Property developer, former BNZ employee, and suspended lawyer found guilty of partaking in $54m mortgage fraud scheme involving 110 Auckland and Hamilton properties

A property developer, former banker and suspended lawyer have been found guilty of partaking in a $54 million mortgage fraud operation involving 110 properties in Auckland and Hamilton.

Property developer Kang Xu, also known as Yan (Jenny) Zhang, suspended lawyer Gang (Richard) Chen and former BNZ employee Zongliang (Charly) Jiang have been convicted for playing different roles in a scheme designed to obtain cheaper home loans for commercial property development.

Xu and Chen worked together to submit false documents related to mortgage applications. They passed them on to Jiang, who processed them in return for kickbacks.

The trio essentially tricked the banks into thinking they were applying for home loans, when the loans were actually used by the company LV Park to develop commercial property. The aim was to secure home loans with lower interest rates than business loans.

The ruling follows a three-month High Court trial brought forward by the Serious Fraud Office.

A fifth individual - a former ANZ employee Peter Cheng - was allegedly involved in the scheme, but fled the country in 2015 before he was arrested.

Xu’s husband, Kang (Thomas) Huang, was the mastermind behind the scheme. He pleaded guilty to his part in it, and was sentenced on February 9 to four years and seven months in prison.

The judge in his ruling explains: "The fraudulent scheme involved a large number of properties owned by entities associated with LV Park being transferred into the names of various relatives, friends or employees of Mr Huang and Ms Xu, including all four of their elderly parents.

"Indeed, in some cases the transferees were entirely fictitious people, created for the sole purpose of the fraudulent scheme."

Of the 57 fraudulent loans that were secured, around half were written by BNZ and half by ANZ. One was also written by a bank that has name suppression. 

While Jiang received $260,303 in kickbacks, the SFO alleges Cheng received $258,000.

SFO director, Julie Read, says: “These crimes, which relied on a high level of calculation and collaboration, undermine lenders’ confidence in borrowers in the mortgage market.

“The banks were misled in a number of respects including the financial position of the purported borrowers and the level of associated risk."

During the trial, the defence essentially argued they didn't know they were caught up in anything illegal. 

Xu's lawyer said she played a “subservient” role in the business, and that "for cultural reasons and out of a sense of pride and perhaps to a certain extent arrogance," her husband concealed the fraudulent aspects of the finance arrangements.

Chen's lawyer made the argument that just because Chen was Huang's lawyer, didn't mean to say he knew of his fraudulent activity.

Meanwhile Jiang's lawyer talked about how busy her client was and the pressure imposed on him by BNZ. 

Xu has been convicted of 22 charges of ‘Obtaining by deception’ under the Crimes Act.

Chen has been convicted of nine charges of ‘Obtaining by deception’. Two of these charges are representative charges. He has also been convicted of one representative charge of ‘corruptly giving consideration to an agent’ under the Secret Commissions Act.

Jiang has been convicted of 25 charges of ‘Obtaining by deception’ under the Crimes Act and one representative charge of ‘Acceptance of gifts by agent’ under the Secret Commissions Act.

Chen and Jiang have been remanded in custody, while Xu has been remanded on bail, until their sentencing later this year.

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47 Comments

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Definitely no need to have a Royal Commission type investigation of our banking practice and codes of compliance.

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Indeed nothing to see here, I wonder how many fraud cases are spotted and end up in court?

Who knows, it's so hard to identify them!

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[ edited. There is just no place to apply a broad racial profile, ever. You don't do it when white males get caught doing dodgy stuff, because you think of them as individuals who have erred. Same test here. Don't profile ethnically. There is a word for that lazy thinking. Ed ]

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"There is just no place to apply a broad racial profile, ever. ... Don't profile ethnically".

That's just your opinion, Ed. There will be people who happen to agree with you (to a varying extent), and there will be many others who, based on their real life experiences, will disagree.

Did the ED just got triggered??? Anyway what she meant to say was you can have your opinion just as I will have mine, but just don't say it in "my space". Fair enough as this is her post.

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Ed, you're being a bit unfair to your readers here. Let them judge my option on merit. If my opinions don't add up they'll be the first to correct me. Instead of correcting my opinion you've censored me and insulted me. Fine, your website but that seems like the easy way out.

By the way I think it's totally okay for immigration NZ to profile on sex and age. As a financial expert you'll know that insurance companies profile on sex and age and they have absolutely no motivation to do so besides profit. I don't see why immigration NZ shouldn't also profile for risk factors. If white Scandinavian males were committing a high percentage of crime INZ should absolutely shut them out.

I don't see what is wrong with putting NZ's interests first.

This silly Overton window is exactly why China is owning us. kiwis are rootless individuals chasing after the next SUV while other nameless groups (happy?) work together with nepotism, racism and language barriers.

@bilbo I have many Chinese friends and neighbours who don't do dodgy stuff why are you targeting the entire race?? It is clear that you have bad intent towards certain race and it is UNACCEPTABLE in this day and age lah!!

You should film a ploperty plomotion video for rife in Dubble Glammour

Here you go Nic Johnson. Title is translated as "When are you coming to DGZ again?" https://www.youtube.com/watch?v=A3PoAnXCcMw
Did you order flied lice for dinner tolight? ^^LOLdgz^^

Hirrarious..

Now why has my PC just thrown up all my passcodes for bank accounts, kids football memberships, the PTA, Netflix, Gym passcode, share accounts... mmh, I didn't realiase my wife subscribed to that, maybe we could watch it together when she gets home from work ........

Dubble Glammour have I been inflected me wiv a vilus from the PRC, are they rooking for us?

^^LOLdgz^^ I filmed another one for you and wifey to enjoy together. It's titled "Secretly in love with DGZ" - Hope you like Nic! https://www.youtube.com/watch?v=37KaabMars8

you are a curious individual, critical of racism and then you post blatantly racist comments - 'flied lice'...
not sure why that hasn't been censored by the editor if racism isn't tolerated

Not racism, it’s putting into text a Chinese accent.

Racism is noticing that people are different.

Title is translated as "When are you coming to DGZ again?"

Your Mandarin is as bad as your logic.

Yours or mine? Use your brain for goodness sake! ^^LOLdgz^^

Actually I think we can have a discussion around cultural normality that is nuanced and understanding. In business you have to understand cultural traits and practices of the people you hire. Among other reasons that's where ANZ failed in it's Asian adventure, they wanted to run a western bank in a country which does not have western values and ended up firing a substantial number of staff for local business practices (i.e. taking kickbacks etc.) to try to get there. We need to be open minded about these factors and find balances to the risks that are intrinsically tied to opportunities. If BNZ had done that I do not believe we would be having this discussion.

It wouldn't be surprising that this happens in the Chinese banks by borrowers. Then they take that money borrowed from a Chinese Bank and use it to buy real estate in foreign countries like New Zealand.

Here is one such example from Vancouver - http://www.cbc.ca/news/canada/british-columbia/china-real-estate-vancouv...

http://business.financialpost.com/personal-finance/mortgages-real-estate...

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UK realised it had a problem about 6-7 years ago but proper Anti-Money Laundering legislation was only introduced in 2016 before which they think up to $20,000,000,000 may have been pumped into the UK property market annually.. NZ was a bit slower to get legislation in place... Why would you, it all so much fun and everyone was getting rich.....rich beyond their wildest dreams!

At the height of the madness I went to an auction on the North Shore. Bidding was frantic and mostly sailed over the heads of the crowd there. There were people at the back of the room in business attire set up with desks with laptops talking on headsets spending money freely and being supplied with drinks and food etc by assistants.

You describe that like it was a bad thing, or certainly a bit odd…..

However, when all said and done, it was simply just another good problem to have – according to our Prime Minister at the time.

The reality was strikingly different from what I thought it would be - small groups of hopeful people bidding on houses they had seen at recent open homes. Those people were there - but they generally participated as spectators once the prices went beyond their reach. There were about 20 auctions briskly done over 2 hours with most of the business going to the headset guys at the back of the room. Whether that's a bad thing is not for me to say...but it didn't feel right.

“Whether that's a bad thing is not for me to say...but it didn't feel right.”

Yes, it certainly didn’t feel right – and it wasn’t right.

It was ultimately an absolute disgrace!

Did you not notice room #2, where there were another 20 auctions going on? I was just an observer flitting between the 2 rooms, but I was there when a house we had sold before the madness in 2011 for $810,000 went for $2.105 million (I can tell you it wasn't worth it; it had many problems).

In Vietnam, they take bank fraud far more seriously than in NZ or Australia.

Former Ocean Bank general director Nguyen Xuan Son, who later became chairman of the powerful state oil firm PetroVietnam, was sentenced to death for embezzlement, abuse of power and economic mismanagement.

The bank’s ex-chairman Ha Van Tham, once one of Vietnam’s richest men, was jailed for life on the same charges, as well as violating lending rules He was convicted of illegally approving a US$23 million loan in 2012

http://www.scmp.com/news/asia/southeast-asia/article/2113431/vietnamese-...

This is a common occurrence there and in China. I don’t know the case but it’s common where the individual concerned has failed to meet his ‘obligations’ to a mayor or governor, perhaps greasing palms or handing over shareholding. The offender is given a sham trial and naturally convicted for fraud/embezzlement/conspiracy. Obstruction is therefore cleared for the official and its back to business as usual.
Maybe the governor’s child will end up with a house, business degree and flash car overseas too.

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I am sure this is just the tip of the iceberg. What a joke.

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Exactly. How many of these world class international citizens have bought only a handful of houses from their mate Zhang at the north shore BNZ?

Who cares about a 4 year sentence when you can make millions and probably not get caught. NZ is so soft they'll probably give you a nice bit of GPS jewelry to wear around your ankle.

Given a very low rate are caught the punishment should be very high. This sort of thing has pushed kiwis out into the whop whops and many can't afford kids anymore. It's all part of a cultural replacement. First they take over a few institutions and streets and it grows from there. Yes indeed they are playing "just the tip" here and we're getting shafted because some boomers fancy new SUVs and cruises.

Just wait and see how much these people care about dumb kiwis lah when they become a voting bloc in local and national politics. It's well known that this group of people can be quite racist

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Naive, short sighted western liberalism at play, once again

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Much like the oft repeated (in NBR comments, at least) mantra "What does it matter who owns the land, they can't pick it up and take it away and we can always legislate over it".

Yeah right. We couldn't keep two murdering French terrorists in jail in the face of trade threats. We absolutely will not be able to exercise real control over productive land assets when too many of them are owned by foreign state-corporate entities.

You would hope it's naivety, because the alternative is so much worse.

Not to taint all immigrants in the 'investor' category - I am sure there are ones who really do contribute to NZ - but one wonders how many in that category are taking NZ for a big ride.

Surely INZ stats dept has an answer for you. I mean they can't just have an immigration policy with no measurement of success surely?

“I am sure this is just the tip of the iceberg”

Oh my goodness yes – of that you can be quite Shore.

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Seize all assets to the crown, revoke an citizenship status and deport back to point of origin requesting PRC educate them about the shame they bring to the good Chinese people living in both NZ and China. Saves the 100k per head for prison time and sets a solid example for others.

Might have to build those bigger prisons after all...

Nah... keep the prisons the same size, no deportation and we could make a killing out of the reality TV spin-off. Hell I'd pay to watch the fraudsters in prison with people who are in prison because they can't afford to buy a house or have a future in their own country because of the fraudsters... We could export that all over the world...Would make Ultimate Fighting Champion look like fly on the wall documentary of a 'Home Counties' (Posh part of UK) lunchtime playground dustup .... The Yanks would pay millions for the rights!! Let's do this.... Make NZ proud.... no fraud here, this is what we do to fraudsters....... What would we call the show?

National Past Times?

Lets face it, gaming the system is not fraud to them its just a game that they are playing.

Bloomberg: Fresh Doubts Raised on China's Bad-Loan Data
https://www.bloomberg.com/news/articles/2018-01-22/fresh-doubts-raised-o...

Quote: China’s bad-loan data, which analysts and investors have long regarded to be understated, was thrown into question again after the banking regulator uncovered faked reporting at a local lender.

Shanghai Pudong Development Bank Co., the nation’s ninth-largest lender, illegally lent 77.5 billion yuan ($12 billion) over many years to 1,493 shell companies to take over bad loans at its Chengdu branch, the China Banking Regulatory Commission said in a statement late Friday. The branch, which had reported zero bad loans, inflated its earnings and faked other operational data to improve performance and evade compliance, the CBRC found.

Reuters: ‘Ghost collateral’ haunts loans across China’s debt-laden banking system
https://www.reuters.com/investigates/special-report/china-collateral-fake/

Hidden peril awaits China's banks as property binge fuels mortgage fraud frenzy
https://www.reuters.com/investigates/special-report/china-risk-mortgages/

One would think it's gonna end ugly in China

Well Trump is certainly playing with fire. BBC article fresh in: Trump puts 25% tariff on Chinese goods
https://www.bbc.com/news/business-44498484

Ya don't S**T! in your own nest. hence the smile, they'll just go home (where money's been sent). Banks to be wary of inside jobs?

It's certainly a false economy that National allowed to keep property prices sky rocketing here. But it's not just NZ that's been effected Canada has some eye opening cases too. Take a look at this recent one that's raises some uncomfortable questions about Canadian real estate.

Better Dwelling article: Court Hears of Unexplained Millions From China and Toronto Real Estate
https://betterdwelling.com/city/toronto/court-hears-of-unexplained-milli...

Quote: The Curious Case of Wang v. Kesarwani

The story begins in 2010 when Ms. Wang and her then husband Mr. Zhang immigrated to Canada from China under the immigrant investor program. Upon arrival, they founded the Yi Hao Investment Company (“YH Investments”) which supposedly was involved in development projects. They arrived with at least six million dollars.
How this large sum of money was obtained and how it was brought into Canada is an open question that the court could not answer. The court was further unable to figure out how they sustained themselves in Canada, where neither of them had any employment or businesses, apart from Mr. Zhang’s gambling habit and YH-Investments land development projects.

The new Chinese buyers keen on Sydney: sophisticated and younger. “They’re very wealthy and able to speak English and they’re looking for a business opportunity in Australia.” https://www.news.com.au/finance/real-estate/the-new-chinese-buyers-keen-...

LOLdgz!, great! They'd better get in quick while there's still some froth! Like you, very "sophisticated", highly leveraged and negatively geared.

@ DGZ: Really don't see how they could get their money out, China will be clamping down even further with this news:-

BBC article: Trump puts 25% tariff on Chinese goods
https://www.bbc.com/news/business-44498484

And you are aware that Sydney is in decline too, now that they have switched to a buyers market due to China's capital flight restrictions.