Crown disclosure problems revealed in failed high-profile money laundering case

Court proceedings leading up to the collapse of a high-profile B.C. money-laundering case last month were dogged by inadvertent disclosure of privileged material by Crown counsel.

Federal prosecutors have refused to provide the reason charges against Silver International Ltd. Caixuan Qin and Jian Jun Zhu were stayed.

But court recordings and documents reviewed by CBC detail months-long delays sparked by the realization the Crown had mistakenly included privileged information in both a first round of disclosure and in a second hard-drive of material intended as a replacement.

The problem led to a defence application in early November for an order of full disclosure within seven days on the grounds of the Charter right to make "full answer and defence."

The charges were stayed at the next appearance.

'I've had this happen more than once'

The Crown wouldn't comment, but lawyers say the issue of privileged information has resulted in previous stays in drug and money-laundering cases — particularly as it relates to the identities of confidential informers.

"I've had this happen more than once," said Michael Mulligan, a veteran Victoria-based criminal defence lawyer.

"It occurs in cases often where there's a large volume of disclosure material including things like search warrant applications and other material where someone just makes a mistake, whether it's the Crown or the police."

Regardless of whether or not the problem led to the stay, the provincial court record of the case highlights the issue of disclosure in complex cases where Crown have to comb through tens of thousands of pages of documentation in order to excise information that might disclose even the slightest hint of an informer.

The Supreme Court of Canada has found that "the identity of police informers is protected by a near-absolute privilege that overrides the Crown's general duty of disclosure to the defence."

That's because, in a worst-case scenario, a confidential informant could be threatened or even killed by a defendant who discovers who may have 'ratted' on them.

'A large volume of disclosure'

Qin and Zhu are husband and wife.

They were charged along with their business — Silver International Ltd. — after a lengthy police investigation into a suspected underground banking operation accused of processing drug money and funding gamblers in high-stakes B.C. casino games.

RCMP executed multiple search warrants during the probe, culminating in September 2017 in the charges of money laundering, possession of property obtained by crime and failure to report suspicious financial transactions.

According to the application filed last month, Crown gave the defence a hard drive "containing a large volume of disclosure" in late November 2017.

But Qin's lawyer, Matthew Nathanson told Crown March 28 that his staff had identified portions of the disclosure which were not redacted as they were supposed to have been.

The defence lawyers gave the hard drive back, but Nathanson told the Crown he had already printed some of the material and used it as part of his legal preparations.

"Nathanson advised Crown counsel that he believed the printed material could not be destroyed or returned to the Crown due to issues of ethics and privilege," the application reads,

"Nathanson advised that the material would be sealed pending directions from the Court."

A second inadvertent disclosure

The Crown provided a second hard drive to the defence in April, and Nathanson and a federal prosecutor appeared in B.C. Supreme Court at the end of June to figure out what to do about the "privilege issue" arising from the first hard drive.

A third party was appointed to review the material to see what needed to remain under seal.

But then "Crown counsel advised defence counsel on July 24, 2018 that the second hard drives contained inadvertent disclosure and would need to be returned."

The defence counsel gave the second hard drives back, but Zhu's lawyer told Crown he had copied some of it to a USB device and "work product has been applied to the material."

They sealed the USB device and defence asked for yet another hard drive as a replacement.

"Crown counsel indicated that they were continuing to liaise with the RCMP to determine when a new hard drive would be ready," the application reads.

But as of two weeks before the charges were stayed, a replacement hard drive had not been provided.

'Serious consequences for police informants'

The court proceedings don't specify the nature of the privileged information inadvertently disclosed. It could also include documents that should be redacted because of solicitor client privilege or cabinet information.

Mulligan says mistakes with disclosure are a challenging issue in an era when huge amounts of text messages and emails are regularly captured in evidence, not to mention the entire contents of cell phones, laptops and mobile devices seized during investigations.

"If information is unnecessarily redacted the Crown can wind up in breach of its disclosure obligations, or, in the worst-case scenario, an innocent person could wind up being convicted if significant exculpatory evidence is not disclosed," Mulligan said.

"On the other hand, inadvertent disclosure can result in serious consequences for police informants."

Mulligan says records of cases stayed to avoid identifying police informants wouldn't typically result in the volumes of reported decisions that appear online.

'Privileged and confidential information'

The issue of privilege also arose in relation to a mysterious decision to stay charges in another high-profile B.C. prosecution: a murder charge against Jamie Bacon.

B.C. Supreme Court justice Justice Kathleen Ker provided little information about her reasons for staying a first degree murder charge against Bacon in relation to the killing of Corey Lal, who was killed in the 'Surrey Six' homicides.

But in her limited reasons, she noted that "Bacon's counsel had come into possession of privileged information that they cannot use in his defence which impacts upon (his) fair trial rights. In part this arose from the manner in which the police handled aspects of privileged and confidential information."

Issues of privilege were also part of pre-trial applications concerning "disclosure, protection and retrieval of privileged information." But Ker noted that her full written rulings were sealed.

The Crown has appealed the stay in Bacon's case.

B.C. Attorney General David Eby said he was "disappointed" when he learned of the stay in the money laundering case.

The RCMP have said the force is reviewing the file to understand "its activities which contributed to this stay" and to incorporate relevant lessons to prevent similar occurrences in the future.