PwC partner Hong Shao and her husband, accused of a $3.3m fraud, have denied any wrongdoing

A PwC partner and her husband, who have been accused of a $3.3m fraud, say all payments they received from China were legitimate, and deny they have done anything wrong.

PwC partner Hong Shao, who has been accused of being involved in a $3.3m fraud, has argued money paid into accounts in her name were legitimate payments under a loan agreement with a wealthy Chinese friend of her husband.

The pair have also argued, in a statement of defence lodged with the court, that money paid to them from China and labelled with descriptions such as “living expense’’ and “school fee’’ may have been so named “to facilitate the transfer of funds from China, in circumstances where there were restrictions on transfers of funds from China”.

Ms Shao, a Sydney-based assurance partner who is currently on leave from the professional services firm while the matter is before the Federal Court, was last year named in a case brought by advertising materials business Creative Promotions.

The case is a civil claim and no criminal charges have been laid.

Brought against Ms Shao and her husband Di Wu, the suit alleges Mr Wu “obtained money dishonestly and fraudulently from Creative Promotions’’ over a period of 12 years from mid-2010 to about July 2022.

READ MORE: PwC partner allegedly helped partner in $3.3m fraud scheme | PwC partner takes leave of absence

Creative Promotions claims Mr Wu, who was employed as an “overseas production assistant’’ in 2005, later started issuing fake invoices to the company’s accountant for payment to three companies – Pretty Arts Products, Best Promotions, and Wenzhou Kindcare Import & Export. Two of these were legitimate suppliers, while Creative Promotions alleges Best Promotions was not – a claim denied by Mr Wu.

Mr Wu allegedly generated invoices which were entirely fraudulent or which were for amounts in excess of services rendered, with the payments made into at least eight accounts at the Bank of China, JP Morgan Chase, Bank of America, the Agricultural Bank of China and HSBC.

It is alleged payments were eventually routed back to Mr Wu’s Westpac account and a Bank of China account in Ms Shao’s name.

Some of these payments, most of which were for $US49,990 ($75,253), were labelled “school fee” and “living expense’’.

PwC partner Hong Shao has denied any wrongdoing.

Other payments identified in the statement of claim have the transaction descriptions “new home”, “slab”, “gyprock” and “concrete pouring”, while $210,035 is alleged to have been paid to Porsche on May 27, 2021.

In all Creative Promotions has alleged it was defrauded $US2.17m as a result of the scheme.

Mr Wu and Ms Shao have each denied any wrongdoing, however, and in a defence filed with the court say that Best Promotions was a legitimate supplier run by Rhea Shen and her husband Jony Zhou.

“Rhea Shen’s company was a major supplier of Creative Promotions,’’ the defence says.

Mr Wu in the statement of defence denies “deny that any aspect of the conduct of respondent one (Mr Wu) in relation to the presentation of the pro forma invoices for payment was fraudulent’’.

The claim says invoices generated were “negotiated at arms length and in good faith’’ and were signed off by either of Creative Promotions’ directors Barbara and Mark Isaacs.

The defence says there was some complexity to payments, with in some cases, a China-based supplier of local currency having to be engaged to facilitate payments in renminbi instead of US dollars.

Invoices also were generated to pay supplementary suppliers in cases where the primary supplier could not provide certain good and services, the defence says.

In terms of moneys paid to Mr Wu and Ms Shao, the defence says these were related to Mr Wu’s facilitation of a loan to Ms Shen, with the proceeds to be used to build a new factory.

In late 2012, Mr Wu struck an oral agreement with “a wealthy friend based in China’’, agreeing to lend Ms Shen RMB3m, ($630,227) at a 30 per cent interest rate until 2014.

The wealthy friend would then lend any loan repayments to Mr Wu, who “would repay the friend any amounts advanced … following the friend’s immigration to Australia’’.

“The payments from the Cheng account identified … comprised repayments by Rhea Shen, in accordance with the agreement,’’ the defence says.

“The characterisation of the payments made by Rhea Shen from the Cheng Account by way of repayment under the loan agreement (including the characterisation of certain payments as “living expense” and “school fee”) was made by Rhea Shen without explanation to or agreement with (Mr Wu).

“(Mr Wu) presumes that such characterisations might have been made to facilitate the transfer of funds from China, in circumstances where there were restrictions on transfers of funds from China.’’

Creative Promotions, in its statement of claim, argues that Ms Shao had “actual knowledge” of the apparent fraud, however Ms Shao, in her portion of the defence, denies that a fraud occurred, or that she would have had knowledge of it.

Ms Shao says she knew of the loan agreement, and opened two accounts for money to be paid into because it was more convenient for her to do so, as the Bank of China branch office in George St Sydney was next to her place of work.

“(Ms Shao) was aware that from time to time payments were being made from China into accounts in the name of (Mr Wu) or (Ms Shao) (and in accounts in the joint names of (Mr Wu) and (Ms Shao)), and believed at all times that they comprised payments pursuant to the loan agreement referred to,’’ the defence says.

The defence says that Mr Wu was the primary manager of their banking affairs, given her demanding professional role, and that she had authorised him to transact on her behalf.

Ms Shao says in the defence that if her husband was guilty of any fraudulent conduct against Creative Promotions, which she denies, then she denies being aware of it and that there were any circumstances which would put her on notice as to any fraudulent conduct taking place.

“(Ms Shao) denies herself being involved in any fraudulent or unlawful conduct against Creative Promotions,’’ the defence says.

It also says that there are no facts alleged by the plaintiff which support a reasonable pleading that she was knowingly involved in any fraudulent conduct.

“None of the facts pleaded … reasonably support the serious allegations,’’ the defence says.

No charges have been laid against either Ms Shao or Mr Wu.