Chung family created 'spider web' of properties, bank accounts
More than seven years after a Toronto-area woman cashed in a stolen $12.5 million Lotto Super 7 ticket, Ontario's lottery corporation is trying to recoup the money, but the lengthy wait may have cost the Crown agency.
CBC News has learned that the Ontario Lottery and Gaming Corporation (OLG) filed a lawsuit in March against the woman who claimed the ticket, Kathleen Chung, and her family and associated companies for "deliberately deceiving" the corporation.
Police allege that Chung's father and brother stole the free play ticket in 2003 from its rightful owners who validated the ticket at the Chung-managed Variety Plus store in Burlington, Ont. The duo then allegedly gave the ticket to Kathleen to claim in an attempt to cover their tracks.
The Chungs were charged in September 2010. Kathleen Chung, 30, faces charges of fraud, possession of property obtained by crime and laundering proceeds of crime. Her brother, Kenneth Chung, 29, and their father, Jun-Chul Chung, 61, were each charged with several counts of theft, possession of property obtained by crime and laundering proceeds of crime.
Since Kathleen Chung cashed in the ticket in late 2004, her family appears to have socked money away in dozens of bank accounts in the Toronto area, Seoul and New York, tucked it into life insurance policies and bought $10.5-million worth of properties, including mansions and a Tim Hortons building, according to the lawsuit and land registry documents.
Forensic accountant Marilyn Abate says the Chungs appear to have set up a sophisticated "spider web" of accounts and numbered companies, a sign they were likely expecting the OLG to come after them.
"They've had seven years to try and hide it and transfer it to different accounts, different jurisdictions and to different properties, or spend it," says Abate.
"As the time goes on, your chances [to recover it] become worse and worse."
Two-year window closed: defendant
Time is also not on the OLG's side in terms of the civil lawsuit. In her statement of defence, Kathleen Chung says she didn't know the ticket was stolen, but also that the limitation period — typically a two-year window — ran out long ago.
The winning ticket has already cost the Crown agency more than twice its original worth. In January, the OLG paid the rightful owners $12.5 million, plus $2.3 million in interest.
The case was highlighted in a 2007 Ontario ombudsman's report about unusually high numbers of insider wins and featured in a documentary by CBC's The Fifth Estate. In 2009, Ombudsman Andre Marin urged the OLG to launch civil suits to regain millions in taxpayer dollars lost to suspected fraudulent insider wins.
Asked why the provincial lottery agency waited until 2011 to sue the Chungs, OLG spokesman Tony Bitonti said it "did not want to prejudice the OPP investigation surrounding this case." The civil lawsuit is currently on hold until the criminal case wraps up.
Lengthy wait questioned
Legal expert James Morton says the OLG appears to have waited an "awfully long time" considering there's a two-year limit in Ontario for filing a civil lawsuit, which starts the day the fraud is discovered.
"You don't have to wait," said Morton. "It's common ... to issue the claim basically the same time you go to the cops."
In Kathleen Chung's statement of defence, filed Oct. 12, it says that the OLG ought to have known years ago that the prize money was wrongfully claimed. It points out that the OLG carried out an almost year-long investigation before giving her the lottery money in late 2004, plus there was a 2007 report by Ontario's ombudsman highlighting Chung's claim as questionable.
Chung denies knowing the ticket was stolen and claims she wasn't "enriched" by the lottery win, instead she claims the money went to her parents and brother.
The family's assets have been frozen in relation to the criminal proceedings.
The family members no longer live in the two mansions worth $3.4 million purchased in the wake of the lottery prize.
The parents and their son live in separate high-rises in the Greater Toronto Area. Kathleen Chung and her husband, Jung Ho Park, 37, who had twin girls in March 2010, have moved into a more modest Oakville home bought in September for $880,000.
Jung Ho Park, a dentist who works at five Toronto-area practices, is also named in the lawsuit. He has filed a statement of defence denying he received any money traceable to the lottery win.
Kathleen and Kenneth's mother, Young Ja Chung, is also named in the OLG lawsuit, as are three individuals whose relation is unknown: Sung Chan Kim, Young In Song and Hi Ok Chung.
Kathleen Chung's statement of defence is counterclaiming for $12.5 million, plus costs, against her father, mother and brother, if the OLG is successful in its lawsuit seeking to recoup the money from her.
Chungs 'credit-proofed' money
Experts will have to dig through a sophisticated network of 34 accounts, including one in South Korea and another in New York, to determine where the $12.5 million went.
Abate says that such a convoluted chain of accounts is typically used to move money around, making it difficult to trace, suggesting the Chungs knew what they were doing.
"They credit-proofed things, they went and hid their money in assets that would be difficult to get at and costly to get at," says Abate.
She also notes that the Chungs used mortgages to pay for more than three-quarters of their $10.5-million in properties, ensuring they could invest their money elsewhere — and making it far more difficult for the OLG to claim.
"The bank is going to get paid out first," says Abate. "Then the money is going to be held frozen by the Crown. And then after the criminal suit's done, we'll see if there's anything left over for OLG."
Thanks to Steve for the tip.