Revenue Canada issues run deeper than Nicolo Rizzuto cheque: ex-staff
$380K cheque to Nicolo Rizzuto may be tip of the iceberg, Enquête research suggests
Problems at the Canada Revenue Agency run much deeper than a $381,000 rebate cheque mistakenly issued to a jailed mob boss, according to two former auditors who say they witnessed an attempt to stall a corruption probe and colleagues getting cozy with organized crime.
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The former CRA employees spoke on camera to Radio-Canada's investigative program Enquête as part of a three-year investigation by its journalists into graft allegations at the tax agency's Montreal office.
The investigation revealed Wednesday that in 2007, the CRA cut a cheque for $381,737.46 to Nicolo Rizzuto, patriarch of Quebec's Sicilian Mafia. At the time, the revenue agency had a lien on Rizzuto's home because he owed $1.55 million in unpaid taxes.
Federal Revenue Minister Kerry-Lynne Findlay acknowledged in a statement Thursday afternoon that the cheque should never have been sent.
"Those responsible for misconduct must be held accountable. We are acting to hold people accountable," the statement said.
"One day they're here, the next day they go work for the bad guys.- Robert Martin, CRA
But the cheque may be just the tip of the iceberg, Enquête's research suggests. Jean-Pierre Paquette, a retired auditor with the CRA's anti-organized-crime unit who learned of the cheque, said he raised wider concerns about possible collusion between some agency personnel and a pair of construction executives, one of whom has ties to organized crime.
Those concerns eventually led to a years-long RCMP investigation that has resulted in more than 100 criminal charges against former CRA staff, the construction magnates, accountants and others.
But when Paquette first voiced his apprehensions, it took nearly a year for something to be done, he said.
"I can't speak to the organization there. I'm talking about certain people, one person in particular," he said in an interview in French. "Just saying, 'Well, look, we won't do this, we don't really have the time to deal with that information, we could be doing other things, we could move on to something else.'
"Until, at a certain moment, I met with a senior manager… and I said, 'Listen, we have a little problem, because I've got proof that there's corruption.' And from that point, well that's where it got going."
Another former auditor in the anti-organized-crime unit said a family with close Mafia ties tried to bribe him in 2002 after their construction company hid $12 million from the tax man.
"In the accountant's office, the elder family member approached me and told me in no uncertain terms that 'We're prepared to give you an amount, $100,000, and you will lower our assessment," said Robert Martin, who retired two weeks ago from the CRA. "But they'd approached the wrong guy."
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Martin didn't want to divulge the family's name, out of concern for personal safety. But court records confirm the incident and talk about the possibility of a criminal investigation by the RCMP. That investigation never happened, however. Paquette and Martin said they started to wonder whether some of the staff at the Montreal tax office were getting a little too close to people with shady backgrounds. It became all the more apparent when a CRA employee would retire and take up private consulting work, in a few cases for the very mobsters they had been fighting.
"It's become endemic: senior managers who are involved in a file take their retirement and a month later have become legal advisers or consultants on the same files for the other side," Paquette said. "It's a huge conflict of interest. Huge."
"One day they're here, the next day they take their retirement and go work for the bad guys. How sincere could they have been while they were here?" Martin wondered.
"Bosses, team leaders, tax-office heads… go on to become agents for people involved in organized crime."
While nine CRA employees have been fired so far as a result of the corruption probe and six face criminal charges filed by the RCMP, there may be a much bigger, still undisclosed problem.
Sources told Radio-Canada about a network involving some CRA audit personnel that was even bigger than the one that police have cracked. The amounts of money involved were in the tens of millions of dollars.
According to those sources, a scheme based around corrupt auditors would see them inflate the tax bills of the companies they were auditing.
Those auditors then forwarded the names of the companies to former colleagues who had left the revenue agency and set up as independent consultants.
The consultants, in collusion with the auditors, would approach the companies and offer their tax-reduction expertise — in exchange for a big commission.
It was easy to get the companies' tax bills reduced, because they'd been artificially inflated in the first place. All that was left was for the consultants to share their commission with their auditor friends.
Anti-organized-crime unit disbanding
Meanwhile, as the RCMP continues its investigation into the CRA, the tax agency's special antiorganized-crime team — the unit that worked alongside the Mounties on Project Colisée and helped put most of the top mobsters in Quebec behind bars — is being disbanded. As part of federal budget cuts, the jobs of the Special Enforcement Program's employees countrywide have been eliminated.
Canada Revenue would not agree to an interview but said in a statement that personnel and resources have not been cut but reassigned to other units.
"There has been no reduction in resources devoted to fighting tax evasion," the statement said. "The goals and mandate of the SEP have not been abandoned. The SEP's resources have been moved elsewhere."
A critic of the government, however, said the unit had special expertise and resources that will be lost or diluted in the shuffle. At the very time the Canada Revenue Agency is reeling from worries about possible mafia infiltration, its top anti-mafia squad has been eliminated.
"They had people dedicated to looking at organized crime, and so they were able to catch it. And that unit doesn’t exist anymore," said Dennis Howlett, executive director of the advocacy group Canadians for Tax Fairness.
"It really puts into question whether the government is really serious about going after organized crime and being tough on crime."
The unit's former staff members also have doubts about whether its work will continue.
"It's so frustrating to know that those types of files will practically never get audited. People are going to think, 'OK, now we can stick it to the system,' " said Martin, who spent most of this career with the Special Enforcement Program.
"Going after a hairdresser who fails to declare $2,000 a year when the other guy is laundering seven or eight million a year… and they're not going after that, I find that unbelievable."
Another retired auditor, Guy Daigneault, said the move to eliminate the unit "doesn't make any sense."
"I don't understand," he said. "I would have never thought that the SEP would be something in the past."
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