The Securities and Exchange Commission (SEC) has filed charges and is seeking to freeze the assets of an Illinois man, whom it alleges defrauded 250 foreign investors of $11 million in a scheme that purported to use a federal government program that Iowa also is trying to use as an economic development tool.
The SEC said Friday alleges that Anshoo R. Sethi fraudulently sold more than $145 million in securities and collected $11 million in administrative fees from more than 250 investors primarily from China. Sethi and his companies duped investors into believing 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.
Sethi allegedly told his investors that in return for their investment, his company would provide the expertise to get them visas to emigrate permanently to the United States, through a legitimate U.S. government program called EB-5.
EB-5 visas can be granted to foreigners who invest in U.S. companies that provide at least 10 jobs for two years for each investor.
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) — the federal agency that administers the EB-5 program — in an attempt to secure the agency’s preliminary approval of the project and investors’ provisional visas.
Meanwhile, according to the SEC, Sethi and his companies have spent more than 90 percent of the administrative fees collected from investors despite their promise to return this money to investors if their visa applications are denied. More than $2.5 million of these funds were directed to Sethi’s personal bank account in Hong Kong.
The Iowa angle
The Iowa Economic Development Authority, like other states, is looking at the EB-5 visa program as a way to attract foreign investment to fuel economic development.
In the past, the state had tried to use the program to help Iowa dairy farmers, but recently Iowa expanded the program to the entire state and has contracted with a firm called CMB located in the Quad Cities to administer the program.
Kim Atteberry, vice president for project development for CMB,) told the Business Record last Wednesday that her company is looking to help finance a multi-million dollar construction project using foreign investors and the EB-5 program.
The Des Moines Partnership facilitated a meeting Thursday to help spread the news about the program.
Atteberry said Tuesday, that some of her company's foreign investors became concerned when they read the Business Record's article about Sethi last week and she wanted to make it clear that CMB is not affiliated with Sethi.
"Literally, we've gotten dozens and dozens of emails about this," she said.
The Business Record article was highly ranked in Google search, but readers in China, India and Pakistan, who clicked on the article had no idea it originated out of Des Moines because there was no Des Moines dateline on the article. Atteberry said several investors did not understand why her company was being mentioned along with Sethi.
She noted that the Iowa Economic Development Authority checked into the firms they wanted to hire to make sure they were credible and would operate with transparancy, before hiring her company.