$7.5 million missing from Richmond lawyer's trust account disrupts real estate transactions
Published on: November 11, 2016
A number of Chinese investors and B.C. real estate professionals are suing Richmond lawyer Hong Guo, alleging $2.1 million in losses, after Guo says more than $7.5 million was stolen from her trust account.
Guo is a prominent immigration and real estate lawyer in Richmond. The complainants, many of them investors from China, say Guo failed to pay taxes and complete real estate transactions with money held for them in the trust account.
Guo says she had trouble meeting her obligations because she was a victim of theft.
In court filing, Guo alleges her former bookkeeper and legal assistant developed a relationship beyond their office work and conspired with accomplices to unlawfully remove the money from her trust account. Some of the millions missing from Guo’s account were converted to cash in a B.C. casino before the bookkeeper and legal assistant fled to China, a civil suit filed by Guo in B.C. Supreme Court alleges.
According to legal filings, at least five property transactions were affected in Guo’s trust fund shortfall. The Chinese investor cases involve $1.38 million in “holdback funds” that Guo is alleged by the investors to have retained in trust to pay her clients’ tax bills on Canadian real estate transactions.
In real estate conveyances, the lawyer hired to transfer a property often holds a large portion of sale proceeds in trust until the Canadian Revenue Agency determines whether a non-resident investor tax bill will be issued. Any such taxes would be paid from the holdback funds, with the remainder of sale proceeds later handed to the seller.
The CRA is seeking hundreds of thousands in tax bills that are unpaid because of the funds missing from Guo’s trust account, legal filings say. Also, a number of local realtors and lawyers allege, in documents filed with the court, that they face big losses because Guo’s firm bounced cheques or failed to pay fees as a result of the trust fund shortfall.
Guo’s civil claim alleges that the two employees drained her trust account by forging her name on cheques, then laundered money in B.C. properties with help from accomplices, then deposited millions in bank drafts into client accounts at Gateway Casinos in Burnaby. Ultimately, players withdrew cash from the casino accounts and sent it to China where one of the suspects received the funds, Guo’s claim alleges.
“It’s very interesting, one manager from this casino said that if a person deposits a bank draft, they could withdraw cash,” Guo told Postmedia in an interview.
B.C. Law Society spokesman David Jordan said that after Guo reported the trust fund shortage this summer, the society took control of the fund and related client files and is investigating.
“Guo has advised us that the shortage is the result of theft by one or more employees of the law practice,” Jordan said.
Canada Revenue spokeswoman Heidi Hofstad said the agency does not comment on specific cases.
In an interview at her Richmond office, Guo told Postmedia “quite a few” of her firm’s property conveyances were affected by the alleged trust fund theft.
“But I covered (some shortfalls), and all the transactions closed because I put money in,” Guo said.
Guo was asked if CRA staff is seeking payment from her law firm of unpaid tax bills from the property transactions affected by the disappearance of money from the trust fund.
“They actually are looking for money from the clients,” Guo said.
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Guo’s lawsuit alleges that between February and April 1, 2016, funds were withdrawn from her firm’s trust account and the disappearance was discovered around early April. Starting in March and April 2016, Chinese investors and B.C. real estate professionals affected by the trust fund breach started to notice massive unpaid bills and financial liabilities in their bank accounts, according to legal filings, as Guo’s firm failed to make payments relating to a number of real estate transactions.
In one of the missing holdback funds cases, Xiao Yong Sun is seeking $337,750 that she alleges was lost after she hired Guo as conveyancing lawyer for the January sale of a Richmond property. The CRA issued Sun a tax bill for $75,912 in March, but when Sun asked Guo’s office to use holdback funds to pay the CRA bill, “employees of the defendants provided a series of excuses for the defendants’ failure or refusal to use the holdback funds to pay the plaintiff’s tax liability,” Sun’s lawsuit alleges. Sun said she used her own funds to pay the CRA bill and alleges that on June 2 she learned funds disappearing from Guo’s trust account had caused a cash shortage at Guo’s law firm and affected a number of property transactions.
In another case, involving a West Vancouver home sale, a Chinese investor alleges she lost about $700,000 in missing holdback funds.
And in a Surrey land sale, a law firm claims it lost about $700,000 when a cheque from Guo’s law firm bounced.
B.C. Supreme Court legal filings since July by Guo and her firm explain a number of allegations against a group of defendants including her former employees.
According to her notice of claim, Guo alleges Zixin (Jeff) Li worked as a bookkeeper for Guo Law Corporation from 2014 until April of this year, and Qian (Danica) Pan was a legal assistant there in 2015. During that time, the suit alleges, “Jeff developed a relationship with Danica beyond work.”
The suit alleges that “as the bookkeeper, Jeff had access” to records of the law firm’s trust accounts and trust cheques, and alleges that around February of this year, Jeff, Danica, and at least one other accomplice, “conspired to steal, mishandle, convert, misuse, embezzle or otherwise misappropriate” funds in the trust account. Between February and March, the suit alleges, Li forged Guo’s signature on a series of trust cheques payable to Pan totalling about $7,580,000 and a $85,000 cheque to an accomplice alleged by Gou to be Ming Fu Wu.
Jeff Li, Danica Pan and Ming Fu Wu have not yet filed responses to Guo’s claim.
In early April 2016, Jeff Li and Danica Pan both left Canada for China within a week of each other, and Guo became aware of the missing funds, Guo alleged in court filings.
None of her allegations or those made in lawsuits filed against her company have been proven in court.
A spokeswoman for Global Affairs Canada said that under terms of the Privacy Act, the department, previously called Foreign Affairs, could not provide details about Canadians in China.
Neither Zixin (Jeff) Li nor Qian (Danica) Pan face any criminal charges in B.C., said Dan McLaughlin, spokesman for B.C.’s Criminal Justice Branch.
In August, a B.C. Supreme Court judge issued an order freezing 10 Canadian bank accounts, accounts belonging to the defendants Zixin Li and Qian Pan as well as Li’s wife and brother and Ming Fu Wu and one casino account, and ordered the banks and B.C. Lottery Corporation to disclose records for the bank and casino accounts to Guo’s lawyer.
In a related court application filed in October by Guo, she adds details alleging how Pan transported the misappropriated money to China. In the filing, Guo alleges Pan told her and the Chinese authorities that Pan used her client account with Gateway Casinos & Entertainment Ltd. in Burnaby, deposited “all or substantial part” of the misappropriated trust funds into her BMO bank account, and made bank drafts payable to Gateway Casinos. She then gave the BMO bank drafts to “various individuals (‘Danica’s accomplices’) who held accounts at Gateway Casino,” according to the filing, and “then received monies in China from the Danica’s accomplices.”
Guo alleges in her court filings the information disclosed by the BCLC “reveals that almost all if not all BMO bank drafts were deposited into Danica’s casino account.” However, the BCLC’s disclosure only included Pan’s “casino account records,” court filings show, and not her “playing records” at BCLC casinos, which, Guo alleges, would include, among other details, the records and transaction statements for Pan’s deposits and withdrawals of any funds.
The records are described in Guo’s court filings as “very important for the plaintiffs to advance their claim in this case and to trace the movement of the misappropriated trust monies.”
B.C. Lottery Corporation spokeswoman Jessica Gares, in an emailed statement, said BCLC complied with the first court order and has not received a court order to produce additional records, as the application was adjourned and no new hearing date has been set.
“None of these allegations have been proven in court and as this matter is presently before the courts, and BCLC is not a party in this matter, it would be inappropriate to comment further,” Gares said.
Guo’s notice of civil claim lists four Metro Vancouver properties, two in Richmond, and two in Burnaby, and claims the defendants applied “part of the misappropriated trust monies to the payment of mortgage, loans, repair” and other expenses related to the properties. In addition to former Guo employees Li and Pan, and the alleged accomplice Wu, there are two other defendants included in her claim, identified as Jeff Li’s wife and his younger brother, Jun Da Li.
Jun Da Li is the registered owner of one of the properties listed in Guo’s lawsuit, with an address on Brentwood Drive in Burnaby. Property records show Zixin Li, whose occupation is listed as “accountant,” and Jun Da Li, listed as “student,” purchased the Brentwood Drive property for $370,000 in June 2013. In October 2015, the title was transferred to Jun Da Li alone, for a consideration of $1 and “natural love and affection.” The transfer document was signed by Hong Guo, B.C. land records show.
The lawyer for Jun Da Li said his client and Jeff Li purchased the property with funds from their parents, who are successful business people in China.
Attempts to contact Zixin (Jeff) Li through his brother’s lawyer were unsuccessful, and emails to Pan, at two email addresses listed for her in court filings, were not answered.
So far, the only response filed to Guo’s claim is from a man claiming he has nothing to do with any of the allegations or other defendants. In September, a response and counterclaim were both filed by a Richmond man named Jun Da Li, who claims he was improperly named in Guo’s “bogus claims” because he is not Jeff Li’s brother and had no involvement with any of the parties.
His counterclaim alleges Guo “erroneously confused innuendo and speculation with fact and evidence in making claims against the defendant who is completely innocent,” and seeks damages for suffering, public humiliation and loss of enjoyment of life.”
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