Millionaire businessman William Yan (aka Yang Liu, Yong Ming Yan and Bill Liu) was at the centre of a political citizenship storm and a police raid on his Auckland apartment. Now Chinese authorities claim he is responsible for a $129 million fraud.

It was only one piece of paper with a familiar name scrawled on it. But it was enough to change the course of a major police investigation and shed more light on the background of one of the country's most controversial new citizens.

Detectives found the note while searching the home of a wealthy Auckland woman last December as part of an inquiry focused on a group of VIP high rollers at SkyCity. More than $9 million of assets were seized as a precaution from her family alone, but the discovery of this document led the police in a different direction.

Handwritten in Chinese, the note authorised the purchase of $1.85 million worth of shares in a company registered in the tax haven of the British Virgin Islands and was signed by Yang Liu. That caught the attention of Operation Galaxy detectives, who also know him by other names - Bill Liu to his friends, Yong Ming Yan according to Chinese authorities and William Yan on his New Zealand passport.

READ MORE: Yan accused of $129 million fraud

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These multiple identities put the millionaire businessman at the centre of a political storm, just before the 2008 election, when it emerged a Labour cabinet minister granted citizenship despite an Interpol warning.

Unproven allegations of "economic crime" in China led officials to believe Mr Yan did not pass the good character test, but Shane Jones over-ruled the advice because of his concerns Mr Yan might be killed if forced to return to his homeland.

This led to accusations of political bias as Mr Yan had forged links to a number of MPs, particularly in Labour, who lobbied in support of his citizenship bid.

The saga took another turn the following year when he was arrested at Auckland International Airport, as he was about to board a plane, and charged with citizenship and immigration offences relating to his multiple identities.

His trademark tracksuits were swapped for business suits at the High Court trial in 2012, where he was acquitted on all counts despite the presiding judge describing the circumstances as "highly suspicious".

No evidence of the alleged fraud in China was given in court and Mr Yan has kept a low profile ever since.

But the resurfacing of his name in Operation Galaxy triggered a fresh look at the dormant allegations of fraud in China and his business dealings in New Zealand, culminating in another police raid on his penthouse in the Metropolis tower.

No criminal charges have been laid but at least $40 million of assets have been seized under the Criminal Proceeds Recovery Act, which essentially forces someone to explain their wealth.

The Weekend Herald can reveal that Mr Yan is alleged to have stolen $129 million in his homeland and concealed the fortune in New Zealand through complex money laundering transactions, according to court documents.

One transaction is alleged to have been a $2.3 million sum "filtered" through Sky City to buy an apartment in the Metropolis tower with cash, while large shareholdings in Kim Dotcom's Mega was held by trusts and companies in other people's names.

His lawyer Paul Wicks, QC, said his client "strongly denies any wrongdoing in any jurisdiction".

Mr Yan has previously said he made his fortune legitimately as a businessman and the two identities he came to New Zealand with, Yong Ming Yan and Yang Liu, are valid because he was fostered out by his birth parents in China for a short time. Both sets of parents registered him as part of their household with different names and dates of birth, said Mr Yan, and the Chinese Government considers him an enemy because he is associated with Falun Gong and is pro-democracy.

But court documents show new allegations in the case against Mr Yan, in which Chinese authorities claim the 43-year-old "orchestrated several complex deceptions" in a $129 million fraud when he was the chairman of a pharmaceutical company in 2000.

New allegations

Details of the alleged fraud in China are suppressed but the sworn statement of Detective Inspector Bruce Good claims Mr Yan is an "economic fugitive" from China and, together with partner Vienna You, had brought a significant amount of money into New Zealand since arriving here in 2001 through alleged "large scale money laundering transactions".

"Police believe that Mr Yan and Ms You have accumulated a substantial asset base in New Zealand and are concealing the true ownership of those assets by registering or purchasing the assets in the names of associates, using the assistance of professionals and other persons mentioned in this affidavit," Mr Good alleged.

The ongoing money laundering inquiry has probed Mr Yan's gambling as a VIP at SkyCity, the purchase of expensive homes and luxury cars, bank transactions, as well as his alleged stake in Mega and other companies.

Based on a proposed purchase price of Mega, police estimate his 18.8 per cent shareholding is worth $39 million.


An exhibit presented during Yan's trial for fraud during his application for New Zealand Citizenship

The police allege Mr Yan's involvement in Mega was held in companies and trusts which listed his friend, Zhihong Xu, and lawyer Jesse Nguy as registered parties.

Police also allege he held shares in another company, FM International, in the name of Mr Xu and both deals share the same "hallmarks", according to the affidavit of Detective Sergeant Keith Kay.

"Mr Yan controls the assets at issue, but complex and convoluted steps have been taken to distance him from these assets," Mr Kay alleged.

"Should the backdoor listings of FM International and Mega take place, I believe Mr Yan would then hold significant share parcels of publically listed companies which would be able to be traded on the NZX without restrictions, thereby providing him the opportunity to 'cash up' and seemingly legitimize the source of his funds."

The police have also frozen a bank account in the name of Mr Xu, holding $4.5 million, believing Mr Yan controls the money.

NZ citizenship

Mr Yan came to New Zealand in December 2001 and has been a permanent resident in NZ since 2002. In 2005, he applied for citizenship, but this was opposed by the Internal Affairs because he had two identities and was wanted for the alleged fraud in China.

He was also under investigation by the Department of Labour as David Cunliffe, the Immigration Minister at the time, was considering an application from officials to have Mr Yan's residency revoked on similar grounds.

Mr Cunliffe declined to revoke his residency and asked officials to continue investigating the potential immigration fraud, according to documents released under the Official Information Act.

Around this time, a police investigation codenamed Operation Aardvark was launched in New Zealand 2007 after a request from China for help to extradite Mr Yan and he was later charged with making false statements on immigration and citizenship papers.

But proposed witnesses from China failed to travel to New Zealand for the trial to give evidence about his alleged false identity and Justice Timothy Brewer acquitted the businessman despite saying the evidence put before him "proves a situation that is highly suspicious".

Most of the documents were false but were filled out by others, like Labour Party stalwart Shane Te Pou, on Mr Yan's behalf.

"In the absence of firm evidence that the accused knew of the falsity ... there would need to be proof of dishonest intention in using the Liu Yang identity," the judge said.

"Such proof, of course, would have to come from admissable evidence...the Crown has not been able to put such evidence before me."

Judgment of Justice Timothy Brewer (mobile users click here to read)

After the acquittal in 2012, the Auditor-General investigated claims of political favours raised in the trial.

Labour Cabinet Minister Shane Jones had granted Mr Yan citizenship in 2008 against the advice of officials because of questions about whether he met good-character requirements because of the multiple identities and the alleged fraud in China.

During the High Court trial, a DIA official said despite this Mr Yan was confident of gaining citizenship because of support from MPs such as Labour's Dover Samuels, who wrote three letters of support.

"He was so anxious that we send the files to the minister. He just wanted the file to go to the minister," said Johannes Gambo.

The Auditor-General criticised Mr Jones in a report released last year but found no evidence of any political corruption. Mr Jones said he granted citizenship on humanitarian grounds because he was told Mr Yan risked execution if he returned to China.

Auditor-General report (mobile users click here to read)

Asset seizures

William Yan has kept a low profile since the trial until his name had resurfaced in a financial investigation into a friend of his, Yingzi Zeng, from whom $9 million in assets were seized in December.

The frozen assets included a late-model Porsche and Maserati, a $3.9 million lifestyle block, an apartment, a large home, bank accounts and businesses.

The Criminal Proceeds Recovery law used to seize assets from Mr Yan and Ms Zeng essentially forces someone to prove how an asset was paid for - even if they were acquitted or criminal charges are not laid.

This investigation focused on a number of VIP members at SkyCity casino and the flow of money related to alleged drug transactions through the casino, according to the affidavit of Mr Good.

"From my experience and from numerous intelligence reports and organised crime investigations, Sky City casino and particularly the VIP facilities are a recognised money laundering risk and an environment within which numerous drug distribution groups work, both alone, and alongside one another," said Mr Good.

"Operation Galaxy identified significant financial dealings by Ms Zeng through SkyCity which exceeded $27 million in six months."

No charges were laid against Ms Zeng, who lives in Auckland's eastern suburbs, and there is no evidence to suggest Mr Yan is involved in the drug trade.

His name was found on documents at her house which linked him to a Hong Kong bank account and a company registered in the tax haven of the British Virgin Islands.

SkyCity casino

One of the alleged "suspicious" transactions reported to police was the cash purchase of one apartment in the Metropolis for $500,000 - one of five titles bought on the 35th floor and combined into one giant penthouse - outlined in Mr Kay's affidavit.

Ms You received $2.3 million in a bank account from a foreign exchange dealer, which she withdrew in two bank cheques of $1.8 million and $500,000.

Those cheques were deposited in Sky City accounts, but 30 minutes later she withdrew $300,000 and Mr Yan then "cashed out" $200,000 worth of chips. The cash was given to the real estate agent inside the casino.

"Given the timing of these transactions it appears Mr Yan used Ms You's accounts to receive, then filter through Sky City, substantial cash funds for the purchase of Apartment 3505," alleged Mr Kay.

"It would have been much more convenient for Ms You to draw a bank cheque from her ANZ account which was payable directly to the real estate agent. I consider that the only logical explanation for payment via this process is that the funds were derived from Mr Yan's criminal offending and he intended to launder the funds and disguise them as casino winnings."

A spokesman said SkyCity was unable to comment on matters before the court, or on any individual.

But he said the company had invested heavily in state-of-the-art monitoring and detection of any unusual or suspicious activity in its casinos.

"Alongside other large financial institutions, SkyCity is bound by one of the strictest anti money-laundering laws in the world and we comply absolutely with the law," the spokesman said.

"Any suspicious transaction at our casinos is immediately reported to the Police Financial Intelligence Unit, and we cooperate fully with them and all other regulatory authorities."

He said the casino, like other major financial institutions, recognised the risk of being targeted by increasingly sophisticated criminal groups and employed specialist investigators in its Anti-Money Laundering Unit, who are in close contact with the police and regulators like the Department of Internal Affairs.

William Yan: Timeline

2001:

Arrives in New Zealand with two identities, Yang Liu and Yong Ming Yan. Also known as Bill Liu

2002: Granted permanent residency as Yang Liu.

2005: Applied for citizenship. Makes donations to Labour and National.

2007: Immigration New Zealand moves to revoke permanent residency vetoed by minister David Cunliffe.

2008: Three MPs write in support of citizenship application including Dover Samuels. Citizenship approved by ministerial prerogative of Shane Jones, against advice of officials. Ceremony conducted by Mr Samuels at Parliament. Changed his name to William Yan.

2009: Arrested at Auckland Airport and charged with making false declarations on his immigration and citizenship papers.

2012: Found not guilty in High Court at Auckland, despite Justice Timothy Brewer saying the evidence put before him "proves a situation that is highly suspicious".

2013: Auditor-General releases report which criticises Mr Jones for granting citizenship but said there was no evidence of improper influence.
http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=10870782

2014: Police raid Mr Yan's penthouse in the Metropolis tower and seize more than $40 million of assets. Court documents allege $2.3 million was "filtered" through Sky City casino.