The battle for booze
The mob is back into smuggling in a big way, experts say

By Dan Nolan / Hamilton Spectator

Traditional organized crime groups are moving back into
bootlegging after decades of surrendering the smuggling trade that
once was the mainstay of their criminal empires.
Smuggling illegal U.S. booze into Canada has become the mob's major
source of income, says organized crime expert Antonio Nicaso.
``It's more (lucrative) than drug trafficking,'' says the Toronto
author of nine books on the mob.
``People don't consider the fact that what is seen generally as a
minor crime generates for them more revenue than major crimes.''
Inspector Ben Soave, head of the RCMP criminal intelligence unit in
Newmarket, confirms ``there has been a significant increase'' in mob
involvement in bootlegging in recent years. However, he believes it
remains secondary to drug smuggling.
An indication of exactly how lucrative the booze trade is can be
found in New York state, where American officials this week unsealed
an indictment revealing an illegal smuggling operation believed to
have moved almost $1 billion Cdn (more than $600 million US) in
alcohol and tobacco from the U.S. into Canada in recent years.
Canadian authorities, while reluctant to identify specific crime
groups they believe are involved in smuggling, seem to acknowledge
the trade is taking a more sinister turn.
This week, Ontario announced a new crackdown on the illicit booze
trade. At the same time, Ontario Provincial Police revealed they
believe a missing Barrie man was killed in a smugglers' feud.
``It's not the benign industry some people would imagine,'' said
OPP Detective Chief Superintendent Wayne Frechette.
PROFIT AND CRIME
``Where there's profit, there's criminal organizations involved,''
says Constable Pierre Parent, of the customs and excise section of
the RCMP's Hamilton-Niagara detachment. ``There's millions to be
made.''
The RCMP says its ``targeting'' about half a dozen local criminal
organizations believed involved in illegal booze. While the crime
groups are not necessarily dividing up the territory, Parent says,
``they all have their customers and share of the market.''
Nicaso says that in their bid to re-establish themselves in the
bootlegging trade, traditional crime families are ``joining forces''
with other players.
``The new mentality of this group is not to fight on the street but
to work together,'' he says.
``In the old days ... Italians worked with Italians, Chinese worked
with Chinese and bikers worked with bikers. Now ... money is the
common denominator, and common sense.''
That seems to be borne out by the New York operation, which was
reputedly funnelling contraband into Canada through a reserve near
Cornwall. A major figure in the Mohawk Warriors group and a former
Native chief were among the people named in the indictment.
U.S. Attorney Thomas Maroney, based in Syracuse, said that of the
21 defendants named in the indictment, 11 were Native Americans.
Jeremiah Sullivan, special agent for U.S. Customs in Buffalo, said
investigators ``have reason to believe organized crime is
connected'' with the New York smuggling operation.
- - -
Bootlegging is a multimillion-dollar industry -- with the Steel
City at the heart of it.
It is believed to have earned smugglers nearly $650 million last
year in Ontario alone.
RCMP say some of the major players operate in Hamilton,
distributing their smuggled goods throughout southern Ontario.
Officials of the Liquor Control Board of Ontario estimate that
smuggled booze accounts for about 10 per cent of the $6 billion
alcohol beverage market. Put another way, that means about one in 10
bottles is illegal.
This includes smuggled liquor - estimated at about $420 million -
and illegally produced domestic wine.
The LCBO bases its analysis on the dollar-value of seized alcohol,
a general decline in spirit sales and the drop in domestic liquor
sales compared with the steadfastness of the legal imported market.
The legal market in spirits is estimated at more than $1 billion
annually.
``You've got to remember we're talking estimates here, but there
are very strong indicators there's something going to another
channel,'' says LCBO spokesman Chris Layton.
That illegal trade costs Ontario taxpayers dearly. Revenue lost to
the province has been estimated at $385 million a year.
It's not difficult to understand the mob's eagerness to reclaim the
booze trade. Authorities say bootleggers purchase liquor from
American distilleries -- who may or may not know of its ultimate
destination -- for about $2.50 a bottle. They can turn around and
sell that same 1.75-litre bottle of spirits in Ontario for $30,
reaping huge profits, but still undercutting the $45 price tag at
the Canadian liquor store. That's a cool $165 profit on every case
of liquor.
Smuggling has rocked the Canadian distillery industry.
Industry spokesman Ron Veilleux estimates liquor consumption has
dropped 20 per cent in the past decade, largely due to lifestyle
changes. Liquor sales, however, have plummeted 46 per cent in
Ontario and 63 per cent in Quebec.
The industry, which sustains 5,000 jobs directly and indirectly,
has closed 18 plants across Canada in the past decade, including one
in Kitchener-Waterloo last year.
Hamilton is at the centre of the illegal trade for one important
reason -- location.
``Hamilton's (in) close proximity to the U.S. border, Toronto, and
there's easy access to Windsor,'' says Parent.
In one operation busted up last fall, Parent said smuggled liquor
was stored in warehouses in east Hamilton and in barns in Ancaster,
Waterdown and Flamborough. All locations provided easy access to the
Queen Elizabeth Way or highways 401 and 403.
``We're right on the route,'' says a Hamilton-Wentworth police
source, who keeps tabs on organized crime. ``It's a flow through,
whether we like it or not.''
``There's a market for liquor here,'' adds Parent. ``We've
disrupted the activity in this area, but we're still seeing liquor
being distributed in the area because the demand is still here.''
Several Canadian police forces established an anti-smuggling task
force near Cornwall in 1994. RCMP Sergeant Jack Bellerose says that
in three years the force has seized $16.5 million worth of illegal
liquor and cigarettes, 1,086 cars and trucks and laid 950 smuggling
charges.
- - -
Authorities say some liquor is smuggled into Canada in cars but
most arrives in transport-trailers.
Booze is flowing in from distilleries from Minnesota, Tennessee,
New York and New Hampshire. In the last state, authorities have
estimated 60 per cent of liquor sold in stores leaves New Hampshire.
Apart from the Ambassador Bridge in Windsor, which saw 1.3 million
trucks coming into Canada between April 1996 and March 1997, the
next highest volume in the country is in Niagara.
More than one million trucks came into Canada over the Peace Bridge
in Fort Erie and the Queenston-Lewiston Bridge in Niagara Falls.
The Blue Water Bridge between Sarnia and Port Huron, Mich., was
crossed by 600,000 trucks and the Detroit-Canada tunnel saw 134,000
trucks.
During the six months from May to October last year, police seized
nine tractor-trailers carrying 14,400 cases of liquor. Duties and
taxes evaded on one load of 1,600 cases can amount to $250,000.
A Canada Customs official in Niagara Falls says large-scale
smugglers have become more sophisticated. Most times alcohol is
well-hidden behind false walls, in fake gas tanks or concealed in
produce.
Smugglers even re-label liquor bottles with phony names such as
McAdams Canadian whisky and Bentley's Genuine Vodka.
``It's hard. You know it's happening, but it's not feasible for us
to offload every rig,'' says the Customs official.
Once over the border smugglers don't have any difficulty finding
people willing to store it. The promise of big cash is sufficient
enticement.
``It was the first time I ever met them,'' says one local man now
facing criminal charges after allowing bootleggers to store cargo on
his rural property. ``I've had a sad experience with this thing.''
From these centres, the liquor is distributed.
``Someone will come up to the rear door of a commercial
establishment in a panel van with 50 cases and work out a deal,''
Parent says. ``It's a cash deal.''
Hamilton-Wentworth police say they now commonly come across bootleg
liquor during monthly bar checks.
``It's all over,'' says Detective Brian Barker of the vice and drug
squad. ``It's bars right across the region.''
SMUGGLING
Just ask John and Ilda Dutra. Their restaurant lost its liquor
licence last year after authorities found 180 bottles of smuggled
rye, rum and vodka in the basement of their Atlantico Restaurant on
James Street North and Barton Street East.
``Ninety per cent of my business is gone,'' says Ilda, 36. ``I had
a good clientele before and this place was packed on the weekends.
``We're just keeping it open because the building is ours.''
The problems for the couple began in October 1995, when a lone
bootlegger showed up one night and offered her husband a deal on
cheap booze.
Dutra said her husband refused, but the next night the bootlegger
returned with the booze.
She says husband couldn't resist the $20-per-bottle price.
``It was ridiculous,'' recalled the mother of three. ``My husband
couldn't refuse.''
Everything was fine until police and liquor inspectors showed up.
``They knew we had it,'' she said.
They lost their licence and were fined $4,000 last fall.
- - -
Bootlegging is part of Ontario's history.
However, in the 1920s and 1930s traffic was going the other way,
thanks to Prohibition in the U.S.
Hamilton was in the thick of bootlegging activity even then, with
key players such as crime bosses Rocco Perri, the legendary ``king
of the bootleggers'' and Tony Papalia, father of slain Johnny
Papalia.
``Liquor smuggling has always been there,'' says Canada Customs
spokeswoman Joanne Brown.
- - -
A warehouse on the Toronto waterfront holds massive quantites of
illegally-made wine and smuggled liquor seized by authorities.
But police and liquor inspectors know it is just a drop in the
ocean.
``I think there will always be this activity, but if we can shrink
the problem and make our domestic manufacturers healthier, that's
where we want to go,'' the LCBO's Layton said.
``There are signs there that it's achievable, but it's not going to
happen overnight.''
DO'S AND DON'TS
There's no free trade on the flow of booze across the border -
legally that is.
- You are permitted to bring one bottle of liquor or a case of
beer, without penalty, back into Canada, providing you have been in
the U.S. for more than 48 hours.
Any more than that and you're required to pay duties and taxes.
There's no exceptions, even if you're away for a week or a month.
- Canada Customs officials readily admit, however, they're not
heavy-handed with people caught with an errant, undeclared bottle -
as long as it's your first offence.
``Normally, there's a tolerance level of $50,'' says one official.
But, if you are caught again, you could be in for some serious
trouble.
And the first-time allowance only applies to people who are not
trying to conceal the liquor.
- A repeat offender could see the booze confiscated, and their
vehicle impounded.
WHY IT COSTS SO MUCH
Ottawa and Queen's Park certainly get their money's worth out of
the legal sale of booze.
The taxes on a bottle of liquor total 83 per cent of its retail
price. In the United States, the average tax on liquor amounts to 44
per cent.
That means that in Ontario you pay about $17 in taxes on a $20
bottle.
``It opens the door for all kinds of abuse and that's what is
happening,'' says Ron Veilleux, president of the Association of
Canadian Distillers.
Here's how it works, again based on that $20 bottle:
The distiller gets $3 for every bottle. That covers the cost of
making the liquor and profit.
Before the bottle leaves the distillery gate, the federal
government slaps a $3.35 excise tax on it.
Transportation to the Liquor Control Board of Ontario costs roughly
65 cents, bringing the price to about $7.
From there, the bottle is hit with provincial markups, totalling
$10.

Only then is the PST and GST applied. This brings the price to
about $20.

The Ontario government makes the largest tax grab, swallowing 60
per cent of the 83 per cent in the tax total.

``We are unfortunately being squeezed between a government's need
for tax revenue and smugglers,'' says Veilleux.

LCBO spokesman Chris Layton acknowledges taxes are high on alcohol
products and that ``the biggest bite is on distilled products.''

``But money off liquor goes to pay for government programs,'' he
says.

``Money to bootleggers goes right into the pockets of organized
crime.''

Provincial officials deny that Ontario's tax structure plays a
significant role in promoting smuggling.

``The way to combat (bootlegging) is through enforcement and public
awareness,'' says Deb McCain, press secretary to Consumer Minister
David Tsubouchi.

``There's been a hold on liquor taxes in the last five years and
sales are going up. We're taking the proactive approach from the
other direction.''

While beer smuggling is not a large problem, a spokesman for the
Brewers Association of Canada says high taxes on alcohol have helped
develop the smuggling industry.

``There's no question high taxes on these products have caused
people to look at ways to get around this tax burden,'' says Sandy
Morrison.

June 28, 1997