Hu et al v. Johnson et al

MOTION to Dismiss for Lack of Jurisdiction

D.D.C.October 6, 2016

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA _____________________________________ ) CHUANG HU, et al. ) ) Plaintiffs, ) ) v. ) ) Civil Action No. 16-208-RCL JEH C. JOHNSON, Secretary, U.S. Dep’t ) of Homeland Security, et al., ) ) Defendants. ) _____________________________________ ) DEFENDANTS’ MOTION TO DISMISS Under Federal Rules of Civil Procedure 12(b)(1), Defendants hereby move this Court to dismiss Plaintiffs’ complaint because Plaintiffs’ claim is now moot and this Court therefore lacks Article III jurisdiction. The grounds for this motion are set forth in the accompanying memorandum of points and authorities. A proposed order is attached. Respectfully submitted, BENJAMIN C. MIZER Principal Deputy Assistant Attorney General WILLIAM C. PEACHEY Director GLENN M. GIRDHARRY Assistant Director By: /s/ Joshua S. Press JOSHUA S. PRESS Trial Attorney United States Department of Justice Civil Division Office of Immigration Litigation District Court Section Case 1:16-cv-00208-RCL Document 18 Filed 10/06/16 Page 1 of 2 P.O. Box 868, Ben Franklin Station Washington, DC 20044 Phone: (202) 305-0106 Facsimile: (202) 305-7000 joshua.press@usdoj.gov Dated: October 6, 2016 Attorneys for Defendants Case 1:16-cv-00208-RCL Document 18 Filed 10/06/16 Page 2 of 2 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA _____________________________________ ) CHUANG HU, et al. ) ) Plaintiffs, ) ) v. ) ) Civil Action No. 16-208-RCL JEH C. JOHNSON, Secretary, U.S. Dep’t ) of Homeland Security, et al., ) ) Defendants. ) _____________________________________ ) DEFENDANTS’ MEMORANDUM OF LAW IN SUPPORT OF MOTION TO DISMISS Case 1:16-cv-00208-RCL Document 18-1 Filed 10/06/16 Page 1 of 10 2 INTRODUCTION Defendants Secretary of Homeland Security Jeh C. Johnson; Director of the U.S. Citizenship and Immigration Services (“USCIS”) Leon Rodriguez; Kathy Baran, Director of USCIS’ California Service Center; Nicholas Colucci, Chief of USCIS’ Immigrant Investor Program; and Federal Bureau of Investigation Director James B. Comey, each in their official capacities (collectively, “Defendants” or “the Government”), through their attorneys, submit this brief in support of their Motion to Dismiss (ECF No. 18) Plaintiffs’ Complaint to Compel Agency Action and for a Writ of Mandamus (ECF No. 1) (hereinafter, “Plaintiffs’ Complaint” or “Pls.’ Compl.”). Simply put, this Court should dismiss Plaintiffs’ Complaint because it requests what Plaintiffs have already received: adjudications by USCIS on their Form I-526 Immigrant Petitions for Alien Entrepreneurs (hereinafter, “Plaintiffs’ Petitions”). See Exhibits 1–3. Thus, because Plaintiffs’ Petitions have already been denied by USCIS, the Plaintiff’s Complaint for mandamus/injunctive relief is now moot. As the D.C. Circuit has explained, a case is moot when “a party has already obtained all the relief that it has sought.” Conservation Force, Inc. v. Jewell, 733 F.3d 1200, 1204 (D.C. Cir. 2013) (internal quotation marks omitted). Here, even if this Court grants the precise relief sought in Plaintiffs’ Complaint, it will simply be ordering Defendants to do what has already taken place—issue rulings on Plaintiffs’ Petitions. See Exhibits 1–3. The Court’s ruling would, therefore, be a nullity and would violate Article III’s prohibition on advisory opinions. Accordingly, for the reasons set forth below, the Defendants respectfully urge the Court to dismiss the Plaintiffs’ Complaint with prejudice. STATUTORY AND REGULATORY BACKGROUND In 1990, Congress amended the Immigration and Nationality Act (“INA”) to provide for classification of “employment creation” immigrants who invest capital in new commercial enterprises within the United States that creates full-time employment of United States workers. See Immigration Act of 1990, Pub. L. No. 101-649, § 121(a) (Nov. 29, 1990) (codified at 8 U.S.C. § 1153(b)(5)). This green-card category is better known as an EB-5 visa. The purpose of the EB-5 visa category is not to reward wealthy immigrants, but to create new employment for Case 1:16-cv-00208-RCL Document 18-1 Filed 10/06/16 Page 2 of 10 3 U.S. workers and infuse new capital into the country. See S. Rep. No. 101-55, at 21 (1989). At the same time, however, Congress was clear that every alien investor must demonstrate that this new capital could be traced back to a lawful source. Id. Congress set the qualifying capital-investment level for alien investors who participate in the EB-5 program at $1 million dollars, but alien investors may also qualify by investing at least $500,000 in a “targeted employment area” or “TEA.” 8 U.S.C. § 1153(b)(5)(C); 8 C.F.R. § 204.6(f). If the alien investor’s investment project is not located within a recognized, designated TEA, then the alien’s capital investment amount must be at least $1 million dollars. Id. In any event, the alien’s investment must “create full-time employment for not fewer than ten United States citizens or aliens lawfully admitted for permanent residence or other immigrants lawfully authorized to be employed in the United States (other than the immigrant and the immigrant’s spouse, sons, or daughters).” 8 U.S.C. § 1153(b)(5)(A)(ii). In 1993, Congress further expanded the employment-creation program by establishing the “pilot program,” which authorized “regional investment center[s] in the United States for the promotion of economic growth, including increased export sales, improved regional productivity, job creation, and increased domestic capital investment.” See Departments of State, Justice, and Commerce, the Judiciary and Related Agencies Appropriations Act of 1992, Pub. L. No. 102-395, § 610(a) (Oct. 6, 1992).1 This program allows economic units, whether public or private, engaged in the promotion of economic growth to seek regional investor center status with USCIS to allow alien investors to fund proposed economic development plans through pooled investments. See 58 Fed. Reg. 44,606; 44,608 (INS) (Aug. 24, 1993). In 1991, the former Immigration and Naturalization Service (“INS”)2 published regulations interpreting the EB-5 statute and establishing procedures for alien investors to file I- 1 The regional center program is no longer in a “pilot” form, although it is scheduled to sunset on December 9, 2016. See Legislative Branch Appropriations Act, 2017, Pub. L. No. 114- 223 (Sept. 29, 2016). 2 Under the Homeland Security Act of 2002, Congress abolished the INS and transferred Case 1:16-cv-00208-RCL Document 18-1 Filed 10/06/16 Page 3 of 10 4 526 petitions for classification as EB-5 alien entrepreneurs. See 56 Fed. Reg. 60,897; 60,910-13 (INS) (Nov. 29, 1991) (codified at 8 C.F.R. § 204.6). To demonstrate eligibility for approval, an alien investor must provide evidence that he has invested or is actively investing lawfully obtained capital in a new commercial enterprise in the United States that will create at least ten full-time positions for qualifying United States workers. See 8 C.F.R. §§ 204.6(j)(1)–(6). As required by 8 C.F.R. § 204.6(j)(4)(i), alien investors must further demonstrate that the investment of the required amount of capital in a new commercial enterprise will create full- time positions for at least ten qualifying employees within two years. See 8 U.S.C. § 1153(b)(5)(A)(ii). In order to demonstrate that a new commercial enterprise will create the requisite ten full-time positions for qualifying employees, if such employees have not yet been hired at the time of filing, an alien investor must provide “[a] copy of a comprehensive business plan showing that, due to the nature and projected size of the new commercial enterprise, the need for not fewer than ten (10) qualifying employees will result, including approximate dates, within the next two years, and when such employees will be hired.” 8 C.F.R. § 204.6(j)(4)(i)(B). For a new commercial enterprise within a regional center, the full-time positions can be created either directly or indirectly by the new commercial enterprise. 8 C.F.R. §§ 204.6(e), (j)(4)(iii). Investors investing in a regional center are subject to all the same program requirements except that they may rely on indirect job creation as demonstrated through reasonable methodologies. 8 C.F.R. §§ 204.6(m)(1), (7). In addition to these regulations, USCIS has designated four agency “EB-5 program precedential decisions,” to provide alien investors with additional guidance on the rules and requirements of the EB-5 program.3 See 8 C.F.R. § 103.3(c). One of these precedent decisions, the former agency’s functions to various agencies within the Department of Homeland Security (“DHS”), which includes USCIS. See Pub. L. No. 107-269, 116 Stat. 2135 (Nov. 25, 2002). 3 See Matter of Izummi, 22 I. & N. Dec. 169 (Assoc. Comm. 1998); Matter of Soffici, 22 I. & N. Dec. 158 (Assoc. Comm. 1998); Matter of Ho, 22 I. & N. Dec. 206 (Assoc. Comm. 1998); Matter of Hsiung, 22 I. & N. Dec. 201 (Assoc. Comm. 1998). These decisions established several rules of the EB-5 program relating to, inter alia, an investor establishing his lawful source of funds. Case 1:16-cv-00208-RCL Document 18-1 Filed 10/06/16 Page 4 of 10 5 Matter of Ho held that a “comprehensive business plan as contemplated by the regulations should contain, at a minimum, a description of the business, its products and/or services, and its objectives.” 22 I. & N. Dec. 206, 213 (Assoc. Comm. 1998). That decision further explains what a petitioner’s business plan must include: The plan should contain a market analysis, including the names of competing businesses and their relative strengths and weaknesses, a comparison of the competition’s products and pricing structures, and a description of the target market/prospective customers of the new commercial enterprise. The plan should list the required permits and licenses obtained. If applicable, it should describe the manufacturing or production process, the materials required, and the supply sources. The plan should detail any contracts executed for the supply of materials and/or the distribution of products. It should discuss the marketing strategy of the business, including pricing, advertising, and servicing. The plan should set forth the business’s organizational structure and its personnel’s experience. It should explain the business’s staffing requirements and contain a timetable for hiring, as well as job descriptions for all positions. It should contain sales, cost, and income projections and detail the bases therefore. Most importantly, the business plan must be credible. Id. (emphasis added). Moreover, in adjudicating an I-526 petition, USCIS must determine whether the facts stated in the petition and supporting documents are true, see 8 U.S.C. § 1154(b), and may reject statements that are unsubstantiated or without a factual basis. See Systronics Corp. v. INS, 153 F. Supp. 2d 7, 15 (D.D.C. 2001). The burden of proof rests on the alien investor to establish by a preponderance of evidence that he is fully qualified for the benefit sought. See 8 U.S.C. § 1361; Matter of Chawathe, 25 I. & N. Dec. 369, 374-76 (AAO 2010). If USCIS approves the I-526 petition, the alien investor (and her dependent family members) may then apply for a two-year conditional green card based on the approved investment project. See 8 C.F.R. § 204.6(l). FACTUAL BACKGROUND According to the Plaintiffs’ Complaint, the Plaintiffs are all investors in EB-5 projects whose petitions were submitted to USCIS many months ago. See Pls.’ Compl. at ¶¶ 37–45. Specifically, Plaintiffs’ Complaint alleges that they submitted their petitions following all of the statutory and regulatory guidelines, but that Defendants have taken longer than expected, or have Case 1:16-cv-00208-RCL Document 18-1 Filed 10/06/16 Page 5 of 10 6 otherwise not timely processed those petitions. Regardless, USCIS has acted on Plaintiffs’ Petitions—issuing denials on September 21, 2016. See Exhibits 1–3. LEGAL STANDARD I. Dismissal Under Federal Rule Of Civil Procedure 12(b)(1) A motion to dismiss for mootness is properly brought under Federal Rule of Civil Procedure 12(b)(1). See Flores v. District of Columbia, 437 F. Supp. 2d 22, 25 n.4 (D.D.C. 2006). That rule imposes on the Court “an affirmative obligation to ensure that it is acting within the scope of its jurisdictional authority.” Jones v. Ashcroft, 321 F. Supp. 2d 1, 5 (D.D.C. 2004). Thus, the parties seeking to invoke the jurisdiction of a federal court—the Plaintiffs—bear the burden of establishing that the court has jurisdiction. See U.S. Ecology, Inc. v. U.S. Dep’t of Interior, 231 F.3d 20, 24 (D.C. Cir. 2000) (citing Steel Co. v. Citizens for a Better Env’t, 523 U.S. 83, 103–04 (1998)); see also Grand Lodge of Fraternal Order of Police v. Ashcroft, 185 F. Supp. 2d 9, 13 (D.D.C. 2001). The “case or controversy” requirement of Article III, section 2, permits federal courts to adjudicate only “actual, ongoing controversies.” Honig v. Doe, 484 U.S. 305, 317 (1988). A case becomes moot “when the issues presented are no longer ‘live’ or the parties lack a legally cognizable interest in the outcome,” County of Los Angeles v. Davis, 440 U.S. 625, 631 (1979) (citation omitted), or when “intervening events make it impossible to grant the prevailing party effective relief.” Lemon v. Geren, 514 F.3d 1312, 1315 (D.C. Cir. 2008) (citation omitted). Although a court must accept as true all the factual allegations contained in the complaint when reviewing a motion to dismiss pursuant to Rule 12(b)(1), Leatherman v. Tarrant Cnty. Narcotics Intelligence & Coordination Unit, 507 U.S. 163, 164 (1993), “‘plaintiff[s’] factual allegations in the complaint ... will bear closer scrutiny in resolving a 12(b)(1) motion' than in resolving a 12(b)(6) motion for failure to state a claim.” Grand Lodge, 185 F. Supp. 2d at 13–14 (quoting 5A Charles Alan Wright & Arthur Miller, Federal Practice and Procedure § 1350 (2d ed. 1990)). However, a complaint must be construed liberally, and the plaintiffs should receive the benefit of all favorable inferences that can be drawn from the alleged facts. See EEOC v. St. Case 1:16-cv-00208-RCL Document 18-1 Filed 10/06/16 Page 6 of 10 7 Francis Xavier Parochial Sch., 117 F.3d 621, 625 (D.C. Cir. 1997). Additionally, a court may consider material other than the allegations of the complaint in determining whether it has jurisdiction to hear the long as it still accepts the factual allegations in the complaint as true. See Jerome Stevens Pharm., Inc. v. FDA, 402 F.3d 1249, 1253-54 (D.C. Cir. 2005); St. Francis Xavier Parochial Sch., 117 F.3d at 624–25 n.3; Herbert v. Nat’l Acad. of Scis., 974 F.2d 192, 197 (D.C. Cir. 1992); Haase v. Sessions, 835 F.2d 902, 906 (D.C. Cir. 1987). ARGUMENT I. The Plaintiffs’ Complaint Is Moot—Depriving This Court Of Jurisdiction It is hornbook law that “Article III Courts may not decide moot questions, only actual cases or controversies.” Nowak & Rotunda, Principles of Constitutional Law § 2.7, at 37 (2d ed. 2005). As the D.C. Circuit has recognized, “[a] case is moot when ‘the challenged conduct ceases such that there is no reasonable expectation that the wrong will be repeated’ in circumstances where ‘it becomes impossible for the court to grant any effectual relief whatever to the prevailing party.’” United States v. Philip Morris USA, Inc., 566 F.3d 1095, 1135 (D.C. Cir. 2009) (quoting City of Erie v. Pap’s A.M., 529 U.S. 277, 287 (2000)). Another commentator has put it thusly: Sometimes, a case or controversy that entered the federal courts as an appropriate subject for the exercise of judicial power may lose its status as such due to an intervening change in the situation or interests of the parties. When such changes occur, the controversy may cease to be definite and concrete, and its resolution may no longer affect the legal relations of adverse parties. The case may, in short, have become moot, and the mootness doctrine may require its dismissal. James E. Pfander, Principles of Federal Jurisdiction § 2.7, at 40 (2006). In this instance, USCIS’s recent denials (Exhibits 1–3) have made it impossible for this Court’s judgment to affect the parties because the Plaintiffs have now received exactly what they sought in their Complaint—a decision by Defendants on Plaintiffs’ Petitions. There is consequently no live case or controversy that exists between the parties, and this Court is therefore without Article III jurisdiction. See, e.g., McBryde v. Comm. to Review Cir. Council Conduct & Disability Orders of the Judicial Conf. of the U.S., 264 F.3d 52, 55 (D.C. Cir. 2001) Case 1:16-cv-00208-RCL Document 18-1 Filed 10/06/16 Page 7 of 10 8 (“If events outrun the controversy such that the court can grant no meaningful relief, the case must be dismissed as moot.”); see also Southwestern Bell Tel. Co. v. FCC, 168 F.3d 1344, 1350 (D.C. Cir. 1999) (“Where an action has no continuing adverse impact and there is no effective relief that a court may grant, any request for judicial review of the action is moot.”) (quoting O’Shea v. Littleton, 414 U.S. 488, 496 (1974)). Simply put, where events have so transpired that the controversy has ended and there is no remedy left for the court to provide, a controversy is moot unless one of the exceptions to mootness applies. See Nat’l Black Police Ass’n v. District of Columbia, 108 F.3d 346, 349 (D.C. Cir. 1997); Hall v. Beals, 396 U.S. 45, 48 (1969) (per curiam) (ruling that a case is moot and non-justiciable if it loses “its character as a present, live controversy of the kind that must exist if [the Court is] to avoid advisory opinions on abstract propositions of law”); Mills v. Green, 159 U.S. 651, 653 (1895). No such exception applies here. Plaintiffs have gotten the relief their Complaint seeks and their case is therefore moot. CONCLUSION For the foregoing reasons, this Court should dismiss Plaintiffs’ Complaint as moot. The Plaintiffs cannot show that they still have standing to bring this suit. Defendants therefore respectfully request that the Court dismiss Plaintiffs’ Complaint with prejudice. Respectfully submitted, BENJAMIN C. MIZER Principal Deputy Assistant Attorney General WILLIAM C. PEACHEY Director GLENN M. GIRDHARRY Assistant Director By: /s/ Joshua S. Press JOSHUA S. PRESS Trial Attorney United States Department of Justice Civil Division Office of Immigration Litigation Case 1:16-cv-00208-RCL Document 18-1 Filed 10/06/16 Page 8 of 10 9 District Court Section P.O. Box 868, Ben Franklin Station Washington, DC 20044 Phone: (202) 305-0106 Facsimile: (202) 305-7000 joshua.press@usdoj.gov Dated: October 6, 2016 Attorneys for Defendants Case 1:16-cv-00208-RCL Document 18-1 Filed 10/06/16 Page 9 of 10 CERTIFICATE OF SERVICE I hereby certify that on October 6, 2016, I electronically filed the foregoing MOTION TO DISMISS with the Clerk of the Court by using the CM/ECF system, which will provide electronic notice and an electronic link to this document to all attorneys of record in this matter. By: /s/ Joshua S. Press JOSHUA S. PRESS Trial Attorney United States Department of Justice Civil Division Case 1:16-cv-00208-RCL Document 18-1 Filed 10/06/16 Page 10 of 10 Exhibit 1 Case 1:16-cv-00208-RCL Document 18-2 Filed 10/06/16 Page 1 of 10 Form I-292 (revised 5/4/2015) www.uscis.gov TO: Chuang Hu Room 1802. No. 26, Lane 1028 Changshou Road, Putuo District Shanghai, China 200438 DATE: September 21, 2016 Application: Form I-526 File: WAC1490020530 DECISION Your Form I-526, Immigrant Petition by Alien Entrepreneur, filed by Chuang Hu, has been denied for the following reason(s): See Attachment If you desire to appeal this decision, or file a motion to reopen and/or reconsider, you may do so. Your notice of appeal or motion must be filed on Form I-290B, Notice of Appeal or Motion, within 33 calendar days of the date of this notice. A filing fee of $630.00 is required, payable to U.S. Department of Homeland Security, with a check or money order from a bank or other institution located in the United States. If no appeal or motion is filed within the time allowed, this decision will be the final decision in this matter. The appeal or motion may not be filed directly with the AAO. Initial filing of the Form I-290B should be sent to: USCIS P.O. Box 660160 Dallas, TX 75266 (For Postal Service Delivery) OR USCIS Attn: I-290B 2501 S. State Highway 121, Business Suite 400 Lewisville, TX 75067 (For Express Mail/Courier) In support of your appeal, you may submit a brief and/or additional evidence, either with the initial filing or within 30 calendar days of the initial filing. If necessary, you may request additional time to submit a brief. Such request must also be made within 30 calendar days of filing. Note, however, that an extension of time to file the appeal may not be granted. Any brief, written statement, or other evidence not filed with Form I-290B, or any request for additional time for the submission of a brief or other material must be sent directly to the AAO at the following address: USCIS Administrative Appeals Office U.S. Citizenship and Immigration Services 20 Massachusetts Ave., N.W., MS 2090 Washington, DC 20529-2090 However, if you are filing a motion, any supplementary arguments or evidence must be filed with the motion to reopen and/or reconsider. No additional time will be permitted. U.S. Department of Homeland Security U.S. Citizenship and Immigration Services Immigrant Investor Program 131 M Street, NE, MS 2235 Washington, DC 20529 Case 1:16-cv-00208-RCL Document 18-2 Filed 10/06/16 Page 2 of 10 Page 2 The Small Business Regulatory Enforcement and Fairness Act established the Office of the National Ombudsman (ONO) at the Small Business Administration. The ONO assists small businesses with issues related to federal regulations. If you are a small business with a comment or complaint about regulatory enforcement, you may contact the ONO at www.ombudsman.sba.gov or phone 202-205-2417 or fax 202-481-5719. Sincerely, Nicholas Colucci Chief, Immigrant Investor Program cc: Jason Blatt, Esq. Westlead Capital, Inc. 15F-2, No. 369 Fusing North Road Taipei (105), Taiwan Case 1:16-cv-00208-RCL Document 18-2 Filed 10/06/16 Page 3 of 10 Page 3 NOTICE OF DECISION Form I-526, Immigrant Petition by Alien Entrepreneur ROSE CENTER FINANCE, LP I. Procedural History Mr. Chuang Hu (the “Petitioner”) filed a Form I-526, Immigrant Petition by Alien Entrepreneur, seeking immigrant visa classification pursuant to section 203(b)(5) of the Immigration and Nationality Act (the “INA”) on October 21, 2013. Petitioner asserts eligibility based on an investment in Chicagoland Foreign Investment Group, LLC (the “Regional Center”) pursuant to the Immigrant Investor Program. 1 The Form I-526 and the evidence presented assert that Petitioner invested $500,000 into Rose Center Finance, LP – the new commercial enterprise (the “NCE”), on August 12, 2013. The NCE proposed to pool $9 million from 18 immigrant investors. According to the Form I-526 and supporting evidence, the NCE will lend the entire amount to Bellwood Place, LLC, the job- creating entity (the “JCE”). The JCE intends to finance a commercial real estate development known as “Rose Center” located in the Villages of Bellwood and Melrose Park, Proviso Township, Cook County, Illinois. The NCE and JCE are principally doing business within a targeted employment area (a “TEA”). INA § 203(b)(5)(A) provides classification to qualified immigrants seeking to enter the United States for the purpose of engaging in a new commercial enterprise (including a limited partnership)- (i) in which such alien has invested (after the date of the enactment of the Immigration Act of 1990) or, is actively in the process of investing, capital in an amount not less than the amount specified in subparagraph (C) 2 , and (ii) which will benefit the United States economy and create full-time employment for not fewer than 10 United States citizens or aliens lawfully admitted for permanent residence or other immigrants lawfully authorized to be employed in the United States (other than the immigrant and the immigrant's spouse, sons, or daughters). 1 Section 610 of the Departments of Commerce, Justice, and State, the Judiciary, and Related Agencies Appropriations Act, 1993, Pub. L. No. 102-395, 106 Stat. 1828 (1992), as amended by section 116 of Pub. L. No. 105-119, 111 Stat. 2440 (1997); section 402 of Pub. L. No. 106-396, 114 Stat. 1637 (2000); section 11037 of Pub. L. No. 107-273, 116 Stat. 1758 (2002); section 4 of Pub. L. No. 108-156, 117 Stat. 1944 (2003); section 1 of Pub. L. No. 112-176, 126 Stat. 1325 (2012); and section 575 of Pub.L. No. 114-113 (2015) (hereinafter the “Appropriations Act”); see also section 131 of Pub. L. No. 114-53, 129 Stat. 502 (2015). 2 The amount of capital required is $1,000,000, except when making an investment in a targeted employment area, the amount necessary to make a qualifying investment is $500,000. INA § 203(b)(5)(C)(i) – (ii); 8 C.F.R. § 204.6(f)(1) – (2). Case 1:16-cv-00208-RCL Document 18-2 Filed 10/06/16 Page 4 of 10 Page 4 In addition to the governing regulations, notably 8 C.F.R. § 204.6, legacy Immigration and Naturalization Service (INS) published four precedent decisions regarding the EB-5 immigrant visa classification, namely: Matter of Soffici, 22 I&N Dec. 158 (Assoc. Comm’r 1998); Matter of Izummi, 22 I&N Dec. 169 (Assoc. Comm’r 1998); Matter of Hsiung, 22 I&N Dec. 201 (Assoc. Comm’r 1998); and Matter of Ho, 22 I&N Dec. 206 (Assoc. Comm’r 1998). Based upon a review of the initial record, Petitioner did not establish eligibility for the benefit sought. Accordingly, U.S. Citizenship and Immigration Services (USCIS) issued a Notice of Intent to Deny (NOID) on May 26, 2016. In the NOID, USCIS notified Petitioner that the following eligibility requirements needed further clarification or additional evidence:  Petitioner has Placed the Required Amount of Capital At Risk;  Invested Capital Was Obtained Through Lawful Means; and  Employment Creation / Comprehensive Business Plan. On July 1, 2016, Petitioner responded to the NOID with the submission of additional evidence.  Transfer receipts of the sale proceeds to Petitioner’s Communication Band of China account ending (3684)  Transfers of funds into Petitioner’s investment accounts and back to his original account  Revised Business Plan Rose Center Finance, LP June 27, 2016  Verification Letter from Martin Banuelos, President, BAE & Construction Group, LLC  North Parcel proposal from Banuelos Architectural Engineering & Construction Group LLC  South Parcel proposal from Banuelos Architectural Engineering & Construction Group LLC  Site Plan South Parcel  Site Plan Rose Center & Title Sheet  Revised Economic Impact Report, June 2016  Commitment Letter from BAE for additional $200,000 financing  Certification of Budget by General Contractor  Articles with a date range of December 2011 – July 2014 regarding the development of Bellwood Metra rail stop  Email confirmation of TIGER grant funding for rail improvements, June 20, 2012  Sample Rent Roll for occupied Residential Units, April 2013  Pictures of completed Residential Units  Pictures of Rose Center Development  Picture of bridge construction near Rose Center Development with notice of road closures  Pictures of Metra rail stop and bridge construction  Pictures of new overpass at Metra rail stop  Copy of Transaction Journal, printed by International Bank of Chicago, June 6, 2016  Copies of monthly statements for the NCE’s escrow account at International Bank of Chicago However, based on a review of the entire record of proceeding, USCIS concludes that Petitioner has not established eligibility for the benefit sought. Therefore, the petition is denied for the reasons discussed below. Case 1:16-cv-00208-RCL Document 18-2 Filed 10/06/16 Page 5 of 10 Page 5 II. Analysis A. Job Creation As required by 8 C.F.R. § 204.6(j)(4)(i), the petition must establish that the investment of the required amount of capital in a new commercial enterprise will create full-time positions for at least ten qualifying employees within two years. See also 8 U.S.C. § 1153(b)(5)(A)(ii). For purposes of the Form I-526 adjudication and the job creation requirements, the two-year period described in 8 C.F.R. § 204.6(j)(4)(i)(B) is deemed to commence six months after the adjudication of the Form I-526. According to 8 C.F.R. § 204.6(j)(4)(i), “[t]o show that a new commercial enterprise will create not fewer than ten (10) full-time positions for qualifying employees, the petition must be accompanied by: (A) Documentation consisting of photocopies of relevant tax records, Forms I-9, or other similar documents for ten (10) qualifying employees, if such employees have already been hired following the establishment of the new commercial enterprise; or (B) A copy of a comprehensive business plan showing that, due to the nature and projected size of the new commercial enterprise, the need for not fewer than ten (10) qualifying employees will result, including approximate dates, within the next two years, and when such employees will be hired.” For a new commercial enterprise within a regional center, the full-time positions can be created either directly or indirectly by the new commercial enterprise. 8 C.F.R. §§ 204.6(e), (j)(4)(iii). Investors investing in a regional center are subject to all the same program requirements except that they may rely on indirect job creation as demonstrated through reasonable methodologies. 8 C.F.R. §§ 204.6(m)(1), (7). 1. Comprehensive Business Plan Matter of Ho held that a “comprehensive business plan as contemplated by the regulations should contain, at a minimum, a description of the business, its products and/or services, and its objectives.” 22 I&N Dec. at 213. Elaborating on the contents of a business plan, the decision states: The plan should contain a market analysis, including the names of competing businesses and their relative strengths and weaknesses, a comparison of the competition’s products and pricing structures, and a description of the target market/prospective customers of the new commercial enterprise. The plan should list the required permits and licenses obtained. If applicable, it should describe the manufacturing or production process, the materials required, and the supply sources. The plan should detail any contracts executed for the supply of materials and/or the distribution of products. It should discuss the marketing strategy of the business, including pricing, advertising, and servicing. The plan should set forth the business’s organizational structure and its personnel’s experience. It should explain the business’s staffing requirements and contain a timetable for hiring, as well as job descriptions for all positions. It should contain sales, cost, and income projections and detail the bases therefore. Most importantly, the business plan must be credible. Case 1:16-cv-00208-RCL Document 18-2 Filed 10/06/16 Page 6 of 10 Page 6 Id. The evidence in the record fails to establish that the NCE will create at least ten full-time positions for qualifying employees. Both Business Plans call for the JCE to develop Rose Center Development in two phases, resulting in the completion of two, two-story facilities, each of which will host commercial occupants on the ground floor and residential occupants on the second floor. The first of the two facilities to be completed will be in a pre- existing structure. USCIS’ NOID noted that there is a significant disparity between the condition of the existing construction as represented in the 2013 Business Plan and that presented in the independent Appraisal Report and Feasibility Analysis provided by Realty Value Consultants. As noted in the NOID, the 2013 Business Plan failed to describe work needed to complete the existing building. In the NOID Response, Petitioner offered no current evidence, other than outdated news articles to substantiate the claim that a new commuter rail station would be built in the area thereby enhancing the land’s value. Some of the news articles, an email confirming TIGER grant funding from June 2012 and sample rent roll dated April 2013 submitted with the NOID Response pre-date Petitioner’s filing so it is unclear why this evidence was not previously submitted but the dated evidence also does little to address the concerns about the project’s viability noted in the NOID. In the NOID Response, Petitioner stated that USCIS has “overrelied” on the description in the appraisal as a portrayal of the state of the building at time of filing and that it is reasonable to expect ongoing construction efforts between the time of the appraisal and time of filing and that the original Business Plan is a more accurate portrayal of the state of the property at the time of filing. Petitioner notes that part of the funding for completing interior improvements will be sourced from the Partnership’s loan, which is comprised of the EB-5 funds that remain in escrow pending I-526 approval, however, Petitioner has not shown that the updated business plan would be more credible once those funds are released from escrow. In fact, the plan relies on funding sourced from EB-5 funds from another NCE, Lake 1, LLC for development of “The majority of the North Parcel’s commercial space…”( 2016 Business Plan, p. 5). That NCE was slated to pool $3.5 million from seven investors to complete 52,000 square feet of the North Parcel building’s garment manufacturer and outlet stores. As of February 3, 2016, all of the investor’s for Lake 1, LLC have been denied by USCIS. Additionally, Lake 1 LLC was previously listed in as an “outlet store” (2013 Business Plan, p. 12) rather than a source of funding. The fact that Petitioner’s “updated” business plan relies on a funding project that has been denied previous to its creation clouds the entire plan’s credibility. The burden is on Petitioner to provide evidence which most accurately portrays the planned project and its current state (as applicable) at the time of filing. Although Petitioner has provided articles to show there may be construction and ongoing plans for the commuter rail station, the most current articles Petitioner submitted on the project are two years old. Because of significant, unexplained discrepancies between the 2013 Business Plan and the 2016 Business Plan, Petitioner has not demonstrated that they have a credible Matter of Ho-compliant Comprehensive Business Plan. The 2016 Business Plan submitted in response to the NOID contains a breakdown of construction costs for completing the North Parcel and constructing the South Parcel (2016 Business Plan p. 21). It estimates a cost of $9.157 million; $9 million from EB-5 investors and an additional $200,000 provided by the General Contractor, Banuelos Architectural Engineering & Construction Group, LLC. However, the estimates appear to have been drastically altered to fit the end total without explanation. For example, the cost listed in the original Business Plan for Carpentry was $5,400,000 (2013 Business Plan, p. 21), the current cost is $1,007,000 for the North Parcel and $679,200 for the South Parcel (2016 Business Plan, p. 21) for a total of $1,686,200. No explanation is provided for the $3.7 million difference for carpentry expenditures between the two business plans. The original cost for carpets was $210,000 while the new cost is $32,300. The original cost for Sprinklers was $275,000 while Case 1:16-cv-00208-RCL Document 18-2 Filed 10/06/16 Page 7 of 10 Page 7 the new cost is $95,000 (North Parcel) and $580,000 (South Parcel). Additionally, the cost for construction per square foot for the North Parcel should be relatively similar to the cost per square foot for the South Parcel, as both buildings are described as mixed-use developments with commercial space on the ground floor and residential space on the second floor. The North and South Parcels are being developed with the explicit purpose of leasing without any special customization for either parcel that would result in a cost differential; no part of the building style, construction material, design and end use implies a significant difference in per unit construction cost. However, the North Parcel costs $83.03 per square foot while the estimate for the South Parcel is $62.01 per square foot. The underestimation for the South Parcel could result in project costs exceeding the budget, which would leave construction incomplete. Square Feet Cost Cost/Square Foot North Parcel 143,544 $11,918,080 $83.03 South Parcel 118,800 $7,367,200 $62.01 *Based on construction figures from 2016 Business Plan, pages 20- 21. The 2016 Business Plan states “According to RS Means (the source used by Petitioner to calculate hard construction costs), the hard construction costs average within the Project areas is $11,397,530, meaning the Projects estimated cost is 19.7% lower than average.” At $9.157 million (2016 Business Plan, p. 26) for Hard Construction costs, the current budget appears to significantly underestimate construction costs. Fluctuations in project estimates are not an oddity in construction, however the lack of explanation for such drastic changes in projections discredits the veracity of the budget, and by implication, the project itself. USCIS concludes the projected cost of $9 million is not reasonable. Therefore, the 70 jobs calculated from expenditures on Hard Construction are not reasonable, and it is more likely not to meet the requirements of the program. Further, the 2016 Business Plan explains that although fully occupied at the time of the original filing, much of the North Parcel building is now vacant with only eight residential tenants remaining in the completed condominiums “mainly due to main road closures (25 th Avenue railroad bridge construction) that began in September 2014 and is expected to continue until September 2016.” (2016 Business Plan, p. 5). That translates into only a 25% occupancy rate. Petitioner refers to articles dating back to July 2014 regarding railroad bridge construction in Melrose Park/Bellwood Village, but has not provided updated information on its current progress. Independent research indicates there was only an initial delay in the construction of the bridge. 3 If the project’s ability to attract tenants is dependent on the main road, any delay in the construction of the bridge is likely to cause further delay in leasing the remaining 24 units in the North Parcel and 72 units in the South Parcel. Petitioner has not demonstrated how the market will be able to absorb an additional 96 units while road closures remain and the new railroad bridge is not operational. Petitioner has not addressed a plan for the high vacancy rates and adverse market conditions. This further undermines the credibility of the proposed project. Additionally, one of the commercial spaces in the South Parcel building, measuring 20,000 square feet, will be occupied by World Wide High Line Telecom LLC (High Line Telecom), the operator of a telemarketing call 3 . http://www.vil.bellwood.il.us/news/default.aspx?&ArticleId=302 Case 1:16-cv-00208-RCL Document 18-2 Filed 10/06/16 Page 8 of 10 Page 8 center. USCIS stated in the NOID that jobs at the telemarketing call center may not be credited to EB-5 investors, as the Highline Telecom company is an independent legal and financial entity, Petitioner’s NOID response states that the relationship between the developer (the relevant portion of the NOID Response refers to the JCE as the “developer”) and High Line Telecom is not simply that of landlord and tenant, but more an affiliate organization of the developer (NOID Response, p. 13) and therefore employees of Highline Telecom LLC should be counted toward the number of jobs created by the JCE. However, High Line Telecom, rather than the JCE, will be operating the telemarketing unit. The only connection between the two entities is that the “developer principal,” Ronald Scarlato, is a 50% owner of Highline Telecom according to the Revenue Sharing Agreement submitted with the original filing. The Revenue Sharing Agreement indicates that the tenant will only pay rent when it earns sufficient revenue (p. 4). It will share up to $27,500 of its post-cost, after-tax revenues with the JCE. The attorney cover letter submitted with Petitioner’s original filing states this is “(a 25% discount on what it would otherwise cost to rent a commercial space in the community.” (p. 9). All of this implies that Highline Telecom will not be paying for the space it occupies in the new building unless it makes a profit, and even when it does pay, it will be at a rate substantially lower than market rate. This could seriously challenge the new development’s cash flow and ultimately result in the JCE’s inability to repay the EB-5 loan in a timely manner. Moreover, neither Business Plan provides details about the operation of the telemarketing business. The plan calls for the hiring 104 employees within 6 months but no evidence has been provided to support its ability to do so. Finally, no evidence has been provided to establish that EB-5 funds will be made available to this company for the purposes of job creation. Therefore, the 104 jobs projected from the operation of High Line Telecom cannot be used for the calculation of jobs for EB-5 purposes. The Revised Economic Impact Report dated June 2016 presents the following job creation table with an estimate of 263 jobs to be created as a result of this investment (p. 4). Table A. Summary of Employment and Revenue Estimates Activity Exp/Rev (Current $) (million $) Exp/Rev (2007 $) (million $) Final Demand Multiplier Total Jobs Hard Construction Costs* $9.16 $8.19 8.62 70.6 Residential Rental Income $0.94 $0.74 9.82 7.3 Direct Jobs Direct Effect Multiplier Total Jobs Telemarketing Call Center 104 1.78 185.2 TOTAL 263.1 *Indirect and induced jobs only Case 1:16-cv-00208-RCL Document 18-2 Filed 10/06/16 Page 9 of 10 Page 9 The 2016 Business Plan’s job creation estimates cannot be verified because; (1) construction costs are unrealistically low and Petitioner has provided no explanation for the alterations; (2) the denial of EB-5 capital investment for Lake 1, LLC results in a shortage of funds necessary to complete the project; (3) Petitioner has failed to establish that the JCE will be operating the telemarketing business calling into question its ability to create jobs and repay its loan; (4) delays in the railroad construction bridge has given rise to adverse market conditions not addressed in the filing. Since the inputs for the Economic Analysis are dependent on the Business Plan’s credibility, the analysis contained therein is more likely than not, flawed. Therefore, Petitioner has not shown the project will create the requisite number of jobs for eligibility under the program. III. Conclusion In summary, USCIS has determined, based on the initial evidence submitted upon filing and after consideration of all additional evidence submitted, that Petitioner has failed to establish by a preponderance of the evidence that the Form I-526 complies with applicable legal requirements. Consequently, USCIS concludes that Petitioner is ineligible for classification under INA § 203(b)(5)(A). In visa petition proceedings, Petitioner bears the burden of establishing eligibility for the benefit sought. See Matter of Brantigan, 11 I&N Dec. 493 (BIA 1966). As Petitioner has not satisfied his burden of establishing eligibility, the Form I-526 is denied. If Petitioner disagrees with this decision, or if Petitioner has additional evidence that shows this decision is incorrect, Petitioner may file a motion or an appeal to this decision by filing a completed Form I-290B, Notice of Appeal or Motion, along with the appropriate filing fee. A copy is enclosed. Petitioner may also include a brief or other written statement and additional evidence in support of the motion or appeal. The Form I-290B must be filed within 33 days from the date of this notice. If a motion or appeal is not filed within 33 days, this decision is final. Petitioner must send the completed Form I-290B and supporting documentation with the appropriate filing fee to: USCIS I-290B P.O. Box 660168 Dallas, TX 75266 For an appeal, Petitioner may request additional time to submit a brief within 30 calendar days of filing the appeal. Any brief, written statement, or evidence in support of an appeal that is not filed with Form I-290B must be directly sent within 30 days of filing the appeal to: DHS/USCIS Administrative Appeals Office (AAO) 20 Massachusetts Ave., N.W., MS 2090 Washington, DC 20529-2090 For more information about the filing requirements for appeals and motions, please see 8 C.F.R. § 103.3 or 103.5, or visit the USCIS website at www.uscis.gov. Case 1:16-cv-00208-RCL Document 18-2 Filed 10/06/16 Page 10 of 10 Exhibit 2 Case 1:16-cv-00208-RCL Document 18-3 Filed 10/06/16 Page 1 of 10 Form I-292 (revised 5/4/2015) www.uscis.gov TO: Zaiyi Qian No. 135, Jiayuan Villa Lane 658 Jiajian Highway, Jiading District Shanghai, China 201822 DATE: September 20, 2016 Application: Form I-526 File: WAC1390591593 DECISION Your Form I-526, Immigrant Petition by Alien Entrepreneur, filed by Zaiyi Qian, has been denied for the following reason(s): See Attachment If you desire to appeal this decision, or file a motion to reopen and/or reconsider, you may do so. Your notice of appeal or motion must be filed on Form I-290B, Notice of Appeal or Motion, within 33 calendar days of the date of this notice. A filing fee of $630.00 is required, payable to U.S. Department of Homeland Security, with a check or money order from a bank or other institution located in the United States. If no appeal or motion is filed within the time allowed, this decision will be the final decision in this matter. The appeal or motion may not be filed directly with the AAO. Initial filing of the Form I-290B should be sent to: USCIS P.O. Box 660160 Dallas, TX 75266 (For Postal Service Delivery) OR USCIS Attn: I-290B 2501 S. State Highway 121, Business Suite 400 Lewisville, TX 75067 (For Express Mail/Courier) In support of your appeal, you may submit a brief and/or additional evidence, either with the initial filing or within 30 calendar days of the initial filing. If necessary, you may request additional time to submit a brief. Such request must also be made within 30 calendar days of filing. Note, however, that an extension of time to file the appeal may not be granted. Any brief, written statement, or other evidence not filed with Form I-290B, or any request for additional time for the submission of a brief or other material must be sent directly to the AAO at the following address: USCIS Administrative Appeals Office U.S. Citizenship and Immigration Services 20 Massachusetts Ave., N.W., MS 2090 Washington, DC 20529-2090 However, if you are filing a motion, any supplementary arguments or evidence must be filed with the motion to reopen and/or reconsider. No additional time will be permitted. U.S. Department of Homeland Security U.S. Citizenship and Immigration Services Immigrant Investor Program 131 M Street, NE, MS 2235 Washington, DC 20529 Case 1:16-cv-00208-RCL Document 18-3 Filed 10/06/16 Page 2 of 10 Page 2 The Small Business Regulatory Enforcement and Fairness Act established the Office of the National Ombudsman (ONO) at the Small Business Administration. The ONO assists small businesses with issues related to federal regulations. If you are a small business with a comment or complaint about regulatory enforcement, you may contact the ONO at www.ombudsman.sba.gov or phone 202-205-2417 or fax 202-481-5719. Sincerely, Nicholas Colucci Chief, Immigrant Investor Program cc: Jason Blatt, Esq. Westlead Capital, Inc. 15F-2, No. 369 Fusing North Road Taipei (105), Taiwan Case 1:16-cv-00208-RCL Document 18-3 Filed 10/06/16 Page 3 of 10 Page 3 NOTICE OF DECISION Form I-526, Immigrant Petition by Alien Entrepreneur ROSE CENTER FINANCE, LP I. Procedural History Mr. Zaiyi Qian (the “Petitioner”) filed a Form I-526, Immigrant Petition by Alien Entrepreneur, seeking immigrant visa classification pursuant to section 203(b)(5) of the Immigration and Nationality Act (the “INA”) on August 26, 2013. Petitioner asserts eligibility based on an investment in Chicagoland Foreign Investment Group, LLC (the “Regional Center”) pursuant to the Immigrant Investor Program. 1 The Form I-526 and the evidence presented assert that Petitioner invested $500,000 into Rose Center Finance, LP – the new commercial enterprise (the “NCE”), on May 22, 2013. The NCE proposed to pool $9 million from 18 immigrant investors. According to the Form I-526 and supporting evidence, the NCE will lend the entire amount to Bellwood Place, LLC, the job- creating entity (the “JCE”). The JCE intends to finance a commercial real estate development known as “Rose Center” located in the Villages of Bellwood and Melrose Park, Proviso Township, Cook County, Illinois. The NCE and JCE are principally doing business within a targeted employment area (a “TEA”). INA § 203(b)(5)(A) provides classification to qualified immigrants seeking to enter the United States for the purpose of engaging in a new commercial enterprise (including a limited partnership)- (i) in which such alien has invested (after the date of the enactment of the Immigration Act of 1990) or, is actively in the process of investing, capital in an amount not less than the amount specified in subparagraph (C) 2 , and (ii) which will benefit the United States economy and create full-time employment for not fewer than 10 United States citizens or aliens lawfully admitted for permanent residence or other immigrants lawfully authorized to be employed in the United States (other than the immigrant and the immigrant's spouse, sons, or daughters). 1 Section 610 of the Departments of Commerce, Justice, and State, the Judiciary, and Related Agencies Appropriations Act, 1993, Pub. L. No. 102-395, 106 Stat. 1828 (1992), as amended by section 116 of Pub. L. No. 105-119, 111 Stat. 2440 (1997); section 402 of Pub. L. No. 106-396, 114 Stat. 1637 (2000); section 11037 of Pub. L. No. 107-273, 116 Stat. 1758 (2002); section 4 of Pub. L. No. 108-156, 117 Stat. 1944 (2003); section 1 of Pub. L. No. 112-176, 126 Stat. 1325 (2012); and section 575 of Pub.L. No. 114-113 (2015) (hereinafter the “Appropriations Act”); see also section 131 of Pub. L. No. 114-53, 129 Stat. 502 (2015). 2 The amount of capital required is $1,000,000, except when making an investment in a targeted employment area, the amount necessary to make a qualifying investment is $500,000. INA § 203(b)(5)(C)(i) – (ii); 8 C.F.R. § 204.6(f)(1) – (2). Case 1:16-cv-00208-RCL Document 18-3 Filed 10/06/16 Page 4 of 10 Page 4 In addition to the governing regulations, notably 8 C.F.R. § 204.6, legacy Immigration and Naturalization Service (INS) published four precedent decisions regarding the EB-5 immigrant visa classification, namely: Matter of Soffici, 22 I&N Dec. 158 (Assoc. Comm’r 1998); Matter of Izummi, 22 I&N Dec. 169 (Assoc. Comm’r 1998); Matter of Hsiung, 22 I&N Dec. 201 (Assoc. Comm’r 1998); and Matter of Ho, 22 I&N Dec. 206 (Assoc. Comm’r 1998). Based upon a review of the initial record, Petitioner did not establish eligibility for the benefit sought. Accordingly, U.S. Citizenship and Immigration Services (USCIS) issued a Notice of Intent to Deny (NOID) on May 26, 2016. In the NOID, USCIS notified Petitioner that the following eligibility requirements needed further clarification or additional evidence:  Petitioner has Placed the Required Amount of Capital At Risk; and  Employment Creation / Comprehensive Business Plan. On July 1, 2016, Petitioner responded to the NOID with the submission of additional evidence.  Revised Business Plan Rose Center Finance, LP June 27, 2016  Verification Letter from Martin Banuelos, President, BAE & Construction Group, LLC  North Parcel proposal from Banuelos Architectural Engineering & Construction Group LLC  South Parcel proposal from Banuelos Architectural Engineering & Construction Group LLC  Site Plan South Parcel  Site Plan Rose Center & Title Sheet  Revised Economic Impact Report, June 2016  Commitment Letter from BAE for additional $200,000 financing  Certification of Budget by General Contractor  Articles with a date range of December 2011 – July 2014 regarding the development of Bellwood Metra rail stop  Email confirmation of TIGER grant funding for rail improvements, June 20, 2012  Sample Rent Roll for occupied Residential Units, April 2013  Pictures of completed Residential Units  Pictures of Rose Center Development  Picture of bridge construction near Rose Center Development with notice of road closures  Pictures of Metra rail stop and bridge construction  Pictures of new overpass at Metra rail stop  Copy of Transaction Journal, printed by International Bank of Chicago, June 6, 2016  Copies of monthly statements for the NCE’s escrow account at International Bank of Chicago However, based on a review of the entire record of proceeding, USCIS concludes that Petitioner has not established eligibility for the benefit sought. Therefore, the petition is denied for the reasons discussed below. II. Analysis A. Job Creation As required by 8 C.F.R. § 204.6(j)(4)(i), the petition must establish that the investment of the required amount of capital in a new commercial enterprise will create full-time positions for at least ten qualifying employees within two years. See also 8 U.S.C. § 1153(b)(5)(A)(ii). For purposes of the Form I-526 adjudication and the job creation Case 1:16-cv-00208-RCL Document 18-3 Filed 10/06/16 Page 5 of 10 Page 5 requirements, the two-year period described in 8 C.F.R. § 204.6(j)(4)(i)(B) is deemed to commence six months after the adjudication of the Form I-526. According to 8 C.F.R. § 204.6(j)(4)(i), “[t]o show that a new commercial enterprise will create not fewer than ten (10) full-time positions for qualifying employees, the petition must be accompanied by: (A) Documentation consisting of photocopies of relevant tax records, Forms I-9, or other similar documents for ten (10) qualifying employees, if such employees have already been hired following the establishment of the new commercial enterprise; or (B) A copy of a comprehensive business plan showing that, due to the nature and projected size of the new commercial enterprise, the need for not fewer than ten (10) qualifying employees will result, including approximate dates, within the next two years, and when such employees will be hired.” For a new commercial enterprise within a regional center, the full-time positions can be created either directly or indirectly by the new commercial enterprise. 8 C.F.R. §§ 204.6(e), (j)(4)(iii). Investors investing in a regional center are subject to all the same program requirements except that they may rely on indirect job creation as demonstrated through reasonable methodologies. 8 C.F.R. §§ 204.6(m)(1), (7). 1. Comprehensive Business Plan Matter of Ho held that a “comprehensive business plan as contemplated by the regulations should contain, at a minimum, a description of the business, its products and/or services, and its objectives.” 22 I&N Dec. at 213. Elaborating on the contents of a business plan, the decision states: The plan should contain a market analysis, including the names of competing businesses and their relative strengths and weaknesses, a comparison of the competition’s products and pricing structures, and a description of the target market/prospective customers of the new commercial enterprise. The plan should list the required permits and licenses obtained. If applicable, it should describe the manufacturing or production process, the materials required, and the supply sources. The plan should detail any contracts executed for the supply of materials and/or the distribution of products. It should discuss the marketing strategy of the business, including pricing, advertising, and servicing. The plan should set forth the business’s organizational structure and its personnel’s experience. It should explain the business’s staffing requirements and contain a timetable for hiring, as well as job descriptions for all positions. It should contain sales, cost, and income projections and detail the bases therefore. Most importantly, the business plan must be credible. Id. The evidence in the record fails to establish that the NCE will create at least ten full-time positions for qualifying employees. Both Business Plans call for the JCE to develop Rose Center Development in two phases, resulting in the completion of two, two-story facilities, each of which will host commercial occupants on the ground floor and residential occupants on the second floor. The first of the two facilities to be completed will be in a pre- existing structure. USCIS’ NOID noted that there is a significant disparity between the condition of the existing Case 1:16-cv-00208-RCL Document 18-3 Filed 10/06/16 Page 6 of 10 Page 6 construction as represented in the 2013 Business Plan and that presented in the independent Appraisal Report and Feasibility Analysis provided by Realty Value Consultants. As noted in the NOID, the 2013 Business Plan failed to describe work needed to complete the existing building. In the NOID Response, Petitioner offered no current evidence, other than outdated news articles to substantiate the claim that a new commuter rail station would be built in the area thereby enhancing the land’s value. Some of the news articles, an email confirming TIGER grant funding from June 2012 and sample rent roll dated April 2013 submitted with the NOID Response pre-date Petitioner’s filing so it is unclear why this evidence was not previously submitted but the dated evidence also does little to address the concerns about the project’s viability noted in the NOID. In the NOID Response, Petitioner stated that USCIS has “overrelied” on the description in the appraisal as a portrayal of the state of the building at time of filing and that it is reasonable to expect ongoing construction efforts between the time of the appraisal and time of filing and that the original Business Plan is a more accurate portrayal of the state of the property at the time of filing. Petitioner notes that part of the funding for completing interior improvements will be sourced from the Partnership’s loan, which is comprised of the EB-5 funds that remain in escrow pending I-526 approval, however, Petitioner has not shown that the updated business plan would be more credible once those funds are released from escrow. In fact, the plan relies on funding sourced from EB-5 funds from another NCE, Lake 1, LLC for development of “The majority of the North Parcel’s commercial space…”( 2016 Business Plan, p. 5). That NCE was slated to pool $3.5 million from seven investors to complete 52,000 square feet of the North Parcel building’s garment manufacturer and outlet stores. As of February 3, 2016, all of the investor’s for Lake 1, LLC have been denied by USCIS. Additionally, Lake 1 LLC was previously listed in as an “outlet store” (2013 Business Plan, p. 12) rather than a source of funding. The fact that Petitioner’s “updated” business plan relies on a funding project that has been denied previous to its creation clouds the entire plan’s credibility. The burden is on Petitioner to provide evidence which most accurately portrays the planned project and its current state (as applicable) at the time of filing. Although Petitioner has provided articles to show there may be construction and ongoing plans for the commuter rail station, the most current articles Petitioner submitted on the project are two years old. Because of significant, unexplained discrepancies between the 2013 Business Plan and the 2016 Business Plan, Petitioner has not demonstrated that they have a credible Matter of Ho-compliant Comprehensive Business Plan. The 2016 Business Plan submitted in response to the NOID contains a breakdown of construction costs for completing the North Parcel and constructing the South Parcel (2016 Business Plan p. 21). It estimates a cost of $9.157 million; $9 million from EB-5 investors and an additional $200,000 provided by the General Contractor, Banuelos Architectural Engineering & Construction Group, LLC. However, the estimates appear to have been drastically altered to fit the end total without explanation. For example, the cost listed in the original Business Plan for Carpentry was $5,400,000 (2013 Business Plan, p. 21), the current cost is $1,007,000 for the North Parcel and $679,200 for the South Parcel (2016 Business Plan, p. 21) for a total of $1,686,200. No explanation is provided for the $3.7 million difference for carpentry expenditures between the two business plans. The original cost for carpets was $210,000 while the new cost is $32,300. The original cost for Sprinklers was $275,000 while the new cost is $95,000 (North Parcel) and $580,000 (South Parcel). Additionally, the cost for construction per square foot for the North Parcel should be relatively similar to the cost per square foot for the South Parcel, as both buildings are described as mixed-use developments with commercial space on the ground floor and residential space on the second floor. The North and South Parcels are being developed with the explicit purpose of leasing without any special customization for either parcel that would result in a cost differential; no part of the building style, construction material, design and end use implies a significant difference in per unit construction cost. However, the North Parcel costs $83.03 per square foot while the estimate for the South Parcel is $62.01 per Case 1:16-cv-00208-RCL Document 18-3 Filed 10/06/16 Page 7 of 10 Page 7 square foot. The underestimation for the South Parcel could result in project costs exceeding the budget, which would leave construction incomplete. Square Feet Cost Cost/Square Foot North Parcel 143,544 $11,918,080 $83.03 South Parcel 118,800 $7,367,200 $62.01 *Based on construction figures from 2016 Business Plan, pages 20- 21. The 2016 Business Plan states “According to RS Means (the source used by Petitioner to calculate hard construction costs), the hard construction costs average within the Project areas is $11,397,530, meaning the Projects estimated cost is 19.7% lower than average.” At $9.157 million (2016 Business Plan, p. 26) for Hard Construction costs, the current budget appears to significantly underestimate construction costs. Fluctuations in project estimates are not an oddity in construction, however the lack of explanation for such drastic changes in projections discredits the veracity of the budget, and by implication, the project itself. USCIS concludes the projected cost of $9 million is not reasonable. Therefore, the 70 jobs calculated from expenditures on Hard Construction are not reasonable, and it is more likely not to meet the requirements of the program. Further, the 2016 Business Plan explains that although fully occupied at the time of the original filing, much of the North Parcel building is now vacant with only eight residential tenants remaining in the completed condominiums “mainly due to main road closures (25 th Avenue railroad bridge construction) that began in September 2014 and is expected to continue until September 2016.” (2016 Business Plan, p. 5). That translates into only a 25% occupancy rate. Petitioner refers to articles dating back to July 2014 regarding railroad bridge construction in Melrose Park/Bellwood Village, but has not provided updated information on its current progress. Independent research indicates there was only an initial delay in the construction of the bridge. 3 If the project’s ability to attract tenants is dependent on the main road, any delay in the construction of the bridge is likely to cause further delay in leasing the remaining 24 units in the North Parcel and 72 units in the South Parcel. Petitioner has not demonstrated how the market will be able to absorb an additional 96 units while road closures remain and the new railroad bridge is not operational. Petitioner has not addressed a plan for the high vacancy rates and adverse market conditions. This further undermines the credibility of the proposed project. Additionally, one of the commercial spaces in the South Parcel building, measuring 20,000 square feet, will be occupied by World Wide High Line Telecom LLC (High Line Telecom), the operator of a telemarketing call center. USCIS stated in the NOID that jobs at the telemarketing call center may not be credited to EB-5 investors, as the Highline Telecom company is an independent legal and financial entity, Petitioner’s NOID response states that the relationship between the developer (the relevant portion of the NOID Response refers to the JCE as the “developer”) and High Line Telecom is not simply that of landlord and tenant, but more an affiliate organization of the developer (NOID Response, p. 13) and therefore employees of Highline Telecom LLC should be counted toward the number of jobs created by the JCE. However, High Line Telecom, rather than the JCE, will be operating the telemarketing unit. The only connection between the two entities is that the “developer principal,” 3 . http://www.vil.bellwood.il.us/news/default.aspx?&ArticleId=302 Case 1:16-cv-00208-RCL Document 18-3 Filed 10/06/16 Page 8 of 10 Page 8 Ronald Scarlato, is a 50% owner of Highline Telecom according to the Revenue Sharing Agreement submitted with the original filing. The Revenue Sharing Agreement indicates that the tenant will only pay rent when it earns sufficient revenue (p. 4). It will share up to $27,500 of its post-cost, after-tax revenues with the JCE. The attorney cover letter submitted with Petitioner’s original filing states this is “(a 25% discount on what it would otherwise cost to rent a commercial space in the community.” (p. 9). All of this implies that Highline Telecom will not be paying for the space it occupies in the new building unless it makes a profit, and even when it does pay, it will be at a rate substantially lower than market rate. This could seriously challenge the new development’s cash flow and ultimately result in the JCE’s inability to repay the EB-5 loan in a timely manner. Moreover, neither Business Plan provides details about the operation of the telemarketing business. The plan calls for the hiring 104 employees within 6 months but no evidence has been provided to support its ability to do so. Finally, no evidence has been provided to establish that EB-5 funds will be made available to this company for the purposes of job creation. Therefore, the 104 jobs projected from the operation of High Line Telecom cannot be used for the calculation of jobs for EB-5 purposes. The Revised Economic Impact Report dated June 2016 presents the following job creation table with an estimate of 263 jobs to be created as a result of this investment (p. 4). Table A. Summary of Employment and Revenue Estimates Activity Exp/Rev (Current $) (million $) Exp/Rev (2007 $) (million $) Final Demand Multiplier Total Jobs Hard Construction Costs* $9.16 $8.19 8.62 70.6 Residential Rental Income $0.94 $0.74 9.82 7.3 Direct Jobs Direct Effect Multiplier Total Jobs Telemarketing Call Center 104 1.78 185.2 TOTAL 263.1 *Indirect and induced jobs only The 2016 Business Plan’s job creation estimates cannot be verified because; (1) construction costs are unrealistically low and Petitioner has provided no explanation for the alterations; (2) the denial of EB-5 capital investment for Lake 1, LLC results in a shortage of funds necessary to complete the project; (3) Petitioner has failed to establish that the JCE will be operating the telemarketing business calling into question its ability to create jobs and repay its loan; (4) delays in the railroad construction bridge has given rise to adverse market conditions not addressed in the filing. Since the inputs for the Economic Analysis are dependent on the Business Plan’s credibility, the analysis contained therein is more likely than not, flawed. Therefore, Petitioner has not shown the project will create the requisite number of jobs for eligibility under the program. Case 1:16-cv-00208-RCL Document 18-3 Filed 10/06/16 Page 9 of 10 Page 9 III. Conclusion In summary, USCIS has determined, based on the initial evidence submitted upon filing and after consideration of all additional evidence submitted, that Petitioner has failed to establish by a preponderance of the evidence that the Form I-526 complies with applicable legal requirements. Consequently, USCIS concludes that Petitioner is ineligible for classification under INA § 203(b)(5)(A). In visa petition proceedings, Petitioner bears the burden of establishing eligibility for the benefit sought. See Matter of Brantigan, 11 I&N Dec. 493 (BIA 1966). As Petitioner has not satisfied his burden of establishing eligibility, the Form I-526 is denied. If Petitioner disagrees with this decision, or if Petitioner has additional evidence that shows this decision is incorrect, Petitioner may file a motion or an appeal to this decision by filing a completed Form I-290B, Notice of Appeal or Motion, along with the appropriate filing fee. A copy is enclosed. Petitioner may also include a brief or other written statement and additional evidence in support of the motion or appeal. The Form I-290B must be filed within 33 days from the date of this notice. If a motion or appeal is not filed within 33 days, this decision is final. Petitioner must send the completed Form I-290B and supporting documentation with the appropriate filing fee to: USCIS I-290B P.O. Box 660168 Dallas, TX 75266 For an appeal, Petitioner may request additional time to submit a brief within 30 calendar days of filing the appeal. Any brief, written statement, or evidence in support of an appeal that is not filed with Form I-290B must be directly sent within 30 days of filing the appeal to: DHS/USCIS Administrative Appeals Office (AAO) 20 Massachusetts Ave., N.W., MS 2090 Washington, DC 20529-2090 For more information about the filing requirements for appeals and motions, please see 8 C.F.R. § 103.3 or 103.5, or visit the USCIS website at www.uscis.gov. Case 1:16-cv-00208-RCL Document 18-3 Filed 10/06/16 Page 10 of 10 Exhibit 3 Case 1:16-cv-00208-RCL Document 18-4 Filed 10/06/16 Page 1 of 10 Form I-292 (revised 5/4/2015) www.uscis.gov TO: Rong Qian Room 602, No. 4, Lane 85, West Suzhou Road Jing’an District Shanghai, China 200041 DATE: September 21, 2016 Application: Form I-526 File: WAC1390593770 DECISION Your Form I-526, Immigrant Petition by Alien Entrepreneur, filed by Rong Qian, has been denied for the following reason(s): See Attachment If you desire to appeal this decision, or file a motion to reopen and/or reconsider, you may do so. Your notice of appeal or motion must be filed on Form I-290B, Notice of Appeal or Motion, within 33 calendar days of the date of this notice. A filing fee of $630.00 is required, payable to U.S. Department of Homeland Security, with a check or money order from a bank or other institution located in the United States. If no appeal or motion is filed within the time allowed, this decision will be the final decision in this matter. The appeal or motion may not be filed directly with the AAO. Initial filing of the Form I-290B should be sent to: USCIS P.O. Box 660160 Dallas, TX 75266 (For Postal Service Delivery) OR USCIS Attn: I-290B 2501 S. State Highway 121, Business Suite 400 Lewisville, TX 75067 (For Express Mail/Courier) In support of your appeal, you may submit a brief and/or additional evidence, either with the initial filing or within 30 calendar days of the initial filing. If necessary, you may request additional time to submit a brief. Such request must also be made within 30 calendar days of filing. Note, however, that an extension of time to file the appeal may not be granted. Any brief, written statement, or other evidence not filed with Form I-290B, or any request for additional time for the submission of a brief or other material must be sent directly to the AAO at the following address: USCIS Administrative Appeals Office U.S. Citizenship and Immigration Services 20 Massachusetts Ave., N.W., MS 2090 Washington, DC 20529-2090 However, if you are filing a motion, any supplementary arguments or evidence must be filed with the motion to reopen and/or reconsider. No additional time will be permitted. U.S. Department of Homeland Security U.S. Citizenship and Immigration Services Immigrant Investor Program 131 M Street, NE, MS 2235 Washington, DC 20529 Case 1:16-cv-00208-RCL Document 18-4 Filed 10/06/16 Page 2 of 10 Page 2 The Small Business Regulatory Enforcement and Fairness Act established the Office of the National Ombudsman (ONO) at the Small Business Administration. The ONO assists small businesses with issues related to federal regulations. If you are a small business with a comment or complaint about regulatory enforcement, you may contact the ONO at www.ombudsman.sba.gov or phone 202-205-2417 or fax 202-481-5719. Sincerely, Nicholas Colucci Chief, Immigrant Investor Program cc: Jason Blatt, Esq. Westlead Capital, Inc. 15F-2, No. 369 Fusing North Road Taipei (105), Taiwan Case 1:16-cv-00208-RCL Document 18-4 Filed 10/06/16 Page 3 of 10 Page 3 NOTICE OF DECISION Form I-526, Immigrant Petition by Alien Entrepreneur ROSE CENTER FINANCE, LP I. Procedural History Mr. Rong Qian (the “Petitioner”) filed a Form I-526, Immigrant Petition by Alien Entrepreneur, seeking immigrant visa classification pursuant to section 203(b)(5) of the Immigration and Nationality Act (the “INA”) on August 27, 2013. Petitioner asserts eligibility based on an investment in Chicagoland Foreign Investment Group, LLC (the “Regional Center”) pursuant to the Immigrant Investor Program. 1 The Form I-526 and the evidence presented assert that Petitioner invested $500,000 into Rose Center Finance, LP – the new commercial enterprise (the “NCE”), on June 5, 2013. The NCE proposed to pool $9 million from 18 immigrant investors. According to the Form I-526 and supporting evidence, the NCE will lend the entire amount to Bellwood Place, LLC, the job- creating entity (the “JCE”). The JCE intends to finance a commercial real estate development known as “Rose Center” located in the Villages of Bellwood and Melrose Park, Proviso Township, Cook County, Illinois. The NCE and JCE are principally doing business within a targeted employment area (a “TEA”). INA § 203(b)(5)(A) provides classification to qualified immigrants seeking to enter the United States for the purpose of engaging in a new commercial enterprise (including a limited partnership)- (i) in which such alien has invested (after the date of the enactment of the Immigration Act of 1990) or, is actively in the process of investing, capital in an amount not less than the amount specified in subparagraph (C) 2 , and (ii) which will benefit the United States economy and create full-time employment for not fewer than 10 United States citizens or aliens lawfully admitted for permanent residence or other immigrants lawfully authorized to be employed in the United States (other than the immigrant and the immigrant's spouse, sons, or daughters). 1 Section 610 of the Departments of Commerce, Justice, and State, the Judiciary, and Related Agencies Appropriations Act, 1993, Pub. L. No. 102-395, 106 Stat. 1828 (1992), as amended by section 116 of Pub. L. No. 105-119, 111 Stat. 2440 (1997); section 402 of Pub. L. No. 106-396, 114 Stat. 1637 (2000); section 11037 of Pub. L. No. 107-273, 116 Stat. 1758 (2002); section 4 of Pub. L. No. 108-156, 117 Stat. 1944 (2003); section 1 of Pub. L. No. 112-176, 126 Stat. 1325 (2012); and section 575 of Pub.L. No. 114-113 (2015) (hereinafter the “Appropriations Act”); see also section 131 of Pub. L. No. 114-53, 129 Stat. 502 (2015). 2 The amount of capital required is $1,000,000, except when making an investment in a targeted employment area, the amount necessary to make a qualifying investment is $500,000. INA § 203(b)(5)(C)(i) – (ii); 8 C.F.R. § 204.6(f)(1) – (2). Case 1:16-cv-00208-RCL Document 18-4 Filed 10/06/16 Page 4 of 10 Page 4 In addition to the governing regulations, notably 8 C.F.R. § 204.6, legacy Immigration and Naturalization Service (INS) published four precedent decisions regarding the EB-5 immigrant visa classification, namely: Matter of Soffici, 22 I&N Dec. 158 (Assoc. Comm’r 1998); Matter of Izummi, 22 I&N Dec. 169 (Assoc. Comm’r 1998); Matter of Hsiung, 22 I&N Dec. 201 (Assoc. Comm’r 1998); and Matter of Ho, 22 I&N Dec. 206 (Assoc. Comm’r 1998). Based upon a review of the initial record, Petitioner did not establish eligibility for the benefit sought. Accordingly, U.S. Citizenship and Immigration Services (USCIS) issued a Notice of Intent to Deny (NOID) on May 26, 2016. In the NOID, USCIS notified Petitioner that the following eligibility requirements needed further clarification or additional evidence:  Petitioner has Placed the Required Amount of Capital At Risk;  Invested Capital Was Obtained Through Lawful Means; and  Employment Creation / Comprehensive Business Plan. On July 1, 2016, Petitioner responded to the NOID with the submission of additional evidence.  Evidence Petitioner was able to use the full value of the collateral property  Income Certificate Issued by Shanghai City Fire Fighting Head Group Politics Department  Employment Certificate from Shanghai City Fire Fighting Head Office Politics Department  “Conversion of Military Man Into Oridinary Cadre Mutual Selection Confirmation Form”  Revised Business Plan Rose Center Finance, LP June 27, 2016  Verification Letter from Martin Banuelos, President, BAE & Construction Group, LLC  North Parcel proposal from Banuelos Architectural Engineering & Construction Group LLC  South Parcel proposal from Banuelos Architectural Engineering & Construction Group LLC  Site Plan South Parcel  Site Plan Rose Center & Title Sheet  Revised Economic Impact Report, June 2016  Commitment Letter from BAE for additional $200,000 financing  Certification of Budget by General Contractor  Articles with a date range of December 2011 – July 2014 regarding the development of Bellwood Metra rail stop  Email confirmation of TIGER grant funding for rail improvements, June 20, 2012  Sample Rent Roll for occupied Residential Units, April 2013  Pictures of completed Residential Units  Pictures of Rose Center Development  Picture of bridge construction near Rose Center Development with notice of road closures  Pictures of Metra rail stop and bridge construction  Pictures of new overpass at Metra rail stop  Copy of Transaction Journal, printed by International Bank of Chicago, June 6, 2016  Copies of monthly statements for the NCE’s escrow account at International Bank of Chicago However, based on a review of the entire record of proceeding, USCIS concludes that Petitioner has not established eligibility for the benefit sought. Therefore, the petition is denied for the reasons discussed below. Case 1:16-cv-00208-RCL Document 18-4 Filed 10/06/16 Page 5 of 10 Page 5 II. Analysis A. Job Creation As required by 8 C.F.R. § 204.6(j)(4)(i), the petition must establish that the investment of the required amount of capital in a new commercial enterprise will create full-time positions for at least ten qualifying employees within two years. See also 8 U.S.C. § 1153(b)(5)(A)(ii). For purposes of the Form I-526 adjudication and the job creation requirements, the two-year period described in 8 C.F.R. § 204.6(j)(4)(i)(B) is deemed to commence six months after the adjudication of the Form I-526. According to 8 C.F.R. § 204.6(j)(4)(i), “[t]o show that a new commercial enterprise will create not fewer than ten (10) full-time positions for qualifying employees, the petition must be accompanied by: (A) Documentation consisting of photocopies of relevant tax records, Forms I-9, or other similar documents for ten (10) qualifying employees, if such employees have already been hired following the establishment of the new commercial enterprise; or (B) A copy of a comprehensive business plan showing that, due to the nature and projected size of the new commercial enterprise, the need for not fewer than ten (10) qualifying employees will result, including approximate dates, within the next two years, and when such employees will be hired.” For a new commercial enterprise within a regional center, the full-time positions can be created either directly or indirectly by the new commercial enterprise. 8 C.F.R. §§ 204.6(e), (j)(4)(iii). Investors investing in a regional center are subject to all the same program requirements except that they may rely on indirect job creation as demonstrated through reasonable methodologies. 8 C.F.R. §§ 204.6(m)(1), (7). 1. Comprehensive Business Plan Matter of Ho held that a “comprehensive business plan as contemplated by the regulations should contain, at a minimum, a description of the business, its products and/or services, and its objectives.” 22 I&N Dec. at 213. Elaborating on the contents of a business plan, the decision states: The plan should contain a market analysis, including the names of competing businesses and their relative strengths and weaknesses, a comparison of the competition’s products and pricing structures, and a description of the target market/prospective customers of the new commercial enterprise. The plan should list the required permits and licenses obtained. If applicable, it should describe the manufacturing or production process, the materials required, and the supply sources. The plan should detail any contracts executed for the supply of materials and/or the distribution of products. It should discuss the marketing strategy of the business, including pricing, advertising, and servicing. The plan should set forth the business’s organizational structure and its personnel’s experience. It should explain the business’s staffing requirements and contain a timetable for hiring, as well as job descriptions for all positions. It should contain sales, cost, and income projections and detail the bases therefore. Most importantly, the business plan must be credible. Case 1:16-cv-00208-RCL Document 18-4 Filed 10/06/16 Page 6 of 10 Page 6 Id. The evidence in the record fails to establish that the NCE will create at least ten full-time positions for qualifying employees. Both Business Plans call for the JCE to develop Rose Center Development in two phases, resulting in the completion of two, two-story facilities, each of which will host commercial occupants on the ground floor and residential occupants on the second floor. The first of the two facilities to be completed will be in a pre- existing structure. USCIS’ NOID noted that there is a significant disparity between the condition of the existing construction as represented in the 2013 Business Plan and that presented in the independent Appraisal Report and Feasibility Analysis provided by Realty Value Consultants. As noted in the NOID, the 2013 Business Plan failed to describe work needed to complete the existing building. In the NOID Response, Petitioner offered no current evidence, other than outdated news articles to substantiate the claim that a new commuter rail station would be built in the area thereby enhancing the land’s value. Some of the news articles, an email confirming TIGER grant funding from June 2012 and sample rent roll dated April 2013 submitted with the NOID Response pre-date Petitioner’s filing so it is unclear why this evidence was not previously submitted but the dated evidence also does little to address the concerns about the project’s viability noted in the NOID. In the NOID Response, Petitioner stated that USCIS has “overrelied” on the description in the appraisal as a portrayal of the state of the building at time of filing and that it is reasonable to expect ongoing construction efforts between the time of the appraisal and time of filing and that the original Business Plan is a more accurate portrayal of the state of the property at the time of filing. Petitioner notes that part of the funding for completing interior improvements will be sourced from the Partnership’s loan, which is comprised of the EB-5 funds that remain in escrow pending I-526 approval, however, Petitioner has not shown that the updated business plan would be more credible once those funds are released from escrow. In fact, the plan relies on funding sourced from EB-5 funds from another NCE, Lake 1, LLC for development of “The majority of the North Parcel’s commercial space…”( 2016 Business Plan, p. 5). That NCE was slated to pool $3.5 million from seven investors to complete 52,000 square feet of the North Parcel building’s garment manufacturer and outlet stores. As of February 3, 2016, all of the investor’s for Lake 1, LLC have been denied by USCIS. Additionally, Lake 1 LLC was previously listed in as an “outlet store” (2013 Business Plan, p. 12) rather than a source of funding. The fact that Petitioner’s “updated” business plan relies on a funding project that has been denied previous to its creation clouds the entire plan’s credibility. The burden is on Petitioner to provide evidence which most accurately portrays the planned project and its current state (as applicable) at the time of filing. Although Petitioner has provided articles to show there may be construction and ongoing plans for the commuter rail station, the most current articles Petitioner submitted on the project are two years old. Because of significant, unexplained discrepancies between the 2013 Business Plan and the 2016 Business Plan, Petitioner has not demonstrated that they have a credible Matter of Ho-compliant Comprehensive Business Plan. The 2016 Business Plan submitted in response to the NOID contains a breakdown of construction costs for completing the North Parcel and constructing the South Parcel (2016 Business Plan p. 21). It estimates a cost of $9.157 million; $9 million from EB-5 investors and an additional $200,000 provided by the General Contractor, Banuelos Architectural Engineering & Construction Group, LLC. However, the estimates appear to have been drastically altered to fit the end total without explanation. For example, the cost listed in the original Business Plan for Carpentry was $5,400,000 (2013 Business Plan, p. 21), the current cost is $1,007,000 for the North Parcel and $679,200 for the South Parcel (2016 Business Plan, p. 21) for a total of $1,686,200. No explanation is provided for the $3.7 million difference for carpentry expenditures between the two business plans. The original cost for carpets was $210,000 while the new cost is $32,300. The original cost for Sprinklers was $275,000 while Case 1:16-cv-00208-RCL Document 18-4 Filed 10/06/16 Page 7 of 10 Page 7 the new cost is $95,000 (North Parcel) and $580,000 (South Parcel). Additionally, the cost for construction per square foot for the North Parcel should be relatively similar to the cost per square foot for the South Parcel, as both buildings are described as mixed-use developments with commercial space on the ground floor and residential space on the second floor. The North and South Parcels are being developed with the explicit purpose of leasing without any special customization for either parcel that would result in a cost differential; no part of the building style, construction material, design and end use implies a significant difference in per unit construction cost. However, the North Parcel costs $83.03 per square foot while the estimate for the South Parcel is $62.01 per square foot. The underestimation for the South Parcel could result in project costs exceeding the budget, which would leave construction incomplete. Square Feet Cost Cost/Square Foot North Parcel 143,544 $11,918,080 $83.03 South Parcel 118,800 $7,367,200 $62.01 *Based on construction figures from 2016 Business Plan, pages 20- 21. The 2016 Business Plan states “According to RS Means (the source used by Petitioner to calculate hard construction costs), the hard construction costs average within the Project areas is $11,397,530, meaning the Projects estimated cost is 19.7% lower than average.” At $9.157 million (2016 Business Plan, p. 26) for Hard Construction costs, the current budget appears to significantly underestimate construction costs. Fluctuations in project estimates are not an oddity in construction, however the lack of explanation for such drastic changes in projections discredits the veracity of the budget, and by implication, the project itself. USCIS concludes the projected cost of $9 million is not reasonable. Therefore, the 70 jobs calculated from expenditures on Hard Construction are not reasonable, and it is more likely not to meet the requirements of the program. Further, the 2016 Business Plan explains that although fully occupied at the time of the original filing, much of the North Parcel building is now vacant with only eight residential tenants remaining in the completed condominiums “mainly due to main road closures (25 th Avenue railroad bridge construction) that began in September 2014 and is expected to continue until September 2016.” (2016 Business Plan, p. 5). That translates into only a 25% occupancy rate. Petitioner refers to articles dating back to July 2014 regarding railroad bridge construction in Melrose Park/Bellwood Village, but has not provided updated information on its current progress. Independent research indicates there was only an initial delay in the construction of the bridge. 3 If the project’s ability to attract tenants is dependent on the main road, any delay in the construction of the bridge is likely to cause further delay in leasing the remaining 24 units in the North Parcel and 72 units in the South Parcel. Petitioner has not demonstrated how the market will be able to absorb an additional 96 units while road closures remain and the new railroad bridge is not operational. Petitioner has not addressed a plan for the high vacancy rates and adverse market conditions. This further undermines the credibility of the proposed project. Additionally, one of the commercial spaces in the South Parcel building, measuring 20,000 square feet, will be occupied by World Wide High Line Telecom LLC (High Line Telecom), the operator of a telemarketing call 3 . http://www.vil.bellwood.il.us/news/default.aspx?&ArticleId=302 Case 1:16-cv-00208-RCL Document 18-4 Filed 10/06/16 Page 8 of 10 Page 8 center. USCIS stated in the NOID that jobs at the telemarketing call center may not be credited to EB-5 investors, as the Highline Telecom company is an independent legal and financial entity, Petitioner’s NOID response states that the relationship between the developer (the relevant portion of the NOID Response refers to the JCE as the “developer”) and High Line Telecom is not simply that of landlord and tenant, but more an affiliate organization of the developer (NOID Response, p. 13) and therefore employees of Highline Telecom LLC should be counted toward the number of jobs created by the JCE. However, High Line Telecom, rather than the JCE, will be operating the telemarketing unit. The only connection between the two entities is that the “developer principal,” Ronald Scarlato, is a 50% owner of Highline Telecom according to the Revenue Sharing Agreement submitted with the original filing. The Revenue Sharing Agreement indicates that the tenant will only pay rent when it earns sufficient revenue (p. 4). It will share up to $27,500 of its post-cost, after-tax revenues with the JCE. The attorney cover letter submitted with Petitioner’s original filing states this is “(a 25% discount on what it would otherwise cost to rent a commercial space in the community.” (p. 9). All of this implies that Highline Telecom will not be paying for the space it occupies in the new building unless it makes a profit, and even when it does pay, it will be at a rate substantially lower than market rate. This could seriously challenge the new development’s cash flow and ultimately result in the JCE’s inability to repay the EB-5 loan in a timely manner. Moreover, neither Business Plan provides details about the operation of the telemarketing business. The plan calls for the hiring 104 employees within 6 months but no evidence has been provided to support its ability to do so. Finally, no evidence has been provided to establish that EB-5 funds will be made available to this company for the purposes of job creation. Therefore, the 104 jobs projected from the operation of High Line Telecom cannot be used for the calculation of jobs for EB-5 purposes. The Revised Economic Impact Report dated June 2016 presents the following job creation table with an estimate of 263 jobs to be created as a result of this investment (p. 4). Table A. Summary of Employment and Revenue Estimates Activity Exp/Rev (Current $) (million $) Exp/Rev (2007 $) (million $) Final Demand Multiplier Total Jobs Hard Construction Costs* $9.16 $8.19 8.62 70.6 Residential Rental Income $0.94 $0.74 9.82 7.3 Direct Jobs Direct Effect Multiplier Total Jobs Telemarketing Call Center 104 1.78 185.2 TOTAL 263.1 *Indirect and induced jobs only Case 1:16-cv-00208-RCL Document 18-4 Filed 10/06/16 Page 9 of 10 Page 9 The 2016 Business Plan’s job creation estimates cannot be verified because; (1) construction costs are unrealistically low and Petitioner has provided no explanation for the alterations; (2) the denial of EB-5 capital investment for Lake 1, LLC results in a shortage of funds necessary to complete the project; (3) Petitioner has failed to establish that the JCE will be operating the telemarketing business calling into question its ability to create jobs and repay its loan; (4) delays in the railroad construction bridge has given rise to adverse market conditions not addressed in the filing. Since the inputs for the Economic Analysis are dependent on the Business Plan’s credibility, the analysis contained therein is more likely than not, flawed. Therefore, Petitioner has not shown the project will create the requisite number of jobs for eligibility under the program. III. Conclusion In summary, USCIS has determined, based on the initial evidence submitted upon filing and after consideration of all additional evidence submitted, that Petitioner has failed to establish by a preponderance of the evidence that the Form I-526 complies with applicable legal requirements. Consequently, USCIS concludes that Petitioner is ineligible for classification under INA § 203(b)(5)(A). In visa petition proceedings, Petitioner bears the burden of establishing eligibility for the benefit sought. See Matter of Brantigan, 11 I&N Dec. 493 (BIA 1966). As Petitioner has not satisfied his burden of establishing eligibility, the Form I-526 is denied. If Petitioner disagrees with this decision, or if Petitioner has additional evidence that shows this decision is incorrect, Petitioner may file a motion or an appeal to this decision by filing a completed Form I-290B, Notice of Appeal or Motion, along with the appropriate filing fee. A copy is enclosed. Petitioner may also include a brief or other written statement and additional evidence in support of the motion or appeal. The Form I-290B must be filed within 33 days from the date of this notice. If a motion or appeal is not filed within 33 days, this decision is final. Petitioner must send the completed Form I-290B and supporting documentation with the appropriate filing fee to: USCIS I-290B P.O. Box 660168 Dallas, TX 75266 For an appeal, Petitioner may request additional time to submit a brief within 30 calendar days of filing the appeal. Any brief, written statement, or evidence in support of an appeal that is not filed with Form I-290B must be directly sent within 30 days of filing the appeal to: DHS/USCIS Administrative Appeals Office (AAO) 20 Massachusetts Ave., N.W., MS 2090 Washington, DC 20529-2090 For more information about the filing requirements for appeals and motions, please see 8 C.F.R. § 103.3 or 103.5, or visit the USCIS website at www.uscis.gov. Case 1:16-cv-00208-RCL Document 18-4 Filed 10/06/16 Page 10 of 10 0 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA _____________________________________ ) CHUANG HU, et al. ) ) Plaintiffs, ) ) v. ) ) Civil Action No. 16-208-RCL JEH C. JOHNSON, et al., ) ) Defendants. ) _____________________________________ ) [PROPOSED] ORDER GRANTING DEFENDANTS’ MOTION TO DISMISS Before the Court is Defendants’ motion to dismiss pursuant to Federal Rules of Civil Procedure 12(b)(1). Having considered the motion, Plaintiffs’ opposition thereto, any reply, and oral argument, if any, the Court HEREBY GRANTS the motion and DISMISSES the Complaint in its entirety. Dated: ____________ ____________________________ Hon. Royce C. Lamberth United States District Judge Case 1:16-cv-00208-RCL Document 18-5 Filed 10/06/16 Page 1 of 1