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Entrepreneur John Hui has been trying for more than a decade to recover US$10 million lost from a computer deal gone bad. To date, he’s spent about $5 million in legal fees in an attempt to force Jay and Christina Chiang of Richmond Hill, Ont., to pay up. The Court of Appeal for Ontario calls the case one of the most contemptuous it has ever seen. But by using more than 10 aliases and moving money across continents to family members outside the court’s jurisdiction, the Chiangs haven’t paid anything. They claim to be bankrupt, despite owning a mansion and two luxury cars, and sending their two sons through Upper Canada College, where tuition and boarding costs about $50,000 a year.
Hui, for one, doesn’t believe the Chiangs are telling the truth. In January, a private investigator he hired found a trading account worth US$5 million while rooting through the Chiangs’ garbage. The court system also has its doubts. The Chiangs have been held in contempt of court for refusing to show how much money they have and for not providing a list of their assets.
Hui’s fight is an important one for Canada because it raises the question of whether people can continue to live the high life while claiming bankruptcy and ignoring their debts. Canada was dubbed the Wild West in 2004 by David Dodge, then the Bank of Canada governor, because of its lax enforcement of securities rules and regulations, and this particular case sparks a worry that the entire legal system could be further undermined if court orders can be repeatedly ignored with no fear of real penalties.
And since the total number of bankruptcies across Canada increased last year by more than 12% — to 96,774 from 86,140 in 2007 — more court orders like the ones the Chiangs have received are likely to be issued. Creditors have some protection since one purpose of Canada’s Bankruptcy and Insolvency Act is to equitably distribute assets to creditors. But, warns bankruptcy lawyer Aubrey Kauffman, things don’t always work that way. If it’s not a straightforward bankruptcy case, where the trustee can allocate assets to debtors, it can be tough to get anything.
“If you have a debtor who is out of control, who will do anything, say anything, who will disregard civilized convention, it is very difficult for the system to deal with those people in an economic way,’’ says Kauffman, a partner with Fasken Martineau DuMoulin LLP in Toronto with 30 years of experience in bankruptcy and insolvency.
Few Canadians have likely heard of the Chiangs, but most certainly know Peter Pocklington, who in March was charged by the FBI for submitting false bankruptcy declarations in the United States. The former owner of the Edmonton Oilers faces a jail sentence of up to 10 years after being accused of failing to disclose two bank accounts and the contents of two storage units when he filed for bankruptcy last August, claiming liabilities of US$19.6 million and a net worth of US$2,900. Canada’s Bankruptcy and Insolvency Act carries a similar provision to the one facing Pocklington, whereby a false claim carries a maximum penalty of $10,000 and/or three years in jail. But, as Hui says, “Unless [the Chiangs] were as famous as Pocklington, we wouldn’t have a chance for the criminal side of the law to lift a finger.”
Unfortunately, Hui’s cynicism comes from experience, and it comes with an important lesson for the rest of us: always complete your due diligence on prospective customers, suppliers and partners before you deal with them.
His tangled case, which has involved courts in five countries, could have been avoided, if he had listened to his gut in the 1990s and hadn’t struck a deal with a computer distribution business owned by Jay and his brother Julius. But that just adds further salt in the wound. The reality is that after a friend vouched for the pair, Hui’s company at the time, Korea Data Systems Co., supplied the Chiang brothers more than $10 million worth of computer monitors in 1993, a deal for which Hui has never received a single penny in return.
Hui first tried to resolve his dispute with the Chiang brothers by himself. When that failed, he turned to the courts. In 1998, a California court ruled Hui was entitled to US$9.7 million from the Chiang brothers. In response, the brothers promptly filed for bankruptcy. Jay, a.k.a. Jay Tien Chiang, and Tienchieh Chiang, now 46, filed in Ontario in 1998, and Julius a year later in California. Hui, who was raised in Hong Kong, completed his MBA at Hamilton’s McMaster University and eventually became something of a serial tech entrepreneur in California, didn’t accept the bankruptcy argument. He was the largest supplier of computer equipment to the Chiang brothers, who had built up a computer distribution business, Aamazing Technologies Inc., from zero to US$40 million in sales in less than five years in the early 1990s. Hui, who won’t say how much he is worth (news reports show he sold one of his startups, eMachines Inc., for US$266 million in 2004), felt the brothers had the means to pay up, and so he vowed to continue his fight.
Christina Chiang, 49, who was an actress and singer in Taiwan, was named in the litigation when a California judge ruled she had helped her husband hide money from Hui in 2004. In Ontario, Christina, also known as Suh Mei Tasi, Su-Mei Chiang and five other aliases, has been part of the court proceedings since 1999, a year after Hui hired a legal team from Borden Ladner Gervais LLP. They told him right from the start he would be unlikely to recover much. But Hui didn’t care. He couldn’t let someone get away with ripping him off while they enjoyed the spoils of his riches. He’s chased the Chiangs through courts in Canada, the U.S., Taiwan, Singapore and Hong Kong.
Jay and Christina have made it almost impossible for Hui to make any real progress. For instance, in October 1999 the couple was ordered to attend court, but they didn’t make it, claiming Christina suffered an injury on her way in. The injury didn’t prevent her from placing a mortgage on the family home at the time of the injury, nor from wiring $600,000 to her father-in-law’s account in Taiwan six days later. On separate occasions, Jay under oath couldn’t remember if he had purchased a Porsche and whether he was a signatory on a bank account. And that’s despite being described in 2002 by someone who did business with him as “bright and accomplished,” and someone who took “a more studied and intellectual approach to the business world.”
Hui’s case finally started to gain some traction in September 2000 when he was granted two legal orders that his lawyer, Aaron Blumenfeld, says could help others fighting bankruptcy cases. The courts handed down an Anton Piller order, essentially the right to search the Chiang mansion on 10 Cortina Court in a wealthy enclave in Richmond Hill, Ont., just north of Toronto. Despite claiming they had no income, records were found of a telecom business that generated between $15 and $20 million. The business disappeared at the time of the order. And, despite saying they had bank accounts at just one branch, evidence of 80 bank accounts and statements from multiple financial institutions were found. No wonder then that the supposedly bankrupt couple who claimed not to have an income could afford a mansion, two luxury cars and holidays to Aruba and Asia.
At the same time, the courts also granted a Mareva order, which froze the worldwide assets of the Chiangs and those of Jay’s parents, Christina’s mother and others related to the couple. On the day that order was put in place, Christina flew to Singapore to transfer $800,000 from her account there to her mother’s account in Taiwan. It was a trip she initially didn’t admit to taking when questioned under oath.
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