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Three years ago, Ping Zhong and her brother were accused of being major players in a fraudulent scheme to skirt residency rules in the province. Now, the Premier says the case ‘probably should have been thrown out.’ What happened?

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Ping Zhong closes the door to the lobby of The Sherwood Inn and Motel in Charlottetown, which she co-owns. It is the first hotel to be owned by Chinese immigrants to the island. It was searched by federal immigration investigators in 2016 as they began to build a case alleging Ms. Zhong and her brother, Yi, were at the heart of an immigration fraud scheme.Photography by Darren Calabrese/The Globe and Mail

The day started out as an ordinary Wednesday. Ping Zhong was doing the breakfast dishes. Her daughter, about to leave for work, opened the front door. What awaited on the other side shocked Ms. Zhong.

The step was crowded with armed, dark-clothed officers. They wanted in.

Panic began pounding so hard in her ears that Ms. Zhong, then 58, could hardly hear the explanation for why she was being arrested. “I do have good English, but I really did not understand their words – ‘abetting’ and ‘inducing,’ ” said Ms. Zhong, who has lived in Charlottetown for nearly 30 years. “A lady showed me the paper. I was so shocked and confused and terrified.”

The paper was a judge-issued warrant giving federal officers permission to arrest Ms. Zhong and search her home, vehicles and the Sherwood Inn and Motel, which her family runs for secondary income. Officers led Ms. Zhong to an unmarked car and she buried her hands in her winter coat, hoping to hide her handcuffs from the neighbours.

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Ms. Zhong said her 2016 arrest was a bewildering experience.

On that day in February, 2016, federal border-security investigators believed they had uncovered the biggest immigration fraud scheme in Prince Edward Island’s history. More than 500 immigrants who applied for permanent residency had used street addresses traced to Ms. Zhong and her hotel on their government immigration forms. The reason for doing so was to create “the illusion they are living in Canada” while actually living elsewhere, according to allegations outlined in the warrant.

Ms. Zhong and her brother, Yi, appeared to be “integral players” who made “a business” out of helping pull off the hoax, investigator Lana Hicks wrote.

Criminal charges were filed against the Zhongs; when their case became public last spring, its revelations exposed the province’s vulnerability to immigration abuse. Specifically spotlighted was an arm of PEI’s immigration program that allowed qualifying immigrants permanent-residency cards before they actually moved to the island. It also raised questions about whether locals – including the Zhongs – were cashing in by helping permanent-resident immigrants skirt provincial rules that required them to live in PEI, rather than elsewhere in Canada.

The Zhongs pleaded not guilty. PEI nonetheless shuttered the suspect arm of its immigration program. It was the third time in a decade the province closed an immigration stream subject to allegations of abuse.

Then, four days into the Zhongs’ December trial, a federal prosecutor unexpectedly asked for a stay of proceedings. The Crown has the rest of this year to decide whether to pursue its charges. However, PEI Premier Wade MacLauchlan said the case, which has raised concerns about the treatment of immigrants on the island, “probably should have been thrown out.”

“It was like the Crown didn’t want to admit that they can’t win,” said Lee Cohen, Ms. Zhong’s Halifax-based human-rights lawyer. Meanwhile, he said, “Ping and Yi are left holding the tatters of their lives.”

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Downtown Charlottetown. Prince Edward Island has offered immigrants a unique stream to permanent residency, hoping to retain workers to fuel its economy. But accusations of bribery, lax oversight and other improprieties have darkened the reputation of PEI’s immigration program.

While PEI recently boasted the country’s top immigration rate, the province has historically struggled to retain immigrants who are attracted to the opportunities and diversity in more populated regions.

In 2012, to combat the drain, the province created a new immigration stream for higher-net-worth immigrants that would grow to be its most popular means of entry. Called the “100% Ownership Stream,” the program granted its nomination for residency to immigrants who paid a $200,000 escrow deposit. The nomination is technically made to the federal government, which has final say on immigration approvals.

PEI’s program was then unique in Canada. Other provinces commonly require immigrants to work via a permit for one year before granting a permanent-residency nomination. PEI’s program allowed immigrant investors to get that status early and without proving they had moved to the island.

The caveat was this: Immigrants in the Ownership stream could only get back their $200,000 deposit if, after two years, they could prove they resided on the island and had opened a business.

Results were mediocre.

Between 2014, when the province began issuing refunds, and 2018, when the program was shuttered, more deposits were forfeited by newcomers than refunded, according to data provided to The Globe and Mail by Island Investment Development Inc. (IIDC), the Crown corporation that manages immigration on PEI.

“Some of those defaults were for people that were not residing here, unfortunately,” said Jamie Aiken, executive director of the IIDC.

The upside, though, was a $40-million boon to provincial coffers.

But Mr. Aiken said that the revenue gains pale in comparison with the positive effect that having more immigrants stay long term would achieve. The reason the province shuttered the program last fall, he said, was that a program review deemed its high default rate ineffective. The new program that replaced it only awards permanent-residency status after immigrants have spent a year on PEI.

The province made this change not long after the Zhongs were charged with defrauding the system. However, Mr. Aiken said the Zhong case did not affect the province’s decision, dismissing the timing as coincidence.

Nevertheless, the timing raised suspicions on the island. Perceptions of PEI’s immigration program have been darkened by long-standing accusations of improprieties that have stretched over more than a decade.

“The waters are really muddy on PEI because people can’t get past what happened 10 years ago,” said Andrew Sprague, a senior communications official with PEI’s Department of Economic Development and Tourism.

Then, PEI was offering provincial nominations for residency to a different stream of entrepreneurial immigrants who agreed to invest roughly $200,000 in an island business – one they did not own or have any part in choosing – and live in the province for one year.

The program was criticized as a cash grab that lacked transparency (the province never disclosed which Islanders’ businesses received immigrant money). Many immigrants who came through the program left the island when their one-year pledge expired.

In response to the criticism, Ottawa announced plans to tighten the program’s rules. PEI approved a plan to rush through a final set of 2,000 applications, flooding businesses with $400-million in foreign cash. Provincial legislators refused to release a list of which Island businesses benefited. But in a 2009 report, the province’s auditor-general expressed concerns many of the companies that did have ties to elected provincial officials, deputy ministers or their families.

Whistle-blowers and the federal government called for an inquiry, leading both the RCMP and the Canada Border Services Agency (CBSA) to launch investigations. But in 2012, both agencies announced there was insufficient evidence to lay charges.

The province shuttered the suspect program that year. In its place, they brought in the escrow deposit system.

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In 2015, a CBSA investigator turned her attention to the Sherwood Inn when she dialled a phone number a pair of Chinese immigrants had given to border agents, assuming it to be a residential address.

Having what law enforcement calls an “address of convenience” is “an essential element” of any provincial nominee’s scheme to commit residency fraud.

Lana Hicks, a 20-year investigator with the CBSA, explains this in an application filed last year in PEI for a search warrant to raid one such suspect address. She also sets out how she uncovered what appeared to be the biggest cases of immigration and residency fraud in PEI’s history.

She stumbled onto it by accident. In 2015, in the midst of an investigation into a suspected watch smuggling, Ms. Hicks dialled a phone number linked to a PEI address that a pair of Chinese immigrants had given border-security agents.

Ms. Hicks assumed she was dialling the residential address of her person of interest.

“A male answered the phone: ‘Sherwood Inn,’ ” Ms. Hicks reported.

Her curiosity piqued, Ms. Hicks went on to discover that 566 immigrants who had applied for permanent residency on PEI had given border-security agents the same two street addresses as their places of residence. Ms. Hicks traced one of the addresses to the Sherwood Inn and Motel and the other to Ms. Zhong – one of the motel’s co-owners.

The sheer volume of people who used the addresses was “extremely high and suspect,” Ms. Hicks wrote in her application for a warrant to search for more clues. “Based on my experience, the numbers go well beyond assisting a couple of friends,” she wrote, adding that her findings appeared to indicate “a very well-established, organized fraud.”

An advertisement for the hotel on a Chinese-language website Ms. Hicks found offered “pick-ups, bank procedures, medical care” as well as help with schooling, housing contacts and more. In her warrant, Ms. Hicks raised this as a red flag, because it “advertises services outside the scope of what is ordinarily seen for a motel.”

To collect information for the warrant, Ms. Hicks had placed surveillance on the Sherwood, Ms. Zhong and her brother, also a part-owner.

Covert investigators followed Mr. Zhong as he picked immigrants up at the airport, chauffeured them around Charlottetown, delivered them to the provincial immigration offices, to Service Canada for driver’s licensing, to banks and schools. Mr. Zhong routinely stopped his van to allow guests to get out and take pictures, including in front of Holland College, where immigrants take English language courses, and other landmarks.

Mr. Zhong sometimes took guests to other hotels instead of the one he owned, an act that raised surprise and suspicion in Ms. Hicks, who questioned Mr. Zhong’s motivation given “it doesn’t even appear that the owners are benefiting from permanent residents staying at their motel.”

When he took one family that was not staying at the Sherwood Inn for a short visit to his hotel on their way back to the airport, it was another red flag to investigators. They believed, Ms. Hicks wrote, that those short stops – which involved some immigrants who had already gained permanent-residency status – were for the purpose of allowing the permanent residents to arrange to have their mail forwarded to the hotel – an “address of convenience” – while they actually went to live elsewhere.

Bolstering this hunch was the fact that investigators’ garbage grabs had found discarded envelopes addressed to a range of individuals.

“I believe that the Sherwood Motel and the owners have made a business of providing this service,” Ms. Hicks wrote, describing her theory. That included the belief that Mr. Zhong’s downtown tours with immigrants – and the photo stops he repeated with so many families – were to help those who had permanent residency, but planned to live elsewhere, collect “some photos in case they were questioned as proof of residency.”

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Footprints in the snow lead up to a motel-room door at the Sherwood Inn and Motel that federal investigators broke open in 2016.

With her search warrant granted, Ms. Hicks had part of her team arrest Ms. Zhong at her home on the morning of February 17, 2016, while others went in search of her brother, who lived at the Sherwood Motel. After breaking down one of the hotel doors, the officers would learn that Mr. Zhong was in China for an annual visit.

What they did find in the motel’s office, though, were a few documents they later submitted as evidence to bolster their theory that immigrants were coming to the hotel for more than rooms to stay in.

Written in Chinese, applications for “Basic Settlement Services” were found printed with names of some former guests and branded by a Vancouver-based immigration consultancy called “Can-Achieve.” While the forms did not actually list the Sherwood Inn or the Zhongs, telephone numbers printed beside the heading “Prince Edward Island Hot Line for Meeting Plane” belonged to the Sherwood and to Ms. Zhong’s husband, Cheng Dong.

More than two years after the February raids, the siblings were charged with helping seven permanent residents and their families commit residency fraud between 2010 and 2013.

That number was far fewer than the 500 or so investigators suspected the Zhongs of helping in their initial search warrant. Still, the evidence underpinning the charges, filed as part of the trial proceedings last December, numbers in the thousands of pages.

Most of those documents are permanent-residency applications that belong to families the Zhongs are alleged to have assisted. They are partly redacted to protect the privacy of some of those applicants. However, they shed light on the wide spread of “immigration intermediaries,” agents and consultants that immigrants hire to help with various points of their journey to become permanent residents in Canada. Ms. Hicks noted in her warrant application that “there are many opportunities in the process where misrepresentation or fraud can occur.”

What the file does not contain, despite its heft, are any documents that show contracts or formal agreements between the Zhongs and the families they stand accused of helping. No documents show a deal between the Zhongs and the immigration consultancies listed in the files, nor do they show evidence that the Zhongs ever received money from anyone for anything other than the rental of their hotel rooms.

The siblings’ trial lasted just four days before Crown prosecutor Caroline Lirette asked the judge to stay proceedings. Ms. Lirette said in an e-mail that her office “does not provide reasons” for requesting a stay.

But to Mr. Cohen, the Zhongs’ lawyer, the explanation is simple. “The reason is there are no dots they can connect that would get a conviction,” he said. “They can’t prove it because there is no evidence. It does not exist. They simply relied on the optics.”

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Ms. Zhong goes through files including letters of support from friends and colleagues.

If she’d had the chance to testify in court, Ms. Zhong would have told the story of what it was like when she came to Canada.

There were very few Chinese people in Charlottetown when Ms. Zhong arrived as a temporary teacher in 1989. She loved the island, though, and three years later, her husband, a university professor, and their young daughter left the eastern Chinese city of Zhenjiang to join her. A dozen or so members of her extended family trickled out afterward.

Ms. Zhong worked then (and does now) as a teaching assistant with special-needs students; her friendship with another teacher led to a joint purchase of the Sherwood Inn and Motel. Ms. Zhong said she is proud that it made her the first Chinese immigrant to own a hotel on the island.

Through the hotel, Ms. Zhong said her family was determined to show newcomers the same sort of kindness that they once received. Some even asked the Zhongs to pick them up at the airport, but deliver them to competing hotels – nicer properties than the bare-bones Sherwood – and to translate for them, which the Zhongs did, usually for free.

Ms. Zhong said her family never refused a request and never charged anything extra for their services beyond the cost of their hotel rooms.

“We appreciated the help we got when we arrived on the island. We thought this was something we could do to make newcomers feel welcome … to make their lives easier,” she said.

When newcomers began to ask if they could use the hotel’s address to receive mail, including citizenship documents and permanent-residency cards, while they were in other parts of Canada or out of the country, Ms. Zhong agreed. Ms. Zhong even allowed the use of her personal home mailing address to some immigrants who felt concerned about having their mail sent to the hotel.

“You know, [I] didn’t think much of it,” Ms. Zhong told Ms. Hicks during their initial, 2016 interview. “We trust people so much.”

The opportunity to make a little bit of extra money from helping needy newcomers arose when a man Ms. Zhong described as Taiwanese showed up at the Sherwood some time in the late 2000s. Ms. Zhong cannot recall the man’s name, but said he told her he was affiliated with an immigration agency called Can-Achieve, based in Vancouver, which had a stream of clients moving from China to Charlottetown and who needed settlement help. (An e-mailed request for comment to Can-Achieve was not met with a response.)

“He said, ‘Maybe we can send you some people,’” Ms. Zhong said, recalling the man said he could pay her $100 to $150 a family. It was a handshake deal; nothing was written down.

“I didn’t see any problems,” Ms. Zhong said. “I was already doing this for people for free.”

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Ms. Zhong says she was 'too naïve' to let newcomers use the hotel as a mailing address. 'There are always some bad apples that will take advantage, but we did not know.'

The agreement with Can-Achieve turned out to be poor and short-lived.

Ms. Zhong, who manages the hotel’s account book, only recouped some of the money from her brother’s efforts ferrying around the newcomer clients that came via the company (she said she does not have a record of exactly how much). Her final call to Can-Achieve was some time in the late 2000s, a follow-up on hundreds of dollars’ worth of unpaid tabs.

“They refused to pay us. The woman on the phone said they changed ownership,” Ms. Zhong said, adding that she has no record of whom she spoke with or when the call took place.

This, too, she would have liked the chance to explain in court.

She also would have said that when newcomers’ mail was coming to her house and the hotel, she never considered that the people who asked her to forward their mail might be committing residency fraud.

“I was too naive,” she told The Globe. “I should not have let them use our address. There are always some bad apples that will take advantage, but we did not know."

Ms. Zhong will have to wait out the year to see whether the Crown will make another attempt to test her in court. Business has suffered as word of the case spread to China; plans to expand the Sherwood are on hold. Memories of the raids come back to Ms. Zhong in nightmares, she said. Her brother, too, struggles with sleep.

Mr. Cohen, the lawyer, said the case is a reminder that appearances are not always what they seem.

“Looking suspicious is not the standard of proof,” he said. “But for the fact that their motel address was used – and there are easy explanations for that – there is no evidence whatsoever connecting Ping or Yi to any kind of collaboration.”

His clients were “mischaracterized,” he said, adding: “What they have done is absolutely legal and generous and noble.”

Led by Ms. Hicks, the CBSA conducted more raids last summer in Charlottetown on a pair of homes owned by a Chinese immigrant and business person. The warrant application contains similar allegations to those made against the Zhongs, including the suggestion that the individual provided a “homestay” and addresses of convenience for more than 400 new immigrants.

More than six months later, no charges have been filed (for this reason, The Globe has chosen not to name the individual, who declined to be interviewed), and it is not clear if they will be. In a statement, the CBSA told The Globe the agency does not discuss its investigations.

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