A former banker, a lawyer and the wife of a property developer are standing trial over an alleged $54 million mortgage fraud scheme in Auckland and Hamilton.
The trio were one of a quartet charged by the Serious Fraud Office (SFO) over more than 70 properties and mortgages.
The SFO alleges the scheme used false information or documents, or withheld information from three banks, to obtain loans and purchase properties between December 2011 and October 2015.
The banks included BNZ, ANZ and an overseas bank that has its name suppressed.
The scheme, the SFO claims, involved loans of more than $54m, 57 applications for finance, 76 Auckland and Hamilton properties, and "bribes" to two bankers who approved some loans.
The SFO wished to charge the second banker, however, he fled the country before court action court be taken. It is believed he is now in China.
The three defendants, whose trial began in the High Court at Auckland today, are Kang Xu, also known as Yan (Jenny) Zhang, lawyer Gang (Richard) Chen, and former BNZ banker Zongliang (Charly) Jiang.
The identities of Chen and Jiang were first revealed by the Herald in December 2016.
Xu is facing 34 charges for obtaining by deception.
She is the wife of Auckland property developer Kang Huang, who has already admitted and been sentenced for his part in the alleged fraud.
The SFO said Huang was the architect of the scheme.
SFO prosecutor Todd Simmonds said Huang managed the property construction company LV Park, which owned and controlled the properties.
LV Park would obtain cheap finance and retain control of the properties to "dramatically increase" the size of its portfolio, Simmonds told the court during his opening address.
The SFO said Huang began the scam because it was cheaper to fund the operation with home loans from banks rather than via finance companies, due to the higher costs associated with commercial lending.
Simmonds alleged Xu had supplied many of the false documents to the banks or supplied them to Chen, who gave them to the banks.
Chen is facing 12 charges, two of which are representative for his alleged deliberate intention to deceive the banks of the identity of the true property buyers.
He also faces two charges for allegedly failing to identify the real borrower, a further seven charges for providing the alleged false and misleading documents, and one representative charge under the Secret Commissions Act for the kickback payments.
Simmonds said the lawyer acted for the reported vendor and buyer in the majority of the property transactions.
Jiang, in his role at the BNZ, processed and approved the loan applications in exchange for cash bribes, Simmonds said.
He faces a total of 26 charges for obtaining by deception and the alleged kickback.
Simmonds said the scheme became an "increasingly organised, systematic and complex deception of the banks".
The judge-alone trial before Justice Sarah Katz is scheduled for 12 weeks, however, the court heard the evidence from 35 witnesses is likely to conclude earlier.
The witnesses include several bank managers, accountants, real estate managers and lawyers.
Property developer jailed
Huang, the Auckland property developer, pleaded guilty to 10 criminal charges in the High Court at Auckland late last year.
He was sentenced to four years and seven months' imprisonment earlier this month by Justice Graham Lang.
At his sentencing the court heard he bribed a banker and used friends, family, staff and fake names to help acquire the mortgages.
Justice Lang, when sentencing Huang, described him as the instigator of a "sophisticated and premeditated" scheme.
Huang had been operating his business in New Zealand for 20 years, building residential homes.
All but $394,000 of the loaned funds have been repaid and ANZ is believed to be pursuing one of Huang's employees, that the loan for that outstanding money because the loan was in her name.
"The fact that so few loans resulted in a loss is a direct result in my view of all of your activities occurring in a rising market. This meant that properties were almost invariably worth more than what they were purchased for when they were sold," Justice Lang said.
"At any stage the housing market could have fallen and that would have exposed all of the borrowers to the potential of claims from lenders," he said.
Justice Lang said that many of the people whose names were on loan applications didn't know they were acquiring property and the mortgage liability associated with it.
The effect of the offending went beyond financial loss, the judge said.
He added that when a breach of trust between banks and customers occurs banks tighten their controls and honest home buyers find it harder to get loans.
The $7000 kickback that Huang paid was a form of "bribery and corruption" in a country largely free of such activities, Justice Lang said.