FRAUD PROBE LINKED TO TYCOON AT CENTRE OF $500M+
Mysterious wheeler-dealer is at centre of a web of B.C. real estate deals
Sam Cooper
The Province
A Chinese property tycoon linked to a massive banking scandal in China’s industrial north is at the centre of more than $500 million in B.C. property deals, a joint investigation by Postmedia and global due diligence firm IPSA International shows.
Chinese real estate magnate Kevin Sun — also known as Hong Sun, Kevin Lin, Hong Wei Sun and Sun Hongwei — founded Sun Commercial Real Estate in 2013. In addition to buying and selling hundreds of millions in B.C. property, the B.C. company, which focuses on immigrant investors, has raised over $200 million from investors.
The banking scandal, at Industrial and Commercial Bank of China, started with a $500-million loan fraud audit in Jilin, a corruption-plagued northeastern province.
“As far as my client knows, there are no ‘Chinese police warrants’ in China for Kevin Sun (under that or any other name) nor are there any RCMP files in relation to same,” Sun Commercial lawyer James Carpick stated in an email to Postmedia.
But law enforcement officers interviewed by Postmedia say investigations in China concerning Kevin Sun and Sun Commercial’s CEO Davidson Guo are known to a number of agencies, including the RCMP, the Canada Border Services Agency and the B.C. Securities Commission.
So exactly who is Kevin Sun and what are his plans for Canadian and Chinese real estate markets?
Despite repeated efforts by Postmedia, Sun would not agree to answer questions about his business interests.
But a B.C. Supreme Court civil case connected to a South Vancouver property flip provides insight.
Detailed testimony from Bo Jiang, Sun’s friend and first employee in B.C., points to Sun’s fortune in China, his arrival on B.C.’s real estate scene, and complex land investment strategies that preceded Sun Commercial’s incredible growth.
Just over 10 years ago, Sun and Jiang were in the kitchen of Sun’s home talking about how rich they would get by flipping Vancouver property. Sun nodded at his employee and patted him on the shoulder.
Bo Jiang — or Bobo, as Sun affectionately called him — was Sun’s translator and jack-of-all trades in property speculation, Jiang would recall in the 2008 B.C. Supreme Court civil case. Bobo was the worker who asked Richmond bureaucrats for land subdivisions, opened a Marine Drive Royal Bank account to manage Sun’s cash, and took care of all the little things, such as maintaining Kevin Sun’s growing roster of empty homes.
Sun hired Jiang in 2004 to work for Qiji, a real estate investment company based in Richmond. It’s not clear how much Jiang knew about his boss’s history in China. But according to Jiang’s testimony, he did know that Sun claimed to be enormously wealthy.
“At that time he said something like, ‘Eventually I would give you more than what you want or what you ask,’” Jiang told the Supreme Court. “He said that, ‘Given that I’m so wealthy, I don’t give a damn about this little money.’”
Also in 2004, Chinese media including Sina, an online financial news service, were reporting that a Jilin entrepreneur named Sun Hongwei had left behind “a $2.8 billion (yuan) credit maze, infamy and misappropriation of state assets.”
Sun Hongwei had rapidly amassed a conglomerate of state-owned companies in the 1990s, multiple Chinese media outlets reported. In 2003, he was named China’s 388th richest citizen according to a profile in New Fortune magazine. But by that time, according to reporters in China, Sun had already disappeared.
‘He says Montreal was too cold’
Kevin Sun is a mysterious figure. In an era when many B.C. real estate titans seek the media spotlight in person to market their projects, Sun prefers the shadows.
Ads for his namesake company, Sun Commercial (also known as SunCom), are plastered across Vancouver transit buses. But Kevin Sun has avoided interviews with Postmedia.
And Carpick, SunCom’s lawyer, distanced Kevin Sun from Sun Commercial, the company Sun founded in 2013. Sun ceased to be a corporate director in June 2015, documents show. “Mr. Sun is not a director, officer, employee or shareholder of my client,” Carpick said.
Postmedia could find only one public picture of Kevin Sun since his arrival in B.C. The September 2015 photo of him posing in front of a large SunCom ice sculpture, standing beside the company’s star employee and vice-president Julia Lau, was removed from Lau’s Facebook page after securities regulators launched a review of the company in connection to a January 2016 report by The Province.
The bottom line is, apart from a few well-informed Mandarin speakers in Richmond’s real estate and political fundraising circles, very few people know that Kevin Sun is the magnate behind the rapid expansion of Sun Commercial and many associated companies in B.C.
“Kevin Sun has been here for a while,” said one leader in the Chinese community. “He is pretty good at staying out of the spotlight.”
Associates, who would be interviewed only on condition of anonymity, say that Sun has claimed he landed in Montreal after leaving China. Sun has permanent resident status in Canada. A photo I.D. copy of Sun’s permanent resident card says his nationality is Chinese, and the card is marked “04 05 2001 Vancouver.”
“He says Montreal was too cold,” one associate said. “I think he came to Vancouver around 2001 or 2002.”
Once in Vancouver, Sun and his wife Ling Lin reportedly lived in a small apartment near Langara College where they socialized with Chinese immigrants. Soon they had single-family homes in Vancouver and Richmond. Kevin Sun and Ling Lin were sued by HSBC Bank Canada, which alleges they defaulted on a $3.2-million mortgage on one of Sun’s homes — a $9.5-million gated mansion in Richmond complete with stables and sprawling grounds that served as corporate mailing address for Sun’s companies. SunCom lawyer Carpick said his client would not comment on a case “still pending before the courts.”
There are no known records indicating whether Kevin Sun transferred wealth from China to Canada. China has strict capital controls barring citizens from transferring more than $50,000 abroad per year.
Allegations of ‘conspiracy to defraud banks’
Sun was born in Changchun City, Jilin Province, on June 17, 1968. His name at birth was Sun Hongwei. News reports now published online in China for over 10 years allege details about Sun’s mysterious rise and abrupt disappearance from Jilin.
One of the reports is a document-based investigation by Caijing, which is called China’s “respected business magazine” by the New York Times. Confidential U.S. diplomatic cables sent in 2008 to the U.S. National Security Counsel and the Central Intelligence Agency, and revealed by WikiLeaks, cited Caijing’s “hard-hitting” reporting on “endemic” corruption in Jilin province.
“The somewhat dated media reports you attach make various statements, but my client has no confidence any of them are true,” lawyer Carpick said. “Anyone who places any faith in the accuracy of media reports from the PRC (China) would be wise to remember that freedom of the press does not exist there.”
Chinese media reports focus on Sun’s humble background as a hairdresser whose fortunes abruptly changed around 1990. Sina Finance reported that after meeting a person reportedly connected with a manager of Jilin’s branch of the Industrial and Commercial Bank of China, which is China’s largest bank, Sun founded Jilin Heng Enterprise Group in 1995. He was 27. In a few short years, Sun’s conglomerate acquired a number of former state-owned enterprises, including semiconductor plants and factories that produced tractors, light bulbs and wire, according to Sina Finance and business documents cited by the media outlet. Soon Sun moved into pharmaceuticals and retail chains.
In 1999, he founded Jilin’s largest supermarket chain. Sun’s supermarket chain faltered when Walmart arrived in Jilin, according to Sina Finance, and Sun faced a cash crunch.
A number of reports allege that some Jilin Heng companies were financed through loans obtained fraudulently. In one case, Caijing cited business documents and reported that Sun was connected to “dubious” venture agreements for a business that “does not exist.”
In November 2000, the Shenzhen Stock Exchange announced that Sun Hongwei and the Jilin Pharmaceutical Group were judged by Jilin City People’s Court to have violated civil law in a company merger involving the “possession, use and disposal” of a Jilin chemical plant. Sun’s company was ordered to “bear the primary responsibility” for losses in the case.
Yet, by 2001, Sun’s conglomerate was counted among China’s top 100 private enterprises. That year, Sun was a representative for the National People’s Congress for Jilin City, public documents in China say.
Around that time, Industrial and Commercial Bank launched a nationwide audit and irregular loans were discovered in the Jilin branch. According to a statement quoted by Sina Finance, the Industrial and Commercial Bank of China audit commission alleged: “Since 1994, Jilin Heng Enterprise Group Co. Ltd. and 13 affiliates, used a variety of techniques in conspiracy to defraud banks. By the end of 2002, the Group’s total Industrial and Commercial Bank of China provincial branch loans stood at 2.8 billion yuan” — about $500 million Canadian.
Reports say that police arrested a number of Sun’s business associates in Jilin. Sun was not arrested and apparently had left China by 2003, Sina Finance reported.
The first known corporate record tied to Kevin Sun in B.C. is his August 2004 registration of the Qiji real estate investment firm. Court testimony by Qiji employee Jiang provides the most-detailed account of Sun’s ventures in or before 2004.
“I was already doing things together with Kevin Sun,” Jiang testified in 2008. “In the beginning, we tried to start an investment company. That investment fund company is for the China real estate market. We also conducted market research in supermarkets. Kevin Sun back then also had an idea he would want to run a soccer gambling club.”
Jiang’s testimony does not make clear if Sun’s earliest plans were for an investment fund for Chinese investors to buy B.C. property, or for investors in B.C. to buy Chinese real estate. However, a Bloomberg News profile of SunOil Ltd. president and chairman Kevin Sun says that in 2015 he had been in the resource industry for 10 years and “during this time Mr. Sun has been active in the international real estate markets as an adviser.”
‘Multiple regulated entities’
In Sun’s Richmond home around 2005, according to Jiang’s testimony in 2008, he and Sun discussed a land deal for the 2400-block of Southwest Marine Drive in Vancouver. Qiji would own the property. But Sun wanted Jiang to sign a mortgage for the home to get “favourable” terms, according to Sun’s legal claim. Also, Sun wanted Jiang to use his name on the home’s title. The reason, according to Jiang’s testimony, was so Sun and Qiji could use Jiang’s first-time homebuyer tax benefits.
Jiang sought assurance that he would get about a 10-per-cent share of the Marine Drive flip profits and similar terms for all the other deals he would complete for Qiji and Kevin Sun. Although no contract was signed, Jiang claims that through Chinese cultural understanding, Sun verbally agreed.
Jiang testified that Sun told him: “‘Bobo, you have peace of mind when all this is done and over with, what you are going to make is not going to be less than $200,000.’”
The Marine Drive home was bought in December 2005 by Bo Jiang for $1.09 million, title documents show. It was listed for sale in April 2006 and sold in September 2006 for $1,368,800.
But legal filings in the case say Jiang paid net sale proceeds of $492,257 to Kevin Sun’s wife Ling Lin and $10,000 to Qiji.
In a contract dispute that arose in 2007, Qiji Investment Ltd. and Sun sued Jiang, alleging he unjustly withheld $137,000 of sale proceeds.
In his statement of defence, Jiang said: “Sun did not wish to proceed with the Marine Drive Project, with the property registered in the name of the company, because Sun believed that the taxes that would be incurred by the company … would render the project less profitable.”
The parties agreed in 2008 to a dismissal of the lawsuit.
Sun Commercial lawyer Carpick said “I rather doubt that the public is interested,” in the Kevin Sun vs. Jiang case, when asked if Sun would answer questions.
In a brief emailed response to a list of questions forwarded by Postmedia, Carolyn Rogers, B.C.’s top real estate regulator and CEO of B.C.’s Financial Institutions Commission, said the case “involves multiple regulated entities.”
“Trustees and beneficial owners, as well as anyone assisting them, must comply with all applicable laws and must not commit tax fraud or mortgage fraud,” Rogers stated.
Rogers said that she would forward the Marine Drive case to B.C.’s Real Estate Council. She said the RCMP, Fintrac (Canada’s anti-money laundering agency), the Canadian Revenue Agency, and B.C. Securities Commission could all answer questions on various aspects of the case. All the agencies were contacted by Postmedia, but none would say whether it would investigate the Marine Drive deal.
“The CRA cannot provide an opinion on the aspects of the transaction described,” Canadian Revenue Agency spokeswoman Colette Turgeon said.
Turgeon stated that generally: “An employer of an employee who is a first-time homebuyer cannot claim the homebuyer’s tax credit.”
In the court case, Kevin Sun’s lawyer quizzed Jiang on a number of cash withdrawals connected with the Marine Drive Royal Bank account, and pointed to a number of large deposits from Kevin Sun, ranging from $10,000 to $30,000.
Jiang said some transactions were for Qiji’s Marine Drive project. He told the court that Sun gave him only large amounts to deposit on Sun’s behalf, and other cash withdrawals were taken out for Sun for unidentified purposes.
“It was not about other projects. It was payment for other purposes,” Jiang said. “I don’t know how to explain to you because Kevin likes to do things this way. Whenever he want cash, he would want me to do something like this.”
Jiang also testified that “we have already conducted a lot of projects,” before the Marine Drive deal and “during some of our very early projects it was this realtor who introduce us to meet the branch manager of Royal Bank.”
The real estate agent, who was only identified in the transcript by his surname Cheung, was believed to be from the Sutton Group Richmond office, Jiang testified.
Jiang’s testimony seems to raise questions about whether real estate agents and bankers regulated by Fintrac and subject to Canada’s anti-money-laundering laws would have completed proper due diligence or would have needed to report suspicious or large cash transactions linked to Kevin Sun.
According to guidelines on Fintrac’s website, a number of aspects of the Marine Drive deal and Jiang’s testimony about Sun’s property investments apparently could have raised red flags for a reasonable professional. For example, Fintrac advises that any real estate transaction in which the buyer is foreign and their purpose is to invest rather than live in a home could be reported. Also, if a non-Canadian home purchaser buys multiple properties in a short time-period, uses a shell company, or attempts to remain anonymous, red flags could be raised.
Management at Sutton Group in Richmond was asked whether it could identify a realtor named Cheung allegedly involved in deals with Kevin Sun and Bo Jiang. Brokerage owner Scott Russell, who is a board director and past president of the B.C. Real Estate Association, said that the office does employ a realtor named Cheung, and Russell did not recognize the names of Kevin Sun and Bo Jiang.
“I don’t know anything about it,” Russell said. “I don’t know what I could add.”
Fintrac would not say whether it received any suspicious transaction reports in connection to the Marine Drive flip case or whether it will investigate.
“This is not for Fintrac to answer as it is not an investigative agency,” a spokeswoman said. “The police would be better placed to address questions relating to possible criminal offences.”
However, regarding Fintrac’s due diligence rules, spokeswoman Renee Bercier said “financial entities must also use reasonable measures at the opening of an account to determine whether a third party, other than the account holder … is directing what happens with the account.”
The Marine Drive case also seems to highlight the vague, failed regulatory structure of B.C.’s real estate industry. After a damning independent report into shady industry practices, Premier Christy Clark recently announced a complete overhaul of real estate regulation.
Rogers, the head of B.C.’s Financial Institutions Commission, was not able to tell Postmedia whether she, as superintendent of real estate, is the regulator of Kevin Sun’s company Qiji, the related real estate company Sun Commercial and those involved in the negotiation and marketing of deals associated to Kevin Sun’s various investment companies in B.C.
Aside from regulatory questions surrounding the Sun vs. Jiang case, about 80 pages of Jiang’s testimony under oath provides unique insights into Kevin Sun’s early deals and investment methods. After Jiang was examined, Jiang’s lawyer asked to examine Sun. Sun did not testify.
Chinese media reports in 2004 referred to a “maze” of financing connected to Sun’s many companies. Similarly, in 2008, Jiang claimed in court that to explain his employment terms and provide accounting for Sun’s projects on “many pieces of land” would be an extremely complex task.
“It is quite a complex issue because some were related to Qiji, but others were related to companies owned by him. Because when he conducted real estate projects, for each project he would register an individual company,” Jiang testified. “Everything was merged together. His individual ventures, ventures by his own company, or ventures where he would co-operate with other people.”
Jiang, who now is a licensed realtor but was not in 2005, was contacted by Postmedia. He said he did not want to comment on the Marine Drive deal or answer questions about Sun.
One of the properties that Jiang referred to in court, a 94-acre farm in Richmond, was raided by the RCMP in 2008 in connection to an alleged meth lab and marijuana grow op. The Richmond Review unsuccessfully attempted to contact the landlord, Qiji Land Syndicate, and its sole director Hong Wei Sun, a 2008 news story said. Cpl. Dennis Hwang of the Richmond RCMP told Postmedia he could not answer any questions about the outcome of the case.
One associate said that in B.C., Sun seems to be repeating the style of business he started in Jilin.
“He is an opportunist. You know, in Jilin he bought factories very cheap and he sells it for the real estate value and then leaves,” the associate said in an interview. “Now he moves very fast from buying farmland to flipping houses to flipping commercial property. If a developer from China wants to develop in Vancouver, Sun buys the land first and sells it to them. He is very secretive and smart.”
An associate of Sun told Postmedia: “In Vancouver, it is not just Kevin, though. There is hundreds of people similar to him.”
The belief that there are hundreds of real estate investors in Vancouver who are under suspicion in China is shared by Canadian law enforcement sources.
“Sometimes we ask ourselves if we’ve already lost the battle,” one such source said. “I think this guy is just part of a large network.”
A maze of B.C. land deals
After examining many hundreds of pages of corporate, legal and land documents connected to Kevin Sun, a visual metaphor helps to focus the picture. Revolving around Sun are a handful of key people, luxurious homes and Metro Vancouver properties with highrise potential. The people, homes and land are connected to about 14 investment companies which are related to Sun Commercial. If Kevin Sun is the centre of this financial solar system, the planets orbiting him are connected in highly fluid relationships where personal names, corporate locations and company names and directorships constantly change. In one simple example, Sun’s land company Qiji has had five different name variations.
Kim Marsh, executive vice-president of IPSA International and a former commander of a RCMP international Organized Crime Investigation Unit, said at the conclusion of a year-long joint investigation by Postmedia News and IPSA: “This case has many alarming red flags.”
“The modus operandi outlined in this case is similar to some of the operations that are using the Canadian real estate market to launder money,” Marsh said. “This situation begs many questions including, what happened to the visa vetting process, banking compliance, public company scrutiny and regulators of all sorts.”
Property documents indicate investors linked to Kevin Sun own or have owned well over $100 million in Metro Vancouver residential property, and some of these luxury residences are linked to Sun investment companies. Land records indicate that over $500 million in B.C. property has been bought and sold through companies related to Sun.
Additionally, Kevin Sun’s company SunOil has allegedly claimed in meetings with immigrant investors in the B.C. provincial nominee program, to possess over $1-billion in North American oil and gas reserves, according to an action in B.C. Supreme Court.
Kevin Sun incorporated Sun Commercial in September 2013, and made De Xue Guo a co-director. Around the time he joined Sun Commercial, according to corporate records, De Xue Guo changed his name to Davidson Guo. Davidson Guo is listed as owner of 6050 Chancellor Blvd., a $2.5-million UBC area duplex purchased in 2010. As SunCom president and CEO, Guo does not answer media questions, SunCom staff said.
Oakridge Centre realtor Denise She and the many properties and companies registered to various spellings of her name are central to Kevin Sun’s real estate investments. Denise Den She, who is called a “long-standing” friend and business associate of Qiji principal Kevin Sun in legal filings, is owner of 3899 Cartier St., a $12.9-million property in Vancouver’s Shaughnessy. Among her many Metro Vancouver property holdings, Denise She’s investment company She2006 Investment owns seven condos on the 7000-block River Road in Richmond. Additional Sun associates include SunOil Ltd. director Hai Feng Zhu, who is the listed owner of #5104 — 1128 West Georgia St., a $3-million Shangri-La Estates penthouse in downtown Vancouver. The penthouse is linked in corporate filings to a controversial SunCom property flip on Vancouver’s Nelson Street, and is also listed as the corporate address for Sun Commercial director Hui Zhen Fei.
SunCom’s former vice-president Julia Lau — a former top B.C. realtor who claimed in SunCom ads to have sold $560 million worth of luxury residences from 2009 to 2014 — was one of the investors in a 2014 SunCom land assembly in Burnaby along with her business associate Mailin Chen. Mailin Chen, formerly a duck farmer in Nanjing, and his investment company Chungwa have owned or flipped 13 properties in B.C. since 2009, and Chen owns a $51.8-million Point Grey mansion. SunCom associates and investors bought 6695 Dunblane Ave., a three-storey Metrotown apartment building, for $9.36 million. The Dunblane property was flipped for $12.3 million in February 2016 — $4 million over assessed value — to Transca Development Ltd., a company incorporated in November 2015. Transca, which is authorized to issue preferred shares worth $100-million according to documents, has now made a rezoning application for a 35- to 40-storey tower on the property.
Another Jilin Case With Vancouver Connections
Aside from its investigation of Sun Hongwei’s businesses, Chinese business magazine Caijing has published a number of stories on deep-rooted corruption in Jilin that were cited in a confidential 2008 report sent to the U.S. Central Intelligence Agency. Describing “endemic” rot reported by the “hard-hitting Caijing magazine,” the report says: “Northeastern Chinese of all stripes bemoan official corruption as a fact of life here. Hardest hit has been Jilin province.”
One such corruption case involved a $130-million bank fraud in northeastern Jilin and neighbouring Harbin, committed by Bank of China branch manager Gao Shan and his co-conspirators, businessman Li Dongze and Dongze’s brother, Li Donghu.
Companies including Northeast Expressway, a state-owned highway company, had looted money from a bank branch in Changchun City. When bank auditors discovered missing funds, the three men fled to Vancouver in 2004 to join family members. China requested the RCMP’s assistance in their return. Gao and Li Dongze were eventually persuaded to turn themselves in to Chinese police on fraud and forgery charges.
Other suspects in the case were charged with blackmail, bribery and drug dealing. Chinese newspapers reported that Li Dongze attempted to bribe and blackmail Chinese officials while hiding in Vancouver, before returning to China in 2012. Li Dongze, Li Donghu, and Gao Shan have all been convicted and jailed in China.
Overall, the confidential U.S. government report paints a depressing picture of life in Jilin. Ten of the province’s top judges were prosecuted for corruption in the mid-2000s, the report says, along with many top politicians, police, and the heads of state-owned companies. Several people connected with the Northeast Expressway fraud committed suicide, and the company’s chief was sentenced to death. The report also said collusion between police and Chinese mafia in the Jilin region is common.
Ipsa International
Ipsa is a company that works with foreign governments and banks to investigate financial fraud and recover offshore funds. The company employs an international staff of investigators, and has also worked with governments and banks to improve fraud detection networks and compliance.
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