A former CEO of the BC Lottery Corporation drove his executives via high-limit gambling to raise income but did not follow a direction from the anti-money laundering watchdog of Canada that demanded B.C. A public inquiry has heard about casinos to establish the origins of massive cash transactions.
On Thursday, at the Cullen Commission, Michael Graydon, who stepped down as a Lottery Corp. CEO in 2014, was examined for his revenue-generation orders to manage a Vancouver casino.
Commission lawyers have developed the case that Lottery Corp. and casino managers were greedy for foreign high roller revenue, even after investigators warned that B.C. casinos were used by Chinese transnational drug gangs to launder money.
Graydon testified that under his watch, bet limits rose from $45,000 per hand in 2008 to $100,000 per hand in 2014. He also said that casino managers and the Lottery Corp. targeted Macau casino high rollers and invested money on facilities to attract these so-called “VIP” baccarat players.
The investigation has previously heard that in 2010, the Gaming Policy and Enforcement Branch of B.C. began to urge the Crown agency to restrict the acceptance by loan sharks and VIPs of tens of millions of $20 bills flooding into casinos. The cash that came into casinos wrapped in elastic bands and carried in grocery bags and boxes was drug money, investigators at both the branch and the Lottery Corp. figured.
But after a branch report warned Graydon that the top 22 high rollers of the Lottery Corp. were responsible for illegal $45 million “buy-ins,” he pushed back, the investigation heard, claiming that cracking down on cash buy-ins would impact Lottery Corp. revenue.
In December 2011, Commission attorney Patrick McGowan read two emails that Graydon sent to his executives, including Jim Lightbody, who took over as CEO of Graydon in 2014. McGowan said the emails revealed that Graydon focused only on generating revenue, but disregarded his mandate to produce revenue responsibly and with appropriate anti-money laundering measures.
According to McGowan, one email said that “I want to stress to the group that it is absolutely critical that we come in on budget from a net-income perspective this year. If we do not, I also want to be very clear there will be no opportunity to pay out incentive this year … the tone in government is not good these days … so remember the consequences you will unleash if you do not participate with some energy through this process.”
A second email said that “It is imperative that your division comes in with these numbers or better. As I have said before, Victoria is not keen to pay incentive if budgets are not met.”
Graydon told McGowan that some of his executives received up to 25% of their salaries in bonuses and that he was using incentives to motivate his staff. When McGowan asked if any B.C. government ministers responsible for gaming had pressured Graydon to produce revenue, he said he understood that his mandate was to fulfill the budget projections of the Lottery Corp.’s government ministers responsible for gaming had pressured Graydon to generate revenue.
Graydon said he remembered in a stunning statement that Fintrac, the anti-money laundering agency of Canada, required the Lottery Corp. to accept large suspicious cash transactions so that the agency could report the data back to Fintrac.
McGowan had investigated Graydon, wondering if he could provide B.C. with some good explanation. Casinos accept $200,000 cash transactions, with $20 bills bundled in $10,000 bricks and delivered in grocery bags to casinos. He asked Graydon if the obligation to reject these forms of transactions had not been considered by him.
Graydon said that “Fintrac actually wanted us to accept the cash,”
Later, a lawyer for the federal government challenged Graydon on the matter, and he acknowledged he had no evidence to back his claim.
“No, this was just a recollection from an observation,” Graydon said, later adding he was “likely” mistaken.
An anti-money laundering manager from Lottery Corp. had warned Graydon that Fintrac “feels we need to have the service providers ask where the money is coming from if someone attends with an inordinate amount of cash.”
Chewka told Graydon that he did not follow the direction of Fintrac and that until 2018, the Lottery Corp. did not require patrons to disclose sources of funds for large cash transactions.
Chewka said that “I’d suggest to you the reason why BC Lottery Corporation didn’t want service providers refusing the cash, is you were concerned with the potential loss of revenue. Is that accurate?”
“Not totally accurate,” Graydon said, reiterating that he assumed his mandate was to provide the B.C. with revenue.
Treasury, report suspicious transactions and co-operate with police and regulators.
Global News received clarification of Graydon’s statements about Fintrac outside the hearing.
A spokesman said that “FINTRAC does not under any circumstances tell businesses how to conduct their business. FINTRAC only requires that businesses … fulfill their obligations, including submitting suspicious transaction reports when required to do so.”
The inquiry continues.