The Art of Looking the other Way

Posted on by Pete Cross

Fraud has many formulations and iterations; corruption, cronyism, nepotism, parochialism, patronage, influence peddling, and outright theft. In this country it has become dispiritingly common place. The blatancy apparent in whichever direction we look. Is this dwindling of basic economic honesty beginning to fester, to grow, and create a doubt. Is there a sense that our democracy and our economy may be crumbling from the bottom up, slowly but methodically. Not by a directed sense of purpose, but rather by our obsessively looking the other way.

Outwardly, those in government corridors, put on a stern and concerned face when confronted with financial matters that go wrong. They give us solace and point to our economic stability, point to our formidable banking institutions, and of course our stable democratic government. But are we rotting through incompetence, disinterest and a lack of investigative desire? Are we being effected not suddenly by a heart attack of malfeasance, but instead a slow eating cancer of general ineptitude.

Fraud, even in its most basic clear cut form is continually around us. Just consider that in a recent survey by Price Waterhouse Coopers it was estimated that half of the companies in Canada report being victims of fraud. When the Covid “waves” hit, how do we ignore and countenance that during the much celebrated Liberal CERB benefit program over $500 million was paid out to persons who were multi-collecting; from CERB, the Canada Revenue Agency, or the Employment and Social Development Canada office.

In terms of just the CERB payments, a recent House Finance committee heard further discouraging testimony that the Auditor General can not even look into the fraudulent obtained payments– for another year– even though they have known about it since 2020. The CRA confirmed that they are not expecting to make a dent in the wrongful payments until 2023, probably about the same time that Federal government workers will actually have to go back to the office. Apparently, we are waiting on the Canada Revenue Agency to get their act together.

Is it a minor problem? You decide. CERB was budgeted to cost $24 billion –it came in at $81.6 billion. In July 2020 Employment and Social Development Canada knew already that $442 million was sent out to 221,320 people in the form of those double payments.

One must always “follow the money.” Where the money goes is where you will find people looking to take benefit from it and see it as an opportunity. The structure of these particular Covid programs created enticing pots of gold. Very little deception was needed.

Since Canada seems “reluctant” to undertake any kind of investigation or go after those that ripped the system, one wondered whether this was a North America wide malaise. Did this exceptional level of forgiveness for the under-handed equally permeate all of the liberal governmental establishments in the U.S. and Canada. As it turns out the American response to the potential for fraud that they too are now uncovering was in fact distinctly different.

In fact, the contrast in our two countries, even though they were running similarly intended programs is startling. If we reflect on the differences in approach and put Canada up to the mirror, our fermenting complacency boldly looks back at us.

Of course, the money amounts in the U.S. are staggering due to the size of their population versus Canada. The PPP as it was called in the U.S. was almost a carbon copy to that of CERB in Canada. (PPP was the Paycheck Protection Plan) The Canadians and the Americans also had more than one plan in effect. For instance, the U.S. also had the Covid disaster relief fund, and the unemployment relief fund.

Before one looks at the numbers, remember that the overall justification in Canada was at the onset of Covid, also echoed by the U.S. government. In Canada sacrificing “security for speed”, getting out the cheques to the populace was more important than the “security” of the system and the quick dispensation of the monies. The U.S. authorities also admit that most of the money was and is, “unrecoverable”.

Unlike Canadians, the Americans are a little more harsh in their language. They have no hesitancy in saying the program was: ” an invitation to fraudsters”, and the “largest fraud in U.S history”. That according to the official who was overseeing the payouts.

The Americans estimate that 10% of the monies paid out under their PPP was fraudulent. (We have seen estimates in this country under CERB of up to 30%). The Americans paid out $800 billion, therefore they estimate that $80 billion was paid out to fraudsters.

In addition, they estimate that $90 billion at a minimum and up to a maximum of $400 billion was taken from the secondary unemployment relief fund. Another $80 billion from a third program, the Covid disaster relief fund. Interestingly, they estimate that at least 1/2 of the stolen funds from the unemployment relief fund were stolen by “international fraudsters”.

Unlike Canadians, the Americans seem upset. They have set up the Pandemic Response Accountability Committee which is headed by General Mike Horowitz. This group has been given a mandate of 10 years to pursue the fraudsters.

Their results so far are in their words “minimal”, with only 178 people “convicted” so far. One wonders if in this country in the last thirty years if we have charged that many with significant fraud. What the investigators have uncovered is that the size and scope of the fraud may be overwhelming, continually expressing surprise on”how blatant it was”.

Using AI programming they are now scanning over 150 million records to identify patterns of fraud, such as the gas station in Houston whose phone number was used for over 150 applications for PPP. The perpetrators are appearing and being charged in increasing numbers; David Hines in Miami took them for $3.9 million; another person $7.2 million, some spending their financial gains on Lamborghini vehicles and mansions. A California couple stole $18 million and eventually pled guilty– the husband getting 17 years in prison, while his wife got 6 years. Yes, in the U.S. they also go to jail.

They have found that the service provider BlueVine, who was contracted to help the government dole out the funds and gave out $4.5 billion bragged about processing applications in less than 5 minutes. They estimate that a stolen identity or a fraudulent single identity could translate into a possible $30,000 in possible claims and benefits. The perpetrators would steal legitimate company names from the internet, inflate the number of employees or create the employees and then apply for the business loans.

One of the more blatant fraudsters was Danielle Miller out of Boston. Taking names from the state website and applying for Covid relief loans allowed her in 40 minutes make $100,000.

There is another myth that is also now also being dispelled. In speaking with experts in the fraud industry and in talking with private businesses they are quickly finding that “trade offs between speed and security” is simply not true. As one person pointed out, if this were true, why wouldn’t large private industries with a consumer facing business and who featured rapid response; why are they not going bankrupt? They describe it as categorically “false” narrative that speed necessitates neglect and oversight.

Of course, maybe none of this could happen in Canada, maybe we are much too honest here.

Auditor General Karen Hogan released a report which included the fact that the Employment and Social Development Canada (ESDC) and the Canada Revenue Agency (CRA) “focused on delivering the benefit quickly…both organizations understood the rules…” and they “relied on applicants good faith”.

Let’s remember that the Canadian CERB program allowed anyone over the age of 15, who made a minimum of $5,000 in 2019, could apply for $2,000 for a period of 28 weeks; following an extension of the program in August 2020. If that was not enough, once the CERB ended for these folks, the government then directed them to a revamped Employment Insurance Program.

The Auditor General admitted that a “pre-payment screening structure could have been put in place” and that telling the government agencies to “ignore warnings or red flags” of fraud may not have been a good thing. The CRA did open a “snitch line”. The thinking must have been, if they couldn’t find the fraud, maybe the public could lead them to it.

The Canadian Anti-Fraud Centre by the end of January 2021 had 8500 cases of CERB related identity theft.

In a 2020 FINTRAC Report made public in November 2021, that the CERB program was “knowingly and actively defrauded ” by scammers, organized crime, and that payments were made to people engaged in illegal or suspicious financial activity”.

Have we learned anything? In 1991 in Vancouver, Murray Pezim was investigated for fraud, the classic pump and dump strategy in mining stocks. In 2022 the U.S. Securities firm (not the Canadian authorities) charged David Siddoo for employing the same system. In 2021 the Cullen Commission exposed billions of dollars in money laundering. Really, nothing has changed.

In this country we are structurally not set up to look for fraud, or any variation of fraud. And if we aren’t looking we are sure to never find anything. The RCMP were recently investigating Trudeau and the Aga Khan who were allegedly influence peddling through elaborate vacations– and lo and behold they found that there are no rules that really apply.

The RCMP which should be the first stop in large scale fraud investigations in this country, as an organization has proven itself time and time again as incapable in the field of economic crime. Investigations in this country are talked about in years, not days, weeks or months. The solution is either that this type of crime is pulled from their organizational mandate, or they need to be dismantled and re-built and resourced to 2021 standards.

Maybe, the general public is willing to let their rage to continue to bubble away just below the surface. The Liberals and the NDP are counting on it. Is it that we are so complacent, so ensconced in our own sphere of security and relative prosperity that we just shrug it off, politically helpless, morally and ethically spent.

Photo courtesy of Flickr Creative Commons by Ryan Steele – Some Rights Reserved

Systemic Corruption

Posted on by Pete Cross

Insidiously, it seeps just below the surface,  swirling in and around every level of the Canadian mosaic. Currents of malfeasance, some large, some small, quietly percolating. Lapping endless waves of cronyism, nepotism, parochialism, patronage, influence peddling, graft, and embezzlement. 

In some countries it is prevalent to the point of being part of a daily existence; places where all daily activities take into account the need to pay forward the corruption.  In the other more “privileged” or affluent countries, like Canada, we smugly point at those living in that third world of undeveloped and often corrupted governments as we shake our heads in disbelief at the levels of criminality. 

The problem with corruption, besides the obvious, is that the slow trickle of misconduct eventually begins to erode societal morals and principles. It begins to gnaw at the very bonds of society.  We, as a society, need to believe in the stability and honesty of a government and those that have been appointed to lead.  We hope that there is an inferred sense of fairness in the vital portions of our society. 

Without it, discontent with one’s position in that society begins to fester. Discontent is followed by disbelief—  one begins to question the “system”.  If doubt in the system gains a foothold, this further undermines the structural pins of decency and respect. 

There are some that contend that systemic corruption combined with the gradual extinction of the middle class is the biggest problem currently facing the democracies of the West. There are some that believe that if not addressed it could indeed prove fatal to our current system of government. 

After all the power of corruption is absolute. One only needs to watch the now besieged authoritarian government in Belarus. This corrupt government which has been led for 26 years by the authoritarian Alexander Lukashenko is now in retreat—the streets now teeming with violent protest. 

Lukashenko pronounced an election victory— one that was clearly rigged in his favour —proved to be a final and ultimate straw for the citizens of that country.  His government’s corrupt practises over the years has now launched daily protests of 200,000 people. As many as 7000 have been arrested and detained as he clings to power and calls on his ally Putin to come to his aid.  Europe’s “last dictatorship” is now in rightful peril. 

Clearly there are levels of corruption around the world. 

Tradingeconomics.com actually compiles a “corruption index” of countries. Belarus, surprisingly considering its problems, is only 66 on the list of 180, 1 being the best, and 180 being the worst. (Somalia has the distinction of being the worst and Denmark is listed as being the least corrupt country in the world)  

Canada is number 12 on the list. (We were 9th in 2016) but due to its slight deterioration Canada is now considered a country “to watch” alongside Saudi Arabia and Angola.

On the surface this seems like a good number, but how do we measure corruption in this country? Let’s consider some recent Canadian examples. 

The underground economy in Canada is estimated by Statistics Canada to be about $45 billion— $16 billion in Ontario alone. Current estimates suggest that this “irregular” economy may account from 10-25% of reported Gross Domestic Product, and that this illicit part of the economy is actually now growing faster rate than the GDP. 

In a poll a couple of years ago, a group of Canadian executives found that twenty per cent of these business leaders believed bribery and corruption were “widespread in this country”.

Recently, in British Columbia the Money laundering Inquiry is for the first time officially looking into what most people have known in this Province for a long time; that illicit funds have for many years been continually funnelled into real estate and high end vehicles; millions of dollars using the casinos as an easy conduit.  

Criminologist Stephen Schneider said that “while criminal organizations have traditionally laundered the proceeds of crime as part of their broader operations, separate money service businesses are now facilitating them”. He goes on to describe the Vancouver “model” which centres around “professional money laundering”. He flatly states that British Columbia is simply “an attractive place to do that”.

When describing financial crimes like securities fraud or stock market manipulation Schneider said that Canada “has never been very good at addressing them”. In summing up an overall picture he describes the obvious “low-hanging fruit” which is the street level drug trade;  but the real danger occurs “within commercial crimes that may be committed by corporations and private businesses that appear legitimate”.

Another recent example which is slowly falling from public view is the SNC Lavalin affair. We should remember that this large Canadian once reputable organization pled guilty to fraud for work in Libya and has now agreed to the paying of a $280 million fine. They were caught having paid $127 million in bribes and laundered millions to win contracts in Libya. A large chunk of that money, some $47 million was paid to Saadi Gadhafi, son of the late dictator Moammar Gadhafi.  Suffice to say that this Canadian company was playing with the upper echelon of the world criminal sphere. 

The RCMP in Canada has over many years systematically dropped the proverbial ball in terms of pursuing these “white collar” types. But this lack of effort can not be totally blamed on the police. The prosecution services, the financial regulators and the corporate world are at the very least guilty of astounding willful blindness. 

As an example, in 2008 and in 2014, the Financial Action Task Force, a relatively unknown but influential international standards setting body called out Canada for a “significant set of deficiencies” specifically regarding our ability to determine the “true owners of private corporations”. This is referred to by accountants as “beneficial ownership transparency” and is the key factor in tracking down financial criminal activity and corruption. Our collective blindness once again at fault.

Finding corruption is in fact quite easy. Just follow the money. Pots of money will always draw the flies, those perpetrators and opportunists along with the ethically challenged corporate insiders. 

The criminal hawks are continually circling. Let’s consider the recent CERB cheques in Canada.  They have gone out to 7.8 million individuals. Statistics Canada then quietly noted, that even though 7.8 million people benefitted “only 5 million Canadians -employees and self-employed people–either lost their jobs or began working less than half their normal hours”.  Even with limited mathematical skills one can easily calculate that this  leaves one with a potential of 40% of the claims being fraudulent. With the announcement of no due diligence required, the fraudsters had to be salivating. Sadly, it has become equally clear that many Canadians have no problem in trying to “rip” the system. 

This leads us to the reverberations out of the WE scandal in Ottawa.  This drew in our own Prime Minister, the Minister of Finance and the Chief of staff of the Prime Minister. 

The Finance Minister, whose daughter was working for WE, and the Prime Minister whose wife, mother and brother had all been paid by the WE brothers in some form— apparently didn’t even know enough about business practises to understand the concept of recusing themselves.  Their sense of entitlement blinded them in their own deceit.  

It was also revealed recently that the WE executives referred to Mr. Morneau as a “bestie” in some back and forth emails. This same Minister quickly remembered, while walking to the very Committee hearing, that he “forgot” to pay back $40,000 in expenses for two rather dubious trips. 

At the time of this blog, Mr. Morneau has now been pushed to the curb, but undeterred is applying for the job of the head of the Organization for Economic Cooperation and Development. One has to wonder how that that job application will skirt around a couple of sticky ethics investigations, but pay no mind, because the Prime Minister is going to vouch for him. 

Mr. Trudeau, for his part, in the style of a tin pot dictator has now “prorogued” the Canadian Parliament, stopping all the activities of Parliament until September 21st. An apt parallel would be if you imagined Trump shutting down the Mueller inquiry. 

It effectively shuts down the various Committee investigations that were going on involving WE and the Liberals. 

But what may be the most disturbing to this writer is the lacklustre enthusiasm for pursuing the offenders in this country. What is it about the citizens of this country where there is no outcry against the white collar criminals?  No outrage or demand for accountability. 

This is a country that applauds the Hells Angels on their toy run, turning our heads from viewing their daily practise of extortions, and torture.  Beatings and killings of the innocent and the promulgation of the sex worker industry or the drug trade is ignored, as long as there is a stuffed bear attached to their handle bars. 

There was a massive outcry in the United States, cameras traipsing behind mediocre actress Lori Loughlin who was convicted in a nation wide college entrance exam cheating scandal for her involvement in getting her  “gifted” kids into University. The U.S. and Canadian media coverage was endless. 

While in this country, businessman, philanthropist, BC Sports Hall of Fame and former CFL’r David Sidoo was found guilty in this same scandal of cheating to get his two sons into college in Boston. He paid $200,000  to have a professional test writer use false credentials to impersonate his two sons to write their SAT’s. He even flew the fraud artist in to write one of the high school exams for one of his sons. Has there been massive shaming, has there been any calls for his removal from the Hall of Fame? Crickets. 

Commissioner Lucki, meanwhile remains in seeming isolation,  effectively distancing herself from the Coronavirus and any investigation involving the Liberals.  One should not expect anything to come out of the Ottawa RCMP corridors in terms of any investigations of wrong doing while under her oversight.

Remember when Ms. Lucki was asked about the investigation of obstruction involving the Prime Minister and the SNC Lavalin controversy? She replied that the RCMP “takes all investigations seriously, and investigate to the fullest”. That was in September 2019.  

Ms. Lucki is proving herself to be a plodding one trick pony. Diversity is clearly her one and only issue. It will also likely prove to be her swan song.

So what does the future hold. Well, the only thing for sure is that Canada on the afore mentioned corruption index is likely to slip further down the ratings. 

Canadians are now becoming a bit closer to Belarus than to Denmark. 

Photo courtesy of Christopher Dombres via Flickr Commons – Some Rights Reserved

“Follow the Money”

Posted on by Pete Cross

I have a clear mental picture of on more than one occasion, sitting around a conference room table, a new homicide case fresh in hand, and debating the merits of one course of action over another. Discussions would eventually come around to one of the items that needed proving; namely, motive.

When the motive was not clear, a reliable side-kick would invariably jump up and holler: “Follow the money!” We would all laugh both because of the manner of the exclamation which had been said with such ferocity, but also because of the obvious nature of what was being proclaimed.

If you want to find crime in this country, this Province, or in your towns and cities, truer words were never spoken. You only need to “follow the money”. This would seem patently obvious to almost everyone who is paying attention. What is less obvious maybe, is whether or not in this country, we actually care. And by “we” I mean Canadians in general, and the police in particular.

Having never seen polling with regard to the views of the general population in terms of their level of concern it is hard to make some definitive statement about the views held by the country as a whole. So this is more of a question than an answer.

However, when it comes to the police the preponderance of the evidence suggests that in fact the police don’t care, or if one was more generous, have chosen to make commercial crime the lowest rung on the ladder of operational policing.

From the police officer trying to avoid the call for a “fraud cheque” or the misuse of a credit card, to the upper management of the municipal, Provincial, and Federal forces who demonstrate an innate ability to ignore the economic crime swirling around them. Their internal view seems to be that since the public is not complaining, why worry, after all it doesn’t “trend” and paper cuts do not make as good a television snippet as assaults and car crashes.

To be sure, the problem of economic crime is complicated. White collar crime in Canada like other countries includes a broad range of offences which can and do include: fraud, bribery, Ponzi schemes, insider trading, embezzlement, cyber-crime, money-laundering, identity theft and forgery.

White collar crime is itinerant, moving easily across boundaries, from city to city, Province to Province, so it becomes necessary to co-ordinate multiple agencies and their variety of investigative groups. The investigations themselves become entangled in this web of jurisdictions and interests. Each agency have different levels of priority, different levels of expertise, different Crown counsels, and different levels of financial support. Stymied in most cases by their own current policing structures.

There are many levels to this blanketing economic cloud– ranging from large national in scope cases, such as SNC-Lavalin or the Bre-X mining scandal of 1997; to the more common such as identity theft and forgery. In between are layers of administrative, political, and government fraud in the millions of dollars.

If one just considers the world of the “scam“, the number of ways the public is being fleeced is only limited to one’s imagination: on-line purchase scams, wire fraud, romance scams, employment scams, crypto-currency scams, shady contractors, and fake invoices. And if you think that these are small problems, they estimate that $19 million was taken in, just in romance scams.

The RCMP and the Financial Crime Unit according to their own web site tells us that we should rest assured as the RCMP is mandated and “contributes to the security of the Canadian economy and seeks to protect Canadians”( take note of the terminology in that they are only “seek”ing and “contributing”). 

The RCMP themselves are also quick to point out that the primary responsibility for things such as fraud, rest with other jurisdictions and they in effect often become an “assistance” agency.

The RCMP have three parts in their weak arsenal aimed at combatting this “growing” problem; the Commercial Crime Branch, the Proceeds of Crime Branch, and the aggressive sounding Financial Action Task Force.

This latter Task Force is actually a policy-making group, Canada being one of a total of 37 other countries. They are there “to set standards and promote effective implementation of legal, regulatory, and operational measures…”. They are apparently geared to “generating the necessary political will to bring about national legislative and regulatory reforms..”. One of the areas often referred to is the need to disrupt money laundering around the world. Suffice to say that in that world, they are not doing a great job in Canada at the moment.

So while this Task Force is circling the globe attending meetings, that leaves us with the Commercial Crime Branch, and the Proceeds of Crime Branch.

Commercial Crime again according to the RCMP web site maintain 27 offices throughout the country. In terms of the work being generated it seems to often mention the need to build “awareness” and develop “strategic partnerships”. This is government language code found throughout the bureaucracies for not doing much at all. They boast of their “many successful public awareness and enforcement initiatives. ” They claim to have 450 officers in those various offices and their site features a photo of a business suited offender wearing handcuffs. But, trying to find actual examples of their “enforcement initiatives” is more difficult.

In 2019 a business and accounting firm, MNP LLP released a “Fraud Aware” study where they reviewed some 200 criminal fraud cases throughout all of Canada, in Ontario, Quebec and British Columbia. BC had the highest loss levels with a total of $14.3 million. What is noteworthy in this figure, and keep in mind that we are only looking at fraud charges, is not the amount of loss, but how little that their efforts amounted to. In the recent study into money-laundering in B.C alone, regulators are now estimating that $1.7 billion went through B.C. Lottery Corporation accounts with large amounts funded by loan sharks and criminal bank drafts.

Fifteen Ponzi schemes in this country amounted to losses of $549 million. Two cases of stock manipulation by themselves amounted to $87 million in losses.

The scarier figure is that they estimate that less than 5% of the fraud was reported in this country. They also indicated that civil procedures were “often timelier and routinely more effective” than reporting the matter as a a criminal offence. This is combined with lenient sentencing in Canada, unlike China where there is a possible death penalty, or even the United States where in 2002 they passed Sarbanes-Oxley act, and punishments were increased in light of the Enron scandal.

In the above studied cases, it should be added, 70 percent of the convictions asked for restitution, but the recovery rate was a mere 29%.

Many financial and legal experts that have for decades been outraged by the lack of effort in this country to combat “white collar crime”.

Spencer Lanthier, in receiving an award as a Corporate Director of some note, said in his remarks, “this city, this Province (referring to Toronto, Ontario) this country has a reputation of being the best location to carry out white collar crime, corporate fraud in the industrialized world”.

In a report on investment fraud in 2014, the Canadian Foundation for the Advancement of Investor rights reached some damning conclusions. They alleged that little data is kept on either fraudsters or their victims, enforcement agencies were not talking to each other, and that the public’s reporting rate was “extremely low”.

The police are now often seen as leaning towards giving up and spend more time trying to get out of these cumbersome, lengthy, and tedious investigations. Some argue the laws are insufficient and the burden of proof too steep. (In Ontario, the police were reportedly telling business people who had been victimized by fraud that they should investigate it themselves and that they were not interested in any event unless the fraud was over a $1million)

You need only to scratch the surface in this country to find the seedlings of suspicion.

If there is any activity involving millions of dollars, or even billions, that is where you will find the criminal and corrupt lurking. Let’s take a few of the bigger possibilities; the marihuana industry, the construction industry, or in large pipeline and hydro projects. Let’s also glance into the government funding behind large infrastructure projects, the millions being given to the indigenous, or lotteries and gaming. It seems that if there is a pot of money there will also be those willing to stick their hands in regardless of entitlement.

And in speaking of gaming, in British Columbia, we may finally be given a chance to look into gaming in this Province and the subsequent laundering of monies. It has been a long time coming, but great hope is being put into the upcoming inquiry by Justice Cullen. This writer is hopeful, but not entirely optimistic.

Cullen has a good reputation, but one must remember that he was formerly a Regional Crown and Assistant Deputy Attorney General when the NDP was in power from 1991 to 2001 before being named Judge.

He is a friend of the NDP, so count on them going after former Liberals, but not so sure the NDP themselves or their friendly compatriots will come under any pressure. Cullen, was a prosecutor for 20 years so we will have to wait and see if he thinks there is criticism needed from the effort or lack of effort put in by the police. Nevertheless, it is one of the few inquiries in recent memory where the “white collars” may be on the run.

Peter German in an interview described money laundering as the “back office for organized crime”. Will they go there? How far will Justice Cullen dig? Only time will tell.

Another group, Transparency International reported on how financial disclosures rules in this country allow “opaque corporate and land registries”. They reviewed ownership of the top 100 residences in Vancouver with an asset value of close to a billion dollars and found that over half had “murky ownership”. Their report was titled “No Reason to Hide” and concluded that Canada has become “a destination of choice for white collar criminals”.

It is bit of an understatement to say that the enormity of the problem in Canada is staggering. We point out countries like Mexico or the Congo as countries of extreme corruption. One wonders if the only difference is that we are just a little better at keeping it under cover.

The citizens of this country seem to see “white collar” criminal acts as less than other crimes. Sociologist Edwin Sutherland, in 1939, defined “white collar crime”as a crime “committed by a person of respectability and of high social status in the course of his occupation”. Maybe our complacency comes from the fact that we see it as partially victimless and partly as smart people “outsmarting the system”. After all we still applaud the person who avoids paying their fair share of their income taxes.

In a recent report, the Conservative MP Peter Kent launched a public complaint against the RCMP for their clear lack of effort in pursuing the fact that Liberal PM Justin Trudeau had been the beneficiary of three private family trips to visit the Aga Khan, the billionaire philanthropist. Trudeau had already been found in breach of four sections of the Conflict of Interest Act, yet this was not enough to prompt a criminal inquiry apparently.

Commissioner Lucki reached new heights in obfuscation when she stated that the RCMP could not “productively pursue an investigation” (my italics).

The Aga Khan Foundation Canada by the way has received over $330 million over the years of Federal support.

Economic crime is insidious and slowly eating out the inner core of this country. The levels of distrust and the growing narrative is that every public and private entity may be corrupted, and it is causing everyone to question some of the fundamental precepts of a functioning democracy.

The U.S. is already beginning to crumble. Trump is proving to be a threat to the very foundations of the U.S. constitution, not because of what he says or what policies he enacts, but because of the the level of corruption which he is fomenting. The stink of corruption is leaking into the Department of Justice and the Federal Bureau of Investigation, and has led to misuse of Congressional funds and the firing of bureaucrats who refused to be corrupted. (In another aside, there is really no Whistleblower protection in this country)

Canada may be even in a worse position with its lack of interest. A massive wake up call is needed and enormous monies and resources are needed to be spent to correct the decades long complacency in this country.

So far, there does not appear to be any political appetite from any party to begin to address this growing pandemic which is built on a belief that we are somewhat immune, somewhat removed from corruption. We follow the plane returning Canadians from China like the press helicopter following the Bronco driven by O.J. but show little interest is what is going on right in front of us.

As this blogger writes the Ottawa Citizen is reporting on former Commissioner Bob Paulson and some questionable billing for his services. It seems that Mr. Paulson’s firm, the lofty sounding Independent Investigation and Review Services billed $116,286.95 for three months work; roughly $1933.00 per day, for him and two others to “review material”, to “develop an interview plan”, conduct interviews, and of course “parking” and “mileage.”

Was this a major significant inquiry, well no, it was to do with a City counsellor for Ottawa and his inappropriate behaviour to some employees. Normally that would type of investigation would fall to a person in the Human Resources Department.

As was said earlier, scratch the surface, and just “follow the money”.

Photo courtesy of 401(K)2012 via Flickr Commons – Some rights reserved

Alas, the Emperor has no Clothes…

Posted on by Pete Cross

In British Columbia, or E Division (just for this blog we will let the E stand for Emperor) there has been one area of investigation where the RCMP has been woefully inadequate, for at least a couple of decades, whether one wants to measure it statistically or in terms of impactful effort.

In the last couple of weeks, that weakness has been revealed and underscored once again, this time by the NDP government and former RCMP Peter German, in a report on money laundering, a significant sub-set in the general category of financial crime.

Inside the police community it has been well known for quite some time, that the RCMP has ignored “white collar crime”, both in term of the allocation of funds or personnel. An often quoted inside joke amongst members in talking about job transfers, was throughout their career how they had ducked and avoided being assigned to the the “fraud” section. A small reflection perhaps, but this attitude of avoiding the financial investigative groups in terms of a possible career, is not a phenomena of the last couple of years.

The growth of internet crime in the 1990’s has thrown fuel on to this constantly burning flame and left Canada with a reputation of being a safe harbour for the financial criminal. This type of crime has often been portrayed as the “victimless” crime, after all the only ones being hurt were those cold-hearted bastions of industry– the banks. The police held this view for the longest time, equally guilty of looking the other way, the problem not worthy of serious examination or study. Even today, in terms of “strategic priorities” you will find it listed fifth, right after “youth” and the “indigenous”.

This lack of a concentrated effort has now been exposed once again, this time spurred on by a new found public and media interest who have taken to conflating money laundering with inflated real estate prices. Of course, there are many fundamental economic issues causing high prices in Vancouver but the one that seems to grate on the middle affluent is the thought of illegal monies from mainland China driving up the price in real estate or on luxury cars. Of course, there are also direct links to drug dealing and therefore the opioid crisis, the other hot button issue. The monies have been traveling through the only pipeline they seem to be able to build in this Province, the one of elastic bound $20 dollar bills pushed through the conduits provided by the casinos.

In the lastest instalment BC Attorney General David Eby called a press conference to discuss a finding of Peter German in his 2nd report on the subject in this Province. Eby claimed to have been so shocked by an early edition of these latest findings that he felt it necessary to go to the public now, not waiting for the entire 2nd report.

So what was the shocking revelation for the NDP?

Well, Peter German being the intrepid former RCMP officer that he was, decided to ask how many officers were actually on the job in terms of investigating money laundering?

The answer: Zero.

Now, one would think that this information would have been known before this time, as it seems like an obvious avenue of inquiry, even for us lesser informed. At the beginning of this inquiry it would have seemed logical to search out who the investigative experts were in the field? Apparently not.

The original answer of course was not zero.

We would not be able to identify the RCMP involvement, if they did not, at the very least try to cover or fudge the actual numbers, hoping of course that there was only the one question; no follow up, no probing allowed.

The RCMP answer to German was that there was 26 “positions” .

German knows the code of when the answer is “positions” and knew enough to then ask, well how many were actually filling those 26 positions?

Answer 11.

German decided to dig further and asked of those 11 how many were actually on the job?

Answer 5.

And those 5 that were actually showing up to work, he persisted, what were they doing?

Well, long pause, they are just packaging and referring all files to the Provincial Civil Forfeiture group.

Thus the secret was out of the bag. Afterword, if you had listened closely and put your ear to the ground outside Green Timbers, you would have heard the sound of bodies scrambling in and out of conference rooms, frantic terse phone calls, the bumping together of the police and political brains entrusted with these matters — stumbling and mumbling on how could they justify such an apparent illustration of lack of operational effort.

Even for those adroit at media manipulation in the “Strategic Communications unit” must have been struggling, proposing spins that at the very least would have been difficult to say with a straight face.

Bill Blair (who had apparently been warned by Eby and given an early copy of the report) started off by admitting that indeed there had been “significant cuts” in some of the Federal units. Then his political survival senses kicked in, and the Liberal godfather of pot began his spin: “We have made very significant announcement in Budget 2019, restoring the RCMP capacity and making significant new investments in intelligence gathering and furthering steps that will facilitate investigation and the prosecution of money laundering offences”. So in translation this means; yup, we haven’t been doing anything so far, but look out now, we are coming with guns blazing.

Assistant Commissioner Kevin Hackett who is becoming remarkably proficient with this kind of yarn spinning, no doubt through un-wanted practise, came up with a buzz worthy comment calling the report and the findings only a “snapshot in time”. If it was indeed a snapshot it must have been taken on a Polaroid One Step.

But like Blair, Hackett when prompted feels the need to beef up his response. He said that the report “didn’t capture all personnel who are involved in cases where money laundering is a component”. He goes on to say that there are over 40 prioritized “projects” underway, and guess what, they found out that “8 of them involve money laundering.” One wonders what standard may be in play here. For instance, a drug dealer being investigated who has a house or a car, could be referred to as being a possible “money laundering” case, using this criteria.

We should also point out that it would be somewhat negligent to not understand a bit of Peter German’s former history with the RCMP. Just six years ago, German was a high ranking officer in the RCMP, the Deputy Commissioner in fact, and as such was at one time technically overseeing financial investigations throughout Canada. He was in charge during the time of the Integrated Marketing Enforcement Teams. Remember them? They were “equipped to respond swiftly to major capital market fraud”. It was by any measure a total flop with three cases brought to court during their first nine years in existence. In essence these positions have been now rolled into the BC Securities Commission, but the RCMP still have a difficult time in providing an adequate minor level of trained officers.

In his 31 years with the RCMP, German did use his time wisely, earning an MA in Public Policy and a Phd in Law from the University of London. He apparently transitioned into an expert in the area of money laundering, wrote a book on it in fact. So someone at the 2nd highest rank in the RCMP (and was rumoured to be in contention for the Commissioner ) and was responsible for areas such as money laundering, did not make a dent in this problem or more importantly did not at least become vocal about the issue while in a policing position. But now, retired and running his own consulting business he has been hired to write a report on the problem of money laundering and throw dirt at the Mounties for their lack of effort. This is not to day say that this makes his report of little value, Mr. German is a well respected learned fellow, so quite the contrary, but one has to appreciate the irony.

Those of course are just the Federal job positions. What has the Province been doing? Well the Liberals being the party in power for most of this time in question have many questions that need to be answered, and the NDP is for the most part still able to feign ignorance.

Ex-RCMP and whistle blower Joe Schalk was the Senior Director of Investigations for BC’s Gaming and Enforcement Branch and was reporting this issue for many years, as early as 2012.

This branch at the time reported to the B.C. Lottery Corporation who would have received many of the reports issued pointing out the problem. They apparently didn’t like the attention it was getting and inevitably the relationship between the two groups began to deteriorate.

In April 2014, the Ministry of Finance conducted a review of BCLC and concluded that the two groups had become dysfunctional and “adversarial”. They recommended a full review of the entire Corporation. Meanwhile, in 2014 Schalk was fired for his efforts, a victim of the old management game very prevalent in this Province, that if you don’t like the message shoot the messenger.

Even with this kind of attention and concern, BCLC, according to German, was still accepting government awards for their exemplary performance.

Schalk was finally exonerated in German’s report for “nailing the issue” and continues to speak openly about the issue, even calling for a full public inquiry. The NDP are still holding back on such an inquiry, no doubt worried that if they let “it” hit the proverbial fan, how much is going to blow back on them.

As said earlier, this is all just one component of a much larger problem in this Province and in this country which has taken root and many can share in the blame; besides the police, Federal and Provincial governments, Crown Counsel offices.

In a recent poll, 36% of Canadian organizations say they have been victimized by white collar crime.

There is the fallacy that most of this crime is too sophisticated to detect, when in fact 61 % of that crime is done by a perpetrator inside the organization. The cost for this; 1 in 10 organizational victims are in excess of $5 million.

According to Criminal Intelligence Service Canada, organized financial crime, including debit and credit card fraud, totals over $5 billion per year. That works out to a cost of roughly $600 per family in Canada.

Canada has produced some famous fraudsters in the past; Harold Ballard the now deceased but former owner of the Toronto Maple Leafs, who was convicted of 47 counts of tax evasion, Alan Eagleson the hockey agent, and Conrad Black who in 2007 was convicted of using $60 million in company funds. Mr. Black, now apparently reformed, writes a column for the National Post.

Among the 35 member countries of the OECD (Organization for Economic Cooperation and Development) bid rigging, cartels, and collusion are estimated to add 20% in costs to any government procurement initiative around the world.

Suffice to say, it is fair comment that there are some financial crime issues in Canada, not just British Columbia.

The RCMP web sites are misleading and have not been updated if one was ever trying to untangle and look behind this bureaucratic veil of secrecy. There are still references to IPOC (Integrated Proceeds of Crime) who on their site point to successes in 2006 and 2009. They are references to IMET (Integrated Market Enforcement Team) which have virtually disappeared, many members re-assigned, some others melding into the BC Securities Commission. IPOC was reviewed back in 2010 by Public Safety Canada and described their operations being severely impacted by “partners leaving…vacancy…staff turnovers..and recruitment issues..are all contributing to less than optimal performance” . It wasn’t working even then.

The RCMP still list having 27 Commercial Crime Sections across the country. They don’t really.

Re-organization in the RCMP has become a dogma, which has been combining and mutating with aggressive promotions and the push to specialization. It has been in full swing over the last number of years and German even makes reference to 2013 as being one of the recent turning points in this current system.

To understand the depth of the problem, one has to understand the depth of the re-organization, and the vast number of personnel involved.

There are four groups of agencies involved with the potential to be involved in money laundering and other associated financial crimes. The RCMP, CFSEU-BC, OCABC, and JIGIT. (Never doubt for a moment the policing ability to come up with acronyms- JIGIT being a personal favourite)

The RCMP has a Federal group named the Federal Serious and Organized Crime Unit (FSOC). It is in this group that you will find a series of Teams and officers (a team usually being about eight). It was about 2013 that various separate departments, drug sections, commercial crime sections etc. got rolled under this Federally controlled apparatus. Operational direction and the assigning of priorities began coming from Ottawa, national priorities were going to outweigh local or Provincial authorities.

Two of the teams in this FSOC deal now with Financial crimes and supposedly have some expertise in the money laundering field. Of course this is the group that German was told had 26 positions, but there were only 5 actually working, and those 5 were simply bundling up investigations and passing the information to BC Civil Forfeiture (yes, another group).

Sources estimate that there is about a 30% vacancy rate Canada wide in the Federal positions being overseen by Ottawa, and this staffing problem is clearly causing major disruptions in any consistent effort in any of these specialized fields.

Besides FSOC and the RCMP, then there is the CSFEU-BC (Combined Forces Special Enforcement unit) whose primary mandate is gangs and gang activity. In addition there is OCABC (Organized Crime Agency of BC), a Provincial organization which is the new iteration of the old CLEU (Combined Law Enforcement Unit). Confused yet.

Wait, there is still JIGIT which is the Joint Illegal Gaming Investigation Team. This was formed in April 2016 and consists of 36 police officers and over 200 civilian personnel. They claim to have 8 active investigations. At first glance, no matter what file/member ratio you may employ, this seems pretty light.

CSFEU-BC and OCA-BC are both managed by a Deputy Commissioner of the RCMP; in this case, Mr. Hackett. So you can see why he feels the need to defend. In his defence he very cleverly talks about the investigations inside CFSEU (40 ongoing investigations) thus avoiding outing the Feds.

The Senior Management team has representatives from all of the agencies, OCA, RCMP and CFSEU.

CFSEU and OCABC has over 400 officers and civilians.

When you consider the number of personnel involved in all these groups combined, it would seem difficult to argue that the number of officers is insufficient.

What may be the crux of the problem, what the issue at its core may be more simple at least in broad terms.

The RCMP has a now ingrained inability to be forthright; the inability to say things were tried and didn’t work, the inability to speak to their political masters and say there is not enough resources to be all things to all people. The no job too small or “doing more with less” is a never ending conundrum that leads nowhere.

Like all government groups, failure is not and can not be an admitted option. Everything is always a success, no matter how dismal the effort or how big the lie. Honesty about their lack or strength of effort has been side-lined and obfuscation is the media tool.

They just can not bring themselves to admit that they can not do it all. They are no longer capable of being a one stop shop on the Federal or Provincial level. When you combine this with low priority being given to financial crime, with the concurrent need for highly specialized academic personnel, what results is a smorgasbord of uncoordinated piece meal investigational files on all levels. Any substantial efforts are being frustrated from the very start and often met with failure. (You will note that we haven’t mentioned the most recent abject recent failure in the Silver International Investments case, which deserves attention on its own)

Throw in governments always in flux who are continually altering the political priorities, a dis-connected Ottawa, insufficient funding in both the needed technology and personnel and a recalcitrant justice system and you end up with zero prosecutions.

The same number now apparently working on money laundering.

Christine Duhaime, an financial crime and money laundering specialist with Duhaime Law said “It’s pretty serious, it’s saying there is no oversight and no real enforcement in this area for the whole province–it’s a little bit crazy”.

A telling snapshot for sure, let’s hope that someone, sometime, takes a look at the issue with a little longer lens.

Photo via Flickr Commons by Andrew Kuchling – Some Rights Reserved