Shenglin Xian, left, president of Shenglin Financial Group Inc., the principal investor in Wealth One, one of Canada’s newest Schedule 1 banks, appears with Prime Minister Justin Trudeau during a meeting with Chinese Canadian representatives from the GTA.
One of the initial players hoping to open a new Canadian bank was a wealthy, politically connected Chinese citizen who was plagued for years by unproven accusations of fraud in his home country. A long-standing case against him was wrapping up just as the proponents of Wealth One Bank of Canada signalled to Ottawa that they wanted to start operating here.
Xu Chang'an's involvement in the bank proposal was obscured in the application for regulatory approval in 2013. The notice said Mr. Xu's wife, Gui Fang Zhu, who lives in Vancouver, would be one of "five significant shareholders." Records examined by The Globe and Mail show that Mr. Xu is the source of the couple's wealth.
Wealth One was approved as a new Canadian bank earlier this year. The company now says "neither Mr. Xu nor Ms. Zhu were ever shareholders," which suggests the couple withdrew their interest. The bank did not answer questions about when or why that happened. "At the time, there was interest in this individual [Ms. Zhu] participating in the bank, but she is not an investor," chief executive officer Charles Lambert said.
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The bank was set up to cater to Chinese-Canadian customers. Regulatory filings show it was established with $50-million from the four remaining investors. It is now one of 30-odd Canadian banks licensed to accept deposits in Canada, known as a Schedule 1 bank.
Ottawa's decision to give it the green light came under criticism after The Globe reported its chief investor, Shenglin Xian, was at a private political fundraiser with Prime Minister Justin Trudeau in Toronto last May. Two months later, Wealth One was approved.
Mr. Trudeau has denied the fundraiser had anything to do with it, pointing out the previous government tentatively approved the bank in 2015.
Ethics commissioner Mary Dawson now wants to question Mr. Trudeau about his interaction with Wealth One before it received final federal approval.
Another director and principal shareholder of Wealth One, Yuansheng Ou Yang, was invited by the Prime Minister to an official dinner in September in honour of Chinese Premier Li Keqiang. The Toronto grocery-store magnate is a Liberal Party donor and is also close to China's Communist Party.
Mr. Xu, the millionaire who had initial interest in the bank, also has significant political influence in China, where he has companies involved in logistics, building materials and property development. He lives in a sprawling three-storey red-brick mansion in Binhai, a suburb of the city of Tianjin, home to one of the world's busiest ports. When The Globe visited him there, Mr. Xu refused to make any comment.
But local court records show that he has spent years fighting lawsuits with business partners, one of whom accused him of misappropriating funds, although local judges eventually ruled in his favour.
In British Columbia, meanwhile, The Globe discovered another connection between Mr. Xu and the new Canadian bank. Until last year, he was in business with Wealth One director and co-founder Morris Chen. At the time the bank was seeking federal approval, Mr. Xu and Mr. Chen were applying to build a mega-hotel complex near Vancouver. Court records show that partnership fell apart when Mr. Xu got tired of waiting for government approvals.
In China, Mr. Xu served for many years as a member of the Tianjin City Chinese People's Political Consultative Conference, a think tank that advises Beijing. Although it has little formal power in the country's Communist Party, the CPPCC is an important forum for influence trading, and membership is coveted as a sign of status.
"He is a very powerful person," said Wang Qing, the founder and president of Tianyi Trade and Investment Ltd.
Mr. Wang said in an interview that a company in which Mr. Xu was an executive gained control of a state-owned shopping mall with three towers, one of which Mr. Xu agreed to sell to Mr. Wang's firm. But the deal went sour in 2005, after Mr. Wang made an initial 34-million yuan payment, worth $6.7-million today.
Mr. Xu's company then sued Mr. Wang to break the contract; both sides blamed each other. Mr. Wang lost, and the court granted ownership to Mr. Xu, ordering him in 2013 to repay some of the investment.
But Mr. Xu has not handed over any money, Mr. Wang said in an interview.
He provided The Globe with copies of cheques in an effort to show that his initial investment was not directed to Mr. Xu's company. He said the money was supposed to go to a company involved with that project. But on each cheque, someone has handwritten in the name of a different company where Mr. Xu and his wife, Ms. Zhu, hold key positions. Two of the cheques were stamped with Ms. Zhu's name as an endorsee.
In 2011, as his case was winding through the legal process, Mr. Wang aired his grievances in public, asking an employee to help him publish and spread a post on local social media about his dispute with Mr. Xu over the shopping mall tower deal.
That same year, Mr. Xu moved $33.5-million of his company's money into the development partnership in Canada, The Globe discovered. Mr. Xu and Mr. Chen, now a Wealth One director, wanted to build a 4.4-million-square-foot hotel, retail and entertainment complex in an area of suburban Richmond, B.C., called Duck Island. In 2012, it was reported to be the largest-ever hotel deal to hit the Vancouver area. It hinged on approvals from all levels of government.
According to Elections BC, the company formed to carry out the project, Jingon International Development Group, donated $8,330 to the B.C. Liberals when it was trying to get land rezoned for the project. Mr. Xu's wife also contributed a total of $35,000 to the party, in 2013 and 2014.
The province and the city of Richmond told The Globe the proposal still has a long way to go before it can even get off the ground. An old jet-fuel pipeline running under the island has to be dug up, which will not happen for two years. The development also needs clearance from the Musqueam First Nation, which has a claim on nearby Crown land.
As Mr. Chen settles in as a director of the new bank, court records show he is embroiled in a costly dispute with Mr. Xu over the B.C. deal. And Mr. Xu alleges in court documents that he is owed millions of dollars by Mr. Chen and others. Mr. Chen did not respond to several attempts by The Globe to reach him for comment.
Mr. Xu's company is suing Mr. Chen's companies, alleging they failed to get development approvals fast enough. He is demanding his money back. Court records show Mr. Xu is trying to invoke a clause in the partnership deal that said he could charge 40 per cent annual interest on his investment if Mr. Chen and others involved did not secure government approvals within two years of the 2012 application.
Mr. Xu's claim says the remaining partners – Mr. Chen, his wife Mingyan Liu and minor shareholder Samuel Cheung, a B.C. realtor – owe him some $73.4-million, a bill he claims is growing by $22,000 a day. Land title records show the remaining partners could also be responsible for millions of dollars worth of mortgages, registered for $26-million against land bought for the deal in 2011.
"The partnership is insolvent and is unable to meet its obligations," says the lawsuit, which was filed in June of last year. It says Mr. Xu's company "lost confidence in the management" by the other partners.
The response filed by Mr. Chen and other partners said the deal came up against "a number of significant and unforeseen obstacles." It called Mr. Xu's interest charges "unconscionable." Nothing more has been filed in court by either party since last year.
In China, Mr. Wang took to the streets after losing in court, where judges ignored his allegations, he said. He protested at a local courthouse and reported Mr. Xu to the Central Commission for Discipline Inspection, the powerful internal enforcement arm of the Communist Party (online records say Mr. Xu is not a party member).
His fight to get back his money has continued in court, with the most recent filings made this year.
"I have lost everything," Mr. Wang said in frustration. "I can no longer make a living. I want to make a bomb and explode it in the Higher People's Court of Tianjin."
In a more recent case, Mr. Xu also went to court against a former business partner in another loan dispute. This time, too, the court ruled in his favour.
With reports from Xiao Xu and Yu Mei