Federal regulators are investigating the financing behind the massive Statler Hotel redevelopment in downtown Dallas.

The Securities and Exchange Commission has questioned at least four people involved in the $230 million renovation of the historic hotel and adjoining former library, The Dallas Morning News has learned.

SEC officials have been asking about the project’s financing and construction, according to people interviewed, who spoke on the condition that their names not be published because the investigation is continuing.

The new facade to the historic Statler Hotel is undergoing finishing touches. (Miles Moffeit / Staff)

Farol Parco, a lawyer in the SEC’s Fort Worth office, said the agency would have no comment. The SEC typically looks at whether investors have received full and accurate information and whether proceeds from the sales of securities are used as promised.

The project’s developer, Centurion American Development Group, declined to comment on the investigation.

"We are grateful for the extraordinary support we have received from the community as we have thoughtfully worked to restore this historic gem,'' the developer's chief executive, Mehrdad Moayedi, said in a statement to The News.

The News has agreed to lease the old library to serve as its new headquarters and plans to move in later this year.

Financial experts say it's too early to gauge whether the inquiry could have an effect on the project. If government investigators find potential violations of securities laws, they often seek financial settlements through negotiations or civil lawsuits.

"You cannot draw any formal or legal conclusion yet about what will come of this,'' said Richard Sandow, a Southlake investment adviser. "But you have to take this investigation with great seriousness.''

One focus of the SEC inquiry is the sale last year of $26.5 million in municipal bonds backed by future tax incentives that the city of Dallas granted to the developer under what’s called tax-increment financing. Cities use such deals to lure developers to build in specific areas with little economic growth.

Under these programs, any increases in property-tax collections in these zones are rebated to developers over time and up to a certain limit — $46.5 million in the case of the Statler project.

Rather than wait to collect these tax payments over decades, Centurion decided to raise money immediately by selling bonds that in the future would be paid off by the tax rebates.

The unusual bond deal was sold through a Wisconsin agency, which told investors they would not have to pay federal taxes on the interest payments.

Scott Carper, program manager for that authority, said this week that it received a letter in March from the SEC requesting "any and all documentation pertaining to the Statler transaction." The Wisconsin agency has turned over its records, he said.

The IRS ruled last month that the bonds do not qualify for the tax exemption that investors were promised. The agency did not explain its reasoning, but Mike Culler, a public-finance tax lawyer for Squire Patton Boggs, said the deal probably failed to show a benefit to the public.

The Wisconsin agency said it has appealed the IRS decision.

Moayedi recently said that the IRS ruling should not affect completion of the Statler complex, which is scheduled to open before the end of the year.

The city of Dallas approved the bond arrangement, but officials said they were unaware of the SEC probe. Karl Zavitkovsky, the former director of economic development who retired in late June, said no one from the SEC had contacted him before he left.

The bond financing was put together by investment bank Jefferies LLC, which did not respond to requests for comment, and lawyers from Orrick, Herrington & Sutcliffe, which declined to discuss the SEC investigation.

Based in Farmers Branch, Centurion American has been working since 2014 to revamp the 19-story Statler and old library along Commerce Street between South St. Paul and South Harwood streets.

The new complex will include apartments, business offices, retail shops and restaurants. The News signed a 15-year lease to occupy the old library building, which is a national historic site.

The project's budget, which has risen 50 percent over the last three years, is built on several government programs and hefty tax incentives.

In addition to the $26.5 million in bonds, the developer is drawing on financing based on tens of millions of dollars in federal and state historic tax credits.

Centurion also is tapping $98 million raised from Chinese investors through a visa program, bond disclosure records show.

The program, known as EB-5, rewards foreign investors in job-creating U.S. projects by helping them qualify for green cards. Critics of the program say poor federal oversight and vague rules put the funds at risk of abuse.

Jon Shepherd, an attorney for A&J Capital Investment, the California-based firm that arranged the EB-5 loans for the Statler project, said the SEC has not contacted the company.

Last fall, a major lender to Centurion disclosed that the SEC staff was recommending an enforcement action against the lender for potential violations of securities laws.

The lender, United Development Funding, Centurion and Moayedi were also named in a class-action lawsuit filed last year in federal court by investors who said the parties were involved in a fraudulent effort to prop up bad loans.

Moayedi and UDF have denied wrongdoing. The parties are negotiating a settlement, according to court filings.