Florida lawyer pleads guilty to running US$1.2 billion Ponzi scheme

By Christine Duhaime | January 27th, 2010

Scott Rothstein, a Florida lawyer who co-founded the now-defunct firm, Rothstein Rosenfeldt Adler, pleaded guilty to running a US$1.2 billion Ponzi scheme and five counts of RICO conspiracy, fraud and money laundering in the biggest investment fraud case in South Florida history. Rothstein, 47, is expected to receive a 30 to 50 year sentence on May 6. At the time of his arrest, Rothstein owned more than a dozen homes, 21 high end luxury cars and a 87-foot yacht. Seven years ago, he was worth only US$200,000.

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Housing boom in Kenya may be tied to Somali pirate trade

By Christine Duhaime | January 2nd, 2010

The housing boom in Kenya and dramatic increases in housing prices in Nairobi has prompted the Kenyan government to launch an investigation into property owned by foreigners according to a report by the Associated Press. The investigation is the result of allegations that Somali pirates are buying real estate in Kenya in record numbers with ransom money. Prices in Nairobi have tripled in the last five years. In the last 24 months alone, Somali pirates have been paid more than US$100 million in ransom money, all of it proceeds of crime that is subsequently laundered.

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Macau Court sentences whole family of government minister for money laundering infrastructure procurement

By Christine Duhaime | June 9th, 2008

Government official had assets worth 57 times his salary

The Collegial Bench of the Court of First Instance of Macau today sentenced a whole family for money laundering in connection with bribes over a government infrastructure project.

The family members are related to Macau’s former Secretary for Transport and Public Works, Ao Man Long. Mr. Ao was a politically exposed person.

In January 2008, Mr. Ao was convicted of 57 counts of corruption, abuse of power, money laundering and unjustified wealth by Macau’s Court of Final Appeal for accepting a HK$20 million bribe. The funds were deposited into the account of a shell company owned by Mr. Ao. They were paid by Chinese Estates Holdings Ltd.

Mr. Ao was sentenced to 27 years in jail and his property was forfeited to the government, including cash, bonds, luxury watches and wine which had a value annually of 57 times his salary.

When Ao was arrested, the Commission Against Corruption found that he owned money and assets worth about MOP800 million, even though his salary was just MOP14 million.

The Court found that the family members were aware of Mr. Ao’s money laundering and enabled him to conceal the proceeds. Their conduct, the Court held, severely hurt the government’s image and weakened confidence in the rule of law. Moreover, it brought into question the integrity of the public procurement process in infrastructure projects, as well as increased the cost of construction.

The family members who were sentenced include his wife, his brother, his sister-in-law and his father. They were sentenced to between 23 and 10 years jail and ordered to pay fines in the millions of dollars.

Ho Meng Fai, a contractor, was also convicted of money laundering. He was initially charged with bribery and money laundering and escaped while on bail. He was convicted in absentia and sentenced to 25 years in jail. He is being sought by Interpol.

The case involves bribes paid allegedly by two Hong Kong businessmen, Steven Lo Kit Sing, CEO of BMA Investment Group Ltd., and Joseph Lau Luen Hung, chairman of a Hong Kong listed company, Chinese Estates Holdings Ltd., to Mr. Ao.

Both were involved in construction of several casinos including the Galaxy Macau, StarWorld Macau and Grand Waldo Hotel.

Escort service CEO sentenced for money laundering

By Christine Duhaime | July 28th, 2007

Ran Prostitution Service Disguised as Escort Service

A Washington woman was sentenced today to two years in prison after pleading guilty to laundering the proceeds of crime derived from running an organized prostitution service disguised as an escort service at a tribal casino. Cheryl Larson pleaded guilty to prostitution, money laundering and possession of illegal drugs.

The services were advertised on the Internet under various names such as ‘Gents For Rent’, ‘A Extra Help’, ‘AA Always Available’, and ‘Cheryl’s Class.’

The business did not provide escort services, rather it provided prostitutes who met customers at hotels around Washington. The operation was run from a business office and a casino in the area.

Larson met the prostitutes at the casinos to give them instructions on their next “date” and to collect from them the cash after each encounter with a client.

The escorts, or prostitutes in this case, were given a cut of the proceeds of crime from Ms. Larson at the casinos. Ms. Larson is also believed to have marketed the prostitutes at the casino to gamblers and was caught on video surveillance apparently pimping them out with various photos that she passed around to entice potential clients.

In order to camouflage the proceeds of crime, Larson routinely and systematically gambled at local casinos. While there, she engaged in minimal play at slot machines and cashed out. She washed approximately US$3 million in cash from the prostitution activities at one casinos over a 4 year period.

Hong Kong Court orders immigrants to Vancouver to repay $213 million in proceeds of crime laundered in Canada and the US

By Christine Duhaime | March 9th, 2006

$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.

Judgment

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.