Gangs made B.C. casinos too dangerous to investigate for money laundering, inquiry hears

Click to play video: 'Shocking new Cullen Commission testimony about gang activity in B.C. casinos'
Shocking new Cullen Commission testimony about gang activity in B.C. casinos
Some startling testimony at B.C.'s inquiry into money laundering Friday. That Asian organized crime groups were becoming so powerful inside B.C. casinos that it was too dangerous to investigate suspected drug cash transactions. Investigative reporter Sam Cooper has more on today's testimony at the Cullen Commission – Jan 22, 2021

British Columbia’s gaming regulator concluded Asian organized crime was becoming so powerful inside B.C. casinos after 2010 that it was too dangerous to investigate suspected drug-cash laundering estimated to reach about $200 million per year, the province’s inquiry into money laundering heard Friday.

The Cullen Commission, which is mandated to determine whether corruption allowed money laundering to take root in B.C. casinos, also heard allegations that casino employees may have worked with “well-known” loan sharks in organized crime, including a notorious suspect named Paul King Jin.

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And the inquiry heard that senior B.C. officials were alerted and understood that suspected drug-money laundering from China was growing at an exponential rate inside Vancouver-area casinos, and especially Richmond’s River Rock Casino.

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But nothing was done until a major RCMP investigation in 2015 threatened to embarrass the B.C. government, according to Derek Dickson, the B.C. Gaming Policy Enforcement Branch’s former director of casino investigations.

Dickson and his former boss, Joe Schalk, testified that the enforcement branch had used police intelligence to determine that from about 2007, organized crime groups operating inside B.C. casinos were using high rollers, who were predominantly wealthy Chinese nationals, to launder money.

Gang members would give bags of $20 bills — which the regulator and RCMP strongly suspected was drug cash — to Chinese VIPs, who would take the money into casinos, gamble with it, then return it to the gangs.

The inquiry reviewed emails from Dickson in which the enforcement branch urged B.C. Lottery Corporation managers to slow down the money laundering by placing a hard limit of $10,000 on “buy-ins” with $20 bills. After 2010, Dickson said, VIPs funded by loan sharks were commonly buying in with well over $100,000 cash per transaction.

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But Lottery Corp. management didn’t start to crack down on VIPs and loan sharks until July 2015, Dickson said, when their officials were alerted of a major RCMP investigation into suspects including Jin.

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“(The branch was told) the outcome is going to embarrass the government, so that is when we started to see BCLC doing more in banning people,” Dickson told the inquiry. “But we never did see a limit on cash.”

The commission heard of an email from Dickson to Schalk, former senior director of investigations, warning that it was too dangerous for staff to investigate transactions involving several organized crime groups that were expanding their operations and “influence” in B.C. casinos.

“The issue is becoming even more significant at the River Rock Casino,” Dickson’s email said, adding that gangsters operating inside the casinos had records for violent offences including kidnapping and had been cited for possession of restricted weapons.

In his testimony, Schalk was asked if he recalled a whistleblower complaint in 2006 that alleged a staff member at the River Rock had helped a loan shark evade surveillance. He said he didn’t recall the specific allegation.

But Schalk said he knew of “incidents of well-known loan sharks that were being given parking privileges at one or more casinos (in the Vancouver area.)”

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“Were employees facilitating or helping loans sharks?” Schalk said. “Maybe, by allowing them to move around very freely. In many cases, these loan sharks were known to employees.”

The regulator’s investigators weren’t only concerned about loan sharks at the River Rock.

The inquiry heard that it investigated incidents in 2014 and 2015 at Gateway’s Starlight Casino in New Westminster.

An email provided to the inquiry showed that the regulator determined that two Gateway VIP gambler managers met with Jin and a number of “high-risk patrons.”

Gateway also received a complaint that said a VIP-room employee, who was investigated for meeting Jin, had allegedly introduced a Chinese high roller to a known loan shark. Dickson said he didn’t know if the investigations had led to any actions.

Schalk testified that from 2008, he and his boss, Larry Vander Graaf, repeatedly warned senior B.C. gaming officials, including then-minister Rich Coleman, of the branch’s conclusion that massive drug-money laundering was occurring in the province’s casinos.

He described showing video tapes of bags of cash flooding into casinos to officials including Doug Scott, one of the deputy ministers responsible for gaming. Schalk said he and Vander Graaf told all of these officials that they believed organized crime was using the casinos to launder money.

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“There is no question in my mind that Mr. Scott understood this was proceeds of crime,” Schalk said. “I recall his eyes widening, almost in awe, that something like this was happening (when viewing the cash transaction videos).”

The inquiry has already heard that Vander Graaf and Schalk were terminated without cause in late 2014, and that Vander Graaf believed it was because they’d been urging the B.C. government to stop money laundering.

Schalk said he believes he was fired because his warnings to senior B.C. officials became increasingly urgent from 2010 to 2014.

He said his final alert showed that suspected drug-money laundering was “coming close to $200 million per year.”

“How we were dismissed was more than curious to me,” Schalk said.

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