RCMP Insp. Bruce Bowie, now retired, told a colleague in 1992 that the Montreal operation was plagued by serious mistakes, problems and flawed decisions. The Vancouver detachment later ran a similar operation.

In March 1992, halfway through the operation, the RCMP officer in charge of the force’s anti-drug profiteering program, Insp. Bruce Bowie, spoke with a fellow officer who proposed an identical currency exchange in Vancouver.

Insp. Bowie told his peer, Insp. J. H. Hislop, that the Montreal operation was plagued by "a significant number of problems, mistakes, and decisions," according to an RCMP memo written by Insp. Hislop on March 31, 1992.

A man charged and later convicted in the case, Domenic Tozzi, in 1995 challenged the legality of the RCMP’s Montreal operation. Quebec Court Judge Pierre Pinard ruled the police operation was lawful.

But when substantial evidence of possible RCMP neglect and wrongdoing began to emerge during the Quebec proceedings, Justice Pinard stopped interrupted witnesses, saying three times that he was not "conducting a royal commission into the RCMP."

The RCMP’s Montreal operation, known in police circles as "a reverse sting," was hastily set up in 1990 to identify, investigate and prosecute money launderers and drug traffickers in Canada who were using currency exchanges for their illegal activities.
Montreal was identified as one of the biggest money-laundering capitals in the world by foreign intelligence and law-enforcement agencies.

The Canadian government was under heavy international political pressure to counter the activity by letting the Mounties loose on the criminals.

A first covert currency exchange probe launched in 1989 by the RCMP’s "C" division in Quebec, code named "Operation CIDA," came apart at the seams after only six months.

A police informant decided he would not testify against anyone involved in a torrent of transactions that saw drug-world figures launder $52 million in just 26 weeks, RCMP documents show.

The documents do not explain why the informant would not testify.

But the Mounties nevertheless identified 15 different criminal organizations that had used U.S. currency from the exchange co-operating with them to import an estimated 2,400 kilograms of cocaine into Canada.

Smarting from the embarrassing, premature end to "Operation CIDA," RCMP officers decided to buy and operate their own currency exchange and staff it with trained undercover officers to avoid relying on paid informants.

The RCMP-staffed currency exchange operation was proposed on July 10, 1990, and approved by RCMP headquarters on Aug. 13, 1990.

Its aim was straightforward. Officers wished to develop evidence of cash flows to support charges of drug-money laundering, make drug seizures and launch related prosecutions.

The proposal for the operation never explicitly stated that the covert currency exchange would facilitate drug trafficking, but police officers involved said their superiors were experienced enough to know this would happen.

In a report dated July 10, 1990, which was appended to the proposal sent to headquarters, RCMP Insp. Michel Cuerrier, the officer in charge of intelligence and operations in Quebec, warned that the covert investigation would be successful only if RCMP brass made it "a priority."

Insp. Cuerrier urged certain guarantees be made to ensure police support services, such as surveillance teams and electronic eavesdropping staff and equipment, be available, together with "a number of investigators to be determined along the way to properly investigate each organization targeted."

Added Insp. Cuerrier: "Without these, we cannot undertake this operation."

The crucial supply of investigators and equipment never materialized.

Less than 24 hours after Insp. Cuerrier wrote those words and before the operation was approved by RCMP brass, 100 Surete du Quebec officers dressed in riot gear stormed barricades set up by 300 armed Mohawks on land belonging to the town of Oka, Quebec, adjacent to a golf course.

An SQ officer was killed in a gunfight with Mohawks, exacerbating a native crisis that had already lasted four months in the hot summer of 1990.

Later that year, the Gulf War erupted when troops from Iraq invaded Kuwait. That international armed conflict continued into mid-1991.

Both events "heavily mortgaged" the RCMP’s manpower in Quebec, an internal report stated.

Hundreds of RCMP officers, from the drug squad and other sections, were forced to shelve ongoing criminal investigations.

They were reassigned to protect federal buildings during the war and deal with other national-security issues during the Oka dispute and Gulf War.

The covert operation went ahead anyway, on a six-month trial basis.

As if the reassignment of its officers wasn’t bad enough, the RCMP soon began to grapple with the steepest budget cuts in the police force’s history, part of the deficit-slashing plans implemented by the then Conservative government.

Meanwhile, organized crime wasn’t fighting a deficit; Canada’s cocaine business was booming.

Every time a criminal organization exchanged $1 million Cdn. into U.S. currency or bank drafts at the RCMP’s covert currency exchange, police estimated that the organization had recently imported, distributed and sold 35 kilos of cocaine.

But officers quickly learned with dismay that they were facing some major challenges. Once they converted Canadian cash into U.S. currency and handed it over to their drug-world "clients," the RCMP had no control over what happened to the money.

Without a sufficient number of surveillance teams and investigators, officers often failed to discover where the original drug money came from and where the exchanged cash went.

For example, at 11:23 a.m. on Sept. 24, 1992, one man walked in and exchanged $959,720 in Canadian cash into 16 U.S.-dollar bank drafts made out to five different people. Nobody was available to follow and identify him.

As their probe unfolded, RCMP officers were often stunned to learn just how far and wide their cheques and currency were being spread.

Drug money exchanged by the covert RCMP company helped fuel the drug trade in Toronto, Montreal, Vancouver, Quebec City, Windsor and other major cities across Canada during the four years.

In July 1992, astonished officers learned that one of their suspects was arrested in Montgomery, Alabama, in possession of 110 kilos of cocaine and $300,000 U.S. in cash, one RCMP report said. The money had come directly from the covert RCMP currency exchange in Montreal.

At the time, the RCMP had not even investigated the arrested man; no detectives were available to take the case.

Bank drafts from the RCMP company were also found on drug traffickers arrested by Metro Toronto Police.

Most of the time, though, bank drafts in U.S. funds issued by the RCMP currency exchange were almost impossible to trace, officers admitted in sworn affidavits that they used to obtain telephone wiretaps in January 1994.

Recipients of the bank drafts used phoney names and laundered the currency through numbered offshore bank accounts controlled by dummy companies—most of them registered in free-trade zones in Panama and other tax havens where few questions are asked at small bank branches.

Without real names, addresses and birth dates of suspects, no foreign police force would even consider a request for investigative assistance from the RCMP, officers stated.

Bank drafts issued by the RCMP company were cashed without difficulty at, among others: the Banco de Bogota branch in Nassau, Bahamas; the International Bank of China in Colon, Panama; the Euro Bank in Boca Raton, Florida; the Republic Bank of Miami, Florida; the Banco Atlantica SA, New York; and the Banco International de Costa Rica in Miami.

As the bank drafts cashed around the world trickled back to the covert company’s offices, officers running the operation had more local concerns.

Political infighting among RCMP officers and security breaches involving corrupt RCMP officers were wreaking further havoc on the operation.

Files on dozens of suspects identified by the currency exchange operation in 1990 and 1991 were transferred to the RCMP’s Montreal drug squad.

The files gathered dust on the desk of the late and corrupt RCMP drug squad boss in Montreal, Insp. Claude Savoie, as mobsters of every stripe moved drug money through the police exchange.

Mr. Savoie, who was transferred to Ottawa in 1991, shot himself in the head with a revolver in December 1992 in his office at RCMP headquarters as fellow officers waited to question him about his contacts with mobsters.

In December 1993, then-RCMP commissioner Norman Inkster said an internal probe found that the late Mr. Savoie took $200,000 in bribes. In exchange, he said, Mr. Savoie leaked sensitive information about police operations to members of crime groups.

There was no mention about his knowledge of the covert currency exchange operation, which was by then in full swing and was supposedly secret.

When interviewed by the Citizen recently, Mr. Inkster said Mr. Savoie was not aware of the covert currency exchange operation in Montreal.

Mr. Inkster added that out of respect for Mr. Savoie’s family, he would not discuss the force’s investigation into Mr. Savoie’s activities "unless I am required to testify about it in a court of law."

But two Montreal Mounties contradict the former RCMP commissioner.

The man who oversaw the covert operation, Sgt. Yvon Gagnon, and the retired Mr. Moisan, said the late Insp. Savoie was fully aware of the covert currency exchange operation.

But the Mounties decided to continue the covert operation—even after Mr. Savoie committed suicide to avoid answering police questions—because they believed he did not sell them out.

Mr. Moisan and Sgt. Gagnon said they both believe to this day that Mr. Savoie did not betray the covert operation because undercover officers could have been killed and he didn’t want to have their deaths on his hands.

"Savoie could have sold out the exchange in five minutes. He was our boss for several months and he had the address of the exchange," Sgt. Gagnon said.

Added Mr. Moisan: "Savoie was in it for the money, but he didn’t want to have anybody killed. He kept telling us how he had received a big inheritance from an aunt. We were all had."

Despite the officers’ claims to the contrary, the Citizen has gathered evidence suggesting that the security of the operation may have been compromised from the beginning and several subsequent times:

Four months later, wet currency started arriving that was physically laundered with soap. "Proof of money laundering," Cpl. Marc Lavoie joked.

Mr. Cotroni’s fingerprints were never again found on bills brought to the RCMP exchange, Sgt. Gagnon said.

He evaded arrest for five years but is now in jail on drug charges.

Did high-level organized crime bosses know the RCMP was covertly operating the Montreal International Currency Center exchange and use it anyway, even though it meant that some of their organizations’ lower- and mid-level ranking members ended up being sacrificed to serve jail time?

One Montreal criminal lawyer who has defended several mobsters over the years, and who spoke to the Citizen on condition he not be identified, believes that’s likely what happened.

The Citizen has no evidence to corroborate his assertion.

But if it were true, why would the mob do it? Because the RCMP-run exchange was a great place for business.

Drug-world figures never had trouble obtaining large sums of U.S. cash from the RCMP money traders—not the case with other currency-exchange companies—and they never hit snags cashing bank drafts that came from the RCMP company, the lawyer said.

The late Insp. Savoie was aware his officers lacked manpower and resources to investigate all the people using the RCMP exchange and passed that information to his high-ranking mob contacts, the lawyer suggested.

Sometimes, the mobsters were surprisingly sophisticated and the Mounties seemed terribly outmanned.

The organized-crime gangs employed dismissed police officers and often detected RCMP surveillance teams tailing them by adopting counter-surveillance efforts.

The criminals hired private detectives to investigate the currency exchange, the RCMP learned after spotting the private eyes lurking on the streets near its business.

And they even hired consultants to check phones for wiretaps.

But the shortage of resources, police corruption and mob sophistication were not the only problems the covert RCMP operation encountered.

There was a serious lack of co-ordination between the RCMP’s local anti-drug profiteering squad, which was overseeing the currency exchange operation, and its drug squad during and after Mr. Savoie’s stint as boss.

Mr. Moisan and Sgt. Gagnon said the late Insp. Savoie and his successors were threatened and jealous of the currency exchange operation. They felt it infringed on their turf, they said.

"Savoie saw a parallel drug squad being created and he didn’t like it. Neither did his successors," Mr. Moisan said.

"To this day," Sgt. Gagnon added, "I am convinced there was a sense of jealousy among officers on the drug squad. I believe that proceeds of crime sections must work hand in hand with drug squads. The RCMP doesn’t understand that. It’s become too bureaucratic."

Despite the slew of serious problems and the lack of resources, the operation blithely continued to exchange known and suspected drug money.

The project was renewed six times during four years.

Undercover officers exchanged $9.33 million in suspected or known drug money by the time the operation had reached its first anniversary in 1991.

They had exchanged a total of $43.3 million by the end of the second year in October 1992.

In weekly reports filed and sent to RCMP headquarters throughout 1990, 1991 and 1992, as business started to pick up, Sgt. Gagnon and his peers on "Major Operation 90-26C" repeatedly and often bitterly complained about their lack of resources.

Cpl. Bolduc added: "We are realizing more and more that we shall not be able to investigate all the information generated by the project due to the shortage of human resources."

"If you consider that cocaine is actually selling for $30,000 a kilo, their sales represent 30 kilos of cocaine in one week."

"I disagree with the theory of the Montreal drug squad which defines these case files as ‘Intelligence,’ " Sgt. Gagnon wrote.

"How can we be closer to a drug transaction? The money exchanged into U.S. dollars can only serve to purchase drugs," he stated. "I understand that these investigations take a certain time and they are difficult, but should we content ourselves with easy and rapid investigations?"

In a report dated March 5, 1992: Insp. Michel Cuerrier complained that no progress was being made on investigations because the drug squad did not have sufficient resources to handle them without more officers.

"If we extrapolate and take for granted that our clients are involved in cocaine- trafficking organizations, a rapid calculation shows that to date our business has exchanged almost $20 million; this sum would translate into a quantity of about 950 metric tonnes of cocaine that these organizations have succeeded in selling. Even if we have an extrapolation here, it nevertheless remains that the reality is maybe close to this picture."

In a report for the week of 92-06-08 to 92-06-14: Under the heading "PERSONNEL SITUATION," Sgt. Gagnon said the summer holiday period started. Another officer noted that while Mounties are taking vacations, criminals weren’t and continued to exchange millions.

"Investigations will be shelved," Sgt. Gagnon warned, "unless we get reinforcements" to replace vacationing officers. He didn’t get them.

Sgt. Gagnon noted officers counted and exchanged $2.19 million that week alone were "already having problems meeting demands placed on them."

Also, a Crown attorney refused to let the RCMP wiretap lawyer Joe Lagana. Due to the resource shortages, RCMP officers hadn’t used all traditional undercover policing methods to investigate him before resorting to electronic eavesdropping, as required by the Criminal Code.

"For as long as we do not try (under cover) infiltration to its fullest potential, we won’t be able to pursue this investigation," Sgt. Gagnon wrote.

"If we do not pursue it, how will we explain the transactions of more than $13 million which we have facilitated?"

As 1992 wound down, Sgt. Gagnon, a 30-year RCMP veteran who is an accomplished and respected drug investigator, finally lost his patience.

In an RCMP report dated Dec. 21, 1992, Sgt. Gagnon sought an extension for the operation which was then slated to expire on Feb. 28, 1993.

Near the end of his request, he stated: "It seems useless to launch operations of this scope if the resources are not available to finish the key work, which is to undertake the investigations."

Officers even had to close the exchange counter to the public several times because they were overloaded with work counting all the drug money, which arrived in bags, boxes and attache cases jammed with small bills.

Only as the covert operation entered its third year did RCMP headquarters begin to express concerns about the worrisome events in Montreal.

On Feb. 23, 1993, the deputy commissioner of the RCMP operations approved an extension of the currency exchange operation, but not without expressing dismay about events within "C" Division in Montreal.

The news was related to Sgt. Gagnon and his officers by the head of the anti-drug directorate at the time, Insp. Bruce Bowie.

"Your request for an extension was discussed with the Deputy Commissioner of police operations and the latter expressed certain concerns about this investigation, particularly that there seems to be an insufficient number of investigators to adequately pursue the information obtained as well as the probes generated by Project Contract," Insp. Bowie wrote.

"As a result of this, this investigation would have never been approved without the assurance that a sufficient number of investigators be assigned to this project," he added.

The RCMP’s Deputy Commissioner of police operations extended Operation 90-26C on three conditions.

He urged that a sufficient number of personnel be assigned to investigate the information obtained, to pursue the investigations generated by the operation and to perform the necessary police surveillance.

Even that order was largely ignored by the RCMP’s Quebec region commanders, whom Sgt. Gagnon said were changing so quickly during the period of the operation that it seemed like a game of musical chairs.

The RCMP decided to reduce the number of people using the currency exchange and reduce the volume of transactions by converting the exchange into a private, by-appointment-only business in the summer of 1993.

That came seven months after such a move was recommended by Const. Cowley, when he suggested in his Oct. 16, 1992, memo that all undercover officers were doing, without the proper resources, was offering money laundering services for drug traffickers.

The RCMP officers hoped the appointments-only rule would allow officers to focus on key suspects in two organizations, that of lawyer Joe Lagana and a farmer-turned-drug trafficker named Jean-Pierre LeBlanc.

Files on the remaining 23 organizations were shelved.

One of the Mounties’ drug and money laundering suspects, Francois Couturier, was shot dead in a bowling alley in the east end of Montreal. His file was closed and information was passed to Montreal police.

But instead of slowing business down, the covert RCMP company’s by-appointment-only business truly exploded beyond their wildest dreams.

By October 1993, the total traded at the covert police exchange more than doubled to $105 million from $43 million a year earlier.

By this time, however, officers running the operation were entirely crippled by yet another problem.

Computer technology used to execute wiretaps and record telephone conversations was outdated and jammed with demands from other cases.

Officers with the covert operation stewed and waited for five months before the "C" Division’s special "I" section could accommodate their requests to wiretap members of the Lagana group to gather evidence of their drug importations.

"Unfortunately, the lack of resources is undermining a large part of our efforts," Sgt. Gagnon steamed in one report.

"We are actually losing a lot of information because it is still impossible to get eavesdropping lines which could advance the investigation," he added.

By August 1993, they had their coveted 16 wiretap lines for the Lagana case, but Sgt. Gagnon reported that only two officers were on the case to read all the transcripts coming in and make sense of them.

"It goes without saying that we are just surviving," a bitter Sgt. Gagnon added.

The operation continued to be hamstrung by manpower shortages, but there was one difference: It started turning away suspects it could not investigate.

In a report filed for the week Nov. 29 to Dec. 12, 1993, Sgt. Gagnon reported that an organization which had $800,000 to launder "between now and the end of the year" was turned away by the covert RCMP company.

Why? "Due to the lack of manpower required to investigate this organization, we refused to do the transactions," he added.

Several times throughout the covert operation, officers tried but failed to make any of their own seizures of cocaine imported by their drug-world clients.

In testimony before a Quebec Court Judge in 1995, Sgt. Gagnon said: "It would be announced to us that in a few weeks, we’d receive large sums of money, but we never got our hands on the imports or the trafficking that was taking place."

In January 1994, officers had learned through wiretaps that some of their suspects, including a man named Sammy Nicollucci, were arranging to have 170 kilos of cocaine imported to Canada.

The officers had three surveillance teams covering suspects, but still failed to make the seizure. They had to remove listening devices from one of the suspect’s offices in Montreal because he was moving.

When he was settled in his new digs, the wiretap lines were again unavailable from the RCMP’s Special "I" section. So the Mounties arranged to transport a shipment of 558 kilos of cocaine for their suspects in the group led by Mr. Lagana, picking it up off the coast of Colombia and moving it to Montreal.

It was only then that the RCMP managed to gather—after close to four years of investigating—enough evidence to arrest Mr. Lagana and his gang for conspiring to import drugs and launder the drug money.

By the time Mr. Lagana and his subordinates were arrested, the covert RCMP currency operation had exchanged $141.5 million in known and suspected drug money.

Despite all the problems they experienced and obstacles they encountered both inside and outside the RCMP, the force’s Sgt. Gagnon and Mr. Morais believe the Montreal covert operation was a good one.

The feel that they "won" in the end because they brought members of two big drug trafficking organizations to justice.

The covert operation also generated valuable intelligence about the Quebec and Canadian drug world while it was in operation, they add.

They don’t like to talk about how $125 million they exchanged at the tiny covert RCMP company vanished into the pockets of Colombian drug lords and Canadian mafia after their cocaine went up the noses of addicts in Canada.

Sgt. Gagnon will say one thing: "Do you think that anything has changed, that things got better in terms of the amount of money laundering going on because of what we did at the Montreal International Currency Center?