A group of 200 foreigners filed suit against the federal government yesterday, alleging that the Immigration and Naturalization Service illegally changed the rules governing a controversial policy that grants legal immigrant status to foreigners who promise to invest at least $500,000 in the United States and create at least 10 jobs here.

The suit, filed in U.S. District Court in San Francisco, contends that INS exceeded its authority by changing the policy in late 1997 and again last year, making it harder for some foreign investors to get final approval for their business plans and thus have their temporary resident status changed to permanent.

The INS contends that the basic requirements of the program remain the same and the changes simply clarified the rules to preclude a rash of complex financial plans that may have met the letter of the original law but in reality did not invest any money or create jobs.

Congress passed the controversial immigration program in 1990 to spur foreign investment and job creation in the United States. It created a new visa category conferring resident status on foreigners who submitted business plans promising to create at least 10 U.S. jobs by investing at least $1 million--or $500,000 in some high-unemployment areas--in new or existing businesses.

To have their resident status changed from temporary to permanent, foreign investors must demonstrate that they actually invested the money and created the jobs.

It is that verification process that the plaintiffs--and the American marketing and investment firm that put together their business plans--contend INS has illegally changed without public review or comment, leaving the investors and their family members in danger of deportation.

"These people can't go forward, they can't go backward and they can't go side to side," said Bill Cook, a former INS counsel who now represents the Greenbelt firm American Immigration Services (AIS), which assembled the business plans for the 200 plaintiffs.

"They are basically stuck in limbo," Cook said. "What you have here is the people at [INS] don't understand these complex transactions and, automatically, anything that they don't understand becomes fraud and abuse."

INS spokesman Russ Bergeron, however, said the agency began to see a dramatic rise in applications for the foreign investor visas in 1997. That increase, he said, prompted the agency's general counsel to review the plans being put together by AIS and other firms and to rule that they did not meet the visa program's requirements.

In 1998, according to Bergeron, the INS's Administrative Appeals Office issued four "precedent" rulings further clarifying what criteria investors would have to meet to have their plans approved and ultimately have their temporary resident status made permanent.

"On the surface, they appeared to meet the requirements of the law," Bergeron said. "But [INS] examiners were raising questions and basically what they were saying was, while these plans on the surface created the appearance of investing $500,000, they were so complicated and convoluted in their structure that it was difficult to ascertain if that was actually the case."

Bergeron said the plaintiffs in the San Francisco lawsuit--and any other foreign investors--are free to draft new business plans to clarify that they have actually invested at least $500,000 and created at least 10 jobs.

"All INS is saying is: 'Show me the money. Where is the money?' " Bergeron said.

Cook, however, argues that INS is changing the rules without informing the foreign investors, making compliance impossible.

"The sad commentary here is the refusal of [INS] to sit down and tell [the investors] what they want. We've been reduced to trying to guess," Cook said.