Alleged gang kingpin may have used Liberal MP’s law firm to launder money through B.C. condo deal

Click to play video: 'B.C. Liberal MP’s law firm entangled in money laundering controversy'
B.C. Liberal MP’s law firm entangled in money laundering controversy
WATCH: Liberal MP’s firm completed controversial “bare trust” land deal for alleged “drug boss.” – Jun 11, 2019

The law firm of Richmond Liberal MP Joe Peschisolido facilitated a secretive financial transaction that might have helped an alleged Chinese cartel “drug boss” launder his unexplained wealth through a Metro Vancouver condo development, a Global News investigation reveals.

The service that Peschisolido’s firm completed is a so-called “bare trust” joint venture.

This type of deal is legal, but a client involved in this case who is a convicted drug-trafficker should have raised “huge red flags” for the Canadian politician’s firm, according to financial crime experts that reviewed documents obtained by Global News.

WATCH: NDP Leader grills Trudeau over ‘bare trust’ real estate deal facilitated by Richmond MP’s law firm

Click to play video: 'NDP Leader grills Trudeau over ‘bare trust’ real estate deal facilitated by Richmond MP’s law firm'
NDP Leader grills Trudeau over ‘bare trust’ real estate deal facilitated by Richmond MP’s law firm

Bare trust deals have become extremely controversial in the midst of B.C.’s money laundering scandal because the transactions allow investors to hide their ownership of land in documents only accessible to lawyers.

Story continues below advertisement

Critics, including B.C. Attorney General David Eby and Finance Minister Carole James, have called bare trusts a loophole that helped drive home prices higher and turned B.C. real estate into a secrecy haven ideal for international criminals seeking to hide dirty money and evade taxes.

The land deal facilitated by a lawyer at Peschisolido’s firm in 2011 involves a company directed by Kwok Chung Tam, an alleged “heavyweight” in the Big Circle Boys, a powerful Mainland China-based drug cartel, according to Canada Border Services Agency (CBSA) records.

The deal was completed while Tam was still serving a conditional sentence for a 2010 drug trafficking conviction, court records show. The bare trust allowed Tam to conceal his ownership stake in a $7.75-million purchase of a 3.7 acre property in Coquitlam, B.C. that sold for $14.8 million in 2015.

The records from Peschisolido’s firm are among thousands of pages submitted to the federal court by the government and Tam’s lawyers as part of his legal battle to stay in Canada.

Many of the records — including those about Tam’s alleged connection to the Big Circle Boys — have never been tested in court.

‘A case of willful blindness’

As Global News has reported, Tam’s alleged leadership role with the Big Circle Boys and his alleged deep ties to B.C.’s casino and real estate industries could make him a poster child for the province’s public inquiry into the so-called “Vancouver Model” of transnational money laundering.

Story continues below advertisement

But the legal services completed by Peschisolido’s former practice — which the B.C. Law Society took custody of in April 2019 for unexplained reasons — could also attract the inquiry’s spotlight.

That’s because the inquiry is expected to examine bare trusts and the regulatory loophole that exempts Canadian lawyers from reporting suspicious transactions to Fintrac, Canada’s anti-money laundering watchdog.

WATCH: Conservatives press government on Liberal MP’s law firm being taken over by B.C. Law Society

Click to play video: 'Conservatives press gov’t on Liberal MP’s law firm being taken over by B.C. Law Society'
Conservatives press gov’t on Liberal MP’s law firm being taken over by B.C. Law Society

And while Tam claims to be a legitimate businessman, between 1991 and 2014 Canadian law enforcement and immigration officials alleged he was a “brazen” casino loan shark, heroin importer and chemical drug lab operator whose source of wealth has been questioned since he arrived in Vancouver in 1988.

And the numbered company used by Tam in the Coquitlam bare trust deal is directly connected to several Richmond homes targeted by an RCMP drug-trafficking investigation in 2006.

Story continues below advertisement

Also, B.C. Supreme Court filings from 2010 made it clear that Tam and his sister Ka Ling Tam — another director linked to Tam’s numbered development company — were subject to a drug-trafficking civil forfeiture case. Tam and his sister did not respond in the case and the government seized about $135,000 in cash found in Tam’s Richmond home.

There were also media reports about raids on Tam’s homes and his suspected ties to the Big Circle Boys — including a 2006 Vancouver Province story that identified him in a headline as an “alleged drug boss known to police.” These prominent reports were publicly accessible before the 2011 bare trust deal was signed.

According to financial crime experts that spoke with Global News, these factors raise questions about whether Peschisolido’s firm took reasonable measures to avoid doing business with Tam before completing a real estate transaction that might have been used to launder money.

WATCH: Liberal MP says he has no knowledge of ‘bare trust’ real estate deal facilitated for alleged ‘drug boss’

Click to play video: 'Liberal MP says he has no knowledge of ‘bare trust’ real estate deal facilitated for alleged ‘drug boss’'
Liberal MP says he has no knowledge of ‘bare trust’ real estate deal facilitated for alleged ‘drug boss’

“Lawyers need to be asking their clients, how did you make your money?” said Kim Marsh, a former commander of the RCMP’s international organized crime unit, who now consults with foreign governments on appropriate anti-money laundering measures.

Story continues below advertisement

“Anybody doing basic due diligence, even basic Google searches, would determine there is huge red flags, that these individuals are involved in illicit activities,” Marsh said. “So anyone doing business with them is either doing nothing, or it’s a case of willful blindness.”

In an email to Global News, Tam’s Vancouver immigration lawyer said allegations linking Tam to organized crime and gangs have never been proven in court or in an immigration hearing.

Tam has also denied these claims.

“I am not now nor have I ever been a member of a gang, triad or criminal organization,” Tam wrote in an affidavit filed with the court in July 2016.

But by 1991 — three years after Tam arrived in Vancouver — immigration officials were aware of Tam’s alleged “criminal endeavours” — including his arrest and suspected participation in a violent Big Circle Boys home-invasion and jewelry store robbery cell. Tam was found in possession of 10 stolen Rolex watches, but the case did not result in any charges, according to CBSA documents.

WATCH: Timeline of money laundering in B.C. casinos

Click to play video: 'Timeline of money laundering in B.C. casinos'
Timeline of money laundering in B.C. casinos

Tam’s Burnaby home was also raided in 1998 following a loan-sharking complaint.

Story continues below advertisement

Police claimed they found raw opium, cash, weapons, and a picture of Tam embracing a prominent politician. Various drug and weapons charges against Tam stemming from the raid were stayed in 2002 because of undue court delays.

In 1999, Tam was charged in Victoria with conspiracy to import and traffic heroin in a case police said had connections to Vancouver, Thailand, Hong Kong and Las Vegas. Tam was acquitted of these charges in 2002 — in part because a judge found wiretap evidence in the case was inadmissible.

Despite the many allegations leveled against Tam, he has only been convicted three times. He was convicted for theft under $1,000 in 1992 — for which he received a pardon in 1997 — and possession of marijuana for the purpose of trafficking and possession of narcotics in 2010.

Peschisolido’s firm taken over by court order

Global News has learned that the B.C. Law Society took control of Peschisolido and Co. in April, and that Peschisolido is no longer a member of the society, which regulates the B.C. legal profession. It is not clear if this action is related to the Tam deal or any similar transactions. The society refused to inform Global News why it decided to “wind up” Peschisolido’s firm, and Peschisolido would not answer questions on why he is no longer a member of the bar.

B.C. Law Society spokesman David Jordan would only say that the society had applied for a court order to take over and “wind up Mr. Peschisolido’s law practice.”

Story continues below advertisement

Jordan pointed to a general statement that says the action occurs when “a lawyer is unable to continue to practise law because of illness, death, retirement, suspension or disbarment.”

Several years ago, Peschisolido’s firm was accused of facilitating millions in underground banking transactions that are linked to a high-profile immigrant investor fraud case in Vancouver. In a separate but related case, the B.C. Securities Commission levied $5.5 million in penalties against the firm’s client Paul Se Hui Oei and Oei’s company, Canadian Manu Immigration. Oei is a prominent donor to the federal and provincial Liberal party in B.C., election records show.

The commission heard that “red flag” transactions included fund transfers from accounts in China and Hong Kong that flowed into Peschisolido and Co.’s trust accounts, before being sent into Oei’s accounts and then wired into Las Vegas casino accounts.

WATCH: Ex-B.C. casino worker blows whistle on timeline of alleged money laundering

Click to play video: 'Ex-B.C. casino worker blows whistle on timeline of alleged money laundering'
Ex-B.C. casino worker blows whistle on timeline of alleged money laundering

Peschisolido and his firm denied any wrongdoing in the B.C. Supreme Court case, legal filings show. Some of the investors withdrew claims against Peschisolido’s firm in April, but one Chinese investor continues to claim the firm’s trust account was used in a fraud, filings show.

Story continues below advertisement

Peschisolido would not answer whether his firm helped facilitate money laundering for clients investigated by police or regulators.

“While I was practicing at Peschisolido and Associates I never oversaw any bare trust real estate transactions nor did I ever deal with Mr. Tam in any capacity,” Peschisolido said in a written response to Global News.

“Those who were at Peschisolido and Associates were there as independent contractor lawyers. While I am unable to comment on specific cases overseen by other independent contractor lawyers, I am proud to be part of a government that has taken significant action to not only combat organized crime but also strengthen Canada’s beneficial ownership transparency anti-money laundering regime.”

‘Black box’ legal accounts

In his recent report into dirty money in B.C. real estate, former RCMP deputy commissioner Peter German said large-scale money laundering has been facilitated in Canada by so-called “black box” legal accounts that can block police scrutiny of transactions that are covered by solicitor-client privilege, such as bare trust land deals.

“It is difficult and often impossible, to launder large amounts of money without the assistance, witting or otherwise, of financial or professional intermediaries, including company formation agents, accountants and lawyers,” German wrote.

Story continues below advertisement

German also looked at B.C. Law Society rules, noting that lawyers must make “reasonable efforts” to verify the identity and the general nature of the business or activity engaged in by their clients.

According to society rules, German reported, if a lawyer believes they could be assisting a fraud or illegal transaction, the lawyer must “withdraw from representation of the client.”

But according to Marsh, anti-money laundering programs run by the society in B.C. are a “façade with no accountability.”

Like German, he said there must be a change to the rule that currently exempts lawyers from having to report suspicious transactions to Fintrac.

“You need to police (lawyers) because they have tremendous ability to facilitate money laundering,” Marsh said.

Bare trust used to ‘conceal assets’

Garry Clement, the RCMP’s former director of proceeds of crime investigations, also said the Tam bare trust deal is questionable.

“On the surface, this (bare trust) appears to have been established to conceal assets,” he said. “After the Supreme Court loss on requiring lawyers to report to Fintrac, there was an understanding the law societies would provide oversight. Notwithstanding this, being willfully blind could be argued as facilitating the concealment of illicit assets.”

And Denis Meunier, the former deputy director for Fintrac, told Global News the deal presented “a number of indicators” that would have warranted a suspicious transaction report if Canadian lawyers were covered by the same laws as bankers, realtors, accountants and casinos.

Story continues below advertisement

WATCH: Were B.C. casino staff connected to money-laundering suspects?

Click to play video: 'Were B.C. casino staff were connected to money-laundering suspects?'
Were B.C. casino staff were connected to money-laundering suspects?

If another financial professional, such as an accountant, completed a similar transaction and failed to report to Fintrac, Meunier said they could face “referral to law enforcement for a criminal investigation.”

Peschisolido and Co. documents show the “nominee” company — the public face of the deal — that appeared on title records for the Coquitlam land purchase involving Tam’s numbered company is directed by Vancouver real estate developer, Jay Minhas. The documents show Minhas was also a part owner in the land deal.

Kathy Ducey, who identified herself as one of the lawyers for Minhas and his “group of companies,” said for privacy reasons she could not comment on the Tam development deal.

Story continues below advertisement

“Mr. Minhas has used both bare trusts and joint ventures for most of his development projects as tools for legitimate tax planning and liability protection,” Ducey said in an email. Ducey said that Minhas has never used bare trusts to facilitate money laundering or tax evasion.

“To his knowledge, Mr. Minhas has not been the subject of any criminal investigation with respect to his real estate transactions.”

Government silent on bare trust

Federal ministers, including Organized Crime and Border Security Minister Bill Blair, were not available for direct comment on the bare trust deal facilitated by Peschisolido’s firm.

However, the offices of Blair and Finance Minister Bill Morneau said the federal government recognizes the seriousness of real estate money laundering in B.C. and is aware of the vulnerabilities connected to Canadian law firms. They said the federal government is looking at making improvements to transparency in the legal profession, and increasing funding to enforce laws against money laundering.

WATCH: Money laundering flowing through back-door channels in B.C. casinos

Click to play video: 'Exclusive: Money laundering flowing through back door channels in B.C. casinos'
Exclusive: Money laundering flowing through back door channels in B.C. casinos

The office of B.C. Attorney General David Eby did not comment on the bare trust deal involving Peschisolido’s firm, but said his government plans to implement a provincial beneficial ownership registry to end the secrecy in B.C. real estate deals caused by legal services such as bare trusts. This is a reform that was recommended by Transparency International Canada after the corruption watchdog found in 2016 that about half of Vancouver’s most expensive homes are owned anonymously through secretive legal structures, including bare trusts.

Story continues below advertisement

While some trusts are registered on land title documents, the owners and terms of their deals are kept anonymous in legal accounts, the report found.

But bare trusts do not have to be registered on land titles, the author Adam Ross wrote, adding that “it is impossible to know how many properties are held through these arrangements.”

“Beneficial owners can remain entirely anonymous – their identities concealed even from the government agencies entrusted with enforcing laws and regulations,” Ross reported.

Tam’s Canadian real estate and banking footprint

Tam’s 2011 bare trust deal isn’t the only document in his immigration file that raises questions of money laundering.

While lawyers do not have to report suspicious transactions to the country’s financial watchdog; bankers, realtors, accountants and other financial professionals do, and they are supposed to cut ties with clients suspected of crime.

But Global News’ investigation into Tam’s immigration file and a review of B.C. legal and real estate records has identified a network of possible business and legal connections.

WATCH: Money-laundering investigation will go back as far as needed: Horgan

Click to play video: 'Money laundering investigation will go back as far as needed: Horgan'
Money laundering investigation will go back as far as needed: Horgan

Details of Tam’s business holdings, such as a water bottling company, a mine, a high-end used car dealership in the 1990s and a number of land development companies, also suggest he has invested millions of dollars into B.C.’s legitimate economy, while at the same time having his source of income — and the legitimacy of his real estate holdings — questioned by both law enforcement and immigration officials.

Story continues below advertisement

“The applicant is currently unemployed,” one immigration official wrote in 2004. “The applicant has not provided me with an explanation of how he supported himself or his family during this time period [1999 to 2004].”

Tam’s confidential RCMP file — included in his immigration case — also has photocopies from Tam’s collection of business cards from prominent Canadian and foreign officials, as well as bankers, realtors, stock traders, restaurant and jewellery shop owners in the Vancouver area.

These records suggest Tam’s business contacts are of interest to police, but the RCMP would not respond to questions from Global News about their file on Tam.

The file includes transaction receipts that show in the 1990s, Tam’s Vancouver auto shop had a chequing account with a Vancouver branch of HSBC.

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

According to claims in an email from a CBSA officer, this high-end used car lot was used to export vehicles to China and Hong Kong that Tam allegedly obtained through casino loan sharking and extortion.

Story continues below advertisement

HSBC said it takes many measures to combat suspicious transactions and that it cannot comment on its alleged dealings with Tam’s companies, which include a 2007 loan for a South Vancouver condo development, according to foreclosure claims in B.C. Supreme Court filings.

In the case, one of Tam’s development companies bought a parcel of land from the same numbered company that is connected to the bare trust deal, Tam’s drug-trafficking conviction and an alleged Richmond drug lab, according to legal filings.

Meanwhile, one of the high-end Chinese restaurants identified by Global News in Tam’s RCMP file provides an “eye-opening” hangout for top-echelon gangsters and powerful figures from Mainland China, according to an RCMP source familiar with ongoing investigations in B.C.

The restaurant also recently hosted a $1,500-a-plate Liberal Party fundraiser attended by Peschisolido and featuring Prime Minister Justin Trudeau. The restaurant owner identified in Tam’s file was not available last week for comment from Global News, an employee said.

Sponsored content