Liberal MP Geng Tan acted as intermediary for businessman now accused of fraud
Chinese-Canadian businessman Xiao Hua Gong, also known as Edward Gong, was arrested in Toronto last week and the Ontario Securities Commission (OSC) has charged him with fraud over $5,000, possession of property obtained by crime, laundering proceeds of crime and uttering a forged document. None of the allegations have been proven in court.
On June 1, Mr. Tan acted as an intermediary for Mr. Gong, who at the time was under criminal investigation by the RCMP, Ontario Securities Commission [OSC] and China's Ministry of Public Security in connection with a $466-million pyramid scheme.
The rookie Liberal MP delivered an unsigned letter from Mr. Gong to Cindy Termorshuizen, the deputy head of mission at Canada's embassy in Beijing, according to an OSC affidavit filed in a Toronto court.
Ms. Termorshuizen turned the letter over to the RCMP liaison officer in China, who forwarded it to investigators in Canada, the document says.
The affidavit said Mr. Gong denied in the letter that he was running a pyramid scheme and promised to co-operate with investigators in both countries.
He claimed he was "running a legitimate marketing and sales method called multilevel marketing and direct sales" of health-care products in China. A former Canadian ambassador to Beijing, David Mulroney, expressed surprise that the Liberal MP would approach the embassy on behalf of Mr. Gong, and praised Ms. Termorshuizen for giving the letter to the Mounties.
"It suggests a pretty shocking misunderstanding on the part of the MP on how our system works," Mr. Mulroney told The Globe and Mail on Thursday. "It is the kind of thing you do in China … when you try to use your prestige or connections to smooth something over. It is not how things are done in Canada."
The MP did not respond to written questions from The Globe about why he did not take the letter to the RCMP in Canada, what was his relationship to Mr. Gong and who paid for his trip to China.
"I simply transported a piece of correspondence on behalf of a fellow member of the Toronto-North York Community," Mr. Tan said in an brief e-mail on Thursday. "I was unaware of any Canadian investigation into this individual. Any inference of influence in this matter is simply wrong."
His office later confirmed that the MP also raised Mr. Gong's case with Chinese authorities.
"Mr. Tan communicated his hope to local officials that due process will be followed," the MPs' office told The Globe in an e-mail.
The Prime Minister's Office had no comment on Mr. Tan's actions.
"This would seem to be a serious example of very poor judgment and improper behaviour," Conservative ethics critic Peter Kent said in an interview. "One has to wonder whether this was a misguided favour on behalf of a financial contributor [of the Liberal Party]."
Mr. Gong is not a constituent of Mr. Tan and does not live in the MP's Don Valley North riding.
His home in Toronto's Bridle Path area, which authorities raided in December, is in Don Valley West, held by Liberal MP Rob Oliphant.
Mr. Gong has donated $7,000 to the Liberal Party over the past few years, and was at a Liberal fundraiser involving Prime Minister Justin Trudeau and Chinese-Canadian business people in Toronto in May, 2016.
Mr. Gong was in a widely circulated photo of the Prime Minister making dumplings for his donors at the event.
The picture was part of The Globe's coverage of cash-for-access fundraisers that prompted the Liberals to usher in legislative reforms on political donations.
Since the 2015 election, Mr. Tan has travelled frequently to China, where he has met Communist Party officials whose goal is to win overseas support for the authoritarian government's political agenda.
In April, he accepted a free trip to Hunan province paid for by Toronto businessman Kai Wu, who runs an an immigration investment and eduction enterprise.
Mr. Tan said he accepted the trip to help Mr. Wu "attract more international students to Canada to study."
The OSC affidavit said the investigation of Mr. Gong involved the New Zealand Police and China's Ministry of Public Security and as well as the RCMP and Canada's FinTRAC, a federal agency that tracks the movement of money offshore.
The OSC alleges that at least $190-million obtained from the pyramid operation was directed to Mr. Gong's bank accounts in Canada and used to buy hotels, residential property, luxury cars and a boat.
This money was in addition to $63-million in New Zealand accounts that investigators have frozen.
Attempts to reach Mr. Gong were unsuccessful, and his lawyer, Glen Jennings, did not respond to requests for comment.
The entrepreneur has rejected the allegations and proclaimed his innocence. In July, when the allegations were raised in China's media, Mr. Gong told reporters he uses the internet to sell health products in China and engaged in multilevel marketing, as other companies do in Canada or the United States.
The OSC charges against Mr. Gong stem from the alleged fraudulent sales of securities in two companies, O24 Pharma PLC, a health supplement firm, and Canadian National TV Inc., from Jan. 1, 2012, to Dec. 20, 2017.
The OSC alleges Mr. Gong controlled both companies and orchestrated the sale of their securities from the Toronto area. The scheme was allegedly run out of a private high school in Toronto that caters mainly to students from China. The school is in the same building as O24.
The OSC said Mr. Gong was "selling worthless shares of O24, an empty company that did not produce any products in-house" and promised big gains to shareholders of CNTV.
Chinese Public Security officers told the OSC and RCMP investigators 11 people were imprisoned and fined in connection with the alleged pyramid scheme in Shaodong county of Hunan Province.
Mr. Gong was not named among them, but the Ministry of Public Security alleged he "remotely developed" staff in China who were involved in the pyramid scheme, which reaped 2.3 billion yuan, about $466-million Canadian.
The Chinese embassy in Canada declined to comment on Mr. Gong's case or whether Beijing might seek his extradition. Mr. Gong was an opera director before he moved to Canada in 2002 and assembled a business empire.
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