The Lure of Citizenship is the Key to an Offering Fraud Halted by the SEC
A path to U.S. citizenship premised on an immigration program crafted to help create jobs, and surrounded with misrepresentations and false documents was the lure used by Anshoo Seithi and his controlled entities to defraud 250 investors of millions of dollars, according to an SEC complaint. The Commission obtained a temporary asset freeze over $145 million in investor funds and a retraining order at the time of filing its complaint against Mr. Seithi, A Chicago Convention Center, LLC and Intercontinental Regional Center Trust of Chicago, LLC, both recently formed entities. SEC v. A Chicago Convention Center, LLC, Case No. 13cv982 (N.D. Ill. Filed Feb. 6, 2013).
The EB-5 Program was created as part of the 1990 Immigration and Nationality Act. It promised foreign nationals who invested $1 million creating or preserving at least 10 U.S. workers jobs in this country the opportunity to obtain a green card. Alternatively, $500,000 could be invested in a high unemployment or rural area. The program is administered by the U.S. Citizenship and Immigration Service or USCIS.
Mr. Seithi used this program to solicit investors to purchase notes in A Chicago Convention Center, claiming it would build and operate what he called the World’s First Zero Carbon Emission Platinum LEED certified” hotel and conference center in the Chicago area. The conference center was supposed to generate over 8,000 jobs, thus qualifying it for the EB-5 Program. Investors were asked to wire a minimum of $500,000 each for their investment and, in addition, $41,5000 as an administrative fee. Investor funds would be held in escrow. Those funds would only released to Defendants if USCIS determined that: (1) the hotel project was capable of generating the minimum number of jobs to qualify for the EB-5 program; and (2) adjudication of the individual investors’ application for a provisional visa, a preliminary step toward obtaining a green card. Those procedures did not, however, apply to the administrative fee.
The offering memorandum claimed the project was moving forward. Several major hotel chains were part of the project, according to the document. All necessary permits and approvals to construct the project were in place investors were told. And, defendants would contribute real estate valued at over $177 million.
The representations were false, according to the SEC’s complaint. Contrary to the offering memorandum claims, Starwood, Intercontinental and Hyatt hotels had not executed franchise agreements. Few steps have been taken to move the project forward. The land that would be contributed was vastly overvalued. And, a falsified letter purporting to be from Hyatt Hotels was furnished to USCIS in an effort to secure provisional approval. A significant amount of the $10,726,466 collected as administrative fees has been misappropriated.
The Commission’s complaint alleges violations of Securities Act Sections 17(a)(1) & (2) and Exchange Act Section 10(b). The case is in litigation. See also Lit. Rel. No. 22615 (Feb. 8, 2013).