CANADA: Elderly couple arrested in contraband cigarette ring

MONTREAL, Quebec (The Canadian Press), March 19, 2008: A Montreal man in his 70s who founded an amusement company is facing fraud charges after his arrest in a police operation that smashed a contraband cigarette ring. Gerald O'Reilly, 74 and Felicitas, his 71-year-old wife, were among 20 people targeted by a Quebec provincial police investigation which began in June 2006. Police say 14 of the suspects were arrested on Wednesday and face charges of fraud, money laundering and profiting from a criminal organization. Industry Canada's website says O'Reilly was the founder of Alouette Amusement Canada Inc. in 1956. The company is described as a major player in all aspects of the amusement and gaming industry in Canada. The firm distributes juke boxes, billiard tables and video games around the world. Capt. Patrick Belanger, a spokesman for the Quebec provincial police, told a news conference that authorities believe the couple supplied a large contraband tobacco market, mainly in Sydney, N.S. He said the illegal tobacco products were provided by four suspects who lived on native reserves in Akwesasne, near Cornwall, Ont., and Kahnawake, south of Montreal. "They were the suppliers to the O'Reilly family and the tobacco which they supplied was transported by truck to Nova Scotia," Belanger told The Canadian Press. Belanger said two of the 20 suspects are from Akwesasne and two others are from Kahnawake. Four are from Nova Scotia. The elderly couple was also allegedly involved in pirating music CDs, operating illegal video lottery terminals and using cash machines for money laundering. Belanger said police also seized three residences owned by the O'Reilly family, including a house under construction valued at $6 million. Police seized seven vehicles, 74 video lottery terminals and 3,500 bottles of wine. Belanger told reporters a number of small phoney businesses were also created in order to obtain fraudulent government loans. "The companies were then closed, but they kept the loans," Belanger said. Investigators say the federal and Quebec governments were deprived of more than $5 million in taxes. RCMP Sgt. Michael Harvey said organized crime takes advantage of the location and geography of aboriginal communities. Investigations show 105 organized crime groups are involved in the illegal tobacco trade and two-thirds of them launder money and smuggle drugs, Harvey said. "They use the money from the sale of drugs in the U.S. to finance their illegal tobacco factories which they set up in aboriginal communities," he said. About a dozen unlicensed factories in Akwesasne receive bulk tobacco from North Carolina and South Carolina, manufacture cigarettes and then transfer them across the St. Lawrence, according to the RCMP. The cigarettes are delivered to so-called "smoke shack" kiosks that dot roadsides in some Quebec native communities. By Peter Rakobowchuk Copyright © 2008, Canoe Inc.