Alarm bells should have gone off the moment Hai Le walked into the Bank of Montreal and asked to refinance the mortgage on his million-dollar home in Vancouver's up-and-coming Marpole area.
His alleged inability to provide proof he had the means to make the hefty monthly payments of about $4,000 should have been reason enough to crumple up and toss the application into the nearest trash can.
Le, a "sales manager," was also asking the bank to mortgage the property for its full value, a strategy that authorities say marijuana growers often use to minimize their losses should and when they get busted.
Yet despite these blatant red flags, the bank approved Le's application for a $976,000 mortgage on Oct. 22, 2008, some 15 months after he'd bought the house from a Viet Van Truong for $980,000.
Ten months after the purchase, in August 2009, Vancouver police raided Le's West 63rd Avenue home and uncovered a massive grow-op. Two days later, Le sought and received a $70,000 mortgage from the Royal Bank of Canada.
The property is now before B.C. Supreme Court in a potentially precedent-setting civil forfeiture case that calls into question the role banks play, knowingly or unwittingly, in the province's multibillion-dollar drug trade.
It also marks the first time, since civil forfeiture legislation came into effect in 2006, that the Victoria-based Civil For-feiture Office has fingered a bank as an interested party in a court action.
This means the CFO is seeking full or partial forfeiture of the bank's interest, the mortgages. In all past property cases, the banks have been repaid outstanding mortgages following sale of the seized property.
The eventual ruling could present a public-relations nightmare for the banks, especially the BMO, which is already dealing with an alleged mortgage-fraud scam in Calgary estimated to be in the tens of millions. In a tersely worded writ of summons filed in Vancouver, the CFO accused both banks of being reckless in granting Le the mortgages -- a charge that directly challenges their due-diligence processes.
In both instances, Le was allegedly unable to provide evidence he had the means to make the mortgage payments through legitimate means. Further, the writ alleges, the RBC mortgage was given when the house had zero equity.
The writ goes even further in suggesting the banks were either aware or "wilfully blind" to the fact that approving the mortgages would allow Le to launder money through the property and their respective institutions.
"All or part of Mr. Le's income is derived from unauthorized production of cannabis marijuana," the writ claims. "BMO and RBC . . . had actual knowledge, were recklessly indifferent towards, or were wilfully blind to the fact that the approval of funding of the BMO Mortgage and RBC Mortgage permitted the West 63rd property to be used as an instrument to launder the proceeds of crime."
The case also provides an interesting, if not disturbing, look at how crime groups successfully use B.C.'s financial institutions to fund their enterprises and launder their illegally earned cash.
According to the writ, Le was part of a "group" of at least three other persons, including a "cashier" and "cook," who've owned the house at different times since 2001 and used it to grow pot and launder money.
This was accomplished through the repeated sale and transfer of the house to the varying group members and the use of illegal money to pay for the down payments and monthly mortgage bills.
"Each time legal ownership What of [the property] transferred Do during the time period from 2002-09, the Group has received the proceeds from the sale of [the property]," the writ claims.
"The Group's involvement in [the property] transfers has allowed for the Group to put monies realized by illegal " activities towards the purchase price of [the property] and the monthly mortgage payments, thereby allowing the proceeds from the Group's unlawful activities to be laundered through the lending institutions who held mortgages over the Property."
Mortgages for the other purchases before Le took ownership in 2007 were also taken from RBC and BMO, according to the writ. Before the 2009 bust, the property was busted twice for being a grow-op.
No arrests or charges were ever made in connection to these busts, according to police, who could provide no further comment, given that the property in question is the subject of a civil-forfeiture action.
Brad Desmarais, officer in charge of drugs and gangs for the Vancouver Police Department, said property is just one way that criminal groups launder their money. And it's not unheard of that an insider at a lending institution might be part of the scam, Desmarais said.
"Whenever you have a broker relationship with a lending institution, I think there is potential for abuse," he said. "But the vast majority of brokers that we are aware of are scrupulously honest."
And he stressed that just because the banks were named in the writ, it didn't mean they were guilty of wrongdoing.
"It just means some agency has decided that a judge should look at conduct. I think citizens should be happy there are checks and balances that make sure [our institutions] are acting appropriately."
Both banks, meanwhile, have filed statements of defence denying all allegations outlined in writ of summons. They've also filed petitions to the court asking that their interests be protected and repaid. The lawyer representing both banks refused to comment, as the case is still before the courts.
A BMO spokesperson said the bank exercises "appropriate due diligence for each mortgage application." A spokesperson for RBC offered a similar comment, noting "employees are educated about fraud prevention and how to spot red flags leading to mortgage fraud."
While unable to speak to the specifics of the case, Maura Drew-Lytle, the director of media relations for the Canadian Bankers Association, said Canadian banks are "prudent and conscientious mortgage lenders."
Before granting a mortgage, Drew-Lyttle said, banks complete a thorough due-diligence process including a credit check, a request for employment details and an accurate appraisal of the property. They will also check whether the information being provided is legitimate, she said.
How then, with no proof of legitimate income, Le was able to get approval for two large mortgages from two different financial institutions will be the question on everyone's mind when a trial date is finally set.
"That remains to be seen," said Lisa Lapointe, the assistant deputy director of the CFO. "It is concerning, that's why we added the bank as a party. What we are saying is the mortgage is being paid with money that is obtained unlawfully and that Mr. Le had no evidence of any lawful income. You can draw the conclusion."
- - -
House's history
Court documents say Hai Le was part of a group that's used the West 63rd Avenue property since 2001 as a grow-operation and money-laundering tool. Proceeds from the sale of the house have gone to the group, documents allege. And down payments and monthly mortgage payments have been made with illegal money. Here is a history of the house since it allegedly came under the group's control.
- July 2001: Yan Hua Yu , a "cashier," buys the house on July 5, 2001 for $516,000. Down payment of $183,000 is made. Documents allege down payment is made with the "group's money." Mortgage of $333,000 is granted by RBC. In May 2002, a grow operation is discovered at the property.
- August 2002: Maggie Shao Hong Ho , a "cashier," buys the house for $420,000. Ho, sister of Yu's sister's ex-husband, puts a down payment of $130,000 on the house. Documents allege payment is made with the "group's money." RBC grants a $270,000 mortgage.
In June 2006, Vancouver police bust a grow-op at the property. Shortly after, Ho hires Viet Van Truong as a contractor to repair the house, condemned by the City of Vancouver.
- October 2006: Viet Van Truong , a "cook," buys the property for $775,000. A $310,000 down payment is made. Documents allege it is paid with "group's money." At time of purchase, house is subject to no-occupancy order. BMO grants a $465,000 mortgage oct. 6, refinanced Dec. 12 for $499,000. Haie's name, initially on transfer documents as half-interest, is taken off. On Jan, 11, 2007, The city allows the house to be reoccupied.
-
June 2007: Hai Le , also known as "sales manager" Henry Hai Le , buys house for $980,000. Down payment is not mentioned. Le allegedly used income from producing marijuana to buy house. BMO grants $784,000 mortgage June 18, 2007, refinanced for $976,000 Oct. 22, 2008. Police bust house Aug. 4, 2009. Two days later, Le is granted $70,000 mortgage from RBC. Mortgage documents say BC is aware of BMO mortgage.
NewsHawk: Ganjarden: 420 MAGAZINE
Source: The Province
Author: Cassidy Olivier
Contact: The Province
Copyright: 2010 Canwest Publishing Inc.
Website: Grow-op was financed by banks
* Thanks to MedicalNeed for submitting this article
His alleged inability to provide proof he had the means to make the hefty monthly payments of about $4,000 should have been reason enough to crumple up and toss the application into the nearest trash can.
Le, a "sales manager," was also asking the bank to mortgage the property for its full value, a strategy that authorities say marijuana growers often use to minimize their losses should and when they get busted.
Yet despite these blatant red flags, the bank approved Le's application for a $976,000 mortgage on Oct. 22, 2008, some 15 months after he'd bought the house from a Viet Van Truong for $980,000.
Ten months after the purchase, in August 2009, Vancouver police raided Le's West 63rd Avenue home and uncovered a massive grow-op. Two days later, Le sought and received a $70,000 mortgage from the Royal Bank of Canada.
The property is now before B.C. Supreme Court in a potentially precedent-setting civil forfeiture case that calls into question the role banks play, knowingly or unwittingly, in the province's multibillion-dollar drug trade.
It also marks the first time, since civil forfeiture legislation came into effect in 2006, that the Victoria-based Civil For-feiture Office has fingered a bank as an interested party in a court action.
This means the CFO is seeking full or partial forfeiture of the bank's interest, the mortgages. In all past property cases, the banks have been repaid outstanding mortgages following sale of the seized property.
The eventual ruling could present a public-relations nightmare for the banks, especially the BMO, which is already dealing with an alleged mortgage-fraud scam in Calgary estimated to be in the tens of millions. In a tersely worded writ of summons filed in Vancouver, the CFO accused both banks of being reckless in granting Le the mortgages -- a charge that directly challenges their due-diligence processes.
In both instances, Le was allegedly unable to provide evidence he had the means to make the mortgage payments through legitimate means. Further, the writ alleges, the RBC mortgage was given when the house had zero equity.
The writ goes even further in suggesting the banks were either aware or "wilfully blind" to the fact that approving the mortgages would allow Le to launder money through the property and their respective institutions.
"All or part of Mr. Le's income is derived from unauthorized production of cannabis marijuana," the writ claims. "BMO and RBC . . . had actual knowledge, were recklessly indifferent towards, or were wilfully blind to the fact that the approval of funding of the BMO Mortgage and RBC Mortgage permitted the West 63rd property to be used as an instrument to launder the proceeds of crime."
The case also provides an interesting, if not disturbing, look at how crime groups successfully use B.C.'s financial institutions to fund their enterprises and launder their illegally earned cash.
According to the writ, Le was part of a "group" of at least three other persons, including a "cashier" and "cook," who've owned the house at different times since 2001 and used it to grow pot and launder money.
This was accomplished through the repeated sale and transfer of the house to the varying group members and the use of illegal money to pay for the down payments and monthly mortgage bills.
"Each time legal ownership What of [the property] transferred Do during the time period from 2002-09, the Group has received the proceeds from the sale of [the property]," the writ claims.
"The Group's involvement in [the property] transfers has allowed for the Group to put monies realized by illegal " activities towards the purchase price of [the property] and the monthly mortgage payments, thereby allowing the proceeds from the Group's unlawful activities to be laundered through the lending institutions who held mortgages over the Property."
Mortgages for the other purchases before Le took ownership in 2007 were also taken from RBC and BMO, according to the writ. Before the 2009 bust, the property was busted twice for being a grow-op.
No arrests or charges were ever made in connection to these busts, according to police, who could provide no further comment, given that the property in question is the subject of a civil-forfeiture action.
Brad Desmarais, officer in charge of drugs and gangs for the Vancouver Police Department, said property is just one way that criminal groups launder their money. And it's not unheard of that an insider at a lending institution might be part of the scam, Desmarais said.
"Whenever you have a broker relationship with a lending institution, I think there is potential for abuse," he said. "But the vast majority of brokers that we are aware of are scrupulously honest."
And he stressed that just because the banks were named in the writ, it didn't mean they were guilty of wrongdoing.
"It just means some agency has decided that a judge should look at conduct. I think citizens should be happy there are checks and balances that make sure [our institutions] are acting appropriately."
Both banks, meanwhile, have filed statements of defence denying all allegations outlined in writ of summons. They've also filed petitions to the court asking that their interests be protected and repaid. The lawyer representing both banks refused to comment, as the case is still before the courts.
A BMO spokesperson said the bank exercises "appropriate due diligence for each mortgage application." A spokesperson for RBC offered a similar comment, noting "employees are educated about fraud prevention and how to spot red flags leading to mortgage fraud."
While unable to speak to the specifics of the case, Maura Drew-Lytle, the director of media relations for the Canadian Bankers Association, said Canadian banks are "prudent and conscientious mortgage lenders."
Before granting a mortgage, Drew-Lyttle said, banks complete a thorough due-diligence process including a credit check, a request for employment details and an accurate appraisal of the property. They will also check whether the information being provided is legitimate, she said.
How then, with no proof of legitimate income, Le was able to get approval for two large mortgages from two different financial institutions will be the question on everyone's mind when a trial date is finally set.
"That remains to be seen," said Lisa Lapointe, the assistant deputy director of the CFO. "It is concerning, that's why we added the bank as a party. What we are saying is the mortgage is being paid with money that is obtained unlawfully and that Mr. Le had no evidence of any lawful income. You can draw the conclusion."
- - -
House's history
Court documents say Hai Le was part of a group that's used the West 63rd Avenue property since 2001 as a grow-operation and money-laundering tool. Proceeds from the sale of the house have gone to the group, documents allege. And down payments and monthly mortgage payments have been made with illegal money. Here is a history of the house since it allegedly came under the group's control.
- July 2001: Yan Hua Yu , a "cashier," buys the house on July 5, 2001 for $516,000. Down payment of $183,000 is made. Documents allege down payment is made with the "group's money." Mortgage of $333,000 is granted by RBC. In May 2002, a grow operation is discovered at the property.
- August 2002: Maggie Shao Hong Ho , a "cashier," buys the house for $420,000. Ho, sister of Yu's sister's ex-husband, puts a down payment of $130,000 on the house. Documents allege payment is made with the "group's money." RBC grants a $270,000 mortgage.
In June 2006, Vancouver police bust a grow-op at the property. Shortly after, Ho hires Viet Van Truong as a contractor to repair the house, condemned by the City of Vancouver.
- October 2006: Viet Van Truong , a "cook," buys the property for $775,000. A $310,000 down payment is made. Documents allege it is paid with "group's money." At time of purchase, house is subject to no-occupancy order. BMO grants a $465,000 mortgage oct. 6, refinanced Dec. 12 for $499,000. Haie's name, initially on transfer documents as half-interest, is taken off. On Jan, 11, 2007, The city allows the house to be reoccupied.
-
June 2007: Hai Le , also known as "sales manager" Henry Hai Le , buys house for $980,000. Down payment is not mentioned. Le allegedly used income from producing marijuana to buy house. BMO grants $784,000 mortgage June 18, 2007, refinanced for $976,000 Oct. 22, 2008. Police bust house Aug. 4, 2009. Two days later, Le is granted $70,000 mortgage from RBC. Mortgage documents say BC is aware of BMO mortgage.
NewsHawk: Ganjarden: 420 MAGAZINE
Source: The Province
Author: Cassidy Olivier
Contact: The Province
Copyright: 2010 Canwest Publishing Inc.
Website: Grow-op was financed by banks
* Thanks to MedicalNeed for submitting this article
