RCMP'S STING AIDED DRUG LORDS: ORGANIZED CRIME IMPORTED 5,000
KILOGRAMS OF COCAINE

An undercover RCMP operation in Montreal between 1990 and 1994
inadvertently helped Colombian drug traffickers and organized
criminals in Canada import and sell close to 5,000 kilograms of
cocaine, internal RCMP documents show.

The police company -- known as the Montreal International Currency
Center Inc. -- changed $141.5 million Cdn in known and suspected drug
money into U.S. currency or bank drafts in U.S. dollars for 25
criminal organizations during its four years in business.

The RCMP estimated this gave the drug traffickers enough U.S. currency
to buy almost 5,000 kilograms of cocaine from Colombian drug cartels,
which was then shipped back to Canada in boats, planes or by other
means to be resold at an estimated street value of $2 billion.

But the RCMP investigated members of only two of the 25 drug and
money-laundering organizations which its covert company supplied with
U.S. currency because they had neither enough manpower nor the
financial and technical resources needed to properly investigate more,
RCMP documents show.

Frustrated by the chronic manpower and other resource shortages as the
covert operation progressed, one incensed RCMP investigator, Const.
Mike Cowley, complained in writing to his superiors on Oct. 16, 1992.

``Without the necessary resources, it seems like our undercover
officers are simply offering a money-laundering service for drug
traffickers,'' he wrote.

Cowley asked to be taken off the operation code named Operation
Contract. He was never disciplined for making the remarks.

RCMP Staff Sgt. Yvon Gagnon, who oversaw the operation, said that
Const. Cowley's observation was accurate.

``He was right,'' Sgt. Gagnon said.

``We kept asking for resources and we didn't get them,'' said Sgt.
Gagnon. ``We hoped that somebody at headquarters would be reading the
reports and begin to understand what was going on.''

The operation was set up to develop evidence of cash flows to support
charges of drug money laundering, make drug seizures and launch
related prosecutions.

The proposal for the operation never explicitly stated that the covert
currency exchange would facilitate drug trafficking, but police
officers involved said their superiors were experienced enough to know
this would be the result.

Here's how it worked:

Drug traffickers in Canada sold cocaine. Pushers working on the
streets, in their homes or in bars, taverns or other establishments
controlled by criminal organizations, made the sales, usually by the
ounce.

Criminal organizations took the Canadian cash they received by selling
the drugs to the RCMP-run currency exchange counter. The drug
traffickers asked that the Canadian money be exchanged into U.S. money
or bank drafts in U.S. dollars.

The traffickers or the couriers working for them would then travel to
Colombia with the U.S. cash or bank drafts. Sometimes, they would ask
the RCMP currency exchange to wire the U.S. funds to overseas bank
accounts.

The bank drafts, made payable to phoney names, were cashed in offshore
bank accounts opened by dummy corporations controlled by the
traffickers.

The money was then secretly moved back to cocaine producers in Cali
and Medellin, Colombia, for the purchase of more cocaine.

As the money exchanged by the covert RCMP company flowed into Colombia
to purchase more and more cocaine, that country's then president,
Cesar Gaviria, was struggling to bring drug lord Pablo Escobar and his

men to justice and stop a wave of cocaine world bombings and murders.

In Canada, the RCMP operation was repeatedly undermined:

- - by a chronic shortage of police manpower and technical resources,
such as specialized computers needed to perform wiretap operations;

- - by missed drug seizures, caused by the chronic resource
shortages;

- - by policing mistakes;

- - and by internal security breaches by two or more corrupt RCMP
officers.

When the RCMP bought a defunct currency exchange and reopened it for
business, the undercover officers running the covert operation quickly
learned with dismay that they were facing some major challenges.

Once they converted Canadian cash into U.S. currency or bank drafts in
U.S. dollars and handed it over to their drug world ``clients,'' the
RCMP had no control over what happened to the money as soon as the
traffickers walked out the door.

Without a sufficient number of surveillance teams and investigators,
officers often failed to discover where the drug money came from and
where it went.

For example, at 11:23 a.m. on Sept. 24, 1992, one man walked in and
exchanged $959,720 in Canadian cash into 16 U.S. dollar bank drafts
made out to five different people. Nobody was available to follow and
identify him.

One organization led by Montreal lawyer Joe Lagana, whose members had
laundered $93 million in drug money through the RCMP currency
exchange, saw its members investigated, charged and convicted. But
less than one quarter of the $93 million was recovered by the RCMP.

Frustrated officers asked their bosses for permission to seek help
from the Canadian Security Intelligence Service or other police forces
after files on suspects began piling up, but the requests were denied,
documents show.

The RCMP operation was so short-staffed, officers were unable to
identify a group of people who had exchanged $7.2 million of the
$141.5 million in known or suspected drug money.

When the operation ended on Aug. 30, 1994, police seized $16.5 million
in cash and properties that the suspects acquired with drug money. But
$125 million of the $141.5 million in known and suspected drug money
exchanged by the covert Mountie company in Montreal had vanished and
could not be traced or seized by police.

``And it served to buy and import more drugs,'' said retired RCMP
corporal Andre Moisan, who worked on the covert operation for two
years. ``Justice Canada was freaked out by this. The sums were
enormous. Cash was coming in (to the currency exchange) so fast and
the amounts were so large, it would make you fall off your chair.

``The government was really afraid of getting in trouble when they
found all this out,'' said Moisan, who works at a Montreal investment
firm.

The currency exchange created by the RCMP was opened in September
1990.

It operated from chic, street-level premises in Montreal, in one of
the busiest business districts.

There was even a suggestion the mob may have known about the covert
operation. In 1993, then RCMP commissioner Norman Inkster said an
internal security probe found that the late and corrupt RCMP drug
squad boss in Montreal, Insp. Claude Savoie, took $200,000 in bribes
and in exchange leaked unspecified sensitive information about police
operations to members of organized crime.

But when interviewed recently, Inkster said Savoie was not aware of
the covert currency exchange operation. Savoie committed suicide to
avoid police questions.

The operation ended on Aug. 30, 1994, when Mounties arrested 57 people
and Crown prosecutors laid a slew of money laundering and drug
charges. The massive movement of money helped expand the clandestine
drug pipeline between Colombia's cocaine cartels and Canadian biker
and Italian Mafia gangs that import, distribute and sell cocaine to
users and addicts in Canada.

In 1992 and 1993, the RCMP operation helped move more than $94.7
million in drug money directly and indirectly to Colombia. Bank drafts
issued by the RCMP company were cashed at, among others: the Banco de

Bogota branch in Nassau, Bahamas; the International Bank of China in
Colon, Panama; the Euro Bank in Boca Raton, Florida and the Republic
Bank of Miami, Florida.


Checked-by: (trikydik)