On February 8, 2013, Washington time, the U.S. Securities and Exchange Commission (SEC) issued an announcement detailing the lawsuit against the Chicago Convention Center project, causing a sensation in the U.S. immigration community. Hours later, the news reached China like lightning, and our consulting lines were ringing incessantly as members of the press and EB-5 investors called to inquire about the details. To respond to these inquiries responsibly, our company hereby issues the following statement:
I. The U.S. Securities and Exchange Commission has officially filed a lawsuit against the Chicago Convention Center project.
We learned immediately from U.S. sources on February 8, 2013, Washington time, that the U.S. Securities and Exchange Commission filed a lawsuit on February 6 in the U.S. District Court for the Northern District of Illinois against the Chicago Convention Center (ACCC), the Intercontinental Regional Center Trust of Chicago (IRCTC), and their controller, Mr. Anshoo R. Sethi (the above three parties are collectively referred to as the "Project Parties"). On February 8, the U.S. Securities and Exchange Commission released an announcement regarding this event (including the original complaint) on its official website. For details, please visit the webpage: http://www.sec.gov/news/press/2013/2013-20.htm.
II. Worldway Group terminated its cooperation with the Chicago Convention Center project parties as early as October 2011.
The sequence of events is as follows: In August 2011, Worldway Group was appointed by the project parties as the sole chief agent in China, and in September, we were invited to attend the launch ceremony in Beijing, where we joined the Governor of Illinois to initiate the project. However, after subsequent research by our group's U.S. Project Management Department, we discovered many suspicious points regarding the Chicago Convention Center project that were vastly different from the five major project advantages claimed by the project parties. Therefore, in October 2011, we summoned Mr. Anshoo R. Sethi to announce that Worldway Group was resigning as the sole chief agent for the Chicago Convention Center in China, withdrawing from the promotion of the project, and terminating our cooperation with the Chicago Convention Center project parties.
III. Terminating the cooperation with the Chicago Convention Center project parties was a major decision made by Worldway Group based on thorough research and in the spirit of being responsible to our clients.
After the Chicago Convention Center launch ceremony, Worldway Group's U.S. Project Management Department immediately initiated due diligence on the project. Two senior project analysts conducted a professional analysis of the project offering documents provided by the project parties. At the same time, Worldway Group's U.S. Project Management Department commissioned senior U.S. EB-5 experts to travel to Chicago to conduct on-site research. The results revealed five major suspicious points:
1. The valuation of the capital contribution claimed by the project parties is seriously inaccurate. The investigation found that the project parties claimed to contribute 3.2 acres of land (the actual size is only 2.8 acres) at a staggering valuation of $177 million, but they could not provide the formal appraisal report they had promised to provide.
2. The capital contribution claimed by the project parties was not transferred to the project company, Chicago Convention Center (ACCC). The investigation found that the land claimed by the project parties as a capital contribution actually belonged to another company established by the controller, Mr. Anshoo R. Sethi, and his father. Mr. Anshoo R. Sethi had promised to transfer the land title to the project company as soon as possible, but later refused to proceed with the title transfer procedures, citing his father's disagreement.
3. The project parties could not provide official supporting documents for the so-called government funding support they claimed. The investigation found that the project parties claimed that the government had invested in the construction of the project, accounting for more than 50% of the total project investment, but they never provided any official documents to prove this.
4. The hotel management experience and capabilities of the controller, Mr. Anshoo R. Sethi, and his father are questionable. The investigation found that Mr. Anshoo R. Sethi and his father owned a low-end, poorly performing small hotel on the land claimed for the capital contribution. This is far from the experience and strength they claimed, and it is impossible to believe that they have sufficient experience and ability to build and operate a so-called "world's first zero-carbon platinum LEED-certified" hotel and convention center, which they claimed would have meeting space and 5 high-end hotels with a total of 995 rooms.
5. The construction budget is inflated, increasing employment risks. The investigation found that the estimated hotel construction cost for the Chicago Convention Center was $740,000 per room. If land costs are included, the cost per room is nearly $920,000, which is the highest construction cost budget per square foot among all EB-5 construction projects. Since construction costs are related to employment calculations, an inflated construction budget inevitably leads to inaccurate employment calculations, and the claimed 1.73 times employment indicator lacks a credible basis.
The five major suspicious points raised by Worldway Group's U.S. Project Management Department as early as October 2011 have unfortunately been confirmed. On February 6, 2013, the U.S. Securities and Exchange Commission made detailed accusations regarding the above-mentioned suspicious points and other issues in a 26-page complaint.
IV. None of Worldway's clients invested in the Chicago Convention Center.
After Worldway Group terminated its cooperation with the project parties, we required all subsidiaries to explain the truth to our clients in the spirit of high responsibility. The company's sincerity was understood, appreciated, and supported by our clients, and all clients without exception switched to other EB-5 projects.
V. The EB-5 project will develop more healthily.
The action taken by the U.S. Securities and Exchange Commission this time, with the full cooperation of the U.S. Citizenship and Immigration Services, aims to protect the interests of EB-5 investors and is conducive to the healthier development of EB-5 projects, and therefore has also received the support and endorsement of the U.S. immigration community.
This incident shows that the U.S. regulatory authorities have strong oversight of EB-5 projects, that the investments of EB-5 investors are strictly protected by law, and that any act of defrauding investors will be sanctioned by law.
This incident serves as a warning and can effectively deter commercial fraud. We believe that more high-quality investment projects will enter the EB-5 field in the future.
VI. Worldway Group will continue to monitor the development of the situation regarding the Chicago Convention Center.
Currently, the U.S. District Court for the Northern District of Illinois has issued an emergency temporary restraining order prohibiting the promotion of this investment immigration project and has frozen $145 million in EB-5 investment funds. At the same time, given that Mr. Sethi unauthorizedly used the vast majority of the $11 million in issuance fees (of which $2.5 million was directly remitted to Mr. Sethi's private Hong Kong account) without the I-526 being approved, leaving less than $1 million in the issuance fee account, the U.S. Securities and Exchange Commission has requested through the U.S. District Court for the Northern District of Illinois that Mr. Sethi return all used/remitted issuance fees. The U.S. Citizenship and Immigration Services has also stopped approving this project. More than 250 EB-5 investors have been affected, most of whom are Chinese.
As a responsible enterprise, Worldway Group will maintain close contact with U.S. parties, closely monitor the development of the situation, promptly inform investors of the truth and consequences of the incident, and welcome investors to call for consultation or visit our branches in Beijing, Shanghai, Shenzhen, Guangzhou, Qingdao, Hong Kong, Macau, Los Angeles, and other locations for face-to-face inquiries.
