The properties in question are 46 Gladstone Road (including 5 Lowe Street) and 67 Lowe Street (both relate to the Masonic Hotel building), 26 Lowe Street, 119 Grey Street and 110 Peel Street which, along with 105 Lowe Street, are leased as one property to the Ministry of Social Development.
They first came to the attention of police when Singaporean national Thomas Cheng was arrested, charged and subsequently convicted of drug importation.
He pleaded guilty to importing and supplying methamphetamine at a trial in Gisborne and was sentenced in February 2018 to 10 years, nine months imprisonment, with a minimum non-parole period of four years, three months.
Recent proceedings, under the Criminal Proceeds (Recovery) Act 2009 (the Act) were first commenced by a “without notice application” for restraining orders made and granted in April 2016.
In 2020, police applied for forfeiture of 15 buildings and bank accounts — reportedly containing about $10m — associated with Cheng.
The buildings, six of which are in Gisborne city centre, were suspected to have been used for money laundering and/or tax offending, and have been the subject of restraining orders issued by police since 2018.
The commercial properties are part of a complex web of ownership. They are owned by companies associated with Cheng’s father William Cheng and wife Nyioh Chew Hong, who still live in Singapore.
Forfeiture proceedings finally concluded at Wellington High Court.
In his written judgement, Justice Cooke said it was not alleged that the pair were involved in or benefited from Thomas’ drug dealing.
“Rather it is alleged that they have been involved in their own tax evasion and associated offending.
“The application in relation to Thomas Cheng’s drug offending, and alleged money laundering sought profit forfeiture orders of $512,852 and $98,520. The balance of the (Police) Commissioner’s contention for profit forfeiture orders, totalling over $20 million, relates to Mr William Cheng, Ms Nyioh Hong and the entities with which they are associated.
“This was broken down to comprise claims in relation to undeclared commercial rental income totalling $5,721,145.98, offshore remittances into New Zealand totalling $13,249,330.08 and interest earned on New Zealand facilities of $520,205.16.”
Justice Cooke said the maximum recoverable amount against Mr Thomas Cheng was $512,852.
In regards to Mr William Cheng, Ms Nyioh Hong and their entities, he rejected the idea that there was a much greater criminal enterprise involving what the Commissioner had described as the Cheng Group.
“In the case of Mr William Cheng and Ms Nyioh Hong their blatant failure to file income tax or GST returns, and to pay income tax and GST, was always likely to be detected. The fact that the gross revenues they earned remained available in their New Zealand bank accounts when restraining orders were made demonstrates that they were naïve.
“They are now in a world of trouble with the IRD.”
Ultimately, the only offending that the Commissioner identified was the New Zealand tax evasion (to the sum of $1.6m).
An affidavit explained that the current tax liability arising from the unpaid $1.6 million was now $11,443,457.37.
“The ballooning out of the amount due is a consequence of the penalty and default interest provisions under the Tax Administration Act.
“The difference between the $1.6 million and the $11.4 million is a consequence of what can be described as penalties, albeit that it includes an interest component. It is not a benefit derived from the offending itself. It is a penalty faced by the offender for their tax evasion.”
Justice Cooke was satisfied that Mr William Cheng and Ms Nyioh Hong kept their property separate from Thomas Cheng.
Police did not respond to requests for comment.
