The Ontario Securities Commission has charged Xiao Hua Gong – who also goes by Edward Gong – with criminal fraud offenses, including fraud of more than $5,000, possession of property obtained by criminal activity, laundering crime proceeds and forgery, according to a news release from the commission.
Gong is accused of fraudulently selling securities for two companies, 024 Pharma Inc. and Canada National TV Inc., worth hundreds of millions of dollars to Chinese citizens.
Gong allegedly controlled both companies and arranged the sales from the Toronto area, according to the OSC. The commission said the sales took place between 2012 and Dec. 20.
"The OSC further alleges that a significant percentage of the money obtained by this scheme was directed to Gong’s bank accounts in Canada which he then used for his personal benefit," the release said.
Canadian officials said Gong was arrested Dec. 28 and posted bail the next day. His next court date is Jan 31.
The OSC conducted the investigation with assistance from members of the Economic Crime Investigation Department, Ministry of Public Security of the People’s Republic of China, the Northern Asset Recovery unit, Financial Crime Group of New Zealand police and the Royal Canadian Mounted Police.
The charges could further delay development of the Harvard property, which Gong bought for $9.3 million in April 2016.
“We want the property to be developed and used,” said Charles Eldredge, who leads the Harvard-Woodstock enterprise zone. “This stands to delay that, if not throw a monkey wrench in the process for a longer period of time.”
The commission alleged that Gong used the money for his own personal benefit, but it’s unclear how the proceedings will affect the dormant 325-acre property.
“Whether this is tied up with his properties in the U.S., or what [the] ultimate effect of that will be, we don’t know,” Harvard City Administrator Dave Nelson said.
Answers likely won’t come until the legal process is underway.
“Until the legal proceedings move forward, we don’t know the consequence,” Eldredge said. “I would presume these legal proceedings will result in a lien or attempt to forfeit property, but I don’t know that.”
Gong allowed property taxes on the 1.5 million-square-foot campus to fall delinquent when he failed to pay the second installment on the $325,437 tax bill Sept 9. An auction company bought the taxes at a McHenry County tax sale Oct. 30, according to county records. This means there is an existing lien on the property by the auction company that bought and paid the taxes. If Gong doesn't pay them back, the company can take control of the site in two and a half to three years.
The property at 2001 N. Division St. has been vacant since 2003. Dearborn, Michigan-based Edward Harvard Holdings LLC bought the site in an online auction in 2016 for $9.3 million. Gong submitted an incomplete application for economic incentives through the Harvard-Woodstock enterprise zone for a proposed $32 million project that would launch smartphone manufacturing at the site in March, but the project has yet to move forward.
Gong’s lawyer, Glen Jennings, who leads the White Collar Defence and Investigations group for Toronto-based Gowling WLG, did not respond to a request for comment.
Former Motorola campus timeline
1997: Motorola builds $100 million corporate campus in Harvard.
2003: In March, Motorola closes the plant. In July, a developer agrees to buy the property with plans to turn the vacant building into an indoor water park.
2004: In August, the water park deal falls apart.
2008: Florida-based Optima International buys the property for $16.75 million.
2010: Trucking company Navistar considers relocating its center of operations to the campus.
2014: Optima International fails to pay its tax bill and owes more than $329,000 in property taxes, according to the McHenry County Treasurer’s Office. The electricity on the property is turned off in the spring. In May, ComEd sues the owners of the corporate campus, alleging that Optima Ventures had accumulated $545,816 in unpaid electric bills as of April. A private equity group in Chicago secures a tax lien on the property in the fall.
2016: Xiao Hua Gong – who also goes by Edward Gong – buys the 325-acre campus for $9.3 million in an online auction by Ten-X.com in April.
March 2017: Edward Harvard Holdings LLC asks the Harvard-Woodstock enterprise zone for economic incentives for a $32 million project in March to begin manufacturing smartphones at the long-vacant campus.
December 2017: Canada’s Ontario Securities Commission charges Gong with criminal fraud offenses, including fraud of more than $5,000, possession of property obtained by criminal activity, laundering crime proceeds and forgery. He later is arrested in Toronto and posts bail Dec. 29.