July to September, 2016

Organized Crime in Canada: A Quarterly Summary

Organized Crime Activities

Organized Crime Genres

Organized Crime Enforcement

 

ORGANIZED CRIME ACTIVITIES

Drug Trafficking

Poly-Drug Trafficking

In July, police in Ontario arrested and charged 27 people in what they are calling a sophisticated organized crime ring involved in distributing, trafficking and exporting various illegal drugs.

The enforcement actions were part of a joint forces operation, code-named Project Beyond, which had been underway since the beginning of 2016.  At the time of the arrests police seized a wide array of drugs, cutting agents and firearms. A Toronto Police Service press release said 283.2 kilos of drugs were seized with a street value of more than $14 million and includes the following:

– Cocaine: 80.8 kg, for a total street value of $7,900,000

– Marihuana: 65 kg, for a total street value of $325,000

– Crystal Meth: 3.3 kg, for a total street value of $198,000

– Opium: 8 kg, for a total street value of $160,000

– MDMA: 24 kg, for a total street value of $481,200

– Ketamine: 101 kg, for a total street value of $2,500,000

– Psilocibin: 1.1 kg, for a total street value of $22,000

– Fentanyl: 79 grams, for a total street value of $7,900

– Methamphetamine: 41,600 pills, or 20.5 kg, for a total street value of $2,460,000

A number of firearms and ammunition were also seized including a Tec 9 Machine Pistol, an AR 15 Machine Rifle, a Springfield .40 Cal Handgun, an Ekol .38 Cal. handgun, a 9mm Mini Glock handgun, a 30/30 Rifle, and two 12-Guage Shotguns. Several rounds of ammunition were also seized.

In addition, police confiscated more than $2.3 million in Canadian and U.S. currency. At a press conference held on July 14, Toronto police officials announced that investigators were in the process of seizing another $3.3 million in assets – in particular, “expensive” condominiums mostly located in Toronto – they believe were purchased with the proceeds of crime.

During the press conference, Insp. Dieter Boeheim of York Regional Police’s Intelligence Bureau said the joint force investigation straddled Canada, the United States as well as “Asian countries.”

“The criminality takes place all over the GTA as well as internationally,” he said. “The group is a very fluid one.”

Boeheim said the criminal group had been trafficking in various drugs for a number of years.

Supt. Gord Sneddon, who heads the Organized Crime Enforcement Unit of the Toronto Police, said the multi-ethnic group was “way above street level” and had “a very clear hierarchy.” The group was allegedly led by a 40-year-old man from Richmond Hill. Boeheim characterized the man, who is facing 15 charges, as “sophisticated” and a “pretty disciplined criminal.” He often used encrypted technology in his communication and kept his inner circle small to avoid detection.

The investigation was conducted by Toronto Police Service Drug Squad Major Projects Section, York Regional Police and Canada Border Services Agency with the cooperation of Six Nations Police.

Sources: InsideToronto.com, July 14, 2016, Toronto and York police put dent in organized crime drug ring with Project Beyond raids; Turtle Island News, July 14, 2016, Six Nations man among dozens charged in massive organized crime bust that netted $14 million in drugs and weapons; Toronto Sun, July 14, 2016, 27 people arrested in drug trafficking bust: Toronto Police

Carfentanil

In August, police and health authorities in Canada and the U.S. began warning the public about a new recreational drug that has surfaced in North America that is 4,000 times more potent than heroin.  The drug is called carfentanil and the warnings came after a rash of deadly overdoses in Ohio and about two months after law enforcement seized a shipment of the narcotic at a marine port in Vancouver.

Carfentanil is a synthetic opioid, derived from the painkiller fentanyl, but is not for human use. It was originally manufactured for veterinary purposes, designed to immobilize large hoofed animals like moose and elephants. Carfentanil looks like table salt and a dose as small as 20 micrograms (equivalent to a few grains of salt) could be fatal to humans.

Carfentanil is so potent, according to CBC News, “it takes a special class of veterinarian to even get access to the drug. Vets who administer the drug wear protective clothing, including a face shield and gloves, when they do so.” As such, police have been warned not to touch the drug if they find it.

The drug is cheaper to produce than other opioids, like heroin and cocaine, and some drug traffickers have added it to the other drugs they sell, such as MDMA (ecstacy) cocaine and heroin. Drug users who survived overdoses in Ohio told police they were told they were buying heroin. In fact, tests later showed there was no heroin in the powder they had purchased.

Between nearly August 19 and the middle of September, there were 300 overdoses in Cincinnati attributed to carfentanil. Firefighters in that city said they sometimes had to use multiple doses of naloxone, an antidote administered to revive those who are suspected of overdosing on opioids.

Tim Ingram, the health commissioner for Hamilton County in Ohio, was quoted in the media as saying, “We may be seeing a whole new shift in street drugs in our culture, moving away from traditional heroin and so forth to the synthetic opioids which are much more potent, faster to market and at less cost.”

U.S. Drug Enforcement Administration officials have said they believe much of the carfentanil in that country is being shipped from China to Mexico, where traffickers mix it with heroin and other drugs such as fentanyl.

In late June, Canada Border Services Agency (CBSA) officers intercepted a one-kilogram package of carfentanil at the Port of Vancouver.

The package originated in China and was bound for Calgary. A 24-year-old man was arrested at his home in Calgary on July 5 and charged with importation of a controlled substance. His name and address were on the package, which was listed as printer accessories.

“If you look at what one kilogram of carfentanil can produce, it’s approximately 50 million fatal doses that could have hit our
Canadian streets,” said RCMP Insp. Allan Lai.

By the end of September, police in Winnipeg reported that they seized 1,477 blotter tabs from a hotel room earlier that month that contained carfentanil. A 37-year-old Winnipeg was charged with numerous drug trafficking offences. Police in Winnipeg said they are not
aware of any overdose deaths attributed to the drug.

However, carfentanil has been blamed for the overdose deaths of two men in Alberta in early October, which prompted a warning from the province’s chief medical officer of health. “Albertans need to know that the drug carfentanil has made its way into our province and that it is an extremely dangerous and deadly opioid,” Dr. Karen Grimsrud said in a statement. Alberta’s Office of the Chief Medical Examiner is believed to be the first toxicology laboratory in Canada to positively identify carfentanil in human blood.

Sources: CBC News, August 9, 2016, Deadly opioid carfentanil bound for Calgary seized in Vancouver; CBC News, September 10, 2016, Elephant sedative carfentanil marks ‘whole new shift in street drugs’; 680CJOB.com, September 29, 2016, Powerful Opioid Carfentanil Confirmed In Winnipeg; CBC News, September 29, 2016, ‘It’s scary stuff’: Deadly drug carfentanil now in Winnipeg; CBC News, October 7, 2016, Deadly opioid carfentanil detected in two deaths in Alberta

Fentanyl

At the end of August, Health Canada announced that six chemicals used to produce the drug fentanyl will be made illegal to import or export without government authorization. The announcement came as the federal government struggled to address the fentanyl epidemic in Canada, which has been linked to numerous overdose deaths.

Health Canada says the move to crack down on chemicals used to make fentanyl is part of its new opioid action plan. The new regulations stem from Bill S-225, which was originally put forward by Senator Vern White, a former Chief of the Ottawa Police.

Fentanyl is a synthetic opioid that’s 100 times more potent than morphine. An amount the size of two grains of salt can kill a healthy adult. The drug is usually prescribed in a patch form to treat chronic pain. But the opioid is now commonly cut into other street drugs — including heroin, oxycontin and methamphetamine — because it is often cheaper and also makes the latter drugs more potent.  CBC News reported that 86 per cent of street drugs in Vancouver tested over a four-week period at the safe injection facility InSite contained fentanyl.

CBC News reported at the end of August that the RCMP has reported an increase in domestic production of illicit fentanyl in recent months.

The drug has hit British Columbia particularly hard; in April of this year, the number of overdose deaths from fentanyl was so great that the provincial government declared a public health emergency as overdose deaths by fentanyl have increased 74 percent in the first seven months of 2016 compared to the same period in 2015.

According to the Globe and Mail, while the problem so far appears most acute in Alberta and British Columbia, “the illicit substance is also on streets in Ontario in growing quantities, with police reporting an increasing number of drug seizures this year.”

The Ontario Association of Chiefs of Police, the Waterloo Region Crime Prevention Council and other groups issued an advisory on fentanyl, saying that 2016 has been a record year for overdose alerts and seizures of so-called “bootleg” fentanyl by police in that province. The groups warn it’s only a matter of time before a wave of fentanyl fatalities occur in the province unless the province takes preventative action.

Sources: CBC News, August, 31, 2016, Health Canada plans stricter control of ingredients used to make fentanyl; Globe and Mail, August 29, 2016, an unprepared Ontario faces imminent fentanyl crisis, groups warn

Marijuana

In July, the RCMP with support from the Canadian Armed Forces, undertook Operation Sabot, an “air-mobility” marijuana-eradication program that uses military helicopters to spot illegal outdoor marijuana farms.

According to a Department of National defence web page, “Since its inception in 1989, the Canadian Armed Forces’ contribution to Operation SABOT has been limited to aircraft and surveillance equipment, and the personnel required to operate them. Patrols conducted under Operation SABOT are led by RCMP officers, who perform and are fully responsible for all related law-enforcement actions.”

The web page goes on to describe a typical outdoor grow operation as “a garden planted in the centre of a cornfield or in a forest, where tall crops or natural vegetation provide camouflage. Indoor grow-ops depend on hydroponic technology, and can be located in any building (agricultural, commercial, industrial or residential) that is supplied with water and electricity.”

The aerial surveillance operation targets different parts of the country every year. It often flies over areas that have a high probability of grow operations based on police intelligence or tips from the public. Its annual fly overs are conducted during the time of the year where an outdoor crop is expected to be harvested (meaning the plants are larger and better able to be seen from the air). If a suspicious farm is spotted the local police are informed, which then apply for a warrant to search the property.

In an article on Operation Sabot, Vice.com noted that the program began in 1989 and “since then, hundreds of thousands have been confiscated, and many criminal charges have been laid ranging from possession to trafficking.”

In 2015, the Canadian Armed Forces provided air-mobility surveillance support to the RCMP, through the deployment of helicopters, in Saskatchewan, Quebec, Nova Scotia and New Brunswick. According to figures obtained by VICE.com, this resulted in the seizure of 76, 375 plants. The most productive year, Vice.com noted, was 2010, in which 171, 378 plants were confiscated. No figures were available for 2016.

Based on 2014 Parliamentary documents, Vice.com reported that Operation Sabot cost the federal government more than $11.4 million between 2006 to 2013. This figure does not include military and RCMP expenses. In 2009 the military allocated approximately $2.5 million to the operation.

Like marijuana interdiction programs in general, there are questions about the effectiveness of this strategy.

“The once-a-year sweep of outdoor grow-ops makes little to no difference on the illegal drug trade in Canada,” said Nathaniel Erskine-Smith, a Liberal member of Parliament for Toronto who has been critical of punitive law enforcement tactics when it comes to marijuana. He says Operation Sabot is a “perfect example” of why cannabis should be legalized soon.

Sources: Department of National Defence, 2016, Operation Sabot; Vice.com, July 15, 2016, Canada is going on a marijuana search-and-destroy mission in farmers’ fields

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In September, the OPP seized 3,100 marijuana plants in Sables-Spanish Rivers Township, located on the north side of Georgian Bay in the Sudbury District of Ontario. The OPP estimated the haul to have a street value of $3.1 million.

Members of the Sudbury unit of the OPP Organized Crime Enforcement Bureau arrested and charged two men from Markham, Ontario: 36-year-old Fei Chen and 34-year-old Kan Zhong. Both men were located at the property at the time of the police raided. Each was charged with the production of marijuana and possession of a controlled substance for the purpose of trafficking.

OPP Detective Sgt. Jerry Filipov said the grow op, which was located outside in an open field west of Sudbury, was about the size of two football fields

“You can imagine something that big, it wouldn’t be very hard to pick out, put it that way,” Filipov said. “It was an open field. It wasn’t concealed in any buildings. It was basically wide open.”

At the time, Filipov said the investigation is ongoing and police are “still trying to find a few things out.” This includes determining where the marijuana was destined for.

Despite the large side of the bust, Filipov indicated, “It won’t have a significant impact on the (provincial) marijuana industry.”

Filipov said the OPP was tipped off about the grow operation from several anonymous sources.

Source: The Sudbury Star, September 24, 2016, Pot bust west of Sudbury worth $3.1 million

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In September, the OPP charged 44-year-old Jon-Paul Fuller, the president of Windsor & Essex County Crime Stoppers program with marijuana production and trafficking charges.

The criminal charges were in relation to an alleged marijuana grow operation in Leamington, Ontario, located in Essex County. Another 53-year-old man was also charged.

Police seized 2,900 pot plants worth an estimated $2.9 million, according to the OPP. They also found 41 kilograms of harvested marijuana.

Soon after the charges were laid, an emergency meeting of the Board of Directors of the local Crime Stoppers was held and Fuller was removed from the board and ousted as president.

Former president Charlie Hotham has been reinstated as head of the region’s Crime Stoppers for an undetermined amount of time. “I was dumbfounded. I was shocked. It was disbelief, not just by me, it was disbelief by the entire board,” he was quoted as saying.

Fuller was president for just a few months before the OPP laid charges.

An extensive interview process and police clearance was also done before Fuller got the job, but “this came out of nowhere” and “people sometimes go awry,” Hotham said.

Source: CBC News, September 23, 2016, Crime Stoppers board ‘dumbfounded’ by president’s grow-op charges

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A written submission by the Canadian Drug Policy Coalition to the federal cannabis legalization task force cites existing studies that show only a small proportion of marijuana production and trafficking is undertaken by organized crime groups in Canada and abroad.

Among the studies referenced in this submission is a 2011 federal Department of Justice report reported that studied a random sample of 500 marijuana production cases in Canada, drawn from Crown prosecutor case files and RCMP criminal history files over an 8-year period. Only 5 percent of the files produced any indication that the offender was affiliated with a criminal organization or street gangs.

The “key findings” documented in the submission are as follows:

1.While the label of organized criminal may be accurately applied to a minority of the individuals involved in the illicit cannabis industry, the defining characteristics of the term are not applicable to the majority.

2. Unsubstantiated media and police reports portray the cannabis industry as dominated by organized crime.Evidence suggests a very low involvement of organized crime in the cannabis industry in

3. Evidence suggests a very low involvement of organized crime in the cannabis industry in Canada; the majority of those in the industry tend to be non-violent and have minimal, if any, involvement with other criminal activities.

4. Those involved in cannabis production are typically small-scale growers who are active members of their communities.

5. Those in the cannabis industry have diverse motivations, including supplementing income, reducing costs, pursuing business and personal interest, controlling quality and producing diverse strains, and avoiding the illegal market.

6. Most of those involved in the illicit cannabis market are keen to be part of a legal market.

These findings led a Globe and Mail article to conclude, “Contrary to common RCMP wisdom, organized crime groups play a relatively small role in Canada’s underground cannabis trade, and the majority of people behind the country’s illegal grow operations and dispensaries are otherwise law-abiding…”

However, as co-author Simon Fraser University Criminology Professor Neil Boyd points out, these conclusions are contingent upon how one defines organized crime.

“A lot of this comes down to your definition of organized crime. If you think three people acting together and potentially making some kind of profit necessarily means that these are organized criminals, then, of course, everybody in the cannabis industry is an organized criminal,” said Boyd. ““But if you think along the lines of the Justice Canada website, where the focus is on corruption [and] the use of force or violence, you’ll find very few people in the marijuana industry are properly defined as organized criminals.”

The description of organized crime that the Coalition appears to use is: “1) a continuing organized hierarchy; 2) rational profit through crime; 3) the use of force or threat; and 4) corruption to maintain immunity from arrest and/or prosecution.”

Boyd said gangs and well-organized crime groups do play a role in the production and sale of marijuana, but police have never proven to what extent, while existing research suggests that most of those in Canada’s underground recreational cannabis industry are non-violent and are not serious and chronic offenders.

The written submission, entitled Evidence and Implications of Organized Crime in the Cannabis Market, comes as the federal Liberal government is soliciting input from across the country as it prepares to introduce legislation to legalize recreational marijuana. The legislation is expected to be introduced in the spring of 2017, although it may not be until 2018 when legal recreational marijuana is available.

The government argues legalization is the best way to combat the involvement of organized crime groups in the production and trafficking of pot and is also the optimal approach to stopping young Canadians from getting easy access to the drug.

The Globe and Mail also noted that even the courts have been skeptical of RCMP claims that criminal organizations are dominant in the underground marijuana trade.

The role of organized crime in the cannabis trade came up during a recent Federal Court case that focused on whether rules established by the Harper government that prohibited medical marijuana patients from growing at home were constitutional. The court ruled against the government, which had argued that allowing patients to grow their own marijuana often leads to diversion into the black market. In February, the Federal Court judge who heard the case questioned the credibility of the RCMP’s expert witness on illegal marijuana cultivation. In his ruling, the judge noted that the Mounties had no hard data to back up their claims that home growers licensed under Canada’s old medical system were magnets for violent thieves and organized crime. The RCMP witness also stated that it is very difficult for the force to know the extent to which organized criminals were able to penetrate the previous system because of the secrecy surrounding most of these groups.

Staff-Sergeant Lindsey Houghton, spokesman for British Columbia’s anti-gang task force, said very few gangsters are ever charged with or implicated in marijuana offences.

“We’ve had a few, but it’s not the majority,” he said.

The pro-marijuana, pro-legalization web site marijuana.com said Boyd’s findings represent the “‘duh no kidding’ moment that most pot lovers in Canada have known for many years” – that mostly “law-abiding citizens run the majority of illegal grow-ops across the nation.”

The Canadian Drug Policy Coalition describes itself as “comprised of over 70 organizations and 3000 individuals working to support the development of a drug policy for Canada that is based in science, guided by public health principles, is respectful of the human rights of all, and seeks to include people who use drugs and those harmed by the war on drugs in moving towards a healthier Canadian society.”

Sources: Canadian Drug Policy Coalition, 2016, Organized crime in the cannabis market: Evidence and Implications. Submission to the Cannabis Legalization Task Force, July 29; Globe and Mail, August 9, 2016, Most of Canada’s marijuana growers are otherwise law-abiding: advocates; News1130.com, August 14, 2016, SFU study finds marijuana industry not fueled by organized crime;  Marijuana.com, August 10, 2016, Canadian Government Exaggerates Organized Crime Involvement in Cannabis

Methamphetamine

In August, the Calgary Police Service said that seizures of methamphetamine were up nearly 300 percent in the second quarter of 2016 compared to the same period in 2015.

Methamphetamine was relatively unknown on Calgary streets just five years ago, but police now say they encounter the street drug almost every day.

“We know that the availability of meth has increased as well as the price points have dropped significantly, to almost half what they were five to 10 years ago,” Staff Sgt. Martin Schiavetta told CBC News.

Police Chief Roger Chaffin said the abuse of hard drugs like methamphetamine and fentanyl has escalated in Alberta in the last few years.

Most seizures made by police are for small quantities from users or street-level traffickers. In February of 2016, however, Canada Border Services Agents found 14.5 kilos of the synthetic drug, the largest amount seized in five years. The drugs were found at the Del Bonita border crossing during a secondary examination of an SUV on January 31. A 40-year-old Calgary woman was charged with importation and possession for the purpose of trafficking, as well as smuggling.

Source: CBC News, September 28, 2016, Meth seizures rise 300% in Calgary as police chief calls for more addiction support; CBC News, February 5, 2016, 14.5 kg of suspected methamphetamine seized at Alberta border

Fraud

Police in Ontario say a 41-year-old man – who claimed to be a diplomat from the United Kingdom – is facing charges after an Ontario woman lost $30,000 in an apparent fraud. Police believe there may be more victims.

Investigators with the York Regional Police Major Fraud Unit say the 51-year-old victim from Vaughan, Ontario told investigators in April of 2016 that after meeting a person online and lending him money, she realized she had fallen victim to a classic romance scam.

She had lent money to a man she had met online and when she asked that he pay it back, he agreed.

An arrangement was made for her to meet an associate of the man at Pearson International Airport to collect the money.  The victim met this man at Pearson International Airport but was told that she would have to pay a fee to free the funds as they were being held up by Customs Canada. The victim paid the fee and further arrangements were then made to meet later in a nearby hotel.

When the woman met the man in the hotel, he said all of the cash she was owed was in the suitcase. But when he opened the suitcase all of the alleged cash was painted black. He told her it had been painted in order to smuggle it into the country, and she’d have to pay additional funds for the cleaning solution.

Arrangements were made to meet on another day to exchange money for the cleaning solution, but the woman never saw the money or the man again.

Police say a Brampton, Ontario man, Taiwo Gbolade, is scheduled to appear in Newmarket, Ont., court on Sept. 29 to face charges of fraud over $5,000 and possession of property obtained by crime.

According to an entry in Wikipedia, “The black money scam, sometimes also known as the “black dollar scam” or “wash wash scam”, is a scam where con artists attempt to fraudulently obtain money from a victim by persuading him or her that piles of banknote-sized paper in a trunk or a safe are actually currency notes that have been dyed to avoid detection by authorities. The victim is persuaded to pay fees and purchase chemicals to remove the dye, with the promise of a share in the proceeds.”

Source: Canadian Press, September 7, 2016, Man posed as U.K. diplomat as part of $30K Ont. fraud scheme: police; Canada Police Report, September 8, 2016, Charges Laid in Romance and Painted Money Fraud Investigation; Wikipedia, “Black Money Scam”

Gambling

The man accused of running the Internet services for a $103-million illegal sports bookmaking operation that police say was linked to the Mafia and the Hells Angels pleaded guilty in a courtroom in September.

Fifty-nine-year-old Gordon Baird admitted he was the administrator of the Platinum Sports Book, a sophisticated betting operation in Ontario that set up its computer servers in Costa Rica.

Baird, who had no criminal record, pleaded guilty and received an 18-month conditional sentence (to be served at home) and was ordered to pay a $400,000 fine. Baird handed over a cashier’s cheque for $50,000 and was given a year to pay the remainder.

“He was not a controlling mind of the criminal organization but through his actions he contributed to the criminal organization,” Justice McMahon said as part of his judgement.

Adrian Humphreys of the National Post provides more details on the bookmaking operation and Baird’s involvement.

With computer servers in Costa Rica, toll-free phone lines, a smart-phone app for gamblers to bet on all major sporting events, the operation was technologically savvy, sophisticated and lucrative. Based on police wiretaps, it is estimated that Platinum employed hundreds of bookies servicing thousands of clients within the Toronto area. The bookies signed up their own clients, collected their debts and paid out their winnings on a weekly basis. The money flowed up the pyramid, court heard, with the top acting as “the bank.

This was an extremely well-organized, professional criminal organization making millions of dollars. A financial audit of seized betting records show that between 2009 and 2013 Platinum grossed more than $103 million. Police seized $4.6 million in cash during its probe.

In 2012, $1.3 million in cash was found in the backpack of Erwin Speckert as he boarded a bus from Winnipeg to Vancouver. The source of the money was never revealed, but Monday’s court proceedings confirmed it was Platinum money being couriered west. Speckert was sentenced last year to three years for money laundering.

“The operation is best viewed as a highly sophisticated and organized pyramid-type structure. The pyramid structure involved a number of ‘cells’ consisting of bookies and their sub-agents signing up bettors/clients,” says an agreed statement of facts in Baird’s case.

“These cells in turn are all connected to the top of the pyramid structure by those managing the organization.”

The top — which Baird was not a part of — was not discussed in his proceeding. At the time of arrests, the RCMP said Platinum Sports Book was linked to members of the Hells Angels Motorcycle Club and the Mafia.

As part of their investigation into the bookmaking operation, police raided an extravagant Super Bowl party – a catered event with an open bar for 2,700 guests – held in the GTA in 2013. It was an invitation-only party thrown annually by Platinum as a customer appreciation event and the posters advertising the party included various hints that it was affiliate with the Hells Angels.  The court heard they event cost more than $100,000 to run.

The day after the police Super Bowl raid and the seizing of Platinum’s websites, almost identical websites were already back up, with the domain name switching from a .com address to a .tk address — signifying registration in Tokelau, three tiny coral atolls in the South Pacific.

In another courtroom in the same Toronto courthouse, two other co-accused in the case — Rob Barletta and Andrew Bielli pleaded not guilty to charges, including bookmaking for the benefit of a criminal organization and possession of the proceeds of crime. Both men are linked to the Hells Angels and Barletta was named by police as a former president of the London, Ontario chapter. Humphreys notes that immediately after his case was adjourned, Barletta walked over to the courtroom in which Baird was entering his guilty plea.

Barletta, Bielli and several other accused still face trial.

Source: National Post, September 12, 2016, Man admits to role in $103M illegal gambling ring allegedly linked to Mafia, Hells Angels

Money Laundering

In September, the Financial Action Task Force (FATF) – an independent inter-governmental body based in Paris that develops and promotes policies to protect the global financial system against money laundering, terrorist financing – released a report assessing Canada’s anti-money laundering regime. The assessment is based on data collected by FATF personnel in Canada from November 3 to 20, 2015.

Overall, the FATF said Canada had strong anti-money laundering and combating the financing of terrorism (AML/CTF) measures in place and had achieved positive results, but it needs to make further improvements to be fully effective.

Some of the key findings of the FATF assessment are summarized below.

  1. The Canadian authorities have a good understanding of most of Canada’s money laundering and terrorist financing risks. The2015 Assessment of Inherent Risks of Money Laundering and Terrorist financing in Canada is of good quality. AML/CFT cooperation andcoordination are generally good at the policy and operational levels.
  2. All high-risk areas are covered by AML/CFT measures, except legal counsels, legal firms and Quebec notaries. Thisconstitutes a significant loophole in Canada’s AML/CFT framework.
  3. Financial intelligence and other relevant information are accessed by Canada’s financial intelligence unit, FINTRAC, to some extent and by law enforcement agencies to a greater extent but through a much lengthier process. They are used to some extent to investigate predicate crimes and terrorist financing activities, and, to a much more limited extent, to pursue money laundering.
  4. FINTRAC receives a wide range of information, which it uses adequately, but some factors, in particular the fact that it is not authorized to request additional information from any reporting entity, limit the scope and depth of the analysis that it is authorized to conduct.
  5. Law enforcement results are not commensurate with the money laundering risk and asset recovery is low.
  6. Canada accords priority to pursuing terrorist financing activities. Terrorist financing-related targeted financial sanctions are adequately implemented by financial institutions but not by designated non-financial business and professions. Charities are monitored on a risk basis.
  7. Canada’s Iran and Democratic People’s Republic of Korea sanction regime is comprehensive, and some success has been achieved in freezing funds of designated individuals, there is no mechanism to monitor compliance with proliferation financing-related terrorist financing.
  8. Financial Institutions, including the six domestic systemically important banks, have a good understanding of their risks and obligations and generally apply adequate mitigating measures. The same is not true for non-financial institutions. The real estate industry has gradually increased its reporting of suspicious transactions.

Two conclusions of the report stand out, at least as far as media coverage is concerned.

The first is that lawyers are still exempt from AML/CTF regulations in Canada, which means they do not have to report large cash or suspicious transactions to the appropriate federal government authorities.

“The lack of coverage of these professions is a significant loophole in Canada’s AML framework and raises serious concerns. Legal persons and arrangements are at high risk of misuse for money laundering or terrorist financing purposes and that risk is not satisfactorily mitigated,” the FTAF report said on this matter.

The FATF joins a number of others critics who believe this is a major void in the system that allows criminal offenders and unscrupulous lawyers to launder money without being caught.

The second conclusion that received considerable media attention was that police in Canada are not doing enough to investigate money laundering and the recovery of the proceeds of crime is low.

“Most of the attention is focused on securing evidence in relation to the (related, more serious) offence and little attention is given to money laundering,” the report states. “Insufficient efforts are deployed in pursuing the money laundering element of (more serious) offences and pursuing money laundering without a direct link to (that) offence.”

The FATF says Canadian law enforcement agencies don’t take a “follow the money” approach to investigating organized crime. “Nor do they initiate a parallel financial investigation, notably because of resource constraints.”

The report also says that the Financial Transactions and Reports Analysis Center of Canada, the country’s financial intelligence agency that processes cash and suspicious transaction reports submitted by banks and other private sector companies, was hampered by the fact that it is not authorized to request information from the firms that it monitors.

In addition to assessing Canada’s anti-money laundering/counter-terrorist financing regime, the FATF concludes that “Canada is exposed to a very high money laundering threat of both local and foreign origin.” While various types of fraud were cited as major sources of laundered money, the report said “the proceeds of drug trafficking laundered in Canada are also significant and derive predominantly from domestic activity controlled by organized crime groups.” Furthermore, “Organized criminal groups pose the greatest domestic money laundering risk, as they are involved in multiple criminal activities generating large amounts of proceeds of crime.”

Those wanting to launder drug proceeds use “businesses that handle high volumes of cash … These include brick and mortar casinos, convenience stores, gas stations, bars, restaurants, food-related wholesalers and retailers and dealers in precious metals and stones.”

The report also says that organized crime groups also use some of Canada’s 43,000 no-name ATM machines — known as white-label ATMs — to launder drug money.

“According to the RCMP, organized crime groups use white-label ATMs to launder proceeds of crime in Canada. The money withdrawn has previously been deposited in bank accounts controlled by organized crime groups through third parties.”

These ATMs, located in stores, restaurants, bars and other community locations, are not owned by banks or credit unions and are not subject to regulation under Canadian law.

Another vulnerability that criminal organization can exploit is “the virtual currency sector” such as online casinos and open-loop prepaid cards.

The FATF review also expressed concerns that Canada’s real estate market is vulnerable to money laundering. Such cases range from the simple, in which a foreign or domestic criminal simply provides cash to a local buyer to purchase property to more sophisticated schemes where loans and mortgages are combined with lawyers’ trust accounts to move dirty money around.

The FATF report indicates the use of real estate to launder the proceeds of crime is not contained to Toronto and Vancouver, but occurs in other parts of the country, in particular in Quebec.

The FATF criticized those in Canada’s real estate industry for not sufficiently scrutinizing suspicious clients and transactions. It also says that Canada’s real estate market is particularly vulnerable to money laundering because lawyers involved in such transactions are exempt from large cash and suspicious reporting requirements. These reporting requirements, mandated by the federal government, apply to numerous other industries and professions in Canada that could potentially be used to laundering dirty money.

“In light of these professionals’ key gatekeeper role, in particular in high-risk sectors and activities such as real-estate transactions and the formation of corporations and trusts, this constitutes a serious impediment to Canada’s efforts to fight (money laundering).”

A spokesman for the Department of Finance said recent and future regulatory amendments to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act will address many of concerns the report raises.

In an email to the Canadian Press, Department spokesperson Paul Duchesne said “We will review FATF recommendations closely to ensure that Canada continues to combat money laundering and terrorist financing effectively while respecting the constitutional division of powers, the Charter of Rights and Freedoms, and the privacy rights of Canadians.”

The Canada Revenue Agency is also investigating suspicious transactions in the Vancouver real estate market, which part of a wider probe by the federal government into ever-rising housing prices there and in Toronto.

Sources: FATF, 2016, Anti-money laundering and counter-terrorist financing measures – Canada, Fourth Round Mutual Evaluation Report, Paris: FATF; Vancouver Sun, September 15, 2016, Police in Canada not ‘following the money’ of crime groups, international report says; Reuters Canada, September 15, 2016, Anti-money laundering body says Canada’s rules can be improved; The Canadian Press, September 15, 2016, Does Canada’s real estate sector risk being a hotbed for crime?

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In September, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) designated the Vancouver-based company PacNet Group as a “significant transnational criminal organization (TCO).” This designation stems from an Executive Order (issued by the President of the United States) entitled “Blocking Property of Transnational Criminal Organizations.”

PacNet is the seventh TCO targeted under this executive order, which provides federal officials to seize and confiscate assets of transnational criminal organizations that pose a threat to American national security, foreign policy, and economic interests. In addition to naming the company, the designation also names 12 individuals and 24 entities connected to PacNet.

Below are some details about the TCO designation of PacNet provided in a press release issued by the Treasury Department.

PacNet, an international payments processor and money services business, has a lengthy history of money laundering by knowingly processing payments on behalf of a wide range of mail fraud schemes that target victims in the United States and throughout the world.

As part of today’s action, OFAC is also designating a global network of 12 individuals and 24 entities across 18 countries.

Specifically, these individuals and entities are being targeted for materially assisting, sponsoring, or providing financial, material, or technological support for, or goods or services to or in support of, PacNet, or for being owned or controlled by other persons being designated as part of this action. As a result of today’s action, all property and interests in property of the designated persons subject to U.S. jurisdiction are blocked, and U.S. persons are prohibited from engaging in transactions with them.

With operations in Canada, Ireland, and the United Kingdom, and subsidiaries or affiliates in 15 other countries, PacNet is the third-party payment processor of choice for perpetrators of a wide range of mail fraud schemes. U.S. consumers receive tens of thousands of fraudulent lottery and other mail fraud solicitations nearly every day that contain misrepresentations designed to victimize the elderly or otherwise vulnerable individuals. PacNet has a nearly 20-year history of knowingly processing payments relating to these fraudulent solicitation schemes, which result in the loss of millions of dollars to U.S. consumers.

PacNet’s processing operations help to obscure the nature and prevent the detection of such fraudulent schemes.  In a typical scenario, scammers will mail fraudulent solicitations to victims and then arrange to have victims’ payments (both checks and cash) sent directly or through a partner company to PacNet’s processing operations.  Victims’ money, minus PacNet’s fees and commission, are made available to the scammers through wire transfers from the PacNet holding account and by PacNet making payments on behalf of the scammers, thereby obscuring the link to the scammers.  This process aims to minimize the chance that financial institutions will detect the scammers and determine their activity to be suspicious.

In 2002, as part of a forfeiture action in the U.S. District Court for the Western District of Washington, two of PacNet’s major corporate entities in Canada and Ireland acknowledged that the use of the mail to market lottery chances, shares, and interests within the United States, as well as the use of facilities of interstate or foreign commerce within the United States to handle payments for these types of fraudulent solicitations, violate U.S. federal statutes.  These entities also acknowledged that the knowing transfer or deposit of the proceeds of violation of two of those criminal statutes into accounts at financial institutions, either for the purpose of promoting such violations or to hide the nature, location, source, ownership or control of such proceeds, constitutes criminal money laundering.  PacNet executives Rosanne Day and Paul Davis represented to the court that in the future they would not use the mail to process payments for illegal lottery purchases.

Despite PacNet’s prior acknowledgement and the many notifications it has received regarding the fraudulent activity of its clients, PacNet continues to knowingly process checks on behalf of numerous companies that are actively involved in widespread mail fraud campaigns.  As an example of the clear warnings PacNet has ignored, the North Dakota Attorney General contacted PacNet in 2009 regarding the Group’s processing of payments for the “Maria Duval” psychic scam.  Although PacNet eventually refunded the money to the victims, PacNet continued to process transactions for the Duval scheme for over five years.  Similarly, PacNet received subpoenas from the Iowa State Attorney General in 2014 regarding the victimization of the elderly and other Iowans by fraudsters they identified as PacNet clients.  PacNet continued to process transactions for these scams until law enforcement shut down the PacNet clients.

The press release said the U.S. Department of Justice will be undertaking criminal actions against PacNet, which will include executing search warrants in several U.S. locations, filing civil injunctions and seizing a PacNet bank account. The Department of Justice claims that in 2016, PacNet processed payments for the perpetrators of more than 100 mail fraud campaigns involving tens of millions of dollars.

PacNet’s Vancouver office is located on Howe Street, in the heart of Vancouver’s financial district.

Source: U.S. Department of Treasury press release, September 22, 2016, Treasury Sanctions Individuals and Entities as Members of the Pacnet Group; CBC News, September 22, 2016, U.S. accuses Vancouver company of processing millions in mail fraud scams

Theft

Police are saying that cargo theft from trucks, warehouses, and marine ports is increasing in Canada. This increase is being driven by the growing organization and sophistication of those behind such thefts.

Cargo theft has created a black market worth between $5 to $6 billion a year countrywide, according to estimates from police and the Ontario Trucking Association.

In the York region of Ontario alone approximately 50 cargo thefts are reported each year — with police recovering $4 to $5 million in goods, said Det.-Sgt. Paul LaSalle who is part of the York Regional Police force’s cargo theft unit.

Much of what is stolen in Ontario is food, said LaSalle. Food “doesn’t have serial numbers,” he explained. “Those flats of berries can hit corner stores or markets, consumers are going to buy them and they’ll get rid of them very quickly.”

Historically cargo theft involved armed robbery or stealing a truck loaded with goods but today it has become much more elaborate. In Ontario, increasingly sophisticated crime groups have infiltrated the shipping industry to expedite their theft. Fake companies are created to bid on the jobs offered online by food producers, according to Lasalle.

The false company will then pick up the goods, but never deliver them — and by the time the manufacturer realizes they’ve been robbed, it’s often too late.

“They want to be able to unload it fairly quickly,” Lasalle said of the goods. “They don’t want the risk of it travelling on a highway for a long period of time.”

In one case where thieves stole approximately 10,500 cases of freezies worth about $60,000, they “hacked into the computer system of the trucking company and stole all their information about all the loads,” he said. “This organized crime is so sophisticated their supply chain would really be the envy of any of us in the industry.”

Source: CBC News, July 16, 2015, How stolen freezies and strawberries are turning into a $5B black market

Tobacco Smuggling

In August, the Cornwall Regional Task Force (CRTF) were involved in three separate investigations that resulted in the seizure of approximately 2,260 kilograms of contraband fine cut tobacco.  In each of these cases, the tobacco was transported by suspect vessels along the St. Lawrence River from the U.S. to various shoreline properties where the product was unloaded and transferred to awaiting vehicles.

The CRTF was also called to Cornwall’s land border crossing on two separate occasions in response to the seizure of fine cut tobacco by the CBSA.  During these investigations, two males, one from New York and the other from Cornwall, Ontario were arrested. The total amount seized by the CBSA was 590 kilos.

In September, an Akwesasne man was arrested for being in possession of approximately 180 kilograms of fine cut tobacco. He was arrested by CRTF investigators who were following up on seizure by the Canada Border Service Agency.

Another unrelated arrest occurred that month after CRTF investigators received information of suspicious activity taking place at a campground along the shoreline following a vehicle stop by local police. During the search of the vehicle, officers found approximately 605 kilograms of fine cut contraband tobacco. They arrested the driver of the car, a 20-year-old man from Salaberry-de-Valleyfield in Quebec.

On September 14, the CRTF participated in an operation led by the Valleyfield RCMP and Sûreté du Québec which resulted in a seizure of approximately 1,450 kilograms of contraband fine cut tobacco and the arrest of one male from the province of Quebec.

In total, according to the CRTF, these seizures of fine cut tobacco during September translate into more than 2 million cigarettes or 11,174 cartons.

“Once again, these successful investigations are the results of great cooperation with our partners and our community,” stated Insp. Steve Ethier, Officer in Charge of the Cornwall RCMP Detachment. “The seizure of contraband fine cut tobacco in vacuum sealed bags demonstrates the lengths organized crime groups will take towards ensuring their product goes undetected.”

The CRTF is a joint forces partnership that includes the Royal Canadian Mounted Police, Ontario Provincial Police, and the Ontario Ministry of Finance.

Source: Cornwall Regional Task Force Press Release, September 8, 2016, CRTF Seize Over 2.5 Tonnes of Tobacco; Cornwall Regional Task Force Press Release, September 23, 2016, CRTF continues to disrupt organized crime

Violence

In September, 40-year-old Sylvain Ethier, who was arrested earlier this year as part of a massive illegal tobacco trafficking conspiracy, was murdered in Ste-Thérèse, northwest of Montreal. Ethier was rushed to hospital in critical condition but he died of his injuries overnight.

The incident took place at night outside his home. Police say the man was hit by several bullets in the ambush and, soon after, a burning vehicle was found in Ste-Adèle, 60 kilometres north of Ste-Thérèse.

According to the Canadian Press, “Leaving behind a burning getaway vehicle is a frequent modus operandi of organized crime killings. Police are working to establish a link between the killing and the vehicle.”

Due to the possible links to organized crime, the case referred to the Sûreté du Québec to investigate.

Ethier was one of 60 people who were arrested in March of this year during an undercover police operation. That investigation involved

undercover officers buying tobacco illegally imported from the United States to be sold in Kahnawake and Six Nations, Ontario. Between August 2014 and last March, the group imported close to 2.1 million kilograms of tobacco. Police accused Ethier of heading the smuggling operation.

As part of the investigation, the SQ seized about $5 million in cash, along with thousands of kilograms of tobacco and more than 800 kilos of cocaine, 21 kilos of methamphetamines, and some marijuana.

At the time of the arrests, police said some of the suspects had links to the Hells Angels, which was working with criminal offenders in the Mohawk community to buy tobacco in the U.S. and then smuggle it into Canada to be sold in Kahnawake and the Six Nations.

Ethier was expected to stand trial to face his charges.

Sources: Canadian Press, September 16, 2016, Suspected organized crime member gunned down in Ste-Thérèse; CTV News, September 16, 2016, Man killed in Ste. Therese reported to have ties to organized crime

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The murder trial for Jamie Bacon has been pushed back to March of 2018 at the request of Crown prosecutors. The trial was supposed to begin on October 31.

Bacon was charged on April 4, 2009 with murder and conspiracy to commit murder in relation to the murder of six men, including two innocent bystanders, in a high-rise apartment building in Surrey.

B.C. Supreme Court Justice Kathleen Ker said the adjournment was unavoidable because of a number of complex pre-trial applications related to evidence and other issues that have not yet been heard by the trial judge. One of these issues was a motion made by Bacon’s defence lawyers to stay the charges against him; because of the length of time it has taken for his trial to get to court, Bacon’s defence lawyers argue his Charter rights for a timely trial is not being met.

Speaking outside the courthouse, a spokesman for the provincial Crown said the state is doing its best to prepare for the prosecution in a timely manner.

“The public should know that this is an example of the criminal justice system essentially working its way through a variety of complex issues,” he said.

Bacon is alleged to have ordered the murder of rival drug trafficker Corey Lal that spiralled out of control on October 19, 2007 and resulted in the murder of Lal, his brother Michael, associates Ryan Bartolomeo and Eddie Narong, as well as bystanders Chris Mohan and Ed Schellenberg.

Cody Haevischer and Matthew Johnston — alleged associates of Bacon — were sentenced to life in prison in 2014 after they were found guilty on six counts of first-degree murder each. Both men are appealing the convictions.

If the stay of proceedings is successful, Bacon could walk away a free man. This would not be the first time that an alleged gang leader has been able to escape from murder charges due to the length of time it has take the case to go to trial.

Now 31 years old, Bacon is the youngest of three brothers who became infamous drug traffickers in B.C. and, as leaders of the Red Scorpions gang. On August 14, 2011, Jonathon Bacon, the eldest brother, was gunned down as he drove away in a Porsche Cayenne SUV from the Delta Grand hotel in Kelowna. One of the other two men in the vehicle who escaped injury was Larry Amero, a full-patch member of the Hells Angels in B.C.

Sources: CBC News, September 23, 2016, Murder trial delayed for accused Surrey Six killer Jamie Bacon; Vancouver Sun, September 23, 2016, Accused killer Jamie Bacon’s Surrey Six trial delayed again

ORGANIZED CRIME GENRES

Italian Organized Crime

At the end of May, Rocco Sollecito was gunned down in broad daylight while at the wheel of his car on Saint-Elzéar Boulevard West in Laval.

Police say they have evidence that that the shooter – a man described as being in his 30s and dressed in black – was waiting at a bus shelter on St-Elzéar Blvd. and opened fire into the passenger-side window of Sollecito’s BMW SUV at a stop sign around 8:30 a.m. He was alone in the vehicle at the time. Sollecito was declared dead after being taken to a hospital. The shooter appeared to know Sollecito’s morning routine, according to the Montreal Gazette.

The murder is being investigated by the provincial Sûreté du Québec because the victim has ties to organized crime, said Lieutenant Jason Allard, an SQ spokesman.

Police allege Sollecito, who was 67-years-old, was a long-time member of the Rizzuto crime family in Montreal.  His murder was the latest in a series of killings that have purged the Montreal mafia of its leadership and has left the once-powerful criminal group in shambles.

He has been described as one of six men in the Rizzuto organization responsible for managing its affairs while its leader, Vito Rizzuto, was incarcerated in the United States. Now only two of those men, Francesco Del Balso and Francesco Arcadi, are alive (both had been recently granted parole following convictions but have been returned to federal penitentiaries out of concerns for their safety).

The killing of the reputed high-ranking member of the Rizzuto family represents “a kind of final cleanup of the old guard,” according to Pierre de Champlain, a noted expert on organized crime in Montreal. He said that Sollecito’s death is part of an ongoing dismantling of the older generation of the Rizzuto crime family.

“The history of Mafia teaches us that each time that the Mafia has gone through trouble it was often due to the purposeful conflict of the old generation versus the young generation, and today the Mafia of Montreal is a perfect example,” de Champlain said in an interview.

De Champlain said it’s difficult to say who was behind the shooting, whether it was another crime family or an upstart gang, explaining that the underworld alliances in Montreal have become “totally fragmented.”

Unlike most other senior made members of the Rizzuto family who trace their roots to Sicily, Sollecito hailed from the southern Italian town of Bari. Sollecito’s expertise in the Rizzuto organization, according to the Montreal Gazette, was in bookmaking and was once caught on a police wire tap during the summer lamenting the absence of the NHL season because it was his prime source of bets.

He was named in an civil suit in Ontario as a middleman in a 1980s scheme by Vito Rizzuto to invest $1.5-million in undeclared revenue in a junior Alberta mining company.

In 2006, Sollecito, along with other members and associates of the family, were arrested as part of Project Colisée. All eventually pleaded guilty to various drug trafficking and criminal organization charges and received sentences of varying lengths. The investigation, along with Vito Rizzuto’s absence, left the family in a highly vulnerable state.

More recently, an inquiry into mafia-led corruption and bid-rigging in Montreal’s construction industry concluded he was the family’s key intermediary with construction company owners and managers and was involved in deciding which construction firms would be allowed to submit the winning bid on a public construction contract.

“Mr. Sollecito was the one who took particular care of what I would call the construction side of the business,” Montreal police detective Éric Vecchio said in testimony at the Charbonneau inquiry.

Written submissions to the Charbonneau Commission described Sollecito as a man with “moral authority/respected by other members.”

RCMP affidavits presented to the inquiry said he was often present at the Consenza Social Club, a regular hangout for senior members of the Rizzuto family. Police surveillance cameras recorded his presence there on 85 different occasions and was frequently in the café when cash was brought in by a construction company boss or underling.

According to police, the leadership of the Montreal Mafia most recently was held jointly by Leonardo, Vito Rizzuto’s surviving son as well as Stefano, Sollecito’s son.  According to CBC News, Rocco Sollecito acted as a consigliere to the two new alleged leaders. In November of 2015 both Leonardo Rizzuto and Stefano Sollecito were arrested and charged with drug trafficking and participating in a criminal organization.

Sources: Journal de Montréal, May 27, 2016, 7 choses à savoir sur Rocco Sollecito, l’influent mafioso assassiné à Laval; Globe and Mail, May 27, 2016, Major figure in Montreal Mafia gunned down; Montreal Gazette, May 27, 2016, Rocco Sollecito, 67, was longtime ally of Montreal’s Rizzuto clan; CBC News, May 27, 2016, Montreal ‘Mob hit’ part of ‘final cleanup’ of old guard, Mafia expert says

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In September, the Canada Border Services Agency announced that they had issued a deportation order to Michele Torre despite having lived in Canada for the last 50 years. The 64-year-old Torre was supposed to be deported to his native Italy on September 16.

However, he won a last-minute reprieve after two federal ministers suspended the expulsion order pending further study. Torre was in fact at the Pierre Elliott Trudeau International Airport, accompanied by two Canadian Border Security agents and minutes away from boarding a flight to Italy, when he received the news.

Torre became a permanent resident after arriving in Canada from Italy in 1967.

The deportation hearing began in 2013 with the federal government arguing that Torre should be removed from the for “serious criminality and organized criminality.”

Torre pleaded guilty in 1996 in a cocaine conspiracy case involving Montreal’s Cotroni crime family and served part of his nine-year sentence in prison. According to CTV News, “In the 1980s, Michel Torre was working as the manager for a St. Leonard pub where the Cotroni clan were regulars. When the native of Italy was sent to Toronto to pick up a container on their behalf, he was arrested when it was revealed it was a shipment of 170 kgs of cocaine. Torre’s arrest was part of a larger investigation called Project Choke. He would eventually plead guilty to conspiracy to traffic cocaine, though he maintains he didn’t know what was in the container and that he no longer has any ties to the mafia.”

He was granted full parole in 1999 after serving a nine-year sentence.

Torre was arrested again in 2006 during as a result of Project Colisée. He spent three years in preventive custody but was ultimately acquitted of criminal charges.

In 2013, he applied for Canadian citizenship but was denied by Immigration Canada.

Sources: CTV News, September 4, 2016, Former mafia associate fighting deportation 20 years after arrest; Canadian Press, September 9, 2016, Man convicted of Mafia-related charges 20 years ago ordered deported to Italy; Montreal Gazette, September 16, 2010, Former Mob associate Michele Torre wins last-minute reprieve from deportation

Outlaw Motorcycle Gangs

Newfoundland

At the end of September, the RCMP in Newfoundland announced it had laid 58 charges as part of a wide-ranging drug investigation. All but two of the men arrested are members of the Vikings Motorcycle Club, which police say is affiliated with the Hells Angels. Among the many charges laid as part of Project Bombard were conspiracy to traffic in a controlled substance, participation in the activities of a criminal organization, and commission of offence for a criminal organization.

“These individuals have direct links to the trafficking of illicit drugs and the use of intimidation and violence to maintain what they consider to be their property,” according to a RCMP spokesperson.

The spokesperson would not elaborate on how they know the two clubs are affiliated; however, the Vikings’s club red and white colours are the same as those of the Hells Angels.

“What I can say is that to be able to use the red and white, to be sanctioned to be allowed to use the red and white, the Hells Angels has to permit that, when it comes to motorcycle patches,” the spokesperson said.

The two men who are not members of the Vikings are a local doctor and the son of a Vikings’ club member. The physician, who practises in St. John’s, was charged with participating in a criminal organization as well as trafficking oxycodone.

Over the course of the investigation, police seized the following drugs: 2.2 kilograms of cocaine, 556 grams of cannabis resin, 360 oxycodone pills, 28 temazepam pills, 27 grams of powder that include heroin and fentanyl, and a small amount of marijuana. Police also seized eight motorcycles, two trucks, as well as clothing, jewelry, support patches and stickers related to the Vikings Motorcycle Club.

In addition to the drug charges, two members of the Vikings – Daniel Leonard and 53-year-old Al Potter – were arrested and charged with the murder of Dale Porter. The RCMP say Porter was stabbed on his North River property in Newfoundland in June of 2014. The father of two young children had no criminal record and was described as friendly, helpful and easygoing. His death came after a night of partying at a nightclub in nearby Bay Roberts.

“When he returned home an altercation took place outside his residence, during which he was seriously injured,” RCMP Supt. Pat Cahill told the media. Cahill said Potter was at the same bar as Porter that night.

Potter was recently released from a prison sentence in Ontario. He was arrested in London, Ontario.

RCMP Insp. Holly Turton called Porter’s death “a tragic example of the Viking Motorcycle Club’s use of violence.”

Project Bombard was a joint operation between the Royal Newfoundland Constabulary and the RCMP that targeted the criminal activities of the Vikings motorcycle club and the murder of Dale Porter.

“We believe these arrests and seizures represent a serious setback in Hells Angels’ attempt to gain a foothold in our province,” Turton told the media.

She also said she hopes the arrests and seizures will also lead to the dismantling of the Vikings, which has about 20 members.

Source: CBC News, September 27, 2016, Vikings club member Al Potter charged with 2nd-degree murder in Dale Porter slaying; CBC News, September 29, 2016, Vikings MC affiliated with Hells Angels, police say in wake of Project Bombard; The Telegram, September 29, 2016, Bikers, organized crime, murder all linked, police say

Quebec

Six members of the Beast Crew motorcycle club are facing drug trafficking charges after being arrested in Sorel-Tracy, Quebec in September.

Those arrested include the suspected leader of the motorcycle club, 37-year-old Martin Raymond and the club’s treasurer, 46-year-old Stéphane Laflamme.

The Sûreté du Québec said the arrests are linked to raids carried out in the spring in which police seized 200 grams of cocaine, amphetamines, three kilograms of marijuana, contraband cigarettes and $30,000 in cash.

SQ Sgt. Daniel Thibodeau says the money generated by the Beast Crew was being funnelled directly to the Hells Angels.

According to Le Journal de Montréal, the Beast Crew MC pays monthly royalties to the Hells Angels from its drug trafficking revenue in exchange for the right to operate in a particular territory.

“It’s important in the sense that this seems to be how the Hells Angels are operating these days,” Thibodeau said. “They are contracting out to smaller criminal organizations to do their lesser, dirtier work.”

La Presse Columnist Daniel Renaud says the Beast Crew, which is based in Richelieu, is one of 17 motorcycle clubs in Quebec that are affiliated with the Hells Angels. Renaud touts the Beast Crew, which has about a dozen members, as one of the three senior support clubs for the Angels, along with the Devils’ Ghosts and the Red Devils.

These support clubs are in addition to five Quebec chapters of the HA: Montreal, Quebec City, Trois-Rivières, Sherbrooke and South. According to Renaud, as of July of this year, only the Montreal chapter was active. The others are inactive because many of their members have been jailed, which has resulting in the chapters having less than seven full-patch members required by their HA charter.

Sources: CBC News, September 19, 2016, Quebec biker gang members with ties to Hells Angels face drug trafficking chargesLe Journal de Montréal, September 19, 2016, Crime organisé: le gang de motards Beast Crew décapité; La Presse, July 17, 2015, Des Hells défient des policiers; La Press, June 16, 2015, La police frappe l’un des principaux clubs-écoles des Hells Angels

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The many HA-affiliated motorcycle clubs in Quebec may be part of a new strategy that the biker gang is using to regain control of criminal markets while avoiding the arrest and incarceration of its members.

“The Hells Angels want to be very far from the street, farther than before because they don’t want to be arrested again,” said André Cédilot, an organized crime expert and former crime reporter for La Presse told CBC News.

The Hells Angels were temporarily destabilized in the years that followed Operation SharQc in 2009, which resulted in more than 100 members of the Hells Angels being put behind bars on various charges.

According to CBC News, as many of the HA members “are being released from prison, organized crime experts say the Hells are not only seeking to reassert control of their traditional illegal enterprises. They are also branching into new businesses and trying to reinvent the way it operates.”

The CBC reported that the brazen murder of Sylvain Éthier, who had links to the HA, “is being interpreted as the latest sign that Quebec’s most notorious biker gang is making a comeback.” The CBC writes that his death may represent a “cleanup within the organization” because he “may have failed to heed warnings that those being released wanted their territory back.”

Radio-Canada’s investigative program, Enquête, reported recently that the Hells Angels have ties to numerous “vape shops” across the province.

Cédilot says the gang is also strengthening its grip on Montreal’s drug trade in a way that emulates methods used by the Mafia.

“They are doing what the Mafia do: they now are relocating their territory to other people and they receive cuts from the drug trafficking on that territory,” he said.

According to CBC News, “The gang delegated tasks to a series of smaller clubs across the province, whose members oversaw business in Quebec’s underground while Hells Angels members served time in prison.”

The CBC also reported in August that the weekend funeral of a Hells Angel member that month “provided valuable information for law enforcement officers monitoring the group’s attempt to rebuild after being decimated by arrests, said several organized crime experts.”

Kenny Bédard, 51, had only recently become a full member of the biker gang when he was killed in a road accident in New Brunswick last month.  But his newcomer status didn’t seem to matter to the hundreds of gang members who gathered at a church in Pointe-Saint-Charles for the funeral on Saturday.   The funeral doubled as a strategic bit of theatre, said one expert, who pointed out the gang has been in

“It was a chance for the bikers to show that they’re close to each other and at the same time, a demonstration of their strength to other bikers who are their enemies,” said Pierre de Champlain, a historian of organized crime in Montreal.

“It shows, ‘Us bikers, we are in control of the territory in terms of the sale of drugs.'”

On Saturday, police officers could be seen taking footage of gang members gathering outside the church — a sign, said another expert, that law enforcement is readying itself for the gang’s resurgence.

“These guys are returning,” said Guy Ryan, a former organized crime investigator with Montreal police. “They will start reconquering their territory and selling drugs.”

Sources: CBC News, September 18, 2016, The renaissance of the Hells Angels, Quebec’s notorious biker gang; CBC News, August 14, 2016, What Quebec cops learned at a Hells Angels funeral

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The Quebec Hells Angels were also bolstered by a court decision in September in which a Superior Court judge stayed a number of charges against one of the highest ranking HA members in that province: Salvatore Cazzetta.

Cazzetta was facing five counts of criminal organization charges and conspiracy to commit fraud, among others, which were laid as a result of Operation SharQc in 2009.

Justice James Brunton dismissed the charges because Cazzetta’s Charter right to a speedy trial was not met. As the Montreal Gazette put it, “the delays violated timeframes outlined by the Supreme Court of Canada’s Jordan decision — which states that Superior Court trials must be completed within 30 months of the suspect’s arraignment.”

“We are absolutely satisfied with this decision,” said Anne-Marie Lanctot, Cazzetta’s lawyer. “We were way past the timeframe … Really, the only delays we were responsible for add up to about 11 months. The Crown made a strategic decision to try to introduce evidence that was inadmissible, which caused delay after delay after delay.”

This is the second time charges against Cazzetta have been dropped because of unreasonable court delays. In 2011, Brunton dismissed Cazzetta’s case and that of 30 others arrested as part of the 2009 SharQC investigation – including numerous other members of the Quebec Hells Angels.

Though Cazzetta will not serve time for any charges stemming from SharQc, he is still facing charges from a drug trafficking case in which he was arrested along with Leonardo Rizzuto and Stefano Sollecito of the Rizzuto crime family.

Source: Montreal Gazette, September 21, 2016, Judge dismisses gangsterism charges in Hells Angels trial

Ontario

In September, a judge in Ontario ruled that the Black Pistons motorcycle club is not a criminal organization, despite convicting some of its members of criminal charges.

Drug trafficking and criminal organization charges were laid in November of 2013 after police in St. Catherines raided the fortified clubhouse of the Black Pistons in that city. The raid was part of an eight-month drug investigation.

The Crown argued that the Black Pistons is a criminal organization and as evidence pointed out to the court the club’s relationship with the U.S.-based Outlaws MC, which is considered a criminal organization in that country. Defence lawyers argued the Black Pistons is more of a social fraternity made up of motorcycle enthusiasts and is not a criminal organization.

In his decision, Justice Joseph Henderson disagreed with the Crown’s case concluding the group did not meet the standard for a criminal organization despite having “a widespread criminal element.”

Under Section 467 of the Criminal Code, a group can be classified as a criminal organization if it has “as one of its main purposes or activities, the facilitation or commission of one or more serious offences.”

According to the Globe and Mail, “The trial judge convicted several members of the Black Pistons, but did not find that the group was inherently criminal. He found that not all members were dope dealers, and those who were did not discuss drug transactions at the same time as “club” business on police intercepts.”

In his decision, Henderson wrote, “I accept that there was a certain criminal element in the membership of the Black Pistons, and it may have been a widespread criminal element … However, the fact that an organization has members who are criminals does not mean that the organization is a criminal organization as defined by the Criminal Code.”

During their raid, police seized the Black Piston’s constitution. However, Justice Henderson said this evidence supports their contention that their club is simply one that is organized around motorcycles.

“I recognize that the constitution could easily be a smoke screen designed to hide any criminal activity,” Henderson wrote in his decision. “I do not believe for a second that the Black Pistons do not tolerate criminal activity just because their constitution says so. But, I also accept that the constitution on its face sets out a legitimate purpose for the Black Pistons, namely that it is an organization for motorcycle riders to organize runs and to socialize.”

A statement from the Black Pistons said: “The Black Pistons MC are a brotherhood and not a criminal organization. We are a group of men united to ride, and have fun. We have families, jobs, and responsibilities just like everyone else and although the media like to portray us as being criminals, the truth is we share a common goal of enjoying life to the fullest.”

As Adrian Humphrey’s writes in the National Post,

The decision is a blow to police who heralded the importance of their case by giving it the code name Project Resurgence, chosen because the Pistons were reclaiming the region on behalf of their mother club: the large, U.S.-based Outlaws Motorcycle Club, the arch-rivals of the better-known Hells Angels.

Nine of the 11 Black Pistons in the city were on the cusp of becoming Outlaws members and forming a new Outlaws chapter at the time of the arrests. Police seized a box containing nine embroidered sets of Outlaws MC patches, destined for the backs of proposed members, along with smaller crests with the words “St. Kitts,” signalling the name of the chapter was to be the nickname of the city of St. Catharines.

And Mario Macedo, 46, was found inside the clubhouse when police arrived in 2013 and was arrested during the raid. He is a long-time member of the Outlaws and came to St. Catharines to oversee the patch over, court heard. While in town, he learned of a cocaine “dry spell” and brokered a $47,000 cocaine deal for some members.

Police say biker gangs use the “power of the patch” — the colours members wear on their back — to instill fear to further criminal aims. Having biker gangs named as criminal organizations mean members can face harsher prison sentences.

The court did convict several members on drug trafficking and conspiracy charges, including Macedo, who was sentenced to 2½ years in prison for conspiracy to commit an indictable offence.

In an editorial on the court decision, the Globe and Mail stated, Legal punctiliousness is a beneficial trait, and judges must ensure that Section 467 is not misused. But if a group is organized, and members are engaging in criminal activity through the organization, the group at some point itself becomes criminal. … Biker gangs often depict themselves as mere social clubs, but many present a serious threat. It’s incumbent on Crown prosecutors to revisit their practices and tactics, but Parliament could also help by revisiting and strengthening the wording of the law, to ensure that it remains able to tackle criminal biker gangs.”

&&&

Source: National Post, September 18, 2016, Black Pistons members are criminals, but Ontario motorcycle club not a criminal organization, judge finds; Globe and Mail, September 22, 2016, Biker gangs and the law of ‘organized’ crime [Globe editorial]

Martin Bernatchez, the president of the Hells Angels’ elite Nomads chapter located just outside Ottawa, was the victim of an assassination attempt in August while a camping in Granby, Quebec. The shooter reportedly bounded out of a wooded area and opened fire several times. Sources say Bernatchez was hit by two bullets and was seriously injured, but the wounds were not life threatening.

In mid-April, the vice president of Nomads chapter, Phil Boudreault was also targeted by a gunman while riding his motorcycle in Lachute in the Laurentians. Boudreault too was seriously injured with a punctured lung and a bullet fragment lodged near his spine, but his life was never in danger from the injuries.

There was some speculation that the two men were targeted as part of an internal struggle within the Hells Angels, which eventually led to the unexpected closing of the Nomads chapter at the end of August.

“It’s closed,” Det.-Staff Sgt. Len Isnor, head of the OPP’s biker enforcement unit, said. “There is no Nomads chapter.”

Neither the Hells Angels or the police are saying why the chapter has been shut down or if it is related to the recent violence.

There were about a dozen members of the Nomads chapter at the time. No information was forthcoming on what would happen to these members. One plausible explanation is that they will be become part of some of the Chapters in Quebec to build up their strength.

By September, however, the former Nomads’ members “haven’t landed anywhere yet,” according to Isnor. “Right now, it’s a very confusing organization,” he added.

In addition to the attempts on the lives of the two senior members, the club lost its long-time president Paul Porter who quit and moved home to Montreal. He was paroled in 2014 after serving time for cocaine trafficking.

The Nomads are considered an elite group within the Hells Angels and often wield power over other chapters in a particular province. They hosted a national gathering of members of the Hells Angels and affiliated clubs – called the “Canada Run” from July 21 to 24 to mark the club’s 15th anniversary in Ontario.

Source: The Stopru, August 12, 2016, The president of the Hells Angels Nomads of Ontario victim of an attempted murder in Granby; Toronto Star, September 13, 2016, Hells Angels nix elite Ottawa-area chapter

Police in Ontario say the Stolen Souls Motorcycle Club, which has a chapter in Cambridge, is affiliated with the Hells Angels.

According to Staff Sgt. Eugene Fenton, head of intelligence for Waterloo Regional Police, “They are relatively new and came out on the scene about two years ago.”

The club began with eight members but now has 13.

Fenton noted that members of the Stolen Souls have been seen at Hells Angels-sponsored events.

“It’s well established that the Hells Angels are a criminal organization worldwide and the Stolen Souls supports their organization,” Fenton said. “There presence in the region is of concern and they are monitored by police.”

Cambridge is located in the Kitchener area of Ontario, which is also home to a chapter of the Hells Angels, with 21 full-patch members. It is one of the largest chapters in Ontario by membership and, according to Fenton, “It’s one of the stronger clubs in the province that has endured.”

As Liz Monteiro writes in the Waterloo Region Record, “When it comes to outlaw biker gangs, Waterloo Region has a long history. Kitchener was home to Satan’s Choice, which was absorbed under the massive Hells Angels ‘patch over’ in December 2000.”

Source: Waterloo Region Record, September 22, 2016, New Hells Angels support club growing in Cambridge

Saskatchewan

In July, two men charged in connection with Project Forseti have pleaded guilty to drug-related charges at Saskatoon Court of Queen’s Bench.

Mark Edward Weber entered pleas to two counts: possession of marijuana exceeding three kilograms for the purpose of trafficking and possession of proceeds of crime over $5,000. John Louis Joseph Fekete, an alleged member of the Fallen Saints Motorcycle Club, an Hells Angels support club, entered a guilty plea to one count of trafficking marijuana exceeding three kilograms.

The two are among 20 people charged as a result of a major investigation targeting the involvement of the Hells Angels and its support club the Fallen Saints in dealing fentanyl and other illegal drugs in Saskatchewan last year. The investigation culminated in arrests of members of both motorcycle clubs in January or 2015. Some of those charged have already been convicted, including at least one member of the Hells Angels.

Source: Saskatoon StarPhoenix, July 13, 2016, More guilty pleas entered in connection to Project Forseti drug bust

Alberta

Five members of the Warlocks Motorcycle Club were arrested in Alberta and face criminal charges after a police investigation into rival biker gangs operating in Fort McMurray.

The investigation was spurred by an alleged conflict between the Fort McMurray chapters of the Warlocks and the Syndicate, which police consider a Hells Angels support club.

An Alberta Law Enforcement Response Teams (ALERT) news release said that between late August and late September a number of criminal incidents are believed to have been linked to the conflict.

Five members of the Warlocks were arrested and charged with committing an indictable offence for a criminal organization, robbery, and possession of a prohibited weapon.

On September 21, four search warrants were executed on three vehicles and one home in Fort McMurray alleged to be the Warlocks clubhouse. Police seized seven Warlocks vests, Warlocks club documents and paraphernalia, 15 rifles and shotguns, one Glock handgun, and other prohibited weapons, including brass knuckles and bear spray.

No firearms charges were laid because all 16 firearms seized were lawfully owned, according to ALERT. But the agency said it will apply to destroy them since they were seized in the interest of public safety.

ALERT said the Warlocks have been operating in Fort McMurray since 2010 as one of two chapters in Canada of the Florida-based organization.

A Warlocks chapter that operated out of Drayton Valley was dismantled in 2014 when ALERT arrested four members. Drayton Valley is located in Central Alberta about 130 kilometres southwest of Edmonton.

The Syndicate has been in Fort McMurray since 2009, according to ALERT. It is one of about two dozen Hells Angels’ support clubs across Alberta. The Warlocks are one of the few outlaw motorcycle clubs in Alberta that are not affiliated with the Hells Angels.

Source: CBC News, September 26, 2016, Five face charges after police crackdown on rival Fort McMurray biker gangs

British Columbia

At the end of September, a B.C. Supreme Court justice convicted David Giles, the vice president of the Kelowna chapter of the Hells Angels, of conspiring to import and traffic cocaine.

Giles was one of five men charged in connection with a 2012 undercover operation, named E-Predicate, in which RCMP investigators posed as cocaine suppliers.

According to a decision written by Justice Carol Ross, Giles believed the RCMP officers when they said they were with a South American drug cartel.  Ross said video and audio recordings made by the RCMP during the undercover operation proved Giles and his associate

Kevin Van Kalkeren agreed to pay the fake suppliers millions of dollars for cocaine.

Indeed, after numerous meetings, Giles handed over $4 million in exchange for what they believed would be 500 kilograms of cocaine.

Giles told one of the officers “that he expected to be able to get rid of the 500 kilos in a couple of weeks,” Ross said in her written statement.  But when the deal finally went down, Giles and his accomplices found themselves holding 199 kilos of fake cocaine and one kilo containing real cocaine and a tracking device.

“I find that it is clear that what Mr. Van Kalkeren and Mr. Giles intended from March 2012 forward was to purchase cocaine from the (undercover officers) for resale,” Justice Ross said. “They believed that the drugs they were purchasing were not already in the country. It is clear that the plan was to sell the drugs in Canada.”

Van Kalkeren has already pleaded guilty to conspiracy to import cocaine and was sentenced in May to 16 years in jail.

Two other men were acquitted of conspiracy to import and conspiracy to traffic cocaine, including Bryan Oldham, another full-patch member of the Kelowna chapter. Oldham was found guilty of possession of cocaine for the purpose of trafficking. Oldham met with an undercover police on August 24, 2012 and said he would take Giles place in the negotiations if Giles could not continue in that role.

The ruling mentioned how Oldham even showed off his Hells Angel’s tattoo to one of the undercover officers to prove he was a member of the motorcycle club.

“Mr. Oldham confirmed that he understood why he was there, that he would take over if Mr. Giles became ill, that he knew they were talking about 500 and that it was not candy, that he would go to Mr. Van Kalkeren if anything happened with Mr. Giles,” Ross said.

Ross acquitted Oldham of the more serious charge of conspiracy to traffic cocaine, however, arguing there was no evidence that he was part of the bigger plot to sell the cocaine.

“I have concluded that the evidence supports a reasonable inference that he did not, in fact, intend to join the conspiracy, and did not do so,” Ross said.

Sources: CBC News, September 30, 2016, Senior Hells Angel convicted in elaborate RCMP cocaine sting; Vancouver Sun, September 30, 2016, Senior Hells Angel convicted of conspiracy to import huge amount of cocaine

 

ENFORCEMENT

The National Post reported at the end of July that all workers who have access to restricted areas at Canada’s ports of entry – in particular airports and marine ports – are being vetted through a police database to guard against criminal infiltration. What makes this “perpetual vetting” system so unique is that the names of these workers are run through the database every day.

“It is virtually real-time,” according to Guy Morgan, director of the Security Screening Program with Transport Canada. “When I come in Monday morning, I know who’s been charged over the weekend. This allows us to then pull those files and re-take a look at the security profiles to determine if anything has changed.”

“We’re trying to protect the transportation infrastructure, the employees that work here, the users and the surrounding communities against the inside threat,” he added.

According to the National Post, “The constant police checks, alongside national security searches by the Canadian Security Intelligence Service (CSIS), background reports from the RCMP and foreign history verification by Immigration Canada has pushed the number of employees stripped of their security clearance by Transport Canada over links to the Mafia, Hells Angels, drug traffickers and other “adverse” people or activities to record-high levels…”

The newspaper also acknowledges, “The increasing breadth and depth of security screening, however, also brings accusations of unfair over-reach, with a wide definition of what is a threat and narrow tolerance for someone explaining it away.”

There have been dozens of cases in the last ten years involving “internal conspiracies” in which employees at airports or marine ports with security clearances have been implicated in smuggling drugs or cash into or out of the country.

In August of this year, a 50-year-old airline ground employee at the Vancouver airport employee was stripped of his security clearance and lost his job when it became known that he had been arrested in 2003 by American authorities with 11.8 kilograms of marijuana and $353,430 in bulk United States currency.

Earlier this year, a female employee lost her fight to keep her job at Vancouver’s Airport Terminal Services after her security clearance was revoked because her former husband was a member of the Hells Angels.

Sources: National Post, September 9, 2016, Aggressive program aims to root out criminal infiltration of Canada’s transportation hubs; National Post, August 5, 2011, Worker stripped of security clearance and job after new organized-crime scare at Vancouver airport