GOVERNMENT DEFIES COURT ORDER TO OPEN FILES ON 'ILLEGAL' DRUG STING

Privy Council Refuses To Release Secret Cabinet Documents;
Justice Department Stops Trial In Mountie Money-Laundering Operation

Privy Council Clerk Jocelyne Bourgon said the documents are exempt from
disclosure.

VANCOUVER -- The federal government, defying a court order, is blocking the
disclosure of legal opinions and other documents showing how RCMP brass
approved undercover currency exchange operations in Montreal and Vancouver.

Deputy RCMP Commissioner Terry Ryan and Jocelyne Bourgon, Clerk of the
Privy Council, have each filed sworn affidavits in British Columbia Supreme
Court, saying the documents about the police-run currency exchanges are
confidential.

The covert currency exchanges were designed to flush out drug dealers
looking for a quick way to convert tainted Canadian cash into U.S. dollars
and bank drafts.

But, as the Citizen has reported this week in a series of articles
examining the Montreal operation, the cash-strapped and short-staffed
undercover unit was overwhelmed by the amount of business it received and
could keep track of only a fraction of the illicit drug loot and suspected
cocaine dealers passing through.

While the RCMP eventually arrested a handful of criminals and recovered
$16.5 million in laundered cash, more than $100 million in known and
suspected drug money exchanged at the Montreal counter simply vanished,
fuelling as much as $2-billion worth of street-level drug sales.

Rather than disclose sensitive legal opinions about the legality of the
currency exchange operations -- after a British Columbia Supreme Court
Justice ordered them made public during a criminal case -- Crown
prosecutors asked the judge to stay charges against a B.C. man accused of
laundering drug money.

And last week, Supreme Court Justice Mary Humphries did stay the charges
against the accused, alleged marijuana dealer Frederick Creswell.

The Privy Council Office, which reports directly to the prime minister, is
the federal department that helps manage the affairs of the cabinet and its
key committees. As Clerk of the Privy Council, Ms. Bourgon is the federal
government's top public servant.

In the affidavit she filed with the B.C. Supreme Court, Ms. Bourgon claimed
the documents involved are cabinet confidences and are exempt from
disclosure under the Canada Evidence Act.

An appendix to her affidavit lists 39 different records or documents that
she says are covered by cabinet confidentiality, protecting them for 20
years.

The documents include communications between several cabinet ministers,
minutes of cabinet meetings, draft legislation, discussion and background
papers for ministerial review and briefing notes.

In his affidavit, RCMP Deputy Commissioner Ryan said documents exchanged by
the police force and its legal advisers in the federal Justice Department
are "intended to be communications of a confidential nature."

Some are secret communications between deputy justice minister John Tait
and the RCMP commissioner in 1993 or 1994, a time when the Montreal and
Vancouver operations were both under way.

Another document is a legal opinion produced in the 1980s by the former
associate deputy attorney general of Canada, Don Christie, about the
legality of so-called "reverse sting operations" such as the storefront
currency exchanges.

The Mounties used Mr. Christie's legal opinion to take the position that
the Vancouver and Montreal storefront operations had been deemed legal by
federal Justice officials.

The Mounties believed that it would be all right for police officers to
help drug trafficking, money-laundering criminals exchange their tainted
Canadian currency for U.S. dollars because the crimes that officers were
trying to detect -- and eventually stamp out -- using the technique were
serious.

At the time, it was illegal for anyone to have in their possession the
financial proceeds of criminal activities. There was no exemption for
police officers conducting criminal investigations, though the laws have
since been changed.

However, the RCMP never made customers of its currency exchanges fill out
forms and show identification, as required under federal money-laundering
laws, when they exchanged sums exceeding $10,000.

When a Montreal man who used the covert RCMP currency exchange was
subsequently accused of money laundering, he challenged the legality of the
police-run operation in 1995. Quebec Court Judge Pierre Pinard ruled the
operation was legal.

But when substantial evidence of possible RCMP neglect and wrongdoing began
to emerge during the Quebec proceedings, Justice Pinard stopped witnesses
and questions from defence lawyers, saying three separate times that he was
not there to "conduct a royal commission into the RCMP."

Two years later, Madam Justice Humphries examined the legality of the
Vancouver operation -- which was entirely modeled after the Montreal
storefront -- and declared the RCMP's conduct illegal in that case.

In a judgment handed down in January 1998 in the case of Mr. Creswell,
Madam Justice Humphries said RCMP officers had knowingly possessed proceeds
of crime and failed to get suspects to properly report large currency
transactions as required by law.

Both were crimes for anybody else who behaved in such a manner, she said.

"What is it that makes these officers agents of the Crown and immune from
the operation of the law in these circumstances?" she wrote.

"Is it that they are pursuing a valid investigation? That their superiors
approved the plan? That it worked? That they did not physically harm
anyone? That their motives were for the public good? That the end justified
the means? That each officer was genuinely convinced his actions did not
constitute a crime?

"In my view," she concluded, "none of these alone or in combination is
enough to justify taking the decision as to what is illegal in this country
out of Parliament's hands and putting it into the hands of the officers of
the RCMP."

The legal opinions and cabinet documents about the currency exchanges are
being sought by criminal lawyer John Conroy, who represents Mr. Creswell, a
resident of Abottsford, B.C.

Mr. Creswell was arrested by the RCMP in 1996 and charged with 22 counts of
possessing the proceeds of crime and money laundering.

The RCMP alleged that Mr. Creswell used the undercover RCMP currency
exchange counter to further his alleged drug-dealing activities in
marijuana.

Mr. Conroy wants to know what the RCMP and its federal legal advisors knew
and discussed before they went ahead with the Vancouver covert operation.

On April 1, Madam Justice Humphries agreed with him, rejecting Ms.
Bourgon's claim of cabinet confidentiality and ordering the Crown
prosecutor in the case to disclose the legal opinions and other documents.

"Where there has been a ruling, as there has been here, that the police
conduct was illegal," Madam Justice Humphries wrote, "there is an issue
which must be dealt with as to whether the conduct is such as to bring the
administration of justice into disrepute or is otherwise an abuse of
process."

She added that the Court needs to examine all the circumstances surrounding
the currency exchange operation and what research the police and their
legal advisors did to decide that such an operation would be deemed legal.

The federal lawyers in the case, Cheryl Tobias and Paul Partridge, were
instructed by their Justice department bosses to ignore the court order to
disclose the legal opinions. They did not give the court any reasons.

The Crown has decided it will appeal the ruling by Madam Justice Humphries.

The RCMP's undercover company in Vancouver, which operated under the name
Pacific Rim International Currency Exchange, was modeled on the troubled
and problem-plagued sister operation run by RCMP peers in Montreal between
1990 and 1994.

The Montreal operation was called the Montreal International Currency Center.

The Citizen reported this week that during its four-year existence, the
RCMP's Montreal company facilitated efforts by Columbian drug traffickers
and Canadian biker gangs to import almost 5,000 kilograms of cocaine and
sell it throughout central Canada.

The RCMP was so short of staff and resources, only a small fraction of the
suspects who used the services of the covert currency exchange to launder
drug money were investigated, the documents show.

There were too few investigators and surveillance teams, there was too
little money and not enough technical resources to investigate all the
criminals who walked in off the street to use the currency exchange, The
Citizen found.

Police manpower shortages were so bad that a full two years into the
operation one incensed RCMP investigator, Const. Mike Cowley, complained in
writing to his superiors that "without the necessary resources and
personnel to do proper and complete investigations, it seems like all we
are doing is offering a money laundering service for drug traffickers."

The Montreal operation exchanged a stunning $141.5 million in known or
suspected drug money during its four years of operation and made a $2.5
million profit from its activities during the period. Meanwhile,
investigators lost track of $125 million in known and suspected drug money,
which ended up floating around North American crime circles and translates
into an estimated $2-billion worth of street-level drug sales.

Copyright 1998 The Ottawa Citizen