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.
Sentencing is scheduled for April 6. Each charge carries up to five years in prison.
Dargey, who lives in Bellevue and planned to build the Potala Village mixed use development in Kirkland, 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 may take several weeks before it is finalized, he said.
An SEC representative declined comment Tuesday.
Dargey’s legal troubles began in 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.
Even as Dargey has negotiated with the government on is criminal and civil matters, Dargey continues to fight the receiver’s plan to finish Potala Place in Everett, often referred to in court documents as Path America Farmer’s Market and 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 — meaning they likely would not get a green card if U.S. immigration officials became aware of the misuse of money. Dargey also 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 filed Tuesday. “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 financers 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 Owens 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.
