The $1b deal & the piranha
A planned ‘monster’ development in a sleepy Waikato town has faltered with a civil trial due to follow a criminal case after a major stoush between investors. Steve Kilgallon reports.
Eight years ago, Pokeno had just 600 inhabitants. But things are changing rapidly in the small Waikato town, once known for its bacon, its giant ice-cream scoops and the gas station where Kelly Johnson fuelled up his Mini for free in Goodbye Pork Pie.
Just 53km from downtown Auckland, huge new estates have swollen the population, and with more re-zoning on the horizon, real estate agent Eric Chase saw a prime opportunity to cash in if he could persuade local landowners to sell up simultaneously.
‘‘It was the biggest deal of my career: an absolute monster,’’ says Chase, of the giant development he conservatively values at $1 billion, featuring more than 700 new houses.
Even merely aggregating and selling the land on would produce, he thought, a profit of at least $55 million.
But the deal to turn the rural land into a giant housing estate went so sour, it ended with Chase’s former business partner Xiaoling ‘‘Annie’’ Chen (also known as Annie Shiu) being found guilty on two charges of deception.
While she awaits sentencing, Chen is also embroiled in a huge civil action with two of her former shareholders, who both gave evidence against her in the Papakura District Court.
Chase now describes Chen Shui as a ‘‘piranha’’, and one of Chen’s former co-investors, Anny Yip, says: ‘‘She is a super, super smart, greedy person.’’
How did it go so wrong?
Eric Chase is a 40-year veteran of property sales, learning his trade in the corruptionriddled Brisbane of the 1980s, a man who jokes about being a rarity: the honest real estate agent.
He’s been rich and he’s been poor, having seen his fortunes falter after a legal stoush with former Auckland mayor John Banks over a failed coffee franchise.
At Pokeno, he saw a chance to make it big again. Having developed a 40-section site there himself, he saw the potential for more.
Approaching the owners of a series of rural sections bordering the town’s west, Chase wanted to package the properties all together to be re-zoned for housing and sold on to a major home builder.
He believed the best chance of finding someone with the money to pull off the deals was by approaching the Chinese community – so he talked to property entrepreneur Annie Chen.
Chase had done deals with Chen before, including selling her Glendowie home to her – and had even briefly employed her niece in his Remuera real estate office.
Chen soon brought in business partners: former Hong Kong businesswoman Anny Yip, and a younger Chinese investor named Zhenlin ‘‘Robert’’ Luo.
Luo invested in three parcels of land, and Yip one. The terms were unusual: Chen’s was the only name on the sale and purchase agreements, but she fronted no money at all.
Instead, Luo and Yip paid the entire deposits, and agreed to cover the costs of re-zoning and consents and even complete settlements in return for 50 per cent shareholdings (or 45 per cent, in one of Luo’s deals). Their upfront investment was in the many millions, but it was to be repaid, with six per cent, once the land was sold on.
Former National Party finance minister Bill Birch undertook the surveying and consenting work for the project, which was to be called Pokeno West – and the hope was that the Waikato District Council would rezone the land this year.
But what made the deals even stranger were demands from Chen that her new business partners make extra payments – in cash – of $100,000 per deal (with another $100,000 on completion).
Both Luo and Yip would testify that she told them the money was for Chase to oil the wheels of the deal – an extra commission that would have been illegal had he taken it. Both paid up.
But Chase knew nothing of the extra payments. The deal unravelled when Yip arrived unannounced in Chase’s office, angrily demanding to know why he had charged her such a large fee.
Chase secured the return of Yip’s $100,000 – with costs and interest – from her broker, Trent Bradley.
Chase and Yip also went to see Luo – and discovered he too had been defrauded. But he had not been repaid.
In a letter to Yip, Chase said: ‘‘I have built a good name with several members of the Chinese community and to think that there are now several Chinese people that believe I am taking money under the table is not something I can tolerate.’’
He also complained to the Serious Fraud Office and the Real Estate Authority. The SFO passed the case to police, who arrested Chen at Auckland Airport last February and confiscated her passport.
It had been three years since Anny Yip had seen Annie Chen. But Chen began pursuing her friendship assiduously when her original investor for the property at 145c Helenslee Rd, Pokeno, withdrew from the deal.
Chase describes 145c Helenslee Rd as a keystone to the entire Pokeno West development.
Chen and Yip became close, with Chen confiding about the failure of her marriage, to prominent doctor Andrew Shiu.
In Chen’s version, the friendship was triggered by a chance meeting in a Parnell gym. ‘‘I was in the bottom of my life at the time, I was just crying because my marriage is struggling,’’ she told the court.
But Yip says the gym meeting never happened – instead, Chen deliberately targeted her as an investor, having failed to persuade her years earlier to put money into a stalled Takapuna apartment development.
This time, Chen persuaded Yip to invest in 145c Helenslee, a deal rushed through because Yip was flying to France for her daughter’s wedding. Yip says she was promised that she’d make up to $20m profit from selling the land on. Convinced, Yip even bought the adjoining 145b Helenslee Rd as a solo purchase.
Yip was still in France when Chen began harassing her over the WeChat message service to pay the $100,000 commission.
Limited by bank transfer limits, Yip paid $10,000 a day for 10 business days. The translated logs of those chats between Chen and Yip were key to the prosecution case.
On her return, Yip began making inquiries about the fee, and learned that unlike in Hong Kong, Kiwi buyers don’t pay agent commissions.
She asked Chen to withdraw from the deal, but was declined. She paid the next stage of the deposit but Chen then cut all contact – leading her to Chase, and the truth. The joint venture would later be dissolved.
Meanwhile, Chen had also collected $400,000 from Robert Luo, who had met Chen at a Christmas gathering at her uncle’s house in 2016.
Within three days, she had taken him for a drive around Pokeno, and by December 30, he’d agreed to fund the purchases of 87-89 and 119 Helenslee Rd. He would later also agree to fund the purchase of 133 Helenslee Rd, a purchase that may now be faltering.
Luo said he understood the commissions would go to Chase to ‘‘ensure that the vendor would select me as the purchaser and use his connections to make sure the rezoning application went smoothly’’.
They formed a joint company with Chen as the sole director – despite Luo paying all the money. By mid-2018 he was so dissatisfied he met Chen at Greenlane McDonald’s to demand the commissions back and her resignation as a director. She refused.
All along, there was a bigger play going on. Eric Chase says the deals were part of a bigger plan in which Annie Chen would keep the most profitable parts of the development for herself, allowing her co-investors to only buy into smaller, more expensive blocks.
The blocks Yip and Luo invested in were smaller sections which bordered Helenslee Rd. They were essential because they provided access into the development and meant it would border onto the existing urban area. Some were more expensive because the vendors were reluctant, and Chase said that developed alone, they were not profitable.
The big money was in the largest block of land he targeted, at 53 Munro Rd. It needed the Helenslee blocks to ‘‘work’’, but was much cheaper.
Chase says his plan all along was to merge the blocks and the investors to share the profits equitably. ‘‘The way the properties were sold by me to Annie was on the basis of a joint venture across all the properties she contracted,’’ he says. ‘‘The real margin only kicks in with 53 Munro included [and] without it . . . it’s marginal.’’
But Chen didn’t invite Luo or Yip to invest at 53 Munro Rd. Instead, that land is now owned by interests associated with Chen, her estranged husband Andrew Shiu and businessman Qing ‘‘Karl’’ Ye, who has major interests in the Pokeno area, including food nutrition company GMP Pharmaceuticals.
Chase says both he and Yip have since met Andrew Shui to ask for a fairer deal, but he declined to alter the arrangements.
Luo and Yip fear that if their properties are developed before 53 Munro, they will be saddled with the early development costs, and they also believe the masterplan maximises homes on 53 Munro, while placing green space and roading on their land.
But Chen has denied ever saying the land would all be developed together, pointing out that it was purchased incrementally.
An order was made last year to prevent Chen from taking any actions on 87/89, 119 and 133 Helenslee without consulting Luo or by court order. But a judge also prevented Luo and Yip taking a caveat over Munro Rd, saying they had not shown they had a legal interest in it or that there was an overall plan for all the sites to be developed at once. A civil trial to resolve the dispute is set for later this year.
The criminal charges, however, were heard at a two-day trial in December at the Papakura District Court where Luo, Yip and Chase were the prosecution witnesses. Prosecutor Ross Burns said the case was a simple one: were the payments obtained by deception? Defence lawyer John Billington QC said the agreements were open to the interpretation that Chen Shui was contractually due the payments. Both investors had signed handwritten agreements in Mandarin which mention the commissions, using a Chinese character that the court heard could variously mean ‘‘interim fee’’, ‘‘brokerage fee’’ or ‘‘middleman fee’’ – and it was never specified who would receive the money.
Chen resolutely professed her innocence, repeatedly denying the commissions were for Chase, saying they were a ‘‘finder’s fee’’ and a ‘‘referral fee’’. ‘‘Everyone knows already it is for me,’’ she said of the fees. Asked about Yip’s payment, she said: ‘‘That’s for me, I brought the project to her.’’
She said it wasn’t explicitly spelled out in the contract because she wanted to avoid Andrew Shui learning of it.
The court heard Luo had outlaid almost $4m upfront in deposits and the disputed commissions. He’d been told he would make a seven-fold profit. ‘‘If I don’t pay this agent fee, I will not get the project,’’ Luo said in evidence. ‘‘‘[Paying the fee] made me feel a bit uncomfortable but it didn’t make me feel unusual. I felt uncomfortable because, one, it was a significant amount to be taking out in cash and, second, that Ms Chen told me if I did not give it to Mr Chase, I would not get the project and that made me more uncomfortable.’’
Asked if he would have paid up if he’d known the money was not going to Chase, Luo said: ‘‘I would have considered it quite unfair, given the fact I had already paid the deposit and she was responsible for the operation of the project, which would have made it even.’’
Among those watching the trial was understood to be a representative of Chen’s new investor, Qiyi Ye. There was also a parent from the exclusive Auckland school St Cuthbert’s, where Chen’s daughter attends.
Judge Rollo said both Luo and Yip were convincing and honest witnesses, and he could understand why they ‘‘would feel cheated’’. ‘‘The concept that one telephone call, a cold call, to the vendors’ agent would warrant an introductory fee or finder’s fee of $500,000 from ZL [Luo], or $100,000 in AY’s [Yip] case, is absurd,’’ he wrote in his judgement.
He ‘‘expressly rejects any suggestion or assertion Ms Chen had an honest belief [even mistaken]’’ that she had a right to the money. His reserved judgement, finding Chen guilty on both charges, arrived on Friday, with a sentence date yet to be set.
Called for comment, Chen said: ‘‘Sorry, bye,’’ and hung up the phone.
Chase, of course, was much more talkative, and delighted his name had been cleared.
‘‘I want the Chinese community to know she is a piranha,’’ he says, ‘‘not sweet orphan Annie’’.