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Report 6Nov00

(9)The Sidewinder scandal

by Kevin Michael Grace

On October 20 the Security Intelligence Review Committee (SIRC), the government agency that oversees the Canadian Security Intelligence Service, issued its annual report. It devotes six pages to a joint RCMP-CSIS operation, Sidewinder, whose secret interim report, "Chinese Intelligence Services and Triads Financial Links in Canada," was issued in 1997. This report was suppressed, and all copies were ordered destroyed, as were all background materials.

According to Sidewinder, Mr. Li is a director of the Beijing-controlled China International Trust Investment Company (CITIC), which had 1997 assets of US$23 billion. CITIC owns or controls Cathay Pacific Airlines, Hong Kong Telecom, Star TV, Poly Technologies and Norinco, suspected of arms shipments to Mohawk reserves. Mr. Li's company Hutchison owns 49% of Husky Energy. CITIC has invested $500 million to buy Canadian companies Celgar Pulp Mill and Nova Corp Petrochemical. Mr. Li and his son own "at least one-sixth to one-third of downtown Vancouver" and have extensive real estate holdings in Toronto. CITIC has "developed...close business links with Power Corporation." (Andre Desmarais, Prime Minister Chretien's son-in-law, is president and co-chief executive officer of Power Corporation.)

Mr. Li is the largest (10%) single shareholder of CIBC, and a shareholder and director of the Hong Kong and Shanghai Bank, which in the 1980s acquired the Hong Kong and Shanghai Bank of Canada, Continental Bank and Lloyds Bank Canada. CIBC, in turn, bought the securities firms Wood Gundy and Merrill Lynch. Li Ka-Shing's son Richard bought 50.1% of Gordon Capital in 1985. (Jean Chretien was a senior adviser there from 1986 to 1990.)

None of the above proves that Canada has been subverted by the People's Republic of China, but the linkages and connections revealed between Mr. Li and Mr. Chretien and his family (which are not detailed in Sidewinder but were reported elsewhere) are, as SIRC might say, disconcerting.

But then, SIRC itself is not entirely in the clear. One SIRC member, James Andrews Grant, has a serious unreported conflict of interest. His biography on the SIRC Web site identifies him as a director of CIBC and chairman of the executive committee of the law firm Stikeman, Elliott, which has a long-standing relationship with CIBC's largest shareholder, Li Ka-Shing.

Report 6Nov00

(12) The Sidewinder scandal

by Kevin Michael Grace

RCMP Commissioner Giuliano Zaccardelli gave an extraordinary press conference on September 7. He told startled reporters, "There are criminal organizations that target the destabilization of our parliamentary system." The commissioner refused to give details but insisted he was not "fear-mongering." He concluded, "We don't want to wait until we become, unfortunately, like some countries around the world, where criminal organizations actually run part of the country."

On October 20 the Security Intelligence Review Committee (SIRC), the government agency that oversees the Canadian Security Intelligence Service, issued its annual report. It devotes six pages to a joint RCMP-CSIS operation, Sidewinder, whose secret interim report, "Chinese Intelligence Services and Triads Financial Links in Canada," was issued in 1997. This report was suppressed, and all copies were ordered destroyed, as were all background materials.

Project Sidewinder was abandoned but then restarted in 1998. A secret final report, "Echo," was issued in 1999. Sources close to Sidewinder have alleged that its 1997 report was first killed and then gutted because it revealed Chinese infiltration as a grave threat to Canadian security and sovereignty.

The SIRC report rejects these allegations. It finds "no evidence of political interference" and claims Sidewinder "was not terminated; it was delayed when its initial product proved to be inadequate." The 1997 report is judged "deeply flawed...a loose, disordered compendium of 'facts' connected by insinuations and unfounded assertions. Overall, the document is rich with the language of scare-mongering and conspiracy theory." SIRC concludes that the destruction of "'transitory' documents related to Sidewinder's first draft" was "standard practice." The disappearance of other "non-transitory" documents is described as "disconcerting" but of no "material impact."

The timing of the SIRC report two days before an election call and its pre-release leak to the National Post are suspicious. SIRC said in September that the report would not be released until the end of the year. Even more suspect is the September 25 assertion in the House of Commons by MP Lynn Myers, parliamentary secretary to Solicitor-General Lawrence MacAulay: "I would like to emphasize that I was not reading from or directly quoting the SIRC report, which is a classified report." He was referring to his September 20 statement to Canadian Alliance MP Jim Abbott dismissing the 1997 Sidewinder report as "deeply flawed" and a "conspiracy theory"--phrases identical to those used in the then-supposedly unwritten, unread, classified SIRC report.

Unfortunately for the Liberals, however, all copies of Sidewinder were not destroyed. The Canadian Alliance and various media, including this magazine, now possess them. The report, 30 pages long and badly translated from the original French, makes a shocking allegation--Hong Kong tycoons, triads (gangs) and Chinese intelligence services "have been working for 15 years in concert with the Chinese government, and some of their 'financial ventures' in Canada serve to conceal criminal or intelligence activities."

These activities include money laundering, heroin trafficking and the transfer of economic, high technology and intelligence data to Beijing. Sidewinder alleges the corruption of the Canadian business and political establishments: "The triads, the tycoons and [Chinese intelligence] have learned that [the] quick way to gain influence is to provide finance to the main political parties...China has obtained access to influential figures who are now or once were active at various levels of Canadian society."

Foremost among the Chinese tycoons, according to Sidewinder, is Li Ka-Shing, of whom U.S. Congressman Dana Rohrabacher has testified, "The U.S. Bureau of Export Affairs, the U.S. Embassy in Beijing and the Rand Corporation...have identified Li Ka-Shing and [his company] Hutchison Whampoa as financing or serving as a conduit for Communist China's military for them to acquire sensitive technologies and other equipment." Last year Forbes estimated Mr. Li's family as the eighth richest in the world, with assets totalling US$10.6 billion.

According to Sidewinder, Mr. Li is a director of the Beijing-controlled China International Trust Investment Company (CITIC), which had 1997 assets of US$23 billion. CITIC owns or controls Cathay Pacific Airlines, Hong Kong Telecom, Star TV, Poly Technologies and Norinco, suspected of arms shipments to Mohawk reserves. Mr. Li's company Hutchison owns 49% of Husky Energy. CITIC has invested $500 million to buy Canadian companies Celgar Pulp Mill and Nova Corp Petrochemical. Mr. Li and his son own "at least one-sixth to one-third of downtown Vancouver" and have extensive real estate holdings in Toronto. CITIC has "developed...close business links with Power Corporation." (Andre Desmarais, Prime Minister Chretien's son-in-law, is president and co-chief executive officer of Power Corporation.)

Mr. Li is the largest (10%) single shareholder of CIBC, and a shareholder and director of the Hong Kong and Shanghai Bank, which in the 1980s acquired the Hong Kong and Shanghai Bank of Canada, Continental Bank and Lloyds Bank Canada. CIBC, in turn, bought the securities firms Wood Gundy and Merrill Lynch. Li Ka-Shing's son Richard bought 50.1% of Gordon Capital in 1985. (Jean Chretien was a senior adviser there from 1986 to 1990.)

None of the above proves that Canada has been subverted by the People's Republic of China, but the linkages and connections revealed between Mr. Li and Mr. Chretien and his family (which are not detailed in Sidewinder but were reported elsewhere) are, as SIRC might say, disconcerting.

But then, SIRC itself is not entirely in the clear. One SIRC member, James Andrews Grant, has a serious unreported conflict of interest. His biography on the SIRC Web site identifies him as a director of CIBC and chairman of the executive committee of the law firm Stikeman, Elliott, which has a long-standing relationship with CIBC's largest shareholder, Li Ka-Shing.

Canadian Alliance MP Jim Abbott, who raised the Sidewinder issue in the Commons, reports that he was immediately denounced by a Liberal MP as a "racist." He adds, "Unfortunately, many Canadians are prepared to buy into these labels, and for that reason they find so much of this  [Sidewinder] unbelievable."

Mr. Abbott takes pains to stress that while he understands "there is a very malicious, a very serious criminal side to triad organizations, there's also the other side within the Chinese culture, where they are part of exchanging power and influence. This is something that we, from our Caucasian, Judeo-Christian basis, just don't comprehend."

Elections Canada loopholes make it easy for gangsters and foreign agents to contribute to Canadian politicians, money which is sometimes received unwittingly. While Mr. Abbott admits his party has "not taken any formal steps" to prevent such occurrences, he explains, "We're very deeply concerned about it and are doing our level best with what information we have to make sure we aren't compromised."

29May00

(13) Chinese triads sought foothold in Vancouver port operations

Fabian Dawson, Staff Reporter The Province

The Vancouver Port Authority ignored warnings about the Chinese business interests it was wooing in the 1990s -- allowing a number of questionable business connections to take root in the port, The Province has learned. In the mid-'90s, as courting efforts aimed at Chinese shipping giant Cosco went into overdrive, intelligence officials -- including local ports police -- sounded alarm bells about the conglomerate's questionable connections. The shipping line is intimately linked to the China International Trust and Investment Corp., a key fundraiser for the Chinese government and a technology-acquiring source for China's military.

U.S. Senate investigators and Canadian intelligence officials have described Cosco as the merchant marine of the Chinese military.

Its vessels have been caught carrying thousands of weapons into California and Chinese missile-technology and biological-warfare components into North Korea, Pakistan, Iraq and Iran, according to U.S. intelligence reports. Last summer -- two years after the ports police were disbanded -- the port signed a deal with Cosco to make Vancouver its gateway to North America. Cosco had chosen the only major port on the West Coast of North America without a dedicated police force.

Port officials maintain they have no evidence Cosco is directly involved in any illegal activity and cannot recall receiving police warnings. Cosco officials have declined interviews.

Police and immigration documents obtained by The Province show that, in the early '90s, Chinese mafia members or triads were attempting to infiltrate port operations.

In one case, a man identified as Chan Chung Hiu applied for a visitor visa at the Canadian consulate in Hong Kong to come to Vancouver on Jan. 14, 1992. Chan said he was an advisor to a company that had concluded a deal with the B.C. government to take over operations at one of the docks.

Background checks conducted found that Chan was a member of the notorious Sun Yee On triad and had served a four-year jail term for armed robbery in Hong Kong.

Chan abandoned the application after being asked to produce a police certificate. In another case, members of the same triad group, who are among the world's biggest heroin traffickers, were seen entertaining a senior officer of the now defunct Co-Ordinated Law Enforcement Unit. The party aboard a yacht was hosted by a Vancouver-based shipping company suspected of having links with the Chinese mafia.

From SIDEWINDER AND THE  MINIVAN: SOME QUESTIONS  FOR PARLIAMENT TO PONDER

by Stuart Farson

"Yet another newspaper story  focused on the purposeful destruction  of intelligence files by CSIS itself. This  bank of files, codenamed “Project  Sidewinder,” covered a joint CSIS- RCMP intelligence effort. Established  in 1995, it evaluated whether Chinese  intelligence was working with Triads  to influence Canadian business and  politics. It looked particularly into  allegations that Chinese interests were  making political contributions, funding university projects and trying to  purchase media outlets for propaganda purposes.  It also examined whether  financial footholds had been garnered  in Canada’s banks, brokerage houses,  commercial buildings, hotels, oil and  gas interests, and shipping ports  (Andrew Mitrovica, “Triad probe still  needed Mountie declares, The Globe  and Mail October 23, 1999).   According to The Globe and Mail,  (Andrew Mitrovica, “CSIS destroys  controversial Asian-crime report,”  October 6, 1999), the head of CSIS’s  Strategic Analysis Branch ordered “the  destruction of all copies of the reports  and other related Sidewinder documents, including e-mails, because he  felt its conclusions were overblown”  in 1997.  Apparently, Canada’s spy masters  believe their employees have leaked  these stories. The vigor with which the  Internal Security Branch has forced  employees to undergo polygraph tests  to identify whistleblowers is said to  have made an already “poisonous”  atmosphere between senior management and some rank and file members  worse (Andrew Mitrovica and Jeff  Sallot, “Spies face lie test in hunt for  whistleblower,” The Globe and Mail,  March 13, 2000)......

The destruction of the “Sidewinder file” also poses questions that  extant review bodies cannot answer.  Media reports suggest there were distinct differences of opinion over the  value of the initial report and the need  for further evaluation, not only  between the RCMP and CSIS, but also  between CSIS management and those  working on the project within the  Service. Though senior management at  CSIS maligned the report as “rumour- laced conspiracy theory,” others saw it  as “groundbreaking” and “years ahead  of the curve” (Andrew Mitrovica and  Jeff Sallot, “The trouble with CSIS  Recent embarrassing revelations,” The  Globe and Mail December 15, 1999).   Unfortunately, none of the review bodies has a mandate to review the activities of both the RCMP and CSIS. SIRC,  in fact, recognized its own limitations  when it called last year for a government-wide review of the whole intelligence community. (Jim Bronskill,  “Review of all spy agencies urged,”  Ottawa Citizen, November 2, 1999).....

It  also speaks directly to the weakness of  SIRC’s research methodology and man- date.  Without documentation, how can  it hope to review the matter satisfactorily? And, of course, it begs the question: if SIRC relies totally on CSIS’s  electronic and paper trails, how can it  ever be certain that CSIS has not routinely destroyed whole file banks to  avoid close scrutiny?  There is also the  question of whether the destruction of  the file bank constitutes an offence  under the Access to Information Act and  should have been reported to SIRC.   Finally, the file’s destruction has been  connected to corruption of the immigration process at the Canadian High  Commission in Hong Kong between 1986 and 1992 by Chinese organized  crime (Fabian Dawson, “Triads linked  to hacking at Canadian mission,  Vancouver Province, August 26 1999). While RCMP and Immigration Control  Officers have persistently alleged that  senior Ottawa officials stifled their  investigations others claim that senior CSIS officials  similarly shut down “Sidewinder”  because it was also heading into “politically sensitive waters.”

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