Canada 'There's nothing we've done that is illegal'

OFF THE WIRE
BY: Tom Blackwell
Source: nationalpost.com

On a sunny June day last year, officers from federal, Quebec and Mohawk police stormed into a steel-and-glass industrial complex on the outskirts of this Mohawk reserve, and hauled away several of the people inside.

It was the first and only raid on one of Kahnawake's burgeoning number of cigarette factories, most of which are fiercely defended by the community.

What made the facility different -- and convinced Kahnawake band leaders to sanction the bust -- is that police alleged its owners were working closely with the Hells Angels, their cheap, tax-free cigarettes being pedalled on the streets of Montreal along with the outlaw bike gang's crack cocaine.

It seems like the clearest case yet of the kind of ties between organized crime and contraband tobacco that police repeatedly argue are widespread.

Burton Rice, however, says the authorities got things all wrong. Mr. Rice, whose family owns the plant targeted by officers that day and who now faces tax-fraud charges, acknowledged that Rice Mohawk Industries (RMI) did have an association with Salvatore Cazzetta, a notorious Angels figure. But in his first public comments on the case, the young businessman told the National Post the family's only contact with Mr. Cazzetta involved using a legitimate company the biker owned as a distributor for a totally unrelated, legal product. They had nothing to do with the drug trade, he said.

Most surprisingly, though, Mr. Rice said the company originally set out to run the tobacco manufacturing plant completely legitimately, with all appropriate taxes paid. Facing obstacles from Mohawk and provincial governments, RMI eventually had no choice but to operate outside the strict limits of non-native law, the 35-year-old said in an exclusive interview.

"There's nothing we've done that is illegal. There's nothing in there that I'm ashamed of," he said over coffee at a suburban Montreal Tim Hortons. "I want justice, I want truth to come out. I'm not going to have my name, my family's name dragged through the mud based on lies."

In some ways, the case encapsulates the growing debate over organized crime involvement in contraband tobacco. Police, government and nonnative tobacco industry officials insist the two go hand in hand, with the crime syndicates using cigarette profits to bankroll trade in drugs and guns, creating a powerful reason for shutting down the cigarette black market.

"When we do our wiretap investigations, our undercover operations, we are able to link the flow of money, and the money is going to these different [criminal] organizations," said RCMP Sergeant Mike Harvey of the joint police task force combatting smuggling around Cornwall, Ont.

Native tobacco insiders and politicians counter that organized crime's involvement is peripheral at most, and being used to unfairly vilify the industry.

"The way they tell it, we're all criminals. It's not true; it's all hype," said Timmy Jay Montour, a tobacco wholesaler on Kahnawake. "They [organized criminals] have nothing to do with the business." What happens to the cigarettes once they leave the reserve, on the other hand, is out of the Mohawk companies' hands, he said.

The RCMP has estimated that 175 organized-crime organizations are involved in the tobacco trade, conceding that some are "mom-and-pop" operations, but also established groups like the outlaw bikers and Eastern-European mob.

A handful of actual prosecutions -- and some convictions -- in addition to the Rice case suggest the criminal groups' role is focused on distribution of the finished product, and sometimes more:

- The RCMP, Quebec and First Nations police filed gangsterism and other charges against 22 people in March 2009, including two Hells Angels and two Kahnawake residents, accusing them of buying cigarettes on the reserve, selling them outside and investing the profits in illegal drug production. One person has since been convicted of gangsterism;

- In 2006, RCMP charged 12 suspects with smuggling cigarettes from a factory on the U.S. side of the Akwesasne reserve, using the proceeds to buy marijuana, and smuggling drugs back to the U.S.

- Last month, Quebec police arrested 17 members of an alleged, non-aboriginal ring that bought cigars and flavoured cigarillos tax free at Tyendinaga Mohawk reserve in eastern Ontario, and sold them to convenience stores in the Montreal area;

In fact, not all Mohawk leaders dismiss the notion of gangster influence. From the start, organized crime has been intimately involved in the industry, helping get cigarettes --then other illicit products-- from Mohawk communities to non-native markets, said Doug George-Kanentiio, a journalist from Akwesasne.

"It is simply impossible for Indian people to have the means to market tobacco off the reservation," he said. "That's where organized crime comes in."

Meanwhile, at southern Ontario's Six Nations reserve, there are unconfirmed reports that Korean or Chinese cabals are actually running small cigarette factories, using First Nations members as fronts, said Bill Montour, the community's grand chief. It is a rumour that worries him: "We don't want our people taken advantage of."

Sergeant Rob Leary, of the RCMP's customs and excise branch, said police are also aware of such reports. A Mohawk businessperson goes further.

"When you peel back the layers, you're really going to see some ugly things in some of these manufacturing facilities. There's not a single Indian in them. There's a whole bunch of Chinese people ... right here in Six Nations," the entrepreneur said, asking not to be named.

Though downplaying the issue and condoning the aboriginal tobacco industry itself, First Nations politicians and police say they do draw the line at infiltration by outside crime groups, especially when illegal drugs are involved.

Mr. Rice said outside police wanted to clamp down on Kahnawake cigarette factories earlier, but Mohawk leaders had refused to acquiesce -- until police came up with what he calls bogus allegations of links between his company, bikers and narcotics. Stylishly dressed and coiffed, the articulate and charming former private school student seems far from the stereotype of a criminal conspirator, and Mr. Rice insists he is not one.

Mr. Cazzetta is infamous as the head of the defunct Rock Machine gang, which fought a long and bloody war with the Hells Angels in Quebec. When the Angels triumphed, Mr. Cazzetta joined forces with his old rivals.

The Rice family's dealings with him, however, were solely through a legal beverage distributor he ran, which sold a U.S. energy drink the Mohawk firm marketed in Canada, Mr. Rice said. He does admit that his own past as an aboriginal person immersed in white society, where taunting schoolmates would call him a "savage," helps him identify with the bikers, though not their criminal acts. "I've always been viewed as an outsider," he said. "Natives, guys like me, are able ...to say 'I know how you feel.' "

When the family started its cigarette operation, though, it planned to be totally above board, figuring that lower overhead costs on the reserve would allow it to pay all the taxes and still undercut the price of major non-native brands. The company obtained a federal licence, which allowed it to sell to other First Nations people, but was denied one by Quebec that would have opened access to the non-native market. In a 2006 letter, Revenue Quebec said it could not consider the licence application because the Kahnawake band council had objected to any inspection of the plant by the department. "We can not ignore ... the council's warnings," the letter said.

The band also opposed the federal licence, which required a Revenue Canada inspector to be in the factory, arguing that it opened the door to regulation and taxation of Mohawk businesses generally, flying in the face of rights granted First Nations when they signed away much of their land in treaties with the British.

Mr. Rice said he suspects the band was anxious to protect Kahnawake's Internet gaming industry, including lucrative poker websites owned by Joe Norton, a former grand chief, and Alwyn Morris, an Olympic gold medalist and former band administrator. Though non-government gambling is banned by the Criminal Code, outside authorities have so far taken a hands-off approach to the Mohawk sites.

Mr. Rice said his charges of bilking the government of revenue by selling cigarettes tax-free are now expected to set an important precedent, determining whether a status Indian exempt from taxation can be convicted of tax fraud.

Police alleged at the time of the raid that the Rice plant, surrounded by a towering fence and overseen now by video surveillance and a slightly lame German shepherd, was used as a base of operations by the Angels. Mr. Rice denies the charge, and says the evidence disclosed by the prosecution since then backs him up.

He warns, though, that the Mohawk cigarette industry is in danger of truly falling prey to organized crime if the current, anything-goes environment continues. Ironically for a man accused of defrauding the government, he argues that the answer is for manufacturers to somehow be regulated.

"If you don't give the proper structure," Mr. Rice predicted, "it will be chaos."

tblackwell@nationalpost.com---------



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