The tiny Pacific nation of Palau is a key hotspot in the growing rivalry between China and the West. Organized criminals with links to the Chinese Communist Party are trying to find a way in — and many in the local elite have welcomed them.
By Bernadette Carreon, Aubrey Belford and Martin Young
Organized Crime and Corruption Reporting Project
The tiny Pacific nation of Palau is a place where newcomers tend to stick out. So locals noticed when scores of young, mostly Chinese citizens started arriving in 2018 and 2019 and sequestered themselves in rundown buildings in and around the country’s main city, Koror.
Unlike the planeloads of tourists that visit the country for its famed limestone islands and unspoilt reefs, the new arrivals didn't see the sights. Instead, they stayed inside all day, their needs met by regular deliveries of food and sex workers.
Police investigators soon worked out what was going on: They were low-paid workers who had been brought in to staff illegal online gambling operations, targeting customers back in China.
Law enforcement came to believe the operations were connected to Chinese gangsters who in the previous years had become an increasingly menacing presence on the country’s streets. Brusque men with visible tattoos would “just cut right to the [front of] the line and drive down the streets like they own it,” said the country’s police chief, Ismael Aguon. “These guys were up and in your face.”
On New Year’s Eve 2019, they decided to act.
In coordinated raids on three buildings, officers arrested 165 people found in rooms fitted out with laptops, mobile phones, bunk beds, and stashes of instant noodles and soft drinks.
The number of people arrested was more than double the usual population of the country's single jail, Aguon said. The police chief said he had no choice but to give the detainees a citation for working illegally and deport them back home. The force was so overwhelmed that a proper investigation and extensive questioning would be impossible.
“Where was I going to put these people?” he asked.
KEY POINTS:
● In 2019 and 2020, Palauan law enforcement detained and deported hundreds of mostly Chinese citizens working in illegal online gambling operations based in the country.
● The operations are just the latest in a string of questionable ventures by ethnic Chinese business people in the country, including U.S.-sanctioned senior triad figure Wan Kuok Koi, also known as “Broken Tooth”. Paluan authorities believe the plans are interlinked, and tied to influence efforts by the Chinese Communist Party (CCP).
● The Chinese push into Palau has been facilitated by longtime Chinese expatriates in the country, as well as members of the local elite.
● Among these prominent locals have been two former presidents, Tommy Remengesau Jr. and Johnson Toribiong.
But Palauan law enforcement had come across something far bigger than a few isolated criminal outfits. The online gambling operations were in fact the latest step in an attempted push into the Pacific nation of just 18,000 people by a loosely-connected network of Chinese businesspeople, some with ties to triad crime groups and China’s ruling party, OCCRP has found.
At stake is influence over a small but strategic Western ally in the Pacific, a region where China has been trying to greatly expand its geopolitical reach in recent years. Palau is a former U.S.-administered territory, and has maintained a formal association with the United States since gaining independence in 1994. The U.S. provides some state services and unrestricted entry to the citizens of Palau, while the country uses U.S. dollars and regularly hosts American military forces.
Palau is also one of just 14 nations worldwide that diplomatically recognize Taiwan; it does not have full diplomatic relations with mainland China, which is ruled by the Chinese Communist Party (CCP). In recent years, Beijing has used aid and diplomacy to convince Kiribati and the Solomon Islands to switch their allegiance to China, leaving Taiwan with relations with just four Pacific Island nations.
While Palau’s government has remained steadfastly pro-West and pro-Taiwan, a group of business figures has in recent years begun pushing Beijing’s interests in Palau. Some have openly proclaimed they are promoting the CCP’s foreign policy goals, while others have furthered Chinese influence by setting up new business ventures and cultivating close relationships with Palau’s elite.
Semdiu Decherong, the former head of the country’s financial regulator, said that these businesspeople and organized crime figures — including a senior triad member known as “Broken Tooth” — appear to be operating with the knowledge of the Chinese state.
"From my understanding… they're all very interconnected,” he said. “There is no way that Broken Tooth was going to come to Palau without the communist government knowing about it. And either they are turning a blind eye or actually behind the scenes supporting.”
OCCRP reporters conducted interviews and examined hundreds of pages of company records and files from law enforcement investigations to better understand the Chinese push into Palau. Along with the illegal online gambling operations, they discovered that this interlinked group of business people has proposed a series of sometimes improbable projects across the country since at least 2016. The prospective businesses have ranged from a blockchain-based insurance scheme to a real-world casino and a special economic zone.
These plans have so far mostly failed to bear fruit, thanks to the skepticism of local law enforcement and regulators, and pressure from Western countries. But they continue nonetheless, aided at times by members of the local elite who have built close relationships with these business figures. Some have even partnered in the ventures.
These plans have so far mostly failed to bear fruit, thanks to the skepticism of local law enforcement and regulators, and pressure from Western countries. But they continue nonetheless, aided at times by members of the local elite who have built close relationships with these business figures. Some have even partnered in the ventures.
Among these prominent Palauans have been two former presidents — Johnson Toribiong and Tommy Remengesau Jr. — as well as state governors, a minister, and the country’s former postmaster general.
What is happening in Palau is part of a growing trend seen across the Pacific Islands and Southeast Asia over the past decade, according to Jason Tower, an expert on China’s overseas criminal networks at the United States Institute for Peace.
Chinese organized crime groups are moving into countries with weak governance in order to build illicit business empires and launder money, with business interests ranging from casinos to online scams and cryptocurrency schemes, he said. By offshoring their criminal activities, they avoid Beijing’s ire and show their usefulness to the CCP through corrupting local elites.
“They're also recognizing that in order to protect themselves from law enforcement and from political campaigns in China, they also need to maintain close relationships with political actors in China, and ultimately, to do their bidding,” Tower told OCCRP.
ADVERTISEMENT
Palauan politicians and ‘undesirable aliens’
Palauan law enforcement detained over 200 mostly Chinese workers during the three raids on suspected online gambling operations on New Year’s Eve 2019, and another in mid-2020. Through brief interviews with some detainees and informants, officers managed to gain insight into how the criminal gangs operated. But a thorough investigation never took place since most detainees were quickly deported.
Typically, workers used phones, laptops, and pre-programmed flash drives to administer gambling sites targeting users in China, police chief Aguon said. The rank-and-file workers appeared to have little idea who they were working for, and were kept in line by beatings and fear of the outside world. Sex workers were also brought on site as an inducement for the men to stay.
“They were told a lot of stories just trying to keep them fearful so they cannot mingle with the locals and stay where they’re supposed to be, getting paid very minimal cash,” Aguon said.
Palauan police recorded testimony that at least some workers had been held in debt bondage. Police records also show that some entered the country via Cambodia, a country that has become a hotspot for human trafficking by Chinese crime groups running online scam operations.
Palauan law enforcement say they have not been able to fully unravel who is behind the online gambling operations, although Aguon said they appear to be linked to large international criminal networks.
A key player appears to have been Tian Hang, also known as Hunter Tian, a 53-year-old Chinese hotelier who lives in Palau and enjoys links to some of its most powerful citizens. Property registry documents show that one of the buildings housing the online gambling operations was leased by a company Tian ran and of which he was part owner.
Tian has also been involved in apparent CCP influence efforts in the country. According to Chinese media reports, he headed the Palau Overseas Chinese Federation, a body aimed at organizing Chinese expatriates in the Pacific nation under the CCP umbrella. Tian even attended a September 2019 event for Chinese diaspora leaders in Beijing’s Great Hall of the People to celebrate 70 years of Communist Party rule.
Aguon said that Tian is not facing any charges in connection to the illegal online gambling operations because authorities were forced to limit their efforts to arresting and deporting people who were working in the country illegally.
However, Palau’s government earlier this year added Tian to its list of 230 “undesirable aliens,” most of whom are Chinese citizens. He remains in the country and is currently fighting his designation, which would bar him from re-entering Palau if he leaves.
Tian did not respond to questions sent by OCCRP.
Property records show that the building Tian’s company leased was owned by Ngirai Tmetuchl, Palau’s minister for human resources, culture, tourism, and development.
“I'm confident that [Tian] was not involved with those [online gambling] people,” Tmetuchl told OCCRP.
Another associate of Tian is Tmetuchl’s cousin, Johnson Toribiong, a lawyer who served as Palau’s president from 2009 to 2013. In an interview with OCCRP, he called Tian a “good friend.” Toribiong recounted a 2017 trip that Tian had organized for him and other notable Palauans to China that involved meetings with senior CCP officials.
“We went to the Great Wall of China, the palace, and the Forbidden City,” Toribiong recalled. “I gave a speech everywhere I went.”
“The whole thing was paid by somebody. I was invited to join as ex-president,” he added.
Since 2017, Toribiong’s law firm and a company owned by Tian have also been partners in a Palau “Chinese Economic Trade Promotion Association,” which is registered as a company in Hong Kong.
Toribiong said he could not recall signing documents to form the association, but added: “I want to bring investment to Palau.”
The association was also founded in partnership with Overseas Chinese Big Data Group, a conglomerate that develops data technology with the Zhengzhou Xinda Advanced Research Institute, which is affiliated with a provincial government and a military university.
One of Overseas Chinese Big Data's subsidiaries describes the research institute as following “the principle of leading the people through the army, and promoting civilian-military integration.” The conglomerate did not respond to written questions.
Broken Tooth Takes a Bite
Because Palauan police never carried out a deep investigation of the illegal casino operations they busted in 2019 and 2020, the criminal networks behind them remain a mystery. But police chief Aguon said he believes the online gambling operations are connected to the entry into Palau of the triad figure Broken Tooth and his associates.
The country is simply just “too small to have different factions” linked to Chinese organized crime, he said.
Rising to prominence in the 1990s as the head of the 14K triad in Macau, Broken Tooth — whose real name is Wan Kuok Koi — was imprisoned there for more than a decade on charges including loan sharking, weapons possession, and membership in an organized crime group. Since his release in 2012, he has rebranded himself as a CCP loyalist — without forswearing his triad affiliations.
According to the U.S. Treasury, which sanctioned Wan in 2020, he remains both an organized crime boss and a member of the Chinese People’s Political Consultative Conference (CPPCC), a top-level political advisory body that forms part of the CCP’s “United Front” foreign influence efforts.
China’s government has strongly denied that Wan is a CPPCC member. Wan has also denied it, describing the U.S. accusations as a “smear campaign.”
Wan has taken a leading role in setting up overseas branches of his Cambodia-based World Hongmen History and Culture Association, which the U.S. sanctioned along with him in 2020. The association takes its name from Hongmen, also known as the Heaven and Earth Society, a centuries-old secret society that the U.S. Treasury and experts say is now a barely disguised front for triads. (Wan has said his World Hongmen Association has always abided by the law.)
According to Tower, the Chinese organized crime expert, the goal of Wan’s Hongmen Association is to build “vast networks both with Chinese business actors and elites across the region, co-opting them into its various schemes.”
“Meanwhile it parrots the narratives of the PRC [People’s Republic of China] government on a range of politically sensitive issues, helping it to build influence in favor of key PRC interests,” he said.
By 2018, Wan had set his sights on Palau. Immigration records obtained by OCCRP show that Wan made two trips from Macau to the Pacific island nation late that year and early the next. He also set up a branch of his Hongmen Association in Palau, nearly nine months after establishing the association’s headquarters in Cambodia.
Soon after his second visit, Wan told a Hong Kong media outlet that the Hongmen Association would be used to build and run a Hongmen-themed resort in Palau that would include a casino and Hongmen-branded alcohol and cigarettes. Payments would be handled using a cryptocurrency called “Hong Coin.” A white paper about the currency written by one of Wan’s companies specifically mentioned its usefulness in online gambling.
“I envision this to be a special economic zone like Macau, and I will have the final say in overseeing the development of customs, ports, and an airport,” he boasted of the planned Palau casino.
Wan did not respond to questions sent to a public contact for his Hongmen Association.
The zone’s proposed location was on the lightly populated southern island of Angaur, the site of a World War II-era airstrip. The island has since assumed greater strategic value, after the U.S. military made plans to use it to base part of a sophisticated high-powered radar system –– costing between $100 million and $250 million –– that is aimed at countering China.
Wan’s attempted push into Palau was facilitated by senior officials. Immigration records show that during his second visit, starting in late 2018, he was listed as a “guest of [the] government.” Two state officials were involved in setting up his local Hongmen Association.
Company records show Palau’s then-postmaster general, Timothy Sinsak, and the then-governor of the state of Airai, Tmewang Rengulbai, both signed on as directors of Wan’s association when it was first registered in early 2019.
Sinsak and Rengulbai did not respond to requests for comment.
Wan even met with Palau’s then-President Tommy Remengesau Jr. and his immediate predecessor, Toribiong.
Remengesau told OCCRP he was introduced to the triad figure by Wang Guodan, another longtime Chinese expatriate in Palau. Also known as Rose Wang, she worked with Tian as the vice chairman of his Palau Overseas Chinese Federation, according to Chinese media reports. She also attended the CCP’s 70-year celebration with him in Beijing in 2019, and was added alongside him to the Palauan government’s “undesirable aliens” list earlier this year.
In a brief phone interview, Wang denied any connection to Wan, Tian’s association, or any CCP-related activities. She did not respond to written follow-up questions.
Remengesau’s predecessor as president, Toribiong, said he believed “Broken Tooth” and his associates were guests of Remengesau in Palau.
“When Broken Tooth came they were like VIPs, they had a lot of meetings,” Toribiong said, adding that he too had met the triad figure.
Remengesau, who stepped down last year, denied he had invited Wan to the country, and told OCCRP he was unaware how the triad figure had been listed as a “guest of the government” when he visited in 2018. The former president said Wang had only briefly introduced him to the triad figure and that he had posed for a photo. But he insisted, “That is the only time I sat down with him.”
On Angaur island, the prospective casino site, Wan was assisted in his attempt to lease some land by the island’s then-governor, Kennosuke Suzuky.
“He was dealing with me directly,” Suzuky told OCCRP, adding that he did not know that Wan was a senior organized crime figure until later, when “I Googled his name.”
“We didn't know who he was,” agreed Jackson Henry, a local property broker who helped Wan look for real estate on the main island of Babeldaob. Palauans only became aware of Wan’s organized crime ties when he started publicizing his casino plans, Henry said.
“These guys are not here to do anything bad. They're not convicted, except for Broken Tooth,” Henry added. “But it's really bad about society, where you go to jail, you pay your dues to society. When you get out… you can’t do anything.”
Remengesau, for his part, said he turned firmly against Wan once he became aware of his background. By April 2019, he announced that he was opposed to the project, after being informed by Taiwan’s government of Wan’s criminal background. The Palau Hongmen Association applied to be voluntarily dissolved shortly thereafter.
ADVERTISEMENT
‘They Know It’s a Scam’
While Wan is not known to have arrived in Palau until 2018, another figure connected to him had already pitched big plans for the small country.
Zhang Bauluo, a Singapore-based businessman, showed up in 2016 and made the rounds in prominent political circles. Through his GT Group, Zhang said he wanted to launch businesses including a $1 billion “smart city,” a blockchain-based insurance scheme, and a bank.
Zhang and Wan are part of the same business circles in Southeast Asia and the Pacific, but the exact nature of their relationship is unclear, organized crime expert Tower said.
The two men have appeared in public together at property development and blockchain events in the region, including a 2018 conference organized by Zhang’s GT Group in the Philippines at which Wan was a guest. Wan took to the stage with Zhang and others at the event and raised wine glasses for the cameras.
Zhang’s plans for Palau were initially facilitated by former presidents Toribiong and Remengesau. Company documents show that Toribiong acted as local legal counsel for Zhang’s GT Group, and helped set up four Palauan companies on his behalf.
Meanwhile, Remengesau rolled out the welcome mat. During one 2016 visit to Palau, the president appointed Zhang an honorary overseas representative of Palau on “economy, trade and tourism.” Remengesau also later made Zhang’s son, at the time a 10-year-old child singer, a tourism ambassador for the country.
Zhang repaid the hospitality. During Remengesau’s successful 2016 re-election bid, Zhang’s company supplied 125 mobile phones that were handed out as gifts at campaign events, the former president acknowledged in an interview. Zhang and his family later attended Remengesau’s inauguration, where they had their own marquee tent.
Remengesau said there was nothing improper about his relationship with Zhang.
“The good thing about me is, when I meet these people, I don't do any business deals… or benefit from it,” he said.
But as with Broken Tooth, Zhang’s plans were eventually either blocked by local authorities or failed to reach fruition. He also appears to have evaporated from the regional business scene.
The GT Group’s websites and social media accounts have largely gone dark since the first half of 2021, after a GT Group executive was charged in Malaysia over an alleged cryptocurrency fraud.
Zhang did not respond to questions sent via email and Facebook.
While Palau has remained steadily pro-Western, it remains a strategic prize in an increasingly contested region. And, in the absence of formal diplomatic connections between the country and mainland China, unofficial proxies remain a powerful tool of attempted influence. Decherong, Palau’s former financial regulator, said there remains a steady flow of questionable Chinese business people interested in Palau.
“They think if they come in with a fancy name, they put up some stupid nicely done graphics on the Internet, all of us stupid islanders are gonna believe it,” Decherong said.
“The Palauans that get involved in it are not stupid. They know it's a scam, but they just play along to see how much cash they can get from these people.” (OCCRP)
Subscribe to
our digital
monthly edition
コメント