Organized Crime in Canada:
A Quarterly Summary
January to March 2002
Corruption
Counterfeiting
Drug Trafficking
and Narco-Terrorism
Money
Laundering
Enforcement
In February, prosecutors withdrew all charges in a
corruption scandal that has dogged the Toronto Police Service's central drug
squad for 15 months and led courts to throw out charges against dozens of drug
dealers. The withdrawal of charges came only weeks before a preliminary hearing
in the case was scheduled to start in Ontario Court.
In a sudden and dramatic announcement in an Old City Hall
courtroom on February 13, provincial Crown attorney Rosella Cornaviera said the
Crown would not proceed on 75 theft, fraud, forgery and breach-of-trust charges
against eight former members of the force's central field command drug squad.
But she hinted that the officers legal problems may not be over.
Cornaviera told Ontario Court Judge Edward Ormston that the
charges would be dropped because “proceeding with them may compromise an
ongoing criminal investigation.”
Edward Sapiano, a defence lawyer who has followed the
so-called “fink-fund” case, said last night the cryptic remark by Ms.
Cornaviera must be a reference to the RCMP-led probe. Last summer, a
high-ranking RCMP officer was brought in to head the Toronto police search for
corruption within its ranks.
Lawyers for the eight accused officers stressed the
positive portion of the Crown's message for their clients and railed against
federal prosecutors for abandoning charges in 120 drug cases.
Clewley said hundreds of thousands of dollars in seized
assets have had to be returned to alleged traffickers, money that “could be
seed money for the next transaction,” because of federal prosecutors' hasty
abandonment of cases against them after the officers were charged.
The eight officers were accused of stealing money,
jewellery and other items from the homes and safety-deposit boxes of drug
suspects they were investigating in 1999 and 2000 and with fraudulently
obtaining money from an informant fund known informally as the “fink fund.”
They were charged on November 22 2000, and have been on
paid suspension ever since.
See Related
Story
Source: "Four federal drug cases stayed, lawyers
suspect corrupt cops.” Canadian Press Newswire. February 8 2002.
Quebec provincial police were called in to investigate the claim of a Parti
Quebecois cabinet minister that he was offered a $500,000 bribe to oppose the
government’s takeover of video gambling before the PQ came to power.
Transport Minister Guy Chevrette revealed he was offered two briefcases
packed with cash in 1989, when video-lottery terminals were a cash cow for
organized crime groups.
In the interview aired on January 23, Chevrette said a woman showed him one
briefcase full of money and said he could have another one if he opposed
government-run VLTs. The kickback
was offered 12 days before a Quebec general election won by the incumbent
Liberals, said Chevrette, who never informed police of the attempted bribe.
Police also stated that they will question Jean Royer, who is currently
vice-president of Loto-Quebec. Royer, an adviser at the time to then-PQ leader
Jacques Parizeau, was with Chevrette when the offer was made. The meeting
occurred at PQ headquarters in Montreal.
Chevrette said the woman, a lawyer, appeared stunned when he refused the
bribery offer and when he told her he would call police if she didn't leave the
building in two minutes. Chevrette
said he couldn't remember the woman's name. Chevrette was PQ house leader at the
time.
In the 1989 election, the Liberals' campaign platform included a promise to
place gambling machines under control of Loto-Quebec, the state-run gaming
corporation.
There were about 25,000 VLTs in Quebec until they came under provincial
control.
Source: Alexander Panetta. “Cops probe PQ minister's claim he was offered
kickback to oppose gambling.” Canadian Press Newswire. January 24 2002.
Police announced in early February that they have cracked a
North American-wide credit card counterfeiting organization after a joint
15-month investigation by the Calgary Police Service and 13 other law
enforcement agencies, including the RCMP and the United States Secret Service.
Police say that Calgary was a centre
of a sophisticated international crime ring involving millions of dollars in
credit card fraud. Of the 478 criminal charges laid against 63 people, police
said 124 charges involved 18 individuals based in Calgary.
The accused were involved in an illegal process called
“skimming,” in which credit cards are swiped twice during normal business
transactions – once through a legitimate card reader that records the
transaction, and then through a second, illicit machine that illegally copies
information stored on the card's magnetic strip. The information is used to make
duplicate cards.
It was the Calgary faction that had special expertise in
manufacturing the counterfeit cards, police say. Gang members would make a
duplicate card - perfect in every way with built-in holograms, embossing,
micro-printing and every anti-theft security device - and sell it on the street
for between $500 to $1,000.
Once a card's data is stolen, it can be used either within
the hour or even years later, as long as it's prior to the expiry date. Crooks
would then run up huge sums on the card, often using it across Canada, in the
United States or abroad. The electronic data stolen from thousands of legitimate
credit card users at 116 retail merchants across North America were used to
manufacture the fake cards, which were used in 34 countries.
The U.S. Secret Service's database picked up records of
transactions in the United States, bringing it into the investigation. As
investigators got closer to the core of the crime ring, activity slowed, with an
estimated 80 per cent reduction of credit card fraud in Western Canada.
As part of the investigation, eight counterfeit credit card
factories in Calgary, Edmonton, Toronto and Greater Vancouver were searched and
their equipment seized. Twenty-three search warrants were executed in Calgary
alone. Thermal printers, embossers, host stamp presses, as well as other
sophisticated equipment were found. Police also seized $879,500 in cash and
property from related crimes and thousands of items used to counterfeit the
cards.
Police estimate the investigation prevented $23
million in credit card fraud in Canada.
Source: Lynne Koziey. “Police smash credit card ring:
Calgary focus of massive investigation.” Calgary Herald. February 1
2002; “Police say Calgary headquarters of counterfeit credit card
operation.” Canadian Press Newswire. January 31 2002.
A copy of a RCMP criminal intelligence report, Narcoterrorism
and Canada, which was prepared in November 2001, suggests that there is a
strong link between organized crime groups and terrorists groups.
High-ranking Hezbollah leaders may be driving around
Lebanon in cars stolen in Canada by Middle Eastern organized crime groups. A
police report also suggests auto-theft rings funnel 10 percent of their profits
to the militant group.
According to the report, violent extremists have also
routinely skimmed off a portion of the millions of dollars in drug money flowing
annually from Canada to southwest Asia. In particular, proceeds from lucrative
Asian hashish shipments smuggled into Canada likely ended up in the hands of
“terrorist elements in Afghanistan.” According to police estimates, most of
the more than 100 tonnes of hashish reaching the Canadian market each year has
originated in Afghanistan and Pakistan. Canadian traffickers have paid an
average of (US) $200 per kilogram to brokers in these countries, meaning about
(US) $20 million has found its way back to producers annually.
“Most of the documented hash importations have been with
southwest Asian suppliers that have been in this business for 10 to 20 years,”
the RCMP report says. “It is likely that terrorist elements in Afghanistan tax
producers, thereby receiving a portion of the potential proceeds.”
The report's release in February of this year came the same
week the warship HMCS Toronto, part of the Canadian contingent in the armed
campaign against terrorism, discovered a shipment of drugs aboard a fishing
vessel off the coast of Pakistan. The narcotics, either opium or hashish, were
found in plastic bags marked with the phrase Freedom of Afghanistan. The defence
department said the seizure was under investigation, with coalition intelligence
officials attempting to determine “possible links with al-Qaida or Taliban
activities.”
The RCMP report notes that narcotics have long been used by
organized crime, extremist and terrorist groups as a means of generating revenue
to support armed conflict. East Indian, Afghan, Pakistani, Tamil, Turkish and
Middle Eastern extremist groups are “suspected of fund-raising in Canada by
various means,” the report adds.
In addition to singling out southwest Asia, the report
points to South American drug shipments entering Canada as a potential source of
terrorist funds. Up to 25 tonnes of cocaine, worth as much as (US) $50 million,
arrive in Canada annually. South American insurgent groups are involved in coca
production, or exert control over regions containing coca fields, laboratories
and airstrips, the RCMP report note. These groups impose taxes ranging from (US)
$100 US to $500 per kilogram to protect the area.
But the RCMP suggest further investigation is needed to
confirm suspicions of Canadian links between terrorists and drug traffickers.
“The closer scrutiny being afforded presently to the terrorist issue could
(help uncover) more concrete information as to the terrorist elements in Canada
resorting to drug trafficking as a means to finance their activities.”
Source: Jim Bronskill. “Canada's hashish trade 'funds
terrorists': RCMP believe extremists get millions from drugs.” Vancouver
Sun. February 16 2002
Gambling
Illegal gambling has been flourishing in Canada despite the
creation of legal casinos and criminals are using sophisticated scams to tap the
cash flow inside them, according an RCMP criminal intelligence expert.
Speaking to about 70 academics, government officials and
representatives from the legal gambling industry at a seminar sponsored by the
University of Alberta and the Alberta Gaming Research Institute, Sgt. Bob
McDonald of the RCMP stated, “An argument can be made that casinos attract
crime.”
Criminals get co-operation from registered casino staff
through coercion, extortion, and corruption, McDonald said. Alberta's 16 casinos
are also targets for counterfeiters, money laundering, loan sharking, and drug
trafficking, he added.
Casinos were legalized without research to determine how
much extra crime would likely happen and nobody has studied the incidence of
these crimes, said McDonald. He went on to say that illegal gambling will
continue to thrive because it offers customers anonymity, illegal drugs, access
to prostitutes and credit, he said, all familiar money-makers for organized
crime.
Across Canada bookmakers take in $1 billion a year through
illegal sports betting, according to Supt. Larry Moodie of the Ontario
Provincial Police. And illegal gambling clubs which operate across the country
can take in $1 million a year running just two poker tables, he said.
Source: “Illegal gambling flourishing despite legal
casinos, says RCMP expert.” Canadian Press Newswire. March 9 2002
Twenty-five Montreal-area residents pleaded not guilty on
February 5 in connection with a telemarketing ring that is alleged to have
defrauded senior citizens of up to $1 million a week. Nayer Amhed, Gary Gacionis
and Vasilios Kolitsidas, all of Montreal, were charged with fraud, conspiracy
and participating in the activities of a criminal organization. Twenty-two
others were also charged with fraud and conspiracy after senior citizens, mostly
Americans, complained they were bilked of up to $50,000 each. The accused
elected for trials by judge and jury. A preliminary hearing is set for May 25.
Amhed, Gacionis and Kolitsidas are the first non-bikers in
Quebec to be charged under the federal anti-gang legislation, police say. The
alleged ring was broken up in February 2000, after police raided a boiler room
in Laval, Quebec. Members of the ring posed as lawyers, police officers and
customs agents, asking victims to provide money for an “investigation” into
a lottery scam, police said.
Crown prosecutor Francois Drolet said Criminal Code charges
relating to participation in a criminal organization are warranted because the
ringleaders ran a highly organized operation.
The arrests came at a time when evidence continued to mount
that Canada – and its three larges cities in particular - is home to hundreds
of bogus telemarketers that defraud thousands of U.S. senior citizens of their
savings every year. Using fake names and American accents, con artists in
Montreal, Toronto and Vancouver fleece unsuspecting U.S. citizens of up to (US)
$70 million a year, according to police estimates. The RCMP estimates that there
at least 50 phone-fraud firms in the Montreal area alone, which bring in up to
(CDN) $60 million a year.
Law enforcement officials in both the United States and
Canada say Canadian laws are too weak to deter the cross-border criminals, whose
ranks have even included a former RCMP investigator who provided names of people
who were targeted by a phone-fraud operation. The former Mountie pleaded guilty
in January to fraud, theft and conspiracy after he admitted to plotting with
three friends to steal seized cheques from RCMP headquarters in Montreal.
Richards, who was sentenced on February 26, pocketed nearly (CDN) $30,000.
The rash of Quebec-based fraud scams prompted the RCMP to
set up Project COLT in 1998 along with the FBI and U.S. Customs. The 20-member
squad has returned some (CDN) $25 million to victims in North America.
Similar task forces are also operating in Vancouver and Toronto. COLT's
biggest bust to date occurred in February 2001 when 25 people were arrested
during a raid on a massive boiler room in Laval, near Montreal.
The scam, which allegedly took in up to $1 million a week,
targeted U.S. seniors, mostly in California.
Police urge the public to protect themselves by refusing to
provide up-front cash or financial information to telemarketers. People should
also be wary if they're told they have won big prizes in a contest they don't
recall entering.
For more information on telemarketing fraud go to: www.phonebusters.com
Source: Brian Daly. “Gangsterism charged in telemarketing
fraud.” Montreal Gazette. February 6 2002; “Canadian laws under
scrutiny as phone fraud flourishes in big cities.” Canadian Press. February
16 2002.
Money Laundering
Ontario lawyers won a reprieve from new federal anti-money
laundering legislation thanks to a temporary court exemption granted by a
provincial court in January. Mr.
Justice Maurice Cullity of the Ontario Superior Court of Justice granted the
exemption until a constitutional challenge of the legislation can be heard in
the province.
A
judge in British Columbia also temporarily suspended the reporting requirement
late last year, while an Alberta court decided that Alberta lawyers should file
sealed reports with the provincial law society until a final decision on whether
the law is constitutional.
Lawyers are contesting a reporting requirement imposed by
Section 5 of the Regulations established under the Proceeds
of Crime (Money Laundering) Act. The regulation requires lawyers,
bankers, real estate agents, investment brokers and other financial agents to
report any transactions where there are “reasonable grounds” to suspect the
money involved is related to money laundering. The reports are to be filed with
the Financial Transactions and Reports
Analysis Centre, a monitoring agency set up by the federal government.
Failure to report can result in fines of up to $2-million and a jail term of up
to five years.
Lawyers argue the law is unconstitutional because it
violates the principle of solicitor-client privilege. Lawyers are not supposed
to tell clients when the reporting is done.
The constitutional challenge was brought forward by
provincial law societies in conjunction with the Federation
of Law Societies of Canada, an umbrella organization made up of almost every
provincial and territorial law society in Canada.
In November, a judge in British Columbia suspended
operation of the regulation in that province, pending a full hearing on the
regulation's constitutionality. Ottawa is appealing to the British Columbia
Court of Appeal. On January 18, the court of appeal agreed with the provincial
law societies request for exemption. The Department of Justice has since
appealed the decision to the provincial Supreme Court.
Lawyers from other provinces filed similar challenges after
Anne McLellan, the Minister of Justice, said she would not consider the B.C.
order applicable in the rest of Canada. She has said exempting lawyers from the
legislation would leave a “gaping loophole” in the law.
An Alberta court has ruled that, pending the outcome of the
challenge filed in that province, lawyers must report suspicious transactions to
the Law Society of Alberta, rather than the federal government.
The Federation of Law Societies is appealing an Alberta court ruling that
lawyers in that province can report suspicious dealings to the Law Society of
Alberta rather than to Ottawa pending an outcome of the challenge.
In March, a similar court challenge
was launched in Nova Scotia by the Nova Scotia Barristers' Society and the
Federation of Law Societies of Canada.
On April 15, the Saskatchewan Court of Queen's Bench also granted an
exemption suspending parts of the Proceeds of Crime (Money Laundering) Act
and Terrorist Financing Act that require lawyers to disclose their
clients' confidential financial affairs.
The April 15th decision means superior courts in five provinces: B.C.,
Alberta, Ontario, Nova Scotia and Saskatchewan have now ruled against the
federal government in this constitutional challenge. The exemption granted by
the five provincial superior courts will remain in force until a full
constitutional challenge can be heard in each province. That case is scheduled
for 2 weeks to begin in the B.C. Supreme Court on June 24th.
Source: Drew Hasselback. “Lawyers get temporary
exemption: Money laundering law.” National Post. January 8 2002; Colin Perkel.
“Ontario lawyers win reprieve from money-laundering reporting requirement.” Canadian
Press Newswire. January 7 2002; “N.S. judge to rule next week on challenge
to money-laundering law.” Canadian Press Newswire. March 12 2002; Canadian
Federation of Law Societies Internet Web Site.
The Office of the
Superintendent of Financial Institutions (OSFI) sent a letter to the
country's banks on February 22 encouraging them to close any correspondent
off-shore accounts with foreign shell banks, that is banks that lack physical
operations or regular employees. The request was made as part of an
international effort to combat money laundering and terrorist financing.
The proposed crackdown on shell banks mirrors a move in the
United States, where legislation has recently been passed that prohibits certain
financial institutions from maintaining or managing accounts for offshore shell
banks.
Nicolas Burbidge, senior director of OSFI's compliance
division, said the regulator is trying to remind Canadian financial institutions
about the risks of dealing with certain offshore entities. According to Burbidge,
Canadian banks often have little idea of who their customers are when they
manage correspondent accounts for foreign shells.
OSFI intends to publish guidance on the subject by the end
of this year and is preparing to meet with a number of industry associations
over the coming months to hammer out a set of standards.
Meanwhile, regulators of the Canadian securities market
admitted a day after the letter had been sent out by OSFI, that they were
surprised by the number of offshore accounts used as a base for stock trading. A
survey of investment dealers revealed that 13,000 client accounts have been
opened in offshore money havens where the activities of their owners can escape
regulatory scrutiny. The survey was conducted by staff of the British Columbia,
Alberta, Quebec and Ontario securities commissions.
The major provincial securities regulators have been
concerned about the use of offshore accounts for several years, said Michael
Watson, director of enforcement with the Ontario Securities Commission. He said
the ultimate goal of regulators is to pin down precisely what firms must do to
satisfy their requirement to “know their client.”
The survey asked members of the Investment
Dealers Association of Canada, the self-regulatory body that governs
Canada’s investment firms, to report how many client accounts were based in
countries blacklisted as money laundering havens, and to explain what steps they
take to ensure clients are engaged in legitimate behaviour. There are currently
23 countries that have been blacklisted by the Financial
Action Task Force for failing to meet certain criteria to combat money
laundering.
In the fall of 2001, the IDA proposed amendments to its
“know your client” requirements that were intended to better define when
brokerage firms must identify the beneficial owners of certain accounts, and to
put in place procedures to deal with accounts at risk of being used for money
laundering. The proposed revisions are being reviewed by the Canadian Securities
Administrators for approval or comment, but there are already indications they
will encounter stiff resistance – possibly even rejection – from the provincial securities
regulators, arguing the proposed measures are not strict enough.
In a presentation to the McHari Institute in Nassau,
Bahamas in early December, an OSC official criticized the IDA's proposed
revisions as inconsistent with Ontario securities law.
“The Enforcement Branch has a number of concerns with the
proposed amendments and recommend staff not support the proposed amendments
until these concerns are appropriately addressed,” said Brian Butler, manager
of investigation for the OSC.
One of his chief concerns was that the IDA would only
require member firms to “attempt to ascertain” the owners of more than 20
percent of a private company. Enforcement officials at the OSC also suggested
that the IDA rules do not clarify when dealers should refuse to open an account
for a client who “appears to be of poor reputation.”
In response to its survey, the IDA pledged to clamp down on
secretive offshore trading activity. On March 6 it announced that it is
examining 684 accounts in “non-co-operating jurisdictions” whose beneficial
owners may not be fully disclosed for signs of suspicious trading, including
possible links to money laundering and terrorist financing.
Paul Bourque, senior vice-president of member regulation
with the IDA, said the Association is contacting its members to ensure they can
identify these clients and that the accounts are being properly supervised. The
IDA will most carefully scrutinize those whose owners cannot be readily
determined.
Sources: Sinclair Stewart. “OSFI takes aim at offshore
shell banks.” National Post. February 26 2002; Sinclair Stewart.
“Watchdogs resist IDA solution: 'Know your client' rules not strict enough.”
National Post. February 26 2002; Drew Hasselback. “Offshore numbers
surprise regulators.” National Post. February 27 2002; Sinclair
Stewart. “IDA probes offshore accounts for suspicious trading: Initial review
in a month,” National Post. March 7 2002.
In its most recent International
Narcotics Control Strategy Report, the U.S. State Department has
fingered Canada as a “major money laundering country” stating that it is
worried about the movement of large sums of cash across the border.
“Canada remains vulnerable to money laundering because of
its advanced financial services sector and heavy cross-border flow of currency
and monetary instruments,” says the report. “The U.S. government, sharing
its northern border with Canada, is particularly concerned about the
cross-border movements of currency.”
The report lists Canada and more than four dozen other
nations (including the United States, Britain, and France) as “jurisdictions
of primary concern” because their financial institutions conduct transactions
involving considerable amounts of money tainted by crime. The report says
Canada's banks “engage in currency transactions involving international
narcotics-trafficking proceeds” that include significant amounts of U.S.
currency, or money derived from illegal drug sales in the United States.
The report notes that Canada is phasing in tougher measures
against money laundering.
The International Narcotics Control Strategy Report is the
Department of State's annual report on illicit drug-control and money laundering
activities in more than 140 countries. The report covers countries that range
from major drug producing and drug-transit countries, where drug control is a
critical element of national policy, to small countries or entities where drug
issues or the capacity to deal with them are minimal. The reports vary in the
extent of their coverage, depending on the information available from host
country authorities.
The report was released on March 1, 2002.
Source: U.S.
Department of State, Internet Web site; Jim Bronskill. “Illicit cash pours
over border: U.S. names Canada 'major money laundering country'.” Ottawa
Citizen. March 6 2002.
YBM Magnex shareholders will receive $85 million from nine
YBM directors, two accounting firms, five underwriters, and two Toronto law
firms under a proposed settlement of two class-action lawsuits involving the
defunct company. Shareholders will
recover between 25 and 30 cents on the dollar. In addition to the money from the
defendants, the stockholders are to receive all of the company's assets, valued
at $35 million.
YBM collapsed in late 1998 after raising $100 million in a
November 1997 share issue on the Toronto stock market. It amassed a stock-market
value of almost $1 billion just before the FBI raided its Philadelphia-area head
office as part of an investigation alleging that the company was involved in
massive securities fraud and was used by Russian organized crime for money
laundering. In 1999, YBM officials pleaded guilty to conspiracy charges in U.S.
Federal Court, admitting the company was conceived solely as a vehicle for fraud
and money laundering. The company eventually went bankrupt.
On May 7 2001, the Ontario Securities Commission (OSC)
began hearings into the collapse of YBM Magnex. The OSC alleges that YBM
officers and board members, including former Ontario premier David Peterson, two
Bay Street brokerage firms, and the law firm, Cassels Brock and Blackwell,
failed to disclose material facts in its share-issue prospectus – including
the fact that company founders were said to have links to Russian organized
crime.
In addition to the nine YBM directors and officers, the
defendants in the shareholder suits were the accounting firms Deloitte &
Touche and Parente Randolph; underwriters National Bank Financial (formerly
First Marathon), Griffiths McBurney, Scotia Capital, Canaccord Capital and HSBC
Securities; the law firm Cassels Brock and Blackwell and one of its partners,
Lawrence Wilder; and another Toronto law firm, Fogler, Rubinoff.
Despite the settlement, the OSC continued with its hearings
into whether YBM Magnex International withheld information from the public.
The class-action lawsuits were a means to compensate shareholders, while
the OSC hearing “is a forward-looking process to protect the market in the
future,” according to Michael Watson, the commission's director of
enforcement. At the end of its
hearing, the commission may impose sanctions - possibly including fines and bans
from taking part in future businesses - against those who committed any
wrongdoing.
On February 8, David Peterson’s lawyer, Alan Lenczner,
argued that OSC staff memos should be allowed as evidence, saying they would
show the OSC itself knew about the FBI investigation at a time when YBM
directors say they were unaware of its full import. Asked if OSC knowledge of
the FBI probe conflicted with the commission's role in running the YBM hearing,
Watson said the respondents “already went to court and argued OSC staff ought
not to be able to proceed because we are in a conflict, and the (Ontario Court
of Justice) rejected the argument.”
On Monday March 26, Owen Mitchell, a former member of
YBM’s board of directors told the OSC hearing that investigators hired by YBM
Magnex testified that they found “no clear evidence” of illegal activities
by the company. Fairfax Group Ltd., hired by YBM in November, 1996, to find out
why the U.S. government had declined to issue work visas to several employees,
uncovered general concerns about the company's financial records and allegations
of ties between shareholders and members of the Russian mob. But there was no
hard evidence of wrongdoing, according to Mitchell. “At the end of an
extensive period of time and considerable expense, it was exactly what we knew
the day before we engaged Fairfax.”
Mitchell, also a former managing director at First Marathon
Securities Ltd. (now National Bank Financial Corp.), is one of nine senior YBM
officers and board members who face allegations of failing to disclose all
material facts about YBM in its 1997 prospectus.
Fairfax investigators reported in March 1997 that when they
tried to contact YBM customers, they instead found “shell companies.” YBM
management suggested the investigators had contacted the wrong companies and
provided a new list of end-users of the company's products. By June 1998, about one month after YBM's headquarters in
Philadelphia was raided by federal authorities, forensic auditors confirmed the
customer list was “a fabrication,” Mitchell said.
Sources: “$120-million settlement reached in YBM Magnex
shareholder lawsuits.” Canadian
Press Newswire. February 7 2002; Lorrayne Anthony. “OSC continues YBM
probe after $120-million shareholder settlement.” Canadian Press Newswire. February
8 2002; Madhavi Acharya-Tom Yew. “YBM probe discovered nothing illegal, OSC
told Fake client list revealed later, ex-director says.” Toronto Star.
March 26 2002.
Related Stories: January
to June, 2001; July
to September 2001; October
to December, 2001
A Senate Committee of Canada continued
its hearings into National Security and Defence during the first quarter
of this year. Addressing the committee in January was
Chief Superintendent Ian Atkins, the RCMP’s head of
criminal operations in Nova Scotia, who reported that the RCMP ran checks on 500
members of the International Longshoremen's Association working on the Halifax
ports and found 187 – or 37 per cent – had criminal records, including
convictions for drugs, assault and impaired driving.
The RCMP polices only a small portion of the Halifax port
facilities, but it initiated the background checks here in 2000 after
discovering problems in Montreal, where the numbers are similar.
Atkins said there is no link between the union and
organized crime, but admitted he is worried those with criminal backgrounds
could be “enticed” to participate in waterfront crime.
However, the head of the International Longshoremen's
Association, representing port checkers, gearmen, stevedores and watchmen, has
accused the RCMP of sensationalizing. Gerald Murphy, president of Local 269 of
the union, said he wonders if that might show many convictions happened long ago
and involved offences like impaired driving, assault and domestic disputes that
have nothing to do with the port.
Atkins said security at the port needs to be as rigid as
security at Halifax International Airport. Since Sept. 11, what goes through the
port has come under scrutiny as police and others, like the committee, come to
grips with potential terrorist threats.
Canada's marine ports have been a major conduit for drug
smuggling, the illegal export and import of stolen automobiles, and the theft of
containers and their cargo. U.S. and Canadian officials also fear Halifax and
other ports could end up as staging grounds for nuclear or biological attacks. .
A multi-agency investigation of port crime now underway
suggests the criminal networks may be linked to ports in Nova Scotia, Ontario,
Quebec and British Columbia. The
Hells Angels, in particular have been identified as pervasive at Vancouver's
ports.
The hearings in Halifax were one of the last of the Senate
committee, which issued its Report
on National Security and Defence in late February. Among its wide-ranging
recommendations was that a full-blown public inquiry into the security of the
country's seaports be conducted.
Organized crime has its claws in the ports, the committee
warned, threatening the Canadian economy and North American security. Senator
Colin Kenny, chairman of the Senate committee said criminal groups in and around
ports could become tools of terrorists.
The Senate report warned that organized crime groups are
“generally active” in Canada's port system and can make entire shipping
containers disappear. An “extraordinarily high percentage of port employees
have criminal records,” the report said, adding that criminals gravitate to
ports because of opportunities to pilfer goods.
The accusations of a possible organized crime presence on
Canada’s seaports were met with derision from port corporation officials.
Crime is not rampant in the Port of Montreal, according to its head, Dominic
Taddeo. He said while there is criminal activity at the port, it is not as bad
as Senator Colin Kenny says.
Kevin Waite, president of the International Longshoremen's
Association, said he was astounded by the senate report.
His union represents 125 checkers who figure out whether containers leave
by train or truck when a ship is unloaded. Waite said the report contains many
errors, and appears to be just an attack on port workers.
Sources: “RCMP say more than one-third of Halifax port
employees have criminal records.” Canadian Press Newswire. January 23
2002; Peter McLaughlin. “Port urged to run tighter ship: Mounties fear
breaches of security at port after checks show 37 per cent of Halifax
longshoremen have criminal records.” The Halifax Daily News. January 24
2002; John Ward. “A Senate
committee says the military should get more money and people and recommends a
full-blown public inquiry into the security of the country's seaports.” Canadian
Press Newswire. March 1 2002; George Kalogerakis. “Port crime contained,
boss says: Senate reports on security lapses are greatly exaggerated: CEO.” Montreal
Gazette. March 7 2002.
The trafficking of people - especially females for
prostitution - and discrimination against women are among the major human rights
issues facing Canada, according to the U.S. State Department's annual Country
Reports on Human Rights Practices for 2001, released in the first week
of March. Thousands of people, including at least 15,000 Chinese, have entered
Canada illegally in the last decade, the report states.
“East Asian crime groups have targeted Canada,” the
report said. “Toronto and Vancouver serve as hubs for organized crime groups
that traffic in persons.”
The crime groups choose Canada because of lax immigration
laws, benefits available to immigrants and proximity to the U.S. border, the
study suggests. Canada is a transit and destination point for the trafficking of
hundreds of Asian, Mexican, and Haitian women into sexual exploitation and
involuntary servitude. Many of the women are eventually smuggled into the U.S.
It stresses that Canadian officials are working with countries in Southeast Asia
to curb the trafficking of women.
The report, compiled from reports by U.S. diplomats,
government workers, journalists and labour activists, has been describing human
rights conditions in UN countries for 25 years.
Source: “Crime groups using Canada to smuggle
people, U.S. report says.” Canadian Press Newswire. March 11 2002
Citing the need to combat “transnational organized crime
and international terrorism,” Canada has petitioned the U.S. Supreme Court to
revive the federal government's $1-billion civil suit against the U.S.-based
R.J. Reynolds tobacco empire for alleged cigarette smuggling.
The Canadian government claims R.J. Reynolds and five
affiliates “conducted one of the largest smuggling operations in U.S. history,
funnelling billions of cigarettes from the United States into Canada without
paying applicable Canadian taxes.”
In the early 1990s, exports of tobacco products by major
Canadian tobacco manufacturers increased significantly, with smuggling of
tobacco into Canada becoming prevalent.
Canada's U.S. attorneys filed a petition in Washington in
early March asking the high court to hear an appeal of a U.S. federal appeals
court decision last October that quashed the unprecedented Canadian suit for
violating a centuries-old “revenue rule” that bars U.S. courts from
interpreting or enforcing the tax laws of foreign nations.
Canada's appeal contains a cautionary note stating that if
the appeals-court ruling is adopted by other countries, “the decision will
similarly thwart U.S. efforts to pursue smugglers and other criminals operating
abroad.”
Canada has already suffered three consecutive defeats in
lower U.S. courts.
The government claims it was defrauded of hundreds of
millions of dollars by R.J. Reynolds Tobacco Co., five related companies and the
Canadian Tobacco Manufacturers Council, who allegedly conspired to violate U.S.
anti-racketeering laws by funneling billions of duty-free cigarettes from the
United States into Canada in the early 1990s, without paying taxes. The
government is also suing the Canadian Tobacco Manufacturers Council.
In October 2001, the U.S. Second Circuit Court of Appeals
in Manhattan voted 2-1 to uphold a U.S. District Court judge's ruling that
accepted Reynolds' central argument that Canada's case doesn't belong in a U.S.
courtroom on the grounds it violates the 18th-century “revenue rule” that
bars U.S. courts from interpreting foreign tax laws.
In its petition to appeal further to the U.S. Supreme
Court, Canada argues “cigarette smuggling is a massive industry that has been
used to finance terrorism and other forms of organized crime.... The Second
Circuit's decision, if left standing, will permit smuggling operations from
bases in New York into Canada and other nations without fear of civil liability
in the U.S. for the foreign taxes that the smugglers evade.”
So far, the government has spent more than $15 million on
the case, which was launched in December 1999.
The lawsuit, which was the first of its kind, claimed damages under the
U.S. Racketeering Influenced and Corrupt Organizations (RICO) law.
Similar lawsuits were subsequently filed by the European
Union and state governors in Colombia against Philip Morris and British American
Tobacco in the U.S. These lawsuits are also hitting roadblocks in U.S. courts.
In an unrelated investigation, the RCMP executed a search
warrant on corporate offices of Rothmans in January in order to review business
records of Rothmans' subsidiary, Rothmans, Benson and Hedges Inc. The records in
question relate to the period 1989 through 1996, during which high rates of
taxes and duties were imposed by the Canadian federal and provincial governments
on domestic sales of tobacco products.
From 1990 to 1993, lower tax levels in the United States
allowed smugglers to buy the cigarettes in border cities, bring them back to
Canada, and sell them for below-retail prices while still making a profit.
In its U.S. lawsuit, the Canadian government said even
though tobacco exports from Canada to the United States rose 11-fold from 1990
to 1993, the tobacco companies had no intention of selling their product in that
country and knew it would be returned to Canada illegally.
At the time, Rothmans cautioned that raising taxes on
cigarettes would cause market destabilization and lead to lost revenue for
Canadian tobacco companies, as well as produce a dramatic increase in smuggling.
However, the tobacco industry has never was never hurt by increased taxes. In
fact, Rothmans has had consistent earnings even when taxes were high. Some
attribute this to the fact that cigarette exports to the U.S. increased
dramatically, which were then smuggled back into Canada.
Sources: David Steinhart. “RCMP reviews records in
Rothmans export probe” National Post. January 19 2002; “Federal
government to appeal cigarette-smuggling suit in top U.S. court.” Canadian
Press Newswire.” March 9 2002; Christin Schmitz. “Ottawa resumes fight
against tobacco giant: Asks court to review $1-billion civil case.”
National Post. March 9 2002.
Organized Crime Genres
On February 3, one of Canada’s most infamous gangsters
died. According to a spokesperson at Montreal's Sacré-Coeur Hospital, Lucien
Rivard, once a trusted associate of Montreal’s Cotroni Crime Family, died at
the age of 86.
Rivard is most remembered for destroying the career of a
federal justice minister, and nearly sinking Lester Pearson's government in one
of the great scandals of recent Canadian political history.
In 1964, Rivard was in prison fighting off extradition
proceedings to the United States, where he was wanted for heroin smuggling. That
was when Pierre Lamontagne, the lawyer hired by the U.S. government, was offered
$20,000 to secure Rivard's release on bail. The bribe was offered by an
assistant to immigration minister René Tremblay. Lamontagne was also pressed by
an aide to federal justice minister Guy Favreau, and by Guy Rouleau, a member of
Parliament and Prime Minister Pearson's parliamentary secretary. The RCMP
investigated but said there was not enough evidence to lay charges.
In November 1964, the opposition got wind of the affair
and, led by Progressive Conservative MP Erik Nielsen, began a ruthless campaign
against Favreau, who was then a rising star in the Pearson cabinet. The scandal
forced Favreau's resignation and, for the 1965 election, Prime Minister Pearson
recruited three new leading candidates in Quebec – Jean Marchand, Gérard
Pelletier, and Pierre Trudeau.
A 1965 inquiry report found he had many backers among
federal Liberal organizers in Quebec – but
Rivard took his secrets to the grave.
Rivard’s extensive rap sheet officially in 1933, when at
17, he was convicted of breaking into a storage shed. By the 1950s, he was a
major figure in the Montreal underworld. Police identified Rivard as a key
player in the city's drug trade and an associate to one of the most powerful
Mafia bosses of that era: the late Giuseppe Cotroni.
In 1956, Rivard settled in Cuba, where he ran nightclubs
while, at the same time, trafficking in guns for Fidel Castro's rebels. It was
there that he fell into the heroin trade, when a smuggling ring's Corsican
connection collapsed in Havana and left him in control.
He returned to Quebec in 1958 and opened the Domaine Ideal,
a beach resort in Laval. It served as a front for his drug-smuggling and
arms-trafficking operations. It was upon his return to Montreal where Rivard
became a crucial figure in what later became known as the French Connection,
where he provided the link between Montreal's Italian organized crime groups and
Corsican heroin smugglers.
In October 1963, U.S. agents in Laredo, Texas nabbed a drug
runner, Michel Caron, as he tried to enter from Mexico with 35 kilograms of
heroin. Caron confessed and implicated Rivard and a member from New York's
Gambino crime family. The investigation was so sensitive that U.S. Attorney
General Robert Kennedy got involved, calling his Canadian counterpart to make
sure Caron's family would be taken to a safe house.
Rivard was arrested and his efforts to get bail by
contacting Liberal contacts entangled the Pearson government. Rivard added fuel
to the scandal by escaping a Montreal jail with another inmate in March, 1965.
He escaped by persuading guards to allow him to go out to water the prison's
outdoor skating rink – on a spring day when the temperature outside was 5
degrees Celsius. Once on the outside they hijacked a car. Rivard gave the
motorist money to take a cab home and later called him to tell him where his car
was. He was on the lam for four months, his escape made even more annoying to
authorities by a series of letters he sent. In one, mailed March 30 to Prime
Minister Pearson, he said, “Life is short, you know. I don't intend to be in
jail for the rest of my life.”
He was caught July 16 1965, near Châteauguay, Quebec, and
extradited to a penitentiary in Texas where he served nine years. He was
released in 1975, and since then he has largely been out of the public eye.
Sources: Tu Thanh Ha. “Montreal mobster nearly sank
Liberals. Lucien Rivard was a major underworld figure – with pals in the
Pearson cabinet.” Globe and Mail. February 14, 2002; Alan Hustak.
“Rivard rocked Ottawa: Drug-smuggler and escape artist dies peacefully at
83.” Montreal Gazette. February 14 2002; Jean-Pierre Charbonneau. The
Canadian Connection: An Expose on the Mafia in Canada and its International
Ramifications. Montreal: Optimum Publishing Co., 1976.
The Montreal Gazette reported on January 20 that a
founder of the Rock Machine has quit the organization because its members
decided to join up with the Bandidos. A National Parole Board report says Claude
(Ti Loup) Vezina decided to quit the Rock Machine while in prison because other
members agreed to be folded into chapters of the Bandidos, considered to be only
second to the Hell’s Angels in size internationally.
The report supports a long-held police theory that the Rock
Machine's founders never intended it to be a biker gang like the Hells Angels.
The Rock Machine was formed around 1994 by a loose collection of organized crime
groups explicitly to counter the growing monopoly that the Hells Angel’s held
over Quebec’s illegal drug market.
The Rock Machine set up chapters in Montreal and Quebec
City and Vezina was often described as the head of the latter chapter, an
allegation he did not deny while in prison.
However, it appears that when the Rock Machine decided to
become part of the Bandidos, a U.S. gang with dozens of chapters all over the
world, Vezina decided to call it quits.
“The recent joining of the Rock Machine to the Bandidos signalled
a change that you are not ready to endorse,” the author of the parole board
report wrote. “You therefore communicated with the 'persons concerned' in
February 2001 to let them know your decision to quit the organization. You have
expressed your desire to retire.”
The parole board granted Vezina's request for day parole
because the date when he qualifies for statutory release was quickly
approaching. At the time, Vezina had served more than four years on several
concurrent prison sentences after a 1997 conviction for drug trafficking and
1998 proceeds of crime conviction.
When he finishes serving two-thirds of his sentence on May
2, he is eligible for statutory release.
Source: Paul Cherry. “Jailed biker quits: Rock Machine
founder pulls out after gang folds into Bandidos: parole report.” Montreal
Gazette. January 20 2002.
Montreal’s
La Presse newspaper reported in January that nearly $100 million in public funds
have been spent over the last six years in the fight against Quebec’s outlaw
motorcycle gangs. This total includes various costs incurred by the Ministries
of Justice and Public Security, the RCMP, and certain municipalities.
The
money was used for, among other things, the creation of special police squads,
the construction of a new courthouse in Montreal specifically for biker trials,
prosecutors' salaries and the cost of detaining more than 100 Hells Angels
members arrested as part of a wide-ranging police sweep last spring.
The
most significant area of spending, about $60 million, was incurred as a result
of the creation of the special anti-biker police squads. Originally called the
Carcajou squad, the re-named Regional Mixed Squads are made up of federal,
provincial, and municipal police forces.
The
province of Quebec injected $10 million into the original Carcajou program. Then
in 1999, the Public Security ministry created the six Regional Mixed Squads at a
cost of $20 million for three years. The cost of maintaining the regional
squads' mandate through 2004 is around $30 million.
In
order to support the work of the regional squads, the Justice ministry created a
special prosecutorial office dedicated to for the fight against organized crime
in September, 2000. That office, consisting of about 20 people including 13
Quebec prosecutors, has an annual budget of $1.7 million.
The
construction of a special courthouse attached to Bordeaux prison in the north
end of Montreal, and the incarceration of more than 100 bikers arrested as part
of the March raids also represented significant costs. As of October 2001, 24
people charged as a result of Operation Springtime 2001 had pleaded guilty.
Source: “Nearly
$100 million in public funds spent over six years on Quebec biker war.” Canadian Press Newswire. January 12 2002
The judge in the trial of 17 Hells Angels members and
associates on Monday rejected a defence argument that federal charges that the
group participated in a criminal organization are unconstitutional.
Lawyer Jacques Bouchard, arguing for all defence lawyers in the case,
said the so-called “gangsterism” offence in the Criminal Code is
confusing. Citing the article's
French version, he noted it refers to ``participating'' in gang activities and
``contributing'' to them in an important way. The words are synonymous so it's
hard to see why lawmakers used both terms instead of one, Bouchard argued in a
pre-trial motion. ``This creates a
situation where we don't know exactly what we're facing.''
Justice Jean-Guy Boilard of Quebec Superior Court dismissed
the request that the gangsterism charges be declared unconstitutional. Boilard
said he couldn't agree with the idea that the Criminal Code article is
imprecise. Francois Briere, a
prosecution lawyer, had argued the law's wording was sufficiently precise. He
noted the Supreme Court didn't insist on overly specific wording in another
matter, when it dismissed allegations of vagueness in the law on “terrorism”
and “danger to Canadian security.”
In addition to allegations that the accused participated in
a criminal organization, the 17 accused face such charges as drug trafficking
and conspiracy to commit murder.
Source: “Quebec judge rejects challenge to gangsterism
charges facing 17 Hells Angels.” Canadian Press Newswire. February 11
2002
From
January 11 to 14, the Hell’s Angels motorcycle club held a conference at a
downtown Toronto hotel. After it was learned that more than 400 members of the
group would be descending on the city's downtown entertainment district, police
braced for the worst and increased their presence on the streets.
Initially,
police also planned to ask local merchants to post signs that would prohibit
gang colours on their premises. However, this initiative was mostly ignored. The
Hells Angels sent letters to those same businesses, offering a weekend of big
profits, and a clear majority decided to ignore the program. Some businesses
even went out of their way to attract the patronage of the Hells Angels. At the
Hey Lucy Cafe, just across the street from the hotel, a sign welcomed the Hells
Angels.
Police reported that
during their time in Toronto, members of the Angels were well-behaved and no
arrests were made.
The weekend was free
of controversy until a photo of Mayor Mel Lastman appeared on the front of
Saturday's tabloid Toronto Sun, with Lastman shaking the hand of a Hells Angels
member. The handshake photo not only shocked many in the city, it was publicized
throughout the country, in turn generating a wave of controversy for Lastman.
Sources:
Mike Oliveira. “Police and Hells Angels bikers warring over what to wear at
Toronto party.” Canadian Press Newswire. January 3 2002; “Hells
Angels leave Toronto without any trouble; Mayor Mel gets a scolding.” Canadian
Press Newswire. January
14 2002.
A
police investigation was launched in February into whether outlaw motorcycle
gangs have permeated the ranks of Quebec prison guards. The allegations of
corruption and alliances between guards and organized criminals emerged during
hearings on reform of Quebec's penal system.
In
the final minutes of testimony before a parliamentary hearing Tuesday, the
president of the union representing Quebec prison guards was asked by Liberal
public-security critic Jacques Dupuis if there was anything to rumours that some
of his members are biker sympathizers.
Rejean
Lagarde, president of the Syndicat des Agents de la Paix en Service
Correctionnels du Quebec initially responded that there was some validity
to these allegations, although he later backtracked from his comments, saying he
was
Admitting
the credibility of the corrections system is at stake, Public Security Minister
Normand Jutras announced that the Quebec Provincial Police had been called in to
investigate. In addition to the police investigation, he promised anyone
currently working in the prison system found to have alliances with bikers would
be fired.
He
also said he would look into overhauling the security checks done on
prison-guard recruits, a move applauded by Dupuis. Currently, guards are
fingerprinted and their names are run through a computer to see whether they
have criminal records.
Similar
allegations of biker-influenced corruption among employees in law enforcement
agencies also emerged during a National Association of Police Professionals
The
concerns stem from an audit of Canadian Police Information Centre (CPIC)
computers at four Toronto immigration offices and one in Ottawa. The audit found
passwords still operable for people who had died or moved to other jobs –
about 20 workers who had two passwords each and 70 people not subjected to
background checks who were using the system.
Cannavino
said at least four people with CPIC access in Quebec have been charged in the
past six months for selling information to the Hells Angels. Another man was
charged in Whitby, Ontario. Cannavino stated that the Angels pay up to $10,000
to workers who help the bikers to steal CPIC data. The gang has allegedly been
targeting secretaries and security and maintenance staff. He said the bikers use
the information to terrorize witnesses, stalk or target police officers and
their families and jeopardize investigations.
The
audit, conducted in February and March of last year, also found cleaners had
access to CPIC computers and the data could be seen through one office window.
Police
said the CPIC system, which stores data gathered by Canadian, U.S. and foreign
police, contains information on warrants, intelligence reports, charges,
convictions, motor vehicle licences and registrations
Sources:
Allison Hanes. “Title Police fear bikers have pals among guards.” Montreal
Gazette. February 21 2002; “Police computers penetrated: Audit reveals
Hells Angels pay enforcement personnel for passwords.” Edmonton Journal.
February 11, 2002.
On March 12, Yves Albert, a 34-year-old father of two, was
pumping gas into his green Plymouth Intrepid outside a gas station in
Saint-Eustache, Quebec when he was gunned down.
Police speculated that Albert was shot by a member or
associate of the Hell’s Angels, mistaken for a member of the rival Bandidos.
Constable Pierre Robichaud of the Surete du Quebec said that Albert's car
resembles a green Intrepid driven last January by a member of the Bandidos gang,
a man of about the same age who was heavier but resembles Albert “a little bit
in the face.” Also, the same three digits, 404, appeared on the license plates
of both vehicles.
Albert was at the gas station pumps when the Voyageur van
pulled in behind him. The gunman got out of the passenger side, shot Albert
several times at close range, and then escaped with his accomplice, who was
driving. A stolen 1995 red Plymouth Voyageur that was used by the killers was
found in Laval's Chomedey district. The van had been torched, which is
considered a signature of a biker hit.
Police
set up confidential phone line - (800) 659-4264 - for anyone who saw the
Voyageur on southbound Highway 13 or in Chomedey.
Albert is one in a number of
innocent people who have been killed as part of an ongoing ware between the
Hell’s Angels and the Rock Machine, and more recently the Bandidos, which
recently absorbed members of the Rock Machine into its fold.
A week following the shooting of Albert, on March 18,
Hell’s Angels associate Steven Bertrand was shot, which police speculate may
have been payback for the suspected botched strike, a senior Montreal police
officer said yesterday.
Two men arrested hours after Bertrand was shot had links to
the Bandidos, Montreal Constable Christian Emond said. Both suspects were
arrested a block from the restaurant where Bertrand was shot. The second suspect
was released because there was no evidence linking him to the shooting.
Bertrand,
a close associate of alleged Hells Angels boss Maurice (Mom) Boucher, was hit by
three bullets in the head, back and shoulder as he lunched at Tokyo Sushi Bar at
the intersection of Park Ave. and Bernard St. in Montreal.
He
remained in stable condition in hospital, police spokesman Luc Belhumeur said.
Police
found a gun near the scene of the shooting and are waiting for test results to
determine whether the weapon was the one used in the attack on Bertrand.
Sources:
“Shooting of Quebec biker likely payback for mistaken killing of innocent:
police.” Canadian Press Newswire. March 20 2002; “Father of two
gunned down in apparent case of mistaken identity.” Canadian Press Newswire.
March 16 2002.
The Royal Canadian Mounted Police is placing law
enforcement officers in five more Canadian missions abroad to aid in its fight
against global organized crime and terrorism.
Liaison officers are to take full-time positions in Canadian embassies or
high Commissions in Beijing,
Vienna, Madrid, The Hague and Kingston, Jamaica.
The postings will significantly increase the force's
international presence. RCMP liaison officers are currently posted in 20
countries, although the force would not identify those nations, citing a concern
for operational security.
The locations of the five new postings were chosen because
of strategic significance, according to a RCMP spokesperson. Their function is
to provide Canadian and foreign law enforcement communities with assistance,
information and coordinating support, specially for investigations related to
drugs, organized crime, proceeds of crime, commercial crime and immigration
matters.
Source: Adrian
Humphreys. “RCMP boosts its presence overseas: Postings at embassies: Liaison
officers to tackle terrorism, organized crime.” National Post. March 27
2002.
