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Top BC Lottery Corp. executives disagreed on province’s suspicious-cash directive, inquiry hears

Click to play video: 'Cullen Commission: Doubts raised about ‘clean’ or ‘criminal’ currency coming into B.C. casinos' Cullen Commission: Doubts raised about ‘clean’ or ‘criminal’ currency coming into B.C. casinos
More testimony today at the public inquiry into B.C. money laundering showed the person in charge of the BC Lottery Corporation's security and compliance had doubts suspicious stacks of $20 bills were criminal cash. – Feb 2, 2021

The BC Lottery Corporation’s CEO and chief operating officer disagreed on the meaning of a direction from the B.C. government in 2015 to reject all cash transactions of mysterious origins, the province’s inquiry into money laundering has heard.

The Cullen Commission has previously heard that in October 2015, BC Liberal minister Mike de Jong directed the Lottery Corp. to determine the source of funds for all cash presented by high rollers at B.C. casinos. The direction came after he and Lottery Corp. CEO Jim Lightbody were informed of an RCMP investigation connecting “VIP” high-limit patrons at Richmond’s River Rock Casino to a Chinese transnational drug-trafficking and money-laundering scheme.

But Lightbody didn’t follow de Jong’s direction, a B.C. government lawyer told the inquiry on Monday, because the corporation’s board of directors estimated that the new policy would drive away patrons and lead to hundreds of millions in losses for the Crown agency.

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BCLC insiders testify at Cullen Commission – Feb 1, 2021

Lightbody previously testified that de Jong’s letter of direction didn’t mean the Lottery Corp. should scrutinize “all cash transactions.”

However, on Tuesday, Lottery Corp. chief operating officer Brad Desmarais said de Jong’s direction did mean all such transactions.

The inquiry has heard that B.C.’s Gaming Policy Enforcement Branch started in 2010 to urge Lottery Corp. managers to reject a massive flow of $20 bills that investigators believed had been laundered as drug cash through Asian organized-crime loan sharks and foreign high rollers. The branch has said that suspicious cash transactions had increased exponentially from 2010 and had been forecast to reach about $200 million per year in 2014.

During his cross-examination Tuesday, Desmarais was accused by B.C. government lawyer Jacqueline Hughes of downplaying the branch’s money-laundering concerns and constructing alternative theories to justify mysterious cash transactions that came predominantly from Chinese VIPs.

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Desmarais and others in the Lottery Corp. advanced the theory that Chinese nationals preferred to use cash for cultural reasons, the inquiry has heard. Desmarais also wrote internal reports rebutting the branch’s concerns, Hughes said, and claimed that legitimate underground banking or cash-based businesses in B.C. could explain why foreign nationals presented bricks of cash in elastic bands at B.C. casinos.

Desmarais also repeatedly argued — without any supporting evidence — that Chinese high rollers were flying into Vancouver with large amounts of Canadian dollars, Hughes said. And Desmarais testified he felt that “confirmation bias” of branch investigators with policing backgrounds led them to determine that bricks of $10,000 in $20 bills in elastic bands always amounted to drug cash.

Read more: B.C. casino bosses complained that drug-trafficking probes were hurting business: inquiry

On Tuesday, Hughes read from a March 2013 email from Desmarais to Lightbody, in which Desmarais argued that an anti-money laundering report, written by the enforcement branch, that asked the Lottery Corp. to reduce large cash transactions in casinos, failed to consider that “legitimate” patrons preferred to use cash for good reasons.

Hughes told the inquiry that Lightbody wrote back: “I completely agree with all your comments … I would suggest … reposition (the) document around misperception of money laundering.”

The Lottery Corp. didn’t require high rollers who were bringing large amounts of cash into casinos to declare their source of funds until January 2018, after an independent review into money laundering in the facilities made the recommendation.

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Desmarais had continued to “frame the reduction of cash as problematic” into 2017, Hughes said.

She read out an email in which Desmarais asked an analyst to estimate how many jobs B.C. casinos would lose if the government eliminated “high-limit” games or put a hard limit of $10,000 on cash transactions.

“(The estimate) doesn’t have to be pretty,” Desmarais’ email said. “This is just something to have in our back pocket during conversations with the government.”

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BCLC president tells Cullen Commission previous government ignored concerns about high-limit gambling – Jan 28, 2021

Hughes suggested that Desmarais had used the prospect of job losses to push back on cash limits, when his real concern was loss of revenue for the Lottery Corp.

Desmarais disagreed, and said all his actions had been in the public interest.

The inquiry also heard that he recommended to Lightbody that Great Canadian Gaming’s head of compliance, Robert Kroeker, come to work for the Crown corporation in September 2015.

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In response to questions from Great Canadian’s lawyer, Desmarais said he considered Kroeker to be “hyper-vigilant” on compliance and anti-money laundering while at Great Canadian’s River Rock Casino.

In previous hearings, Hughes suggested that, after Kroeker joined the Lottery Corp., he pushed back against reports and audits that alleged that large-scale money laundering through Chinese VIPs was occurring at River Rock Casino.

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