Wednesday, December 6, 2023

Yachts, Custom Cars and $36,000 Mattresses: Inside an Alleged Fraud – The Journal. – WSJ Podcasts

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This transcript was prepared by a transcription service. This version may not be in its final form and may be updated.

Ryan Knutson: For the past few years, our colleague Aruna Viswanatha has been reporting on a man named Guo Wengui.

Aruna Viswanatha: So as a reporter, you get all these crazy tips and almost every single one of them, by the time you report it out and confirmed what actually happened, the story is 25% of what you thought it was. And with Mr. Guo, this is literally the only story I’ve ever worked on that the crazy tips we got would end up 25% crazier in the final story. It was just like everything about him was just so wild.

Ryan Knutson: Guo is a Chinese billionaire who spent the past eight years living in the US. He made a name for himself as a critic of the Chinese government, and he’s built up a social media presence with hundreds of thousands of followers.

Aruna Viswanatha: Rabble-rouser is exactly what he is. He lobs really salacious allegations against all sorts of people, and you never quite know exactly where he’s going next.

Ryan Knutson: Guo has been a major thorn in the Chinese government’s side, and for years they’ve been trying to get him back to China to face criminal prosecution for a number of alleged crimes.

Aruna Viswanatha: He has been a bit of a singular figure in the US-China relationship, especially as that relationship has deteriorated over the past few years. He has been a huge focus for the Chinese government, and the US has long resisted handing him back.

Ryan Knutson: And last week, the FBI arrested Guo and prosecutors charged him with orchestrating a billion dollar fraud in the US.

Aruna Viswanatha: What they do with him in consultation with the Chinese government is ultimately going to be a very interesting question.

Ryan Knutson: Welcome to the Journal, our show about money, business, and power. I’m Ryan Knutson. It’s Wednesday, March 22nd. Coming up on the show, the rise and fall of Guo Wengui.
Guo Wengui has a rags to riches story. He grew up in a poor family in China, and then in the 1990s he became a millionaire through Chinese real estate. He built iconic structures in Beijing, including one that looks like a dragon’s head. But Chinese officials say there’s more to his story than just a man who pulled himself up by his bootstraps. They say he built his wealth in part through bribery.

Aruna Viswanatha: In the mid-2010s, President Xi Jinping starts engaging in this widespread crackdown of corruption. And the allegation was that Mr. Guo had built his fortune in part by paying kickbacks to various people in the Chinese government, including one in particular, this former senior official in Chinese intelligence service.

Ryan Knutson: Guo has denied these allegations. He fled China in 2014 and came to the US. After he arrived, he was quiet for the first few years.

Aruna Viswanatha: And then starting around 2017, he starts building up a Twitter profile. He starts streaming these online videos and giving these media interviews. And what he starts alleging is that he has real evidence of corruption at the highest levels of the Chinese Communist Party, and he is going to be unveiling that when the time comes.

Ryan Knutson: And what are these videos that he posts on social media look like? What’s the tone?

Aruna Viswanatha: They’re very conversational. I mean, some of them are inviting you into his life, into his very fancy apartment with his fancy, fluffy white Pomeranian by his side. And he would stream what he was doing for hours, talking about the Chinese government.

Speaker 3: That statement is very fitting for those departments. They are departments of evildoing.

Aruna Viswanatha: Just talk about his day, talk about his exercise routine.

Speaker 3: I just finished exercising, so I am so sweaty.

Aruna Viswanatha: Some of it was just so off the wall, but it was very entertaining.

Ryan Knutson: He’s even made music videos, including one where he asks his fans to follow him and take down the Chinese Communist Party, or the CCP.

Aruna Viswanatha: And he ends up cultivating a pretty sizable following, especially among the Chinese diaspora, who are really intrigued by what he’s saying and start following him pretty regularly.

Ryan Knutson: Guo said had $150 million war chest that he planned to use in his campaign against the Chinese Communist Party.
And you’ve met him.

Aruna Viswanatha: I have. He is quite a character. He’s very charismatic. He’s very friendly and very well-dressed. He likes to live very lavishly, so his apartment is very beautifully furnished. He stays at the nicest hotels, he orders lots of great food. He wants everyone to have a good time. And he’s always recording you. That’s another thing to know about him.

Ryan Knutson: Really? He’s always recording you?

Aruna Viswanatha: He’s known to record a lot of his conversations and then broadcast them later.

Ryan Knutson: That’s what I’m also known for.
It wasn’t just Chinese people living outside China, the diaspora, who were interested in what Guo had to say.

Aruna Viswanatha: He was also getting a lot of attention from the US government and the Trump administration, especially in the beginning when it was not quite clear what to make of him. He was clearly someone with a lot of access in China, who is out now saying he was going to spill their secrets. And the US government viewed him as potentially a really useful bargaining chip, as potentially a useful source. They thought that here’s someone that could be of real value to them.

Ryan Knutson: Was he meeting with government officials? I mean, did officials … you hinted at this. In the Trump administration or any other administration think, oh, here’s a guy who has access. We should talk to him. We can get information from him and hopefully he can help us.

Aruna Viswanatha: So he did start talking to FBI agents over the years, and folks at more senior levels became pretty intrigued by who he was.

Ryan Knutson: As Guo’s profile rose, the Chinese government tried cracking down on him from afar.

Aruna Viswanatha: So after he starts going public with the allegations that he’s saying that he has all this evidence of corruption, little things start to happen that raise his profile even more.

Ryan Knutson: For example, in 2017, a news outlet he gave an interview to said his websites were hit by cyber attacks. The Chinese government denied being involved.

Aruna Viswanatha: And then the biggest point of tension, the Chinese government sends senior security officials to go talk to him and convince him to come back. And these people have come into the US not on official business visas and the FBI finds out about this. They tell them, you got to leave. You’re not here on the types of visas that you would need to do anything like this. You’ve got to get out of here right now.
And they basically stop them at the jet bridge of their Air China flight. And there’s this big standoff within the government, can we arrest them? Do we need to let them go?

Ryan Knutson: The agents decided to let the Chinese officials go with a warning. Around the same time, the Chinese government also tried to get prominent US businessmen to lobby the Trump administration to send Guo back. The effort allegedly included people like Casino mogul Steve Wynn and former Fugees rapper Pras Michel.
Afterward, the US government sued Steve Wynn, saying he needed to register as a foreign agent. He denied wrongdoing and a judge dismissed the case. It’s now on appeal. The US also charged Pras Michel with illegal lobbying. He pleaded not guilty. His trial starts on Monday.
Why does the Chinese government want Guo back so badly?

Aruna Viswanatha: That’s a very, very good question, that the best we could tell was that they wanted him to stop basically stirring up trouble within the Chinese diaspora. And within China, his content was totally censored and you could find almost no reference to him within the Chinese internet. But within the Chinese diaspora, he was causing a lot of trouble and he was a big headache for the Chinese government.

Ryan Knutson: So China has all these efforts to try to shut him up, essentially. What did that do to his reputation?

Aruna Viswanatha: It definitely bolstered it within China-hawks in the United States. And the most prominent example of this was former Trump advisor Steve Bannon.

Ryan Knutson: Steve Bannon was one of Donald Trump’s top advisors during the 2016 election and served briefly as the president’s chief strategist.

Aruna Viswanatha: Soon after Mr. Bannon leaves the White House, one of his first forays in his post-administration life is to go into business with Mr. Guo.

Ryan Knutson: What did they try to do together?

Aruna Viswanatha: So they announced in 2018 that they were going to be raising $100 million to spend investigating senior Communist Party officials and exposing their misdeeds, is essentially what they said they would do. And then they also launched this, what they bill as this media company that’s going to build a real media platform to get through the Chinese firewall and be the first real bridge-building media network between China and the West.

Ryan Knutson: So build a news channel that people in China could somehow see, that was targeted at Chinese citizens?

Aruna Viswanatha: Some kind of website, yeah. The idea was that they’re building a media company that would somehow counter the Chinese Communist Party inside China and outside China.

Ryan Knutson: That sounds like an ambitious plan.

Aruna Viswanatha: Yes.

Ryan Knutson: How this ambitious plan worked out, that’s next.
A lot of the money that Guo Wengui and Steve Bannon raised for their media company came from Guo’s followers.

Aruna Viswanatha: It’s a lot of people in the Chinese diaspora. Chinese Americans, maybe first generation Chinese Americans here that found him captivating and knew him as a businessman.

Ryan Knutson: By 2020, Guo and Bannon had raised more than $300 million for their media venture. But pretty quickly, their investors started to question the business.

Aruna Viswanatha: We reported back in July 2020 that the FBI had started investigating this fundraising effort that he had done, because we understood that investors started feeling pretty uncomfortable about this. They said they didn’t get the appropriate documentation, they didn’t quite understand what was happening, and some of his bank accounts that had been set up for this media company were frozen. And so they started to get worried.

Ryan Knutson: The investors demanded refunds, and Guo responded by rallying his still very large fan base against them and branding them as spies of the Chinese Communist Party.

Aruna Viswanatha: He would go on videos in a pretty menacing way, carrying around a baseball bat, talking about how he was going to go after these Chinese spies that were trying to bring him down.

Ryan Knutson: The investors denied they were spies. His reaction was similar to how he’s gone after others he perceived as critics. He sued many people, including the Wall Street Journal’s publisher and our colleague Aruna herself. The case against the Journal publisher and Aruna were dismissed.
In addition to Guo’s media business with Bannon, he also raised money from investors for his own ventures, like a clothing line, his own cryptocurrency, and an elite G-Club membership that promised access to special investment opportunities. In total, Guo had raised around a billion dollars from investors. And then last week, the FBI arrested Guo and charged him with 11 counts of fraud and money laundering.

Aruna Viswanatha: What prosecutors allege is that rather than actually trying to put any of that money into what he said he was going to, he just immediately turned around and sent 30 million here to buy this home in New Jersey, sent money there to upkeep his yachts, sent hundreds of thousands of dollars to car dealerships for custom-built race cars.

Ryan Knutson: And is it true there’s a $36,000 mattress?

Aruna Viswanatha: Two.

Ryan Knutson: Two? What? Do those even exist?

Aruna Viswanatha: I would like to know what a $35,000 mattress feels like. I don’t actually know.

Ryan Knutson: Yeah, I mean, what is it made out of? Gold feathers or something?

Aruna Viswanatha: Right.

Ryan Knutson: And how has Guo responded?

Aruna Viswanatha: He’s very much denied any wrongdoing and said that all of his efforts were geared towards countering the Chinese Communist Party and were valid efforts.

Ryan Knutson: Guo pleaded not guilty. His lawyer hasn’t responded to requests for comment. Bannon, who received a pardon from President Trump on other matters, hasn’t been charged with anything related to Guo. A lawyer for Bannon hasn’t responded to requests for comment.
So what could happen to Guo next?

Aruna Viswanatha: He faces pretty serious charges that come with 20 years in prison, potentially. And a lot of his assets have been seized, and the government is trying to get those forfeited and repay some of these investors that he took a lot of money from.

Ryan Knutson: Now, if Guo is convicted, the US government will have to decide if it wants to send him back to China as the Chinese government has always wanted, or keep him in the US.

Aruna Viswanatha: I mean, this is a really interesting question. The US has no extradition treaty with China, but they have on occasion sent people back to China that the Chinese government has asked for, including ones who have been convicted and sentenced of crimes. The more interesting question is what ultimately happens to him in the context of the US-China relationship, and if China does still ask for him back.
Essentially, what they most wanted was for him to stop talking and riling up trouble within the Chinese diaspora community. He can’t do that … he has been effectively silenced anyway, at this point. So what we are watching for is, will the Chinese government ask for him back? And then will the US government be open to sending him back?

Ryan Knutson: That’s all for today, Wednesday, March 22nd. The Journal is a co-production of Gimlet and the Wall Street Journal. Additional reporting in this episode by Sha Hua and James Fanelli. Thanks for listening. See you tomorrow.

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