A Chinese national is facing a federal charge for allegedly laundering millions of fraud proceeds used by a co-conspirator to purchase and flip real estate for profit in West Hawaii.
The federal grand jury indictment, handed down June 10 in U.S. District Court in Honolulu, charges Yao Zhungjun, 50, of Beijing, with a single count of conspiracy to commit money laundering as part of multiple schemes to defraud J.R. Simplot Co., a multinational supplier of agricultural products, between 2010 and 2016.
Yao, a former project manager at J.R. Simplot Co., an entity operating out of China, which had acquired the Jacklin Seed Co., a producer and marketer of grass seed and turfgrass based in Liberty Lake, Washington, allegedly solicited grass seed orders at artificially inflated prices from Chinese customers and then negotiated kickback payments from those customers in exchange for rebate payments from Simplot.
Co-conspirator Christopher Claypool, Jacklin’s general manager, approved and Yao collected millions of dollars in kickbacks from just one Chinese grass seed distributor, Beijing Oasis, on more than $10 million in rebates Simplot paid to Beijing Oasis.
The indictment also alleges that Yao and Claypool conspired to defraud Simplot directly. Specifically, Claypool arranged for seller commissions purportedly owed to a European partner to be paid to Yao through a Citibank Hong Kong account in Yao’s wife Li Yi’s name. Claypool directed the payment of more than $7.3 million in fraudulent commissions to this account from 2008 through 2014.
As part of the money laundering conspiracy for which Yao was indicted, he and Claypool then routed the proceeds of these schemes through at least six pieces of real estate on the Big Island. Between March 2010 and June 2016, Yao allegedly caused more than 55 wires, totaling over $11.6 million, to be sent from accounts he controlled in Hong Kong to accounts at First Hawaiian Bank in Hawaii for use in the acquisition and development of six parcels under Claypool’s control.
From 2010 through October 2018, Claypool developed and then sold those properties located in Waikoloa, Puuanahulu, Kukio and Kailua-Kona, for more than $11.4 million and later transferred the proceeds to investments accounts at brokerage firm Edward Jones.
The Big Island properties together totaled nearly 6.3 acres with lots ranging from less than a quarter-acre to just under 3 acres. Among them were a 0.35-acre oceanfront parcel near the popular Banyans surf spot and a 10-bedroom, 5.5-bath home on 2.87 acres in Kukio.
Two of the properties, one on Eleele Street in Waikoloa and the other on Makani Eka Place in Kukio, were transferred to Kilohana Makai LLC for sale to unaffiliated third parties. Kilohana Makai LLC remains the landowner on the lone parcel not sold, the 0.35-acre parcel off Alii Drive.
That oceanfront lot is the same parcel that went before the Leeward Planning Commission in April 2019 when Kilohana Makai LLC sought a five-year extension of a special management area use permit that had expired nearly two years prior. That permit would have allowed a five-story, 11-unit condominium on the parcel.
The developer agreed several months later during mediation prompted by a contested case to take the plan off the table. The landowner’s representative said Kilohana Makai LLC planned to work toward making the lot a public space for the community.
Also known as Keakealaniwahine, the Hawaii County Council approved purchasing the site May 5 using Public Access, Open Space and Natural Resources Preservation Commission (PONC) funds. Market value for the property Tuesday was $1.245 million.
Kona Councilwoman Rebecca Villegas, who introduced the resolution authorizing the purchase, said she will be looking into the ownership matter.
“I had no idea,” she said late Tuesday. “The representative of the property that I was working with was somebody local and reputable.”
Claypool was still listed at the start of this year as the sole manager of Kilohana Makai LLC, according to the state Department of Commerce and Consumer Affairs. The company received a certificate of good standing on Tuesday.
Yao has yet to be apprehended following the indictment, and remains at large. If convicted, he faces a maximum sentence of 10 years in prison, a fine of more than $20 million, and three years supervised release.
Claypool was separately charged. He pleaded guilty on March 15 to three counts of conspiracy to commit wire fraud and one count conspiracy to commit money laundering. That followed a grand jury indictment Feb. 24 in U.S. District Court in Oregon.
Each count could have resulted in a maximum sentence of 20 years incarceration. However, per the plea agreement, federal prosecutors will seek no more than four years in federal prison. Claypool must also pay nearly $8.3 million in restitution to Simplot. Sentencing is set for June 21.
Source: Hawaii Tribune Herald
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