SEATTLE — Everett developer Lobsang Dargey faces as much as 10 years in federal prison after pleading guilty to fraud-related charges Wednesday.
Speaking in a subdued voice, Dargey entered his pleas in U.S. District Court in Seattle, more than a year after federal investigators raided his offices and home. The charges — one count of wire fraud and one count of concealing information from U.S. immigration officials — each carry up to five years in prison. Sentencing is scheduled for April 6.
He also agreed to pay as much as $24 million in restitution to more than 200 investors in his projects. The final sum could be smaller based on investment returns and refunded fees.
Investors “won’t have gotten what they bargained for if they only get their money back,” said Seth Wilkinson, an assistant U.S. attorney. Dargey’s plea was part of an agreement with the U.S. Attorney’s Office.
Investors wrote checks to Dargey under a federal program that offers foreigners a shot at green cards in exchange for bankrolling developments that create jobs here.
However, Dargey’s criminal activity threatens to end their hopes of staying in the U.S. Many already moved here on a temporary basis and face possible deportation.
Based on fraudulent claims and falsified documents, Dargey, 43, convinced Chinese investors and lenders to put nearly $240 million into real estate projects in Everett, Seattle, Kirkland and Shoreline, according to the plea agreement. Although he is being given credit for resolving the case against him without trial, the plea agreement specifies that Dargey understands the court could order him to serve consecutive sentences on the two charges. That would mean a decade behind bars.
“Our expectation is to ask for a significant prison sentence,” said Justin Arnold, an assistant U.S. Attorney, after the hearing.
Dargey did not respond to questions after the hearing. Despite living in the U.S. since 1997, the Tibetan native still struggles with English, which he reads at a grade-school level, his attorney, Robert Mahler of Foster Pepper, told U.S. District Magistrate Judge James Donohue in court Wednesday.
Dargey was released pending sentencing. However, he has to surrender his passport and regularly check in. He lives in Bellevue with his three children and wife, Tami, sister of tennis star Andre Agassi.
“Mr. Dargey recognizes that misrepresentations were made to investors and (U.S. Citizenship and Immigration Services),” his attorney said in a prepared statement. “He very much regrets that his conduct could have resulted in harm to anyone and has made extraordinary voluntary efforts to insure, to the extent humanly possible, that every single investor obtains both the economic and immigration benefits of their investments.”
Dargey also has reached a tentative agreement to settle a civil lawsuit brought by the U.S Securities and Exchange Commission, according to court papers and his attorney in that case, Peter Ehrlichman of Dorsey & Whitney.
It might take several weeks before it is finalized, he said.
An SEC representative declined comment Tuesday.
In filings in the civil case, SEC lawyers have rejected Dargey’s claim that he has worked to protect investors’ interests, accusing him of needlessly delaying or hampering proceedings.
According to the plea agreement in the criminal case, Dargey’s misdeeds continued up until August 2015 when the SEC filed the lawsuit in U.S. District Court, alleging fraud and misuse of investors’ money. The court appointed a receiver and handed him control of Dargey’s companies.
At the time, he had been exploring tapping foreign investors to bankroll developments in California and Oregon.
Even as Dargey has negotiated with the government on his criminal and civil matters, he’s continued to fight the receiver’s plan to finish Potala Place in Everett, often referred to in court documents as Path America Farmer’s Market or Everett Farmer’s Market.
Dargey entered the real estate market in 2006 when he purchased the Everett Public Market in downtown Everett. Next he purchased and renovated the former Federal Building on Colby Avenue. Then in the midst of the recession, he turned a former used-car lot into Potala Village, a four-story apartment building with ground-floor retail.
His career as a developer took off when he found a ready source of cash investors — Chinese citizens interested in moving to the United States. A federal program called the EB-5 program offered foreign investors temporary residence and an accelerated shot at a green card if they put at least $500,000 into a development project that created jobs in the U.S.
Dargey began laying the groundwork in 2010. He created development projects in Seattle and Everett, and enrolled them in the EB-5 program. He established contacts in China to help recruit investors.
From 2012 to 2015, Dargey and associates raised $153.6 million from 282 Chinese investors. In all, 80 investors put $43.6 million into Potala Place in Everett and 202 investors put $110 million into Potala Tower in Seattle.
However, investigators determined that Dargey put millions of investors’ dollars into other projects in early stages in Seattle, Kirkland and Shoreline. The investors knew nothing about these projects, which did not qualify for the EB-5 program. That also meant the investors likely would not get a green card if U.S. immigration officials became aware of the misuse of money.
Compounding the problems, Dargey did not invest huge sums of his own money as he had promised.
Those actions “resulted in gaping funding deficits” for the Potala Place and Potala Tower, assistant U.S. attorneys said in charging papers. “Dargey filled these deficits by raising tens of millions of dollars from a lender and a new equity investor.”
To hide his misuse of individual investors’ money, he provided the financiers with falsified documents, according to court documents. Voya Insurance and Annuity Co. loaned the Everett project $25 million, and Shanghai Binshun Investment Management Co. — better known as Binjiang — invested $30 million in Potala Tower. It invested another $30 million in two of Dargey’s side projects.
He told potential investors that putting money into the projects brought a “green card guarantee.” That was not true, federal prosecutors said in court papers.
Dargey was a good salesman, though, and convinced public officials from former Lt. Gov. Brad Owen to Everett Mayor Ray Stephanson to talk up his projects to potential foreign backers. Seattle Mayor Ed Murray praised Dargey at the groundbreaking ceremony of Potala Tower, an event attended by actor Tom Skerritt.
In addition to siphoning off EB-5 money for other development schemes, Dargey spent investors’ money on gambling trips to casinos, to pay a $31,000 jewelry bill and to help buy a luxury home in a posh Bellevue neighborhood.
Federal immigration officials have ended his companies’ participation in the EB-5 program. Appeals have been filed on behalf of investors.
A Las Vegas-based developer bought the Potala Tower project in October in a court-approved sale.
Assistant U.S. attorneys declined to say if anyone else will be charged in connection with Dargey’s fraud.
Generally, the case “should send a strong deterrent message to anyone” who might be considering fraud involving the EB-5 program, Wilkinson said.
Dan Catchpole: 425-339-3454; firstname.lastname@example.org. Twitter: @dcatchpole.
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