Canada

Citizenship on sale

Investigating Ottawa's immigrant investor plan

SHAR LEVINE,ANDREW PHILLIPS July 1 1996
Canada

Citizenship on sale

Investigating Ottawa's immigrant investor plan

SHAR LEVINE,ANDREW PHILLIPS July 1 1996

Citizenship on sale

Canada

Investigating Ottawa's immigrant investor plan

SHAR LEVINE

ANDREW PHILLIPS

The image is striking, but not completely revealing. Prime Minister Jean Chrétien smiles out from the pages of a Taiwanese-Canadian newspaper and clasps the hand of Gordon Fu, the president of a high-profile company that specializes in immigration from Taiwan to Canada. What the photograph does not show is that during the private meeting in the Prime Minister’s Office in Ottawa on Feb. 28, Fu took the highly unusual step of personally handing Chrétien a letter asking that the Prime Minister speed up his application for permanent residency in Canada. Fu was angry that although he heads the biggest consulting company in what has become the hottest Asian market for Canadian business immigration, his own application had been stalled by federal officials. “I have brought in over $225 million of business to this country,” he complained later in an interview with Maclean’s. “Why shouldn’t they let me in? Why should I have to wait so long?” One reason for the wait became evident on June 14 when the RCMP laid criminal charges against Fu and his brother Robert, who heads the Canadian arm of the family business, Imperial Consultants Ltd. The charges, laid in Ontario provincial court in Ottawa, allege that the Fu brothers attempted to bribe two senior officials of the federal immigration department, John Martin and Michael Bradley. Martin, director of

Ottawa’s business immigration division, and Bradley, a senior investment analyst with the immigration department, were in a position to influence a decision affecting lucrative investment funds controlled by Robert and Gordon Fu. According to police sources, the charges involve allegations that the Fu brothers offered each official $50,000 to change a department ruling that suspended several of their funds. Last week, Robert Fu was arrested on the charges in Vancouver, and a warrant was issued for the arrest of Gordon Fu, who is based in the Taiwanese capital, Taipei. The charges against the two men are only part of a wider investigation: even before the bribery charges were laid, Imperial Consultants was the target of a wide-ranging RCMP inquiry. And police officials have told Maclean’s that the RCMP and Immigration officials are now co-operating in an investigation of the Fus’ extensive business operations.

That, in turn, raises wider questions about Ottawa’s immigrant investor fund, launched 10 years ago as a fast track for wealthy newcomers to Canada. Federal officials say the program has brought just over $3.1 billion and at least 45,000 people into Canada since it began in 1986. The idea is that the money would be made available as risk capital for Canadian companies, creating thousands of new jobs. But according to immigration lawyers and even some government officials, the system is being widely abused—and the greatest area of abuse now is Taiwan. In effect, say the critics, Canada has given up control of a major aspect of its immigration policy to for-

eign-based consultants, many of whom use unscrupulous methods including falsification of documents to qualify their clients for Canadian visas. And, the critics add, the benefits that Canadians have been led to expect from these wealthy immigrants may be more apparent than real. Although the regulations require them to invest a minimum of $250,000 or $350,000, depending on the province, for five years to obtain residency in Canada, that money often does not come into the country.

Instead, fund managers can, and often do, use elaborate shell games so that their clients qualify by putting up only a fraction of the cash required. And even that money, say police sources familiar with ongoing investigations into some investor funds, sometimes remains in overseas accounts. The result, say the system’s many critics, is that Canadian residency, and eventually citizenship, is for sale at bargain prices. “The investor immigration program has always stunk,” said an immigration department official with extensive experience in Asia who asked that his name not be used. “And in Taiwan, it stinks higher than anywhere else. There is massive fraud.” Canadian officials familiar with the trade say that many consultants operating in Taiwan have become so sophisticated in preparing their clients’ applications that they—not Canadian Immigration officers—effectively control who can get into this country through the investor immigrant and entrepreneur immigrant programs. ‘There isn’t staff to check all the applications,” says the Immigration official. “It’s mostly a paper transaction between lawyer and consultant. It’s a Potemkin Village, a charade, and the taxpayer’s interest is not being served.”

Taiwan is the focus of the latest concern for several reasons. The country’s booming economy has produced many millionaires anxious—and able—to buy sanctuary in a stable country like Canada. Recent tension with the Communist People’s Republic of China produced new interest from Taiwanese who fear political trouble down the road. Unlike Hong Kong, where most busiI ness people speak English and are relatively I familiar with Canada, Mandarin-speaking § Taiwanese tend to be easier targets for conH sultants who promise to settle them pain? lessfy in a strange new land. And Canada’s

lack of formal diplomatic ties with Taiwan makes it more difficult for Canadian Immigration officials to investigate questionable behavior there.

The charges against Robert and Gordon Fu involve only the alleged bribery—not any other practices. The Fu brothers are major players in the 10-year-old immigrant investor program, which attracted $606 million and 2,009 investors to this country last year alone. With offices in Taiwan and Hong Kong as well as Vancouver, Toronto, Montreal and Moncton, N.B., Imperial Consultants alone has brought some 3,000 Taiwanese families to Canada since it was founded in 1987. It advertises a full range of services, charging consulting fees averaging $12,000 per applicant, and signing up many of its clients for the services of its related travel agency, real estate company and auto brokerage. Most lucrative, though, are commissions from the tens of millions of dollars of clients’ money invested in a dozen private investment funds controlled by Robert and Gordon Fu. At the time of the February meeting in Chrétien’s office, the brothers were aware that the government was about to bring in new regulations drastically limiting the eligibility of privately administered venture-capital funds open to immigrant investors. Those new rules, which are to come into effect on June 30, were prompted by several high-profile cases involving mismanaged and even fraudulent funds. After June 30, private firms will no longer be allowed to set up new investment funds for business immigrants, or accept new money for existing funds. Prospective immigrants will have to direct their money to government-sponsored funds instead.

Those restrictions have alarmed the scores of consultants in Taiwan who earn fat fees by helping Taiwanese invest the minimum needed for residency in Canada. In an ad in a Taiwanese newspaper, one prominent firm specializing in immigration to Canada, called OIC Confraternity, warned potential clients: “Canadian immigration is entering a dark time. Restrictive policies will exclude a greater number of immigrants as refusal rates increase dramatically.” The 150-member Taiwan Immigration Consultants Association in Taipei recently sent a letter of protest to Canada’s Commission in Hong Kong, which handles immigration applications from Taiwan. “Most of our members promote Canada as the number 1 choice for immigration, but it seems the Canadian government has become tougher,” says Ong Tuo, the association’s chairman. “They’re making it very tough for us.”

Publicly, however, officials at the Canadian trade office in Taipei maintain that it is “business as usual” for immigration to Canada. And in Ottawa, Immigration officials defend the program as a way to bring money to Canada and create jobs. Department spokesman John Oliver said the new rules restricting private funds are aimed at dealing with the main problems with the program—including the fact that some investors bring only part of the required money into Canada. “It’s something the department believes in,” he said. “It’s just a matter of redesigning it so it attracts risk capital that goes to small and medium-sized business.” According to department figures, the immigrant investor program has created 25,346 jobs since 1986.

Still, the program is evidently a sensitive subject for Ottawa. When Maclean’s began making inquiries into the program and the activities of immigration consultants in early March, that prompted a flurry of concern, including a confidential faxed message from Rick Morrison, executive assistant to Georges Tsai, an assistant deputy minister of Immigration. Morrison’s message warned several department officials about the inquiries and asked for advice on what “steps we should take for damage control.”

The story of Imperial Consultants starts soon after Ottawa launched the investor immigration program a decade ago. At that time, the Fu brothers were involved in their

family’s business in Taiwan, selling chemicals. They soon switched to selling Canada, and Robert Fu moved to Vancouver to open up a Canadian operation that now employs about 80 people (in addition to 300 staff in Taiwan). Their brother, Tim, and the wives of all three men are also involved in what has become the biggest company in the booming Taiwan-Canada immigration business.

Gordon Fu’s entrée to the Prime Minister’s Office came through Montreal-based Lévesque Beaubien Geoffrion, one of the largest Quebec-based investment firms dealing with business immigration. Until recently, Imperial was the exclusive agent in Taiwan for a Quebec fund managed by Lévesque Beaubien. Louis Leblanc, vice-president and director of the company, was responsible for setting up the February meeting at which Fu presented his personal appeal to the Prime Minister. (A spokesman for Chrétien said last week that the meeting involved potential investors in a hotel in the Prime Minister’s Quebec riding, and that any letter given to him would have been passed on through “normal channels.”) Fu told Maclean’s that when he met the Prime Minister he was “very angry” that his own application for permanent residency in Canada had been delayed for 18 months. “That’s a very bad treatment for me,” he said. Later, however, Fu acknowledged that it was inappropriate for him to ask the Prime Minister to intervene in his case. “That is a mistake,” he said, adding that “cultural differences” between Canada and Taiwan accounted for his gesture.

Imperial Consultants also attempted to enlist the aid of another man with political connections to the immigration department: former Conservative minister Gerry Weiner. Weiner, minister of state for immigration from 1986 to 1988, visited Imperial’s offices in Taiwan and accepted a two-day paid trip from Montreal to Vancouver in February to mark the Chinese New Year as a guest of Imperial, which also published his picture in its client newsletter. Last

week, Weiner said that the Fus had made “a number of offers” to him, but he did not accept any of them. “I do not have any relationship or employment with Imperial Consultants,” he added.

Imperial was dealing with Lévesque Beaubien for another reason that irks critics of the investor immigrant program. As part of its independent immigration policy, Quebec runs its own program for investors, separate from that administered by Ottawa and covering all the other provinces. By requiring that all immigrant investments be made through a registered broker and invested in a Quebec corporation, the province gives business immigrants a high degree of security. There is no requirement, however, that immigrants who take advantage of the Quebec program’s favorable terms actually settle there—and few do. Instead, they qualify for Canadian residency but usually go to Toronto or Vancouver, home to Canada’s biggest Taiwanese community (about 45,000 people).

That practice is commonly known in the immigration community as “trampolining”—landing in one province and bouncing immediately to another. As a result, Quebec gets the financial benefits of immigrant investment (some $1.1 billion in the past decade), while other provinces (mainly British Columbia) end up with the cost of educating the immigrants’ children, medical benefits, and the social tensions that come from the arrival of many newcomers from different cultures. “The money goes to Quebec but all the bodies come to British Columbia—so it’s a double whammy for British Columbia,” says a disgruntled provincial trade official based in Asia, who also asked for anonymity. “But you can’t blame the immigrants. The system allows them to do it, so why not?”

Managers of private funds set up for immigrant investors fear that Ottawa’s new regulations will cut off their main source of income. They predict that even more new investment will now go to

Quebec (which now gets fully half of all such money coming into Canada), because it is not covered by the federal rules. As a result, it will be the only province able to produce new private investment funds, while only government-sponsored funds will be able to operate in the rest of the country. Private fund managers outside Quebec say that is an unfair advantage, since they will no longer be allowed to create new funds, market to overseas investors or manage their investments in Canada.

Most of the private funds that Imperial sells are based in provinces that require a minimum investment of just $250,000 (only British Columbia, Ontario and Quebec funds require at least $350,000). They are also higher-risk. Both Gordon and Robert Fu point out that Imperial Consultants does not actually own the private funds: they are owned or managed by the Fus or members of their families. The Fu brothers have even installed their elderly mother, Kuang-Lung Chao, as manager of several funds. Their funds include Atlantic Capital Corp., Atlantic Prudence Fund, Atlantic Growth Fund Corp., P.E.I. Growth Fund Corp., Mount Royal

Capital Corp., AB Dynamic Fund Corp., KLC Capital Corp., NB Growth Fund Corp., NS Growth Fund Corp., and AB Capital Corp. Together, they represent investments of more than $257 million.

Critics of the system propose several ways to correct its most glaring flaws. One suggestion voiced by those concerned about immigrants “trampolining” from Quebec to other provinces is that investors be required to reside in the province where they place their money for a period of three years. That would affect 85 per cent of those who have invested through the Quebec plan and then gone on to settle in other provinces. New immigrants, knowing there is a residency requirement, would be free to choose to live in Quebec or to invest in the province where they intend to live. Says Richard Kurland, a Montreal immigration lawyer and adviser to the Quebec immigration department: “That would further the moral contract the immigrant investor makes when he declares that the intended province of destination is Quebec.”

Other critics maintain that rules governing who can act as an immigration consultant should be tightened. The federal immigration department recently endorsed that idea, saying it is prepared to consider licensing consultants as part of a strategy aimed at protecting the public against abuse. At present, many Canadianbased consultants regulate their own activities: the Toronto-based Organization of Professional Immigration Consultants requires its 200 members to follow rules of professional behavior and a code of ethics. However, says spokesman Paul Billings, Ottawa has undermined OPIC’s attempts to police the business by allowing unregulated overseas consultants to deal with Immigration officials. “Not only the industry, but the country as a whole, is being given a black eye by these unscrupulous consultants and immigration lawyers,” says Billings. “We are a bit frustrated.”

Still other critics, even within the immigration department itself, take a harsher view. “They should eliminate the whole damn program,” one official said bluntly. “It’s a farce.” With tens of millions of dollars at stake, however, that is advice Ottawa is unlikely to follow.

With DIANE BRADY in Hong Kong

DIANE BRADY