Dive Brief:
- Seattle-area developer Lobsang Dargey pleaded guilty to fraud charges Wednesday in relation to a government visa program that rewards massive foreign investment with temporary residence and an expedited green card application process, according to the Herald Net. Dargey faces 10 years in prison and $24 million in fines.
- Prosecutors alleged that Dargey accepted nearly $240 million in EB-5 funds from more than 200 foreign investors but diverted the money to other non-EB-5-qualified projects and, in some cases, spent the money on luxury items for himself, family and friends. He was charged with one count of wire fraud and one count of concealing information from immigration officials.
- Dargey also allegedly misrepresented the status and use of foreign investments to the U.S. Citizenship and Immigration Services, and, as a result, many of those who participated — primarily Chinese investors — in the EB-5 program through Dargey’s developments now face deportation.
Dive Insight:
Dargey not only played fast and loose with EB-5 money, but authorities said he also provided false information to banks in order to obtain loans that promised to fill in the gaps when he diverted EB-5 funds elsewhere. According to the Seattle Times, Dargey allegedly altered bank statements to make it appear he had millions in cash on hand when he actually had less than $500,000. After those institutions provided Dargey with loans, he also supposedly faked additional documents as well during due diligence follow-ups. Authorities said Dargey took an average of $545,000 from each investor and falsely claimed their green-card status was guaranteed.
Of course, not all EB-5 developments end up like Dargey's. In fact, according to Next City, developers for the multibillion-dollar mixed-use Hudson Yards complex managed to raise $600 million from 1,200 Chinese families using the EB-5 program. And earlier this week, New York City developer Tishman Speyer also expressed interest in using the plan to help finance its $490 million partial conversion of the downtown Brooklyn Macy's building into office space. Chicago's Vista Tower developers could also raise approximately $200 million in EB-5 investment.
Another developer, Laurance Freed, of Joseph Freed and Associates, faced charges also related to false statements to a financial institution last year. The Chicago real estate developer was convicted last March of three counts of bank fraud, one count of mail fraud and four counts of making a false statement to a financial institution in connection with the redevelopment of an area department store. The charges carry a possible total prison sentence of 230 years.
