Yellowknife businessman receives house arrest for fraud conviction

A Yellowknife businessman was handed a conditional sentence of two years less a day on Friday after pleading guilty to defrauding the Business Development Bank of Canada, or BDC.

Liang Chen’s sentence will in practice amount to a lengthy period of house arrest, if he follows the conditions set out by Judge Gary Magee, and an order to pay back the money he took.

In 2018, Chen received a $250,000 BDC loan for the business Northern Sky Films.

The court heard he then funnelled the majority of the money into his personal bank account and used it to pay employees of Copperhouse Eatery and Lounge, where he was a co-owner at the time.

Chen says he planned to pay back the loan. He made payments until November 2020, when business ceased due to the pandemic and he had no income.

In 2023, RCMP announced they had arrested one person as part of the subsequent fraud investigation. Chen pleaded guilty in April.

The conditional sentencing order was jointly proposed by the Crown and defence, whose lawyers said it had been carefully discussed and negotiated for more than a year.

Under his sentencing order, Chen will not be allowed to leave his house for the first 18 months except under specific conditions such as dropping his young daughter at school, attending medical appointments and working. He also has to complete 150 hours of community service during the first year and a half.

During the remaining six months of his sentence, he will have to follow a curfew from 8pm to 6am. 

Chen was also ordered to pay back $229,380.91, the amount still owing on the BDC loan.

“This is a jail sentence, sir, and you’re being permitted to serve your jail sentence in your home, in part because that will allow you to pay back the money that you fraudulently took,” said Judge Magee as he handed down the sentence.

“If you’re caught breaking any of the rules of the conditional sentence, it’s likely that you’ll be arrested and brought into court before a justice of the peace.”

Chen must pay back the money in $1,500 increments every month, starting in October.

“If you’re more than 30 days late, the entire amount immediately becomes payable. And if you’re in default of the fine, the term of imprisonment in default is two years,” said the judge.

If the money is paid to BDC, it is deducted from the amount payable to the court.

Magee told Chen the conviction will impact his reputation in Yellowknife, and told him he should be fortunate the people who wrote him letters of support – including his wife and employees of his tourism business – still trust him.

“Your reputation has been damaged, sir, perhaps significantly, but not destroyed. So you have to move forward. You have to continue to earn money to pay off this fine order that I made today, otherwise you will go to jail,” Magee said.

The judge noted aggravating circumstances of the case include that Chen was acting as an immigration consultant to help Shengteng “Tony” Wang start Northern Sky Films, a 360-degree dome theatre and virtual reality arcade that opened in 2020.

Chen opened the business in his own name, applied for the loan for business improvements, used it to pay Copperhouse employees, and then didn’t tell Wang about the quarter-million-dollar loan when the business was transferred into Wang’s name.

Chen’s lawyer, Jessi Casebeer, said Chen thought BDC would collect money from him directly and not involve Wang, but BDC saw Northern Sky Films as the company responsible for the loan.

Things were further complicated as BDC had not been informed when Wang became a director and Chen was removed from the business. The loan default was also the subject of separate civil proceedings.

Wang’s victim impact statement was not read aloud, but the judge said it referenced the difficulties caused when he was not informed of the $250,000 loan.

“One of the most aggravating features here of this crime is that it was not spontaneous or brief. It was prolonged and involved a number of steps,” Magee said.

“Mr Chen knew what he was doing. He knew that the $250,000 didn’t belong to him and at any time he could have stopped, could have stepped out of this path, could have returned the money to BDC … could have left it for Northern Sky Films to be used for its proper purpose that he had identified in the loan application. But he didn’t stop until he was caught when BDC contacted Mr Wang.”

In Chen’s favour, mitigating circumstances considered included the absence of a prior criminal record, that he pled guilty to the charges, the remorse he had shown, his four letters of support, and that he faces a damaged reputation in a small city.