How a Chinese Company Laundered Millions Using Las Vegas Slot Machines
Huge amounts of cash from a Nasdaq-listed Chinese medical equipment company ended up where it shouldn't have.
Naomi Rovnick
Mar 18 2013
A visitor tries a slot machine at Global Gaming Expo Asia in Macau on June 8, 2011. (Bobby Yip/Reuters)
There are fresh allegations that some of the money that went missing from a Chinese company once listed on the Nasdaq may have been laundered through slot machines in Las Vegas casinos.
As we reported in December, medical equipment maker China Medical Technologies was listed on the Nasdaq from 2005 until February last year, and had the bluest of blue-chip advisers, underwriters, investors and creditors. It was wound up last July after missing interest payments. According to court filings since our last report, the company's liquidators now claim that $670 million of cash the company raised in its 2005 IPO and subsequent equity and bond sales cannot be located, upping their estimate from a previous $400 million.
In a December 31 filing with the New York Southern District Bankruptcy Court, the Hong-Kong based liquidation firm, Borrelli Walsh, alleged that instead of being invested in China Medical, hundreds of millions of dollars that the company raised were "funneled to Wu [Xiaodong, its CEO] and his associates, including [Jenny] Bi [Xiaoqiong, his wife]." According to the filing, Wu gave Bi over $26 million between 2005-2010.
According to information that two of China Medical's creditors shared with Quartz -- and which they say they also got from the liquidators -- Bi put $62 million through slot machines at the Bellagio casino in Las Vegas between 2008 and 2012. Another source separately confirmed that the casino's records do show Bi's $62 million slot machine spend in that time period. A spokesman for the liquidation firm declined to confirm this, as did a spokesperson for Bellagio. (In case the figure seems incredible, it's worth noting that Bellagio does have $1,000-a-spin slot machines.)
In documents lodged with the same court, creditors' law firm Stroock, Stroock and Lavan said Bi's tax returns for the years 2009, 2010 and 2011 showed she reported just under $17 million of "gambling winnings" as income, along with an almost matching amount of what she called "gambling losses." The lawyers alleged: "This huge 'gambling' cash flow is inconsistent with Bi's banking records and gives rise to a strong suspicion that Bi may have engaged in money laundering and tax evasion." The lawyers added that Bi maintained accounts at the Wynn casino in Las Vegas as well as Bellagio. A Wynn spokesperson declined to comment.
No claims against Bi's concerning money laundering, tax evasion or even involvement in the alleged fraud at her husband's company have been proven. But the lawyers and liquidators for China Medical could potentially pursue a theory relating to a money laundering technique that uses slot machines. In past cases, such a technique has involved entering a casino, feeding cash into a machine, playing for a short time and then swapping the remaining credit for a cheque from the casino. The cheque can be put into a bank account and recorded on a tax return as gambling income. This does not mean the casino itself is implicated in illegal behavior.
Borrelli Walsh have also placed 100 pages of Bi's bank records on the court file. They show that she transferred $6.97 million to Bellagio and Wynn--with the lion's share going to Bellagio--during 2006-2011. Bi was a big casino spender, according to these records. One one day in February 2008, for example, she wired $500,000 to Bellagio. Just over a month later, she transferred a further $200,000 to the same casino. On average over the five years, according to Quartz's analysis of the bank records, she spent $116,000 a month gambling in these two venues.
In turn Bi has claimed, also in court filings, that she separated from China Medical CEO Wu Xiaodong in 2001 and that the money laundering claim is "wholly baseless." She also says she has had no relationship with China Medical since before its IPO in 2005. She says she had not received funds from Wu since 2008 and that any monies he gave her were for the couple's daughter's school and living expenses. Wu, says the December filing from Borrelli Walsh, has disappeared.
Bi now lives in Singapore, where last year she launched a womens' clinic named the Sincere Medical Specialist Centre for Women. She did not return an email requesting comment, and a call and email to her solicitor, Carl Oberdier, were also not returned by press time.
http://www.theatlantic.com/china/archive/2013/03/how-a-chinese-company-laundered-millions-using-las-vegas-slot-machines/274126/
There are fresh allegations that some of the money that went missing from a Chinese company once listed on the Nasdaq may have been laundered through slot machines in Las Vegas casinos.
As we reported in December, medical equipment maker China Medical Technologies was listed on the Nasdaq from 2005 until February last year, and had the bluest of blue-chip advisers, underwriters, investors and creditors. It was wound up last July after missing interest payments. According to court filings since our last report, the company's liquidators now claim that $670 million of cash the company raised in its 2005 IPO and subsequent equity and bond sales cannot be located, upping their estimate from a previous $400 million.
In a December 31 filing with the New York Southern District Bankruptcy Court, the Hong-Kong based liquidation firm, Borrelli Walsh, alleged that instead of being invested in China Medical, hundreds of millions of dollars that the company raised were "funneled to Wu [Xiaodong, its CEO] and his associates, including [Jenny] Bi [Xiaoqiong, his wife]." According to the filing, Wu gave Bi over $26 million between 2005-2010.
According to information that two of China Medical's creditors shared with Quartz -- and which they say they also got from the liquidators -- Bi put $62 million through slot machines at the Bellagio casino in Las Vegas between 2008 and 2012. Another source separately confirmed that the casino's records do show Bi's $62 million slot machine spend in that time period. A spokesman for the liquidation firm declined to confirm this, as did a spokesperson for Bellagio. (In case the figure seems incredible, it's worth noting that Bellagio does have $1,000-a-spin slot machines.)
In documents lodged with the same court, creditors' law firm Stroock, Stroock and Lavan said Bi's tax returns for the years 2009, 2010 and 2011 showed she reported just under $17 million of "gambling winnings" as income, along with an almost matching amount of what she called "gambling losses." The lawyers alleged: "This huge 'gambling' cash flow is inconsistent with Bi's banking records and gives rise to a strong suspicion that Bi may have engaged in money laundering and tax evasion." The lawyers added that Bi maintained accounts at the Wynn casino in Las Vegas as well as Bellagio. A Wynn spokesperson declined to comment.
No claims against Bi's concerning money laundering, tax evasion or even involvement in the alleged fraud at her husband's company have been proven. But the lawyers and liquidators for China Medical could potentially pursue a theory relating to a money laundering technique that uses slot machines. In past cases, such a technique has involved entering a casino, feeding cash into a machine, playing for a short time and then swapping the remaining credit for a cheque from the casino. The cheque can be put into a bank account and recorded on a tax return as gambling income. This does not mean the casino itself is implicated in illegal behavior.
Borrelli Walsh have also placed 100 pages of Bi's bank records on the court file. They show that she transferred $6.97 million to Bellagio and Wynn--with the lion's share going to Bellagio--during 2006-2011. Bi was a big casino spender, according to these records. One one day in February 2008, for example, she wired $500,000 to Bellagio. Just over a month later, she transferred a further $200,000 to the same casino. On average over the five years, according to Quartz's analysis of the bank records, she spent $116,000 a month gambling in these two venues.
In turn Bi has claimed, also in court filings, that she separated from China Medical CEO Wu Xiaodong in 2001 and that the money laundering claim is "wholly baseless." She also says she has had no relationship with China Medical since before its IPO in 2005. She says she had not received funds from Wu since 2008 and that any monies he gave her were for the couple's daughter's school and living expenses. Wu, says the December filing from Borrelli Walsh, has disappeared.
Bi now lives in Singapore, where last year she launched a womens' clinic named the Sincere Medical Specialist Centre for Women. She did not return an email requesting comment, and a call and email to her solicitor, Carl Oberdier, were also not returned by press time.
http://www.theatlantic.com/china/archive/2013/03/how-a-chinese-company-laundered-millions-using-las-vegas-slot-machines/274126/
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