Three people convicted in $54 million mortgage fraud case

The three defendants in a Serious Fraud Office trial who worked together to illegally obtain home loans have been convicted. The scheme, which involved 110 separate property transactions in Auckland and Hamilton, was designed to obtain cheaper lending for a commercial property development.

Property developer Kang Xu, who is also known as Yan (Jenny) Zhang, suspended lawyer Gang (Richard) Chen and former bank employee Zongliang (Charly) Jiang were convicted for their respective roles in the fraudulent scheme that obtained about $54 million worth of residential home loans. Another bank employee was also involved in the scheme but left the country in 2015.

Ms Xu was convicted of 22 charges of ‘Obtaining by deception’ under the Crimes Act. Her husband, property developer Kang (Thomas) Huang, pleaded guilty to his part in the scheme prior to the trial. Contrary to Ms Xu’s defence during the three-month trial, the Court found she was aware of and actively involved in the criminal offending.

(external link)Mr Chen was convicted of nine charges of ‘Obtaining by deception’, two of which were representative charges. Mr Chen was also convicted of one representative charge of ‘corruptly giving consideration to an agent’ under the Secret Commissions Act. This charge relates to secret commission payments made to the bank employees.

Mr Jiang was 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 in relation to the kickbacks. Mr Jiang received secret commission payments for his role in the scheme.

Mr Huang, who masterminded the offending, was sentenced to four years and seven months of imprisonment in February. Also known as Gang Wang, Mr Huang pleaded guilty to all ten charges he faced in December, which were eight charges of ‘Obtaining by deception’, one charge of ‘Corruptly giving consideration to an agent’, and one charge of ‘Dishonest use of a document’.

SFO Director, Julie Read said, “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. The SFO is committed to investigating and prosecuting this kind of large-scale offending to maintain the integrity of the financial market place.”

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

ENDS

For further media information

Henry Acland
Serious Fraud Office
027 705 4550

Note to editors

Background information

The trial of Kang Xu (49), Gang Chen (43) and Zongliang Jiang (38) commenced on 26 February 2018.

Ms Xu is the wife and business partner of Kang (Thomas) Huang (50), who is also known as Gang Wang. Mr Huang was the instigator of the overall offending, as acknowledged by him through his guilty pleas on all charges laid against him prior to the trial of the other defendants in the case.

Mr Chen, who was a lawyer at the time of offending, was suspended from the profession for two years in March 2017 by the New Zealand Lawyers and Conveyancers Disciplinary Tribunal. The Tribunal found wilful and deliberate misconduct proven by his failure to declare his five criminal driving convictions to the New Zealand Law Society over a six year period.

Kang Xu is also known as Yan (Jenny) Zhang; Gang Chen is also known as Richard Chen; and Zongliang Jiang, who is a former BNZ employee, is also known as Charly Jiang.

Crimes Act offences

Section 240 Obtaining by deception or causing loss by deception
(1) Every one is guilty of obtaining by deception or causing loss by deception who, by any deception and without claim of right,—
(a) obtains ownership or possession of, or control over, any property, or any privilege, service, pecuniary advantage, benefit, or valuable consideration, directly or indirectly; or
(b) in incurring any debt or liability, obtains credit; or
(c) induces or causes any other person to deliver over, execute, make, accept, endorse, destroy, or alter any document or thing capable of being used to derive a pecuniary advantage; or
(d) causes loss to any other person. 

(1A) Every person is liable to imprisonment for a term not exceeding 3 years who, without reasonable excuse, sells, transfers, or otherwise makes available any document or thing capable of being used to derive a pecuniary advantage knowing that, by deception and without claim of right, the document or thing was, or was caused to be, delivered, executed, made, accepted, endorsed, or altered.

(2) In this section, deception means—
(a) a false representation, whether oral, documentary, or by conduct, where the person making the representation intends to deceive any other person and—
  (i) knows that it is false in a material particular; or
  (ii) is reckless as to whether it is false in a material particular; or
(b) an omission to disclose a material particular, with intent to deceive any person, in circumstances where there is a duty to disclose it; or
(c) a fraudulent device, trick, or stratagem used with intent to deceive any person. 

Secret Commissions Act offences

Section 3 Gifts to agent without consent of principal an offence
(1) Every person is guilty of an offence who corruptly gives, or agrees or offers to give, to any agent any gift or other consideration as an inducement or reward for doing or forbearing to do, or for having done or forborne to do, any act in relation to the principal’s affairs or business (whether such act is within the scope of the agent’s authority or the course of his employment as agent or not), or for showing or having shown favour or disfavour to any person in relation to the principal’s affairs or business. 

(2) Any gift or other consideration given or offered or agreed to be given to any parent, husband, wife, civil union partner, de facto partner, or child of any agent, or to his partner, clerk, or servant, or (at the agent’s request or suggestion) to any other person, shall be deemed for the purposes of this section to have been given or offered or agreed to be given to the agent.

Section 4 Acceptance of such gifts by agent an offence
(1) Every agent is guilty of an offence who corruptly accepts or obtains, or agrees or offers to accept or attempts to obtain, or solicits from any person, for himself or for any other person, any gift or other consideration as an inducement or reward for doing or forbearing to do, or for having done or forborne to do, any act in relation to the principal’s affairs or business (whether such act is within the scope of the agent’s authority or the course of his employment as agent or not), or for showing or having shown favour or disfavour to any person in relation to the principal’s affairs or business. 

(2) Every agent who diverts, obstructs, or interferes with the proper course of the affairs or business of his principal, or fails to use due diligence in the prosecution of such affairs or business, with intent to obtain for himself or for any other person any gift or other consideration from any person interested in such affairs or business, shall be deemed to have corruptly solicited a consideration within the meaning of this section.

About the SFO

The Serious Fraud Office (SFO) was established in 1990 under the Serious Fraud Office Act.

The SFO is the lead law enforcement agency for investigating and prosecuting serious or complex financial crime, including bribery and corruption.

The presence of an agency dedicated to white collar crime is integral to New Zealand’s reputation for transparency, integrity, fair-mindedness and low levels of corruption.

This work contributes to a productive and prosperous New Zealand and the SFO’s collaborative efforts with international partners also reduce the serious harm that corrupt business practices do to the global economy.

The SFO has two operational teams: the Evaluation and Intelligence team and the Investigations team.

The SFO operates under two sets of investigative powers.

Part 1 of the SFO Act provides that it may act where the Director “has reason to suspect that an investigation into the affairs of any person may disclose serious or complex fraud.”

Part 2 of the SFO Act provides the SFO with more extensive powers where: “…the Director has reasonable grounds to believe that an offence involving serious or complex fraud may have been committed…”

In considering whether a matter involves serious or complex fraud, the Director may, among other things, have regard to:

• the suspected nature and consequences of the fraud and/or;
• the suspected scale of the fraud and/or;
• the legal, factual and evidential complexity of the matter and/or;
• any relevant public interest considerations.

The SFO’s Annual Report 2017 sets out its achievements for the past year, while the Statement of Intent 2014-2018 sets out the SFO’s strategic goals and performance standards. Both are available online at www.sfo.govt.nz(external link)

The SFO Twitter feed is @FraudSeriousNZ(external link)