By Abby Schultz

When President Donald Trump announced plans last week to introduce a "gold card" that wealthy investors who want to be U.S. citizens can buy for $5 million, he also said he would scrap a different 35-year-old investor immigration program.

Commerce Secretary Howard Lutnick described that existing program -- known as EB-5 -- as "poorly overseen, poorly executed," during Trump's first cabinet meeting on Feb. 26.

Several high-profile cases of fraud and misuse of funds had plagued EB-5 for years, but Congress tightened oversight of the program significantly when it was reauthorized through bipartisan legislation in 2022.

Immigration specialists and proponents of the current program welcome Trump's new gold card as a vehicle for attracting wealthy individuals across the world, but they don't see why it can't be offered alongside EB-5 (which stands for employment-based fifth preference). The programs would serve different purposes and different people.

As Trump envisions it, proceeds from the $5 million gold card fee would go straight to the U.S. Treasury, providing a needed source of income to pay down the nation's deficit. Applicants would have to be wealthy enough to part with $5 million forever.

The EB-5 program is after a different demographic -- individuals who invest $800,000 in an economic development project designed to create jobs in a rural community or an area with high unemployment. (Projects in wealthier areas require an investment of $1.05 million). Applicants who successfully complete the program -- proving their investment generated at least 10 jobs -- are issued a green card and get their money back.

"The market for a gold card versus the market for an EB-5 visa is incredibly different -- they can exist side by side and even augment one another," said Aaron Grau, executive director of Invest in the USA, a nonprofit trade association for professionals serving the EB-5 market.

Trump said he would replace the EB-5 visa with a gold card within two weeks, which would be the week of March 10. Proponents of the current program hope that the administration at least allows it to continue until reauthorization runs out in 2027, particularly given the pipeline of economic investment fueled by EB-5 that is under way, said Basil Mohr-Elzeki, managing partner with immigration specialist Henley & Partners North America. The U.S. "wouldn't want to give that up."

It won't be that simple to do away with EB-5 and initiate a new program in two weeks. Congress has authority over immigration law, which can't be altered by executive order, according to Shae Armstrong, a lawyer with Bradley Arant Boult Cummings, which represents EB-5 project developers.

Armstrong, who has worked on about 100 projects in the last two years, also doesn't see any reason to do away with EB-5. The reforms enacted by the 2022 reauthorization vastly improved oversight. Under current law, investor dollars that are pooled to fund a project must be audited annually by a third party or overseen by a third-party administrator -- the route the majority of projects take, Armstrong told Barron's.

"The administrator won't allow the money to flow into a project unless there is evidence of a bona fide business expense," he said. "It provides transparency to investors, the government -- everyone involved." The process also prevents bad actors from commingling funds with other projects or with their own personal accounts.

One of the most notorious abuses of the program was a multimillion-dollar fraud executed by three individuals in the Northeast Kingdom of Vermont beginning in 2008 that involved eight EB-5 projects, including the Jay Peak ski report and a biomedical research park that was supposed to be built nearby Newport, Vt.

The park was a "complete fraud," according to a March 2024 report by the Vermont state auditor, while construction of the other seven projects was done but "not always to the specifications or at the costs told to the investors."

The victims were non-U. S. citizens who entered into the government EB-5 program to invest in a viable commercial enterprise in the country as a path toward getting a green card, the report said.

"We can't run away from the fact that, in the past, there have been bad actors," Grau told Barron's, but "Congress took a hard look at the program and put serious integrity measures in place that have fundamentally changed the program."

Given the measures enacted in 2022, and the bipartisan support it garners in both houses of Congress, Grau doesn't believe EB-5 will be scrapped. One reason Congress supports the program is because it has generated more than 1.4 million jobs and more than $55 billion in economic development since it began, largely through major projects in economically underserved areas across the country, according to Grau.

Dozens of real estate and infrastructure developers across the country have relied on EB-5 investors for the construction of hotels, apartment buildings, stadiums, interstate interchanges, and other projects across the country. The program is administered by the Department of Homeland Security, while the State Department issues visas and the Securities and Exchange Commission has some oversight. Commerce doesn't play a role.

Some of the projects cited by Invest in the USA include a multiple-phase expansion of Big River Steel, in Osceola, Ark., an expansion of a retail center in Westlake, Ohio, and the development of the Jefferson Energy Terminal at the Port of Beaumont in Texas.

The 2022 law also strengthened the program by how it screens EB-5 investors. For example, since the reauthorization, the regional centers that pool EB-5 investment dollars for specific projects have worked with financial firms to make sure investors are vetted according to anti-money-laundering laws and regulations, including know-your-customer identification, said Kelly Brown, chairman and CEO at Ampersand, a Wisconsin-based deposit administration firm.

"Having a company like us, with the banking experience we have, ensures everything is processed and maintained at the proper levels," Brown told Barron's.

Ampersand also escrows EB-5 deposits in community banks across the country until the money is released for investment in a designated economic development project.

"This program allows the community banks access to a diversified source of funding that they can push out into their communities in the form of loans," Brown said.

Armstrong is puzzled that the Trump administration would be interested in a program that funnels money directly to government coffers instead of one that creates jobs and facilitates economic growth. A gold card program may attract the same amount of money as the EB-5, but he believes "it'll be a wash at best."

However, the fact Trump and his administration are focused on immigrant investors is "phenomenally good news for us," Grau said. "We're excited it's on [Trump's] radar."

Write to Abby Schultz at abby.schultz@barrons.com.

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

March 06, 2025 03:30 ET (08:30 GMT)

Copyright (c) 2025 Dow Jones & Company, Inc.