Alleged partnership of Canadian casino company with gambling tycoon could trigger new investigation

Click to play video: 'Alleged partnership of Canadian casino company with gambling tycoon could trigger new investigation'
Alleged partnership of Canadian casino company with gambling tycoon could trigger new investigation
WATCH: A Hong Kong tycoon suspected of links to organized crime in Macau casinos was allegedly a partner with B.C.-based Great Canadian Gaming in a casino ship venture in the South China Sea, a Global News investigation shows. – Jul 24, 2018

A Hong Kong tycoon suspected of links to organized crime in Macau casinos was allegedly a partner with B.C.-based Great Canadian Gaming in a casino ship venture in the South China Sea, a Global News investigation shows.

This new information could lead to an investigation by B.C.’s gaming enforcement branch, Attorney General David Eby said.

WATCH: Global investigation raises more money laundering concerns

Click to play video: 'Global investigation raises more money laundering concerns'
Global investigation raises more money laundering concerns

Global’s investigation — based on extensive interviews with former Great Canadian employees and review of hundreds of pages of legal and corporate documents — reveals that Cheng Yu Tung, who was Hong Kong’s third-richest man before his death in 2016, was allegedly a key backer for the casino ship known as the China Sea Discovery.

Story continues below advertisement

Great Canadian’s casino cruise only lasted for about a year, ending in 2001, and was plagued by problems with Chinese gangsters and armed junket operators, according to documents and witness interviews. It ended in a number of law suits.

A statement from Eby, says that even for casino ventures that take place outside Canada, significant investors involved with B.C. registered casino companies must be vetted for suitability and integrity by B.C.’s government. And B.C. casino companies must operate with integrity, the statement says, wherever they do business.

Eby’s ministry confirmed that Cheng Yu Tung has not been registered to participate in B.C.-based gambling businesses.

“Allegations of unregistered individuals participating in companies that deliver gaming services in British Columbia are serious,” Eby said in a statement.

“Any credible information about such individuals should be forwarded to British Columbia’s Gaming Policy Enforcement Branch so that appropriate investigations can be initiated.”

Sandy Garossino, a former Crown prosecutor who has been critical of organized crime influence in B.C. casinos, called the revelation of Cheng Yu Tung’s alleged partnership with Great Canadian a “bombshell” that “blows open the necessity of a public inquiry, into what happened in B.C.”

Story continues below advertisement

WATCH: Global investigation raises more money laundering concerns

Click to play video: 'Global investigation raises more money laundering concerns'
Global investigation raises more money laundering concerns

Reviewer Peter German, a former high-ranking RCMP officer, filed a scathing report confirming that Chinese organized crime networks with roots in Guangdong, Macau and Hong Kong, laundered at least $100 million through loan sharks and VIP gamblers in B.C. Lottery casinos.

German concluded casinos “unwittingly” allowed organized crime to launder money. And German called River Rock Casino the “epi-centre” of the activity.

Great Canadian, which has become the dominant casino operator in Canada after being awarded new contracts in the Toronto area, continues to be reviewed for management integrity by Ontario’s regulator, due to allegations made public last year by Eby’s ministry.

WATCH: David Eby blames BC Liberals for money laundering issues

Click to play video: 'David Eby blames BC Liberals for money laundering issues'
David Eby blames BC Liberals for money laundering issues
Story continues below advertisement

German’s report does not probe Great Canadian’s troubled venture into Asian cruise ship gambling in 2001.

But a former Great Canadian security supervisor who was aboard the China Sea Discovery, Proka Avramovic, says he believes Great Canadian’s Hong Kong-based venture was an important introduction to the model of Chinese VIP gambling.

In a court case involving China Sea Discovery investors, Avramovic testified about terrifying incidents aboard the casino ship, including the time a powerfully connected Chinese businessman allegedly held Great Canadian employees captive in a port of the Chinese island of Hainan, until he was repaid for an investment.

The businessman, only referred to as “Mr. Y” in court, controlled armed forces in Hainan and had real estate assets in Richmond, according to Great Canadian employees.

Avramovic testified that his complaints to B.C.’s government after he returned from the China Sea Discovery were dismissed, and he was informed regulators didn’t want to handle his allegations about loan sharking in B.C. Lottery casinos, because the industry was expanding.

“The China Sea casino was the template of how things would work in Canada,” Avramovic said in an interview. “These red flags were raised 15 years ago, and it has to be connected to what is happening now.”

Garossino agreed, saying new information about Cheng Yu Tung could help explain how the Macau gambling model took root in B.C.

Story continues below advertisement
Click to play video: 'What is the ‘Vancouver Model’?'
What is the ‘Vancouver Model’?

“If Cheng Yu Tung was involved in a partnership with Great Canadian in any way, at any time, it would be a bombshell, in my opinion,” Garossino said in an interview. “Cheng would be an unsuitable partner, in any jurisdiction in North America. And what is really striking about this revelation, is that everything about the River Rock Casino model has had outward manifestations of the Macau model, almost from the beginning.”

In a prepared response for this story, Great Canadian’s chief operating officer Terrance Doyle did not answer specific questions about Cheng Yu Tung’s alleged involvement with Great Canadian, or other allegations in this story. Doyle said the China Sea Discovery only operated for a limited time in 2001, offering casino cruises out of Hong Kong, and Great Canadian was a minority partner in the joint-venture.

Story continues below advertisement

“Any attempt to extrapolate from this business venture, while relying on the comments of former Great Canadian employees or innuendo, significantly risks doing a disservice to your readers,” Doyle stated.

“Dr. (Peter) German found that casino service providers in B.C. were operating in accordance with AML (anti-money laundering) policies, practices and statutes,” Doyle stated. “And in the case of Great Canadian, we undertook detailed efforts to report all suspicious activity that led to certain law enforcement action, as well as taking proactive measures to combat loan sharking efforts in 2016.”

Notorious for Triad activities

Cheng Yu Tung was famed for building a multi-billion dollar empire through his private jewellery conglomerate, and gambling, real estate, and banking interests in Hong Kong, Macau and China. His family’s empire is now estimated at over $20-billion, according to Forbes.

A Guangdong native, Cheng once bested Donald Trump in a New York real estate deal, and also had ties with a Chinese leader whose family secretly amassed billions as Cheng’s businesses expanded in China, the New York Times has reported. Cheng’s real estate wealth extends into Canada, too. Along with a consortium of Hong Kong tycoons, in the 1990s, Cheng was an early investor in major Vancouver condominium and hotel developments.

But Cheng is also known to police and gambling regulators around the world for alleged associations to organized crime figures in Hong Kong, and because for decades he and Hong Kong tycoon Stanley Ho controlled a Macau casino monopoly, run through a byzantine network of private and public companies. Ho was also a major investor in Vancouver real estate, the Washington Post reported in 1991.

Story continues below advertisement

U.S. gambling regulators have concluded, documents show, it is almost impossible to be involved in Macau VIP room gambling, without connections to Chinese organized crime. A 2009 report by the New Jersey attorney general’s division of gaming enforcement, alleged Cheng Yu Tung was directly involved in operating three VIP rooms “that are notorious for triad activities” in Stanley Ho’s Macau casinos.

In an interview Garry Clement, a former director of the RCMP’s proceeds of crime program and the former Hong Kong Liaison Officer from 1991 to 1994, said that in his Hong Kong duties he “learned of Cheng Yu Tung’s ties to Stanley Ho, at a time when Ho controlled the Macau casinos and enabled Triads to establish gambling rooms.”

Clement said he forwarded “significant” reports to RCMP headquarters about Cheng, Ho and Triads, “detailing connections,” and his concerns.

Cheng’s business partner Stanley Ho, and Ho’s family, have twice been rejected as suitable investors in B.C. casino companies, due to background investigations, B.C.’s Ministry of Attorney General confirmed. But Cheng Yu Tung’s alleged partnership with Great Canadian appears to have been undetected.

Stanley Ho, who is now 96, has repeatedly denied any links to Triads, and has never been arrested or convicted.

“Cheng was an original partner, all the way through”

In 2000 Great Canadian was looking for a way to tap into the high-end market of Asian high-rollers.

Story continues below advertisement

Gambling is illegal in China. But in Macau, and in casino ships cruising international waters near Hong Kong, Chinese VIPs can get money offshore through junket operators, and lay massive bets.

Great Canadian executives including Walter Soo, the company’s current head of international VIP gaming, saw an opportunity in floating casinos.

“We had $500 limits in B.C. and we wanted to do $10,000 bets,” one former Great Canadian employee involved in the China Sea Discovery venture said.

According to legal filings, Great Canadian, Allegiance Capital, an investment bank from Texas, and a Hong Kong real estate tycoon named Charles Ming, invested about $15 million in an aging cruise ship, named it the China Sea Discovery, and turned it into a gambling vessel. Ming planned to attract investors in Hong Kong, court documents say.

Walter Soo ran the casino for Great Canadian, according to court testimony.

The business plan was also detailed in a Wall Street Journal story in 2001, which said Ming and his Hong Kong travel company, Kamhon, would run the venture for a subsidiary of Great Canadian Gaming. The story mentions Kamhon’s connection to New World Development Co., the multi-billion dollar Hong Kong corporation directed by Cheng Yu Tung. But there is no mention of Cheng’s involvement.

Story continues below advertisement

A review of emerging market corporate records indicates that Kamhon is a subsidiary of New World Development Co.

Ming, who died in 2008, was a director and major shareholder of Great Canadian Gaming, according to Washington State gaming records.

If Cheng’s alleged partnership with Great Canadian is investigated by B.C.’s government, this information could be relevant. In a response, B.C.’s Ministry of Attorney General informed Global that its staff could find no B.C. gaming records for Ming, Cheng, or Kamhon.

All government documents related to the China Sea Discovery case have been destroyed due to passage of time, a response to a Global News freedom of information request says.

Some former Great Canadian employees said there was excitement that Cheng Yu Tung, who was seen as “royalty” in Hong Kong, would provide the China Sea Discovery access to port infrastructure in Hong Kong.

But it didn’t work out that way.

“Cheng was an original partner, all the way through,” one former Great Canadian employee, who asked not to be named for fear of being sued, said. “But there was no access to any of Cheng’s infrastructure, and that was kind of disappointing to Great Canadian. Because you think you are partnering with a substantial player in Asia, and then you get there, and it is almost like they didn’t really want to be seen, being in the gambling business.”

Story continues below advertisement

Accounts of Cheng’s involvement with Charles Ming in a South China Sea cruise are supported by a 2002 Hong Kong media report, from the widely read Apple Daily.

The report says that Ming was accused by an Asian bank of an unpaid debt in the 2001 venture, and that posters announcing the claim, including pictures of Ming and Cheng, were pasted to the walls of New World Development headquarters.

Gamblers playing slot machines at the River Rock Casino in Richmond B.C. Sharon Doucette/CP

Walter Soo threatened

Avramovic, a security manager with Great Canadian until 2003, testified about his experiences on the China Sea Discovery and in B.C. casinos, in the Texas court case.

Avramovic testified about a scenario allegedly involving Soo that was reported to Great Canadian’s head office. When the China Sea Discovery made arrangements to cruise with VIPs from the Chinese island of Hainan, a figure only referred to in transcripts as “Mr. Y” allegedly attempted to take control.

Story continues below advertisement

“Mr. Y was making some demands about the money that he invest, and Walter Soo tried to resolve the issues. Then Walter Soo’s being threatened by him. Mr. Y wanted money back in order to free the ship from China.”

Global News could not reach Walter Soo to ask questions about his involvement in the China Sea Discovery.

Avramovic testified about receiving a $900,000 cheque from a Great Canadian executive at Vancouver’s YVR airport, and hand-delivering the cheque to Great Canadian executives in Hong Kong.

Great Canadian executive Boki Sikimic, who was Avramovic’s boss, also testified in the Texas court case, and reported the same transaction.

“I know that’s in Hainan when we have to send money to pay. Somebody took the ship,” Sikimic testified. “The reports that I receive, they’re running away. They owe money to China. They been paid some Mr. Y. He wants to take the ship.  I remember guys sending reports there was guns on the ship.  Everybody is, you know, running scared for their lives, from operation.”

None of the allegations in the case between Allegiance and Great Canadian were proven in court. And in cross-examination, Great Canadian’s lawyer challenged Avramovic’s testimony that Mr. Y’s entourage was armed, and that Walter Soo was threatened by Mr. Y, and that a deal was made with Mr. Y to free the ship. Great Canadian eventually settled with Allegiance out of court, a corporate statement from Great Canadian says.

Story continues below advertisement

The testimony of Avramovic and Sikimic, is supported by an account of the China Sea Discovery voyage filed on a shipping news website. The account says armed officials operating a travel charter in Hainan made ‘severe’ threats to casino and ship employees.

A number of former employees, including Avramovic, said Great Canadian’s casino ship could not obtain fuel to leave Hainan, until Mr. Y was satisfied.

Some former Great Canadian employees said they were aware that Mr. Y owned real estate assets in Richmond, B.C., and in addition to running a travel agency in Hainan, he ran spas and karaoke lounges in Hong Kong. They said some Great Canadian managers, including Walter Soo, continued to visit Mr. Y in Richmond, after the alleged difficulties in Hainan were resolved.

One employee explained that there was nothing “nefarious” in Great Canadian’s actions. But from Hong Kong to Hainan, Great Canadian was beset with the problem of Triads that controlled Asia’s VIP market.

“There were bad people, trying to control what we did, and they could control immigration in China,” one employee said. “Mr. Y wanted a stake in the casino because he could bring on the players, and he knew there was a lot of money to be made … He was the king of that island, and what he said went.”

WATCH: John Hua spoke exclusively with Fred Pinnock about what the BC Liberals knew about the problem of money laundering in B.C. casinos.

Click to play video: 'Extended interview: Former head of B.C.’s illegal gambling enforcement team had raised concerns'
Extended interview: Former head of B.C.’s illegal gambling enforcement team had raised concerns

Junket agents

In testimony in the Texas court case, Avramovic and Sikimic pointed to junket agents, and what Sikimic viewed as suspicious activity at the China Sea Discovery cash cage. Sikimic said he received numerous reports from ship security staff, of unknown junket agents taking stacks of money from the cash cage, that they did not gamble with.

Story continues below advertisement

According to Sikimic’s testimony, junket agents aboard the China Sea Discovery were paid a commission related to the amount of money a VIP gambled.

“Agents are paid and junkets are paid,” Sikimic testified. “Somebody come (to the cash cage) and the guy says give him $200,000. He is one of the agents. He’s the one that represents somebody. He says give him 200. Now, from those 200, I’ve been told they get commission. They get five percent.”

Great Canadian’s lawyer objected to Sikimic’s testimony on junkets, claiming it was irrelevant to the case.

In the language of Fintrac, Canada’s anti-money laundering agency, Sikimic’s testimony about player agents could provide examples of “third-party” transactions. Sikimic testified that he questioned these alleged junket transactions to his superiors at Great Canadian. But he was repeatedly told “that’s the way they do things,” in Chinese gambling, Sikimic testified.

If B.C.’s government were to investigate the China Sea Discovery case, this could be an example of an operations “integrity” issue, as referred to in Eby’s response for this story.

Reports on junket gambling in Macau, explain that junket agents arrange deals with Chinese border officials in which Chinese VIPs can transfer cash out of China, avoiding capital export controls, and receive the cash or chips in private casino rooms. Or, VIPs can take cash loans from junket agents in order to buy casino chips, and pay back the loans in China.

Story continues below advertisement

German’s report concludes that the second type of transaction — VIPs taking criminal cash loans in B.C. and repaying debts in China, just as “it happens in Hong Kong and Macau” — eventually became common in Metro Vancouver casinos.

Avramovic also testified that when he took over security on the China Sea Discovery, he was briefed that some high-rollers involved with junkets would not be checked for weapons.

“So of course, I didn’t want to interfere. I didn’t want to jeopardize, you know, anyone’s safety on the ship because, obviously the Chinese custom officer will let them go.”

In cross-examination, Great Canadian’s lawyer said Avramovic couldn’t prove he saw actual weapons onboard the China Sea Discovery.

Story continues below advertisement

Explaining his allegation in an interview, Avramovic said: “I was briefed that some important people will come through the security and we shouldn’t really check them, because they are junket players. I was instructed those players and their entourage are probably armed and have lots of cash, so they won’t be going through the metal detectors.”

Another former Great Canadian employee claimed to have witnessed a feared alleged Macau casino junket operator and her entourage skirt metal detectors, while boarding the China Sea Discovery, in Hong Kong.

Peter German’s report does not question whether VIP-delivering companies allegedly involved on the China Sea Discovery, could have followed Great Canadian back to B.C., after 2001.

Global News asked Sandy Garossino and Garry Clement, if based on the evidence in this story, that could have been the case.

“The danger is obvious,” Garossino said. “The thing about organized crime is, you can’t run away from these relationships, even if you want to.”

“I believe this is just a continuation of what was started overseas, and the China Sea Discovery, only being one outlet,” Clement said.

Whatever the case, in the time period covered by German’s report — when Walter Soo was responsible for developing Great Canadian’s massively profitable VIP program at River Rock Casino — B.C. Lottery Corp., Gaming Enforcement Branch, and RCMP investigators noted serious concerns with Chinese VIPs and suspicious cash transactions.

Story continues below advertisement

According to German’s report, a B.C. Lottery Corp. investigator claimed that “the River Rock VIP room was ‘full of facilitators.’ Some members of senior management within River Rock appeared to have developed friendships with these players.”

“The investigator sensed that high-limit gamblers, referred to as ‘whales,’ were untouchable,” German’s report states.

German’s report specifically noted a suspected “third-party” transaction at River Rock — a potentially illegal transaction according to Fintrac’s anti-money laundering regulations — which resembles the “agent” transactions described in Sikimic’s testimony.

At River Rock, a “VIP host allegedly arranged a buy-in of $200,000 in $100 bills for a person who was representing a high-limit player,” German’s report states. “Apparently, the intent of the buy-in was to obtain chips in advance of a visit from China, by four friends of the banned player.”

In a media release welcoming the conclusions in German’s report, Great Canadian said German recognized the role casinos have in combatting illegal activity, and German “has acknowledged the proactive measures that Great Canadian has implemented beyond what was required by regulation.”

Loan sharks

In his testimony, Sikimic claimed that he resigned from Great Canadian partly because he was tired of dealing with loan sharks in B.C. casinos, and “I was afraid for my life, and life of my family, if I go further.”

Story continues below advertisement

“Everything dealing with loan sharks … it’s the biggest problem.  Government — they know what’s going on. Even police knows (and the B.C.) Gaming Policy Enforcement Branch,” Sikimic testified, in 2004. “There was shooting, there was people found dead in the car … everything was connected to the loan sharks. So it’s not a group of, you know, people that you would mess with.”

Great Canadian’s lawyer objected to Sikmic’s testimony on loan sharks, saying it wasn’t relevant to the case.

But German’s report confirmed a number of murders and disappearances related to loan sharking in B.C. Lottery casinos, in the 2000s.

“Loan sharks were a staple of casino life … staff and players at many casinos paid little attention to these people,” German’s report states. “They typically carry illegal or undeclared cash given to them by their bosses. The money is to be repaid with interest, secured by the borrower’s personal safety or possessions.”

In an interview, Clement noted “this is exactly the same modus operandi that occurred in Macau casinos, in the 1990s.”

Garossino also said German’s description of loan sharking in B.C. casinos matches the Macau model, and River Rock Casino showed “outward manifestations” of this, in early cases of loan shark related violence. Garossino pointed to the murder of female loan shark Rong Li in 2006 near River Rock, just two years after the casino opened. Rong Li was part of a 24/7 criminal lending operation at River Rock, according to court testimony.

Story continues below advertisement

German’s report says that a “decade of dirty money” started after 2002 in B.C. casinos, when the minister then responsible for B.C. Lottery Corp., Rich Coleman, decided to streamline gambling regulations.

Minister of Natural Gas Development Rich Coleman speaks to media during a press conference in the Legislative Library on Wednesday, February 15, 2017 in Victoria, B.C.
Minister of Natural Gas Development Rich Coleman speaks to media during a press conference in the Legislative Library on Wednesday, February 15, 2017 in Victoria, B.C. THE CANADIAN PRESS/Chad Hipolito

In an interview, Proka Avramovic said that he believes Coleman attempted to discredit him, when CBC broadcast Avramovic’s allegations about loan sharks, in a 2004 TV interview. Avramovic believes if Coleman would have seriously considered his allegations about loan sharks, when Coleman was solicitor-general, the casino money laundering scandal that has shamed B.C., may have been avoided.

“Upon my arrival back from China, (from the China Sea Discovery) I felt that I had to do something more, regarding loan sharks in Lower Mainland casinos,” Avramovic said. “Because I saw some of the familiar faces, from the time sailing on the casino ship in the China Sea.”

Story continues below advertisement

In a prepared response, Coleman said he acknowledges more could have been done to combat money laundering in B.C. But Coleman said “there is a strict divide” in B.C. between politicians and “those charged with administering” criminal justice.

“Decisions on which cases to investigate and prosecute are made without any influence at all from elected officials,” Coleman said. “I could not, and would not, provide direction to police on what or how they should be investigating. It is simply nonsense to suggest otherwise.”





Sponsored content