Ok, this is sounding good. You have a number of options. First, skip the Department of State all together. Those that do not have a U.S. Birth Certificate, U.S. Naturalization Certificate or Certificate of U.S. Citizenship should no longer apply directly for a U.S. Passport. More often than not, they will say no and should direct you to USCIS which I guess in this case they did not do. As far as your options, let’s break them down:
1) File an N-600 or N-600K with USCIS and show them all the evidence that he was adopted correctly, admitted into the U.S. legally and by operation of law became a U.S. Citizen at that time. Here is a link to the forms where you should read the instructions in each to determine which you should file:
This is probably your best option because it should end up getting him a Certificate of U.S. Citizenship and then with that he can apply for a U.S. Passport as the final determiner of who is a U.S. Citizen is the DHS, not DOS.
2) You can contact one of your U.S. Congressmen and get them involved to push the DOS to look into the facts and issue a U.S. Passport. I think this is not a good option as the U.S. Congressman will probably direct you to do option #1. If you still want to try or if you need their help with option #1, you can contact them at http://www.usa.gov/Contact/Elected.shtml. Remember that you have three Congressmen, so if one does not work out for you, you have two more.
3) And then the most expensive option would be to sue the U.S. government to rectify the problem with the IR4 to IR3. I don’t really recommend this at all because it is very expensive and no guarantee to win.
So honestly, I would try for option #1 and that should work. It wouldn’t be a bad idea to use an attorney either. You can look for one at www.ailalawyer.com.
Please let me know if you have additional questions and please do not forget to rate my service to you (not the state of the law) as that is the only way that I can get credit for my assistance to you. Even after you rate the service, I can still answer additional questions for you without additional charge. If you do rate me positively, a bonus is always appreciated. If you would like to request me in the future, just go to http://www.justanswer.com/law/expert-guillermosenmartin/ and make sure you type: FOR GUILLERMO on the subject line. Thank you!