Golden Rainbow complaint May 1999

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Golden Rainbow complaint May 1999

  1. 1. 123456 IN THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF WASHINGTON AT SEATTLE78 GOLDEN RAINBOW FREEDOM FUND, a Washington Limited Partnership; NO.9 Plaintiff, COMPLAINT FOR INJUNCTIVE AND10 DECLARATORY RELIEF AND FOR vs. DAMAGES11 JANET RENO, Attorney General of the12 United States,13 Defendant.14 Plaintiff alleges as follows:15 I. JURISDICTION AND VENUE16 1. The court’s jurisdiction over the subject matter of this complaint is conferred by17 28 U.S.C. §§1331 and 2201, and 5 U.S.C. §701 et seq.18 2. Venue is proper in this district under 28 U.S.C. §1391(e) because the defendant19 is an officer or employee of the United States, acting in her official capacity, and the plaintiff20 resides in this district.21 II. PARTIES22 3. Plaintiff Golden Rainbow Freedom Fund is a limited partnership formed under23 the laws of the State of Washington on January 27, 1998. It is engaged in investing capital for24 CUSACK KNOWLES FERGUSON P.L.L.C. ATTORNEYS AT LAW TWO UNION SQUARE, SUITE 3000 COMPLAINT FOR INJUNCTIVE AND 601 UNION STREET SEATTLE, WASHINGTON 98101-2324 DECLARATORY RELIEF AND FOR DAMAGES - 1 (206) 521-3001 420001P JJ230101
  2. 2. 1 purposes of developing, purchasing, and/or remodeling warehouse and office space within2 specific geographic areas for industries and companies that support international trade. It is the3 successor entity to a number of limited partnerships that have been organized for this purpose4 since February, 1996. The Golden Rainbow Freedom Fund is also known under the name of5 “Gateway Freedom Fund” in Japan.6 4. Defendant Janet Reno is the Attorney General of the United States. In that7 capacity, she is charged with the administration and enforcement of the laws relating to the8 immigration and naturalization of aliens. Such officials of the Immigration and Naturalization9 Service (“Service”) as may be named in this complaint, or the proceeding which may follow,10 have acted under the authority delegated to them by the Attorney General.11 III. STATUTORY AND REGULATORY PROVISIONS12 5. This complaint concerns the provisions of §203(b)(5) of the Immigration and13 Naturalization Act (INA) of 1990, 8 U.S.C. §1153(b)(5); §610 of the Department of Justice14 and Related Agencies Appropriations Act, 1993, Pub.L. 102-395, 106 Stat. 1828, 1874; and15 the regulations implementing those statutes, 8 C.F.R. §204.6.16 IV. FACTUAL BACKGROUND17 The Immigrant Investor Program18 6. In 1990, the Congress enacted Section 203(b)(5) of the Immigration and19 Naturalization Act, 8 U.S.C. §1153(b)(5). This provision created a new preference allocation20 of visas for a category of immigrants described in the statute as “employment creation”21 immigrants. Under Section 203(b)(5), a certain percentage of visas were set aside for22 immigrants seeking to enter the United States to engage in a new commercial enterprise in23 which they had invested, or were in the process of investing, $500,000 or $1 million24 CUSACK KNOWLES FERGUSON P.L.L.C. ATTORNEYS AT LAW TWO UNION SQUARE, SUITE 3000 COMPLAINT FOR INJUNCTIVE AND 601 UNION STREET SEATTLE, WASHINGTON 98101-2324 DECLARATORY RELIEF AND FOR DAMAGES - 2 (206) 521-3001 420001P JJ230101
  3. 3. 1 (depending on the unemployment rate of the enterprise’s location), and which would create2 full-time employment for at least 10 U.S. citizens, or aliens authorized to be employed in the3 United States (the immigrant and his or her immediate family excepted).4 7. The immigrant investors must first file a petition (Form I-526, Petition by Alien5 Entrepreneur) with the Service. The date of filing a petition establishes the applicant’s “priority6 date,” which determines when the applicant may interview with a consular officer, or adjust7 status for permanent residence. Once the petition is approved by the Service, an interview is8 scheduled with a consular officer when a visa becomes “available” from the State Department.9 The availability of a visa is dependent on a number of factors, including the category of visa10 sought, the country of origin of the immigrant, and the exhaustion of the visa quota for a11 particular category or country in that calendar year.12 8. Under Section 216A of the Immigration and Naturalization Act, 8 U.S.C.13 §1186b, a potential immigrant who is determined to have met the requirements of Section14 203(b)(5) is admitted for permanent residence on a conditional basis as an “alien15 entrepreneur.” 8 U.S.C. §1186b(f)(1). The immigrant can petition to have the conditional16 status removed 90 days before the second anniversary of his or her admission for permanent17 residence. 8 U.S.C. §1186b(c)(1).18 9. After the “alien entrepreneur” files a Petition for Removal of Conditions (Form19 I-829) before the expiration of the two-year conditional period, the Service determines if the20 immigrant had actually invested, or was in the process of investing, the requisite amount of21 capital in the commercial enterprise over the previous two years. If it is found that the22 immigrant has made this showing, the immigrant’s conditional status is removed. 8 U.S.C.23 §1186b(c)(3).24 CUSACK KNOWLES FERGUSON P.L.L.C. ATTORNEYS AT LAW TWO UNION SQUARE, SUITE 3000 COMPLAINT FOR INJUNCTIVE AND 601 UNION STREET SEATTLE, WASHINGTON 98101-2324 DECLARATORY RELIEF AND FOR DAMAGES - 3 (206) 521-3001 420001P JJ230101
  4. 4. 1 10. The Service’s final rules for implementing the immigrant investor provisions of2 the Section 203(b) were promulgated on November 29, 1991, 56 Fed. Reg. 60897, and went3 into effect that day. Those regulations set forth the Service’s interpretation of the language in4 Section 203(e)(5). In particular, §204.6(e) provides, inter alia, that:5 a. “Capital” includes cash and other tangible assets, but also includes indebtedness, provided that the immigrant investor is personally liable6 for the debt and that the debt is not secured by the assets of the new enterprise.7 b. “Commercial enterprise” means any for-profit activity formed for the8 ongoing conduct of lawful business, including a partnership, either general or limited.9 c. “Invest” means to contribute capital, but the definition excludes any10 contribution of capital “in exchange for a note, bond, convertible debt, obligation, or any other debt arrangement” between the immigrant11 investor and the new commercial enterprise.12 11. Section 204.6(g) of the regulations provides that any number of immigrant13 investors may invest in a single enterprise, with the caveat that each individual’s investment14 must result in the creation of at least ten (10) full-time jobs for qualifying employees. This15 section also provides that there can be co-owners of the new enterprise who are not seeking16 classification as “immigrant investors,” as well as foreign or domestic corporations or17 partnerships.18 12. Section 204.6(j)(5) of the regulations addresses the statutory requirement that19 the immigrant investor be engaged in the management of the new enterprise, either through20 day-to-day managerial control or through policy formulation. Subparagraph (iii) of this section21 provides that a limited partner will be considered sufficiently engaged in the management of22 the enterprise if the limited partnership agreement gives the investor “certain rights, powers,23 and duties normally granted to limited partners under the Uniform Limited Partnership Act.”24 CUSACK KNOWLES FERGUSON P.L.L.C. ATTORNEYS AT LAW TWO UNION SQUARE, SUITE 3000 COMPLAINT FOR INJUNCTIVE AND 601 UNION STREET SEATTLE, WASHINGTON 98101-2324 DECLARATORY RELIEF AND FOR DAMAGES - 4 (206) 521-3001 420001P JJ230101
  5. 5. 1 8 C.F.R. §204.6(j)(5)(iii).2 Creation of the Immigrant Investor Pilot Program3 13. On October 6, 1992, the Congress established the “Immigrant Investor Pilot4 Program,” which was intended to encourage potential immigrants to invest in “regional5 centers,” entities organized “for the promotion of economic growth, including increased export6 sales, improved regional productivity, job creation, and increased domestic capital investment.”7 Section 610, Department of Justice and Related Agencies Appropriations Act, 1993, Pub.L.8 102-395, 106 Stat. 1828, 1874 (hereinafter 1993 Appropriations Act). The original9 requirement that each individual investment create ten jobs for qualifying employees was10 expressly relaxed, with investors in a “regional center” instead permitted to put forth in their11 filings “reasonable methodologies for determining the number of jobs created by the pilot12 program, including such jobs which are estimated to have been created indirectly through13 revenues generated from increased exports resulting from the pilot program.” Id., §610(c).14 14. On August 24, 1993, the Service promulgated its Interim Rule governing the15 Immigrant Investor Pilot Program. 58 Fed. Reg. 44606. Although the legislation authorizing16 the Pilot Program specified that the program’s multiple purposes were the “promotion of17 economic growth, including increased export sales, improved regional productivity, job18 creation, and increased domestic capital investment,” the Service’s rulemaking improperly19 focused only on the “increased exports” component of the program. To that end, the preamble20 to the rule noted that, while Section 610(c) requires that the revenues generated by the21 enterprise must result in exports, the enterprise itself need not be engaged directly in generating22 exports of goods or services. Therefore, immigrant investors participating in the pilot program23 were allowed to credit jobs created indirectly through their investment activities. 58 Fed. Reg.24 CUSACK KNOWLES FERGUSON P.L.L.C. ATTORNEYS AT LAW TWO UNION SQUARE, SUITE 3000 COMPLAINT FOR INJUNCTIVE AND 601 UNION STREET SEATTLE, WASHINGTON 98101-2324 DECLARATORY RELIEF AND FOR DAMAGES - 5 (206) 521-3001 420001P JJ230101
  6. 6. 1 at 44607.2 15. The Service’s Interim Rule also provides that, in lieu of strict adherence to the3 “10 jobs created” requirement of the original immigrant investor program, “reasonable4 methodologies” could be used to estimate the number of jobs created by investment in a5 regional center. These methodologies may include multiplier tables, feasibility studies, analyses6 of foreign and domestic markets for the goods and services to be exported, and “other7 economically or statistically valid forecasting devices which indicate the likelihood that the8 business will result in increased employment.” 8 C.F.R. §204.6(m)(3)(v).9 16. The Service’s final rule implementing the Immigrant Investor Pilot Program was10 published on April 15, 1994. 59 Fed. Reg. 17920. No substantive changes were made to the11 Interim Rule, but in responding to comments on it the Service noted that the legislative history12 of Section 610 of the 1993 Appropriations Act “indicates that Congress intended to determine13 the viability of pooling investments in specific regions of the United States.” Id. (citing S. Rep.14 No. 918, 102 Cong., 2d Sess. (1992)).15 17. In addition to the regulations cited above, additional guidance on the immigrant16 investor program has been provided by legal opinions published by the Service’s Office of17 General Counsel. In an opinion dated September 10, 1993, the General Counsel concluded that18 pooled investment programs fully satisfied the letter and spirit of the employment-creation19 statute. He also concluded that an investor’s capital was placed “at risk,” for purposes of 820 C.F.R. §204.6(j)(2), even if the investor and the enterprise in which he or she invested had21 an agreement for the sale of the investor’s interest in the enterprise (such as by redemption,22 third-party purchase, or otherwise) after the two-year conditional period had been satisfied.23 18. Furthermore, in an opinion dated June 27, 1995, the General Counsel concluded24 CUSACK KNOWLES FERGUSON P.L.L.C. ATTORNEYS AT LAW TWO UNION SQUARE, SUITE 3000 COMPLAINT FOR INJUNCTIVE AND 601 UNION STREET SEATTLE, WASHINGTON 98101-2324 DECLARATORY RELIEF AND FOR DAMAGES - 6 (206) 521-3001 420001P JJ230101
  7. 7. 1 that the Service’s regulations did not require that the indebtedness of an investor (such as a2 promissory note backed by the investor’s own assets) meet the requirements of a secured3 transaction under Article 9 of the Uniform Commercial Code.4 Organization of the Golden Rainbow Freedom Fund5 19. On August 10, 1995, the Service’s Chief of Immigrant Branch Adjudications6 informed the organizer of the Fund that venture capital funds were a qualifying investment7 under the Pilot Program, if a petitioning alien could show that “the fund infuses capital into8 export-generating businesses, which, in turn, create jobs.”9 20. The application filed by the Golden Rainbow Freedom Fund for designation as10 a “regional center” to participate in the Immigrant Investor Pilot Program described the Fund’s11 intention to develop or renovate commercial/warehouse properties for sale or lease to12 manufacturing and export-oriented companies. Most of the development activity contemplated13 would take place in urban, high-unemployment areas and rural areas in Washington and14 Oregon which are located close to export facilities, and which have failed to attract investment15 from traditional sources. The application also described the organizational structure of the16 Fund, which would be limited partnerships open to ten investors for an investment of $500,00017 each. Each investor would be a limited partner and would be required to commit their capital18 for a minimum of three years; at the end of three years, the limited partners would be allowed19 to sell their partnership unit subject to a right of first refusal of the General Partners.20 21. The application also projected the number of new jobs that would be created by21 a typical development project financed by the Fund. Using a typical export warehouse22 renovation project undertaken in Seattle’s Central District, the application estimated direct23 employment from a $1.8 million investment of 50 employees from tenant activity in the24 CUSACK KNOWLES FERGUSON P.L.L.C. ATTORNEYS AT LAW TWO UNION SQUARE, SUITE 3000 COMPLAINT FOR INJUNCTIVE AND 601 UNION STREET SEATTLE, WASHINGTON 98101-2324 DECLARATORY RELIEF AND FOR DAMAGES - 7 (206) 521-3001 420001P JJ230101
  8. 8. 1 building, and 16 employees from construction work involved in the building’s renovation, for2 a total of 66 employees, or approximately 20 new jobs per each $500,000 investor in one the3 Fund’s limited partnerships. Furthermore, using the “job multiplier” figures supplied by the4 Port of Seattle and the Economic Development Council of Seattle and King County that each5 export-oriented job supports five to six other jobs, the application estimated that the 66 direct6 jobs created by renovation and operation of the warehouse in turn created 333 indirect jobs.7 22. On February 5, 1996, the Acting Assistant Commissioner, Adjudications, of the8 Service designated the Golden Rainbow Freedom Fund as a regional center to participate in9 the Immigrant Investor Pilot Program under Section 610 of the 1993 Appropriations Act. The10 designation identified the Fund’s primary project as the development of an air cargo and11 manufacturing facility in Jackson County, Oregon.12 23. On March 20, 1996, the Golden Rainbow Freedom Fund Limited Partnership13 #1 was organized under the laws of the State of Washington for purposes of investing in the14 Golden Rainbow Freedom Fund regional center.15 24. On October 11, 1996, the Golden Rainbow Freedom Fund Limited Partnership16 #2 was organized under the laws of the State of Washington for purposes of investing in the17 Golden Rainbow Freedom Fund regional center.18 25. On or about September 5, 1996, the Golden Rainbow Freedom Fund applied19 to the Service for an amendment of its designation as a “regional center” for purposes of the20 Immigrant Investor Pilot Program. The application requested that the designation note that the21 Fund did business under the name of “Gateway Freedom Fund” in Japan, and added a new22 project to the regional center.23 26. The “new project” concerned development in (1) the City of Seattle’s24 CUSACK KNOWLES FERGUSON P.L.L.C. ATTORNEYS AT LAW TWO UNION SQUARE, SUITE 3000 COMPLAINT FOR INJUNCTIVE AND 601 UNION STREET SEATTLE, WASHINGTON 98101-2324 DECLARATORY RELIEF AND FOR DAMAGES - 8 (206) 521-3001 420001P JJ230101
  9. 9. 1 Neighborhood Reinvestment Area, an aging industrial area located immediately south of2 downtown Seattle, which had been designated by the State of Washington as a “Community3 Empowerment Zone” (“CEZ”), and (2) the“Enterprise Community” (“EC”), designated and4 administered by the U.S. Department of Houding and Urban Development, encompassing5 areas of Seattle’s Central Area, Southeast Area, Duwamish and Delridge Area. Although6 separately designated, there is considerable overlap between the two designated areas The7 CEZ/EC encompasses much of the Port of Seattle, and includes several export-oriented8 businesses. The amended application also added further documentation of the job creation9 benefits of investment in the CEZ/EC, and estimated that each job created in the CEZ/EC10 produces anywhere from three to eight supporting jobs.11 27. On October 25, 1996, the Assistant Commissioner, Benefits Division, of the12 Service again designated the Golden Rainbow Freedom Fund as a regional center to participate13 in the Immigrant Investor Pilot Program under Section 610 of the 1993 Appropriations Act.14 The designation acknowledged that the Golden Rainbow Freedom Fund used the name15 Gateway Freedom Fund in Japan, and designated the Fund’s regional center as encompassing16 both an air cargo and manufacturing facility in Jackson County, Oregon, and the Seattle17 CEZ/EC described above.18 28. On January 14, 1997, the Golden Rainbow Freedom Fund Limited Partnership19 #3 was organized under the laws of the State of Washington for purposes of investing in the20 Golden Rainbow Freedom Fund regional center.21 29. On March 18, 1997, the Golden Rainbow Freedom Fund Limited Partnership22 #4 was organized under the laws of the State of Washington for purposes of investing in the23 Golden Rainbow Freedom Fund regional center.24 CUSACK KNOWLES FERGUSON P.L.L.C. ATTORNEYS AT LAW TWO UNION SQUARE, SUITE 3000 COMPLAINT FOR INJUNCTIVE AND 601 UNION STREET SEATTLE, WASHINGTON 98101-2324 DECLARATORY RELIEF AND FOR DAMAGES - 9 (206) 521-3001 420001P JJ230101
  10. 10. 1 30. On May 8, 1997, the Golden Rainbow Freedom Fund Limited Partnership #52 was organized under the laws of the State of Washington for purposes of investing in the3 Golden Rainbow Freedom Fund regional center.4 31. On July 7, 1997, the Golden Rainbow Freedom Fund Limited Partnership #2005 and the Golden Rainbow Freedom Fund Limited Partnership #300 were organized under the6 laws of the State of Washington for purposes of investing in the Golden Rainbow Freedom7 Fund regional center.8 32. On January 27, 1998, all of the Golden Rainbow Freedom Fund limited9 partnerships described above were merged into the Golden Rainbow Freedom Fund Limited10 Partnership, which was organized under the laws of the State of Washington for purposes of11 investing in the Golden Rainbow Freedom Fund regional center.12 33. On March 17, 1998, the Golden Rainbow Freedom Fund Limited Partnership13 #500 was organized under the laws of the State of Washington for purposes of investing in the14 Golden Rainbow Freedom Fund regional center.15 34. Between August, 1996, and the present, approximately 90 immigrant investors16 who were participants in the Golden Rainbow Freedom Fund’s regional center filed I-52617 petitions for classification as immigrant investors. The applications supporting these petitions18 contained substantially the same information regarding the Fund: documentation of the Fund’s19 designation as a “regional center,” the most recent audited financial statements of the Fund,20 copies of the limited partnership agreement, and the like. Of the 90 applicants for permanent21 resident status, the Service approved approximately 40 of the petitions, and conditioned the22 petitioners’ permanent resident status for the statutory two-year period. Approximately 30 of23 the applicants had their petitions approved but subsequently revoked under the “precedent24 CUSACK KNOWLES FERGUSON P.L.L.C. ATTORNEYS AT LAW TWO UNION SQUARE, SUITE 3000 COMPLAINT FOR INJUNCTIVE AND 601 UNION STREET SEATTLE, WASHINGTON 98101-2324 DECLARATORY RELIEF AND FOR DAMAGES - 10 (206) 521-3001 420001P JJ230101
  11. 11. 1 decisions” discussed below, and the remaining 20 or so applicants had their petitions denied2 under the “precedent decisions.”3 35. Since being granted conditional permanent resident status, the approximately 404 immigrants have invested nearly $20 million into the local economy through the Golden5 Rainbow Freedom Fund.6 INS Rewrites the EB5 Program and Applies It Retroactively7 36. On October 20, 1997, the Service’s Office of Adjudications distributed a8 memorandum to its field offices to guide them in their adjudication of petitions filed by9 immigrant investors. These guidelines reiterated the Service’s prior practice of approving10 participation in investment funds with the same features as exist in the Golden Rainbow11 Freedom Fund, such as redemption agreements, commissions, reasonable management fees,12 and promissory notes.13 37. On December 26, 1997, the Service (and the Department of State, whose14 officers in overseas posts conduct interviews of and issue visas to potential immigrant investors)15 abruptly suspended processing immigrant investor petitions.16 38. On March 11, 1998, the Service abruptly changed its interpretation of its own17 regulations, and instructed its Regional Service Centers to not adjudicate any petitions from18 immigrant investors that were investing in programs with the following features: redemption19 agreements, payment of management fees, promissory notes held by a fund’s promoter,20 guaranteed rates of return on fund investments, and sinking funds to secure the investor’s debt.21 39. On or about June 11, 1998, the Service’s Acting Associate Commissioner for22 Programs issued a “field memorandum” that formally placed all immigrant investor petitions23 under consideration by the Service “on hold,” although they already had been effectively24 CUSACK KNOWLES FERGUSON P.L.L.C. ATTORNEYS AT LAW TWO UNION SQUARE, SUITE 3000 COMPLAINT FOR INJUNCTIVE AND 601 UNION STREET SEATTLE, WASHINGTON 98101-2324 DECLARATORY RELIEF AND FOR DAMAGES - 11 (206) 521-3001 420001P JJ230101
  12. 12. 1 frozen by the December 26, 1997, suspension of petition processing.2 40. On or about June 26, 1998, the Service’s Acting Associate Commissioner for3 Programs issued a memorandum setting forth his “revised field instructions” to the Service’s4 regional offices, setting forth the procedures for adjudicating the immigrant investor petitions5 that were “on hold.” The memorandum began by noting that nineteen I-526 petitions had been6 sent to the Services’s Administrative Appeals Office (“AAO”) from four Regional Service7 Centers, that “precedent decisions” would be designated by the AAO from among those8 nineteen cases, and that the AAO was preparing decisions on those cases so designated.9 “Precedent decisions,” under the Service’s regulations, are intended “to serve as precedents10 in all proceedings involving the same issue(s)...[and] are binding on all Service employees in11 the administration of the Act.” 8 C.F.R. §103.3(c).12 41. The June 26 memorandum further stated that during the first week of July,13 1998, the Service would provide “intensive supplemental training on these precedent decisions14 and related EB-5 matters to select adjudicators” who would be assembled at the Service’s15 California Regional Service Center. These adjudicators, who were referred to as the “tiger16 team,” were tasked with adjudicating, between July 15 and August 13, 1998, the17 approximately 680 petitions that were on hold.18 42. According to the June 26 memorandum, immigrant investors whose I-52619 petitions were pending were to be told that their petitions were being forwarded to the “tiger20 team” for adjudication in accordance with the “precedent decisions” that were still to be issued21 by the AAO.22 43. The June 26 memorandum also provides, however, that immigrant investors23 who were at the end of their two-year conditional period, and whose I-829 petitions to have24 CUSACK KNOWLES FERGUSON P.L.L.C. ATTORNEYS AT LAW TWO UNION SQUARE, SUITE 3000 COMPLAINT FOR INJUNCTIVE AND 601 UNION STREET SEATTLE, WASHINGTON 98101-2324 DECLARATORY RELIEF AND FOR DAMAGES - 12 (206) 521-3001 420001P JJ230101
  13. 13. 1 the conditions removed from their permanent resident status were on hold, were also to have2 their petitions adjudicated under the yet-to-be-issued “precedent decisions.” In other words,3 petitioners whose investment program had been approved by the Service at the outset of their4 two-year conditional period, and who had immigrated to the United States and invested in the5 U.S. economy in good-faith reliance on that approval, were now to be told that their6 investment programs would be judged retroactively under new and undefined criteria, and that7 their permanent resident status could be in jeopardy as a result.8 44. Furthermore, the June 26 memorandum requires that immigrant investors whose9 I-829 petitions are deemed inadequate under the new criteria are to be given only one option10 to “cure” the alleged deficiencies in their investment programs: to withdraw their petitions and11 file a new I-526 petition for conditional permanent resident status. Moreover, the petitioners12 are required to leave their homes in the United States, file the new petitions at an overseas13 consular post, be assigned a new “priority date” associated with the new petition, wait for the14 availability of a visa, and schedule another interview at the overseas consular post. If, after all15 this, the petition is granted, the immigrant investor is required to go through another two-year16 conditional period before being granted permanent resident status.17 45. In late June and July, 1998, the Associate Commissioner for Examinations,18 issued four “precedent decisions” that were to guide the adjudication of the remaining petitions.19 Matter of Soffici, Interim Decision 3359 (June 30, 1998); Matter of Izumii, Interim Decision20 3360 (July 13, 1998); Matter of Ho, Interim Decision 3362 (July 31, 1998); Matter of Hsiung,21 Interim Decision 3361 (July 31, 1998). Each of these “precedent decisions” dealt with issues22 raised on appeal by either the petitioner or by the Regional Service Center, but they also went23 beyond that to address issues raised sua sponte by the Associate Commissioner. Moreover,24 CUSACK KNOWLES FERGUSON P.L.L.C. ATTORNEYS AT LAW TWO UNION SQUARE, SUITE 3000 COMPLAINT FOR INJUNCTIVE AND 601 UNION STREET SEATTLE, WASHINGTON 98101-2324 DECLARATORY RELIEF AND FOR DAMAGES - 13 (206) 521-3001 420001P JJ230101
  14. 14. 1 they added requirements for petitioners that are beyond the scope of the existing law, and2 which contradict the Service’s long-standing precedent on these matters.3 46. For example, in Matter of Hsiung, supra, the Associate Commissioner affirmed4 the Regional Service Center’s denial of a visa petition on the grounds cited by that Center’s5 director. But the decision then went on to discuss “other issues” which the Associate6 Commissioner felt “must be addressed.” It added a requirement that any security interest in the7 assets backing an investor’s promissory note to the enterprise “must be perfected to the extent8 provided for by the jurisdiction in which the asset is located, and the asset must be fully9 amenable to seizure by a U.S. note holder.” Hsiung at 2-3 (footnotes omitted). The decision10 noted the June 27, 1995, General Counsel’s opinion that the Service’s regulations did not11 require the security interest in an investor’s promissory note be perfected in accordance with12 the UCC, but made no attempt to explain the basis, either statutory or regulatory, for the13 additional requirements imposed by the decision. Id. at 3, fn. 1.14 47. In Matter of Izumii, supra, the Associate Commissioner ruled that an investor15 in an ongoing limited partnership was not eligible for a visa because the petitioner had not16 “established” a new commercial enterprise within the meaning of the legislation. Izumii at 33-17 34. The Associate Commissioner recognized that the Service had previously approved18 numerous petitions involving investment plans in which limited partners joined partnerships19 over varying periods of time, but only explained its departure from a policy relied upon by20 hundreds of investors by claiming that “experience has shown...that some of these pooling21 arrangements are being used to circumvent the establishment requirement....” Id. at 34.22 However, the decision made no finding that the pooling arrangement it examined was being23 used to circumvent the establishment requirement, nor did it identify which pooling24 CUSACK KNOWLES FERGUSON P.L.L.C. ATTORNEYS AT LAW TWO UNION SQUARE, SUITE 3000 COMPLAINT FOR INJUNCTIVE AND 601 UNION STREET SEATTLE, WASHINGTON 98101-2324 DECLARATORY RELIEF AND FOR DAMAGES - 14 (206) 521-3001 420001P JJ230101
  15. 15. 1 arrangements were being used in this way, and how.2 48. As “precedent decisions,” the four decisions discussed above are binding on3 Service employees adjudicating petitions prospectively. But, as discussed above, they have4 been applied to I-526 petitions from immigrant investors whose investment programs have been5 approved in the past by the Service.6 49. More egregiously, they have been applied retroactively to investors whose7 investment programs were already approved by the Service, were granted conditional8 permanent resident status, and moved themselves and their families to the United States. Each9 invested over $500,000 in the local economy; this money has been irrevocably invested in a10 pooled fund, and cannot be withdrawn until the fund’s investments as a whole are liquidated11 in the future. Because of their reliance on the Service’s long-standing interpretation of the12 provisions of the immigrant investor program, these immigrants now face revocation of their13 permanent resident status and subsequent deportation.14 50. The Service’s engaging in illegal rulemaking, its reversal of long-standing15 interpretations of the rules governing the Pilot Program, and the retroactive application of the16 “precedent decisions” to the Fund’s existing and approved investment program, have caused17 direct and concrete injury to the Fund. Simply put, the Service has placed the Fund in jeopardy18 by unlawfully eliminating its primary source of capital. As an investment fund, the Fund19 continually makes commitments of capital to finance development projects in economically20 distressed areas of Seattle, projects that have difficulty attracting financing from more21 conventional sources, and which require substantial and long-term commitments of capital in22 order to be successful. The Service’s abrupt reversal of longstanding precedent, and especially23 the retroactive application of the new criteria to conditional permanent residents who have put24 CUSACK KNOWLES FERGUSON P.L.L.C. ATTORNEYS AT LAW TWO UNION SQUARE, SUITE 3000 COMPLAINT FOR INJUNCTIVE AND 601 UNION STREET SEATTLE, WASHINGTON 98101-2324 DECLARATORY RELIEF AND FOR DAMAGES - 15 (206) 521-3001 420001P JJ230101
  16. 16. 1 their capital at risk for nearly two years, only to now face repetition of the petition process or2 deportation, has caused a loss of investor confidence in the Fund and has led to a withdrawal3 of upwards of $3 million from the Fund since the issuance of the four “precedent decisions.”4 V. CAUSES OF ACTION5 First Cause of Action: Improper Rulemaking6 51. Plaintiff hereby incorporates by reference paragraphs 1 through 50 of this7 Complaint.8 52. The defendant’s wholesale revision of the requirements applied to petitions filed9 by immigrant investors, as implemented by the Service’s issuance and reliance upon the four10 “precedent decisions” referenced above, violates the rulemaking provisions of the11 Administrative Procedure Act, 5 U.S.C. §553, which requires notice of proposed rulemaking12 and the opportunity for interested persons to participate in the rulemaking by means of13 submitting written data, views, or arguments.14 Second Cause of Action: Action Exceeding Statutory Authority15 53. Plaintiff hereby incorporates by reference paragraphs 1 through 52 of this16 Complaint.17 54. The defendant’s wholesale revision of the regulatory regime governing the18 Immigrant Investor Pilot Program was contrary to the program’s authorizing legislation,19 exceeded her statutory jurisdiction, and should therefore be set aside pursuant to 5 U.S.C.20 §706(2)(C).21 Third Cause of Action: Arbitrary and Capricious Decisionmaking22 55. Plaintiff hereby incorporates by reference paragraphs 1 through 54 of this23 Complaint.24 CUSACK KNOWLES FERGUSON P.L.L.C. ATTORNEYS AT LAW TWO UNION SQUARE, SUITE 3000 COMPLAINT FOR INJUNCTIVE AND 601 UNION STREET SEATTLE, WASHINGTON 98101-2324 DECLARATORY RELIEF AND FOR DAMAGES - 16 (206) 521-3001 420001P JJ230101
  17. 17. 1 56. The defendant’s wholesale revision of the regulatory regime governing the2 Immigrant Investor Pilot Program, in a manner that abruptly reversed its own settled precedent3 on the subject, was arbitrary and capricious, and should therefore be set aside pursuant to 54 U.S.C. §706(2)(A).5 Fourth Cause of Action: Due Process Violations6 57. Plaintiff hereby incorporates by reference paragraphs 1 through 56 of this7 Complaint.8 58. The defendant’s wholesale revision of the regulatory regime governing the9 Immigrant Investor Pilot Program, and its retroactive application of that regime to the plaintiff’s10 approved investment program, deprived the plaintiff of due process under the Fifth Amendment11 of the Constitution of the United States.1213 Fifth Cause of Action: Uncompensated Taking14 59. Plaintiff hereby incorporates by reference paragraphs 1 through 58 of this15 Complaint.16 60. The defendant’s wholesale revision of the regulatory regime governing the17 Immigrant Investor Pilot Program, and its retroactive application of that regime to the plaintiff’s18 approved investment program, has resulted in an uncompensated taking of the economic worth19 of the Golden Rainbow Freedom Fund, in violation of the Fifth Amendment of the Constitution20 of the United States.21 VI. RELIEF SOUGHT22 WHEREFORE, plaintiff respectfully requests that the Court enter judgment in its behalf23 and:24 CUSACK KNOWLES FERGUSON P.L.L.C. ATTORNEYS AT LAW TWO UNION SQUARE, SUITE 3000 COMPLAINT FOR INJUNCTIVE AND 601 UNION STREET SEATTLE, WASHINGTON 98101-2324 DECLARATORY RELIEF AND FOR DAMAGES - 17 (206) 521-3001 420001P JJ230101
  18. 18. 1 a. issue an order setting aside the four “precedent decisions” relied upon2 by the defendant in denying or revoking the permanent resident status3 of the investors in the Golden Rainbow Freedom Fund;4 b. issue an order directing the defendant to, in a timely manner, approve5 the permanent residence status of those investors in the Golden Rainbow6 Freedom Fund who filed I-526 petitions prior to the date of issuance of7 the “precedent decisions”;8 c. issue an order directing the defendant to, in a timely manner, approve9 the I-829 petitions for removal of conditional status of those investors in10 the Golden Rainbow Freedom Fund whose I-526 petitions were11 approved prior to the date of issuance of the “precedent decisions.”12 d. issue an injunction restraining defendant from denying or revoking, on13 the basis of the four “precedent decisions” described above, any further14 petitions filed by immigrant investors in the Golden Rainbow Freedom15 Fund;16 e. issue an injunction restraining defendant from denying, on the basis of17 the four “precedent decisions” described above, any petitions to remove18 the conditional permanent resident status of investors who became19 conditional permanent residents prior to the issuance of the “precedent20 decisions” through their investment in the Golden Rainbow Freedom21 Fund;22 f. award plaintiff damages, in an amount to be determined;23 g. award plaintiff reasonable attorneys fees and other costs of this suit; and24 CUSACK KNOWLES FERGUSON P.L.L.C. ATTORNEYS AT LAW TWO UNION SQUARE, SUITE 3000 COMPLAINT FOR INJUNCTIVE AND 601 UNION STREET SEATTLE, WASHINGTON 98101-2324 DECLARATORY RELIEF AND FOR DAMAGES - 18 (206) 521-3001 420001P JJ230101
  19. 19. 1 h. award such other relief as the Court may deem proper.2 DATED this ____________ day of May, 1999.34 CUSACK & KNOWLES, P.L.L.C.56 By Kenneth J. Cusack, WSBA #176507 Charles E. Albertson, WSBA #12568 Attorneys for Plaintiff89101112131415161718192021222324 CUSACK KNOWLES FERGUSON P.L.L.C. ATTORNEYS AT LAW TWO UNION SQUARE, SUITE 3000 COMPLAINT FOR INJUNCTIVE AND 601 UNION STREET SEATTLE, WASHINGTON 98101-2324 DECLARATORY RELIEF AND FOR DAMAGES - 19 (206) 521-3001 420001P JJ230101

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