China accuses Canadian-Chinese tycoon of major role
in pyramid scheme
STEVEN
CHASE, ROBERT FIFE AND
XIAO XU
A Chinese-Canadian businessman
who attended one of Prime Minister Justin Trudeau’s controversial
cash-for-access fundraising dinners last year is now fighting accusations by
prosecutors in China that he played a key role in a massive pyramid scheme that
took in more than $350-million.
Edward
Gong, from his home in Markham, Ont., has assembled a business empire in recent
years, acquiring hotels in the Toronto-area as well as the second-largest hotel
in Michigan and two Chinese-language TV channels in Canada, including Canada
National TV. He was an opera director before he moved to Canada in 2002 and
became a wealthy entrepreneur, according to a 2016 profile in state-run China
Daily.
Mr. Gong
was awarded a Queen’s Diamond Jubilee medal in 2012, which was given to
recognize community service.
He has been photographed with former prime minister Stephen Harper, and
befriended Mr. Trudeau at a now-famous Liberal fundraiser involving
Chinese-Canadian business people in Toronto last May.
He was in
one of the widely circulated photos of the Prime Minister at the event – it shows
Mr. Trudeau making dumplings for his donors. The picture was part of The Globe
and Mail’s coverage of cash-for-access fundraisers that prompted the Liberals
to usher in legislative reforms concerning donations to political parties.
The
businessman, whose given Chinese name is Xiao Hua, told the China Daily last
December that he was using his Canadian broadcasting outlets to represent
“China’s voice in Canada.”
China’s
state-controlled news agency, Xinhua News, recently reported that prosecutors
in Shaodong county of Hunan Province have accused Mr. Gong of recruiting
personnel for a pyramid scheme that reaped 1.9 billion yuan, which is
equivalent to $350-million (Canadian).
It is not
known whether Mr. Gong has run afoul of China’s Communist Party, which has
recently clamped down on alleged corruption, ensnaring far bigger corporate
tycoons such as the chairman of Anbang Insurance Group and the founder of
property giant Dalian Wanda Group. Anbang chair Wu Xiaohui was recently
arrested for undisclosed reasons and Beijing barred state-owned banks from
lending money to Wanda, whose founder, Wang Jianlin, has been accused of
overpaying for overseas properties.
The
Chinese embassy in Canada declined to comment on Mr. Gong’s case and on whether
Beijing might seek his extradition, saying only that it has “learned from media
reports that the relevant Chinese local judicial department recently conducted
a trial on a pyramid-selling case.” The Chinese government has been pressing
Canada to sign an extradition treaty that would make it easier for Beijing to
bring alleged wrongdoers to China.
According
to Xinhua, 11 people were handed prison sentences and fines in connection with
the alleged pyramid scheme. Mr. Gong was not named among those convicted or
sentenced, but the news agency, citing court proceedings, said he is accused of
having “remotely developed” personnel in China who were involved in the pyramid
selling.
Pyramid
schemes are an illegal form of multilevel marketing, an arrangement for the
distribution of products in which participants are supposed to earn money by
supplying products to other participants.
According
to Canada’s Competition Bureau, they focus primarily on generating profit by
recruiting others to put their money into it rather than from the sale of the
products.
The
Xinhua article said organizers of this alleged scheme sold health products
supplied by O24 Pharma PLC, which they said was owned by Mr. Gong’s Edward
Enterprise International Group, and charged members 5,000 yuan to join. The
court said this scheme offered members shares of O24 Pharma and Canada National
TV if they purchased O24 health products such as “Harp Seal Oil,” “Lung
Cleanse” and “Stress Less.” Britain’s corporate registry shows a company called
O24 Pharma PLC was majority owned by Mr. Gong as of 2015.
The
entrepreneur did not immediately respond when asked for comment, but he held a
lengthy news conference on Wednesday at a Toronto-area hotel he owns, where he
rejected the allegations and proclaimed his innocence.
Mr. Gong
vowed to fight the accusations and take the matter to China’s Supreme Court if
necessary. He portrayed the allegations as an attack on his TV channel and
businesses.
“In North
America, I have about 630 employees; around 600 of them are full-time
employees,” he told reporters. “You can defame me, but you cannot defame a
media that spread the positivity of Chinese culture. … I am a Canadian citizen.
But my heart is still in China.”
He took
issue with Chinese media coverage that reported he was a fugitive “on the run,”
saying he is being tried in public without the right to defend himself and has
not been to China since August, 2005.
“I
haven’t received any summons from court, neither any notice from any department
in China. ... I wasn’t given any right to talk and then I become an escaped
criminal. I cannot sleep these two days; I am a little bit depressed,” he said.
Mr. Gong
defended his business in China, saying he uses the Internet to sell health
products there and engages in multilevel marketing just as other companies do
in Canada or the United States. “This is normal when we sell products here.”
Mr. Gong
owns a small chain of mid-sized hotels as well as a private high school in
Hamilton that caters mainly to students from China. His corporation acquired
Motorola’s former production research centre in Illinois last year with the
goal of establishing a biological engineering research and development
facility.
A U.S.
lawyer working for the Chinese-Canadian businessman told the Detroit Free Press
last year that “Mr. Gong has considerable resources. I will say that,” when
asked how much he was willing to spend on a massive renovation of the former
Dearborn Hyatt Regency, which he bought for $20-million (U.S.).