In Rosenfeld’s discharge hearing, the bankruptcy judge noted that Rosenfeld claimed assets of $2,000 and liabilities of $4,629,731. And yet, said the judge, “he lives in a house owned by his wife which is valued at in excess of $1.3 million dollars and which contains personal property insured for in excess of $500,000. During his bankruptcy, he has continued to enjoy a lifestyle replete with housekeeper, gardener, a peak season vacation in Barbados and private school fees.” Rosenfeld had credit card debts of fifteen to sixteen times his disclosed assets. He claimed personal expenses as business expenses (including his wife’s monthly cell phone bills of $400 to $500). The judge found Rosenfeld “evasive and … not credible” and said “he was not honest with his creditors, the Trustee or this court. He was unwilling to make full disclosure of his financial affairs. He has not made any economic sacrifices during his bankruptcy or shown any remorse. His attitude is a slap in the faces of his creditors. I join the Trustee and his creditors in suspecting that he has undisclosed assets offshore.”
Rosenfeld’s three-week jury trial, on two charges of money laundering and one of attempting to possess the proceeds of crime, started at the beginning of February 2005. Bill Majcher gave extensive evidence. Excerpts from Majcher’s tapes of his conversations with Rosenfeld were played, and the jury was shown a videotape of the money-counting meeting in the Hyatt Hotel. Glen Orr, Rosenfeld’s lawyer, described his client as looking more like “a comptroller with a small company” than a drug kingpin. Addressing the jury, Orr argued that the Crown had not proved beyond a reasonable doubt that Rosenfeld believed the money to be drug proceeds because Rosenfeld was delusional and it was impossible to know what he believed. The prosecutor referred to a “serious problem in Canada” of shady lawyers hiding behind solicitor-client privilege. On February 22, the jury found Rosenfeld guilty.
At a March 18 sentencing hearing Majcher said that lawyers have become key players in money-laundering operations because they are not obliged by law to report suspicious financial transactions. “In almost every case we are doing,” said Majcher, “lawyers are central.” On March 30, a Toronto judge sentenced Rosenfeld to three years in prison and fined him $43,230 (the amount Rosenfeld was paid to launder the money). Adrian Humphreys reported in the National Post on March 31, 2005:7
It was an opportunity not missed by Rosenfeld.
Heavy set with thinning, greying hair and a heavy brow, Rosenfeld dressed like a successful lawyer to the end—choosing a dark suit with a silver and green tie and placing his dark-framed glasses on shortly before the judge entered the courtroom.
After his sentencing, he began his transformation from lawyer to convict.
He removed his tie—which is not allowed in prison over safety concerns—and passed it to his brother. He then pulled a more utilitarian coat, a red ski jacket, over his suit and placed his hands behind his back for a waiting officer’s handcuffs.
Rosenfeld was taken to Toronto’s Don Jail. Five days later he was released on bail of $1.95 million, with three of his relatives pledging money and property. He fired Glen Orr and hired another lawyer for an appeal. The Russians have yet to blow up his “associate.” At the end of 2006, Rosenfeld’s appeal had yet to be heard.
Bill Majcher says that he liked Rosenfeld and that Rosenfeld “almost had a crush on me.” Rosenfeld was “in some ways a sort of Falstaff,” says Majcher, referring to the buffoon and braggart created by Shakespeare, but he adds, “Make no mistake, there was much truth to many of his claims about criminal activity. He did all those things he said he did.” After his spectacular Bermuda Short success, Majcher, a twenty-year veteran of the RCMP, was given the rank of inspector and assigned to run the RCMP’s Integrated Markets Enforcement Team (IMET), based in Vancouver, which investigates serious capital markets fraud. But Majcher himself was set for a fall. On June 29, 2005, he was removed as head of IMET and the next day was suspended with pay pending the outcome of an internal investigation. This followed a May 21 column by David Baines in The Vancouver Sun, which pointed out that Majcher, while on active RCMP duty, had sought a federal Conservative nomination (unsuccessfully), and that Majcher and Kevin Garner, a convicted felon, were considering a deal for a movie based on the Bermuda Short sting.8 Majcher is now a director of a Hong Kong–based investment bank. In another strange twist, Kevin Garner, who served fifteen months in a U.S. prison for money laundering as a result of Bermuda Short, invented a board game called “Dirty Money: The Money Laundering Game.” On September 29, 2005, Betsy Powell reported in the Toronto Star that Garner spoke about money laundering and his board game in Toronto to more than a hundred branch managers with ScotiaMcLeod, a major Canadian brokerage house, and received a standing ovation.9
PETER SHONIKER is another Toronto lawyer who enjoyed dining at Opus on Prince Arthur Avenue (Toronto Star reporter Betsy Powell has referred to Shoniker as a “permanent fixture at Opus.”10) He is the son of the late Eddie Shoniker, a respected Conservative Party insider who served as chairman of the Ontario Transport Board in the seventies. Peter Shoniker, a graduate of the University of Ottawa law school, came to serious public attention in 1986, when he was a thirty-one-year-old assistant Crown attorney driving a car with the vanity licence plate “JAIL4U.” Wearing a bulletproof vest and accompanied by two bodyguards, Shoniker told a Quebec conference that Canadian terrorists trained in Libya, South Yemen, and Lebanon were getting ready to kidnap and assassinate Canadian politicians. Shoniker said that studying terrorism was his hobby, and that he had taken courses on terrorism from experts in the CIA, FBI, U.S. Navy Intelligence, and New York Police Department. A variety of academics who attended the conference roundly condemned what he said, severely questioning both his facts and his bona fides, and Shoniker was suspended for a month from his job as an assistant Crown attorney and disciplined for speaking out in a way inappropriate to his office.
Despite this early and very public false step, Shoniker went on to considerable legal and political eminence. After three years as a Crown prosecutor, he took up private practice as a defence lawyer, acquiring high-profile clients. In 1993, he defended Raymond Twinney, a former Newmarket mayor who ended up pleading guilty to corruption. In 1998, Shoniker represented Bryan Cousineau, former York Region police chief who pleaded guilty to two counts of breach of trust. Shoniker also represented the Niagara Board of Police Commissioners at a royal commission inquiry into allegations of wrongdoing in the Niagara police force; Major-General Lewis MacKenzie at the 1995 Somalia inquiry; and four Christian brothers charged with physical and sexual abuse of students at the school where they taught. Shoniker—some say trading initially on his father’s reputation—became closely associated with provincial Conservative Party members. His friends included former Toronto chairman Paul Godfrey, former Toronto mayor Mel Lastman, former Ontario premier Ernie Eves, and Roy McMurtry, who became Chief Justice of Ontario. Shoniker was widely credited with helping secure the job of Toronto police chief for Julian Fantino in 2000.
During this period, Shoniker also established close links with the Cayman Islands. In 1989, he bought a condominium there, and in 1991 he and Renée Vinett—now a lawyer in Toronto—were married on Grand Cayman (they are estranged). He also, for a time, acted as coordinator of the Cayman Islands National Drug Council. An October 18, 2002, Cayman Islands government press release announced that the governor had given Sir Peter Shoniker an award for his pro bono work in raising the international profile of the National Drug Council. (Inexplicably, Shoniker had taken to using the title “Sir” from time to time.)
It was a considerable shock to the Ontario establishment, and presumably to Shoniker’s eminent friends, when, on June 14, 2004, he was arrested on money-laundering and related charges. Shoniker was arrested near his home as he returned from a business trip to Europe. He was accused of laundering about $750,000 supplied by RCMP undercover agent Corporal Al Lewis as part of an elaborate fifteen-month sting operation called Project OJUST. An undercover police officer told Shonike
r that the money had been skimmed from the pension account of the United Steelworkers of America’s Hamilton branch. The money, laundered from Canada via several other countries, ended up in a New York City Citibank account. Shoniker claimed a fee of about 10 percent and took another $50,000 for fictitious bribes paid to police and customs officers. In a recorded telephone conversation with Corporal Lewis, Shoniker said that Lewis could tell him anything because of solicitor-client privilege, and that they needn’t worry about wiretaps. “There isn’t a fucking judge in the city who would grant an authorization on my line,” he said. In another taped conversation, Shoniker described himself as “untouchable.”
“Today’s arrests demonstrate that no aspect of our society is immune to criminal activity,” said RCMP Inspector Don Panchuk, head of the Toronto Integrated Proceeds of Crime Section. “Investigations into alleged criminal activity involving a lawyer are uniquely difficult and complex,” said Chief Superintendent Ben Soave, head of the Combined Forces Special Enforcement Unit, on the day of Shoniker’s arrest. Soave continued, “Investigative tools that police could normally employ are extremely restricted when the subject of an investigation is a lawyer. The unfortunate consequence of these restrictions is that the legal profession can be exploited to cloak criminal activity.” After spending the weekend in a holding cell, Shoniker was released on $75,000 bail, posted by his wife Renée.
The legal process creaked along. It was not until August 18, 2006, that Shoniker pleaded guilty to one charge of money laundering and one charge of theft. In court to show support was former Toronto police chief Julian Fantino (who embraced Shoniker), former deputy police chief Steve Reesor, former Canadian Armed Forces major-general Lewis MacKenzie, and former judge David Humphrey Sr. Glowing testimonials were read to the judge. MacKenzie described Shoniker as having been a “lawyer of integrity, honesty, professionalism, devotion and ability.” Others (including Paul Godfrey) wrote in a similar vein. There were sixteen letters of praise. His adopted daughter said Shoniker helped her fight an eye disease that could lead to blindness; while that letter was being read, Shoniker burst into tears. Friends attributed his downfall to a combination of too much work, alcohol dependence, a sleep disorder, and abuse of prescription drugs. Major-General MacKenzie made an extraordinary and fatuous statement: “As they say in the military, ‘You don’t die for the Queen. You don’t die for God. You don’t die for your country. You die for your buddies.’” It was left to John Barber, writing about Shoniker a few days later in The Globe and Mail, to put common sense and good judgment on the record:11
The scary thing is that so many still love him. Even after seeing the truth laid bare in a scathing indictment detailing the man’s greed and criminality—an open-and-shut, irrefutable case—they hug him tight and make ludicrous excuses. The reason Mr. Shoniker engaged in sophisticated schemes to launder stolen money, they say, is because he had trouble sleeping at night.
But beneath all the special pleading and tear-jerking flummery, there is one message that all Mr. Shoniker’s supporters share. It doesn’t matter what he did, he was one of us: untouchable. What is most striking about their interventions is not love, certainly not sorrow, but indignation. It’s creepy.
Christie Blatchford wrote a profile of Peter Shoniker in the June 26, 2004, Globe and Mail:12
When almost two weeks ago, Peter Shoniker was arrested by the Royal Canadian Mounted Police and charged with a sheaf of money-laundering offences, it is fair to say that some of the most powerful people in Toronto shuddered in apprehension.… He is improbably well-connected to police officers both of high and low rank, police organizations …, a smattering of Ontario judges, and political movers and shakers mostly but not exclusively within the Ontario Conservative Party.
One of Shoniker’s business cards, Blatchford wrote, identified him as Sir Peter A.E. Shoniker, Order of the British Empire, and Counsellor/Special Envoy to the United Nations. But, Blatchford reported, there was no record of his ever having received a British award, and the United Nations had never heard of him. On September 6, 2006, Shoniker, fifty-two, was sentenced to fifteen months in jail. As sentence was handed down, Shoniker collapsed back into his chair. He was wearing cowboy boots.
DRUG USERS don’t use credit cards to score cocaine.13 Mobsters don’t write cheques to buy automatic weapons. In the world of crime, cash is king. This creates a problem for a criminal. He can’t use wads of dollar bills carried in a briefcase to buy a fancy automobile, a penthouse in Hawaii, or a gold watch studded with diamonds. Even were such transactions possible, they would attract too much dangerous attention. To enjoy the fruits of his labours, the crook has to inject his criminal cash into the legitimate financial system. Al Capone, so legend says, did it by pretending that his money came from a chain of laundromats that he happened to own. This effective approach to the problem gave rise, according to legend, to the term “money laundering.”
The scale and complexity of crime have changed since Al Capone ran his brutal empire from a huge and luxurious suite in Chicago’s Lexington Hotel. The International Monetary Fund estimates that today the annual amount laundered worldwide is between 2 and 5 percent of the world’s gross domestic product (GDP), between $1 and $5 trillion U.S. dollars. (Canada’s annual GDP is about $1 trillion U.S. dollars.) The few laundromats that remain are not up to the job. They have largely been replaced by sophisticated financial intermediaries—including lawyers.
Lawyers have a particular advantage as money launderers. The rule of solicitor-client privilege prevents forced disclosure of what a client tells his lawyer.14 The international financial community and the Canadian government, including the RCMP, think that solicitor-client privilege can be used by a lawyer to hide money laundering by organized crime. This, they believe, is vaulting the legal profession into the forefront of money laundering.
At its 1989 meeting in Paris, the G-7 established the Financial Action Task Force (FATF) to develop an international response to money laundering. Thirty-one countries—including Canada—and two regional organizations now belong to the FATF. By 1990, the organization had developed “40 Recommendations” (most recently revised in 2003), setting out what national governments should do to implement effective anti-money-laundering programs. Canada made money laundering a crime in 1989. Two years later, the Proceeds of Crime (Money Laundering) Act introduced a wide range of record-keeping requirements for transactions that involved more than $10,000 cash. But several times in the nineties Canada ran up against the FATF. Canada was criticized for not complying fully with the 40 Recommendations, particularly when it came to the key requirement that suspicious transactions be reported to a central authority.
It was to meet these embarrassing criticisms that Parliament, in 2000, replaced the 1991 statute with a new Proceeds of Crime (Money Laundering) Act. The new act established the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC). Financial industry participants must collect certain transaction data and send it to FINTRAC, which analyzes the data for evidence of money laundering and may disclose “designated” information to national, foreign, or international law enforcement agencies. In 2001, FINTRAC was additionally authorized by amendments to the act, which became the Proceeds of Crime (Money Laundering) and Terrorist Financing Act, to look for financial transactions that constitute threats to the security of Canada and to disclose this information to the Canadian Security Intelligence Service and other law enforcement agencies.
Regulations under the 2000 act required lawyers (along with other professionals, financial institutions, brokers, casinos, etc.) to report a client’s suspicious financial transactions to FINTRAC. The client’s identity had to be disclosed, but it was illegal to tell the client that a report had been made. A suspicious financial transaction was defined as one where “there are reasonable grounds to suspect that the transaction is related to the commission of a money laundering offence.” The regulations provided that legal counsel was not required to disclose “any c
ommunication that is subject to solicitor-client privilege,” but the scope of solicitor-client privilege was not defined.
The legal profession was outraged by these provisions, perceiving them as a dramatic attack on the traditional relationship between lawyer and client. Several provincial law societies quickly went to court, arguing that the constitution protects communications between a lawyer and a client, even communications not covered by solicitor-client privilege. The new regulations, it was argued, forced lawyers to act inconsistently with their duty of loyalty and confidentiality to clients.
The courts were highly sympathetic to these arguments, and across the country granted law societies temporary exemptions from the reporting requirement pending full determination of the constitutional challenge. In a January 2002 Ontario decision, for example, Justice Maurice Cullity said, “In imposing a duty on legal practitioners to give secret reports of their clients’ transactions to a government agency, the legislation clearly impinges on, and alters, the traditional relationship between solicitors, or counsel, and their clients.… It strikes at the lawyer’s duty of loyalty and the client’s privilege against self-incrimination as well as the principle that lawyers should be independent of government.”15 The various judgments across the country indicated that the exclusion of privileged communication from the reporting requirement did not sufficiently address the potential for constitutional breach.
Faced with these successful court challenges, in March 2003 the federal government repealed the regulations making lawyers subject to the reporting requirement. “This is a testament to the resolve of Canada’s law societies,” said a spokesman for the Federation of Law Societies of Canada. The government pushed back and said, “It is important that Canada’s anti-money laundering and anti-terrorist financing regime covers all entities that act as financial intermediaries, including legal counsel and legal firms.… The government therefore intends, following consultations, to put in place a new regime for legal counsel.”
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