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Vancouver-based PacNet fights legal action to confiscate $15.5 million in properties, bank accounts

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A Vancouver-based company accused of being a payment processor for hundreds of millions in worldwide direct mailing scams is fighting to have a B.C. civil forfeiture lawsuit sealed from public view.

The application by PacNet Services Ltd. is among several applications, including on document disclosure, that will be decided by B.C. Supreme Court Justice Shelley Fitzpatrick before the actual civil forfeiture case is heard.

Following a week of arguments beginning this month on the various matters, Fitzpatrick has reserved judgment and will be making her findings known at a later date.

The province’s civil forfeiture office is suing to confiscate properties and bank accounts in British Columbia of PacNet and its principals, including president Rosanne Day and company officer Ruth Ferlow, totalling about $15.5 million as proceeds of crime, according to information heard in court this week.

Properties in Vancouver, West Vancouver and Keats Island are valued at about $10 million, while multiple bank accounts contain just under $5.5 million, Vancouver lawyer Allan Doolittle, representing the B.C. civil forfeiture office, said in court.

PacNet and its principals have denied all allegations, saying that at no time has PacNet knowingly processed payments for any promotion known or found to be fraudulent, according to responses filed with the court.

PacNet came to international attention suddenly in September 2016 when the U.S. government identified PacNet as a “significant criminal organization” that allegedly worked for 20 years with “direct mailer” scammers to launder millions of dollars defrauded from numerous vulnerable victims.

The designation landed PacNet on a list that included drug cartels and mobsters — and almost immediately shut down PacNet’s worldwide business, including operations in Ireland, the United Kingdom and subsidiaries or affiliates in 15 other countries, because its reputation was “shattered,” the company has said in court documents.

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By late 2017, the significant criminal organization designation had been removed by the U.S. Treasury Department for the company and the 12 people who had been listed, including Day and Ferlow.

In its request to seal the court file from public access, PacNet lawyer Michael Bolton argued the sealing was necessary to protect against adverse publicity and consequences to witnesses, protect confidential information from public disclosure and protect against the dissemination of compelled testimony and compelled production of documents.

“These proceedings commenced by the director (of civil forfeiture) arise in the wake of an ill-considered, unsupportable and unlawful effort by the United States Department of Treasury … to brand PacNet as a Transnational Criminal Organization without notice or hearing, without any charge or opportunity to respond, in part to attempt to coerce the cooperation of the criminal mail fraud against other parties, including some former PacNet clients,” Bolton writes in the sealing application.

In response, Howard Mickelson, a lawyer for the B.C. civil forfeiture office, wrote the office was not opposed to a limited sealing order — for example, one that sealed the affidavits of witnesses who were not the subject of the case — but was opposed to sealing the entire file.

In its suit, the B.C. civil forfeiture office says that all or substantially all of PacNet’s revenues come from the unlawful direct-mail scams and any legitimate sources of revenue have been deliberately established as a cover for its otherwise unlawful operations.

“Despite PacNet’s knowledge of these criminal investigations and enforcement proceedings against certain of the PacNet clients, in many instances PacNet continued to process payments from victims of the unlawful solicitations,” says the claim.

In its response, PacNet said on several occasions the company has been approached by law enforcement agencies to assist in the investigation of a client who was alleged to have been involved in fraudulent promotions. “On each occasion that this occurred PacNet cooperated with law enforcement agencies,” PacNet says.

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Company laundered up to $220 million, B.C. civil forfeiture office alleges

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An illegal Richmond money business was laundering as much as $220 million a year, the B.C. civil forfeiture office alleges in a lawsuit launched to seize property and assets valued at more than $4 million.

A couple linked to the money service business — Silver International — had criminal charges for money laundering stayed without explanation by federal prosecutors in November.

Now, B.C. crown prosecutors are seeking to use the province’s civil forfeiture laws to seize a $2.3-million Richmond house, $2 million in seized cash, River Rock Casino chips and gift cards as the proceeds of crime, alleging money was laundered for customers that included drug traffickers importing cocaine from Mexico.

The threshold for proving a civil claim is lower than for a criminal conviction, a balance of probabilities as opposed to beyond a reasonable doubt.

In documents filed in B.C. Supreme Court last week, the civil forfeiture office alleges that Caixuan Qin, the director of Silver International and owner of the Richmond home, and her spouse Jian Jun Zhu, laundered more than $80 million during a 4½ month period in 2015.

The transaction information, laid out in ledgers obtained by police, showed that from June 1, 2015 to Oct. 15, 2015, $83.1 million was taken in and $81.5 million went out. On an annual basis, this would represent $221 million in money taken in and $217 million in money going out, the civil forfeiture office said in court filings.

Analysis by the RCMP — to get a better understanding of the nature and volume of the business of Silver International — showed that in a single day, Sept. 30, 2015, $2.675 million was brought in and $1.652 million was taken away.

The allegations have not been proven in court and Qin, Zhu and Silver International have not filed a response.

Matthew Nathanson, lawyer for Qin and Silver International, said Monday that they are drafting a response. “This is not an action that will proceed unopposed,” Nathanson said in a written statement.

Nathanson argued last month the money should be returned promptly to his clients.

The civil forfeiture suit provides details that were unknown following the collapse of the criminal case, of which B.C. Attorney General David Eby said he was “incredibly disappointed” and a review is needed of went wrong.

According to the civil forfeiture office’s court filings, Silver International created no customer profiles, as required by federal laws for money services businesses carrying out transactions of more than $1,000, and instead the ledgers were coded.

And Silver International did not register as a money services business as required by federal law until after the police raid in October 2015.

Police investigators were able to cross-reference the deposits and withdrawals of several of the biggest customers caught on surveillance with the code names in the ledger, according to the court filings.

The police identified Maxim Poon Wong — also known as Nelson Wong — as a customer of Silver International with transactions of nearly $3.9 million, alleged the civil forfeiture office. Wong, recorded in RCMP databases as being associated with the Yellow Triangle Boys gang and a triad associate, was also identified as working with Michael Whieldon, a high-level drug trafficker importing cocaine from Mexico, the court filings allege.

Wong was arrested in Sept. 2015 with nearly $227,000 in cash, the bulk of it in bundles of $20 bills, and documents on how to produce methamphetamine.

“The customers (of Silver International) included individuals linked to drug production, trafficking, money laundering, homicide, assault, possession of property obtained by crime and counterfeiting instruments and extortion,” alleges the civil forfeiture office filing.

Other items seized as part of the police investigation of Silver International included 9.6 grams of cocaine at the Richmond home and a digital scale. Also seized at the home were a suitcase containing a card embosser, a credit car reader and blank plastic cards; a computer with data for 256 credit card account numbers that were not associated with Qin or Zhu; counterfeit identification in the names of various individuals; and eight boxes of rifle cartridges.

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B.C. plan to expand civil forfeiture program called unconstitutional

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Eight years have passed since David Lloydsmith learned British Columbia’s Civil Forfeiture Office wanted to seize his modest two-bedroom bungalow, but he says the panic and anger that gripped him that day have not gone away.

Lloydsmith is still outraged that the office tried to seize his home based on a police search without a warrant that produced no criminal charges. B.C.’s Supreme Court and Court of Appeal eventually ruled his rights were violated, but he says the emotional scars remain.

“It cost me friends. It cost me a relationship. I still haven’t been able to have another relationship since,” he said, adding he still owes a friend money for helping cover tens of thousands of dollars in legal bills.

“I have serious trouble sleeping. It’s done damage to me that I don’t know if I can ever get over.”

Critics of civil forfeiture hailed the Lloydsmith decision as one that sent a message about the need to protect charter rights. Some were shocked on Tuesday when the B.C. government announced it intends to dramatically expand civil forfeiture.

Calling it the “most significant revision” of the Civil Forfeiture Act since its introduction in 2006, Public Safety Minister Mike Farnworth announced three proposed changes, which he said were aimed at organized crime and fentanyl trafficking.

Under the changes, the onus would be shifted to a defendant to prove that an asset is not an instrument or proceed of unlawful activity, in cases where the Civil Forfeiture Office provides the court with “sufficient evidence” clearly linking the asset to crime.

The office would also be able to ask a judge to order an accused person’s assets be held before it formally sues them, and finally, it would be able to compel banks to hand over information before customers transfer assets.

Minister of Public Safety and Solicitor General Mike Farnworth.

Minister of Public Safety and Solicitor General Mike Farnworth.

Shifting the burden of proof to a defendant is “obviously terrible,” said Micheal Vonn of the B.C. Civil Liberties Association.

The Civil Forfeiture Office files lawsuits to seize assets believed to be the proceeds or instruments of illegal activity, regardless of whether the asset owner has been charged or convicted, and even if they’ve been acquitted, of a crime.

Vonn noted the standard of proof is already lower in a civil trial than a criminal one. In civil proceedings, one party’s case must simply be more probable than the other’s, while in criminal trials, guilt must be proven beyond a reasonable doubt.

Civil forfeiture defendants are also ineligible for legal aid, unlike many people charged with crimes, she added.

“Now, they’re actually reversing the onus on certain portions of this,” Vonn said. “So you show up in court — very lucky if you’re able to defend yourself at all, vis-a-vis counsel or otherwise — to prove that you are not guilty.

“That’s a standard that almost never will you see justified constitutionally.”

As for the amendments aimed at stopping people from transferring assets before they can be seized, Vonn said she’s concerned about the forfeiture office accessing banking information using a lower legal standard than police.

“We have processes whereby police are entitled to investigate on a warrant standard of reasonable and probable grounds. We have a reason for that — so we protect against abuse,” she said.

There is already a criminal forfeiture process that seizes assets after conviction, she added.

She said the civil liberties association would consider challenging the amendments if passed, adding she’s baffled by Farnworth’s comments that the government consulted with experts and believes the amendments are constitutional.

Micheal Vonn of the B.C. Civil Liberties Association.

Micheal Vonn of the B.C. Civil Liberties Association.

Phil Tawtel, executive director of B.C.’s Civil Forfeiture Office, said the program focuses on “property, not people.”

“There is no case where someone is going to go to jail for this,” he said. “The question is: is there enough evidence to show that an asset, a property, is either the proceeds or an instrument of unlawful activity?”

The Supreme Court of Canada has upheld provincial civil forfeiture laws, he said, ruling unanimously in 2009 that they aim to deter crime and do not encroach federal jurisdiction over criminal offences.

“Certainly, it’s still incumbent on the director to bring evidence to satisfy the court that the forfeiture is in the interests of justice,” Tawtel said.

The office has brought in $87 million since 2006, spending $37.5 million on crime prevention initiatives and $1.63 million on victim compensation. The remainder has been spent on legal counsel and office operations, Tawtel said.

Bibhas Vaze, a lawyer who has represented many civil forfeiture defendants including Lloydsmith, said he’s worried that in the face of criticism about the office, the government wants to expand it further.

Police showed up at Lloydsmith’s home in Mission in 2007 and said they were investigating a 911 call. When he refused to let them in, they forced their way in and found, seized and destroyed a number of marijuana plants.

Lloydsmith said the plants were for his own medical use and he was not charged. Nevertheless, the forfeiture office sued to seize his home in 2011, and only abandoned the case after the courts ruled the “unreasonable” search violated his rights.

Vaze said civil forfeiture enables the government to use evidence found in illegal police searches that would not be admissible in criminal trials.

Tawtel responded that it’s up to the court to decide whether charter breaches have occurred and what the remedies are.

“I’m not out there saying that government should not be able to seize assets of people who are engaging in illegal activity,” said Vaze. “The problem is: at what cost?”

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B.C. Supreme Court orders cash and Corvette forfeited as proceeds of crime

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The civil forfeiture action has a lower threshold for proving a claim than for a criminal conviction, a balance of probabilities instead of beyond a reasonable doubt. Read More

Jaguar linked to trafficking should be forfeited, B.C. government says

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RCMP officers were watching last April when Kyle Robert Bird allegedly made at least four drug deals while driving around Langley in his 2013 Jaguar XF. Read More

Properties linked to money-laundering schemes remain in hands of accused: investigation

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Metro Vancouver properties valued at nearly $10 million remain in the hands of people prosecuted in the U.S. for money laundering, Postmedia has learned. Read More

Burnaby house sought in civil forfeiture allegedly linked to CRA scam

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The province is suing to have a $1.9-million Burnaby house forfeited, alleging the property is linked to a Canada Revenue Agency fraud scheme. Read More

B.C. Securities Commission denies abuse of process in pursuit of properties to collect on $31.7 million in penalties

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The B.C. Securities Commission has responded to a civil lawsuit from the wife of financial fraudster Earle Douglas Pasquill, denying its efforts to collect tens-of-millions of dollars in penalties owed by him via properties she owns is an abuse of process. Read More

Bank seeks $1.2-million mortgage repayment allegedly linked to B.C.'s biggest money-laundering case

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The Bank of Nova Scotia has demanded payment of a $1.2-million mortgage on a West Vancouver home allegedly owned by a key target in an RCMP investigation of B.C.’s biggest money-laundering case. Read More

Properties linked to money-laundering schemes remain in hands of accused: investigation

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Better co-operation needed among jurisdiction to close loopholes, expert says

Burnaby house sought in civil forfeiture allegedly linked to Canada Revenue Agency scam

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Unsuspecting individuals were contacted and told to send money in cash or gift cards to retail mailboxes in B.C. and Ontario.

B.C. Securities Commission denies abuse of process in pursuit of properties to collect on $31.7 million in penalties

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The commission filed legal action in 2018 to get access to seven properties valued at $20 million held by, or in part held by, the wife of financial fraudster Earle Pasquill.

Bank seeks $1.2-million mortgage repayment allegedly linked to B.C.'s biggest money-laundering case

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RCMP investigation uncovered an alleged $220-million-a-year money-laundering operation at a Richmond underground bank

Accused in alleged $7.5 million trafficking and money laundering forfeiture suit deny wrongdoing

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Accused state their income was derived from legitimate revenues generated from business employment, rent and other investments

B.C. government files forfeiture case against alleged drug dealers

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Siblings named in lawsuit were trafficking for the Brothers Keepers gang, director says

Government wants Langley farm forfeited where police found guns, ammo

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The suit says stolen vehicles, firearms and more than 500 marijuana plants were found during searches of the property.

B.C. government wants to seize Kelowna house allegedly linked to drug trafficking

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RCMP found fentanyl, cocaine, methamphetamine and other drugs and cash in house, according to civil forfeiture claim

Hells Angels win 13-year court battle against B.C. government

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The long-running civil case began in November 2007 when the RCMP raided the Nanaimo clubhouse. In 2012, the civil forfeiture case was expanded to include both the East End and Kelowna clubhouses.

Province seeks forfeiture of $100,000 cash seized by police at River Rock

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In a separate case, the province wants forfeited $85,000 in cash that was shipped through FedEx by a Calgary-based international money transfer business.

Gov't wants Coquitlam house forfeited for alleged link to drug line

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Lawsuit says Christina Kawalec should have known her son Aaron was allegedly using her residence to stash drugs.
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