Trial to tell whether money was theirs, bank’s

By Jeff German

Saturday, June 14, 2008 | 2 a.m.

A federal racketeering trial stemming from the alleged embezzlement of $400 million from China’s state-run bank is delving into the secretive and high-powered world of Strip high rollers.

In a 15-page trial brief filed Thursday, federal prosecutors said three former branch managers of the Bank of China and their wives “maintained a lavish lifestyle in Las Vegas” as they gambled away $12 million of that money in just two years.

“All of the defendants were high-profile gamblers known to many Las Vegas casinos,” the prosecutors wrote.

While conducting hundreds of thousands of dollars’ worth of business with the casinos on a daily basis, prosecutors said, the defendants had the use of casino jets, stayed in luxurious hotel rooms and ran up restaurant tabs of up to $4,000.

In a case that involves unprecedented cooperation between China and the United States — including the first-ever videotaped criminal depositions taken in China — two of the former bank managers and their wives are charged with a pattern of racketeering activity from 1991 to 2004 in the alleged $400 million theft, including laundering money in Las Vegas and Canada and entering the United States illegally.

Prosecutors have come to Las Vegas from the Justice Department’s Organized Crime and Racketeering Section in Washington to begin trying the case this week. The trial, which also involves four language interpreters, is expected to last at least three months.

In his opening statement Wednesday, Justice Department lawyer Ronald Cheng told the jury the defendants did much of their gambling at Caesars Palace and the Bellagio.

At baccarat, their game of choice, they often would bet $10,000 a hand and sometimes $100,000 a hand, Cheng said.

After Bank of China auditors began to uncover the missing money in 2001, Cheng said, the defendants wired $8 million to a Las Vegas casino and traveled to Vancouver, British Columbia. They arranged for a casino jet to fly them to Las Vegas to get the $8 million, but when they arrived, they learned the money had been frozen. According to news reports, however, during that trip one defendant still managed to lose $2.4 million at Caesars Palace.

Flight logs and passenger manifests for a private jet registered to Caesars Palace are on prosecutors’ list of evidence.

The indictment alleges the defendants were involved in transporting more than $3.1 million in stolen money to several Las Vegas casinos in 2000 and 2001.

A $1 million check was cashed at Caesars Palace, four checks totaling $2 million were deposited at the Hong Kong office of the Rio, and cash deposits of $130,000 were made at Paris Las Vegas, the indictment charges.

In their trial brief, prosecutors list as witnesses a half-dozen executives from Caesars Palace, Treasure Island, the Bellagio and the Rio.

Gambling and financial records from those casinos and others, including the Venetian, Paris and the now-defunct Showboat, are among the tens of thousands of pages of documents prosecutors expect to show jurors over the next three months.

Gaming regulators and casino insiders said this isn’t the first time, and likely won’t be the last time, big spenders have swept into town to gamble with allegedly ill-gotten gains.

“If they’re playing with cash, and they’re considered a high roller, there’s no responsibility on the casinos’ part to find out where they got the cash,” said Jerry Markling, chief of enforcement at the Nevada Gaming Control Board.

Mike Sloan, a former Strip executive who consults for the industry, said: “Casinos are no different than any other business. Over the years, this happens. You don’t necessarily know the source of people’s money.”

Although only a few reporters are covering the trial so far, the case previously attracted international attention because it is considered the largest bank embezzlement in China’s history.

James Tong, a UCLA political science professor who specializes in China, said the communist government asked for U.S. assistance under a June 2000 treaty between the countries pledging increased cooperation on law enforcement matters.

The prosecution, he said, has been watched closely by the Chinese government as well as the U.S. State Department, and is seen as a positive development in the complicated and sometimes chilly relationship between the countries.

“There has definitely been very close cooperation here,” Tong said.

A week after the Jan. 31, 2006, superseding indictment, China’s official news agency ran a story praising the work of U.S. authorities and suggesting the case would lead to even more cooperation.

American authorities were instrumental in getting Yu Zhendong, one of the former Bank of China managers involved in the alleged theft conspiracy, to return to China. Under a plea deal with prosecutors in Las Vegas, Yu agreed to cooperate in the case and go back to China to face similar charges there.

Prosecutors and defense lawyers traveled to China to take Yu’s videotaped deposition, the first time that is known to have occurred in an American criminal case.

Las Vegas attorney Bret Whipple, who attended the deposition, said the visit by the Americans attracted a lot of interest from the Chinese media. Prosecutors this week began playing for the jurors more than 30 hours of Yu’s deposition.

Whipple, who represents former Bank of China branch manager Xu Guojun, said he intends to present evidence that will show his client had no intent to commit any wrongdoing.

Whipple said he doesn’t understand why the Justice Department is even prosecuting this case.

“Why are they going through with this three-month song and dance about this money that was allegedly misappropriated in China?” he said. “They could have just charged them with visa violations and sent them back to China to deal with the bank issues.”

Attorney Mitchell Posin, who represents the other branch manager on trial, Xu Chaofan, shares that opinion. Posin said the charges were filed here after the Bank of China took steps to “clean up its act.”

“They needed a scapegoat and that was our clients,” he said.

The defense attorneys are all appointed to represent the defendants, meaning taxpayers are footing the bill. The lawyers estimate the defense is going to cost taxpayers about $1 million and the total cost of the case will be at least $2 million and possibly as much $5 million.

Jeff German is the Sun’s senior investigative reporter. Sun reporter Steve Kanigher contributed to this story.