Too many looked other way

By Dermod Travis

Could a similar question be posed of money laundering at B.C. casinos to that of the philosophical thought experiment, “if a tree falls in a forest and no one is around to hear it, does it make a sound?”

The question might go like this: if money laundering happens and everyone looks the other way, was it really laundered?

Citing a till-then secret 2016 report by auditor MNP LLP, the Vancouver Sun's Sam Cooper reported last fall that B.C.'s gaming policy and enforcement branch (GPEB) had “compiled a document which identified approximately $13.5 million in $20 bills being accepted at River Rock Casino in July 2015.”

The MNP report noted that: “Law enforcement intelligence has indicated (the funds) may be the direct proceeds of crime,” adding “casino staff are accepting these wads of cash even though there is “no known source of funds.”

Yet, in an August 2015 interview with Business in Vancouver  –  one month after that $13.5 million walked in  – the then-vice president of corporate security and compliance at Great Canadian Gaming, Robert Kroeker, insisted that: “money laundering doesn't happen at Great Canadian Gaming facilities. Regulations make it impossible to launder money through B.C. casinos.” 

River Rock is a Great Canadian facility.

It's possible that one of the causes for much of the muck the B.C. Lottery Corporation is now trying to wipe off itself can be traced back to 2001, when then-solicitor general Rich Coleman announced the restructuring of gaming in B.C.

The mandates of five agencies that had been responsible for oversight of the industry – the Gaming Policy Secretariat, the Gaming Commission, the Racing Commission, the Gaming Audit and Investigation Office, and the BCLC – were merged into two: GPEB and the BCLC. 

It wasn't long before the red flags started popping up. 

By 2005, B.C.'s then-auditor general Wayne Strelioff called on the BCLC to “improve the reporting it provides to its Board of Directors and “strengthen surveillance in casinos.” GPEB was advised to “improve its casino-related processes, including audit and compliance and public reporting.” 

Over the next four years the BCLC was warned that casinos were failing “to identify suspicious transactions, didn't collect enough information on potential criminals, and many of the reports that were filed were late." 

In 2011, CTV reported that the BCLC had been fined $670,000 by the Financial Transactions and Reports Analysis Centre (FINTRAC), in 2010, following an audit “that revealed hundreds of errors made reporting cash transactions over $10,000.”

FINTRAC is the federal body mandated “to facilitate the detection, prevention and deterrence of money laundering and the financing of terrorist activities.”

Michael Graydon, then-BCLC president, told CTV it was now “in complete compliance with FINTRAC rules, and that most of its problems were related to late filing of reports because of technical glitches and human error.”

Three years later, the BCLC's executive finally approved “a plan to buy a high-tech software system to flag suspected money-laundering transactions, at a budgeted cost of $7.4 million.” 

They're still working out the bugs, as Cooper recently reported.

In the spring of 2014, nearly $27 million “flowed through two B.C. casinos” – most in bundles of $20 bills – according to CBC News.

The bulk of it, $24 million, at River Rock, one of Kroeker's facilities where “money laundering doesn't happen.”

An internal 2016 GPEB audit obtained by Cooper alleges “that, in 2015, three B.C. casinos allowed gamblers to purchase chips with $6.7 million from illegitimate lenders. River Rock accepted $5.37 million of that total – or 79 per cent.”

Less than four months after MNP delivered its report to former finance minister Mike de Jong, Great Canadian Gaming was one of the $10,000 sponsors of the B.C. Liberal party's 2016 convention. 

This past summer, B.C.'s deputy attorney-general, Richard Fyfe, “gave thumbs up for almost 200 court administrators and sheriffs from across B.C. to hold a $91,650 leadership conference at River Rock,” as Bob Mackin reported in January.

GPEB found one way to try and make money laundering disappear – or at least draw less attention to it – it stopped using the term in its annual table of incidents in 2013.

Money laundering became “suspicious transaction reports” and then, in 2015, was grouped in with “criminal code related offences.”

Something else disappeared, part of Kroeker's work history.

He's no longer with Great Canadian Gaming, but you wouldn't know he had ever been there from the biography posted to his new employer's website. That career highlight was there, but it was removed by them sometime after April 2016.

He's still a vice-president of compliance and security, only now with the B.C. Lottery corporation. 

You couldn't make it up if you tried.

– Dermod Travis is the executive director of IntegrityBC


Canada forest proud

By Derek Nighbor

In Canada, the forest industry has been part of our lifeblood and a cornerstone of the economy for decades. The issue of how we manage our forests has also been the topic of healthy debate for generations.

However, what is often overlooked is Canada’s global leadership in sustainable forest management and the positive role Canadian forests and the forest products industry play in addressing climate change and providing socio-economic benefits.

As we celebrate the sixth annual UN-declared International Day of Forests on March 21, it seems only fitting to highlight six areas in which our industry shines internationally.

Canada’s forest laws are among the strictest in the world. They protect our forests and ensure that sustainable forest management practices are followed across the country. For example, every tree that is harvested in Canada must be replaced. This means consumers can be confident that the forest and wood products they buy from Canada were obtained legally and harvested under a system of sustainable forest management.

Canada boasts nearly 40 per cent of the worlds certified forests, far more than any other country. From Yukon to Newfoundland and Labrador, the forest sector is benefiting local communities, boosting our economy, helping to advance reconciliation with Indigenous communities and showing us what we can accomplish when working together.

In 2016, Canada harvested less than 0.5 per cent of our harvestable forests. The careful and planned management ensures we can enjoy the environmental, social and economic benefits of Canadian forests forever.

Canada’s Forest sector is leading the way in bio-economy. In the bio-economy, renewable resources such as wood-fibre are being converted into many types of consumer and industrial products which range from construction materials, auto parts, bioplastics, bio-chemicals and fuel for vehicles and planes. They also provide a way to generate more value from trees while minimizing waste. When used as a substitute for non-renewable materials and energy sources, bio-products can help reduce dependence on fossil fuels, cut greenhouse gas emissions and minimize environmental impacts from industrial operations.

Canada’s forest sector is one of the largest employers in the nation. Nearly one million Canadians are employed directly and indirectly in the forest products sector.

Canada’s forest sector is one of the largest employers of Indigenous peoples in the country.  Nearly 10,000 Indigenous peoples worked in the forest sector in 2016.

Canada’s forest products sector has long taken pride in balancing environmental and economic goals.  With 160 million hectares of internationally certified forests — more than any other country — Canada is widely recognized as a responsible supplier of forest products from legal and sustainable sources.

By embracing world-leading environmental standards, spending hundreds of millions every year on forest management planning, and committing to continuous improvement using the latest research, the responsible way in which we manage our forests is very much a competitive advantage in the global marketplace.

Keeping our forests healthy and sustainable is vital – to preserve their beauty for generations to come, to leverage them as a critical resource in the fight against climate change, and to support good-paying jobs for hundreds of thousands of Canadian workers across rural and northern Canada.

On this International Day of Forests, I would like to salute the nearly one million Canadians who are employed directly and indirectly in the forests products sector and are working every day to build a better future for all of us.

– Derek Nighbor is CEO of the Forest Products Association of Canada

Escaping housing trap

By Josef Filipowicz and Steve Lafleur

The B.C. government's recent budget included a 30-point plan aimed at the province's housing woes. The aim was off the mark.

Most of the plan's points fit into two broad categories: reducing demand by raising property transfer taxes, for non-residents and on homes over $3 million, for example; and increased spending on social housing - sometimes called affordable housing - for disadvantaged groups.

In both of these categories, the government targets specific niches of the housing spectrum - non-residents and the most vulnerable - but ignores the fundamental drivers of housing markets (and prices) for the vast majority of British Columbians.

British Columbia gained almost 250,000 new residents between 2011 and 2016 - more than the entire population of Burnaby. A growing population and growing average incomes and historically low mortgage interest rates mean that homes in B.C. - particularly in Vancouver - remain in high demand.

Typically, when faced with strong demand, homebuilders respond by building new homes. However, if the supply of new homes doesn't meet that demand, prices increase. That's precisely what has happened in B.C.

The provincial government's new housing plan partially recognizes this ongoing supply conundrum by repeating the need to accelerate new home construction. However, its solution to this conundrum is to spend at least $6.6 billion over 10 years to construct thousands of new social housing units.

While some British Columbians will benefit from this new raft of social housing, the province's plan almost completely ignores the many more market-rate homes (houses, townhomes, apartments) required to satisfy demand and eventually help temper prices. Without addressing this chronic shortage, renters and buyers alike will see their ability to climb the housing ladder reduced, and the billions of taxpayer dollars spent on "homes and housing supports that people need" will have been in vain.

For all the talk of affordable housing, the vast majority of British Columbians need affordable market-rate housing. Why? Because most people don't qualify for subsidized housing and expanding eligibility would mean needing to build even more social housing. The majority of British Columbians just need the market to accommodate their housing needs.

So what's holding back the supply of new homes in B.C.'s most desirable metropolitan areas?

Of course, there's geography - the ocean, mountains and U.S. border all make it more difficult to build new neighbourhoods at the urban fringe of Metro Vancouver. But there's also red tape at city halls across the region that slows or halts homebuilders from getting much-needed housing on the market.

It takes 21 months (on average) for homebuilders to obtain building permits in Vancouver and more than a year across the Lower Mainland. There's also an ad-hoc process of fees levied on builders, making it difficult for them to know how long a project will take and/or how much it will cost. This uncertainty reduces the likelihood of new homebuilding, aggravating existing supply constraints.

These regulatory barriers impact affordability. The previous provincial government commissioned a report on the homebuilding process. It found that hundreds of thousands of units were tied up in the approvals process across several Metro Vancouver municipalities.

And yet, rather than addressing the causes of a severely constrained housing market, the government of Premier John Horgan has opted to tinker by targeting two relatively small groups at either extreme of the housing market. This is a lost opportunity and indicates a fundamental mischaracterization of B.C.'s housing woes.

Rather than focusing on affordable housing for some and freeing up homes at the margins, the government should ensure that the housing market can accommodate the needs of all British Columbians.

Josef Filipowicz and Steve Lafleur are analysts at the Fraser Institute.

– Troy Media


Kill the sacred cows

By Dermod Travis

When times are tough, governments like to spin bad news budgets as a call for every segment of society to share in the pain. 

Rarely, when times are good, do they set out a blueprint to share the gain, something the last government paid dearly for.

Finance minister Carole James rightly recognized that B.C.'s social fabric is a little frayed and some mending might be the order of the day. While her budgetary themes were dead on, the devil is still in the detail. 

Governments can hike revenue by sneaking it in through the back door – as the former government preferred to do – or through the front, as James chose to do, but without sufficient context.

Looking at the principal cities of each province – and relying on 2017 numbers from Saskatchewan – a family earning $75,000 in Vancouver had the fourth lowest provincial tax bill ($6,642) of the 10 cities. Calgary was lowest at $2,766 and Charlottetown highest at $9,502.

Add in utilities (heating, electricity, telephone and car insurance) plus the average rent for a two-bedroom apartment in Vancouver (CMHC data) and suddenly that family has the second highest costs of the 10, just behind Toronto. Vancouver was in sixth spot in 2015 for median family income, though. 

The government may see room to raise taxes and be right, but British Columbians don't have much in the way of room when it comes to disposable income. All the more reason for the finance minister to proceed with caution.

The budget's big blooper goes to the ill-thought-out employer health tax, which simply shifts a regressive tax from one group to another.

One can't call it ill-advised, because it runs counter to the advice the ministry was receiving from the task force it appointed last November. 

It is customary to wait for the advice before charting a contradictory course.

University of Victoria economist Lindsay Tedds – the panel's chair – tweeted following the budget: “This is not the direction we were going.” 

They were leaning to a combination of a personal income tax surcharge and a small payroll tax. 

James has MSP down for $1 billion in 2019/20, with the payroll tax bringing in an additional $1.85 billion. In some quarters that's called double-dipping. 

It's also a difference of $1.1 billion over what former finance minister Mike de Jong estimated in his final budget. 

The great unknown? How much of it is a tax grab? 

For some employers – who paid their employees' premiums – it may be six of one, half a dozen of another, for others it's a new cost of doing business.

The switch from regressive to progressive should be as revenue neutral as possible. The government still has nine months to work it out.

On paper, B.C. may be one of the wealthiest provinces in Canada, but paper wealth tied up in home equity doesn't mean gobs of cash in the bank.

Back in 1993, economics instructor David Tha was the poster boy for opposition to then-finance minister Glen Clark's surtax on homes valued at more than $500,000.

Tha is back, but his circumstances have changed.

The Point Grey home he purchased 31 years ago for $370,000 is now valued at $6.5 million, an increase of 1,658 per cent. 

In the same period the cost of living rose 96.6 per cent. It's a safe bet his salary – before he retired – rose at pretty well the same rate.

Tha may only have three options to pay an extra $12,000 in taxes per year: cash in, borrow against equity or borrow from the province at 0.7 per cent.

While the public's mood has changed – lessening the risk of pitchforks at the legislature – James is already signalling tweaks to the government's real estate speculation taxes. Smart move. 

Budgets are as much about balance, as they are about being balanced.

Hoping to escape the 20 per cent luxury car surtax by dashing off to Alberta to buy your next Ferrari? Wait 'til you try and register it in B.C. 

– Dermod Travis is the executive director of IntegrityBC

Mysterious Mr. Beattie

By Dermod Travis

Sometimes the real identity behind a fake identity story can be just as good a story. This may be one of those times. Meet Michael Beattie, a resident of Brantford, Ont.

Last month, Beattie had a BA in engineering from McGill University, an MBA from Western University and “a personal net worth of $228 million,” all according to his fictitious website bio.

Turns out he's a convicted perjurer and fraudster and is facing charges for fraud over $5,000, laundering proceeds of crime, and possession of proceeds of property obtained by crime over $5,000 in Ontario. 

He had been Caledon, Ontario's fleet manager in the town's public works department, when he was charged in 2016. 

Beattie's lawyer for his latest endeavour – Grant McGlaughlin at Goodmans LLP, a Bay Street, Toronto law firm – initially “denied that his client was the man who was charged,” The Globe and Mail reported. 

This week, Beattie was dumped by the firm.

Why is any of this relevant to British Columbia? 

Claiming to be a construction magnate, Beattie had been beating the drums against a proposed $1.5 billion bid by China Communications Construction Co. for Canadian construction firm Aecon.

Aecon is part of the AFDE Partnership, a joint venture that includes Flatiron, Dragados and EBC Inc., which has been selected by BC Hydro “as the preferred proponent to move to the next phase for the Site C generating station and spillways contract.”

Flatiron and Dragados are divisions of Madrid-based ACS Grupo. Along with Quebec-based EBC Inc. they're part of the consortium building Montreal's new Champlain bridge. 

In December, Montreal media reported that more than 2,000 repairs have already been undertaken on defects with the still under construction bridge.

In meetings with MPs earlier this month, Beattie was accompanied by McGlaughlin and up to three lobbyists, including former CBC broadcaster – now with Ottawa-based Ensight Canada – Don Newman and Joseph Belan, a Swiss-based businessman.

The subject matter of Beattie's lobbying was “to provide an introduction to (his fictitious) MBM Investment Corp. and to discuss the China-Canada Free Trade agreement and issues related to the Investment Canada Act.”

The former fleet manager told The Globe and Mail – before his ruse had been uncovered – that he felt many in Canada's construction industry: “oppose the sale on national-security grounds, pointing to Aecon's widespread involvement in critical infrastructure projects from nuclear energy to pipelines, transit and hydro-hydroelectric projects such as the massive Site C project in B.C.”

Adding for effect, "(CCCC) has no accountability because they are tools of the Communist Party.” 

How could a Bay Street law firm that has counted at least five state-controlled enterprises of the Chinese government among its clients – “tools of the Communist Party of China” no less – take on Beattie as a client?

One of its partners, Hong Kong-based Felix Fong, is a member of the 400-member Selection Committee for the purposes of electing the Chief Executive for Hong Kong Special Administrative Region and the Hong Kong members to the People’s Congress of China. 

Then there's this other nagging matter. How does Goodmans take on Beattie as a client, when it happily promotes the fact that one its other clients was Aecon?

Was Goodmans going to risk flushing its China business down the drain for Beattie, a client who has insulted the country at every opportunity over the past four months? China is not well known for taking insults in stride.

Before Ottawa approves the CCCC takeover, there's some new questions that need to be asked in light of Beattie's shenanigans. How exactly did Beattie – a former fleet manager facing criminal charges – end up as a player in this $1.5 billion acquisition, and why? Who paid the legal and lobbying bills, Beattie or a third-party? And if Beattie did, was he later reimbursed by a third-party? 

BC Hydro officials may want to hold off signing any contracts with the AFDE Partnership until this has all played out. Never hurts to know who you're actually signing an agreement with.

– Dermod Travis is the executive director of IntegrityBC.

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