Former senior B.C. official says he warned minister of suspected drug money laundering in B.C. casinos

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Cullen Commission hears more damning testimony about the flow of B.C. casino revenue
More testimony Thursday at the commission into money laundering in B.C. that alleges casino revenue was more important than controlling the flow of suspicious cash – Nov 12, 2020

In 2010, a senior British Columbia official warned Rich Coleman, then-minister responsible for gaming, that casino investigators believed drug-traffickers were laundering a “horrendous” amount of $20 bills through B.C. Lottery Corp. facilities, a provincial inquiry has heard.

But the then-BC Liberal government failed to act on repeated recommendations to crack down on high volumes of $20s flooding into Vancouver-area casinos, Larry Vander Graaf, the former executive director of the B.C. Gaming Policy Enforcement Branch, told the Cullen Commission.

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And, Vander Graaf said, he believes he was fired by B.C.’s government in late 2014 because his superiors didn’t want to act on his recommendations, because it would impact casino revenue.

Click to play video: 'Cullen Commission told warnings about casinos ignored'
Cullen Commission told warnings about casinos ignored

Vander Graaf explained that his staff had become increasingly concerned with massive cash cage transactions involving $20 bills after 2008.

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The cash came into casinos bundled in bricks of $10,000, and wrapped in elastic bands, which is how drug dealers store their proceeds, he said.

The enforcement branch’s intelligence indicated that so-called “VIP” gamblers, who were predominantly from China, received the cash from loan sharks that were known to be working for organized crime, the inquiry heard. The loans were repaid in China, the branch believed.

Even if the VIPs lost money, it was the repayment of funds that laundered money for drug gangs, the branch believed. These repayments could come in bank accounts in China, or VIPs would give the loan sharks their homes, vehicles, or other forms of currency.

This solved the problem that drug gangs have, warehousing $20 bills.

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The branch’s video evidence showed the loan sharks delivered large bags of cash to the VIPs outside the casinos, “like a drive-thru” Vander Graaf said.

In 2009, the branch started asking B.C. Lottery Corp. and senior officials in charge of the branch to restrict the amount of $20 bills any casino could accept in a 24 hour period.

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Money laundering commission told of difficulties investigating suspicious activities in legal casinos

But nothing changed. And in 2010, the suspected money laundering was exploding, with tens of millions of dollars in $20 bills recorded as suspicious transactions by the casinos and B.C. Lottery Corp., the inquiry heard.

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The inquiry, which is mandated to determine whether corruption allowed money laundering to take root in B.C. casinos, has already heard that massive cash transactions of more than $100,000 per buy-in became common after 2010 in several Vancouver-area casinos.

“Nobody wanted to say, ‘Don’t take the money,” Vander Graaf testified Thursday. “It looked like, walked like, and talked like, drug proceeds.”

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When no action was taken, Vander Graaf said, he decided to raise the money laundering issue with Coleman, and “anyone that would listen.”

He said he met with Coleman and his deputies in the branch’s office in Burnaby, and the discussion lasted about 20 minutes.

“He sat across from me, and Mr. Coleman opened the conversation, and said, ‘What about this money laundering?'” Vander Graaf recalled.

“And I said, ‘They are bringing it in, in $10,000 bundles.’

He says, ‘I know lot’s of people with $10,000 in their pocket.’ And I said, ‘If it’s in $20 bills with elastic bands on both ends, you better check your friends out.'”

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Money laundering commission hears about B.C.’s number one casino high-roller

Vander Graaf said that Coleman listened, as he “explained to him the horrendous problem we were having in the casinos, with the $20 bills. That they are a problem to drug traffickers.

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And I said money laundering was an integrity issue in gaming, and I felt we had to do something about it.

I said I could not prove it was proceeds of crime, but I believed it was drug money.”

According to Vander Graaf, Coleman’s deputy, Lori Wannamaker, said, “Rich, we have to do something about this.”

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But nothing happened, according to Vander Graaf.

Asked for comment on the alleged meeting, Coleman, who was an MLA until this fall when he opted not to run again in B.C.’s provincial election, told Global News he will not be commenting on other witness testimony.

“I conduct myself on the advice of counsel and do expect to be before the commission in the spring,” Coleman said.

And previously, Coleman has strongly rejected any suggestion that he turned a blind eye to suspicious cash or criminal activity in B.C. casinos.

In 2011, B.C.’s government undertook a review on suspicious cash in casinos. The reviewer did not include Vander Graaf’s recommendations to limit casino’s acceptance of $20 bills, he said.

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Cullen Commission hears dramatic testimony from casino insiders

Supposed alternatives to cash transactions that were instituted had no effect. The volume of suspicious cash transactions rose steeply, year-to-year, he said.

He told Cullen Commission lawyer Allison Latimer that he believed his superiors, including Coleman, were the only ones that could get B.C. Lottery Corp. and casino owners to stop taking the suspicious cash.

“I believe as a Crown corporation … we have integrity of gaming … (and we) should not be accepting $10,000 bricks (of cash),” he said.

The inquiry heard of a number of stunning transactions, with investigations by the branch escalated to Vander Graaf’s superiors.

These included an investigation at New Westminster’s Starlight casino in 2010. A VIP returned $1.2 million in chips to the casino in exchange for cash, the inquiry heard, and asked management to provide a letter verifying the legitimacy of the funds.

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The casino’s senior managers provided the letter, while knowing the VIP was associated to a number of suspicious transactions and a banned loan shark, Vander Graaf testified.

The RCMP provided an opinion, the inquiry heard, that the casino’s action had provided the VIP “a get out of jail free card,” if police had decided to investigate him for laundering proceeds of crime.

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But this particular incident wasn’t isolated, Vander Graaf said. And a number of B.C. Lottery Corp. managers and casino managers gave “extreme latitude” to VIPs because they didn’t want to lose them as customers, he testified.

Many of the VIPs, who were among the biggest gamblers in the province, were involved in loan sharking themselves, he said.

He told the inquiry that his staff became increasingly frustrated in 2014, after escalating reports to deputy ministers for gaming with no results. There was also a growing concern of violence, with a number of gangs active in several Vancouver casinos, he said.

Click to play video: 'Senior B.C. official ‘stepped around me and left’ when asked about money laundering, inquiry hears'
Senior B.C. official ‘stepped around me and left’ when asked about money laundering, inquiry hears

One of the last reports Vander Graaf forwarded up to his superiors, documented a $1-million transaction from a Chinese national named Kesi Wei, at Richmond’s River Rock Casino. The cash delivered to Wei was tied to “Paul Jin, a known loan shark associated (with) Chinese organized crime activities,” and also to Jin’s associate Kwok Chung Tam, the inquiry heard.

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Lawyers for the owner of the Richmond casino, Great Canadian Gaming, have argued in the inquiry that the company reported all suspicious transactions and has done nothing wrong in relation to money laundering. The company also says its staff helped police identify Paul King Jin.

Soon after the incident, Vander Graaf sent a memo to the assistant-deputy minister then responsible for gaming, John Mazure.

The memo warned that the regulator could be failing in its “moral” duty to protect the integrity of B.C. casinos, and that casino service providers could be turning a blind eye to and facilitating money laundering, the inquiry heard.

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Gaming enforcement branch didn’t have authority to investigate money laundering

Vander Graaf said that he got no response from Mazure, and soon after he and his assistant were fired. He told Latimer, he believes it was because of his recommendations.

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“They could have stopped the money laundering with the recommendations we were making, and they didn’t,” he said.

“There is only one reason why they wouldn’t do that. It may impact the bottom line revenue. So, that’s the only rationale, I have on that.”

Cross-examination of Vander Graaf is scheduled for Friday.

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