By Antonio Olivo, Chicago Tribune reporter
8:40 AM EST, February 14, 2013
A project to build a convention center near O'Hare International Airport has been temporarily stopped by a federal judge after a government lawsuit accused the developer of trying to bilk Chinese investors out of millions of dollars.
Anshoo Sethi's plan to attract foreign investors for his Chicago Convention Center project was detailed in a Tribune article last July that laid out the promise and problems of the rapidly growing EB-5 visa program.
In a lawsuit filed by the Securities and Exchange Commission this month, Sethi is accused of using false documents to pump up his project. The lawsuit seeks to force Sethi to return $145 million he collected from about 250 investors, most of them Chinese. The SEC also says Sethi wrongfully transferred $2.5 million from investors into a personal bank account in Hong Kong.
Sethi envisioned the convention center on land where his family's struggling, run-down Chicago O'Hare Garden Hotel once stood at 8201 W. Higgins Road. The site remains vacant and littered with debris after the troubled hotel was demolished in November.
As part of the SEC lawsuit, filed Feb. 6 in Chicago and unsealed last week, a federal judge has ordered that Sethi's project be temporarily stopped. The judge also ordered that Sethi's assets be seized and that investors' money that left the United States be returned to this country.
If the project unravels, it's likely Sethi's investors would lose at least some of their money and, for now, their hopes of making it into the U.S. through the EB-5 program, said financial analysts familiar with the program.
"People are trying to figure out how they can get their money back," said Punyu Ho, a Chicago-based financial analyst with Chinese clients who have invested money in other EB-5 projects.
Sethi, 29, did not respond to several messages requesting comment on the lawsuit and its allegations.
The SEC suit is the latest allegation of fraud to confront the EB-5 program, which federal authorities say has leveraged $6.2 billion in foreign investments since it was launched in 1990.
Officials at U.S. Citizenship and Immigration Services, which administers the EB-5 program, say it is responsible for creating about 49,300 jobs through projects that have included a Vermont ski resort, the home of the Brooklyn Nets NBA basketball team, and hotels and restaurants across the country.
Local EB-5 projects include assisted living centers for the elderly in suburban Chicago and Wisconsin. So far, nearly 13,600 people have been admitted to the U.S. through the program, with nearly 4,900 placed on the path toward citizenship, federal statistics show.
The program's recent growth can be traced to the economic downturn that began in late 2007. Cash-strapped developers began flocking to China, where an economic expansion has created thousands of newly minted millionaires.
But the promise of a new life in America is frequently undermined by the complex realities of pulling together development deals that can create the number of jobs required for investors and their families to qualify for legal permanent residency, critics of the program say.
A recent surge of failed EB-5 projects that caused investors to lose money has prompted increased vigilance from Citizenship and Immigration Services and the SEC. Both agencies say they've seen more examples lately of projects that merit investigating.
Officials at Citizenship and Immigration Services say they have assisted the SEC in its investigation into Sethi's company, Intercontinental Regional Center Trust of Chicago LLC. The agency is monitoring the federal lawsuit to determine whether to discipline Sethi or boot him from the program, spokesman William Wright said.
"Our partnership in this case will serve as further notice to the community that USCIS remains vigilant and will take all measures to combat fraud and malfeasance in this program, Wright said in an emailed statement. The agency could not say how the case would affect the visa applications from investors, he said.
Sethi's project, which he says would create 8,000 jobs, has been heavily promoted in China and was at one time endorsed by Illinois officials. During a trip to China in fall 2011, Gov. Pat Quinn spoke favorably of Sethi during a promotional ceremony in Beijing. Warren Ribley, the former head of the state Department of Commerce and Economic Opportunity, appeared in a promotional video for Sethi's project.
Department officials in July said Ribley's appearance in the video was a mistake. And the governor's office demanded that Sethi stop using Quinn's appearances in promotional material. State officials say they have no plans to support the project.
The SEC accuses Sethi of spending most of the $11 million in administrative fees collected from investors, who are required to kick in $41,500 each. That money is supposed to be refunded to investors if a project unravels.
Sethi's father, Ravinder Sethi, allegedly used $35,000 of investor money deposited in a Hong Kong bank to pay settlement costs related to a separate federal lawsuit filed in 2011 by the Wyndham hotel chain for breach of contract.
The lawsuit also accuses Sethi of doctoring financial documents to make the convention center project appear more viable.
Copies of hotel "franchise agreements" submitted by Sethi to Citizenship and Immigration Services that indicated financial interest from several hotel chains turned out to be expired. One, under the Hyatt hotel chain's letterhead, was fabricated, the lawsuit alleges.
"We were surprised and dismayed when we were informed that Mr. Sethi had falsified Hyatt documents representing that he had reached agreements with the company, which he clearly had not," the company said in an emailed statement.
A "comfort letter" Sethi said was from the Qatar Investment Authority, based in the Arabian Peninsula, was also a fake, according to the lawsuit. The letter said the firm would finance $340 million for construction of the convention center if Sethi failed to persuade Illinois authorities to help pay for the project through government bonds and loans.
Under a court order, Sethi has until Saturday to provide an accounting of funds outside the U.S. that are related to the convention center project. He has yet to file a response to the lawsuit.
Sethi is also temporarily forbidden from marketing his project, though the websites of some immigration companies in China continue to promote the convention center as a golden opportunity.
Other Chinese websites have carried news of the SEC's lawsuit, with some online commenters asking for more details about the "29-year-old mastermind" behind the alleged scheme.
A filing in the SEC lawsuit provides some information about Sethi's history. It calls attention to his claim to potential investors of 15 years of experience as a developer, which would mean he would have started when he was 14.
From 2002 to 2006, the filing notes, Sethi was licensed as a pharmacy technician.
Copyright © 2014 Chicago Tribune Company, LLC