September 2, 2015

Dargey denies allegations from SEC about EB-5 funds

Dargey Development issued a statement denying allegations from the U.S. Securities and Exchange Commission that its affiliate Path America misused $17.6 million from foreign investors.

The statement from Lobsang Dargey's company said it was not given notice of the investigation and subsequent civil action that was filed Aug. 24 in U.S. District Court of Western Washington.

“Had the company been contacted, we would have provided the SEC with additional information concerning our operations, which we believe would have demonstrated that we relied upon legal counsel advice when soliciting investments, that appropriate disclosures were made to our investors and that our financial statements are sound.”

Path America has hired Dan Dunne and George Greer of Orrick Herrington & Sutcliffe.

“We have instructed our counsel to cooperate with the SEC while aggressively defending the company and are confident that at the end of the day the SEC's allegations will be disproved,” the statement said.

The funds in question were raised through the federal EB-5 program, which gives foreign nationals an opportunity for U.S. residency in exchange for investing in job-creating projects and businesses.

According to court documents, 250 people invested approximately $125 million to build a 41-story hotel and apartment tower in Belltown and a mixed-use apartment complex with an indoor farmers market in Everett.

Court documents say Dargey used $2.5 million of the allegedly misappropriated funds to buy a house in Bellevue in the name of a trust of which he is the beneficiary. He also is accused of withdrawing more than $350,000 in cash from accounts for the Seattle tower and the Everett mixed-use project. Documents say approximately $200,000 of that was withdrawn at 14 casinos in Washington, Nevada, California and British Columbia.

Dargey funneled $14.7 million in EB-5 money from the Seattle tower and Everett project to projects in Kirkland and Shoreline, according to the documents.

Last week, a judge authorized the SEC to freeze Dargey's assets and accounts, and he is barred from raising more money from investors. This order is temporary. The next step is a hearing Sept. 14 to keep those restrictions in place until the case is resolved.

The general contractor for the 41-story tower and the architect on two other Dargey projects told the DJC last week that they have stopped work temporarily as a result of the court proceedings.