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From the Winter 2003 issue of The News Media & The Law, page 26.
By Rebecca Daugherty
In case after case, the government invokes privacy exemptions to the federal Freedom of Information Act to protect the names of people who run the government or are somehow affected by it.
But the U.S. Court of Appeals in New York City (2nd Cir.) ruled Nov. 25 that the government is limited in what it can withhold under the guise of protecting the privacy of a high-ranking official, and outlined factors to be weighed in deciding whether privacy exemptions to the FOI Act apply.
The decision forces the Immigration and Naturalization Service to give immigration attorney Steven Perlman of New York City information about Paul Virtue, a former INS chief counsel, from an inspector general's report on the INS's EB-5 program, which offers special visas to wealthy foreign investors. Virtue signed off on decisions on how that program was run.
"I had a lot of clients who would be interested in the EB-5 program but it has basically been an unusable program," Perlman said. "And as a citizen, I was outraged that certain privileged citizens were benefitting from what was essentially a fraudulent scheme."
The program, established in 1990, gives special U.S. visas to wealthy foreigners who invest $1 million in business ventures employing at least 10 U.S. workers (or $500,000 in areas of low unemployment). The investors eventually could receive permanent resident status.
Under EB-5, an immigrant could invest in a solo business or a partnership and receive a two-year conditional permanent residence. Near the end of the two years, he could petition the INS to verify that program requirements were met. If they were met, the alien could receive permanent residency.
Perlman told the court that, for several years, INS officials and the Department of State helped private companies owned or represented by former officials of those agencies and other politically prominent individuals to "hijack" the program. The business interests would pool capital of various aliens in limited partnerships for investments, accepting $125,000 and a promissory note for the rest, $375,000.
These companies made few investments and created few jobs. But the aliens they helped could contribute money to a company for investment, wait for two years and gain approval for permanent residence. The company could then forgive the promissory notes and keep the bulk of the capital the alien had given it.
Reporters Walter Roche and Gary Cohn of The (Baltimore) Sun reported in February 2000 that Virtue had issued rulings in 1993 and 1995 that completely changed the shape of the investor visa program by allowing visa applicants to pool their money and to substitute promissory notes for much of the cash, knowing they would receive green cards and would never have to make their full investment.
They reported that firms including American Immigration Services of Greenbelt, Md., were created to take advantage of the 1990 law and included former INS officials to represent them. They also reported that Virtue's law firm now represents AIS.
Critics within INS and the Department of State voiced great opposition to the program, and in December 1997 then General Counsel David Martin struck down rules and greatly restricted the use of promissory notes.
Perlman early on was concerned enough about what he was hearing about EB-5 from his clients to meet, starting in 1995, with several INS officials, who also became concerned. Despite the interest, over the next two years, the INS adopted what Perlman said were "plainly indefensible" legal positions in order to render sham investments seemingly legal. It also expedited rules to prevent officials from challenging questionable cases, Perlman said.
According to papers Perlman filed with the court, some people with the INS General Counsel's office did not go along and in December 1997 forced issuance of a legal opinion making many of the investment plans illegal. In 1998, the acting director of the INS General Counsel sought an investigation of the "appearance of impropriety" of high-level employees in the Office of Programs and the Office of General Counsel.
In response to his FOI Act request, Perlman will receive information on Virtue, who in various counsel roles at INS made policy decisions that benefitted companies that arrange the visas, and for whom former INS commissioners or employees worked.
Virtue left the government in 1999 before the report was completed and was not chastised for those decisions. He is now a partner in a Washington, D.C., law firm that represents one of the companies that benefitted from the decisions he made while at INS.
To protect Virtue's privacy, INS withheld portions of the Inspector General's report on how the program was mishandled. It invoked privacy exemptions to the FOI Act to withhold information about his association with the program.
A U.S. District Court in Manhattan in August 2001 upheld the government's right to keep that information secret.
But the appeals panel ruled that the INS could not withhold information on a high-ranking employee where a high degree of wrongdoing was alleged. Information on witnesses and third parties to the contracts could be withheld simply because of the embarrassment and potential harassment that could come from being associated with a lawsuit, but a high-ranking government official was another matter.
The appeals court outlined five factors calling for release of the information.
First, Virtue's high rank, combined with his direct responsibility for serious allegations examined in the report, tilts strongly in favor of disclosure, the court said.
Second, the degree of wrongdoing and strength of evidence against the employee also weighed in favor of disclosure, the court said. Virtue allowed former INS officials with financial interests in the EB-5 program to exercise improper influence over the program, with fairly serious consequences. His approval of some proposals by the visa investment companies may have improperly allowed aliens to come into the United States.
Third, the release of the report by the government appears to be the only way for the public to learn about the investigation and this factor weighs in favor of disclosure.
Fourth, the information sought sheds light on government activity and the more it does so, the more this factor favors disclosure. The court noted that while the report discussed Virtue at length, the discussion focused on his role as an INS general counsel.
Fifth, the court noted that information about Virtue in the report related to government activity, not private activity. This factor weighed heavily in favor of disclosure, it said.
Perlman told the court that the investigation team had interviewed everyone except Virtue by March 1999, and that ultimately the investigation centered around Virtue because he had served as the primary controlling authority on all decisions.
Virtue resigned in May 1999 and was interviewed in August 1999. The Inspector General closed the case without taking further action in October 1999.
Perlman filed his FOI request for the Inspector General's report in November 1999, and until he began actual litigation for it, he received no information. Four INS attorneys filed privacy waivers to facilitate release of information, but only after Perlman sued did the Department of Justice release any information. At the start of litigation it provided 49 pages of the 143-page report. (Perlman v. U.S. Department of Justice)