The iProsperity group of companies collapsed last month owing creditors $325 million – though more than $130 million of those claims are from related entities within the iProsperity group.
Administrators from three insolvency firms are picking through the wreckage of the vast web of companies set up by iProsperity while NSW Police and the Australian Securities and Investments Commission investigate Mr Gu’s activities in Australia.
“There is clear evidence of substantial amounts of funds received from investors that have been used by the companies and its directors for a variety of uses – for example we have found evidence suggestive of new funds repaying old investors (or loaning funds back to certain investors) [and] substantial monies being paid to related parties, including Mr Gu,” Cor Cordis partner Barry Wight said.
While primarily headquartered in Sydney, iProsperity had extensive Melbourne operations including a large office at 120 Collins Street, the same building that houses the corporate regulator’s Melbourne operation.
iProsperity was one of the biggest players in Australia’s significant investor visa scheme, a government-run program that fast tracks residency visas for offshore citizens and is popular with wealthy Chinese.
The visa scheme allows non residents to secure permanent residency if they invest at least $5 million with a registered manager who places their investment in a fund and properties are then bought on their behalf. The Australian arms of several large investment banks, including UBS and Moelis, have many successful such funds and investments.
In the case of iProsperity, many of the assets its funds bought on behalf of investors were located in Melbourne.
This included Century City Walk shopping centre and the adjacent Novotel Hotel in Glen Waverley, worth $150 million, the Pullman Hotel in East Melbourne for as much as $200 million, and a $220 million portfolio of Ibis hotels. Claimed purchases outside Australia including the Hudson Hotel in New York and the Iririki Resort and Casino in Vanuatu – an increasingly popular investment destination for wealthy Chinese residents.
But administrators have found that despite iProsperity’s claims about these purchases and reports in the financial presses about it being a “breakout star” in property investment, many of its claimed transactions were not what they seemed.
Administrators to most of the group of companies at Cor Cordis have identified a range of unusual transactions that they are further investigating.
One deal of interest to Cor Cordis is iProsperity’s claims to own the Pullman Hotel overlooking the MCG.
“This hotel has not been part of the broader group’s assets holdings (although it has been marketed in this way),” Mr Wight said.
“During our limited discussions with Mr Gu and also with [his business partner Harry] Huang, they have advised that iProsperity essentially acted as a broker to assist a high net worth client in acquiring the hotel,” Mr Wight said.
He said he was now investigating to see if there were any links between the purchaser and iProsperity.
Another transaction by iProsperity that is under investigation by administrators involved a portfolio of Ibis hotels including one in Melbourne near the Queen Victoria Market and two hotels in Sydney.
KPMG has found that while iProsperity raised $60 million from investors to purchase five Ibis-branded hotels in Australia, it did not complete the transaction.
“Whilst the company raised significant funds from investors in respect of the proposed acquisition totalling $60.5 million (based on our review of the company’s bank statements), the Ibis hotel transaction did not complete,” KPMG partner Morgan Kelly said in a report to creditors.
Administrators have also found iProsperity did not complete its acquisitions of the Iririki Resort and the Hudson Hotel.
Christopher Skase was a businessman who became one of Australia’s most wanted fugitives after he fled to Majorca, Spain to live a life of luxury when his business empire collapsed with hundreds of millions of dollars in debt.
The Sunday Age was not able to reach Mr Gu in Los Angeles for comment.
Sarah Danckert is a business reporter.