from a case. For example, in the instant case, had the petitioner’s
mother been the borrower under the loan agreement and
subsequently gifted the mortgage loan proceeds to the petitioner,
USCIS would have approved the first I-526 petition without regard
to the indebtedness.
This means that a case where the capital is sourced from
indebtedness should be approvable as long as the petitioner
engages in a currency swap to acquire the USD and that the
USD is properly documented as lawful. Arguably, under the
same theory, the currency exchanges engaged in by 10 friends
and family in the case described here should have provided the
petitioner with the same result: an approved I-526 petition.
In both cases, the petitioner established ownership of the USD
capital via contractual agreements (with 10 friends and then
with one). In the first case, the lawful source of the USD was the
transactions of commercial banks that conduct due diligence
on their capital through KYC procedures. In fact, USCIS singles
out the currency swap for RFE while allowing a host of similar
transactions to pass muster.
Taking the analysis one logical step further, if a currency swap
can eliminate indebtedness, it should indicate that the source of
the original RMB capital is largely, if not completely, irrelevant to
the USCIS’ assessment of legality and ownership of a petitioner’s
investment capital. In other words, if a currency swap cures
indebtedness, making un-qualifying capital qualifying, then the
original RMB source evidence should be unnecessary.
in the petitioner owning the refunded USD capital again.
Nevertheless, the USD capital invested by the petitioner in
the second case was the exact same capital invested in the
originally denied indebtedness case.
The USCIS approved the second I-526 petition despite its
prior finding that the exact same USD was not capital that
could be used for EB-5 investment. This outcome highlights
the absurdity and inconsistency of USCIS’s indebtedness and
currency swap policies, in that an independent application
of each, caused a different result in two cases with the exact
same petitioner investing the exact same capital.
ANALYSIS
A petitioner should be able to document ownership of the USD
through the currency swap contract and lawfulness of the USD
investment capital through evidence provided by the third-party
exchanger. To hold otherwise requires a petitioner to document
ownership and legality of $1 million instead of $500,000, which
would arbitrarily double the statutory investment threshold for
some EB-5 investors but not others.
The best test case for the theory outlined here is an indebtedness
case with a currency swap, where the USD capital is sourced by
the preponderance of the evidence. The true test case, however,
is one that omits discussion of the source of the RMB capital
while only documenting the lawful source of the USD by the
preponderance of the evidence. Ownership in both cases could
be established via contractual agreement.
Any volunteers?
How do we reconcile these outcomes?
The simplest answer is that both the indebtedness and currency
swap policies are simply wrong. There is no rationale for the
policies that is supported by law. Leaving the simple answer
aside, let’s explore the only viable theory: a currency swap shifts
the evidentiary burden of lawfulness to the third-party exchanger
and thus effectively cleanses the USD of the “indebtedness” taint.
This is an absurd outcome. It is also inconsistent with
USCIS’ holding in the indebtedness denials, which finds that
indebtedness renders the investment funds non-compliant with
the regulatory definition of capital and thus unusable for EB-5
investment. However, the result is consistent with another facet
of current USCIS policy, which allows a gift to erase indebtedness
81
EB5 INVESTORS M AGAZINE
KRISTAL OZMUN
Kristal Ozmun is a partner in Miller Mayer’s
immigration practice group. Ozmun focuses her
practice on employment-based immigration with
a unique specialization in the EB-5 preference
category. Ozmun has written and lectured on EB-5
topics for multiple organizations, including the American Immigration
Lawyers Association, Invest in the USA, EB5 Investors Magazine and ILW.