Struck Off
The New Zealand Lawyers and Conveyancers Disciplinary Tribunal has struck off a solicitor convicted of participation in a fraud scheme
Mr Chen was convicted in the High Court at Auckland after a Judge-alone trial before Katz J of nine charges of obtaining credit by deception and a representative charge of corruptly paying secret commissions. The offending related to a mortgage fraud scheme in which Mr Chen acted as solicitor for the vendor, the purchaser and the lending banks.
Katz J described the offending as being conducted on a massive scale, highly sophisticated, involving 110 transactions and approximately $54 million in funds obtained from the lending banks by deception. Mr Chen was not convicted in respect of all the transactions but was involved in what the judge described as a significant number of transactions which was calculated fraudulent offending committed over a lengthy period of time and on a massive scale.
Katz J went on to say that Mr Chen’s offending was a gross breach of trust in his capacity as a solicitor which required denunciation in the strongest terms along with a strongly deterrent sentence.
Mr Chen received a sentence of six years imprisonment with a minimum period of imprisonment of three years imprisonment.
Counsel for the applicant
He referred to the serious, sustained and premeditated conduct of Mr Chen.
He drew our attention to the concern expressed by Katz J about Mr Chen’s
risk of reoffending where she noted the following factors:
(a) his limited insight into his offending;
(b) his lack of remorse;
(c) his attempt to justify his offending and blaming of others;
(d) his lack of understanding that his conduct affected others and yet stating
that he knew his actions were illegal; and
(e) his reported display of a high sense of entitlement.
Mr Marchant further submitted that Mr Chen should be struck off in order to protect the reputation of the profession and in order to maintain public confidence in the integrity of the profession.
The Tribunal
An order for strike-off can only be made if the Tribunal comprised of five members unanimously agrees that the lawyer is no longer a fit and proper person to be a practitioner. After considering the facts and submissions of the applicant along with the non-opposition of Mr Chen, the Tribunal accepted that an order for strike-off was appropriate.
NZ Herald reported on the criminal case.
A former banker, lawyer, and wife of a property developer have been jailed and sentenced to home detention for their involvement in a $54 million mortgage fraud scheme in Auckland and Hamilton.
Lawyer Gang (Richard) Chen, Kang Xu, also known as Yan (Jenny) Zhang, and former BNZ banker Zongliang (Charly) Jiang appeared for sentencing today in the High Court at Auckland before Justice Sarah Katz.
After a three-month trial, which began in February, Justice Katz delivered her verdicts in June.
The judge’s verdicts were contained in more than 200 pages, released to the Herald, after she considered 1500 pages of notes evidence and thousands more pages of documentary evidence from the trial.
Today, Justice Katz sentenced Chen to a total of six years’ imprisonment, Jiang to four years and nine months’ behind bars, and Xu to 12 months’ home detention for their “premeditated and prolonged” fraud.
Justice Katz also imposed a minimum period of imprisonment of 50 per cent for Chen and Jiang.
The trio were part of a quartet charged by the Serious Fraud Office (SFO) over 76 Auckland and Hamilton properties and suspicious mortgages, involving 57 loan applications and 110 transactions.
The scheme involved loans of more than $54m and bribes of $7000 per transaction to the two bankers, Jiang and former ANZ banker Peter Cheng, who approved the loans.
Jiang processed and approved about $18 million in loan applications in exchange for cash bribes.
Justice Katz said Jiang was motivated by greed.
The SFO wanted to charge Cheng but he fled the country before court action could be taken. The Herald believes he is now in China.
Justice Katz found Jiang guilty of all 26 charges he faced, including one representative charge for accepting bribes, Xu of 22 of 34 charges, and Chen guilty of 10 of 12 charges, including one representative charge for paying bribes.
The charges were for obtaining by deception and breaching the Secret Commissions Act.
SFO prosecutor Todd Simmonds told the court the group’s offending was “massive” with a high degree of sophistication and lasted nearly two years, from December 2011 to October 2015.
“It didn’t happen by mistake, it didn’t happen at the drop of a hat, it was a scheme, and I submit it was deliberately and carefully planned by them.”
Xu is the wife of Auckland property developer Kang Huang, whose property construction company LV Park was used to facilitate the fraud.
He plead guilty to 10 charges late last year and was sentenced to four years and seven months’ imprisonment earlier this year by Justice Graham Lang.
Simmonds said Xu’s collaboration was significant and vital for the fraudulent scheme but her husband was, without a doubt, the instigator and mastermind.
When delivering her verdicts, Justice Katz had also called Huang the “mastermind and instigator of the scheme”.
During the trial, Xu’s lawyer Adam Simperingham tried to shift any blame from her client to Huang, whom was labelled as a “megalomaniac” hiding his fraudulent nature.
Today, Simperingham said his client was also “subservient and obedient” to her husband, who was also described by Xu as a “showman and a risk-taker”.
Simperingham told the Herald after the hearing the SFO had failed to “prove particulars that had been alleged” for the charges Xu was acquitted of.
“All of Mrs Xu’s offending occurred under intense pressure from her husband in a family and cultural context in which it was difficult for her to say no,” the lawyer said.
“Mrs Xu’s role in the business was primarily lawful,” he said of her management of the homes’ constructions, adding the tradespeople were properly paid.
All but $394,000 of the loaned funds have been repaid, the court heard at Huang’s sentencing, and ANZ pursued the outstanding amount.
The court heard today, however, the loses from the scheme have totalled $427,000.
But Simmonds said the minimal loses when compared to the amount fraudulently obtained was a result of “good luck”.
In the bank’s victim impact statement, it said mortgage fraud offending has a negative impact on hard-working Kiwis as a result of stricter lending conditions and the wider economy.
Bribing bankers also damages staff morale, the statement said, while several managers expressed a reputational damage the offending had on them and their lending teams.
In the summary of her verdicts, Justice Katz found Chen had acted as the “middleman” between Huang and his wife and bribed his “inside contacts” at BNZ and ANZ.
A third overseas bank was also used but its name is suppressed.
Simmonds said Chen’s role, while a solicitor of the court, was a “gross breach of trust”.
He said Chen had made 39 corrupt payments to facilitate the scheme, totalling nearly half-a-million dollars.
LV Park, which Huang operated in New Zealand for 20 years, obtained cheap finance and retained control of properties to dramatically increase the size of its portfolio.
However, properties owned by entities associated with LV Park were being transferred into the names of various relatives, friends and employees of Huang and Xu, including all four of their elderly parents, court documents released to the Herald read.
Some of the transferees were entirely fictitious people with fake passports, created for the sole purpose of the scheme.
The SFO said Huang’s motivation was because it was cheaper to fund the operation with home loans from banks rather than via finance companies, due to the higher costs associated with commercial lending.
SFO director Julie Read said after the verdicts: “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.”
(Mike Frisch)