03 August 2018

Fraud: R. v. Xu, Chen & Jiang

Kickbacks totalling $498,600 were paid to two bank employees willing to turn a blind eye to fraudulent mortgage applications when pushing them through bank approval systems, all part of a $54 million dollar mortgage fraud.
Peter Cheng, employed by ANZ, fled the country when the frauds were exposed.  Zonglian Jiang, employed by BNZ at the time of the frauds, received $240,000 in bribes. He was sentenced to four years nine months imprisonment.  Lawyer Gang Chen, described as the middleman in the fraud and ‘the glue’ holding the entire scheme together, was sentenced to six years imprisonment.
The fraud was a stratagem to reduce financing costs for property developer LV Park controlled by Kang Huang.  Properties under construction were ‘sold’ to dummy buyers, enabling home-owner mortgage rates to be charged on mortgage advances rather than higher commercial rates.  Over a two year period ending late 2013, a total of 57 fraudulent mortgage applications raised some $54 million in working capital for LV Park.  The named dummy purchasers either did not exist, or knew nothing of the loan application made in their name or willingly lent their name having been told it was a ‘re-financing’ arrangement undertaken by LV Park.  False purchasers unwittingly used were LV Park employees and relatives of Kang Huang including his parents and parents-in-law.  Elaborately forged paper trails supported the loan applications. This included forged Chinese bank statements purporting to show cash available, fictitious employment records supposedly evidencing an ability to service the mortgage loan coupled with a record of salary payments having been received.  This involved care to ensure bank entries of salary payments received, funded in fact by LV Park, reconciled with salaries recorded in applicants’ false employment letters.  In one case a false passport was obtained from Hong Kong in the name of one Shou Zhang and mortgages taken out in the name of this fictitious person: BNZ advanced $767,500; ANZ $1.2 million.
Justice Katz was particularly critical of Chen’s offending.  As a lawyer, Chen played a pivotal role signing off documentation he knew to be fraudulent.  He engineered payment of LV Park’s bribes to Cheng and Jiang, washing payments through bank accounts of his aunt and his sister in an attempt to disguise their origin. He obtained the false Shou Zhang Hong Kong passport. 
Kang Xu was sentenced to twelve months home detention. She was found responsible for forging false Chinese bank statements.  She told the court she was only acting as a dutiful wife under instructions of her husband, Kang Huang owner of LV Park.  There was evidence of Xu remonstrating with her husband over the potentially perilous consequences of his fraudulent scheme and also evidence of her signature being forged to some of the mortgage applications.  At an earlier court hearing, Huang was sentenced to four years seven months jail for fraud.
The High Court was told Huang and Xu do not have successfully track records as property developers.  Previous projects had failed.  They were both undischarged bankrupts for a good part of the time that the fraudulent mortgage scheme was operating.  LV Park was a high-risk borrower using mortgage fraud to masquerade as a low-risk home borrower.  Few of the fraudulent loans resulted in a loss.  A rising real estate market ensured the banks were repaid.
R. v. Xu, Chen, Jiang – High Court (3.08.18)
18.157