Canada Busts Guns-for-drugs Ring

Canadian cops collected cocaine, 47 guns, 18 vehicles and black-market Viagra, and arrested 27 people after pre-dawn raids across the greater Toronto area last week, in what police said was a bust of a guns-for-drugs pipeline run by sophisticated white-collar criminals.
“We are shocked by the extent of the criminal enterprise that we have uncovered in this investigation,” Toronto police chief Bill Blair told the Toronto Star after the raids. “It is most certainly a source of a vast number of the illegal handguns that have been making their way on to the streets of Toronto, that have caused so much death and destruction and fear in our communities.” (Fourteen people have been killed in gun violence in Toronto this year.)
The case began two years ago, when US authorities told their Canadian counterparts that 237 handguns had been smuggled into Canada from Chicago. The Canadians meanwhile figured out that several of their gangs were trading meth, ecstasy and marijuana to the Americans for cash, guns and cocaine. Nearly 40 people have been arrested and around 80 guns seized so far in the two-year Operation Blackhawk.

Bulgaria Freezes Its Own Funds

Since various doings in Bulgaria came to light this past spring – its interior minister resigning over alleged ties to mobsters, gangland killings, rampant corruption – the European Union’s money arm has hinted that it could cut off funding to Bulgaria, one of the 27-nation bloc’s newest members.

But Bulgaria beat the EU to the punch on Wednesday by freezing nearly €90 million in EU-backed infrastructure projects. Officials said an audit had found severe irregularities in spending, and announced that the National Road Infrastructure Fund will be disbanded. A new agency will be put in place under the direct supervision of Bulgaria’s deputy prime minister.

In recent months, the European Commission froze funding for all EU aid programs that started running before Bulgaria joined the bloc in 2007 on suspicion of fraud and embezzlement. The EU's anti-fraud office OLAF has carried out several investigations in Bulgaria.

In a recent interview with the Dnevnik daily, EU Commissioner for Regional Policy Danuta Huebner said that the government's handling of the road fund issues "will be a test for Bulgaria to prove that it can abide by the rules when dealing with EU money."

(Deputy PM Meglena) Plugchieva, who was appointed in April to coordinate the distribution of EU funds, said the decision Wednesday to suspend the projects was "a result of the self-control measures undertaken by the government."

Mexico to Start US-style Trials

In an enormous overhaul of its judiciary, Mexico will allow public, adversarial-style trials, and prosecutors will be able to hold organized crime suspects for 80 days without charge. Suspects will also be considered innocent until proven guilty.

Instead of judges behind closed doors ruling guilt or innocence based on written evidence, the constitutional reforms, signed by President Felipe Calderon last week, foresee lawyers arguing it out in public court. But it’s not clear when the law will come into effect throughout the country: courts have until 2016 to implement the statute.

Mexico is trying to stem a tide of drug violence that has left some 4,000 people dead since the beginning of last year, including the murder of the acting federal police chief last month. Human rights groups have both praised and criticized the measures, applauding the ‘innocent until proven guilty’ clause, but slamming them for allowing prosecutors to hold suspects without charge. But the bill’s most controversial provision, which would have allowed police to search homes without a warrant in life-threatening situations, was struck from the bill in February by the lower house. Police have said that criminals run into their homes with police in pursuit, and police can do nothing until they secure a search warrant. The new law instead speeds the authorization of warrants, allowing police to ask for them with a phone call or an e-mail to judges.

Mexico’s war on the drug cartels that have more or less taken over the country has been fought by the police and the military for the past 18 months. But some are pointing out that the military may not be the best tool with which to fight sophisticated organized crime groups, reports Canada’s Globe and Mail:

Egardo Buscaglia, an adviser to the United Nations and an academic at Mexico's Autonomous Technological Institute, paints a catastrophic scenario if Mr. Calderon does not begin an unprecedented crusade against narcotics links to legal business and politics.

“Unless this happens, the organized groups simply allocate more money to corruption and violence in order to protect themselves,” says the analyst, who points out that in a business worth tens of billions of dollars a year, they can afford to. “What then happens is their networks expand both vertically and horizontally.”

Just how high up corruption has already gone was laid bare by the assassination in Mexico City in May of Edgar Millan, the operational brains behind some of the offensive's biggest arrests. Mr. Millan was killed as he entered his parents' apartment building by a hit man who not only knew the police chief's top secret movements in advance, but also had a copy of the key.

Mortgage Fraud Crackdown

Here in the US I’ve been hearing news every day about the mortgage debacle, and it turns out that finally someone is doing something about all of those dodgy mortgages that were given out in the past several years. In what the Los Angeles Times called “the penalty phase of the mortgage meltdown,” more than 400 people have been charged with mortgage fraud since March in a crackdown called Operation Malicious Mortgage. The Justice Department made the announcement last week on the same day that two former hedge fund managers at Bear Stearns were arrested on suspicion of misleading investors about a fund that invested in sub-prime loans and collapsed at a cost to investors of $1.4 billion.

That money is about the same amount -- $1 billion – that homeowners and other borrowers in the US lost as a result of the mortgage meltdown, but a drop in the bucket compared to the estimated $1 trillion in losses worldwide that resulted from the US crisis. The FBI has more than 40 task forces throughout the US that are dedicated to mortgage fraud; the New York Times reports that the FBI has seen that fraud caseload nearly double in the past three years.

The scams are varied. One Chicago case involved drug money laundered through the purchase and renovation of real estate. In another, a Washington couple allegedly used fake buyers to take control of homes while promising homeowners they could continue living there until they were back on their feet enough to buy back their property in a year – but then they allegedly took out loans against the value of the homes, making it impossible for the former owners to reclaim them. Other cases involved people borrowing against falsely inflated property values: one case involves two Beverly Hills real estate agents accused of conspiring to secure $142 million in loans by falsely inflating the values of houses in California.

Obviously the arrests of these tricksters are to be applauded. But one blog on Retail Banking Strategies, despite its yawn-inducing name, had some pointed and intelligent things to say about who’s really to blame in these fraud cases:

All the elements you’ve heard about in the worst cases of fraud were there: straw buyers, collusion by appraisers, false documents from compliant CPAs, etc. But, as bankers, what really struck us was how easy the scheme was to detect — and yet the lending banks, including some of the largest and best respected in the country, were so obviously negligent in performing even the simplest due diligence that it seemed at times they were virtual co-conspirators.

Just one example: a dummied up paystub from an out of town corporation would have been easily detected by a telephone search (no listing), web search (not there) or check of business licenses (never heard of them). Yet a leading bank welcomed this newcomer, gave them a multi-million dollar mortgage based on an artificially inflated appraisal, and then a home equity loan for almost all the remaining (non-existent) value. And with the bona fides established by one bank, these fraudsters went to another financial institution, showed their first month’s bank statement from the competition (entirely composed of proceeds from the no-equity home equity loan), and had these new bankers virtually fall over themselves offering even more loan services in order to win the relationship from the competition. Then they went to another bank….well, you get the picture. And this is just one of the inventive schemes we uncovered.

Corruption Round-up

In “who will police the police” news, two high-ranking Russians in the country’s organized crime and terrorism taskforce have themselves been arrested on suspicion of extorting €1.5 million from a bank vice-president. Major Dmitry Tselyakov and Major Alexander Nosenko were arrested earlier this month for allegedly extorting the money through Lithuanian intermediaries from Pyotr Chuvilin, vice-president of Incredbank and general director of the Spartak football club. Officials told the press that the charges were related to the two majors’ former jobs, when both men worked in the Russian Federation interior ministry’s financial crime department.

Hungary’s Socialist government has installed speed cameras and radars on highways and started taking away the driver’s licenses of speeders and drunkards in a bid to crack down on corruption. “It’s been almost common practice in Hungary for drivers caught speeding or drunk at the wheel to simply slip policemen a fiver to get them off the hook,” reports AFP. It may be working: Accidents are down this year by almost 40 percent from last year.

Italian Prime Minister Silvio Berlusconi will end up in court on corruption charges after all, though last week his allies had tried to get the case thrown out. Berlusconi is accused of paying his co-defendant, British lawyer David Mills, at least $600,000 in 1997 in exchange for false testimony in two Berlusconi trials in the 1990s. Both men deny the charges. The judge on the case has continued to hold hearings, though Berlusconi has requested to have the judge removed on grounds of political bias. But there’s more going on: Berlusconi’s friends in the Senate last week approved an amendment mandating that trials for alleged crimes committed before mid-2002 be suspended for a year. Most lawmakers in the center-left opposition walked out of the session; leading center-left figure Emma Bonino called the decisions a “dark page in the history of the republic.” Berlusconi said it was needed to ease the pressure on a clogged judiciary, which can take years to complete a trial.

A head of a state-run Chinese bank is under investigation for corruption, reports AP. The China Development Bank stated in a report for a financial daily that the bank’s vice-president, Wang Yi, had been detained and subject to a probe by the Communist Party and its judicial departments. Little else is known about the case, as the bank’s statement only made mention of “Comrade Wang Yi’s severe disciplinary violations,” which the press reported as a Chinese code phrase for alleged corruption. China also fired a dozen officials for dereliction of duty and misuse of earthquake relief on Monday, and gave administrative reprimands to 43 local officials for their behavior in the wake of the May 12 earthquake in Sichuan province.