In 2012, as police and regulators urged the BC Lottery Corporation to crack down on rapidly increasing volumes of suspected drug cash pouring into Vancouver-area casinos, its CEO was urging his executives to “be creative” in maximizing revenue, in order to satisfy the province’s budget demands, or else lose their yearly bonuses.
Buried in the Cullen Commission’s final report is the possibility that the incentive of individual compensation at BCLC was one of many factors, along with the B.C. Liberal government’s drive for casino income, that may have hampered efforts to shut down money laundering.
Commissioner Austin Cullen’s 1,800-page report, released this week, has drawn criticism for not finding evidence of political corruption after his wide-ranging public inquiry into money laundering in B.C.
He faulted senior elected officials, including former premier Christy Clark and former gaming minister Rich Coleman, for failing to stop government casinos from accepting cash that appeared to be derived from criminal activity, but said there was no evidence their failures were motivated by corruption.
And in media interviews after the report’s release on Wednesday, he said the inaction stemmed from government’s lack of “will” and understanding of anti-money laundering. He said the threshold for corruption would have only been met if he found evidence that individuals had personally benefitted in some way from decisions that allowed money laundering to occur.
Yet, from 2008 to at least 2015, his report said nearly everyone with power and insight into B.C. casino operations had reason to believe that cash connected to wealthy travellers from China and Vancouver-based crime networks was rising exponentially.
From 2010 to 2014, the value of large cash transactions connected to this network quadrupled, the report said. And while senior officials, including Coleman, were directly warned from at least 2010 that much of this cash looked like drug money, the floodgates were opened wider: BCLC increased bet limits to $100,000 per hand and several Vancouver-area casinos enlarged the private “VIP” betting rooms built for Chinese businessmen who used cash supplied by loan sharks. All of this led to a stunning, newly revealed total of $1.2 billion in large cash transactions in 2014. Many, if not most, of the suspicious transactions from this total were criminal funds, Cullen concluded.
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Revenue considerations in Victoria and at BCLC seem to have also come into the equation. Cullen points to a set of emails sent by Graydon to managers as a factor underlying B.C. government failures to stem the flood of suspect cash.
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In a December 1, 2011 email, CEO Michael Graydon urged his executives to meet financial targets being set by the provincial government, stressing that “if we do not, I also want to be very clear there will be no opportunity to pay out incentive this year.”
“These are very different times and we have to be responsive to our shareholder and I am committed to do that,” Graydon’s email said.
At the inquiry years later, Graydon testified that the “shareholder” was the B.C. government and that he’d been referring to his repeated conversations with government officials who said they relied on BCLC to fund initiatives.
In another email to BCLC managers, sent Dec. 13, 2011, Graydon followed up with a “similar message,” the final report said.
“It is imperative that your division comes in with these numbers or better,” Graydon wrote. “As I have said before Victoria is not keen to pay incentive if budgets are not met.”
During the inquiry, Graydon was asked if the province had explicitly communicated that it wouldn’t pay the bonuses if the targets weren’t hit.
“They didn’t need to tell me that. I already knew that,” Graydon said. “That was sort of the arrangement in regards to how incentive payouts were designed within our organization.”
In another email outlined in the report, Graydon told managers the province wanted to increase BCLC’s net income by at least $40 million for the following two fiscal years.
Graydon denied that BCLC prioritized revenue over “social responsibility,” the report said.
The final report draws a link from Graydon’s revenue-generation emails to explosive testimony from three BCLC casino investigators who claimed they were ordered to ignore the massive cash transactions driving the revenue gains.
In 2012, Ross Alderson, a BCLC investigator at Richmond’s River Rock Casino, drew the ire of Great Canadian Gaming’s managers for asking gamblers about the source of their bags of cash, the report said.
Alderson and two other investigators were then called to meet with then-compliance manager Terry Towns who, Cullen said, directed them not to ask Great Canadian’s high rollers about their source of funds.
In a subsequent meeting detailed in the report, another manager, Gord Friesen, said he agreed with the investigators’ questioning of the high-profile players, but that “this is political”: “Alderson testified that the directions issued by Towns were connected to ‘financial pressure’ and that it was ‘about the revenue.'”
And so, casino investigators no longer questioned gamblers about the source of their cash, Cullen said, despite the fact that in 2012, the federal money laundering watchdog, Fintrac, audited BCLC and said investigators should be doing “source of funds inquiries.”
The lottery corporation did not implement a general policy for casinos to ask about the source of funds for all patrons making large cash transactions until 2018, the report said.
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