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CRA issues run deeper

than Nicolo Rizzuto cheque

$380K cheque to Nicolo Rizzuto may be tip of the iceberg, Enquête research suggests

CBC News Posted: Sep 26, 2013 9:07 PM ET Last Updated: Sep 27, 2013 2:52 PM ET

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Problems at the Canada Revenue Agency run much deeper than a $381,000 rebate cheque mistakenly issued to a jailed mob boss, according to two former auditors who say they witnessed an attempt to stall a corruption probe and colleagues getting cozy with organized crime.

The former CRA employees spoke on camera to Radio-Canada's investigative program Enquête as part of a three-year investigation by its journalists into graft allegations at the tax agency's Montreal office.

The investigation revealed Wednesday that in 2007, the CRA cut a cheque for $381,737.46 to Nicolo Rizzuto, patriarch of Quebec's Sicilian Mafia. At the time, the revenue agency had a lien on Rizzuto's home because he owed $1.55 million in unpaid taxes.

Federal Revenue Minister Kerry-Lynne Findlay acknowledged in a statement Thursday afternoon that the cheque should never have been sent.

"Those responsible for misconduct must be held accountable. We are acting to hold people accountable," the statement said.

'"One day they're here, the next day they go work for the bad guys.'- Robert Martin, CRA

But the cheque may be just the tip of the iceberg, Enquête's research suggests. Jean-Pierre Paquette, a retired auditor with the CRA's anti-organized-crime unit who learned of the cheque, said he raised wider concerns about possible collusion between some agency personnel and a pair of construction executives, one of whom has ties to organized crime.​

Those concerns eventually led to a years-long RCMP investigation that has resulted in more than 100 criminal charges against former CRA staff, the construction magnates, accountants and others.  

But when Paquette first voiced his apprehensions, it took nearly a year for something to be done, he said.  

"I can't speak to the organization there. I'm talking about certain people, one person in particular," he said in an interview in French. "Just saying, 'Well, look, we won't do this, we don't really have the time to deal with that information, we could be doing other things, we could move on to something else.' 

"Until, at a certain moment, I met with a senior manager... and I said, 'Listen, we have a little problem, because I've got proof that there's corruption.' And from that point, well that's where it got going."

CRA cheque to Rizzuto

A $381,737 tax-rebate cheque issued by the Canada Revenue Agency to Quebec crime boss Nicolo Rizzuto is stoking concerns about possible corruption at the agency. (CBC)

Another former auditor in the anti-organized-crime unit said a family with close Mafia ties tried to bribe him in 2002 after their construction company hid $12 million from the tax man.

"In the accountant's office, the elder family member approached me and told me in no uncertain terms that 'We're prepared to give you an amount, $100,000, and you will lower our assessment," said Robert Martin, who retired two weeks ago from the CRA. "But they'd approached the wrong guy."

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Martin didn't want to divulge the family's name, out of concern for personal safety. But court records confirm the incident and talk about the possibility of a criminal investigation by the RCMP. That investigation never happened, however. Paquette and Martin said they started to wonder whether some of the staff at the Montreal tax office were getting a little too close to people with shady backgrounds. It became all the more apparent when a CRA employee would retire and take up private consulting work, in a few cases for the very mobsters they had been fighting.

"It's become endemic: senior managers who are involved in a file take their retirement and a month later have become legal advisers or consultants on the same files for the other side," Paquette said. "It's a huge conflict of interest. Huge."

"One day they're here, the next day they take their retirement and go work for the bad guys. How sincere could they have been while they were here?" Martin wondered. 

"Bosses, team leaders, tax-office heads... go on to become agents for people involved in organized crime."

While nine CRA employees have been fired so far as a result of the corruption probe and six face criminal charges filed by the RCMP, there may be a much bigger, still undisclosed problem. 

Sources told Radio-Canada about a network involving some CRA audit personnel that was even bigger than the one that police have cracked. The amounts of money involved were in the tens of millions of dollars.

According to those sources, a scheme based around corrupt auditors would see them inflate the tax bills of the companies they were auditing.

Those auditors then forwarded the names of the companies to former colleagues who had left the revenue agency and set up as independent consultants.

The consultants, in collusion with the auditors, would approach the companies and offer their tax-reduction expertise - in exchange for a big commission.

It was easy to get the companies' tax bills reduced, because they'd been artificially inflated in the first place. All that was left was for the consultants to share their commission with their auditor friends.