$485 Million Laundered to Vancouver and Elsewhere
In a fascinating series of judgments from Hong Kong, six wealthy immigrants to Vancouver from China, who laundered over US$485 million through casinos in Macau and Las Vegas, and banks in Canada and Hong Kong, were ordered to repay stolen funds to the Bank of China.
The key judgment in the case, Bank of China v. Kwong Wa Po and Others HCA5291/2001, describes how $213 million in proceeds of crime was moved through Macau casinos by junket operators and transferred to Vancouver banks from Hong Kong, and subsequently used for gambling in Las Vegas, to buy houses in Vancouver and Richmond, and maintain the defendants’ lavish lifestyle in Vancouver.
The James Bond Like Facts
The facts of the case are convoluted.
In 2005, the Bank of China sued the three defendants, Kwong Wa-Po, Ching Fo-Chu, aka Ching Yu-Chu, aka Ching Yu-Chu Sindy and Xu Xia-Li to recover $213 million from the defendants that was proceeds of crimes committed by relatives of the defendants who were former Bank employees at the Kaiping branch of Bank of China in Guangdong Province.
The three bank executives Xu Chaofan aka Hui Yat Fai, Yu Zhendong and Xu Guojun aka Hui Kit Shun, orchestrated the fraud.
Mr. Xu, Yu and Hui were head of the Bank of China, each succeeding the other from 1998 to 2001. According to a Bank of China fraud investigation, the three bank executives advanced approximately US$95 million in fraudulent loans to several Hong Kong based companies without knowledge of those entities, which were credited to a third party company called Ever Joint Properties Ltd.
Ever Joint was controlled by Mr. Xu, Zu and Hui. In the course of 8 years, the bank executives transferred $213 million to Ever Joint as purported “loans.” Despite receiving $213 million, Ever Joint was never a customer of the Bank of China. None of the loans were repaid.
Ever Joint subsequently transferred the $213 million to the three defendants, who came to Canada.
The Bank of China successfully sued its bank executives to recover the $485 million and then sued the three defendants, as third party beneficiaries, for $213 million of the $485 million they had received.
While employed with the Bank of China, the three executives each earned only $1,200 per month yet in an eight year period, amassed a fortune of $485 million.
The three executives fled to Hong Kong after the Bank of China began investigating their activities on October 13, 2001 and then to Vancouver on October 15, 2001 all on the same flight.
1st Defendant – Mr. Kwong
The first defendant, Kwong Wa-Po, is the brother-in-law of Mr. Xu. Between 1994 to 2001, he received $30 million from Mr. Xu from Ever Joint. On October 16, 2001, before fleeing Asia, Mr. Kwong made the following transfers to remove the funds from Asia to Canada:
- $167,000 deposited into the Standard Chartered Bank in his name.
- $250,000 to the Royal Bank of Canada in Vancouver in the name of Ching Fo-Chu, the second defendant in this action.
- $77,000 to the Standard Chartered Bank in the name of Ms. Ching.
- $309,000 to the Heng Seng Bank in the name of Ms. Ching.
- $150,000 to the Royal Bank of Canada in Vancouver in his name.
After depositing the cheques, Mr. Kwong fled to the US, a day after the bank executives fled to Vancouver. He then fled to Vancouver from the US, to join his children and ex-wife and bought two houses in Vancouver – one for him and the 2nd Defendant, Ms. Ching, and the other for his ex-wife.
In the interim, the three bank executives, together with Mr. Kwong and Ms. Ching, chartered a private jet in Vancouver and flew to Las Vegas wherein they lost $2.3 million gambling at Caesars and Paris casinos. A week later, they returned to Las Vegas and lost $934,000.
Mr. Kwong was, at one time, a junket operator who organized and transported wealthy gamblers from Mainland China to Macau to gamble.
2nd Defendant – Ms. Ching
Ms. Ching is both the sister-in-law and common law spouse of Mr. Kwong (he loved both sisters at the same time, and they apparently both loved him). In 2001, she received $1 million from Mr. Kwong and subsequently received $1.3 million from him at the Royal Bank of Canada in Vancouver. She too fled to Vancouver in early October 2001.
Ms. Ching returned to Hong Kong to collect more money in several Hong Kong bank accounts. She was arrested in Hong Kong with the third defendant trying to flee back to Vancouver with the money and charged with dealing with proceeds of crime under Hong Kong law. She was convicted of money laundering in 2003.
3rd Defendant – Ms. Xu
The third defendant is the sister of Mr. Xu, the bank executive. She immigrated to Toronto in 1995 and became an accountant. In October 2001, her brother asked her to come to Hong Kong. When she arrived, he instructed her to meet him at a train station. During that meeting, he gave her a cheque for $1.4 million from a Macau casino with instructions to deposit it at the Standard Chartered Bank that day in her name and to return it to him one day in the future when he asked for it. She deposited the funds as instructed and fled to Vancouver.
She subsequently received a phone call from Mr. Xu with James Bond like instructions to return to Hong Kong and give the $1.4 million in small amounts to a man in an overcoat at the Hong Kong airport known only as “John”, which instructions she followed over the course of several days, communicating with him and her brother using disposable SIM cards.
When she had dispersed the $1.4 million allegedly to “John”, whom she couldn’t describe at trial, she attempted to flee to Vancouver and was arrested at the Hong Kong airport. She was charged with dealing with proceeds of crime and convicted of money laundering.
The Bank of China claimed a proprietary interest in the $213 million and sued the defendants to recover it.
With respect to Mr. Kwong, he was a fugitive, never having returned to Hong Kong from Vancouver and although his lawyer filed evidence for him, it was not admitted because he refused to attend the trial. His defence, however, was that he received the funds for his junket business to repay gambling debts incurred by Mr. Hui and they were not proceeds of crime, and to the extent they were not from the junket operation, he argued that he had repaid the funds advanced to him by Mr. Hui and those funds were no longer owed to the Bank of China.
The Court did not accept the junket operation theory and found that Mr. Kwang was aware that Mr. Xu only earned $1,200 per month and could not have legitimately earned the $30 million he gave to Mr. Kwang at any time, thus Mr. Kwang was or should have been aware that the funds were proceeds of crime. Moreover, the fact that he fled from Hong Kong the day after the three executives and ended up in Vancouver with them; instructed his co-defendants to launder funds from Hong Kong to Canadian banks; and subsequently gambled with them in Las Vegas belied his story that he was unaware that the funds were tainted.
With respect to the second defendant, the Court held that her evidence was completely unreliable, noting that if all her lies were “inscribed on bamboo, they would make the cows that carry them perspire so much, it would fill up a house.” She was held to have known that the funds were proceeds of crime and to have received them, and dealt with them illegally.
With respect to the 3rd defendant, the Court held that her James Bond-like story of the mysterious “John” who appeared at the Hong Kong airport and at various other times in the dark in the back alleys of Hong Kong to collect $1.4 million from her was too incredulous to be believed. She was also held to have known that the funds were proceeds of crime and to have received them, and dealt with them, illegally.
The Court held that the $213 million taken from the Bank of China was proceeds of crime from the fraudulent loans processed by the bank executives that were improperly given to the defendants. In the result, all three defendants were held liable to repay the Bank of China for the money they received from the bank executives.
In 2006, the three bank executives were indicted in Las Vegas for racketeering, money laundering and fraud. In 2008, Mr. Yu was convicted in the US and voluntarily returned to China to serve a twelve year sentence. The other two were convicted in the US.
In 2013, their sentences were upheld on appeal. Mr. Kwong was a fugative in Vancouver and his whereabouts still appear to be a mystery.