KEY POINTS:
A property developer conned more than $10 million from major banks in a home loan scam that lasted four years.
Auckland-based Dan Ping Wu used more than 150 bank accounts and credit cards, creating fictitious documents on his home computer to scam millions of dollars from the country's top lenders.
He then bought properties all around Auckland - playing the red-hot real estate market, which not only enabled him to repay the loans, but also to make large profits.
The Serious Fraud Office (SFO) finally tracked down Wu, 42, after he hit multiple banks between 2002 and 2006. He eventually pleaded guilty in the Auckland District Court to 30 charges of dishonestly using documents and using documents with intent to defraud.
Each charge has a maximum sentence of seven years' imprisonment. Despite the SFO pushing for a three-year prison sentence, Wu got just 12 months' home detention and 300 hours' community work.
The Herald on Sunday tried to contact Wu at his Grey Lynn address, but was told he had left months ago. One source said he had left Auckland. The court refused to say where Wu was serving his home detention.
During his four-year spree, Wu dishonestly obtained $10,217,600 in loans from banks, including the ANZ, BNZ, Westpac and Kiwibank. He used
many false ASB documents, although it is not clear whether that bank advanced him money.
Wu conned the banks with what the SFO described as "a vast number of transactions", using more than 50 bogus documents. They included false employment letters, false bank statements, false term investment documents and false sale and purchase agreements.
Wu owned and operated at least 50 properties.
The scams were elaborate and relied on the banks' gullibility and the fast-moving property market. In one case, in October 2002, Wu bought 37 Flaxdale St, Beach Haven for $171,000 with the aid of a fraudulently obtained ANZ loan of $136,800. The application misrepresented the incomes of Wu and his sister Dong Wu. He sold it for $283,000 in May 2003, a gain of almost $150,000.
In another transaction, the BNZ advanced $496,000 for 5 Mavis Place, Beach Haven, based on Wu's claim that he was to buy the house for $620,000 (supported by a false sales and purchase agreement). In fact, Wu already owned the property, having bought it three years previously for $143,000. He sold it for $265,000 a year later.
The properties over which he was charged have all been sold. Most of them increased in value, allowing Wu to repay the loans and make a profit. Where the sale price exceeded the loan amount outstanding, Wu pocketed the surplus.
Wu also submitted loan applications under the names of family members, including his sister and his wife. Three of Wu's companies - Passion Properties, Spirit Properties and Dannynaire Properties - are still active on the Companies Register.
A common feature of the scams was that the borrowers claimed to have substantial funds on term deposit and that they were employed and receiving high salaries. But Wu did not receive a salary throughout the four years of offending.
Despite its extensive investigation, the SFO could not establish how much profit Wu made from his scams. He claimed he made only around $276,000 gross - which shrank to $131,000 after "operational costs" were deducted.
He told the court his costs included education, personal travel, a vehicle, an office, wages and payments to contractors.
The SFO told the court that "Mr Wu cannot be given what is in effect a credit at sentencing for having spent funds obtained - either directly or indirectly - by fraud on expenses such as these, which were clearly for his own benefit".
It said Wu's estimate of his profit did not take into account the amounts advanced to him in loans. For instance, on one property he accurately recorded a genuine purchase price of $300,000. However, through a misrepresentation in the loan application that the property was worth $711,000, the mortgage advanced to him was nearly $570,000.
"Mr Wu's analysis takes no account of how the surplus funds were used and that money could well have been used by him in respect of other properties included in his analysis."
The SFO suggested a quite different profit: $1.1 million.
Wu's conviction has thrown a spotlight on a plague of similar property scams which has blighted the real estate industry. Last year, the Herald on Sunday investigated these scams, some of which the SFO is investigating. They are likely to come to court.
Real estate insiders have described the known scams as "the tip of the iceberg". The Institute of Valuers said last year it had uncovered similar mortgage frauds in various parts of the country.
Bank spokespeople contacted by the Herald on Sunday said they did not have any information about the Wu case, or were unwilling to comment. Kiwibank spokesman Bruce Thompson said the bank had "particularly good processes in place to detect fraud".
"We work co-operatively with the police, SFO and other banks and we have been very successful. But crime is a part of life and Kiwibank is not exempt from it."
The ANZ spokesperson could not be reached.
Peter Thompson, director of Auckland's biggest real estate firm Barfoot & Thompson, welcomed the conviction, but was not impressed with the sentence of home detention. "That won't deter others. My biggest concern is the delay in getting these people heard and prosecuted. In between times other people could try to do the same things."
His company sacked four sales-people last year for alleged misconduct and Thompson said he was confident processes had been tightened across the industry. "I believe banks have more security controls in place. I'm pleased to see people working together." But he said he couldn't be certain other people like Wu weren't still operating in the market.
HOW THE SCAM WORKED
* 718D Manukau Rd
On or about December 18, 2004 Wu used a number of documents dishonestly with the intention of obtaining finance from the BNZ. Documents included:
BNZ loan application
False sale and purchase agreement
False employment letter
False ASB term investment document
False ASB bank statement
False Kiwibank statement
The false sale and purchase agreement showed a purchase price of $610,000. The property had actually been purchased by Wu in June 2002 for $390,000. The false ASB term investment document showed $200,000 invested. The account was genuine, but contained only $10,000, invested for one week in October 2004. The false bank statements showed false deposits for salary and rental income.
The bank advanced loan funds of $488,000 to Passion Properties. The house was sold for $415,000 in September 2006 and the loan repaid.
* 882 Dominion Rd
On or about August 15, 2004, Wu used a number of documents dishonestly with the intention of obtaining finance from Kiwibank. Documents included:
Kiwibank loan application
False employment letter
False payslips
False ASB bank statement
The false employment letter and payslip showed Wu as being employed by EastRain Travel, with an annual income of $95,000. Wu was not employed. The false ASB statement was created on Wu's computer, showing false deposits for salary and rental income and showing a closing balance of more than $10,000. The account number was for a genuine account - but it was actually overdrawn by nearly $63,000.
The bank advanced $279,200 which went towards the purchase price of $300,000. The property was refinanced in November 2004 with another dishonestly obtained loan and the original loan was repaid.
* 1158 New North Rd
On or about March 7, 2004 Wu used documents dishonestly to get a loan from the BNZ, including: BNZ loan application, false employment letters, false payslip, false ASB bank statements.
The application was in the names of Wu and sister Dong Wu and followed an unsuccessful attempt to get a loan from Kiwibank for the property. The false letters and payslips claimed Wu and his sister were employed by EastRain Travel. False statements showed salary deposits for Dong Wu, when in fact she was receiving a Department of Social Welfare weekly benefit of $428.53.
The BNZ advanced a loan of $557,850 to Wu's company Spirit Properties, which went towards the house purchase price of $697,000. The property was sold for $800,500 in April 2006 and the loan was repaid.
