$18.7m cigarette smuggling case: Businesswoman jailed, millions in assets forfeited

A businesswoman has been jailed for her role in one of the largest cigarette smuggling and tax evasion cases ever in New Zealand.

Nearly $5.5 million of her joint assets have also been forfeited after Customs — acting on an anonymous tip-off — discovered large shipments of cigarettes being unlawfully imported into the country under the guise of a furniture company run by a husband and wife.

Ultimately, the Auckland couple’s four-year scheme saw more than 19 million smokes shipped from China and $18.7m in excise tax avoided.

Today, Hua Yi (Cindy) Zhu sobbed in court as she was sentenced to three years’ imprisonment.

Her imprisonment also comes as her husband Wei Yi (Charles) Hu, described by the judge today as the “mastermind”, was released on parole this month. He had been sentenced to five years and three months’ behind bars in June 2020.

They can today be named after a long-standing suppression order lapsed.

The pair had used their company Zhong Ze Group New Zealand Ltd, trading under the name The Furniture Warehouse, to import cigarettes inside metal office cabinets.

In May 2018, Customs was informed a man was dealing in black market smokes. It sparked a six-month investigation, code-named Operation Whitethorn, which used covert surveillance, CCTV footage, importation interceptions, search warrants, and examining his phone messages and Trade Me sales.

Investigators were then led to Hu’s Auckland storage facilities, where the extent of the criminal enterprise was discovered.

Customs records show that between August 2015 and December 2018 the couple’s company imported 133 shipping containers from China which were said to be full of only furniture.

During Customs’ searches, hand-written notes were also found on the office cabinets concealing the smokes which recorded the quantity and brand of cigarettes sought from China. Millions of dollars in cash was also found in black rubbish bags.

Zhu’s lawyer, Marie Dyhrberg QC, today said her client played a “significantly lesser role” than her husband and argued home detention was an appropriate sentence.

“She does recognise the harm to the New Zealand community and New Zealand Government,” Dyhrberg said.

But Customs prosecutor Dennis Dow, who had earlier described the case as “unprecedented large scale tax evasion”, said Zhu’s charges represented her knowledge of the offending rather than naive recklessness.

Describing her crimes, Judge Evangelos Thomas said Zhu assisted the scheme by finding storage space, disposed of the office cabinets once they were empty and passed on information relating to orders.

“You assisted with payments to the supplier when required, you conducted market research,” he explained, having found Zhu guilty after a trial of 39 total charges under the Customs and Excise Act 2018.

“There are obvious features which make this offending serious; the planning and premeditation, the duration and scale of the operation, the extent of the loss, that this was all for your own financial gain … This is one of the largest cases of its kind that New Zealand has ever seen.”

Customs has estimated Hu sold some $6.4m worth of unlawful cigarettes to four buyers during an 18-month period.

As part of the investigation, the police’s asset recovery unit also restrained two properties worth several million dollars, two luxury cars and several bank accounts.

This led to a High Court forfeiture $5.5m settlement in November 2020, court documents obtained by the Herald read, while Zhong Ze Group was also earlier fined $9800 by the court at Hu’s sentencing.

In a statement after today’s sentencing at the Auckland District Court, Customs investigations manager Cam Moore said Operation Whitethorn has been the largest ever cigarette smuggling operation in recent Customs and New Zealand history.

“This final sentencing shows that Customs will take every effort to disrupt the illicit trade in cigarettes and seize criminal proceeds. We are fully focussed on disrupting and dismantling criminal networks in the tobacco black market,” he said.

Several other tobacco smuggling schemes have been foiled by Customs in recent years, including a Malaysian businessman accused of trying to avoid $3m in tax in a record-breaking single-seizure bust.

The Herald has also earlier revealed how an increasing tobacco black market has cost the government more than a quarter of a billion tax dollars annually.

In May 2020, Parliament also passed legislation closing a loophole which allowed people to import cigarettes and loose leaf tobacco for manufacturing cigarettes and “roll your owns” for sale on the black market without excise tax.

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