Ninth Circuit Faces Delicious EB-5 Dilemma

By David North on April 20, 2018

The Ninth Circuit faces an interesting decision and either way it goes it will do some damage to the EB-5 immigrant investor program.

The EB-5 program is the arrangement whereby an alien, usually from China, gets a family-sized set of green cards for investing $500,000 in an investment approved by, but not guaranteed by, the Department of Homeland Security.

In the case in question, if the nod goes one way, the Ninth Circuit will agree with a lawyer contending that the EB-5 program is not about investments at all – that it is a benefit program granting green cards to a relatively small group of well-to-do aliens. This would debunk the EB-5 boosters' argument that the program is an important economic tool.

If the decision goes the other way, the Securities and Exchange Commission, the cops on this particular beat, will win its case against Hui Feng and his law firm, which is facing a $2.7 million assessment for violating the broker-dealer rules. SEC says that he and his associates were selling securities without a license.

According to a report by Law360 (partly behind a paywall), Feng argued that he was not obliged to get an SEC license because "everyone knew that the EB-5 visa program was an immigration program and not a securities program."

While acknowledging the verbal dexterity of Mr. Feng, I am rooting for the SEC because the fines it collects go to the Treasury, and tend to discourage bad behavior in this program.

Feng has appeared on these posting before, in a report by my colleague Dan Cadman, who raised a different but equally interesting question: Shouldn't an immigration lawyer penalized by SEC be penalized by the immigration courts as well?

The EB-5 program seems to have a knack for attracting a bad press.