Following a Trail of Tainted Money From China Into Vancouver Real Estate

Date

A man accused of paying bribes in one of China’s biggest-ever military corruption scandals allegedly funneled at least 114 million Canadian dollars into banks in that country before investing more than CA$32 million in luxury Vancouver real estate.

Key Findings

  • Chinese property developer Chen Runkai transferred at least CA$114 million allegedly derived from corruption into Canadian banks.
  • The money allegedly came from a major Chinese military corruption case that landed a lieutenant general with a suspended death sentence.
  • Chen Runkai changed his name from Chen Zijun after China issued an international arrest warrant in relation to the case.
  • Both Chen and his daughter are fighting in court for Canadian citizenship after immigration authorities rejected their applications.
  • Through his lawyer, Chen denied the corruption allegations and said his land deals were clean.

Before moving from China to Canada in 2006, Chen Runkai told immigration officials that he made at most 41,000 Canadian dollars a year. His wife, he said, was employed as a clerk.

Despite their modest incomes, a series of money transfers poured CA$114 million into the Chen family’s Canadian bank accounts a few years later.

Chen, it turns out, is wanted for arrest by the Chinese government on charges of bribery for his alleged role in a major corruption scandal involving a senior military official, OCCRP and the Toronto Star have learned. Now, he’s fighting to stay in Canada, where his family has two mansions in Vancouver overlooking the Pacific.

He is the owner of a Tudor-style home with mountain and ocean views he purchased in 2016 for CA$15.6 million. It sits a few doors down from another mansion his daughter purchased in 2012 for about CA$14 million — without a mortgage — when she was 25, while listing her occupation as “student.”

Until now, Chen has been unknown to the public and referred to only as “Person A” in a case study by a British Columbia commission tasked with examining overseas money laundering in the province, and its links to surging property prices.

The Chen family’s investments in Canada add to mounting concerns about illicit overseas money flowing into the country’s overheated real estate markets, helping push already sky-high housing costs out of reach for many Canadians.

Amid public debate about billions of offshore money laundered through real estate in Vancouver — one of the world’s most expensive cities to own a home — the British Columbia government formed the Cullen Commission in 2019 to look into the issue. It is expected to deliver its final report to the government in June.

The Cullen Commission’s case study is heavily redacted and makes no reference to Chen, but OCCRP and Toronto Star reporters used publicly available documents from Canada and China to piece together his identity, along with that of his wife and daughter.

🔗Finding Chen

The case study included a chart created by Canada’s financial regulator, Fintrac, showing the path of the money from China to the Chen family, but all names were redacted. Just above the box, however, one company name was partly visible.

Using different combinations of letters, reporters searched the Panama Papers, a vast leak of corporate data obtained by the German newspaper Süddeutsche Zeitung, and shared with the International Consortium of Investigative Journalists. One search yielded a British Virgin Islands company called Canada Plaron International International Trading Ltd., with a single shareholder: Chen Zi Jun. That name also appeared in Chinese reports about the military corruption scandal.

Then reporters searched British Columbia’s property registry for this name. They found titles for both Chen — under the name Chen Zijun — as well as his wife, who co-owned the house they bought in 2007 and sold last year. The property value and year of purchase by two owners corresponded to information available in the redacted case study.

The case study also noted that Chen’s daughter, referred to as “Person C,” had purchased a property in Vancouver in 2012 for about 14 million, while listing her occupation as “student.” Vancouver media had reported on a woman named Hanying Chen making such a purchase.

Property registry documents show that the first name of the owner of the property named in media reports changed to Hanying from Zhouren in 2015 –– the same year Chen and his wife, Qi, also changed their names. On the title of the initial purchase, Zhouren listed the address for the house her parents sold last year.

Reporters then searched the Federal Court for cases involving Chen Hanying, and found a judgment that referenced legal efforts by her unnamed father to stay in Canada. The details matched those in the Cullen Commission case study related to “Person A,” or Chen Runkai.

Through his Toronto lawyer, Chen said he had never been involved in corruption and that his money was earned legally through property development in China before being brought to Canada.

“It’s obviously very stressful to be in the situation that he’s in,” said the lawyer, Lorne Waldman. “But he believes in the legal system in Canada.”

Court documents about Chen’s case to stay in Canada have been sealed. But a Federal Court judgment relating to his daughter reveals that Chen is fighting charges including “misrepresentation” to Canadian immigration authorities, and “organized criminality.”

Credit:
Darryl Dyck for the Toronto Star/OCCRP

Chen Hanying bought this mansion, with a tennis court, in Vancouver in 2012.

‘Strong Indicators’ of Money Laundering

The federal government has been quietly analyzing the source of Chen’s wealth through documents dating back to before he arrived in Canada in 2006 through the now defunct Immigrant Investor Program.

Chen told authorities that he and his wife had amassed CA$1.26 million to bring into Canada. But from 2010, far more money started moving into Chen family bank accounts in Canada.

It started with CA$15.1 million sent from four different companies in Hong Kong and mainland China, documents in the case study show. Millions more followed. Money was sent through offshore companies in tax havens and an underground banking network of companies and Hong Kong currency exchanges, some with connections to organized crime, according to the case study. By the end of 2014, the Chen family had moved over
CA$114 million
into Canada in this way.

An anonymized analysis from the Financial Transactions and Reports Analysis Centre of Canada (Fintrac) contained in the Cullen Commission case study set out details of multiple transfers into a Canadian account held by Chen’s mother — referred to as “Person D” in the documents — over which Chen had power of attorney. The money was transferred in smaller chunks, the transaction records show.

The Fintrac analysis said the transfers could be a sign of financial crime: “The discrepancy between the funds they had available and the volume of subsequent transfers to Canada is a significant indicator for money laundering activity.”

The analysis cast doubt on the source of Chen’s wealth, noting that he had refused to supply information, and it raised red flags about the nature of the transfers into Canada.

Although the Chen family’s money moved through five major Canadian banks, only one of them, UBS Bank (Canada), flagged the conspicuous transfers as suspicious. The volume of transfers in such a short time had the hallmarks of a money laundering technique called “layering,” in which “complex layers of financial transactions are used to obscure the source of the ownership of funds,” according to a report filed by UBS Canada flagging some of Chen’s 2011 transactions as suspicious.

UBS asked the Chens about the source of the funds. Clear answers never came, and the bank reported the transactions to federal authorities and closed the account.

But the family had little trouble finding other Canadian banks to accept ongoing flows of tens of millions of dollars as late as 2016. The documents show the money arrived in accounts the Chen family held in many of the country’s large banks, including CIBC, Royal Bank of Canada, HSBC and Bank of Montreal.

When asked for comment, all the banks issued written statements saying they could not speak about an individual client, but have strong commitments to detecting and reporting suspicious financial transactions.

“It seems to me there … are strong indicators of money laundering,” said Mary-Jane Bennett, a former criminal lawyer in Vancouver who was recently commissioned by Toronto’s Massey College to investigate and write a report on money laundering, who reviewed the documents uncovered by reporters. “This is a very strong case.”

The Cullen Commission also mentions money sent from offshore tax haven firms, and includes an image of a Hong Kong storefront currency exchange connected to a company that transferred money to Canada.

“As occurs in pretty well any money laundering case, you’ve got shell companies…built for one single purpose and that is to launder funds,” said Bennett. “Their whole purpose is to create a sense of legitimacy.”

And legitimacy is a key reason Canada is a routine target for money laundering, she says.

“We’ve got these highly regarded banks so if you get it through one of those banks, you’ve got a pretty good wash of clean money.”

Aerial view of Tudor-style mansion in Vancouver

Credit:
Darryl Dyck for the Toronto Star/OCCRP

Chen Runkai bought this Tudor-style mansion in Vancouver for almost $16 million in 2016.

Alleged Bribes in China

The Fintrac report shows the Chen family didn’t want to explain where all this money was coming from. When a bank official asked about the source of their funds, Chen’s mother said the funds were proceeds of a land sale in China, but could provide no details.

When they turned to her son for more information, Chen “was unwilling to provide any satisfactory documentation confirming legal title over the land in , or in relation to any land sale transactions.”

But OCCRP and the Star have uncovered the alleged source of the Chen family’s wealth. The money appears to have come from land deals involving Gu Junshan, a Chinese lieutenant general who was handed a suspended death sentence in a high-profile corruption case in 2015.

Chen was named in a 2014 open letter in Chinese addressed to “all military commanders and fighters,” which excoriated Gu for corruption. The author of the letter was anonymous, but it circulated widely online and was referenced in state-backed media. It alleged that Chen paid large bribes to Gu to acquire 100 hectares of land near a former military airport in Shanghai that was part of a development project overseen by Gu.

“During the course of the initial investigations into Gu, unidentified senior military officials allegedly tipped off Chen, who fled to Canada,” the letter said. “President Xi Jinping then ordered the issue of an arrest warrant, but to this day he has eluded authorities.”

The letter was cited in an article published by the pro-Beijing Phoenix Weekly magazine, which was then posted by the China Police Network, an official mouthpiece. That article called Chen a “real estate developer” who had “paid a huge amount of bribes to Gu.”

Given China’s closely controlled media and internet environment, the letter naming Chen would only have been allowed to circulate online if it had been officially sanctioned, said Eva Pils, a China expert who teaches law at King’s College London.

“There would be zero likelihood that it would survive, I’m kind of tempted to say more than a few hours, but maybe more than a few days,” she said. “If there has been no attempt to stop circulation, that’s almost like official approval.”

Chinese court and company registration documents, as well as media accounts, reveal more about Chen’s dealings with Gu. They say Chen bought and sold properties at the site of a former military airport in Shanghai that was part of a development project overseen by Gu.

The state-owned Wen Wei Po newspaper alleged that Chen was a “key figure” in the Gu bribery case. It said that, in the late 2000s, Chen obtained parcels of land near the airport for “much lower than the prevailing market prices for Shanghai land at the time,” suggesting this was due to his relationship with Gu.

A court judgment shows that a Shanghai businesswoman named Zou Yunyu then acquired the same land and between 2009 and 2013 took out a series of loans against it, totaling 889 million RMB (around US$144 million). She defaulted on the loans.

Also in 2009, payments started coming into Chen family bank accounts in Canada. The Cullen Commission mentioned two mainland China companies among those transfering funds, and corporate documents reveal that those firms were connected to Zou.

Waldman said the large money transfers coming into Canada were the proceeds of a land deal that was part of the “big development” overseen by Gu. But he said his client did not know Gu personally, had paid him no bribes, and had been caught up in a “political” case against the general.

“He didn’t do anything wrong, doesn’t know the general, and was involved in legitimate business activities,” said Waldman in a video call.

He said Canadian authorities should understand that information provided by China cannot be trusted due to the country’s notoriously corrupt legal system, which often uses evidence obtained through torture.

“I think it’s likely that the government of Canada’s interest in my client’s case occurred as a result of the Chinese government approaching them,” said Waldman.

The Canada Border Services Agency said it was unable to comment on Chen’s case specifically, but said it sometimes receives information from “foreign government enforcement agencies” about individuals seeking citizenship, and would then seek to “confirm its validity.”

Pils noted that Chen’s business activities may have been at least tacitly approved of at the time, even if he was involved in Gu’s corruption scheme.

“It seems to be such a constant feature of these deals –– taking bribes,” she said, adding that the government-controlled land tenure system “ensures a very, very high involvement of the party state authorities in virtually all major land transactions.”

Sweeping Implications

As Chen’s legal battle to stay in Canada continued to wind through the courts, he found himself the anonymous subject of the “Money Laundering Case Study”, one of more than 1,000 exhibits compiled by the Cullen Commission.

Concerns about suspicious foreign money in Canada’s real estate market reach well beyond the Chen case. Experts have testified to the Commission that real estate has also become inundated with dirty money derived from the drug trade and other crimes, as well as alleged corruption.

Aerial view looking towards downtown Vancouver

Credit:
Pixabay

Aerial view looking towards downtown Vancouver.

“By laundering illicit funds, serious and other organized criminals are able to profit from some of the most damaging crimes,” including drugs and human trafficking, violent crime and fueling the devastating opioid crisis, the Government of Canada wrote in its closing arguments to the Commission last July.

A 2020 report from the Criminal Intelligence Service of Canada found that as much as CA$113 billion was being laundered in the country every year. In all, 176 organized crime gangs – half with international ties – were fully integrated into Canada’s economy, the report says, and nearly half were involved in the cocaine trade.

The real estate sector, in particular, is “vulnerable to exploitation by criminals looking to launder illicit (proceeds of crime),” the federal government submission reads, by providing a secure, legitimate investment and a location to live and conduct “further criminal business.”

James Cohen, executive director of Transparency International Canada, which also made submissions to the Cullen Commission, urged authorities to take action against international money laundering.

“It is one of the most infuriating and awful reasons for housing prices to go up – the idea that limited housing supply is just sitting there as a safety deposit box for the funds of drug dealers and crooks and kleptocrats,” he said.

“We could add some housing supply without ever hammering a nail into a board by removing the dirty money that’s just sitting in these vacant condos and houses.”

A British Columbia government expert panel estimated in 2019 that more than CA$7 billion in dirty money was laundered in the province in the previous year alone. As much as CA$5.3 billion of that was laundered through real estate, causing housing prices to increase about 5 percent.

Two Mansions and Three Name Changes

Chen’s first known Vancouver property purchase was in 2007, when he bought a home in the upscale Shaughnessy neighborhood for just under CA$2.3 million. He and his wife were listed on the title that year as joint tenants under their former names, Chen Zijun and Qi Chenguang. They sold the house last year for CA$4.9 million.

In 2012 their daughter –– at the time named Chen Zhouren –– bought a mansion featuring a tennis court and swimming pool near the beach in Point Grey for CA$14.7 million. The British Columbia Assessment Authority lists that property as the 98th most valuable in Vancouver, now worth CA$19 million.

Two years after Chen’s daughter purchased the property, Chinese prosecutors brought a corruption case against Gu for abuses including selling off military land in exchange for bribes. The general had amassed properties and possessions that far outstripped his military salary, according to media reports. Chinese police reportedly spent two days at one of his homes, loading four trucks with luxury items, including a solid gold statue of the revolutionary communist leader Mao Tse Tung.

Gu Junshan’s luxury residence in Puyang

Credit:
Imaginechina Limited/Alamy

Gu Junshan’s luxury residence in Puyang, Henan province, China.

China issued an international arrest warrant for Chen for his alleged involvement in the scam, which eventually got Gu a suspended death sentence, later commuted to life in prison.

In the meantime, Chen was fighting to stay in Canada. The Border Services Agency found him “inadmissible” for citizenship, but his lawyers convinced a federal judge to examine that decision. Amid this legal battle, with an arrest warrant from China hanging over his head, Chen and his family changed their names.

Titles for their properties show that in 2015, Zijun and his daughter, Zhouren, became Chen Runkai and Hanying. His wife, Qi Chenguang, switched her first name to Ruizhen. The following year, Chen purchased a Tudor-style mansion under his new name.

His daughter’s Canadian citizenship application is also in limbo, hanging on the verdict of her father’s case, according to a federal court judgment.

Documents from the case show that Hanying Chen obtained permanent residency as a dependent of her father, who had entered Canada under the federal government’s former Immigrant Investor Program in 2006. She declared having $5,000 in her possession on arrival. She noted in 2015 that she was receiving financial support from her parents, who were retired but had savings from real estate deals in China.

Waldman, who is also representing Chen’s daughter, declined to comment on her immigration case.

Although Chen and his family live in luxury, their comfortable lifestyle is tarnished by the ongoing court case and threat of deportation.

But the fact that the Chinese legal system routinely relies on torture to obtain evidence puts the Canadian government in a tricky position, said Pils, the King’s College professor. If the justice system in Chen’s home country were trustworthy, Canada could extradite him to face a fair trial, she said. “But you can’t have that when you’re dealing with China.”

“It doesn’t matter whether someone has perpetrated a completely awful crime, they still have a right not to be tortured,” Pils added.
Canada’s Department of Justice declined to comment, and the Chinese embassy in Ottawa did not respond to questions.

Legal and immigration experts agree there is little chance Canada would ever extradite Chen to face charges in China. But while he and his family await word on their citizenship in Canada, the weight of financial evidence authorities have gathered is sufficient to justify a response, says Bennett, the lawyer writing the report on money laundering.

“When you’ve got all of the indicia of money laundering, it seems to me that somebody should take a serious look at seizing their property,” she said.

Martin Young (OCCRP) contributed research. Jeremy Nuttall (Toronto Star) contributed reporting.

Fact-checking was provided by the OCCRP Fact-Checking Desk.

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