necessity in order to justify discrimination based on family size.
While agreeing that a compelling business necessity might be an appropriate
standard, the Ninth circuit said, it would be “fundamentally unfair to hold the
Pfaffs to this standard given HUD‟s truly appalling conduct in this matter.” Pfaff
True, an agency‟s decision is entitled to deference whether by rule making or
adjudication, but “Justice dictates, however, that our general rule of deference to
announcements of law by adjudication have its exceptions. As the Supreme Court
has cautioned, there may be situations where the [agency‟s] reliance on
adjudication would amount to an abuse of discretion …”. Such a situation may
present itself where the new standard, adopted by adjudication, departs radically
from the agency‟s previous interpretation of the law, where the public has relied
substantially and in good faith on the previous interpretation, where fines or
damages are involved and where the new standard is very broad and general in
scope and prospective in application.” … (citations omitted)
No such deference is called for here because the new compelling business
necessity standard “departs abruptly from HUD‟s preexisting “reasonableness”
standard. Radically inconsistent interpretations of a statute by an agency, relied
upon in good faith by the public, do not command the usual measure of deference
to agency action.” 88 F. 3d at 749.
The Pfaffs conduct took place before the case imposing the new standard was
decided. The “element of retroactivity” said the court, “only amplifies the
unfairness of the holding to the Pfaffs …” at 749. So the court reversed the HUD
The court was especially troubled in Pfaff that “HUD has made inconsistent and
misleading representations to those regulated . . . and, in so doing, has led them
down the garden path.” Id. at 747. The court further reasoned:
The disadvantage to adjudicative procedures is the lack of notice
they provide to those subject to the agency‟s authority. While
some measure of retroactivity is inherent in any case-by-case
development of the law, and is not inequitable per se, this problem
grows more acute the further the new rule deviates from the one
before it. Adjudication is best suited to incremental developments
to the law, rather than great leaps forward. The APA contains
numerous mechanisms, such as the notice and comment
rulemaking procedure, by which the public is given notice of
proposed changes before they occur. See generally APA § 552,
553, 557. For this reason, the Supreme Court has concluded that
“rulemaking is generally a better, fairer, and more effective
method of announcing a new rule than ad hoc adjudication.”
Community Television of S. Cal. v. Gottfried, 459 U.S. 498, 511
103 S. Ct. 885, 893, 74 L. Ed. 2d 705 (1983). Id. at 748.
In Ruangswang v. INS, 591 F.2d 39 (9th Cir. 1981), the Ninth Circuit found that
the INS violated the APA and abused its discretion by attempting to establish a
new standard for immigrant investors through the adjudicatory process and then
tried to apply the new standard to the alien. The adjudicatory opinion sought to be
applied to Ruangswang‟s immigrant investor petition had, like the new rules in
the AAO 1998 EB-5 “precedent” decisions, been published in a prior adjudicative
proceeding: Matter of Heitland, 14 I. & N. Dec. 563 (BIA 1974).
Heitland was decided after Ruangswang had already made her investment, in
reliance upon the INS‟s prior policy and application of the law and the Ninth
Circuit reasoned that even if there was a valid adjudicatory creation of an agency
standard, the INS abused its discretion by applying that standard to Ruangswang,
who had no prior notice under the APA of its existence.
The court quoted from NLRB v. Bell Aerospace Co., 416 U.S. 267, 295 (1974),
that the “adverse consequences ensuing from . . . reliance [upon the agency‟s past
decisions may be] so substantial that the [agency] should be precluded from
reconsidering the issue in an adjudicative proceeding.” Ruangswang, 591 F.2d at
44 and concluded that “the Board improperly applied the law [issued in Heitland]
to Mrs. Ruangswang‟s application, whether it was attempting to create a new
standard of conduct by adjudication or believed that it was merely interpreting the
relevant regulation.” Id. at 46.
Likewise, in Patel v. INS, 638 F.2d 1199 (9th Cir. 1980), the INS, by an
administrative adjudication (Matter of Heitland), added a requirement to the
regulations governing the eligibility of immigrant investors for visas. The Ninth
Circuit, relying on NLRB v. Wyman-Gordon, disallowed the requirement because
it changed past practices through the “prospective announcement of a broad,
generally applicable requirement, amount[ing] to „an agency statement of general
and future effect.‟” Patel, 638 F.2d at 1204 n.5 (quoting the APA).
The Patel court held that the INS, by applying its adjudicatory decision in
Heitland to the petitioner, abused its discretion because it was doubtful the alien
“could have clearly determined what he must do to qualify for the exemption.
The INS had been sending aliens confusing signals.” Id. at 1205. The Court of
Appeals reasoned that the rule of law at issue should have been established by
rulemaking because the situation called for a general standard, not a case-by-case
Furthermore, Alaska Professional Hunters Ass‟n, Inc. v. FAA, 177 F.3d 1030
(D.C. Cir. 1999), contains many parallels to the situation here. In that case, the
appellants were hunting and fishing guides in Alaska who flew light aircraft as
part of their guiding services. Since 1963, the FAA‟s Alaska Region had
consistently advised guides in that state that they were not governed by the
agency‟s regulations for commercial pilots, but were only subject to the general
rules governing private aviation.
Then, in 1998, the FAA‟s headquarters in Washington, believing that the Alaska
Region‟s long-standing advice was premised on an erroneous reading of an old
Civil Aeronautics Board decision, published a “Notice to Operators” in the
Federal Register, informing Alaska guide pilots that they were now subject to the
commercial aviation regulations. The guides challenged that change, alleging that
the FAA was trying to evade its rulemaking obligations under the APA. The
FAA‟s principal defense was that the “Notice to Operators” was merely an
interpretive rule, and therefore exempt from the APA‟s normal notice and
The Court of Appeals disagreed, ruling that “[w]hen an agency has given its
regulation a definitive interpretation, and later significantly revises that
interpretation, the agency has in effect amended its rule, something it may not
accomplish without notice and comment.” 177 F.3d at 1034. Nor was the court
swayed by the agency‟s argument that the Alaska Region‟s advice to the guide
pilots represented a “local enforcement omission, in conflict with the agency‟s
policy in the rest of the country.” The court found that:
Those regulated by an administrative agency are entitled to „know
the rules by which the game will be played.” Alaska guide pilots
and lodge operators relied on the advice FAA officials imparted to
them—they opened lodges and built up businesses dependent on
aircraft, believing their flights were subject to [general aviation
requirements] only. That advice became an authoritative
departmental interpretation, an administrative common law
applicable to Alaskan guide pilots. The FAA‟s current doubts
about the wisdom of the regulatory system followed in Alaska for
more than thirty years does not justify disregarding the requisite
procedures for changing that system.
Id. at 1035 (citations omitted).
The same considerations outlined by the D.C. Circuit in Alaska Professional
Hunters apply with equal force to this RFE. Mrs. Lam Leung made her
investment for EB-5 purposes in justifiable reliance on opinion letters,
memoranda, and the INS‟s numerous prior approvals of similar investor visa
petitions in the identical project. If the Service now decides that the regulatory
regime for that program is not accomplishing the statutory purpose, it is of course
entitled to change the rules—but only in the manner provided for by the APA, and
not with retroactive application.
In the present case, the INS‟s existing EB-5 regulations already presented a
generalized standard for agency action. The 1998 adjudications by the AAO
added new generalized standards to the existing regulations. These were not mere
prospective refinements in an individual case, but were set forth in the
“precedent” decisions as broad rules of general application. These decisions
constitute substantive “rules” for APA purposes. Since the INS failed to comply
with the APA‟s notice and comment rulemaking requirements, the “rules” created
by the “precedent” decisions are invalid and hence cannot be relied upon in the
B. The “Precedent” EB-5 Decisions Cannot be Applied Retroactively to Mrs.
For the record, the INS has also violated the APA by applying the “rules” set forth
in the four “precedent” decisions retroactively to Mrs. Lam Leung. The APA
expressly prohibits retroactive application of new substantive rules. See 5 U.S.C.
§ 551(4) (rules, by their definition, may have only “future effect”).
Courts enforce this rule by presuming that rules and laws generally do not apply
retroactively. See, e.g., Bowen v. Georgetown University Hospital, 276 U.S. 204,
208 (1988) (“[C]ongressional enactments and administrative rules will not be
construed to have retroactive effect unless their language requires this result. . . .
By the same principle, a statutory grant of legislative rulemaking authority will
not, as a general matter, be understood to encompass the power to promulgate
retroactive rules unless that power is conveyed by Congress in express terms.”)
(citations omitted). See also Uzuegbu v. Caplinger, 745 F. Supp. 1200, 1215
(E.D. La. 1990) (“Under general rules of statutory construction, a substantive,
noncurative, adverse change in administrative rules is not to be applied
retroactively unless the language of both the administrative rule and the statute
authorizing the rule requires such a result.”).
As the INS‟s new requirements for EB-5 petitions set forth in the four
“precedent” AAO decisions are substantive “rules” under the APA, their
retroactive application violates the APA and is also arbitrary, capricious, and an
abuse of discretion.
Retail, Wholesale and Department Store Union v. NLRB, 466 F.2d 380, 390-93
(D.C. Cir. 1972), sets forth criteria to determine whether an agency‟s rules have
an impermissible retroactive effect. Five considerations determine whether a rule
is being applied retroactively:
(1) whether the particular case is one of first impression, (2)
whether the new rule represents an abrupt departure from well
established practice or merely attempts to fill a void in an unsettled
area of law, (3) the extent to which the party against whom the new
rule is applied relied on the former rule, (4) the degree of the burden
which a retroactive order imposes on a party, and (5) the statutory
interest in applying a new rule despite the reliance of a party on the
old standard. Id. at 390.
Each of these elements exists here. First, the four EB-5 “precedent” decisions
created new rules that reversed years of longstanding INS policy. They therefore
constituted cases of first impression. Second, the new requirements set forth in
the so-called precedent decisions abruptly and drastically departed from the INS‟s
own longstanding and consistent prior practice. The INS approved Mrs. Lam
Leung‟s I-526 petition based on its existing rules. Yet the RFE questions Mrs.
Lam Leung‟s I-829 petition, which is based on the same facts. Third, Mrs. Lam
Leung detrimentally relied upon the INS‟s prior rules and longstanding policy and
practice by making her investment in compliance with the INS‟s prior rules.
If the INS denies Mrs. Lam Leung‟s I-829 petition, she and her family may be
forced to return to their home country. Fourth, Mrs. Lam Leung will
unquestionably be burdened by a retroactive application of the new rules if her I-
829 is denied as she and her family may be removed despite all the money she has
invested. Fifth, the statutory interest in applying the new rules does not outweigh
the detrimental reliance on the prior rules experienced by Mrs. Lam Leung and
her family. Mrs. Lam Leung has complied with the statutory interest to create
jobs for U.S. workers by investing her money in the Von Verde Packing House
Based on these factors, it is clear under Retail, Wholesale and Department Store
Union that the INS‟s issuance of new rules in the four “precedent” EB-5 decisions
have an impermissible retroactive effect and violates the APA. For that reason,
the INS cannot rely on the reasoning announced and use those cases even if its
RFE does not mention the cases by name.
Recent court rulings in another immigration context illustrate the illegality of
applying new rules retroactively. The Immigration Act of 1990 (“1990 Act”)
granted special immigrant status to certain immigrant dependents of a juvenile
court.2 The 1990 Act required such aliens to be declared dependent on a juvenile
court and placed under the custody of a state agency. The 1990 Act also required
Immigration Act of 1990, Pub. L. No. 101-649, § 153, 104 Stat. 5005 (1990).
a determination that it would not be in the alien‟s best interest to be returned to his
or her homeland. Congress restricted this provision in 1997.3 After enactment of
the 1997 amendment the INS sought to apply the more restrictive rules set forth in
the 1997 statute to special immigrant juvenile (SIJ) applications that had been
filed but not approved before November 26, 1997.
The INS stated that if an SIJ application had been filed before the 1997 law‟s
enactment date and had been approved or adjusted after that date, the Service
intended to review the approval under the new law and rescind those approvals
that did not comport with the requirements of the new law. A federal district
court struck down this interpretation, holding that the 1997 amendment applied
only to cases filed after the passage of the amendment, not to cases filed before its
passage but adjudicated subsequent to its enactment. Yue Yu v. Brown, 92 F.
Supp. 2d 1236, 1250 (D.N.M. 2000). See also Gao v. Jenifer, 185 F.3d 548 (6th
Cir. 1999) (same).
Similarly, the INS lacks legal authority to apply the so-called precedent decisions
retroactively to Mrs. Lam Leung, whose I-526 petition was approved before the
AAO decisions were issued, and whose I-829 petition is based on the underlying
approved I-526 petition.
Finally, the four AAO EB-5 “precedent” decisions do not state that they are to
apply retroactively. They do not address how to deal with I-829 petitions filed by
investors whose I-526 petitions were approved before the so-called precedent
decisions. Thus, even if the precedent decisions bind later I-526 petitions, they
are not binding on I-829 petitions filed that are based on I-526 petitions approved
before the “precedent” decisions.
C. The INS is Estopped from Applying the Four “Precedent” Decisions to Mrs.
“Estoppel is an equitable doctrine invoked to avoid injustice in particular cases.”
Heckler v. Community Health Servs. of Crawford County, Inc., 467 U.S. 51, 59-
60 (1984) (rejecting government‟s urging to adopt flat rule prohibiting estoppel
claims against the government). A leading case on governmental estoppel is
Watkins v. United States Army, 875 F.2d 699, 706-07 (9th Cir. 1989) (en banc)
(“„where justice and fair play require it,‟ estoppel will be applied against the
government”) (citation omitted).
Here, the INS is estopped from applying its new requirements retroactively and
from denying the petition to remove the conditions on Mrs. Lam Leung‟s
permanent residency on the basis of the new rules set forth in the four “precedent”
EB-5 decisions even if the RFE does not specifically cite to those cases. Mrs.
Departments of Commerce, Justice, and State, the Judiciary, and Related Agencies Appropriations Act,
Pub. L. No. 105-119, § 113, 111 Stat. 2440 (1997).
Lam Leung reasonably relied on the statements, assurances, representations, and
prior adjudications of the INS in similar cases in the same project in making her
own investment. Moreover, Mrs. Lam Leung can show affirmative misconduct
by the INS through the agency‟s intentional circumvention of the APA and the
intentional violation of the INS‟s own rules.
Finally, the INS‟s wrongful act in unlawfully issuing new rules in an adjudicative
proceeding and applying them retroactively will cause a serious injustice to Mrs.
Lam Leung. For these reasons, the INS is estopped from applying the new rules
set forth in the so-called precedent decisions to Mrs. Lam Leung‟s I-829 petition.
D. The INS’s New Requirements Violate the Statute
The INS‟s so-called precedent decisions issued in mid-1998 dramatically altered
the rules and regulations governing the EB-5 program and may result in the denial
of Mrs. Lam Leung‟s I-829 petition if applied retroactively at this time. The
“precedent” decisions created over a dozen major changes in the EB-5 program.
For example, as already discussed above, the “precedent” decisions established a
rule that requires an investor to be present at the inception of the partnership to be
considered an investor. This reversed the INS‟s prior rule, which at no time
required an investor to be present at or to play a hand in the legal formation of the
commercial enterprise in which she has invested. If this change is applied to an I-
829 applicant such as Mrs. Lam Leung, she cannot retroactively cure the fact that
she invested in the Von Verde Packing House and became a limited partner after
the date of its legal formation.
Similarly, before the “precedent decisions,” an investor did not have to pay all the
money due under a promissory note within two year. Under Matter of Izumii, an
investor must now show that nearly all the money due under a promissory note
was paid within two years. Again, this change, if applied retroactively, would
invalidate Mrs. Lam Leung‟s immigrant investor status although Mrs. Lam Leung
is prepared to pay off the promissory note in full even if all payments are not yet
due if the CSC were to approve her I-829.
Finally, having concluded that petitioner was not an original partner who
participated in the establishment of the commercial enterprise in which she has
invested, the INS concludes that to qualify for removal of conditions, petitioner
must show that her investment has expanded VVPH‟s net worth or number of
employees by at least forty percent, a more onerous requirement than what was
required when her I-526 was approved.
INA § 203(b)(5) does not contain these and other requirements imposed by the
“precedent” decisions. The INS‟s application of these requirements therefore
violate the statute. As such they cannot be lawfully applied to decide Mrs. Lam
Leung‟s I-829 petition.
(2) GENERAL PARTNER FEES
Again, without specifically referring to Matter of Izumii, the RFE requests
petitioner to show that the requisite amount of capital has been paid into VVPH
and finds fault with the fact that under Article 8,5 of the Agreement of Limited
Partnership of Von Verde Packing House Limited partnership, an annual base fee
of $100,000 will be “set aside” (emphasis added) to pay the General Partner for
management and supervisory services since “any part of [the petitioner’s]
investment that is used to pay fees is not available and may not be computed as
part of the qualifying investment”.
While we have already stated our position that Matter of Izumii may not be
applied retroactively, a closer examination indicates that the CSC has misquoted
and misinterpreted this partnership provision.
The instant case is totally unlike the Izumii case, where the AAO was objecting to
the stripping out of fees and expenses from each investor’s capital contribution
(finder’s fees, attorney’s fees, consulting fees etc) so that the full capital
contribution never gets infused into the commercial enterprise for the purpose of
What Section 8.5 the Partnership Agreement actually states is as follows:
“8.5 Fees and Expenses
(a) The General Partner shall be reimbursed for all reasonable expenses
incurred in the performance of its duties hereunder and in the
management of the Partnership’s affairs that are not borne and paid
by the Partnership and that are approved in writing by a Majority-
in-Interest of the Limited Partners.
(b) The Partnership will pay (emphasis added) the General Partner an
annual base fee of US$100,000 for management and supervisory
services. The General Partner will be responsible for the general
management and oversight of the Partnership’s affairs and will hire
qualified personnel, perhaps including affiliates of the General
Partner, to perform this function.”
Nothing has been “set aside” or withheld from each investor’s capital contribution
for attorney’s or finder’s fees, or administrative costs. Instead, each VVPH
investor’s entire capital contribution has been received in full by the partnership
without the stripping out of any fees and expenses.
As in any limited partnership, however, the day to day management of the
operations of the partnership is handled by the General Partner rather than the
limited partners and the $100,000 annual base fee which the partnership as a
whole pays the General Partner annually is for its services, just as the partnership
pays for other routine ongoing operational expenses such as salaries for its
These costs are fully accounted for as legitimate business expenses by VVPH
under the Internal Revenue Code, are reasonable and customary in the industry,
and paid as and when due from available cash, not deducted from the investor’s
original capital contribution.
There is no withholding, ear-marking or set asides from each alien investor’s
capital contribution which would result in less than the full capital contribution
being made available to the commercial enterprise, which is that the AAO found
objectionable in Izumii.
(3) FULL-TIME EMPLOYMENT OF QUALIFIED EMPLOYERS
Finally, with respect to proof that petitioner’s investment has resulted in the
creation of the minimum 10 full-time positions for qualified employees, the CSC
criticized the submission of the lists of employees employed by VVPH’s two
wholly-owned subsidiaries, Yuma Citrus Harvesting, Inc. and Von Verde Citrus
Packing House Inc. without accompanying documentation to clarify whether they
were full-time, part-time or merely seasonal workers and the lack of employee
wage or pay records or Forms I-9 to verify their actual employment.
In fact, these lists of employees were compiled in the same format as INS had
requested for Von Verde Limited Partnership’s investors seeking removal of
conditions. As agreed with the CSC in the “live” presentation in November, 1995,
when a van was used to deliver boxes and boxes of voluminous personnel
documents such as I-9s, W-2s, and payroll records for review in connection with
VVLP investors’ removal petitions, similar documentation would not be required
to be submitted again in connection with future removal of conditions petitions
but would be made available for an INS on-site inspection if it wishes since the
records would fill several 4-drawer file cabinets.
As previously also explained and accepted by the INS in its past review of the
Von Verde program, the business plan for Von Verde calls for the creation of the
requisite ten full-time positions for each of its immigrant investors but “full-time”
work in harvesting means having at least 35 hours of work each week available
for any willing worker for about 9–10 months of each year, depending on fruit
production and weather. This is because intensive hot weather in the summer
reaching a high of 115 F or more prohibits virtually all farming activities in the
months of June and July. The fact that citrus workers usually take the summer off,
like school teachers, does not mean that these employees are “seasonal” and not
The citrus industry has a very high employee attrition rate because of the hard
labor required and the hot weather. In addition to their voluminous nature, W-2s,
I-9s and the like have also not been provided because these documents may
mislead the INS into thinking that some of the workers are part-time or seasonal
and not “full-time” as some workers may be unwilling to work a full-time work
week and clock out after half a day’s work or just do not show up regularly for
work even though such work is available. The point is that the same identical
employees do not necessarily work for a specified period of 9–10 months per
calendar year even though a certain proportion may. Thus, it is not possible to
identify and allocate ten specific names to each limited partner investor seeking
removal of conditions.
Because Von Verde cannot control employee attrition and some workers may be
unwilling to work a full work week even though its positions are full-time in
nature and the regulations do not require intimate identification of the same ten
workers for a given period for each investor seeking removal of conditions, it was
agreed with INS in 1995 when the CSC reviewed the VVLP investors’ I-829
petitions that a “snap-shot” list of employees compiled as of a given date be
submitted at the time of removal of conditions, with the understanding that since
employees in the citrus industry have a historically high attrition/turnover rate, the
total wages paid each year as reflected on the tax returns would corroborate the
fact that the requisite full-time employment positions had in fact been created to
support each investor seeking removal of conditions.
Mrs. Lam Leung was the thirty-ninth investor to seek removal of conditions. At
the time of the submission of her I-829, a list compiled as of May 5, 1999
confirmed 142 employees employed by Yuma Citrus Harvesting, Inc. and a list of
80 employees for Von Verde Citrus Packing House, Inc for a total of 222 full-
time positions. As pointed out in Attachment 1 submitted with the Form I-829,
for purposes for employee allocation, the first 22 investors seeking removal of
conditions had already created at least ten full-time jobs each as a result of their
However, when Mrs. Lam Leung submitted her petition for removal of conditions
on January 7, 1999, the two VVPH subsidiaries admittedly did not have 390
employees to support all 39 investors seeking removal of conditions.
Thus, projected hiring schedules were submitted which confirmed that the two
entities would have sufficient full-time positions to support Mrs. Lam Leung’s
petition for removal of conditions “within a reasonable time” as required by 8
CFR §216.6(a)(4)(iv), (408 total employees by September, 1999).
It was also explained at the time of the I-829 submission that the number of
employees hired was at a slower pace than VVPH originally projected because of
a delay in the opening of the packing house as a result of the corniophora disease
which had decimated the Yuma citrus industry and because of the lack of infusion
of new capital by new investors who had been deterred from investing or who had
withdrawn their investments as a result of the uncertainty created by the INS in its
administration of the EB-5 program.
The CSC, however, now points to the VVPH 1996 and 1997 U.S. Partnerships tax
returns to conclude that even the list of 222 full-time positions hired by the two
subsidiaries had not been documented as Item 9 in the VVPH tax returns shows
no salaries or wages and Schedule (A), item 3 shows nothing under “cost of
In fact, VVPH is not the direct employing entity of the employees and, at the time
Mrs. Lam Leung filed her removal of conditions petition, its two wholly-owned
subsidiaries, Yuma Citrus Harvesting, Inc. and Von Verde Citrus Packing House,
Inc., had not yet filed their U.S. Corporation tax returns, because, as explained in
counsel’s cover letter accompanying the submission of the I-829 petition, the
coniphora disease had decimated the Yuma Citrus industry resulting in
insufficient citrus to harvest and a delay in the opening of the packing house until
We are therefore submitting at this time as Exhibit (5) the 1998 and 1999 U.S.
Corporation Income Tax Returns of Von Verde Citrus Packing House Inc. and
Yuma Citrus Harvesting, Inc. and the Amended U.S. Corporation Income Tax
Return of Von Verde Citrus Packing House Inc. for the year ended June, 1999.
These are the most recent tax returns available as the year 2000 tax returns have
not yet been prepared.
An examination of item 13 of these tax returns (salaries and wages) reveals that
Von Verde Citrus Packing House Inc. actually paid US$665,631 in salaries and
wages for 1998 (for tax year 7/1/98 – 6/30/99) and US$676,707 for 1999 (tax year
7/1/98 – 6/30/00) while Yuma Citrus Harvesting, Inc. paid US$381,623 in salaries
and wages for calendar year 1998 and US$186,008 for calendar year 1999.
As you know, 8 CFR §216.6(a)(4)(iv) provides that at the time the alien
entrepreneur files a petition to remove the conditional basis of his permanent
resident status he can either provide “evidence that [he] created or can be
expected to create within a reasonable time 10 full-time jobs for qualifying
employees”. (emphasis added)
Mrs. Lam Leung thus met the requirements of this regulation at the time she
submitted her petition for removal of conditions as she was the thirty-ninth person
to seek removal and evidence was presented to show the employment of 222
employees along with projected hiring schedules that the rest of the required jobs
would be created “within a reasonable time”.
While eighty investors had originally subscribed for VVPH limited partnership
interests, many investors demanded their investment back or withdrew and were
deterred from completing their investment after signing the subscription
agreement as a result of the uncertainty created by the INS’s decision to freeze the
adjudication of all I-526s and I-829s beginning in December, 1997.
As a result of demands from these limited partners and the threat of litigation
against the partnership because of the INS’s “hold” and its decision to implement
new interpretations and requirements on a retroactive basis, much of the business
plans of VVPH had to be suspended and placed on hold and real properties had to
be sold (sometimes at distressed prices) to generate the funds to meet these
demands from investors.
In addition to the havoc created by the INS’s change in policy and the necessity to
buy out the disgruntled investors, Von Verde was unable to implement its original
business plans in full because of the coniophora decease which had decimated the
Yuma Citrus industry and because of the opening up of the U.S. market to foreign
fruit producers as a result of the Free Trade Act being implemented in 2000,
which resulted in the U.S. market being flooded with lemons from Argentina
without any quota.
Enclosed as Exhibit (6) is a letter from the General Partner of VVPH explaining
in greater detail all of the events which have transpired which were totally out of
the control of the partnership which has resulted in insufficient employees being
employed at this particular moment in time to support the removal of conditions
petitions of all of its investors.
Going forward, VVPH has also prepared a credible schedule showing the increase
in the volume of fruit production and the total number of full-time employees for
its subsidiaries will reach 455 by September, 2002 (375 workers for Yuma Citrus
Harvesting, Inc. and 80 for Von Verde Citrus Packing House Inc.), which will
more than support the removal of conditions petitions of the 43 investors who
have opted to remain in the project.
INS cannot now challenge the sufficiency of the number of employees when it
has in large part been responsible for wreaking havoc to VVPH’s business plans
because of its action in placing the adjudication of petitions on hold. While
VVPH’s two subsidiaries admittedly do not presently employ 430 employees to
support the removal of conditions for all 43 VVPH investors, not all 43 investors
have filed I-829s yet and the showing that the requisite number of employees
have been hired or is expected to be hired within a reasonable time need only be
made at the time the removal of petition is filed under 8 CFR §216.6(a)(4)(iv).
What is important is that Mrs. Lam Leung met the employment creation standards
of 8 CFR §216.6(a)(4)(iv) at the time she filed her I-829 and she continues to
meet these standards as a credible hiring schedule is being submitted as part of
this response which establishes, consistent with 8 CFR §216.6(a)(4)(iv), that 10
full-time jobs for qualifying employees can be expected to be created within a
reasonable time for all 43 VVPH employees. See projected hiring schedule,
Attachment (B) in Exhibit (6), letter from General Partner of VVPH.
Finally, the CSC examines the various tax returns of VVLP (specifically,
Schedule (F), item 24 which shows the amount of money paid to hired labor) to
support its conclusion that less than full-time workers have been hired for VVLP
as well and states that petitioner had not met the employee creation requirement
even if the VVLP employees were added to the VVPH employee list, even though
petitioner’s investment was in VVPH and not VVLP.
In fact, VVLP is VVPH’s general partner and part of a “vertically integrated”
citrus enterprise. While we will not debate the merits as to whether VVLP
employees can be counted towards the employment creation requirements for
VVPH investors at this time, we nevertheless wish to clarify any confusion. The
fact is that the employee list provided to INS is of the employees hired by
VVLP’s two wholly-owned subsidiaries, Von Verde Harvesting, Inc. and VV
Harvesting, Inc. Thus, the tax returns of VVLP would of course not reflect the
wages paid to employees its subsidiaries have hired.
As previously explained in its presentation to the CSC in 1995, VVLP is a
holding company which holds farm land and other capital assets and does not
directly employ workers. All of the full-time positions which are created are with
VVLP’s wholly-owned subsidiaries, Von Verde Harvesting Inc. and VV
Harvesting Inc., which were created to employ the laborers for corporate limited
Thus, the “hired labor” wages reflected in Schedule (F), item 24 of VVLP’s tax
return is a reflection of the money ($790,795 in 1997 in the example cited by the
CSC) which was paid by VVLP for its portion of custom farming charges charged
by Von Verde Harvesting Inc. that year. It is not a reflection of VVLP’s total
number of employees as VVLP does not employ anyone but simply pays its
wholly-owned subsidiaries for “hired labor”.
VVLP’s wholly-owned subsidiary, Von Verde Harvesting Inc., performs various
functions for the Von Santau Ranch, which is owned by VVLP and bills the entity
accordingly. Von Verde Harvesting, Inc. also bills Mesa Del Sol Inc. and Ranch
1100 for custom farming, harvesting and landscape work while VV Harvesting
bills other outside growers for whom it performs harvesting and picking work.
For the sake of completeness, we are submitting as Exhibit (7), the 1998 and 1999
U.S. Corporation Income Tax Returns of Von Verde Harvesting Inc., and VV
Harvesting Inc.4 which are the most recent tax years available as the year 2000
tax returns have not yet been prepared.
An examination of item 13 of these tax returns (Salaries and Wages) reveals the
Von Verde VV Harvesting
Harvesting Inc. Inc. Total
1998 $2,114,829 $4,082,532 $6,197,371
1999 $2,279,343 $5,760,451 $8,039,794
Adopting the rough calculation method of the CSC, we divide up $8,039,794 of
wages by the 900 positions the VVLP limited partners are responsible for
creating, to come up with average wages of $8,933 per person per annum. Based
on the fact that most of the farm laborers are paid minimum wage ($5.15 per
hour) and that “full-time” employment is defined as a position requiring 35
working hours per week in 8 CFR §204.6(e), each worker is working roughly
49.56 weeks per year in 1999 ($8,933 5.15 = 1,734.56 hours divided by 35
hours/week) and 38.2 weeks in 1998 ($6,197,371 900 employees) = ($6,886 per
annum 5.15) = (1,337.09 hours divided by 35 hours per week).
As also previously explained and accepted by the CSC in the live presentation in
1995 in connection with earlier removal of conditions cases, full-time
employment in the citrus industry is usually about 9 months per year, with only
some employees getting 10-12 months employment. This is because the months
of June and July prohibits almost all farming activities because of intense hot
weather (reaching a high of 115°). Thus, the farming season starts in August and
is generally finished by the end of April to the beginning of May, depending on
when citrus such as Valencia oranges are ready for harvest.
We trust this information and documentation clarifies that Von Verde has all of
the requisite qualifying employees to support removal of conditions for VVLP
investors and has a credible business plan and hiring schedule for the creation of
the requisite full-time jobs for all 43 VVPH investors within a “reasonable time”
as required by 8 CFR §216.6(a)(4)(iv).
Confirmation of the fact that these two entities are wholly-owned by VVLP can be found in Schedule K,
item 5, Statement 5, which indicates 100% ownership by VVLP.
Congress established the immigrant investor program to attract investment capital into
the U.S. economy and to create jobs for American workers.
VVPH is a legitimate enterprise which was established in good faith to meet these goals.
While the two 100%-owned subsidiaries of VVPH, Yuma Citrus Harvesting, Inc. and
Von Verde Citrus Packing House Inc. do not presently employ the requisite 430
employees to support the removal of conditions petitions of its 43 investors, we have
submitted credible evidence that VVPH “can be expected to create within a reasonable
time 10 full-time jobs for qualifying employees”.
We do not dispute that there may have been abuses by some large-scale “pooled
investment” programs which have taken advantage of certain loopholes in the law which
prompted the “hold” of I-526 and I-829 cases and resulted in the subsequent publication
of the four AAO precedent decisions in mid-1998 to provide guidance and clarification of
However, in its zeal to curb the perceived abuses by some of the investment programs,
we hope the INS will nevertheless objectively evaluate the merits of each individual case
and the commercial enterprise the investor has invested in and focus on whether the
capital raised from the foreign investors has actually been utilized by the commercial
enterprise’s operations for the acquisition of productive assets as well as in the creation of
VVPH is not a consulting company or a conduit for funds raised from investors but part
of a vertically integrated and real operating business with real employees and real needs
whose conditional lawful permanent resident limited partners will be irreparably injured
if the INS retroactively apply new, more restrictive standards on their removal of
We urge the CSC not to lose sight of the INS position articulated by then Commissioner
Doris Meissner in her letter of June 16, 1998 to former Senator Spencer Abraham, then
Chairman of the Subcommittee on Immigration that “the Service believes that the
immigrant investor program can have a positive economic impact on the United States by
attracting foreign capital to establish new job-creating business”. The CSC should
therefore flexibly interpret the law as a matter of due process and fundamental fairness,
especially in its retroactive application of the “establishment” aspects of the Izumii
decision in the context of those who have already immigrated on the basis of an approved
I-526 petition years before the publication of that precedent and in its determination of
whether the employment creation requirement have been met.
In Commissioner Meissner’s words, the Service should work “to administer the program
in a way that encourages foreign investors to take advantage of the program and invest
the full amount of the money required by congress to create full-time jobs for United
We therefore respectfully request that the present I-829 be approved.