Local EB-5 VISA Fraud
SEC Complaint: 15-sec-v-dargey-complaint
Recent Seattle newspaper headlines have informed us that Lobsang Dargey, a local real-estate developer, has agreed to plead guilty to EB-5 fraud allegedly involving at least $125 million from 250 Chinese investors. This type of fraud is a form of securities and immigration fraud and has become more common on both sides of the transaction: investors make fraudulent claims regarding their eligibility for the program and promoters misappropriate their investments.
EB-5 was enacted by Congress in 1990 to stimulate the U.S. economy through job creation and capital investment by foreign investors. Under a pilot program enacted in 1992, and regularly reauthorized since then, investors may also qualify for EB-5 visas by investing through regional centers designated by U.S. Citizenship and Immigration Services (USCIS) based on proposals for promoting economic growth. On September 29, 2016, President Obama signed Public Law 114-223 extending the regional center program through December 9, 2016. Ten thousand visas are allocated each year and processing times can be two years. Not only does the investor and family need to be vetted for the visa (e.g. where did the money come from?). There are two investment amounts $500,000 and $1,000,0000. Both require creation of ten full time (35 hours per week) permanent jobs. The $500,000 is by far the most popular and is only available in rural and high unemployment area. This is where the developers get involved. They package a deal, arrange for USCIS processing, and arrange permanent management. Teams of well-paid sales agents sell the package in China and elsewhere. Since the package involves an investment with an expectation of a profit, it is a “security” under U.S. state and federal law. The investors are entitled to full disclosure.
On August. 25, 2015, The Securities and Exchange Commission announced an asset freeze obtained against Lobsang Dargey in Bellevue, Wash., accusing him of defrauding Chinese investors. In the civil law suit filed in the Western District of Washington, the SEC alleged that Lobsang Dargey and his “Path America” companies raised at least $125 million for two real estate projects: a skyscraper in downtown Seattle and a mixed-use commercial and residential development containing a farmers’ market in Everett, Wash. The SEC claims Dargey diverted $14 million for unrelated real estate projects and $3 million for personal use including the purchase of his $2.5 million home and cash withdrawals at casinos.
The Department of Justice also pursued the case criminally. According to the Seattle Times, Dargey pled guilty to two felonies: Conspiracy to commit wire fraud and concealing information from the federal government, which were enhanced because of the magnitude of the fraud. As part of the plea deal, the government said it wouldn’t bring charges on other, undisclosed potential offenses. From his birth on the livestock floor of a primitive farmhouse in Tibet to celebrating multimillion-dollar deals with local luminaries in Seattle, developer Lobsang Dargey’s rise was swift and remarkable. Dargey has only a second-grade-level education and could not read English beyond an elementary-school level.