In late 2015, the chair of the BC Lottery Corporation’s board of directors didn’t alert the provincial gaming minister about the corporation’s knowledge of a Chinese transnational money-laundering scheme using government casinos, but instead complained about competition from illegal casinos, a public inquiry has heard.
And in a September 2015 meeting, then-board chair Bud Smith informed then-BC Liberal gaming minister Mike de Jong of the specific address of an illegal casino in Metro Vancouver that was raided by police shortly after. But the underground casino was subsequently found to be deserted, the Cullen Commission heard.
Smith’s stunning testimony could shed light on earlier statements at the inquiry that suggested some Lottery Corp. staff were afraid of being accused of leaking information about illegal casinos.
The inquiry has previously heard that on Oct. 1, 2015, de Jong sent Smith and Lottery Corp. executives a letter ordering them to clamp down on hundreds of millions in suspicious transactions. B.C. officials had learned of a major RCMP investigation targeting international drug traffickers, loan sharks and so-called “VIP” baccarat players at Richmond’s River Rock Casino. And de Jong ordered the Crown agency to determine the source of any cash before accepting it.
The commission, which is mandated to determine whether corruption allowed money laundering to take root in B.C. casinos, has heard that B.C.’s Gaming Policy and Enforcement Branch concluded that after 2010, suspicious cash transactions via Asian gangs and loan sharks and Chinese high rollers were growing exponentially, and that in 2014, suspected drug-money laundering in B.C. casinos was forecast to reach about $200 million per year. And Lottery Corp. brass were warned in 2014 that most Chinese high rollers took loans from well-known loan sharks connected to drug-trafficking, and repaid the funds in China for low fees.
On Thursday, the inquiry heard that during an October 2015 board meeting, Smith and Lottery Corp. CEO Jim Lightbody discussed the impact of de Jong’s directive, which the board estimated would lead to hundreds of millions in losses. In response, compliance executive Robert Kroeker drafted a letter with input from Lightbody for Smith to share with de Jong.
B.C. government lawyer Chantelle Rajotte told the hearing that Smith’s draft letter said: “Requiring every slot and table player to fill out a source of funds evaluation … prior to acceptance of funds is likely to result in widespread business disruption and is likely to have a very widespread adverse impact on player visitation rates … (and will) in all likelihood put much of the 77 per cent of slot and table play revenue that is cash-based in jeopardy.”
- Gas station clerk stabbed several times during violent attack at Ultramar in Montreal
- Canada’s most wanted list: Toronto suspect in fatal shooting at No. 1
- Man acquitted in Tina Fontaine murder found dead, says her aunt
- Canadians should expect politicians to support right to bail, Virani’s office says
However, Smith testified that he never sent the draft letter to de Jong. Instead, he claimed to have met de Jong in person to discuss the source of cash directive.
Rajotte said that Smith’s briefing notes for that meeting said that “a small number of high-value patrons account for a significant amount of B.C.’s gaming revenue,” and for cultural reasons, these VIP baccarat players preferred to use cash.
Under cross-examination, Smith — a former MLA and B.C. attorney general — said he’d been referring to about 250 high-limit players that accounted for a “disproportionate” number of the Lottery Corp.’s suspicious cash transactions.
Smith admitted that prior to meeting de Jong, he knew that interviews with 13 of these high rollers at River Rock Casino showed they borrowed cash from unknown sources in B.C. and paid the funds back to unknown banking accounts in China and Canada. The criminal scheme would later become known as the “Vancouver Model” of money laundering.
“This information didn’t make it into the briefing of minister de Jong?” Rajotte asked.
“That’s correct,” Smith answered.
Rajotte suggested to Smith that the Lottery Corp. failed to follow de Jong’s anti-money laundering directive until January 2018 because it would have significantly impacted its revenue.
Smith disagreed, and said de Jong clarified that his directive didn’t mean what it said.
“What actually happened is that I met with the minister, and asked about the phrase — whether that meant every $20 bill that came into the casino, that the people would have to be questioned about the source of funds,” Smith said. “The response was, ‘No, no, that is not what I expect to happen. I expect you to be more diligent … (but) not on a prescriptive basis.”
Smith said he didn’t ask de Jong to put that explanation in writing, and that he could not recall when the alleged meeting took place.
He said he was concerned, however, about “little or no enforcement” of illegal casinos in Metro Vancouver and that he briefed de Jong on the problem in September 2015.
“I just felt not enough was being done to take down those facilities, and they were present and probably still are,” Smith said. “I was aware of an address. And I shared that (address) at that meeting.”
The inquiry heard that a police investigation targeted the underground casino in Metro Vancouver, and when officers arrived, the facility had been shut down. Smith didn’t disclose how he learned the underground casino’s address or why he shared the information with de Jong.
“I had heard about these things,” Smith said. “I have connections to various people and I made a few phone calls, and low and behold, up came the address.”
The inquiry has also previously heard that Lottery Corp. compliance executive Kroeker had asked not to be informed of details of an investigation into another Metro Vancouver illegal casino, because he didn’t want to be accused of leaking information.
The inquiry is expected to examine whether high-value casino chips that went missing from the River Rock were being used in illegal casinos.
Smith said before stepping down in June 2018, he warned B.C. NDP gaming minister David Eby that authorities were not cracking down on illegal casinos.
And he told a commission lawyer that underground casinos present heavy competition to government casinos, partly because the underground ones offer credit.
At one point in his testimony, Smith cursed and vehemently denied that anyone in the Lottery Corp. or B.C. government decided to turn a blind eye to money laundering.
And he said he advised both Eby and de Jong that the province should consider ending baccarat games in which high rollers can bet up to $100,000 per hand.
The only other jurisdictions that offer such games are Macau, Las Vegas, Australia and Boston, Smith said.
Meanwhile, the inquiry heard a day earlier that a River Rock Casino VIP room manager downplayed a sexual assault committed by a high roller against another staff member.
The February 2016 incident was investigated by Lottery Corp. investigator Ross Alderson.
Great Canadian Gaming’s then-compliance director Pat Ennis felt Alderson had no authority to do so, according to Alderson’s report.
“Writer spoke with Pat Ennis who indicated that police were not called by Great Canadian Gaming on the wishes of one of the staff members, however writer believes the staff member was in an extremely vulnerable position and looked to her superiors for assistance support and direction,” his report said.
Ennis acknowledged the VIP manager involved acted inappropriately. But he said that Great Canadian handled the incident correctly.
The VIP manager, Lisa Gao, was later de-registered in a branch investigation that found in late 2017 she helped a banned River Rock high roller buy $200,000 worth of casino chips through another man, the inquiry heard, in violation of Canada’s anti-money laundering rules.
The inquiry continues.
Comments