Everett-based Path America said Monday it was surprised by a federal investigation into its practices and expects to be cleared of any wrongdoing.
Everett-based Path America said Monday it was surprised by a federal investigation into its finances and expects to be cleared of any wrongdoing.
The assets of the privately held company and its chief executive, Lobsang Dargey, were frozen a week ago, soon after the Securities and Exchange Commission filed a civil suit alleging that they and subsidiaries had misappropriated $17.6 million from the $125 million or more they raised from would-be immigrant investors.
“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 SEC’s allegations will be disproved,” Path America said in a statement.
The SEC’s complaint alleges Dargey misappropriated funds that were raised through the federal EB-5 visa programfor two Seattle area projects he was developing — Potala Tower in downtown Seattle and a hotel-and-apartment project with a farmers market in downtown Everett.
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Through EB-5, immigrant investors can become eligible for a permanent residency visa for themselves and their families by investing $500,000 in a commercial project that creates at least 10 jobs.
The SEC alleged Dargey, 41, of Bellevue, tapped funds intended for the two projects to spend on a $2.5 million home there, other real-estate investments and gambling at 14 casinos across the West.
Path America said in a statement that it had no advance notice it was being investigated.
“Had the company been contacted, 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,” said the statement.
Path America said it has retained securities attorneys Dan Dunne and George Greer of the law firm Orrick Herrington & Sutcliffe.
The asset freeze has temporarily halted construction of Potala Tower, Path America’s hotel-and-residential tower project in downtown Seattle, and could jeopardize another planned project in Seattle’s Rainier Valley.
Attorneys for both sides agreed that Path America will provide the SEC by Sept. 7 with a full accounting of how investors’ money was used, according to a court filing. A temporary restraining order, including the asset freeze, is slated to continue until Sept. 14.
Also Monday, attorneys for the SEC and Path America agreed to unlock funds to pay specified vendors and employees. The largest is PCL Construction, the general contractor on Potala Tower, which will be paid more than $2.8 million for work completed, according to the filing.