A massive RCMP investigation of alleged underground bankers in Richmond, B.C., estimated to be laundering over $1 billion per year collapsed in November because federal prosecutors mistakenly exposed the identity of a police informant who they feared could have been killed if the case proceeded, Global News has learned.
The so-called E-Pirate investigation started in 2015 and targeted Richmond-based Silver International, an alleged illegal money services business. The investigation culminated in a series of undercover raids in October 2015. RCMP said they seized millions in cash, as well as B.C. Lottery Corp. casino chips, from Silver’s office in a Richmond business complex, plus computers, cellphones and digital evidence containing tens of thousands of documents from Silver’s office and other locations.
Federal prosecutors laid charges in September 2017. The allegations have not been proven in court. After lengthy preliminary proceedings in B.C. provincial court and the Supreme Court of Canada, the case was scheduled to go to trial in January 2019.
But for reasons they refused to explain, federal prosecutors and the RCMP stayed charges against Silver, and Caixuan Qin and Jian Jun Zhu, the Vancouver couple that allegedly ran the operation.
WATCH: Charges stayed in Canada’s biggest drug money laundering investigation
It was believed to be the largest money laundering probe in Canadian history and a crucial prosecution for B.C. that sources say has failed because of weaknesses in Canadian law enforcement, including the inadvertent disclosure of information that could have endangered a hidden informant co-operating to help the RCMP break the case.
Silver took in about $1.5 million in criminal cash deposits per day, and distributed funds to about 600 bank accounts in China, as well as using cash from Vancouver drug dealers and casino loan sharks to fund Chinese high-rollers in B.C. casinos, the RCMP investigation alleged.
Initial investigations by the RCMP estimated that Silver allegedly laundered about $500 million in two years.
But according to new information in a case study of the E-Pirate investigation by the Financial Action Task Force — an international government body that sets anti-money laundering standards — it is now estimated the alleged “professional” laundering network washed over $1 billion per year.
One component of the network’s alleged operations was using legal and illegal casinos to help gamblers from China move money to and from Canada, and in some cases cash out chips for a “B.C. casino cheque” to deposit into Canadian banks and buy Vancouver real estate, the FATF report says.
The FATF report also alleges the underground bank used B.C. as a hub to perform crucial drug-trafficking and global money transfer services for Chinese Triads, Mexican Cartels, and Middle Eastern organized crime groups.
WATCH: Sources say China won’t stop flood of fentanyl into Canada
In November, B.C. Attorney General David Eby reacted to news of E-Pirate’s collapse, calling it a “crisis” for Canada and saying he had no advance warning of the prosecution failure. Eby said he will seek answers because the public deserves to know why the case collapsed.
By reviewing court filings and interviewing sources with knowledge of the decision to stay E-Pirate charges, Global News has learned that federal prosecutors mistakenly revealed the identity of a secret police informant when they released a large volume of digital files to Silver’s lawyer in a standard evidence disclosure process.
While combing through the evidence to prepare a defence, Silver’s legal team eventually noticed information that could identify a police informant. Silver’s lawyer Matthew Nathanson contacted prosecutors and alerted them to the error, and the two sides worked on a potential solution.
The exact reason why the RCMP and federal prosecutors abruptly decided in November the disclosure error could not be overcome is not clear. But as the scheduled trial date rapidly approached, time pressure to make full disclosure to defence and the sheer amount of evidence handled in the case appears to have been key issues, said sources who could not be identified.
Most importantly, the police informant who helped the RCMP to build its case was judged to be at “high risk” for death if the case proceeded.
WATCH: B.C. Attorney General David Eby says there is a ‘real gap’ to deal with money laundering crimes
Following Canadian legal guidelines, prosecutors and the RCMP judged protecting the informant’s life outweighed the interest in pursuing charges against Silver and its operators.
Nathanson said that he could not comment on information Global News has learned about the mistakes in evidence disclosure that led to a stay of charges in E-Pirate, or any of allegations made against his clients.
The RCMP would not confirm or deny information learned by Global News on the exposure of an informant.
“The sensitivities surrounding the stay of charges in this case preclude us from sharing or confirming any further details beyond what we are providing,” the RCMP stated, in response to questions for this story.
The RCMP added: “Respectfully, we must caution you that your question regarding the presence of a confidential informant (CI) is inappropriate. If a CI existed on any investigation, announcing their presence publicly places them at serious risk of harm and undermines their vital role in law enforcement. Even if there is no confidential informant(s) in any investigation, alluding to the presence of one places others equally at risk and potentially discourages others from coming forth to assist law enforcement. The rule of informer privilege was developed to protect citizens who assist in law enforcement and encourages others to do the same.”
In a response, the Public Prosecution Service of Canada said reasons for staying charges “were not provided in court” and “it would be inappropriate to provide them to the public or the media.”
Weaknesses in Canada’s justice system
The mistake of revealing an informer identity in E-Pirate, for which both the RCMP and federal prosecutors must take responsibility, underlines weaknesses in Canada’s justice system and challenges that arise in complex money laundering and drug trafficking cases that rely on increasing volumes of digital evidence, some police and legal experts told Global News.
B.C. criminal defence lawyer Michael Mulligan said he has handled similar cases in which police informants are erroneously exposed in the disclosure process, leading to dropped charges. He said most Canadians would be surprised to learn how often police use informants in the drug world — from street addicts to high-level organized crime figures who sometimes continue their criminal schemes while on government payrolls. Mulligan said he is aware of cases in B.C. in which confidential informants have been murdered because their identities are leaked or mistakenly disclosed in the legal process.
“Unfortunately, people have been killed,” Mulligan said.
There are a number of legal and ethical factors at play in the handling of informants, according to Mulligan. Canadian courts have decided the lives of informants must be protected above all factors, Mulligan said, partly because it’s believed police will have difficulty cultivating informants if news of botched informant cases emerges.
The capture of rising volumes of evidence in modern high-tech investigations can be a double-edged sword for police too, according to Mulligan and several experts who could not be identified because of sensitivity surrounding the E-Pirate case.
Prosecutors must vet large caches of digital evidence and release everything except for privileged material for the defence to review, Mulligan said, or face the risk of prosecuting innocent people, or losing cases because of defence claims that important information was withheld.
On the other hand, with virtual mountains of evidence to review and the clock ticking on court-mandated deadlines, mistakes sometimes happen, Mulligan said, because those vetting the evidence must be very familiar with the case. And further complications can arise in cases where foreign language experts are required to translate evidence, which was the case in E-Pirate, according to the RCMP.
“If you have to read 10,000 pages of text messages there will be occasional mistakes,” Mulligan said.
Some experts familiar with the E-Pirate investigation, who could not be identified, believe Canada’s justice system is under-resourced to investigate and prosecute complex money laundering cases. Not only is the RCMP lacking the leadership direction and human resources to investigate such cases, but prosecution services lack the employees needed to vet evidence, and Canadian judges are not trained to handle highly technical money laundering cases, one expert on E-Pirate said.
Several E-Pirate and Asian-organized crime experts interviewed by Global News have said that current disclosure rules and court proceedings time limits set by the Supreme Court of Canada stack the deck in favour of defence lawyers and transnational organized crime groups. The situation is so bad — according to one veteran drug-trafficking officer in Vancouver who could not be identified due to an ongoing real estate money laundering probe by B.C.’s government — that civil forfeiture actions are now often seen as the only viable option for police to hinder the growth of organized crime groups.
In December, shortly after the E-Pirate case collapsed, B.C. filed a civil forfeiture action against Silver, Qin and Zhu.
The action seeks the forfeit of a $2.5-million Vancouver home and $2 million cash plus $17,800 in River Rock Casino chips police say they seized from Silver’s office in Richmond, in addition to relatively small amounts of currency from Mexico, Venezuela, Taiwan, Hong Kong and China, seized from the home and safety deposit boxes, legal filings in B.C. Supreme Court allege.
Silver, Qin and Zhu have not yet filed a response, and Nathanson said he could not comment.
However, Nathanson said that in general, he would comment that criticism of court-mandated disclosure rules and time limits on criminal cases is wrong.
“The time limits imposed on criminal cases are not designed to allow guilty persons to avoid justice. To the contrary, they are designed to ensure that criminal trials occur in a timely way, for the benefit of all justice system participants,” he stated. “The right to full disclosure is a key component of the right to make full answer and defence, which is at the very core of our justice system. It helps ensure that criminal trials are fair, and that the innocent are not convicted.”