Man Indicted for Trading US Visas for Real Estate Development Funds

Allison Tussey —  August 28, 2014 — Leave a comment

Anshoo Sethi, 30, Chicago, Illinois, a property developer, was indicted on federal charges for allegedly exploiting a U.S. visa program to fraudulently raise approximately $160 million from some 290 Chinese nationals who invested in the project while seeking U.S. residency.

The defendant was charged with eight counts of wire fraud and two counts of making false statements in a 10-count indictment returned today by a federal grand jury.  He was the founder and a managing member of A Chicago Convention Center, LLC, which purported to be building a $912 million hotel and convention center complex on nearly three acres of land located at 8201 West Higgins Rd., east of the airport.  Sethi, who was also the managing member of the Intercontinental Regional Center Trust of Chicago, LLC, will be arraigned on a date yet to be determined in U.S. District Court.

The indictment seeks forfeiture of at least $11 million in administrative fees that Sethi allegedly collected from Chinese investors and expended as part of the fraud scheme.  Sethi misappropriated at least $320,000 of the fees to purchase luxury goods for himself, his family, and friends, and for an unrelated civil lawsuit settlement, to fund a cosmetic surgery business, and for other personal expenses, the indictment alleges.

The U.S. Securities and Exchange Commission sued Sethi over the purported project in early 2013 and the case was settled earlier this year.  Approximately $147 million, which had been escrowed by Sethi and frozen by the SEC, was returned to Chinese investors.

The indictment alleges that between January 2011 and February 2013, Sethi defrauded investors and deceived the U.S. Department of Homeland Security’s U.S. Citizenship and Immigration Services (USCIS) in its review of visa applications through false statements and representations about the participation of established hotel brands in the project; the appraised value of the project site; government financing; the City of Chicago’s provision of Tax Increment Financing; the development of the project; and the use of the investors’ administrative fee.

According to the indictment, foreign nationals may obtain an EB-5 visa, qualifying them for U.S. residency, if they invested $1 million, or if they invested at least $500,000 in a domestic project in a high unemployment or rural area and their investment would create or preserve at least 10 jobs for U.S. workers.  In addition, EB-5 visas were set aside to be granted to foreign investors in Regional Centers that promoted economic development, such as Sethi’s Intercontinental Regional Center Trust of Chicago.  The USCIS granted Sethi’s application for Regional Center status in June 2011.

Sethi solicited Chinese nationals who were interested in obtaining EB-5 visas to invest $500,000 each plus a $41,500 administrative fee in A Chicago Convention Center and the Intercontinental Regional Center, representing that the $500,000 would be used for construction of the complex and the $41,500 would be used for administrative and marketing expenses, the indictment alleges.  Each Chinese national who invested $541,500 in the project also applied for an EB-5 visa with USCIS, but no EB-5 visas were actually granted to investors through the convention center project.

A Private Offering Memorandum stated that each investment interest constituted approximately 0.025 percent ownership of the project, and it projected raising $249 million through investor contributions.  Additional funding for the project would be obtained through a contribution of the three-acre site on Higgins Road, which Sethi allegedly represented had a greatly inflated appraised value of $177 million, approximately $339 million in government bond financing, and various government tax credits and grants, the memorandum stated.

To raise investment funds, Sethi used employees and foreign sales agents and provided them with numerous documents and marketing materials to distribute to investors in China.  Sethi also made presentations regarding the project directly to investors in China, according to the indictment.

The indictment further alleges that Sethi falsely represented that the project had executed franchise agreements with established hotel brands, namely Hyatt, Starwood, and Intercontinental Hotel Group, to operate at least three separate hotels at the complex, knowing at the time that no such agreements existed.

Sethi also allegedly falsely represented that that the State of Illinois and the federal government were investing funds and providing tax credits for the project, including circulating a forged letter stating that the project qualified for financing through the Illinois Finance Authority.  He also falsely represented that the City of Chicago had agreed to provide approximately $97 million through Tax Increment Financing, and he distributed a fake agreement and a fake city ordinance as evidence that the project had been approved for TIF financing, the indictment alleges.

Sethi further falsely represented that the $41,500 administrative fee was fully refundable if the investors’ EB-5 visas were not approved, even though he knew that he had spent nearly all of the administrative fees collected and did not have the resources to repay the investors.

The indictment was announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois, and Robert J. Holley, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation. The SEC and the USICS assisted in the investigation.

The government is being represented by Assistant U.S. Attorney Sunil Harjani.

Each count of wire fraud carries a maximum penalty of 20 years in prison and a $250,000 fine, or an alternate fine of twice the loss or twice the gain, whichever is greater, and restitution is mandatory.  Each count of making false statements carries a maximum sentence of five years in prison and a $250,000 fine.  If convicted, the Court must impose a reasonable sentence under federal sentencing statutes and the advisory United States Sentencing Guidelines.

Allison Tussey

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