The CEO and chief operating officer of the BC Lottery Corporation disagreed about the meaning of a direction from the B.C. In 2015, the province’s inquiry into money laundering heard the government rejecting all cash transactions of mysterious origins.
The Cullen Commission has previously heard that BC Liberal Minister Mike de Jong directed Lottery Corp. in October 2015 to reveal the source of funds for all cash sent to B.C. by high rollers with casinos. The direction came after he and the Lottery Corp. CEO Jim Lightbody was told of an RCMP investigation at Richmond’s River Rock Casino connecting “VIP” high-limit patrons to a Chinese transnational drug trafficking and money laundering scheme investigation.
But Lightbody did not follow the direction of de Jong, a B.C. On Monday, the government lawyer told the inquiry that the board of directors of the corporation estimated that the new strategy would scare away patrons and lead to losses for the Crown agency of hundreds of millions.
Lightbody previously testified that the letter of direction from de Jong did not mean that “all cash transactions” should be scrutinized by the Lottery Corp.
Lottery Corp. chief operating officer Brad Desmarais said on Tuesday, however, that de Jong’s direction meant all such transactions.
The investigation has heard that the Gaming Policy Enforcement Branch of B.C. began in 2010 to encourage managers of Lottery Corp. to reject a massive flow of $20 bills that investigators suspected were laundered by Asian organized-crime loan sharks and foreign high rollers as drug cash. Suspicious cash transactions have grown exponentially since 2010 and are expected to reach around $200 million per year in 2014, the branch said.
On Tuesday, during his cross-examination, Desmarais was accused by B.C. Government lawyer Jacqueline Hughes of downplaying the money-laundering problems of the branch and developing alternate theories to justify predominantly mysterious cash transactions from Chinese VIPs.
The inquiry has heard that Desmarais and others at the Lottery Corp. advanced the theory that Chinese nationals wanted to use cash for cultural reasons. Desmarais also wrote internal reports rebutting the claims of the branch, Hughes said, claiming that legal underground banking or cash-based businesses in B.C. It could clarify why foreign nationals presented cash bricks in elastic bands to B.C. with casinos.
Desmarais also repeatedly argued — without any supporting evidence — that Chinese high rollers were flying into Vancouver with large amounts of Canadian dollars, Hughes said. And Desmarais testified he felt that “confirmation bias” of branch investigators with policing backgrounds led them to determine that bricks of $10,000 in $20 bills in elastic bands always amounted to drug cash.
On Tuesday, Hughes read from a March 2013 email to Lightbody from Desmarais, in which Desmarais claimed that an anti-money laundering report written by the enforcement branch asking the Lottery Corp. to reduce large cash transactions in casinos failed to recognize the “legitimate” customers preferred to use cash for good reasons.
Hughes told the inquiry that Lightbody wrote back: “I completely agree with all your comments … I would suggest … reposition (the) document around misperception of money laundering.”
After an independent investigation of money laundering in the facilities made the recommendation, The Lottery Corp. did not require high rollers who brought significant amounts of cash into casinos to declare their source of funds until January 2018.
Hughes said that Desmarais had continued to “frame the reduction of cash as problematic” into 2017.
She read an email in which Desmarais asked an expert to estimate the number of B.C. workers If the government abolished “high-limit” games or set a hard limit on cash transactions of $10,000, casinos will lose.
“(The estimate) doesn’t have to be pretty,” Desmarais’ email said. “This is just something to have in our back pocket during conversations with the government.”
Hughes indicated that Desmarais had used the possibility of job losses to force cash limits down when the Lottery Corp. lost revenue was his main concern.
Desmarais disagreed, and he claimed that all his acts were in the public interest.
The investigation also heard that he suggested to Lightbody that Robert Kroeker, the head of compliance of Great Canadian Gaming, come to work for the Crown corporation in September 2015.
Desmarais said he considered Kroeker to be “hyper-vigilant” on compliance and anti-money laundering while at Great Canadian’s River Rock Casino in response to questions from Great Canadian’s lawyer.
In previous hearings, Hughes indicated that he pushed back against reports and audits after Kroeker joined the Lottery Corp. that alleged that there was large-scale money laundering at River Rock Casino through Chinese VIPs.
