Canadian facing fraud allegations serving sentence in China in another case

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A Canadian at the centre of international fraud allegations involving the National Cancer Centre in the former Soviet republic of Georgia is serving a prison sentence in China on a fraud conviction in another case.

The British Columbia Securities Commission unveiled a case against Winter Huang in late January, accusing him of fraud in relation to two failed projects in Georgia and China. But Chinese media reports indicate Mr. Huang was arrested more than three years ago for a different fraud in China, where he confessed to scamming millions of dollars worth of loans from Chinese banks.

On Sept. 9, 2012, according to Chinese media accounts, police at the Beijing airport arrested Mr. Huang after years of investigation into allegations he committed bank-loan fraud worth 58-million yuan, worth roughly $9.5-million in 1996.

Chinese authorities alleged he faked land permits, a seal and signature used to obtain loans, inflated the value of oil tank cars used as collateral for other borrowing and failed to repay money to a series of lenders.

Under interrogation by Chinese police, Mr. Huang confessed to the allegations, the Chinese reports said, leading to the arrest of three other people for embezzlement of public funds and illegal issuance of loans.

Mr. Huang and a company he founded, Pegasus Pharmaceuticals Inc., are facing accusations in Canada of fraudulently raising $64-million (U.S.) from investors, including $26.5-million that was supposed to be spent on projects in China and Georgia. In a case unveiled Jan. 28, the B.C. securities regulator alleges less than $3-million of the money raised was spent on actual work on the two projects.

Asked about Mr. Huang, a spokesman for Global Affairs Canada confirmed that "we are aware of a Canadian citizen being detained in China" and that "Canadian officials in Beijing are in contact with the individual and providing consular assistance." He declined to provide further details, citing the Privacy Act.

Chinese authorities did not return phone calls requesting comment.

The Chinese accounts do not contain details of Mr. Huang's sentencing, although the country's courts boast a 99.9-per-cent conviction rate. And it appears he remains in prison as Feb. 23 approaches, the date set by the BCSC for a hearing on his case.

BCSC spokesman Richard Gilhooley said the commission is not able to comment on whether staff know Mr. Huang is in jail. But he said the regulator frequently conducts hearings "in absentia" when someone cannot attend in person.

"In situations where respondents want to attend but are unable to do so, we make every effort to accommodate them by other means via teleconference, phone, et cetera," he said. "Also, to ensure fairness, hearing panels have discretion over whether or not to adjourn cases where a respondent is unable to attend."

Mr. Huang's arrest was reported by numerous Chinese news organizations, some of them fawning accounts of Song Lei, the officer who brought him in after extensive detective work that saw him travel 30,000 kilometres to track down witnesses and information. Song Lei confirmed that Mr. Huang remains in jail but declined further comment.

Mr. Huang's Chinese given name translates directly to "winter," and his downfall lay partly in also using Winter as his English name, which allowed Chinese authorities to more easily find him.

He initially protested his 2012 arrest, arguing he was a Canadian citizen and saying he was innocent. He eventually admitted to what police accused him of doing, the Chinese reports said.

Mr. Huang founded Pegasus in 1997 to research and test plant-based botanical treatments for cancer, but later raised millions from investors to finance ambitious projects to build a new National Cancer Centre in Georgia and a pharmaceutical manufacturing "biopark" in the Chinese port city of Dalian.

In Georgia, Pegasus purchased the country's National Cancer Centre with a promise to invest $20-million to modernize it to Western standards. Pegasus launched into a renovation that left much of the once-functioning building shut down and filled with rubble. The work was never completed, and only a portion of the building is in use today.

In Dalian, the BCSC alleges Pegasus spent only $560,000 of the $11.1-million it raised from investors to build a biopark project, while $10.6-million was instead used to make payments to earlier investors, pay commissions to sales agents and for operating costs at Pegasus unrelated to Dalian.

The municipal government in Dalian provided Pegasus with more than one million square metres of land for the project, which was to include production facilities and housing.

In October, 2012, the BCSC issued a warning, alerting investors not to invest in Pegasus because it was selling securities without issuing a prospectus or being registered with the commission, and was promising returns as high as 100 per cent annually. The regulator unveiled fraud allegations against Mr. Huang in January, more than three years after its original warning.

Mr. Gilhooley said it took the BCSC a long time to complete its investigation because of the size of the alleged fraud and the volume of materials. He said it was also difficult to locate investors because the "vast majority" of victims do not speak English as a first language, and said the "international nature" of the case made it time consuming to get documents from other countries.