Chinese National Sues Over EB5 Visa Denial

July 17, 2018 by Kevin S. Kim, Esq.

On Friday, a Chinese national filed a lawsuit against the federal government over being denied a U.S. visa under the government’s EB-5 immigrant visa program. The program allows immigrants that invest a minimum of $500,000 of personal funds into American projects or businesses to apply for permanent residency.

Jingru Zhao sued the Department of Homeland Security claiming that her visa was wrongfully denied, despite having provided a $500,000 minimum investment into a Georgia senior living center development. She alleges that she fulfilled all requirements of the program in 2014 when she put up $500,000 for the development of a Powder Springs, Georgia senior living center. The project was estimated to create over 150 full-time jobs, over ten times the amount required to qualify for the EB-5 visa program.

The suit alleges that the government denied her application after incorrectly finding that the invested money wasn’t hers, and the Administrative Appeals Office later finding, also erroneously, that her contract with the developer contained a clause that would have made her investment “risk-free.”

Zhao points out in her suit that her sister, Jingkun Zhao, also made a $500,000 investment into the same project, yet had her application for a U.S. visa approved.

The complaint contends that both sisters made a combined $1 million investment into the project after taking out a loan on a property they owned in China that was gifted to them by their parents. In the denial of her application, the USCIS determined in 2017 that the money invested into the project wasn’t hers because her mother was listed as the owner of the property in China that purportedly secured the loan.

Zhao stated in her suit that nowhere in the Immigration and Nationality Act does it say that only assets owned solely by an EB-5 applicant can be considered a “cash investment.”

Zhao also stated in the complaint that “Because ‘invest means to contribute capital’ and ‘capital means cash,’ the only reasonable interpretation of the plaintiff’s $500,000 U.S. currency deposit to the new commercial enterprise is that she made a present commitment of qualifying capital under [the INA] which was fully at-risk.”

The suit claimed that the federal government violated the Administrative Procedure Act by wrongly denying her petition.

After she appealed the UCIS’ decision to deny her application, the Administrative Appeals Office agreed with the government’s decision to deny her application. They based the denial on the grounds that her $500,000 investment did not qualify as capital under the terms of the program, and that her stake into the project was never “at risk” because a call option clause in the contract allowed the developer to buy out her investment share in the project after five years.

Her suit disputed that finding by referencing two other unrelated cases where Washington D.C. district courts found that the UCIS acted “arbitrarily and capriciously” by denying other EB-5 visa applications based on a similar call option feature being made available to the investor by the developer.

According to the complaint, the call option in Zhao’s contract with the Georgia senior living center is similar to those cases in that it does not guarantee that the developer will exercise the option to buy out the investor, and therefore does not limit the risk to the applicant of investing in the project.

“The administrative record does not support a finding that the investor has a guarantee of repayment of her $500,000 capital investment plus interest at a predetermined price and at a predetermined time as a debt arrangement,” the complaint stated.

The case is Zhao v. U.S. Department of Homeland Security et al., and is being heard in the U.S. District Court for the District of Columbia.