Foreign investment rule supported by Trump, Biden administrations is voided

A federal magistrate has voided a rule issued by the Department of Homeland Security that led to a decline in development projects financed by foreign investors seeking visas through an immigrant investor program.

The reversion back to the old rule will be short-lived, however. A critical piece of the program, which designates projects that receive foreign investment, is scheduled to expire at the end of the month.

The new rule, issued under President Donald Trump's administration, increased the minimum investment to apply for EB-5 visas from $1 million to $1.8 million and from $500,000 to $900,000 in certain high unemployment areas, while making it more difficult for development projects in densely populated cities and towns to qualify for investment.

President Joe Biden's administration agrees with the rules but U.S. Magistrate Judge Jacqueline Scott Corley in San Francisco ruled on Tuesday that doesn't matter.

She said the government violated procedural hurdles to implement the new rules because Acting Department of Homeland Security Secretary Kevin McAleenan was not properly appointed to his position when they were issued. Several other judges have blocked immigration policies of the Trump administration because acting secretaries were improperly elevated to their roles, even though the current administration supports some of the policies.

The Departments of Homeland Security and Justice did not immediately respond to requests for comment. Behring Regional Center LLC v. Wolf, 20-cv-09263 (N.D. Cal., filed Dec. 21, 2020).

The rule in question was issued in July 2019 under McAleenan. It went into effect in November 2019 under Acting DHS Secretary Chad Wolf.

The lawsuit was filed by real estate investment firm Behring Regional Center, which disperses EB-5 funds to development projects in Northern California. It alleged that neither McAleenan nor Wolf had the authority to issue the rule because their appointments were illegitimate.

Former DHS Secretary Kirstjen Nielsen, Behring claimed, illegally changed the order of succession to appoint McAleenan to her position once she resigned.

Corley agreed the rules altering the EB-5 immigrant investor program should be struck down because McAleenan was improperly elevated to DHS secretary.

"This court joins the numerous other courts which have held that because Secretary Nielsen amended the wrong Order of Succession when she purported to place the Customs and Border Protection Commissioner -- Mr. McAllenan -- third in line after the deputy secretary of homeland security and the undersecretary of management for succession to the acting secretary of homeland security position, Mr. McAllenan's appointment was invalid," she wrote.

She also rejected arguments that the current, Senate-confirmed DHS Secretary Alejandro Mayorkas' approval of the rules should allow them to take effect.

The changes to the immigrant investor program have led to a steep decline in investments in EB-5 projects, according to Behring. It said investors were concerned about the minimum investment amount and uncertainty around the program.

Lawmakers are split on whether to increase oversight of the program to prevent fraud and encourage investment to rural areas of the country or loosen restrictions to attract more investors.

Plaintiffs' attorney Todd A. Pick of Greenberg Traurig LLP said in a statement, "We are very pleased with the court's thorough decision in this important area of the law."