A banker, a lawyer and the wife of a property developer have all been found guilty over a $54 million mortgage fraud scheme that involved bribes and more than 100 property transactions across Auckland and Hamilton.
After a three-month trial concluded last month, Justice Sarah Katz delivered her verdicts this morning.
The trial had begun in the High Court at Auckland in February for Kang Xu, also known as Yan (Jenny) Zhang, lawyer Gang (Richard) Chen, and former BNZ banker Zongliang (Charly) Jiang.
The trio were part of a quartet charged by the Serious Fraud Office (SFO) over 76 properties and suspicious mortgages, involving 57 loan applications and 110 transactions.
Jiang was found guilty of all 25 charges he faced, Xu was found guilty of 22 of 34 charges, and Chen guilty of 10 of 12 charges.
The SFO wished to charge former ANZ banker Peter Cheng as well, but he fled the country before court action could be taken. It is believed he is now in China.
Justice Katz's verdicts were contained in 210 pages, released to the Herald today, after she had considered 1500 pages of notes evidence and thousands more pages of documentary evidence.
Xu is the wife of Auckland property developer Kang Huang, who has already been jailed for his part in the fraud.
All but $394,000 of the loaned funds have been repaid, the court heard at Huang's sentencing, and ANZ was pursuing the outstanding amount.
Justice Katz called Huang the "mastermind and instigator of the scheme", who was the one others assisted.
During the trial, Xu's lawyer Adam Simperingham said Huang was a "megalomaniac" who hid his fraudulent nature and should be solely blamed for the criminal activity.
Xu, Chen and Jiang will be sentenced later this year, but Justice Katz was concerned about them skipping the country despite their passports being surrendered.
"I'm slightly worried about the access to false passports after what I just summarised a moment ago," she said.
Xu lives in New Zealand with her teenage daughter and was not a flight risk, Simperingham argued. He added he would be seeking a sentence of home detention for his client.
Justice Katz granted Xu bail until sentencing. Chen and Jiang were remanded in custody.
She said she was particularly concerned about Chen's flight risk after he had been able to access false passports as part of the fraud.
Chen's lawyer Sam Wimsett said his client had not personally benefited from the broader fraud and he will provide the court a cultural report before sentencing, which he says will show the Chinese cultural norms of how Chen responded to the requests and demands of Huang.
In the summary of her verdicts, Justice Katz said Chen acted as the "middleman" between Huang, Xu and his "inside contacts" at BNZ and ANZ, Jiang and Cheng.
Jiang's counsel Julie-Anne Kincade said she would be providing a similar cultural report.
SFO prosecutor Todd Simmonds said he will be calling for periods of imprisonment for all three, and Justice Katz agreed that was the likely outcome.
Simmonds said the group used false information or documents, or withheld information from three banks to obtain loans and buy properties between December 2011 and October 2015.
The banks included BNZ, ANZ and an overseas bank, which has its name suppressed.
The scheme involved loans of more than $54m, 57 applications for finance, 76 Auckland and Hamilton properties, and bribes of $7000 per transaction to the two bankers who approved the loans.
Huang was the architect of the scheme and pleaded guilty to 10 charges late last year and was sentenced to four years and seven months' imprisonment this year by Justice Graham Lang.
He 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 said.
Huang had been operating his business in New Zealand for 20 years, building residential homes.
Properties owned by entities associated with LV Park were being transferred into the names of various relatives, friends and employees of Huang and Xu, including all four of their elderly parents, court documents released to the Herald read.
In some cases the transferees were entirely fictitious people, created for the sole purpose of the scheme.
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.
Xu had supplied many of the false documents to the banks or supplied them to Chen, who gave them to the banks, Simmonds said.
Chen faced 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 was also accused of failing to twice identify the real borrower, a further seven charges for providing 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 most of the property transactions.
Jiang, in his role at the BNZ, processed and approved the loan applications in exchange for cash bribes.
He faced 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".
After the verdicts, SFO director Julie Read said: "These crimes, which relied on a high level of calculation and collaboration, undermine lenders' confidence in borrowers in the mortgage market.
"The banks were misled in a number of respects including the financial position of the purported borrowers and the level of associated risk. The SFO is committed to investigating and prosecuting this kind of large-scale offending to maintain the integrity of the financial market place."