CHICAGO—A Chicago man who convinced 290 Chinese nationals to invest in a phony $912 million hotel and convention center complex near O’Hare International Airport has been indicted and charged with fraud, according the U.S. Justice Department.,
Anshoo Sethi, 30, was charged with eight counts of wire fraud and two counts of making false statements in a 10-count indictment returned Wednesday by a federal grand jury.
Sethi was the founder and a managing member of A Chicago Convention Center, LLC, which purported to be building the hotel and convention center on nearly three acres of land located at 8201 West Higgins Rd., east of the airport.
If convicted, Sethi is facing a very long prison sentence. Each count of wire fraud alone carries a maximum penalty of 20 years in prison and a $250,000 fine, officials said.
Sethi is also the managing member of the Intercontinental Regional Center Trust of Chicago, LLC.
The indictment seeks forfeiture of at least $11 million in administrative fees that Sethi allegedly collected from Chinese investors and expended as part of the fraud scheme.
Sethi spent at least $320,000 of the fees to purchase luxury goods for himself, his family, and friends, and for an unrelated civil lawsuit settlement, to fund a cosmetic surgery business, and for other personal expenses, the indictment alleges.
Officials said the U.S. Securities and Exchange Commission sued Sethi over the purported project in early 2013 and the case was settled earlier this year. About $147 million, which had been escrowed by Sethi and frozen by the SEC, was returned to Chinese investors.
The indictment alleges that between January 2011 and February 2013, Sethi defrauded investors and deceived the U.S. Department of Homeland Security’s U.S. Citizenship and Immigration Services.
Sethi allegedly did so by doing the following: Making false statements and representations about the participation of established hotel brands in the project and the appraised value of the project site. He also lied about government financing and the city of Chicago’s provision of Tax Increment Financing along with the development of the project; and the use of the investors’ administrative fee.
Foreign Nationals Can Qualify for U.S. Residency by Investing $1 Million
According to the indictment, foreign nationals may obtain an EB-5 visa, qualifying them for U.S. residency, if they invested $1 million, or if they invested at least $500,000 in a domestic project in a high unemployment or rural area and their investment would create or preserve at least 10 jobs for U.S. workers.
In addition, EB-5 visas were set aside to be granted to foreign investors in Regional Centers that promoted economic development, such as Sethi’s Intercontinental Regional Center Trust of Chicago.
The Department of Homeland Security granted Sethi’s application for Regional Center status in June 2011.
Sethi Allegedly Scammed Chinese Nationals Interested in EB-5 Visas
Sethi solicited Chinese nationals who were interested in obtaining EB-5 visas to invest $500,000 each plus a $41,500 administrative fee in A Chicago Convention Center and the Intercontinental Regional Center, representing that the $500,000 would be used for construction of the complex and the $41,500 would be used for administrative and marketing expenses, the indictment alleges.
Each Chinese national who invested $541,500 in the project also applied for an EB-5 visa with USCIS, but no EB-5 visas were actually granted to investors through the convention center project.
A Private Offering Memorandum stated that each investment interest constituted approximately 0.025 percent ownership of the project, and it projected raising $249 million through investor contributions.
Additional funding for the project would be obtained through a contribution of the three-acre site on Higgins Road, which Sethi allegedly represented had a greatly inflated appraised value of $177 million, approximately $339 million in government bond financing, and various government tax credits and grants, the memorandum stated.
Sethi Used Employees and Others to Promote His Scam in China
To raise investment funds, Sethi used employees and foreign sales agents and provided them with numerous documents and marketing materials to distribute to investors in China. Sethi also made presentations regarding the project directly to investors in China, according to the indictment.
The indictment further alleges that Sethi falsely represented that the project had executed franchise agreements with established hotel brands, namely Hyatt, Starwood, and Intercontinental Hotel Group, to operate at least three separate hotels at the complex, knowing at the time that no such agreements existed, officials stated.
Sethi also allegedly falsely represented that that the State of Illinois and the federal government were investing funds and providing tax credits for the project, including circulating a forged letter stating that the project qualified for financing through the Illinois Finance Authority, officials stated.
He also falsely represented that the City of Chicago had agreed to provide approximately $97 million through Tax Increment Financing, and he distributed a fake agreement and a fake city ordinance as evidence that the project had been approved for TIF financing, the indictment alleges.
The indictment also maintains that Sethi further falsely represented that the $41,500 administrative fee was fully refundable if the investors’ EB-5 visas were not approved, even though he knew that he had spent nearly all of the administrative fees collected and did not have the resources to repay the investors.
Chicago Governor Appeared on a Video for Sethi’s Project
The Chicago Tribune newspaper reported in July 2012 that at one point, Sethi’s project, described as building five environmentally progressive luxury hotels near the airport on land where his family’s run-down hotel once stood, had preliminary support from Democratic Gov. Pat Quinn.
The newspaper reported that Quinn appeared in a promotional video shot during a trip to China in fall 2011.
“We know how to make convention centers,” Quinn said in the video. Warren Ribley, then head of the state Department of Commerce and Economic Opportunity, also appeared in a promotional video for Sethi’s project, according to the newspaper.