Overseas investors have hired private investigators to probe Auckland Council staff, as their New Zealand-based property manager blames the Council for plans to develop their properties falling through.
The notorious property manager/developer, Augustine (or Ee Kuoh) Lau, and his overseas associates have collectively been fined hundreds of thousands of dollars by the Environment Court for illegally modifying the properties to cram more tenants on to them.
A number of the properties have effectively been turned into slums, with a non-compliant sewerage system in one instance leaking raw sewage into a stream nearby.
Now the owners appear to be walking away from their creditors, defaulting on their mortgages to Westpac, a finance company and individual lenders.
Malaysian-born Lau has filed court proceedings, alleging there are conflicts of interest between the work some Auckland Council staff members do for the council, and their personal business endeavours.
Speaking to interest.co.nz, Lau (who is a New Zealand permanent resident who's lived here for 25 years) says New Zealand is “rotten” with “corrupt” officials.
Presumably relaying this message back to his disgruntled investors, mostly in China, they have hired private investigators to examine the situation.
Auckland Council’s manager of regulatory compliance, Steve Pearce, is aware of the investigators.
He says: “Much of the information that Mr Lau purports to be about our staff is inaccurate, however these are very stressful circumstances for our staff who have simply been doing their jobs.
“Our focus at the moment is supporting our staff through this while continuing with our enforcement proceedings against Mr Lau and his associates.”
Pearce maintains Lau has also been involved with hiring the investigators, however Lau says he too has come under their scrutiny, as the overseas investors aren’t happy with him.
How has Lau ended up in such a mess?
Interest.co.nz understands Lau played a key role in sourcing properties with development potential, promoting these to overseas investors and agreeing to manage and develop them with the aim of maximising rental yields and eventually capital gains.
Lau says he manages 10 to 20 Auckland properties. Interest.co.nz has knowledge of 10 properties, as they have been mentioned in Environment Court rulings or are security for mortgages that have been defaulted on.
Their titles reveal they have all been bought by Lau’s associates within the last five years.
Eight have been contemporaneously settled, or bought and sold by a number of parties in one day. Lau or a company he’s involved with has been the “middleman” in three transfers. Another overseas investor, Chengjiang Wu, has been the “middleman” in four.
Of the seven properties that have had their sale prices registered with local authorities and then passed on to QV, five (possibly six) appear to have been on-sold for at least twice as much as they were bought for.
Asked to explain the situation, Lau points out that while the settlements occurred on the same day, there were gaps between when sale and purchase agreements were signed by the various owners.
As for the escalations in price, he says this accounts for the subdivision and renovation work that had been agreed to be carried out on the properties.
Grand plans fail to fly
For example, Lau says he planned to build 145 houses on a 6.7 hectare Orewa property one of his associates bought in 2013 for $6.8 million (according to QV) - three times more than its capital valuation at the time.
The property at 32 Weranui Road was transferred to three buyers in one day, before landing in the hands of the current owner, Qiufen Lu.
Interest.co.nz does not know how much the first buyer paid for the property, compared to the fourth in the sequence.
A caveat registered on the property’s title reveals the owner, Lu, and one of the middlemen, Wu, entered into a five year deed of lease just before the sale was settled. Augustine Lau signed the caveat on behalf of Wu.
One of Lau’s overseas investor associates, Liansen Mao, provided two mortgages secured over the property of up to $20 million, and another up to $10 million. It is unclear how much of these loans were drawn down. They were both repaid quickly.
As a side note, Mao’s daughter, Jiawen Mao, is also in default of mortgages secured over property managed by Lau.
A $2 million Kookmin Bank mortgage was also secured over Lu’s property and repaid.
However a $2.55 million Westpac mortgage, written in 2014, is now in default.
An ad in the classifieds of the NZ Herald, asking for anyone who knows Lu’s whereabouts to bring the notice to her attention, says $30,514 is in arrears.
It also says Lu breached the terms of the mortgage by granting Wu an “interest in or right over” the property by providing him with a lease without the bank’s consent.
Lau’s other associates are in similar positions. See this story, and this one for more.
Council woes and changing political environment provoke defaults
Talking about his property wheeling and dealing more broadly, Lau says there was a rush from overseas investors just before the bright-line test came into effect in October 2015.
While the market was “crazy” at the time, he now maintains it is “in trouble”.
He believes New Zealand’s changing political landscape - with a Labour-led government banning foreign buyers and pledging to extend the bright line test to five years - as well as the Reserve Bank in October last year introducing tougher loan-to-value ratio rules for investors, and banks tightening their lending, have taken the sheen off New Zealand for his associates.
Coupled with the Environment Court cutting their incomes by requiring the tenants in all the illegal dwellings (IE relocated classrooms, prefabs, sheds and subdivided houses) on their properties to be evicted, Lau says these factors have prompted the investors to walk away from their creditors.
“They have the right not to pay the mortgage when they find an unfair situation,” he says.
Interest.co.nz cannot get hold of any of the investors to run his explanation past them.
Lau claims the Council also has double standards; prosecuting him for breaching the Resource Management Act in the process of housing vulnerable people, but allowing people to sleep at bus stops and in cars.
Positioning himself as the victim in the situation, he says he’s simply trying to help reduce the number of homeless by providing often temporary accommodation.
“I try to help Auckland Council solve some of the problems,” he says.
Pressed further on the extent to which the Council’s “injustice” has contributed to his associates defaulting on their mortgages, Lau says: “I cannot go into details… It is not my problem.”
What Lau admits is his problem however, is that he risks being declared bankrupt. He on October 3 filed High Court proceedings against the Inland Revenue, alleging its incapable staff resulted in him losing his $3 million Paratai Drive property, making him homeless.
In the numerous court cases Lau has ended up in, he always represents himself.
88 Comments
The Banks no longer lend to foreigners without NZ sourced income for this very reason. However our banks will need to write off some of these as bad loans if they can't recover all of the funds via the mortgagee sale. These properties will be sold at FIRE sale prices now.
So you reckon that there aren't "Kiwi" property owners doing the same thing? Of course, there are, and always have been!
This case might be one of "well that's how I did it overseas, and that's how I'll do it here" but it isn't an isolated case - to either our shores or any other jurisdiction.
Your citizenship can only be deprived if you hold a citizenship of another country. Augustine Lau is Malaysian-born as per the article and Malaysia does not allow dual citizenship. If he does hold a NZ citizenship, his Malaysian passport (and citizenship) would have been forfeited by default, meaning he cannot be deported.
You are wrong again. You can't deport someone to a place where he doesn't have a legal status. It was NZ who made a mistake for granting him citizenship and it is a problem for NZ to solve. Also his business practice is influenced by how he was taught in the NZ education system and it is relevant.
Yes you can - they become a stateless person or can be sent back to the country in which they where born. Under that logic all an over stayer has to do is renounce citizenship of their birth country and they could not be deported - don't think it works like that. It has been done before - a certain criminal would not reveal is real identity / nationality so he was to serve his time in New Zealand and then be deported back to Australia from where he arrived in New Zealand . Australia are then going to prosecute him for crimes he committed there and then deport him back to the US from where he arrived. The US are then going to prosecute him there for crimes he committed there - so he is going to spend a long time in prison.
http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=11734745
How is New Zealand's education system at fault - I am intrigued by your logic. It implies that he has been brainwashed and has no free will or independent thought. He is responsible for his own actions.
Lau told me he is a New Zealand permanent resident who has lived here for 25 years. (I have added this to the story).
Permanent residency is not the same as citizenship. Each country is different. I have permanent residency in Japan, but I can be deported or removed. Same with Australia. Same with Singapore.
Wrong assumption. From a bankers point of view, for every $1000 lost due to bad and doubtful debts, a further $10,000 needs to be written in new lending, just to break even. Those bank margins are tight on earnings and profit! Therefore the loss is actually a multiple of x 10 on the original debt. But that is ok, because the banks customers will make up the difference, the banks sales people will push more high lending to meet targets and the share holders lick the cream off the sponge cake. Business as usual.
Well done National. Your policy of selling NZ out has created a great mess that tax and rate payers will have to clean up. A mess from all angles, morally, environmentally, and ethically.
Banks to clean up their funding (bankruptcy), and Chinese investors to cut in a specialist from Hong Kong or similar for collection. All around would not want to be Mr Lau.
Remind me again why National wanted this sort of person in NZ...?
Certainly sound like blatant money laundering and then we wonder how Auckland's house prices had got so out of control; "6.7 hectare Orewa property one of his associates bought in 2013 for $6.8 million (according to QV) - three times more than its capital valuation at the time.
The property at 32 Weranui Road was transferred to three buyers in one day, before landing in the hands of the current owner, Qiufen Lu".
no it works like this
buy from a stranger for say 500k 20% deposit, sell straight away to an (associate) another stranger for extra 100 K who then on sells for another 100kg to another (associate) another stranger, so you end up with 500k mortgage from bank, pay first stranger the rest is just paper money, house ends up being inflated in price by the 20% but its all the banks money
this has been happening for years as a work around the LVR deposit rules,
Yes Ozark is one of the best TV dramas that I've seen in a long time, very well put together. Certainly up there with Breaking Bad and House of Cards. If you're in or interested in property, you really need to watch this series to understand how money laundering works and how industry professionals can get sucked in to facilitating money laundering without even realizing it at first, and of course how property is used to launder drugs money.
Here's the trailer: https://www.youtube.com/watch?v=5hAXVqrljbs
Skycity? Forgive me, please explain.
This article explains money laundering and its direct impact to the Auckland Housing bubble very well. Shady practices hung like dirty laundry. Playing his role of the man in the middle, if this was a Hollywood movie Lau would be the Laughable Lackey.
In this instance, his greed exposed him. Taking advantage of high rent, see Partitioned Homes, to get more money for himself raised red flags. He incurred background checks exposing mortgage fraud.
And doesn’t it look easy. They exploited an uneducated system that doesn’t have anti money laundering procedures in place. Any foreign buyer could do it. They saw opportunity, fuelled the fire in the process, and made off like bandits. The measures put in place elsewhere highlight those in the know.
Great work interest.co.nz for the line of questioning you took. Follow the white rabbit…
"Positioning himself as the victim in the situation, he says he’s simply trying to help reduce the number of homeless by providing often temporary accommodation".“I try to help Auckland Council solve some of the problems,” he says.
If this is true then he would be charging only a token minimal rent wouldn't he. So by them moving out, it wouldn't affect his finances much at all.
Top man. Very altruistic motives.
hydraulicking the price
One single property, 3 sale and purchase agreements, each one executed contemporaneously on the same day, each subsequent transfer jacking up the price from $500k to $1 million to $1.5 million is called hydraulicking the price or ticking the price, but, all on the same day in order to re-mortgage to the point the original source money can be extracted so only the bank is left holding the paper is mortgage fraud.
QV and the Conveyancing Solicitor and the Councils and the Banks all saw this, it was in front of their eyes
How can 4 institutions simultaneously turn a blind eye and not raise any questions?
this is a debacle (I'm talking about the appellant's unreasonable and self righteous state of mind and actions):
http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=11940206
But the dumbest thing is why it even gets news attention as a 'lead item'
Bizarre
While we can all sit around and tut Mr. Lau we must also admit that, as a society, we have failed and continue to fail to address the root causes of this issue so should also assume culpability . So you'll forgive me for not sitting around and endulging in some idological hand-wriging at this point.
'Interest.co.nz does not know how much the first buyer paid for the property, compared to the fourth in the sequence.'
I've heard of many stories of properties that on-sold to multiple mainland Chinese interests several times in quick succession. There has been a lot of foolish, frenzied and greedy behaviour, which has frequently screwed the last in line in terms of purchasers.
There's one case doing the rounds where the latest buyer paid far too much and is now desperately and unreasonably trying to get concessions from Auckland Council and Auckland Transport to get them out of the muck. But it won't work.
These people only have themselves to blame. But sadly, it has helped to screw not only themselves, but also the land development market in Auckland.
Well done to the previous government for letting things get to this.
Feking hell!! The RE's really help facilitate the whole money laundering thing don't they! https://www.trademe.co.nz/property/residential-property-for-sale/auctio…
Now do you understand why I really despise Real Estate Agents. Why don't they just tile it "Money Launders Delight" and be done with it.
I don't think real estate agents are that clever CJ. I can't imagine how a property changes hands 4 times in one day. Definately not by the normal methods of marketing.
As for your example link so what?? Its a Henderson lifestyle block, Its not a farm so the only hope of it making money is that population pressure eventually makes it economic to develop.
There is lots of land like this for sale. Developers are the commodity. they have to put the money up, at their risk.
When there's a downturn or recession its the developers who go bust. Every body loves to hate and be jealous of developers. They all went broke after the GFC which is one of the reasons Auckland has a housing shortage now.
Even if Auckland City Council has acted in a corrupt manner they are still obliged to act on the insanitary buildings. Buildings that he's taken no action to address. Moaning that your income has been cut off because of illegal building works and illegally occupied buildings isn't a very convincing argument.
@Norhland Hippy, Well it's widly recognize that RE's help to facilitate money laundering. Which is why globally most Western countries that have bloated property markets have had to bring in protective measures, unfortunately NZ AML measures are far to light and ineffective.
As for the link location, even this article shows that a lot of Slum Lord property developers will take advantage of rapid over population pushing poorer tenants to Auckland's outskirts. Also where they can be less observed to do non authorized building as highlighted in this article.
Good work Jenee. Interest.co.nz is lucky to have you and Gareth willing to scratch deeper.
Interesting thing with this deal is I have a friend that is a builder in the area. he has told me many times of the money made in this deal. Consider the psychological impact on ordinary New Zealanders being sucked into the vortex of ever increasing land/house prices. Believe me it is so in this case. Sad when there are adult children all in the market to buy, and one pair just did a few months back.
I will have another chat to him this week and see what he actually knows, to compare to what he thought he knew :-)
Over the past couple of days I have been crawling around the anti-money-laundering AML/CFT Act. Was looking to find what the RBNZ does with suspicious transactions. It does your head in. Apart from the fact there are 3 reporting authorities. The banks are required to notify the RBNZ of all reportable transactions. If the RBNZ has any reason to suspect something untoward about a particular transaction they may or may not report that to the Police. They don't have to. The RBNZ is not the enforcer. The Police are. Then you go to the Police Department web-site and their Financial Intelligence Unit (FIU) and there is another huge volume of information to plough through
Interesting thing is there have been some legislative amendments to the AML/CFT Act itself in 2017. Up until the end of last year the Act spelt out who the Act applied to in detail. The amendments spell out specifically that this act does not apply to Lawyers, Solicitors, Accountants and Real Estate Agents
After a while your head spins. Lots of words. Lots of pages. Enormous. Yet there is no prescription about what is to be done and any reporting requirements. So far after 5 years there doesn't seem to be any naughtiness. Although I think something came out of the Department of Internal Affairs last month
The Money Laundering rules need to be applied to Lawyers, accountants and especially the real estate industry immediately for the foreign buyer ban to have any effect whatsoever.
Already overseas syndicates buy using foreigners with citizenship status to purchase property. If a Kiwi Citizen suddenly has 1m in cash to purchase a property, the rules will clearly show where the money came from and who is really behind the purchase. Either that or it will show up possible tax cheats.
Those in the real estate industry specialising in this sector are hard at work strategising around the likely rules.
Why go slow when you can go fast
If the Coalition introduced Phase II of the Act next week, applied to those 3 outfits, prices would fall fast
Hello Phil Twyford, Jacinda Adern, Winston Peters - can you hear me
You don't need to re-negotiate any FTA's - just pull finger
Hello, trying out the account. Long time reader but never posted before ;). This event really stood out for me as I know someone directly affected by this individual. As I don't want to get all SJW about it but at the same time felt a good old mob with torches and pitch forks is long due for people like him. NZ had became too passive perhaps?
BearBear, you should comment more often. I have often wondered if society is too passive for its own good. Generally we rely on people doing the right thing however doing the right thing is a result of subtle training in a society since birth, unwritten rules and customs and the like. People these days are generally too afraid to confront others for bad behaviour.
I don't often comment because talking does not get things done and you end up being a keyboard warrior or SJW. But regarding this individual is very hard to determine the right course of action.... while I want to see some street justice happen like the good on head on pike or hang em up on the city wall, I have to remind myself that society as a whole is better if kept civil.
As most NZ residents and citizens are using on the whole only one name, a lot Mr. Lau and his associates are permitted to use 2 or 3 or more variations of their name as in EKLau, Augustine Lau etc perhaps they should be restricted to one English name for use in English speaking countries they wish to occupy. Also the number of companies established for new residents even young sudents, that they puchase property through.This would make this situation a lot more difficult.for fraudsters and those seeking to laundering money via real estate. An urgent matter for the lawmakers.
On the same subject ask more question to receive the answers. Those who enabled Mt Lau and benefitted by those transactions. Those big red flags.!!!
The vendors who received the money, the selling agents, the banks, the lawyers, the council who gave the permits, those who should have said, "wait a minuted this is not right". Those who should have done somthing but did nothing.Or told "be quiet and say nothing". The enormous amount of money spent on legal and court fees which most likely will not be recovered. Will that be passed onto the ratepayers?
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