CANADIAN DRUGS FUND TERRORISM, OFFICIAL SAYS

A top U.S. official says violent Middle Eastern groups are reaping the
profits of an illicit cross-border drug trade -- one involving a
cold-medication ingredient that is bought legally in Canada before it is
cooked up into illegal street drugs south of the border.

The head of the U.S. Drug Enforcement Administration, Asa Hutchinson, said
a North American methamphetamine racket is financing terror in the Middle-East.

"It's the first time we've seen drug proceeds going back [from the United
States] to a terrorist organization," Mr. Hutchinson told The Washington
Post in remarks published yesterday.

In recent interviews, Mr. Hutchinson has singled out Hezbollah, the radical
Lebanon-based group responsible for hundreds of bombing deaths, as a prime
benefactor. By some accounts, millions of dollars have been moved overseas
to fund terrorism. Mr. Hutchinson did not put a precise figure on the
amount of money involved in the cold ingredient.

Canada figures in the alleged scheme because, compared to the United
States, it has relatively lax controls on a chemical called pseudoephedrine.

In recent years, huge amounts of the ingredient -- what law enforcement
calls a "precursor chemical" -- have been confiscated at the border. U.S.
officials said much of the ingredient reaches California and Mexico, where
it is mixed with other chemicals to form methamphetamine, also known as speed.

In the United States, evidence of a conspiracy involving more than 100
people to import the ingredient to make speed has been outlined in criminal
complaints. Mr. Hutchinson said the Middle Eastern men accused of being
behind the scheme are funnelling money to Hezbollah.

Some observers -- especially defence lawyers -- said Mr. Hutchinson's
remarks are inflammatory and way off base.

The RCMP said it has not found evidence of such a conspiracy.

After intense U.S. lobbying, Canada is reining in the pseudoephedrine
trade. The government expects to have stricter controls in place by
January, with Health Canada licensing firms that have legitimate interests
in producing the substance.

The pressure has also affected the private sector. U.S. officials named two
Quebec companies, Frega Inc. and Formulex Inc., as major sources of legally
bought but illegally imported pseudoephedrine.

Contacted yesterday, a spokeswoman for Formulex said the company was
unaware of the problem. "We altogether dropped making pseudoephedrine," she
said.

In January, U.S. officials named Canada as a source of the ingredient while
announcing the arrests of dozens of suspects in a methamphetamine
investigation called Mountain Express III. At the time, police said many of
the charged men were of Middle Eastern origin but were ordinary criminals.

By April, Mr. Hutchinson appears to have re-evaluated the situation. He
told a Los Angeles Times reporter that some of the methamphetamine money
had been sent to the Middle East to support terrorist organizations such as
Hezbollah.

Defence and prosecution sides in California, where more than 35 men have
been indicted in the scheme, have expressed skepticism about terrorist
links. Nothing in the formal criminal complaint mentions Hezbollah or the
Middle East.

Citing unnamed officials, The Washington Post reported yesterday that "Arab
gangs in Canada" are said to be responsible for trucking the
pseudoephedrine into the United States.

A spokesman for the RCMP said yesterday that the force has seen no evidence
of this -- not least because the movement of the controversial ingredient
is uninhibited.

"It's not illegal in Canada.

"The illegal activities probably happen at the border or on the U.S.
ground," said Corporal Benoit Desjardins.