This Aint No Party - This Aint No Disco.... Operation Sidewinder

I am putting this article on the blockchain because I'm worried it will disapear down the the Internet Memory Hole. The article in question pertains to a leaked classified document called "Operation Sidewinder" put out over 20 years ago which details the pernicious influence on Canada-China relations.

Remember when the RCMP and CSIS accused the Chinese government of purchasing real estate in Canadian urban centers as a method of threatening Canada? No? That’s because the recommendations from a former classified program called Sidewinder was abandoned. All documents were ordered destroyed, and buried in 1997 by the Liberal government. Turns out we were as anxious to build ties with China then as we are now. Despite our national spy services advising the government that, well…this would happen to real estate.

In a report titled Chinese Intelligence Services and Triads Financial Links in Canada, an RCMP-CSIS joint task force allege that the Chinese government is using legal and legitimate businesses to gain control over the economic levers of Canada. They also warn that the “Canadian economy is concentrated in three or four large urban centres.” Consequently, “[Canada] is more vulnerable [than other countries] because of the many legislative loopholes governing finance and the concentration of financial power in the hands of few”.

20 years ago, when people thought Barbie Girl was great music, this seemed like our top spies were spinning a far-fetched conspiracy theory. Analysts even referenced how far fetched it seemed in the actual document. They preface the report with “this document does not present theories but indicators of a multifaceted threat to Canada’s national security based on concrete facts drawn from the databanks of the two agencies involved [the RCMP and CSIS].”

The report also warns that “if you look at a single individual, the threat does not seem to be there, but because of their associations and their alliances with China, the facts analyzed lead us to believe that a gain of influence is the object of a concerted plan and that could constitute a threat to Canada.” Reading the details today, these ideas seem less far-fetched than ever.

“China remains one of the greatest ongoing threats to Canada’s national security and Canadian industry.”

— Chinese Intelligence Services and Triads Financial Links in Canada

Chinese Billionaires, Gangsters, and Spies

Canada’s top spy agencies claimed that they have identified distinct groups of people that are “working with the Chinese government to gain influence through some of their ‘financial ventures’ in Canada.” They further allege that the Chinese government is using tycoons, triads, and spies to “attain influence over the economic levers and prominent Canadian figures”.

Chinese-Canadian Tycoons
Well known (and loved) Chinese-Canadian business tycoons are said to be a threat. Stanley Ho (Casino barron, former owner of Ramada), and Li Ka-shing (founder of Concord Pacific) are both named in the report for their aggressive investments in Canadian real estate, and financial institutions. At one point they estimate that Li Ka-shing and his son owned at least ⅓-⅙ of downtown Vancouver at the time. The report also notes the recent buy of 18 hectares by the CN Tower, which is over 1% of downtown Toronto.

The report claims that the two were selected by Beijing to be the unofficial leaders of Hong Kong after the departure of the British. While Sidewinder doesn’t explain why they’re concerned, the American government lays it out on the table. The US government wrote in a report that the RCMP identified Ho as having links to Kung Lok, a branch of the Triads.

Canadian analysts don’t quite say why Li Ka-shing is on their radar. They do infer that his acquisition and interest in Canadian banks is worrisome, but not why. When China launched CITIC, a state-owned investment firm, Li Ka-shing was appointed to the first board of directors. Additionally the U.S. Embassy in Beijing has claimed Li Ka-shing’s Hutchinson Whampoa is “financing or serving as a conduit for communist China’s military”. So maybe that’s it?

Hong Kong’s Triads
The report also alleges that Triads have developed large businesses in Canada, both legitimate and not-so-much. For those that don’t know, the Triads are one of the largest organized crime groups in the world. They have significant operations in Canada, mostly around Vancouver and Toronto. They’re discreet and intelligent, not street goons. Police forces around the world allege they do everything, from drug trafficking to smurfing. Although they do have much more legitimate operations, like making movies and real estate development.

The report claims Beijing is giving them a free pass in exchange for sharing influence. RCMP-CSIS analysts also claim they have identified triads, amongst legitimate immigrants, using “investor” and “entrepreneur visas” to come to Canada. They note that Canada is an “excellent place to invest in companies to launder the profits derived from criminal activities while securing a portion of their assets outside of Hong Kong and obtaining a Canadian passport.” Back then they must’ve been unaware that Canada is an excellent place to launder any money.

Chinese Spies
The report also accuses the Chinese Intelligence Service (ChIS) of using specialists, students, and shell companies to “pursue their acquisition of economic intelligence.” They additionally claim that ChIS is attempting to position themselves in a way in which they can impact the management of the country.
Real Estate, Banking, and Technology

Sure, we watch television. We know spies are sent around the world to gather military and economic secrets. What’s interesting in this report is something that’s been undiscussed for 20 years. RCMP-CSIS analysts claim China is after “soft” sectors, such as “real estate, hotels, transportation, oil companies, and travel agencies”.

Activity in “soft” sectors doesn’t attract the scrutiny of larger, regulated industries. A look at Lenovo’s rejected bid for handset maker Blackberry vs. Anbang’s successful bid for the Bentall Centre in Vancouver is an example of this. The former received great scrutiny because it was technology, the latter not so much. The analysts further noted that investments in commercial sectors “at first site do not involve any security risks and did not attract the attention of the Canadian services responsible for security.”

They go on to say “the scale of their venture or investments has now made them some of the most important figures present in the major centres [of Canada], and their decisions to invest in one place or another are not a matter of indifference to anyone. Such projects are seen by the local or national business community as a ‘favour’ or a ‘chance’ not to be missed”. Sounds vaguely familiar.
Influence In Politics

The report notes that they’re not interested in Canada because of our sweet maple booty. It’s because of our political influence. They allege that the 3 groups of people are attempting to control our political base. According to the report, there’s two methods in which they use – donations and constituency.

“The triads, the tycoons, and ChIS have learned the quick way to gain influence is to provide finance to the main political parties. Most of the companies identified in this research have contributed, sometimes several tens of thousands of dollars, to the two traditional parties, that is, the Liberal and Progressive-Conservative Parties.”

Those sentences are concerning for two reasons: First, terrible grammar. Second, politicians feel a sense of duty to repay political donors. At the very least, they often grant them favours to keep the money flowing for campaigning. We restrict foreign donations to our political parties for this reason. Unfortunately, what happens when “domestic” companies make donations to help foreign influence? We can’t do a whole lot about that, now can we?

“The triads, the tycoons, and ChIS have learned the quick way to gain influence is to provide finance to the main political parties. Most of the companies identified in this research have contributed, sometimes several tens of thousands of dollars, to the two traditional parties, that is, the Liberal and Progressive-Conservative Parties.”

Leveraging Legitimate Desire

No, the report isn’t racist and thinks the whole country should be on edge with all Chinese people. In fact, the analysts say the “great majority” of Chinese immigrants are “legitimate”. They allege that spies and triads are hiding amongst the ranks of regular families. Despite this, the report claims “Canadian authorities detected a significant presence of Chinese organized crime” using Canada’s generous immigration schemes.

Notably present in the table of contents but not included in the draft is a section on Canadian schools. A copy hosted by retired police officer Leo Knight has a section called “University of Toronto and University of Western Ontario”. The actual information was redacted unfortunately. I guess we’ll never know what mysteries our universities and student visas contain.
It’s Probably Nothing…Sidewinder Gets Disbanded

Operation Sidewinder was abruptly disbanded before the document was leaked. Apparently all copies were ordered destroyed, and the “rest were lost”. No one’s quite sure who ordered the documents destroyed. It’s believed the project died under pressure from within and outside the agencies.

The internal struggle reads like an argument between kids, then covered up by the oldest one. Senior RCMP officials say CSIS officials tried to alter information and delete materials in ways that “undermined the report’s integrity”. CSIS claims the report did not meet the analytical rigour. The Security Intelligence Review Committee (SIRC) did a final investigation into the matter, and claimed the report was “deeply flawed”. They did determine that the final draft was up to standard, but it did not present a credible threat.

They also disclosed in a second report that documents were improperly handled. One agent in Toronto had his car broken into, and files stolen. They concluded “petty thieves intent on supporting a drug habit” committed the crime. They also say the classified documents stolen were “unread”, disposed of in a dumpster, and emptied at a landfill site…but they were never recovered. Which is a lot of details considering they have no idea what happened after the burglary.
Political Response To Sidewinder

As you can guess, this report didn’t sit well with anyone in government. It alleges a powerful country is conducting a spy mission, using influential Canadians. They even scrutinized a company whose board Prime Minister Chretien’s son-in-law sat on. The company was China’s state-run CITIC, but still. Right or wrong, it wasn’t going to sit well.

The whole report went mostly silent, with a few exceptions. Once, when RCMP officers involved filed an obstruction-of-justice complaint. They alleged senior officers covered up their investigation. Another time in Parliament, when they noted that whistleblowers are punished in Canada. They used two of the CSIS agents that had their careers ruined shortly after Sidewinder as an example.

Most notable was in 2010, when then CSIS director Richard Fadden mentioned it in a CBC interview. He alleged two BC cabinet ministers are under the influence of foreign governments, but didn’t substantiate the claims. Afterall, it’s not like Vancouver’s politicians are flying China’s flag over city hall or anything. Wait, that happened? That’s six kinds of weird. Vancouver Mayor Gregor Robertson said at the time “it’s frustrating and unfortunate that local elected officials in BC had aspirations cast upon them without any justification”. Yeah, that Gregor.

I know, bringing up Sidewinder brings up more issues than it clears. In fact, some of you might think this was a hate piece written to attack the Chinese and politicians. Completely not my intention. In fact, I receive at least a couple emails a day saying I’m too pro-China for some of my articles.

Our point was, often we sweep things under the rug because they’re uncomfortable to talk about. We do so at our own peril. Canadian politeness often gets taken advantage of by politicians, businesses, and (if we believe our top spies) foreign countries. In exchange, we seem nice but get Royally screwed. I’m just one Canadian though, what do you folks think?

Drop us a comment below, or share this with a friend and discuss. We’d love to hear what Canadians think about the Sidewinder report 20 years later. We’ll be exploring how crazy Sidewinder is over the next few posts. Like us on Facebook to be notified when the next post goes live.

Sidewinder

Secret

RCMP-CSIS Joint Review Committee

Draft Submission

SECRET

Joint RCMP Study

Information as of

24 June 1997

Translated text

Chinese Intelligence Services

and Triads Financial Links in Canada

Draft Submitted

to the RCMP-CSIS

Joint Review Committee

24 June 1997

TABLE OF CONTENTS

Table of Contents (Note: pages are for the original document not on this HTML)

i

Foreword

iii

Summary

iv

Introduction

1

Beijing's Strategic Alliances, or the lessons of Sun Tsu

1

Immigration to Canada

3

Hundreds of Canadian Companies "Made In China"

4

Case Studies

5

-Multinationals

CITIC (Canada)

5

Norinco and Poly Technology (Poly Group)

5

-Banks and financial institutions

CIBC and the Hong Kong Bank of Canada

6

Wood Gundy, Merrill Lynch and Gordon Capital Corp.

6

-High technology

Semi-Tech Corporation

7

China Huaneng Group, Unipec Canada and Goldpark China Ltd.

7

-Entertainment and Media

Charles Y. M. Kwan Promotions
8

North American Studios
8

China Vision and Fairchild Entertainment

8

Hong Kong Telecommunications and Wharf Cable Ltd.

9

-Food-Services industry

Tai Foong International
9

-Real estate and hotels

Grand Adex Properties Inc. and Concord Pacific Development Corp.
9

World Financial Properties
10

Ramada Hotels, Harbour Castle (Toronto) and others

10

-Universities and research centers

University of Toronto and University of Western Ontario
10

Chinese Intelligence Services Penetration of Canadian Companies
11

Interference by Financing of Canadian Political Parties
11

The Importance of the Chinese Diaspora
12

Consequences for Canada
12

Recommendations
14

Appendixes

-Appendix I: Annual number of certifications of permanent residence in Canada for persons

                    from Hong Kong since 1990:  "entrepreneur" and "investor" categories
15

-Appendix II: Annual breakdown of the choice of province by permanent residents from

                    Hong Kong "entrepreneur" and "investor" categories
16

-Appendix III: Origin and Description of the Triads
17

-Appendix IV: Description of a Typical Triad Member

Profile A: Young Adult
20

Profile B: Mature Member
21

-Appendix V: Guanxi or networking
22

-Appendix VI: The Chinese Diaspora
23

FOREWARD

 In May 1996 a joint project was initiated by the RCMP Criminal Analysis Branch and the CSIS Analysis and Production Branch to assess the extent of the threat posed by the acquisition and control of Canadian companies by members or associates of triads and with affiliations to the Chinese Intelligence Services. The research team quickly realized that the initial premise was the tip of the iceberg with only a minute portion of a much more complex situation showing. It should be stressed that this report is a prospective document that makes to claim to provide a full survey of the issue; in fact, quite the opposite.


 This document does not present theories but indicators of a multifaceted threat to Canada's national security based on concrete fats drawn from the databanks of the two agencies involved, classified reports from allied agencies and various open sources. This study has departed from the conventional and sometimes confining approaches followed by our respective methodologies. Although both organizations have fairly extensive expertise on Chinese matters, it is nevertheless very different. It is clear at the end of this exercise that both organizations have gained from cooperating on this research. When put together, these two bodies of expertise complement each other, providing a broader and more substantial perspective of the Chinese issues. (S)


 The scope of the problem found after a few weeks of research dictated that the initial research results had to be presented in the form of case studies. At the moment, we estimate that over 200 Canadian companies are under the direct or indirect control of China. Although it was impossible to do all the research within the parameters initially given; however, sufficient details have been found to reveal the threat. It should be reiterated that this report presents concrete facts, not just ideas or speculation. We trust that we have demonstrated the need to continue the work within a broader and more elaborate framework. (C)

Chinese Intelligence Services and Triads

Financial Links in Canada

SUMMARY

 Since the mid-1980s, a substantial immigration flow from Hong Kong has taken place and Canadian authorities were first alerted when a significant presence of Chinese organized crime elements among this group was detected. Many came through the "entrepreneur and "investor" immigration program and some of these criminals even have succeeded to obtain their Canadian citizenship. Although not all immigrants in these categories are suspected, two particular groups of individuals raised attention. Two other groups have also taken advantage of the "entrepreneur" and "investor" categories to immigrate and to invest in Canada. First, a certain number of very rich Hong Kong Chinese business people (tycoons) who are known to have been cooperating with the Chinese Government for years. Then a group composed of associates and relatives of China's leadership and the Chinese Intelligence Service (ChIS). Intelligence reveals that certain individuals of these three groups have been working for over fifteen years in concert with the Chinese government, and some of their "financial ventures" in Canada serve to conceal criminal or intelligence activities. (S)



Hand in hand with this situation, the ChIS [Chinese Intelligence Service] make very active use of their access to Canadian industries through exchanges of specialists and students, and also set up shell companies to pursue their acquisition of economic and technological intelligence. Cooperation between the Hong Kong tycoons, the triads and the Beijing leadership adds a new dimension to the well known "mass line collection" strategy followed by the ChIS. This situation substantially raises the level of the potential threat, revealing the effectiveness of Chinese efforts to obtain Canadian technology and their capability to interfere in the management of the country. Central points and essential for the understanding of the problem are the cultural singularities that characterize the Chinese as the concepts of "debt of honour", "duties", "Hou Tai or backers" and "Guanxi or connections." ) (S)



 By using these alliances, the Chinese government is trying to gain influence on Canadian politics by maximizing their presence over some of the country's economic levers. To that end, they proceed initially to buy and/or legally set up a company in Canada that, once under their control, buys other companies and so on. An effective domino effect ensues that acts like a well-spun web or network at strategic points. It is estimated that over 200 Canadian companies have passed into Chinese influence or ownership since the early 1980s through the triads, tycoons or China national companies. These businesses are found in various sectors of the economy, ranging from multinationals to banking, high technology and real estate (CITIC, Norinco, Husky Oil, Grand Adex Properties Inc, Merrill Lynch, Gordon Capital, Inc, Tai Foong International, CIBC, Ramada Hotels, China Vision and Semi-Tech Corporation, etc.). The triads' companies are also used to pursue their criminal activities, such as money-laundering and heroin trafficking, as well as assistance to the ChIS.  (S) 


 Being Canadian these businesses are also eligible to receive government subsidies for research or classified contracts from Federal Departments. The risk is that after the research is done, there results can be transferred to China. Other form of risk is with the access gain through classified contract. As an example, a Canadian company under Chinese influence was in contention for a contract to set up and run a classified communications system linking the main agencies of the Canadian intelligence community. A company in Toronto specializing in video surveillance was originally Canadian, but was bought by  a Chinese multinational. It is impossible at present to say how many or which Canadian companies are in the same situation. These examples, however, raise questions about the integrity of some companies that have already installed security systems for various Canadian government institutions or Canadian research industries. (S)



 Significant portions of some large Canadian urban centres are also owned by Chinese entrepreneurs. For example, it is estimated that Li Ka-Shing owns with his son at least one sixth to one third of downtown Vancouver.  (S)



These "corporate" figures have become an influential presence on the political and economic landscapes of Toronto and Vancouver and at the provincial and federal levels. The triads, the tycoons and the ChIS have learned the quick way to gain influence is to provide finance to the main political parties. Most of the companies identified in this research have contributed, sometimes several tends of thousands of dollars, to the two traditional political parties, that is, the Liberal and the Progressive-Conservative Parties.  (S)

The Chinese leadership continues to gain much direct or indirect influence over the Canadian economy and politics. Having bought significant real estate holdings and established businesses in Canada, China has obtained access to influential figures who are now or once active at various levels of Canadian society. In many ways, China remains one of the greatest ongoing threats to Canada's national security and Canadian industry. (S)

"Be so subtle that you are invisible.

         Be so mysterious that you are intangible. 

 Then you will control your rival's fate."

Sun Tzu,

                            The Art of War (c. 509 BC)

INTRODUCTION

1. With the announcement of the return of Hong Kong to China in the mid-1980s, Canada witnessed the arrival of a substantial immigration and capital flow from that region. For example, between January 1990 and March 1997, 233,077 Hong Kong residents emigrated to Canada, of whom nearly 70,0001 were in the "entrepreneur" or "investor" category. This exceeded the "family" category over the same period. Although the great majority of these migrants were legitimate, the Canadian authorities detected a significant presence of Chinese organized crime elements, among them, namely the triads and their associates, some of whom succeeded in obtaining Canadian citizenship.2 (S)

1. Some wealthy Hong Kong Chinese investors and Chinese from Mainland closely affiliated or related with the country's leadership and the ChIS also took advantage of the "entrepreneur" and "investor" categories to emigrate in and invest in Canada. Few even bought or established companies on Canadian soil through family members who had obtained Canadian citizenship. Intelligence indicates that these specific individuals with these three groups: triads, Hong Kong investors and people close to China's leadership, have been identified working with concert with the Chinese government to gain influence through some of their "financial ventures" in Canada. Some companies which are also used to conceal criminal or intelligence activities. At the same time, the ChIS use their access to Canadian businesses through exchanges and technical or student visas to steal classified and technological information. They have gone so far as to set up shell companies to pursue their economic and technological information acquisition operations. (S)

1. A new triumvirate was born. This cooperation between Hong Kong Chinese business people, the triads and the Beijing leadership adds a new dimension to the known mass line collection strategy followed by ChIS. Economic, political and security indicators based on factual data revealed the potential threat and efforts made by the Chinese to obtain Canadian technology, but above all to obtain influence over economic levers and prominent Canadian figures. (S)

BEIJING'S STRATEGIC ALLIANCES, OR THE LESSONS OF SUN TZU

1. When Deng Xiaoping came to power in the late 1970s, he introduced his economic reforms with the slogan "to get rich is glorious." To achieve that end, he had to move China onto the international markets. The isolationism of the former regime, however, handicapped the Chinese leadership. It therefore turned to the richest Chinese business people of Hong Kong, including, among many others, Li Ka-Shing, Henry Fok Ying-Tung, Wang Foon-Shing, Stanley Ho3 and the man who would eventually be chosen by Beijing to head Hong Kong after the departure of the British, Tung Chee-Wa (C.H. Tung). On 23 May 1982, Li Ka-Shing and Henry Fok met with Deng Xiaoping and Zhao Ziyang in Beijing to discuss the future of the peninsula. Their task would be to advise and educate the Chinese authorities about the basic rules of capitalism. In return, Beijing gave them privileged access to the vast Chinese economic basin. These powerful international financiers played an important role in the preparations for the transfer of Hong Kong. (UC)

1. In 1984, the British Government of Margaret Thatcher announced that it would return Hong Kong to China on 1st July 1997. This was not news to the Chinese or the rest of the world since a treaty signed nearly a century before had stipulated that Hong Kong was to revert to China in 1997. The reality of the impending transfer, however, created insecurity that was strengthened by the tragedy of Tiananment Square in June 1989. That incident made Beijing realize more than ever that it would have to prepare the ground for its arrival not only with regard to the financial community but also the population. In the late 1980s, Western intelligence services reported the very active presence in Hong Kong of the United Front Work Department (UFW).4 For that purpose, the UFW was given the responsibility among other things for building alliance with the triads already affiliated with many business people. As early as 1992, Western intelligence services knew that, Wong Man Fong, formerly Head of the New China News Agency, was instructed to inform the triads bosses that if they agreed not to jeopardize with the transition process and the normal business in Hong Kong, Beijing would assure them that they will be allowed to pursuit their illegal activities without interference.5 The Beijing authorities also created a front company in Hong Kong for Wong Man Fong to facilitate his contacts with the triads and so assist triads groups set up legitimate business in China, particularly in Guangzhou and Shangai.6 Following these negotiations, Deng Xiaoping himself was speaking of the triads as Chinese "patriotic groups", and the Hong Kong press published a photograph of Charles Heung, a senior officer of the Sun Yee On, conversing with the patriarch's daughter.7 At the same time, Interior Minister Tao Siji indicated that there were patriotic members among the triads and they were welcome to do business in China. (S)

1. The political class has also been targeted by Beijing's leaders. Without any doubts for the communist masters it was essential to obtain the cooperation of key elements of influential local personalities. Their collaboration or their resistance in China's requests before July 1st was going to make the difference between the possibility to do business with China after the transition. To achieve this, political and business people have been approached and enthusiastic collaborators received positions within various transition committees. For example, in early February 1997, Rita Fan Hsu Lai-Tai was appointed by Beijing, chair of the Hong Kong Special Administrative Region (SAR) Provisional Legislative Council (LEGCO). Mrs. Fan Hus has been identified as a secret cadre of the Chinese Communist Party and an associate of Albert and Sonny Yeung, both officers of the Sun Yee On triad. She is also the daughter of one of the leaders of the Shanghai Triad criminal organization known as the Green Gang before the communist takeover in 1949. This group was known for its political assassinations on behalf of another triad boss, Chiang Kai Shek.8 (S)

IMMIGRATION TO CANADA

1. Canada has always been a preferred destination for the people of Hong Kong. It is estimated that 100,000 Canadians live on the peninsula, and most of them are natives of the city. Hong Kong alone has been for the last 10 years the top source of immigration to Canada, with over 500,000 Hong Kong people now living here and accounting for 22 percent of all immigration to Canada. Over half of the 66,000 persons who left Hong Kong in 1996 came to Canada. To that must be added 17,000 students, amounting to a fifth of all foreign students in Canada. (C)

1. Among legitimate immigrants in recent years, some persons affiliated with or members of the Chinese triads have succeeded in slipping in and obtaining Canadian citizenship. Several triad officers 9 and their associates even have family members residing in Canada. Their choice of Canada was no accident. This country is an excellent place to invest in companies to launder the profits derived from criminal activities while securing a portion of their assets outside Hong Kong and obtaining a Canadian passport. Most of these individuals are members or associates of the upper echelons of the triads and own or run large businesses in Hong Kong. As part of their secret agreements reached with the Beijing leadership,10 these triads now use their Canadian acquisitions to engage in intelligence activities, such as intimidating individuals, identifying potential sources of facilitating visit of Chinese delegations on behalf of China. (S)

1. Two other types of investor represent another danger to the Canadian economy, namely, the rich Hong Kong Chinese business people and leaders of the Chinese civilian and military authorities of China. Like the "entrepreneurs" affiliated with the triads, Chinese investors from Hong Kong or Beijing have taken control of Canadian companies in various sectors of the economy. Some of these businesses have even obtained Canadian government classified contracts. The threat is more significant because the strategic alliance between the Beijing leadership and Hong Kong tycoons is reinforced by the powerful ethnic and cultural ties associated with guanxi.11 This concept rules the links, the obligations or duties and the type of relations between individuals and is a characteristic of the Chinese culture. (S)

1. In all three cases, their commercial activities have enabled them to develop a position in the Canadian economy that affords them the opportunity to engage in intelligence activities, such as illicit transfer of technology, foreign influence and interference, identification and cultivation of persons favourable to China, and the acquisition of undue control in important Canadian economic and political circles. (S)

1. Even before Hong Kong's official return to the Communists, it was established by several Western agencies that their national immigration systems had been affected by illegal ChIS and triad interference. Laurence Leung Ming-Yen, a former director of the Hong Kong immigration service, is still under investigation after he had to resign under the pressure of allegations of corruption and illegally disclosing confidential information about residents of the peninsula. The controversy surrounding Leung was fed by his business relationship with the flamboyant tycoon Tsul Tsin Tong, well known for his pro-Beijing views and a member of the notorious Chinese People's Political Consultative Conference and Preparatory Committee. The murder of Leung's young daughter in Vancouver in 1993 by a crossbow bolt has still not been solved. The Vancouver police suspect the crime was committed by triad members.

1. In 1996, an extensive special investigation within the American immigration service led to the arrest of two former heads of this service stationed in Hong Kong. Jerry Wolf Stuchiner was found in possession of illegal Honduran passports12 and was recently released after he accepted to collaborate in the trial of James DeBates.13 James DeBates and his wife Heddy, an American of Chinese origin, were also arrested and questioned regarding their involvement in Stuchiner's activities and the illegal entry of Chinese immigrates into the United States. Canada has unfortunately its share of difficulties. Different cases were investigated and like the case of Robert Geddes, a former citizenship judge, whom was charged in May 1997 with 33 counts of fraud and misrepresentation in 13 known cases involving Hong Kong Chinese.

1. Analysis of the destination of immigrants broken down by Canadian province is an indicator of the concentration of the activities of these groups. Between January 1990 and March 1997, 39.1 percent of the persons registered in the entrepreneur and investor categories chose to settle in British Columbia, particularly in the south Fraser Valley. Ontario for its part received 28.5 per cent of immigrants, who settled mainly in the Toronto area. This pattern is explained by the large, long-established Chinese communities in these areas which are essential in the activities of the triads, Chinese investors and ChIS. Under the same program, 20.6 per cent of such immigrants settled in Quebec while Alberta received only 7.3 per cent. (S)

HUNDREDS OF CANADIAN COMPANIES "MADE IN CHINA"

1. The influx of Chinese investors who are affiliated with the triads or new associates of Beijing poses a new challenge to Canada's national security. The central point of the strategy of the Chinese is first to buy a Canadian company so as to obtain a "local identity", legally concealing subtly their foreign identity. Then, using this acquisition, the Chinese-Canadian company invests heavily or buys other companies in various economic sectors, but always under the Canadian banner. In actual fact, control lies in Hong Kong or Beijing, and the financial benefits or fruits of research, often paid for by Ottawa or the provinces, are likely to make their way to Asia. (S)

1. Hand in hand with their ethnicity and their commercial ambitions, the financial network of the Chinese entrepreneurs associated to the organized crime and to the power in Beijing has grown exponentially and very rapidly in Canada. Their influence over local, provincial and national political leaders has also increased. In the game of influence, several of these important Chinese entrepreneurs have associated themselves with prestigious and influential Canadian politicians, offering them positions on their boards of directors. Many of those companies are China's national companies.

1. The analysis of the information demonstrates that their attention was not initially directed towards sensitive sectors like high technology or other even more sensitive areas, but towards what might be called "soft" sectors such as: real estate, hotels, transportation, oil companies and travel agencies. Commercial sectors that at first sight do not involve any security risks and did not attract the attention of the Canadian services responsible for security. The scale of their ventures or investments has now made them some of the most important figures present in the major centres, and their decisions to invest in one place or another are not a matter of indifference to anyone. Such projects are seen by the local or national business community as a "favour" or a "chance" not to be missed. (S)

CASE STUDIES

1. It is estimated at the present time that over 200 Canadian companies are under Chinese control. These business are to be found in myriad sectors of the economy, ranging from multinationals to banking, high technology and real estate. Some typical cases are presented here to illustrate the various scenarios that are clearly worrying for Canadian security. At first site, these individual cases do not seem to be a great threat. It becomes, however more disturbing when the ownership links between various sectors of Canadian enterprises are revealed. (S)

Multinationals

1. CITIC (Canada) China International Trust Investment & Company (China International Trust & Investment Corporation) is the largest Chinese operating internationally. It has subsidiaries operating in several Western countries, including the United States and Canada (Vancouver). Founded at the end of the 1970s, it now has assets worth US$23 billion. Its subsidiary in Canada CITIC BC Inc., opened it doors in 1986. By 1995, it reported a turnover of CDN$250 million (1995). The projections for 1996 aimed for $290 million. (UC)

1. CITIC was initially established to encourage foreign investment in China. It has since taken the lead in Chinese investments outside China, in all areas from real estate to electronics. In 1979 Beijing appointed to CITIC's board of directors three Hong Kong financial giants, Li Ka-Shing, Henry Fok Ying-Tung and Wang Foon-Shing. With their assistance, in the following years, the Beijing acquired important companies such as Cathy Pacific Airlines, Hong Kong Telecom and Star TV. In Canada, it is estimated that CITIC has invested nearly $500 million to buy up businesses in certain areas, such as Celgar Pulp Mill in British Columbia, Nova Corp Petrochemical in Alberta, real estate through Hang Chong Investments Ltd. and hotels. Eventually, CITIC developed also close business links with Power Corporation. (S)

1. CITIC recently attracted American media attention in the scandal over illegal contributions to the US Democratic Party and influence-peddling by the Chinese government (see section below). CITIC, China Resources and the Lippo Group (in which in both Li Ka-Shing is a large shareholder) are at the centre of the affair. CITIC chairman, Wang Jan, is also chairman of Poly Technology (see next section). CITIC has repeated the gesture by contributing through its Canadian subsidiaries to Canadian Political Parties. (UC)

1. Norinco and Poly Technology (Poly Group). Northern Industrial Corporation (Norinco) and Poly Technologies (a subsidiary of Poly Group) are both owned by China and under the control of CITIC. They have subsidies around the world, including Canada (Montreal) and the United States. Poly Group was until recently head by Deng Xiaoping's son-in-law, He Ping, and is part of the entrepreneurial drive of the People's Liberation Army (PLA). Several large quantities of arms manufactured by Norinco have been confiscated on Indian reserves, especially those of the Mohawks. In May 1996, US authorities what they described as the biggest arms seizure on American soil, confiscating 2,000 AK-47assault rifles and other military weapons from a warehouse in California. The US-based Chinese representatives of Poly Technologies and Norinco were arrested in connection with this affair. Although the final destination of the arms has not been determined, the Amerindians "Warriors" and American militia trails are strongly suspected by US authorities. (S)

1. In another incident, the Rex International Development company of Hong Kong, in which Norinco is the majority shareholder, is currently under investigation possibly subject to prosecution for exporting components for the manufacturing of chemical weapons to Iran. Rex was established in 1982 as a joint venture with Norinco by Tsui Tsin-Tong, a financial partner of Li Ka-Shing. Tsui filed an application to emigrate to Canada in 1985 which has been renewed several times. His case is still not settled because he has never satisfied the Canadian authorities by providing adequate explanations of his contacts with the PLA and the ChIS. Silver City Development Ltd., which holds shares in Rex, has been used for several years by the ChIS and the Chinese leadership as an investment front and cover. (S)

1. Through the power of its multinationals industries and the billions of dollars they generate, China has been able to establish itself in the Western economy. This gave to the country an enormous advantage in the pursuit of gaining influence. In return through these subsidies and influences, they are able to open channels to facilitate access to Western power and traffic of illegal weapons and technology. (S)

Banks and financial institutions

1. CIBC and the Hong Kong Bank of Canada. The banking industry is one if not the most important economic leverage in this country. To control or to be able to influence the actions of a bank gives to a single or a group of important shareholders a very influential and privilege position in our society. In this domain, Canada might be in a disadvantage position. Of the G-7 countries, Canada has the fewest banks that is five major institutions including the CIBC which in return creates the highest concentration of assets in the same hands. Banks, as a whole, hold 57 percent of industrial shares, 54 percent of private deposits and 65 per cent of personal credit. Some analysts predict that the Canadian banks will hold 70 percent of the mutual fund market by the year 2000. (UC)

1. Rich investors like Li Ka-Shing and even the Chinese regime itself got interested in the 1980s to invest in banks and Canadian banks too. Li Ka-Shing owns 10 percent of the CIBC, which is the largest single individual share holder. He is also in partnership with the CIBC in many companies like development projects like of the land of Expo 86 in Vancouver (CDA $3 Billion). This bank seems to be particularly used by Chinese investors. The 1980s saw several bank acquisitions and mergers in this country. The Continental Bank was sold to Lloyds Bank Canada which in turn was bought by the Hong Kong Bank of Canada. The latter is the sixth largest bank in Canada, and the largest foreign one. In 1986, it acquired the Bank of British Columbia. Li Ka-Shing and Stanley Ho14 are share holders and on the Board of Directors of the Hong Kong Bank in Hong Kong which owns the subsidiary in Canada. The Government of China is also a share holder of that bank. (UC)

1. Wood Gundy, Merrill Lynch and Gordon Capital Corp. Other important financial sector linked to banks is the brokerage house business. In Canada, it is dominated by a few large banks. In 1993, eight of the largest Canadian brokerage institutions were owned by five banks and controlled 70 percent of the securities market. In 1988, CIBC bought 65 percent of the shares of Wood Gundy at a cost of CDA $190 million, or three times the book value. (UC)

1. In 1990, the CIBC took over Merrill Lynch Canada, one of the eight largest Canadian institutions. Merrill Lynch International is owned by Thomas Fung (see below, China Vision) and Li Ka-Shing business associate. Another prestigious old Canadian firm is Gordon Capital Corp. became 50.1 per cent owned by Richard Li, son of Li Ka-Shing, in October 1995. That is two years after Richard began to work for the firm. After Richard joined the board, William (Ken) Davidson, former vice-president and executive director of the CIBC, received a promotion to the board, and Bob Fung the position of vice-president. His son Mark often travels on Team Canada trips to Asia. Again, it is not only the financial leverage that should be noticed but the gain of influence this sector offers. (S)

High technology

1. Semi-Tech Corporation. Semi-Tech Corporation is a Canadian multinational corporation based in Markham, Ontario. It was formed from various public companies listed on several shock exchanges, including Toronto, Montreal, New York, Tokyo, Osaka, Nagoya, Frankfurt and Hong Kong, and has revenues of over US $3.5 billion. This corporation, and its chairman James Ting in particular, have business ties with China. Stanley Ho is the principal shareholder through his company Shun Tak (Hong Kong) and sits on Semi-Tech's board. (UC)

1. This company has concentrated in particular on information technology, establishing Semi-Tech Microcomputers Ltd., Semi-Tech MicroElectronics Corp., Semi-Tech Electronics, Singer and STM Systems Corp. The last of these was established by the merger of Data Crown (Canada) and Canada Systems Group, two companies that count various federal government departments among their clients and some of whose employees are regularly in contract with Chinese diplomatic representatives. Of particular note is the fact that Canada Systems Group had applied to undertake the development of COSICS, the Canadian On-line Secure Information and Communication System that was to link the Department of External Affairs, the RCMP, CSIS and National Defence. The project was suspended by the federal government due to the lack of financial resources. (S)

1. China Huaneng Group, Unipec Canada and Goldpark China Ltd. On January 1997 Canadian newspapers announced that the Chinese companies China Huaneng Group Group Hong Kong Ltd. (CHG(HK)) and China International United Petroleum and Chemicals Co. (Unipec) had concluded an agreement whereby Huaneng would buy 70 percent of the shares of Unipec Canada Ltd. Unipec Canada Ltd., in turns, holds 57 percent of the shares of Goldpark China Ltd. of Toronto which, holds exclusive world rights for the productions of photographic security systems. CHG(HK) is a subsidiary of the fifteenth largest Chinese State Company, China Huaneng Group. Unipec for its part is a giant of the Chinese oil industry which has sought in recent years to diversify its activities. It is also famous for the many lawsuits against it and for its illegal transactions involving large arms sales to Iraq for oil. (UC)

Entertainment and Media

1. It has been known for several years that the Hong Kong triads, particularly Sun Yee On, control the Chinese entertainment industry. In Canada, some promotion companies with affiliations to Chinese organized crime and the ChIS have organized tours for artists from China and Hong Kong. Significant investments have also been made by these groups in the Canadian Chinese-language media, including the Chinese-language television industry which is integrated into the general Canadian television system. (S)

1. Charles Y.M. Kwan Productions. Charles Kwan Yee Man15 has been active in the Asian live entertainment business industry for years through his companies, including china Cultural Promotions Limited and Charles Y.M. Kwan Promotions Inc. In the course of his business activities Kwan is regularly in contact with prominent members of the Hung Lock and Sun Yee On triads. He also maintains relations with the Chinese Free Masons (CFM) in Toronto which have always been used by the ChIS to identify potential sources and promote Chinse policies. (S)

1. North American Studio (Canada). Although this company closed its doors in 1996, it was well known in police circles for its criminal origins. Also using the names North American (Canada) Motion Picture Corp. and North American (Canada) Television Corp., this company has been under the control of the Sun Yee On triad since its beginning. The firm attracted media attention recently as a result of the legal sage of Miranda Yuen, an employee of North American Studio and the ex-wife of the top boss of the Wo Hop To triad. In the early 1990s, members of the Sun Yee On triad bought a warehouse in Markham, Ontario which was converted at a cost of $7 million into a film and television production studio. The group has since been the subject of ongoing investigation by police authorities in connection with certain criminal activities. Some of the company's executives were regularly in contact with representatives of the Chinese diplomatic missions in Canada and were regularly involved in Canadian political circles like servings as intermediaries in organizing a dinner between the mayors of Shanghai and Toronto. (S)

1. China Vision and Fairchild Entertainment. China Vision is a pay-TV station in Toronto, established by Francis Cheung in 1981. In 1991 it had about 110,000 Canadian subscribers of Chinese origin in the Toronto, Edmonton, Calgary and Vancouver areas. Pro-democracy groups across Canada submitted briefs to the CRTC alleging that Cheung received financial assistance from the Chinese government, and that China Vision's reports on China were approved and influenced by the government of that country. (UC)

1. In 1992, the CRTC entertained an initial offer of purchase for China Vision. This offer was made by John Sham, a Toronto resident, Hong Kong film promoter and an employee of Television Broadcast Ltd. of Hong Kong. Sham is an associate of Charles Heung, a senior officer of the Sun Yee On triad. The potential buyers of China Vision included John Sham and North American (Canada) Television Production Corporation, which was affiliated with the Sun Yee On triad.16 This offer was withdrawn following information given to the CRTC by Canadian authorities. (S)

1. In 1993, Thomas Fung of Fairchild Communication Ltd. of Vancouver submitted an offer to purchase China Vision to the CRTC for CDN $9.25 million. Fairchild Communications Ltd. is 80 per cent owned by Happy Valley Investments Ltd., also of Vancouver, and 20 per cent by Television Broadcasts Ltd. of Hong Kong, the largest global producer of Chinese-language programming. Various Canadian groups of Chinese origin opposed Fairchild's purchase offer because they were concerned that this sale would open the door for the Chinese government to influence Canadian television news broadcasting. They argue the station would be vulnerable to political pressure from the Chinese government, especially after 1997, and because the Hong Kong media often practiced censorship where China was concerned for fear of offending the government of that country. Although the CRTC shared some of the groups' concerns, in October 1993 it approved the purchase of China Vision by Fairchild Communications Ltd, granting it a license for four years. It should also be pointed out that Fung has bought an important amount of shares in Hollinger and Southam, two press giants in Canada. (C)

1. Hong Kong Telecommunications and Wharf Cable Ltd. In March 1997, these two companies formed in consortium with Li Ka-Shing's Hutchinson Whampoa Ltd., Cheng Yu-Tong's New World Development Co. and Heung (Jimmy) Wah-Shing's Win Film Co. Jimmy Heung is known in Hong Kong as a senior officer of the largest triad, Sun Yee On. He is the younger brother of Heung Wah-Yim, the Dragon Head of this group, who was officially identified in 1992 by the US Senate's Standing Committee on Asian Organized Crime. The output of these companies is used by the Canadian Chinese-language media. It should be noted that the company was bought by another Hong Kong company, Fairchild Communications, and CITIC is also the owner of Hong Kong Telecom. The productions of all the above mentioned companies are used by the Canadian Chinese language media. This transactions highlights well the close relationship among Chinese business people, the triads and China's power. (S)

Food-Services industry

1. Tai Foong International. Triad members or their associates are also involved in the food-services industy, witness the example of Tai Foong International of Mississauga, Ontario. The company's chairman and managing director, David Lam, is affiliated with the Kung Lok triad.17 Tai Foong International sells seafood around the world. The company has offices in Vancouver, Calgary and Montreal with headquarters in Mississauga. It has divisions in the United States, specifically Las Vegas and Seattle, and in Hong Kong. According to our information, Tai Foong International is believed to be involve in importing heroin into Canada from Hong Kong.18 In addition, various members of the management have for several years maintained regular contacts with Chinese trade and military representatives in Canada, organizing meetings, paid visits of Chinese delegations and so on. Several, including David Lam, have travelled frequently to China on business. (S)

Real estate and hotels

1. Everywhere in the world the core of Chinese economic activity is located in large urban centres. In Canada, the bulk of the country's economy is concentrated around a few large cities only. Real estate has always been a preferred area for the Chinese, and several have built large fortunes from it. In itself real estate is not a obvious threat to the security of Canada but it becomes an excellent vehicle to gain access to local politicians and their influence and power. You own one building is one thing, you own 10 or 30 commercial buildings and your influence is considerable. If you are located in the heart of the business activities, you are the focus of attention. The business of centres of Toronto, Vancouver and in part Montreal are now in large portion owned by Hong Kong or Beijing. (C)

1. Grand Adex Properties Inc. and Concord Pacific Development Corp. Grand Adex is wholly-owned by the Kaumo Hui and Li Ka-Shing families. In 1987, the two tycoons' sons Terry Hui and Victor Li, helped Li Ka-Shing acquire 80 hectares of Expo 1986 land in Vancouver for Concord Pacific. They are now pursuing a residential development mega-project estimated to be worth $3 billion. In March 1997, Grand Adex and Concord Pacific repeated the same scenario by going into partnership with the Toronto company TrizecHahn Corp (80 percent foreign own), obtaining a $2 billion project and 18 hectares of prime land west of Skydome in downtown Toronto. They also obtained an exclusive lease on the CN tower for the next 35 years with two possible 15-year extensions. At 33, Terry Hui, who has now obtained Canadian citizenship, heads up these two companies and is considered the most important property developer in Vancouver. (UC)

1. World Financial Properties. In 1992, when the Reichman brothers' Olympia and York Development company faced a serious financial crisis, the CIBC was the Reichmans' largest Canadian creditor, and the Bank of Hong Kong the largest overall creditor. Li Ka-Shing's Dragon Holdings Ltd. acquired 51 percent of Olympia and York Development's New York office towers for $20 million, and, in 1996, bought Olympia with the assistance of the Bronfman family, renaming it World Financial Properties. (UC)

1. Ramada Hotels, Harbour Castle (Toronto) and others. Large hotel chains and almost all the prestige hotels in Canadian urban centres are now owned by Chinese private or state interests. This is an easy service sector and is used mainly to generate income while increasing property holdings. Such is the case of the Ramada international chain, owned by Stanley Ho (25 hotels in Canada), the Sutton Place in downtown Toronto, acquired in 1993 for CDA $29 million and the Meridien Hotel in Vancouver. The Harbour Castle Westin in Toronto was bought by Li Ka-Shing in 1981 at a price of $93 million and a further $20 million payment in 1989. Other examples, the Carlton Inn and the Carlton Place in Toronto are owned by CITIC. This, of course, is only a tiny part of what is to be found in Vancouver, Montreal and other Canadian centres. (S)

Universities and research centers

Sections 43-45 dealing with the University of Toronto and University of Western Ontario are missing from our copy of the report.

Source Notes

1 See Appendixes I and II, tables on Immigration from Hong Kong

2 See Project Stopover. CID/RCMP.

3 In 1996 FORBES magazine estimated the "official" personal fortune of Li Ka-Shing at US$ 10.5 billion, Henry Fok Ying-Tung

  at $2.5 billion and Stanley Ho at $3.1 billion.  (UC)

4 The United Front Work Department is one of the five components of the ChIS. See CSIS Report 95-6/33, The Future of

  Hong Kong: New Dogma, Old Tricks

5 In May 1996 the publisher of the Hong Kong tabloid Surprise Weekly, Leung Tin-wai, received two individuals in his office at

  height of the day.  They cut off his arms with a kitchen knife because the newspaper was preparing to publish an article 

  unfavourable to Beijing in relation to Hong Kong's return in July 1997.  (UC)

6 Wong himself recently confirmed this information in a public conference in Hong Kong after defecting to Western authorities.

7 See Project Sunset. CID/RCMP

8 See Appendix III, Origin and Description of the Triads.

9 See Appendix IV, Profile of Typical Triad Member.

10 See CSIS report Report 95-6/06, Organized Crime Links to the Intelligence Services of China and Taiwan.

11 See Appendix V, Guanxi or Networking.

12 Several thousands of Hondurian passports were reported stolen last year

13 Stanley Ho, the Macao casino tycoon, is Honorary Counsel of Honduras in Macao.

14 Stanley Ho holds a monopoly on the six casinos on the Island of Macao which alone bring in US$6 billion a year. (UC)

15 See Project Shehang. CID/RCMP

16 See Project Shehang. CID/RCMP

17 ibid.

18 ibid.

19