An international businessman with $70 million of frozen assets in New Zealand argues Kiwi authorities are on a “fishing expedition” to obtain his Canadian tax returns and bank statements.
Xiao Hua Gong, also known as Edward Gong, is a controversial entrepreneur known for building a business empire through a hotel chain and television channels in Toronto.
The Chinese national is the subject of investigations by the Public Security Bureau in China and the Securities Commission of Ontario. He was arrested in Canada in December 2017 over an alleged $202m pyramid scheme involving the suspected fraudulent sale of health supplements and hundreds of millions of dollars in shares.
Nine months before his arrest, however, New Zealand’s High Court granted the Commissioner of Police freezing orders for some $70m of Gong’s assets here, held in bank accounts and property.
It is alleged by police that Gong deposited $77m- profits from the pyramid scheme – into New Zealand over seven years.
Gong, who was friendly with and donated to Canada’s Prime Minister Justin Trudeau, was later ordered by the High Court to hand over a tranche of personal and financial information to police.
He has now unsuccessfully attempted to challenge the decision in the Court of Appeal, a judgment released today reads.
Gong argued – among other grounds – that the scope of the pre-commencement discovery was unreasonable and oppressive, an abuse of process, and warrants a hearing before the substantive proceedings on forfeiture orders are determined.
Top Auckland-based lawyer David Jones QC, who is the latest in a string of lawyers to represent Gong in NZ, said the commissioner already had sufficient evidence to apply for forfeiture orders.
It was nothing more than a “fishing expedition”, Gong’s legal team said.
The mogul’s main argument against the scope of discovery was over the police’s desire to obtain his tax returns and bank statements from Canada, which the commissioner said Gong has previously agreed to provide but has failed to do so.
Police wanted Gong’s personal Canadian tax returns for the tax years ending October 31, 2009 to October 31, 2011 and also bank records for the tax years ending October 31, 2006 to October 31, 2016.
In December last year, a draft originating application for civil forfeiture orders was filed by the commissioner and identified several alleged predicate offences in New Zealand, Canada and China.
They included money laundering, fraud and receiving stolen property or proceeds of crimes. It also refers to Gong having committed alleged tax offences in Canada “including filing a false or deceptive return”.
But Gong took issue with police having access to his records because Canadian tax authorities have not commenced proceedings against him.
Jones argued absent of any credible suggestion of tax offending in Canada, the commissioner is acting beyond his authority by trying to find evidence of such crimes.
The commissioner, represented by lawyers Mark Harborow and Hannah Macdonald, said the documents sought “relate to, but are not limited to, establishing whether tax offending in Canada should be relied on as discrete predicate offending”, the judgment reads.
The commissioner also said the documents were relevant to issues such as the amount of unlawful benefit obtained by Gong and the property which the police allege is liable to be forfeited.
The Court of Appeal said the documents sought are “very basic and of the kind that are routinely sought before forfeiture applications are commenced”.
“There is nothing unreasonable or oppressive about the terms of the order,” it said, dismissing Gong’s application for leave to appeal.
Gong, who has denied the charges and allegations that his financial success and influence was gained from the alleged scheme, was also ordered to pay costs.
Earlier this year, Auckland company Jiaxin Finance was fined $2.55m for failing to report 311 suspicious transactions worth $53.4m belonging to Gong.
The company’s sole director Qiang Fu was personally fined $180,000, while Fu’s mother Fuqin Che, who was also found guilty of structuring a transaction, was hit with a $202,000 penalty.
The case, revealed by the Herald, was the first of its kind in New Zealand’s courts since specific anti-money laundering laws were introduced.
In October, an East Tāmaki house owned by Gong was razed by a large fire.
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