E-Pirate money-laundering investigation: Leadership problems, missteps proved fatal
Credit to Author: Kim Bolan| Date: Fri, 18 Oct 2019 01:43:59 +0000
Months after charges were stayed in Canada’s largest money-laundering case, neither the RCMP nor the Public Prosecution Service of Canada has provided any public explanation of what went wrong.
But a Postmedia investigation has uncovered details of how the massive prosecution of Silver International and its owners, Caixuan Qin and Jian Jun Zhu, was derailed.
The RCMP has completed its internal review on the troubled investigation into the illicit washing of more than $220 million a year through Silver’s Richmond office. Sources say the review concluded that RCMP investigative standards were not always met, that there were leadership problems resulting in breakdowns of supervision over investigative teams, and that in some instances proper documentation wasn’t kept.
But the biggest complication in the case was the inadvertent disclosure of unredacted files to Silver’s defence team and concerns that some of the information could identify confidential informants.
Most of the problems stemmed from a lack of experience on a criminal case of that magnitude, the sources said.
In the end, it was senior federal Crown prosecutors who made the decision to pull the plug. RCMP executive officers in B.C. agreed with the call.
No one from the RCMP or the prosecution service would comment for this story on their internal reviews of the flawed file.
But Postmedia has spent months talking to a variety of sources familiar with the case known as E-Pirate.
B.C. Attorney General David Eby said Thursday that he is still waiting for all the answers about the stay in the unprecedented case. Since E-Pirate was in the hands of federal prosecutors, “I don’t get the same level of information that I would get if it had been a provincial prosecution,” he said.
B.C. Attorney General David Eby, at a press conference in Vancouver, September 5 2019.
“It is a challenging situation for a provincial attorney general on a federal case like this that is so high-profile and so important to the province.”
When Postmedia revealed that the charges against Qin, Zhu and their allegedly illegal bank were quietly stayed last November, former investigators who worked tirelessly on the file were stunned.
“I was shocked because it was a good case. It was an exceptionally good case,” retired Insp. Bruce Ward said Thursday.
“I was very disappointed in that we — the RCMP — would walk away from all that effort without an attempt to fight — fight for the people of B.C. It is not about me and this project — look at the public reaction when that file collapsed.”
Ward, who spent two years as the monitoring officer in charge of E-Pirate, said there are always challenges to overcome when cases go to court.
He pointed to the Surrey Six murders and the potential impact on the prosecution when misconduct charges were laid against four now-former Mounties who worked on the case.
“You look at the pain people went through on the Surrey Six trial, but the RCMP said we want to make this work and we are willing to contribute all efforts that are necessary to make this work,” Ward said.
Five gangsters were convicted for the 2007 massacre despite the police misconduct.
That same will to succeed on the part of RCMP management wasn’t there for E-Pirate, Ward said. “We didn’t even fight.”
• • •
Even before the inadvertent disclosure of hundreds of pages of unvetted documents to a defence lawyer in November 2017, there were cracks in the investigation.
In August 2017, weeks before charges were sworn against Qin, her spouse and their illegal bank, a new RCMP superintendent arrived from Ontario at the B.C. offices of the federal and serious organized crime unit.
That new leader, who has since retired, had different priorities for the unit. He wanted officers to work on trade-based money-laundering investigations — dirty cash being used to purchase goods that are then used in legitimate commerce.
Almost all the 32 cops working on the Silver International file from the spring of 2015 until the fall of 2017 were reassigned, according to several officers who worked on the case.
After charges were laid on Sept. 26, 2017, just a few officers remained on the case, despite the onerous demands of getting it ready for trial and meeting the requirement to disclose all the evidence to defence lawyers.
Building at 5811 Cooney Rd. in Richmond that housed Silver International Investments, accused of being an underground bank and laundering millions of dollars.
It was a non-Mountie support staff person who made the error that in part led to the collapse of the case.
That civilian employee created hard drives of the mountains of E-Pirate evidence to provide to Crown prosecutor Maggie Loda so she could disclose the material to the defence. The files that were to be copied had all been vetted and properly redacted to protect witnesses and confidential informants, sources told Postmedia.
By mistake, the employee dragged the original versions of the files over to the hard drives that were to be distributed.
The error might have been caught if either an RCMP officer or someone in the federal Crown’s office had reviewed the material before it was sent to the office of lawyer Matthew Nathanson on Nov. 27, 2017.
But no one did.
It wasn’t until March 28, 2018, that Loda got called by Nathanson. His articling student had noticed that unredacted files were included in what had been disclosed, he explained.
The next day, Loda fired off an email, marked “urgent,” to key Mounties who had been involved in E-Pirate alerting them to the problem, and they promised an immediate review.
Postmedia has seen some internal documents laying out the back and forth between the prosecutor and various police officers in the days and weeks following the revelation about the disclosure problems.
By April 4, 2018, a report had been completed by a senior officer on E-Pirate, explaining that the inadvertent disclosure only related to the RCMP’s report to Crown counsel sent on June 15, 2017, and contained a total of 1,369 unredacted documents.
The report writer concluded that despite the error, it appeared there was “minimal risk” to anyone referenced in the material.
Some personal information had been included about victims in the case, he said, but the “target group” was already aware of the victims and the information was very dated.
Another section of the disclosed material containing 420 documents was considered the “highest risk category,” the officer said. But it had also been determined that the risk presented to anyone by its erroneous release to the defence was “minimal.”
The RCMP’s confidential-informant unit said the material was generic in nature, but would require a closer look, the April 4 report also said.
By early May, there appeared to be a rift in how the RCMP was reacting to the disclosure error, the documents show.
Investigators working on E-Pirate continued to assert that the inadvertent disclosure was not a major issue and shouldn’t affect the prosecution.
But Mountie specialists who manage confidential informants were meeting separately with Loda and expressing their concerns about the disclosed material. They said the E-Pirate investigators wouldn’t be in a position to assess the risk to confidential informants because detailed information about informants is withheld from others in the RCMP.
By July 2018, the documents indicate the informant-disclosure issue was considered serious enough that there was “the possibility that E-Pirate was at risk.”
As the RCMP tried to assess the potential harm from the accidental release, the disclosure issues were being raised monthly in pretrial court appearances attended by Loda and Nathanson and Zhu defence lawyer Daniel Song, according to court transcripts.
Nathanson said that while he gave the hard drives back to the Crown as soon as he identified the problem, he had already printed out some of the material and begun to work on it.
He said he needed a B.C. Supreme Court justice to weigh in on whether that material should also be passed back. In the meantime, he sealed and secured the documents.
Nov. 22, 2018, was scheduled as just another pretrial conference at provincial court in Richmond.
Federal Crown Gerry Sair appeared instead of Loda, who was tied up in B.C. Supreme Court.
“I can advise the court that the Crown will be directing a stay of proceedings against the three accused on all counts,” Sair said.
There was no explanation provided. And just like that, Canada’s biggest money-laundering prosecution was over.
• • •
Ward, who retired in December 2017, was not interviewed for the RCMP’s review of what went wrong. He believes that the RCMP officers who took over federal policing in B.C. in the fall of 2017 — after most of the work had been completed on E-Pirate — didn’t have the same commitment to seeing the case through.
“The new management of federal policing at E Division had nothing invested in this file and walked away from it, not understanding that it took a lot more effort to maintain something that was in their minds already completed,” said the veteran cop, who is also a professional accountant.
“As such, Crown was left without any support to address these challenges. They were not insurmountable whatsoever.”
• • •
While no one faced criminal liability in E-Pirate, there have been charges laid against several people in so-called “tentacle” probes — mostly for drug trafficking — the proceeds of which were sometimes washed at Silver International’s underground bank.
Stephen Chen was convicted in B.C. Supreme Court in July of trafficking. He’s also facing a lawsuit by the B.C. director of civil forfeiture, who alleges that Chen deposited $5.31 million in Silver International and withdrew $2.27 million between June 1 and Oct. 1, 2015 — the same period police were watching him in the drug case. The government wants two Vancouver properties and more than $67,000 forfeited. Chen claims the civil allegations against him are politically motivated because of the failed E-Pirate prosecution.
Vincent Yen Tek Chiu, another alleged organized criminal believed to have used Silver International, is facing drug-smuggling charges in California. His brother Richard, also suspected of using the underground bank for drug profits, was found murdered and burned in Colombia in June.
There are several other civil forfeiture cases filed, including one against the original E-Pirate targets, Qin and Zhu. Just this week, an appeal court judge reversed an earlier ruling ordering the return to the couple of $2 million in cash seized by police.
And there is a related investigation by the Combined Forces Special Enforcement Unit in which several people have been arrested, but not yet charged.
There is also the B.C. commission of inquiry into money laundering, set to begin public meetings in Vancouver next week.
Both Eby and Ward hope the inquiry provides answers to the questions British Columbians have about money laundering.
“Putting the specifics of Silver International to one side, the general impression people have is if they play by the rules and they pay their taxes, and they are competing with people who don’t pay taxes and are laundering money for organized crime around basics like housing, it feels profoundly unfair, and it is unfair,” Eby said. “There is a lot there for the inquiry and I hope they follow the money and go as exhaustively as they need to.”
Added Ward: “I am hoping that the inquiry does open the public’s eye to the difficulties that the police and Crown and regulators face in keeping them safe by prosecuting organized crime in this country.”