The court-appointed receiver now running Path America, which bankrolled real-estate projects through Chinese immigrant investors, says three of its four developments should be put up for sale as soon as possible, including the 40-story Potala Tower in downtown Seattle.
The court-appointed receiver now running Path America, which bankrolled real-estate projects through Chinese immigrant investors, says three of its four uncompleted developments should be put up for sale as soon as possible, including the 40-story Potala Tower in downtown Seattle.
In a recovery plan filed late Wednesday in federal court, receiver Michael Grassmueck said he will soon ask court permission to market and sell the Potala Tower project, which is now a 60-foot-deep pit at 2116 Fourth Ave.
The receiver said he is “keeping in mind the potential adverse impact” on Chinese nationals who each invested $500,000 in Path America’s projects to obtain permanent-residency visas. According to the Securities and Exchange Commission, there are 250 such investors.
The receiver’s report says $45 million was also invested in several Path projects by a Chinese company, Binjiang Tower Corp.
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Construction on the tower began last year but was halted abruptly in August, days after federal regulators filed a civil fraud lawsuit alleging Path America’s CEO, Lobsang Dargey, siphoned off millions of dollars of investors’ funds for his personal use.
Dargey lost control of his real-estate projects last October, when the federal court placed them in a receivership and appointed Grassmueck to run Path America.
The tower was touted as offering 342 apartments and a 142-room Hotel Indigo, a boutique brand from InterContinental Hotels Group.
The Potala Farmer’s Market, a mixed-use project that’s 90 percent built, should be completed and leased up in the next nine months, Grassmueck told the court. Then it too should be sold, he said.
About 80 Chinese nationals invested nearly $40 million in the Potala Farmer’s Market. Many have filed petitions with the U.S. Citizenship and Immigration Services (USCIS) to obtain permanent-residency visas through the EB-5 program.
But the federal immigration agency has notified the receiver it plans to terminate Path America from the EB-5 program for both the Potala Tower and Farmer’s Market projects, Grassmueck wrote.
“While there is no way to know what USCIS will do, it is possible that there is an EB-5 benefit by completing the project as originally contemplated,” Grassmueck wrote.
Path America also had bought land in Shoreline and Kirkland and was deep in the planning process to obtain building permits for developments.
In a separate filing, Grassmueck said he has recovered $47 million in cash from different Path America bank accounts. But the funds in specific projects’ accounts were insufficient to cover their post-receivership expenses, he said. He expects to spend $2.28 million through Aug. 31 to cover the receivership’s expenses.
Grassmueck said he had to make $500,000 in payments to Potala Tower contractors to preserve the project’s value and minimize the chance of liens being recorded against it.
In his recovery plan, Grassmueck said he’ll pursue claims against Dargey and his other companies if money the former CEO transferred out wasn’t returned to the receivership voluntarily.
Of the $64 million in EB-5 funds received for the Potala Tower, over $30 million was paid to other Dargey companies, Grassmueck told the court in November. And of the $39 million in EB-5 funds raised for the Farmer’s Market, more than $15 million was transferred to other firms Dargey controls, he said.
Information in this article, originally published Jan. 20, 2016, was corrected Jan. 25. A previous version of this story incorrectly refered to the Everett Farmer’s Market, based on the court-appointed receiver’s report. The Everett Farmers Market is an unrelated seasonal outdoor market.