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“Criminal Organization” or Legitimate Gaming Operation: The government blurs the distinction

(2010-10-11)
 

By Solomon Friedman 

Note: The following is intended as legal information only and does not constitute legal advice of any kind. If you are in need of advice, please consult counsel with the specifics of your particular situation.

Background

The following primer was prepared as a result of numerous requests by clients seeking information about the scope and effect of the recently-enacted “serious offence” regulations.

These past weeks have seen an interesting confluence of regulation and press bulletins from both the federal and provincial governments. On one hand, the federal government has announced the expansion of the “criminal organization” definition in the Criminal Code. At the same time, several provincial governments, including Ontario and British Columbia have moved towards the establishment of government-run online gaming websites.  As discussed below, the timing of these two announcements is hardly coincidental.

The New Criminal Code  Regulations

The federal government has recently announced that it is effectively broadening the definition of “criminal organization” for the purposes of the Criminal Code.

Unlike terrorist groups, which must be specifically named by an Order in Council, there is no list of recognized “criminal organizations”. Such an approach is currently being studied by a Parliamentary committee but has yet to be implemented. Instead, the Criminal Code provides for a relatively broad definition, which captures a wide spectrum of activities. These criteria are further watered down by the government’s new regulations.

Section 467.1 (1) of the Criminal Code defines a “criminal organization” as any group of three or more persons, operating inside or outside of Canada, whose main purpose is the facilitation or commission of a “serious offence”. Until now, serious offences had been restricted by statute to indictable offences which carry a maximum punishment of imprisonment for five years or more. However, the Code also provides that any other crime, if so prescribed by regulation, can be defined as a serious offence. Prior to the enactment of these regulations, this power had yet to be exercised by the federal government.

Under the new regulations, the following offences, regardless of their prescribed punishment, will constitute “serious offences”:

-         keeping a common gaming or betting house

-         betting, pool-selling and book-making

-         committing offences in relation to lotteries and games of chance

-         cheating while playing a game or in holding the stakes for a game or in betting

-         keeping a common bawdy-house

In addition, several narcotics crimes, including the trafficking of small amounts of marijuana, have been added to the list of serious offences. 

Defining a “Criminal Organization”

There is some helpful case law on the procedure a court must follow in order to accept the Crown’s assertion that an individual is indeed acting as a member of a criminal organization. A thorough examination of the application of s. 467.1 is found in R. v. Beauchamp, [2009] O.J. No. 4872, a recent criminal case at the Ontario Superior Court of Justice.

In order for a court to make a “criminal organization” ruling, the judge must find, beyond a reasonable doubt that there was:

-         a group of three or more persons;

-         that has as one of its main purposes or main activities;

-         the facilitation or commission of one or more serious offences, that would likely result in the direct or indirect of a material benefit, including a financial benefit;

-         by the group or any of the persons who constitute the group.

It is possible that organizations that carry on a significant amount of otherwise legitimate business activity can be captured under the criminal organization provisions of the Criminal Code. As the court found in Beauchamp (at para. 504), “the facilitation or commission of criminal offences need not be the only activity or purpose of the group, so long as it is one of the main ones”.

In addition, when weighing a charge of participating or contributing to any activity of a criminal organization, s. 467.11 grants the court extraordinary leeway to find that a member was acting as a participant in a criminal undertaking.

For example, s. 467.11 (2) provides:

(2) In a prosecution for an offence under subsection (1), it is not necessary for the prosecutor to prove that

(a) the criminal organization actually facilitated or committed an indictable offence;

(b) the participation or contribution of the accused actually enhanced the ability of the criminal organization to facilitate or commit an indictable offence;

(c) the accused knew the specific nature of any indictable offence that may have been facilitated or committed by the criminal organization; or

(d) the accused knew the identity of any of the persons who constitute the criminal organization.

Moreover, the court is permitted to draw inferences from matters entirely unconnected to criminal conduct or illegal activity. In this vein, s. 467.11 (3) reads as follows:

(3) In determining whether an accused participates in or contributes to any activity of a criminal organization, the Court may consider, among other factors, whether the accused

(a) uses a name, word, symbol or other representation that identifies, or is   associated with, the criminal organization;

(b) frequently associates with any of the persons who constitute the criminal organization;

 (c) receives any benefit from the criminal organization; or

(d) repeatedly engages in activities at the instruction of any of the persons who constitute the criminal organization.

The Practical Impact

The implications of being labeled a member of a criminal organization are serious. Individuals who are alleged to be acting as part of a criminal organization are deprived of numerous key procedural and substantive safeguards.

For example, it is easier for police to justify invading the privacy of individuals associated with “criminal organizations”. Under Part VI of the Criminal Code, before obtaining authorization to intercept private communications – be it by phone, text message, email or otherwise – police must demonstrate either that other investigative methods have been tried and have failed or that other means are unlikely to succeed. In other words, where a wiretap must usually be a tool of last resort for the police, there is no such restriction when investigating a criminal organization.

Moreover, ordinary wiretap authorizations must be renewed by a judge every sixty days; however, wiretap warrants issued to investigate “criminal organizations” need only be reviewed every year.

Next, unlike the ordinary criminal accused who must be released on bail unless the Crown can show cause as to why detention should be ordered, the accused member of a “criminal organization”, who under law is presumed innocent before proven guilty, bears the onus to demonstrate to a court why bail is appropriate.

Sentencing is also affected by a “criminal organization” finding. Where the Crown can demonstrate that the offence was committed for the benefit of a criminal organization, the punishment for certain offences will be significantly increased, including the application of mandatory minimums and consecutive sentences. 

Also, the Criminal Code makes it far easier for the Crown to force individuals and groups to forfeit property when they are deemed to be the “proceeds” of a criminal organization.  In certain circumstances, even the mere affiliation with a “criminal organization” can constitute a criminal offence, carrying a maximum sentence of five years imprisonment. 

In addition, entities largely based overseas should be aware that there is no territorial limitation to the “criminal organization” definition. As s. 467.1 provides, a “criminal organization” is a group that is composed of three or more persons in or outside of Canada.

Finally, the government has not mandated any “waiting period” before these new regulations come into effect. Accordingly, they are presently in force.

The Effect on Online Gaming

It is notable that the government seems to be devoting significant attention to the prosecution of gambling and betting offences under the rubric of “criminal organization” activity. This approach makes it easier to investigate, convict and sentence individuals and organizations operating operate gaming schemes.

Over the past two months, several provincial governments have announced their intention to establish internet gaming websites, serving the residents of their respective jurisdictions. In fact, British Columbia has already established such a site – “PlayNow.com” – which, after its glitch-plagued abortive launch, is now offering players their choice of table games, sports betting and online bingo.

Ontario was next on the bandwagon. As reported in early August, the Ontario Lottery and Gaming Corporation plans to offer access to “legal online gambling” by early 2012. Finally, the Alberta government announced days later that the province plans to consider legalized, government-run internet gaming.

At present, the legality of both operating and playing at an online gaming site is matter of considerable legal uncertainty. However, it would seem clear from the Starnet case of the early 2000s that the government will take steps to shut down online gaming companies operating in Canada who offer gaming access to Canadians.

While that has been the extent of government enforcement thus far, it is quite possible that the announcement of government participation in online gaming is a prelude to stricter enforcement of the Criminal Code gaming provisions. It has been our experience that government expansion into a previously unoccupied area – be it gaming, alcohol or tobacco - is often accompanied by legislative, regulatory and police action with the direct aim of shuttering the competition.

Accordingly, if online gaming operators are not currently in compliance with the statutory provisions found in Part VII of the Criminal Code, it is possible that they may be subject to the harsher investigative, asset seizure and sentencing provisions of the Code’s “criminal organization” scheme. Moreover, the recent government push into online gaming may signal a renewed desire to prosecute offences previously – and perhaps, purposefully - ignored by politicians and law enforcement.

Sources:

Case Law

R. v. Lindsay, [2009] O.J. No. 2700 (O.S.C.J.)

R. v. Beauchamp, [2009] O.J. No. 4872 (O.S.C.J.)

Statutes

Criminal Code, ss. 197- 209, 467.1- 467.14

Government Publications

Canada Gazette, Regulations Prescribing Certain Offences to be Serious Offences, (http://tinyurl.com/3673nnp)

Media

Calgary Herald, Alberta takes wait-and-see approach on Net gaming, (http://tinyurl.com/2d3ww8x)

Canadian Press, Feds extend Criminal Code definition of 'serious offences' to hit gang profits, (http://tinyurl.com/25jygey)

CBC News Online, Online gambling expansion launched by B.C., (http://tinyurl.com/2frhw7u)

Marketwire, Government of Canada Enacts New Regulations to Help Fight Organized Crime, (http://tinyurl.com/29p4p6j)

Montreal Gazette, Change to Criminal Code gives law enforcers more power, (http://tinyurl.com/2896xo9)

Ottawa Citizen, Online gambling coming to Ontario, (http://tinyurl.com/2bh293e)


Author: Solomon C. Friedman


 
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