Frequency of Lawsuits in the Three Investor Categories: EB-5, E-1, and E-2

As I was reading about the latest depressing EB-5 (immigrant investor) court case (more on that later) the thought struck me that maybe there were more lawsuits in the EB-5 program than in the other two alien investor programs, those of nonimmigrant treaty traders (E-1) and treaty investors (E-2). For more on these two State Department-run programs.

I have been writing about EB-5 scandals for years — they seem quite numerous — but I could not recall, offhand, a single court case involving either of the two nonimmigrant investor programs, despite the fact that the nonimmigrant programs, combined, deal with a much larger number of cases than EB-5.

As a first step, I decided to get a measure of the total size of the three programs. Using State Department and DHS data for 2019 (when there was neither Covid nor Senate inaction on the extension of the EB-5 program) I found these numbers:

So the two nonimmigrant programs had about five times as much traffic as the EB-5 program. There is no ceiling for either E-1 or E-2 visas, the limit on EB-5s is just under 10,000. (As nonimmigrant visas the E-1 and E-2 do not lead to a green card, whereas EB-5 does.)

Then I turned to a measure of the reported court cases, a rough and ready one. I simply googled the names of the three programs and that of a law press service, Law360; the format was, in the first instance: “Law360 EB-5 court cases report 2022". I got 10 hits for EB-5 and none for the other two programs. Ten hits appear to be the Google maximum, so the 10 to zero ratio is about the best one can do from this source, but bear in mind that there are five times as many E visas issued as EB-5 ones.

Another source on this subject is the EB-5 Investments website litigation list, which apparently stopped operations in January 2021. Even leaving two years of cases unrecorded, it shows 155 court actions, mostly, but not all, individual investors suing to get their money back. That the list is no longer being served is yet another indication of the decline and fall of the EB-5 program. I know of no comparable tally in the E programs.

Why the big difference? My sense is that in virtually all EB-5 cases the alien puts up a large sum of money — currently $800,000 — for someone else to manage; meanwhile, in the E nonimmigrant program, the alien runs his or her small business in the States. There is, in summary, much less room for cheating the alien in the E programs than in the EB-5 one.

Getting back to the EB-5 case that caught my eye initially — unlike most Law360 reports on individual issues, this was one in which the alien lost in court; it is also one of all too many cases where the alien investor acted ineptly. As in many of these instances, the accused middleman and lawyer, Taher Kameli, and the investor, Mansour Merrikhi Nasrabadi, both had ties to the same nation, Iran in this case.

The investor had placed $500,000 with the lawyer’s regional center. Then, in a not-too-shrewd move, the investor hired the same lawyer as his immigration attorney. The project tanked, and the lawyer “led the investment fund into bankruptcy in order to avoid paying investors and to benefit himself”, according to the investor.

Then in another inept move, the investor hired another attorney to sue the first one, with the second one apparently not knowing about the statute of limitations. The judge threw out the case on the grounds that it was not filed in a timely manner.

A sad story but not an unusual one in the EB-5 field.