EVERETT — An Everett developer accused by federal authorities of defrauding foreign investors is keeping quiet.
But one of Lobsang Dargey’s companies, Path America, issued a public statement Sunday saying that it did nothing wrong soliciting millions of dollars from Chinese investors to fund various real estate projects in Snohomish and King counties.
The company also said it has retained a Seattle law firm to “aggressively” defend the company while also cooperating with the U.S. Securities and Exchange Commission.
The federal agency filed a civil suit against the privately held company and Dargey, its CEO, on Aug. 24 in U.S. District Court in Seattle. The lawsuit alleges that Dargey misused $17.6 million of investor money to buy a new house in Bellevue and to bankroll two apartment buildings.
The court also froze the company’s and Dargey’s assets. However, that has not stopped construction in downtown Everett at Potala Place and Farmer’s Market, an apartment building with ground floor retail space.
Path America says it “had no notice that the SEC was investigating the company” until the lawsuit was filed last week.
Had the SEC contacted Path America, “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,” the company says.
The company has hired Dan Dunne and George Greer, partners with Seattle-based Orrick Herrington &Sutcliffe law firm.
“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 SECs allegations will be disproved,” the company says.
Dargey has not personally responded to repeated requests for comment.
The Bellevue home listed in the lawsuit is unoccupied. Much of the interior is stripped to the wall studs and the concrete floor is bare. It appears to either be under construction or renovation. There was no sign that work was going on Monday.
Instead, Dargey still is living in his old home, a modest mid-1950s rambler in a quiet Eastside neighborhood. His wife, Tami Dargey, answered the door and politely declined to comment.
According to the SEC’s lawuit, Dargey bought the new home for $2.5 million, allegedly using some money from foreign investors, who thought they were bankrolling real estate developments in return for green cards as part of a federal program.
The federal EB-5 visa program offers qualifying foreign nationals a shortcut to residency in the U.S. if they invest at least $500,000 in a federally-approved project that generates or keeps 10 jobs for U.S. workers.
In all, Dargey and Path America raised more than $125 million from 250 foreign investors. The money was supposed to go to either Potala Tower in Seattle or Potala Place and Farmer’s Market in Everett.
The investors paid $500,000 for a limited partnership in one of the two projects. That money went into an escrow account in the U.S. They also paid a $45,000 “administrative” fee, that was wired to a Hong Kong bank account controlled by Dargey, according to court documents.
The SEC claims Dargey used $14.7 million of investors’ money for two developments that were not part of the federal EB-5 visa program — Potala Place Kirkland and Potala Place Shoreline.
Dargey, 41, names most of his projects to include the name Potala, a nod to Potala Palace, the Dalai Lama’s historic winter home in Tibet.
He also allegedly withdrew $350,000 in cash from investor funds, including more than $200,000 at 14 different casinos Washington, Nevada, California and British Columbia, according to the complaint.
Work has reportedly stopped at Potala Tower in Seattle, which was bankrolled in part with $85 million from 170 Chinese nationals.
However, work is proceeding at Everett’s Potala Place and Farmer’s Market. Eighty-two Chinese nationals invested about $41 million in the project, according to court documents.
The Everett project includes 220 apartments, a year-round farmer’s market and upscale dining, and an adjacent 122-room Hampton Inn. The market was supposed to open Aug. 1, but now is slated to open before Thanksgiving, according to Bill Crosthwait, the project’s community Manager.
Construction still is under way on the apartment building, mostly on the ground floor. The building, which occupies a block of Grand Avenue between Hewitt Avenue and Wall Street, already is 7 percent occupied and more than 20 percent leased, he said.
The apartments range from studios to two bedrooms, and cater to people who’ll make use of the 1980s-vintage arcade game in the community room or attend wine tastings on the building’s wood-planked, rooftop deck.
Dan Catchpole: 425-339-3454; dcatchpole@heraldnet.com; Twitter: @dcatchpole.
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