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SEC freezes the assets of an EB-5 regional center in Chicago
By Chiu Chang
Taiwan News, Staff Writer
2013-02-20 10:36 AM
In 1990, U.S. Congress enacted the Immigrant Investor Program, also known as “EB-5,” to stimulate the U.S. economy through job creation and capital investment by foreign investors. The EB-5 program enables foreign investors to possibly qualify for a green card if they invest $1 million (or $500,000 in a “Targeted Employment Area” with a high unemployment rate) in a project that creates or preserves at least 10 jobs for U.S. workers. The quota for EB-5 visa each year is 10,000.

Investors can take advantage of a pilot program called Regional Centers enacted in 1992. Investments made through regional centers can take advantage of a more expansive concept of job creation including both “indirect” and “direct” jobs. According to USCIS, there are 254 regional centers approved to this date. California, Washington and New York have the most regional centers.

The Regional Center designation does not mean that its capital investment projects are backed or guaranteed by the government. Further, there are no guarantees that an investor may ultimately be granted unconditional permanent resident status through an EB-5 investment.

Out of all the regional centers, the Intercontinental Regional Center Trust of Chicago has been noticeable for its extremely large size of the offering ($249.5 million through 499 investors) and the bold claims made by its promoters and migration agents in China. If successful, those agents can earn well over $100,000 - $150,000+ for each investor they secure. Several agencies were helping promote this project in China including Worldway, The Shanghai International Service Trade Group Overseas Affairs and the Governor of Illinois, Pat Quinn.

The general partner of the project is Anshoo Sethi, a 29 year old resident of Illinois. Sethi and his companies duped investors into believing that by purchasing interests in ACCC, they would be financing construction of the “World’s First Zero Carbon Emission Platinum LEED certified” hotel and conference center near Chicago’s O’Hare Airport. Investors were misled to believe their investments were simultaneously enhancing their prospects for U.S. citizenship through the EB-5 Immigrant Investor Pilot Program.

In the offering materials, Anshoo Sethi claims that he has “over fifteen years of experience in real estate development and management, specifically in the lodging area”, and that he came from a "three-decade-old family business of hotel development." Crain's Real Estate Daily reported in 2009 that the family has "never developed a hotel."

The offering materials also misleadingly state that the project’s developer Upgrowth LLC has “more than 35 years of experience.” Illinois corporate records show that Upgrowth was just organized in 2010.

Sethi and his companies prominently featured in their marketing materials the purported participation of three major hotel chains in the project: Hyatt, Intercontinental Hotel Group, and Starwood Hotels. However, none of these hotel chains have executed franchise agreements to include a brand hotel in this project. Two of the chains actually terminated prior deals with other Sethi-related entities more than two years before these offering materials were circulated to investors.

On Feb. 8, 2013, the Securities and Exchange Commission (“SEC”) announced charges and an asset freeze against Anshoo Sethi and his two companies behind an investment scheme defrauding foreign investors through a federal visa program.

The SEC alleges that Anshoo R. Sethi created A Chicago Convention Center (ACCC) and Intercontinental Regional Center Trust of Chicago (IRCTC) and fraudulently sold more than $145 million in securities and collected $11 million in administrative fees from more than 250 investors primarily from China.

The SEC alleges that Sethi and his companies falsely boasted to investors that they had acquired all the necessary building permits and that several major hotel chains had signed onto the project. They also provided falsified documents to U.S. Citizenship and Immigration Services (USCIS): a comfort letter from Hyatt Hotels and a backup financing letter from the Qatar Investment Authority to secure the USCIS’s preliminary approval of the project and investors’ provisional visas.

The SEC further alleges that the offering materials falsely stated that construction would begin in summer 2012 and occupancy of the first tower would occur in early spring 2014. A search of the Chicago Building Permits database for the project address shows that the only recent permits are for a tent for a purported groundbreaking ceremony held in November 2012, a demolition permit, construction of a fence, and a minor electrical wiring permit.

Separate from the investment capital, there are administrative fees that the EB-5 program requires to be deployed into a job-creating enterprise. More than $11 million in administrative fees were collected and out of which Sethi have spent more than 90 percent and more than $2.5 million of these funds were directed to Sethi’s personal bank account in Hong Kong.

Sethi was in Taiwan in August of 2012 to promote his project. He repeatedly asked Taiwan Immigration Consultants Association (“TICA”) to let him speak to its members, but TICA declined. Sethi also set up a Cheng Du office in Sichuan Province to attract China investors.

The SEC obtained an emergency court order to protect the remaining $145 million in investor assets.

The SEC’s complaint alleges that Sethi, ACCC, and IRCTC violated Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5. In addition to the temporary restraining order and asset freeze granted by the court, the SEC’s complaint seeks permanent injunctions and other monetary relief.

February 13 By Dr. Chiu Chang is a law professor in the Taipei University of Science & Technology

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