Canada Targeted by China Agents

InsightMag.com

12/18/2000
Canada Targeted by China Agents

By James D. Harder
harder@insightmag.com

A Canadian intelligence-service report reveals the People’s Republic of China has infiltrated Canadian society with a network of agents, operatives and organized-crime figures.

A controversial classified document that labels the People’s Republic of China (PRC) as Canada’s greatest national-security threat has grabbed headlines and national exposure as Canadians prepared to head to the polls on Nov. 27 in a federal election. With billions of dollars and thousands of operatives and sympathizers in Canada backing them up, says the report, a dangerous consortium of Chinese triads, PRC agents and Hong Kong tycoons has infiltrated Canadian society. While weapons and heroin are being smuggled into Canada, high-tech secrets, ownership of key companies and large sums of money are being procured by China, according to the classified report.

      The report  officially titled Chinese Intelligence Services and Triads Financial Links in Canada and code-named “Sidewinder”  has been at the center of a heated debate for 16 months as the Canadian Security Intelligence Service (CSIS) has tried to explain why it buried the carefully documented analysis in 1997.

       Brian McAdam, a former Canadian immigration-control officer in Hong Kong, is an internationally renowned expert on the Chinese triads  networks of professional criminals dating back to imperial times  and has written scores of sensitive reports on their organization and activities. He watched with alarm as they wove their way into the fabric of the Canadian economy and he played a key role in getting the triad investigation under way.

       McAdam first became involved in identifying triad leaders while in Hong Kong. “It was an unexpected part of the job. I didn’t realize how many were coming to Canada,” says McAdam. He began asking questions when he noticed the size of the investment portfolios of the triad leaders headed for Vancouver. Soon he discovered that an alliance had been formed in 1984 between the triads and the communist government in Beijing, effectively granting the criminal syndicates permission to continue operating out of Hong Kong when it reverted to PRC control in 1997 in return for their help in gaining an international business presence.

       Meanwhile, “I spent the last two years of my career being ostracized by my colleagues as I exposed corruption in the embassy there,” he tells Insight. But while he was making enemies, McAdam was becoming the leading Western expert on the depth and magnitude of the Chinese networks. When he returned to Canada he became a key instigator of Sidewinder.

       Not himself a part of the CSIS, McAdam passed his investigative work to Michel Juneau, a French Canadian now living in Ottawa. Juneau is a skilled professional who has spent 21 years working in the shadowy world of intelligence. Articulate and highly educated, he was the chief of the Asia Pacific region for the strategic analysis at CSIS in 1995 when the Canadian investigation of the triads began. According to the original Sidewinder report, the Sidewinder team was tasked to assess the threat posed to Canada by the growing number of Canadian companies coming under the ownership of members or associates of triads with affiliations to Beijing’s intelligence services.

       “I don’t think they are going for any type of business monopoly; I think they are going for world hegemony,” Juneau tells Insight. “What they’ve learned is that control is not the real power  influence is the real power.”

       The Sidewinder report was the result of a joint study by the Royal Canadian Mounted Police (RCMP) and the CSIS. The material dovetailed with a report issued by the House Select Committee on U.S. National Security and Military/Commercial Concerns with the People’s Republic of China, which detailed similar Chinese infiltration of U.S. policymaking.

       Al Santoli, national-security assistant to Rep. Dana Rohrabacher, R-Calif., points to the Sidewinder report as a “precursor in terms of sounding the warning of the efforts being made by the People’s Republic of China to influence American policymakers and policymakers in Canada and elsewhere in our hemisphere.”

       But Sidewinder did not have the impact its authors hoped it would. Before the final draft was complete, the five-member team was pulled off the project and the report spiked. “Sadly, it’s the same type of national-security irresponsibility on the part of both U.S. and Canadian policymakers,” Santoli tells Insight of Sidewinder’s early demise.

       CSIS management was given the job of determining that the tone of the report was too extreme and given to “scaremongering” and “conspiracy theory.” New analysts were brought in and a new, politically correct spin was given to the analysis.

       A revised report, dubbed “Echo,” was finished in January 1999. To no one’s great surprise, it fell far short of Sidewinder, according to Juneau and some of the RCMP officers who were part of the project. When word of the burial of the original top-secret report reached the Canadian Parliament, it led infuriated members to question why their top spy agency hadn’t followed up on documentation showing such infiltration. Soon many Canadians had joined in the questioning and it was clear that the government had to do something. In fact only CSIS and the Liberal government seemed happy with the neutered version, and soon allegations began to arise that the Liberal government was in the pockets of the triads. That prompted yet another review of the Sidewinder project, this time by the Security Intelligence Review Committee (SIRC), the members of which were appointed by Liberal Prime Minister Jean Chretien.

       The review was completed by the SIRC in October and dutifully justified abortion of the original document by the CSIS directors. A senior official at the SIRC assures Insight that while the review was undertaken to confront mounting allegations from the media that Sidewinder had been shelved due to political pressure, that was far from the truth. “It’s not a particularly persuasive piece of work,” she says of Sidewinder. “There was a lot of scaremongering. It needed to be reworked to get rid of that tenor.”

       Not everyone agrees with this assessment. Jim Abbott, a member of Parliament with the Canadian Alliance, the official opposition to the ruling Liberals, has read Sidewinder and says the Canadian public would be astounded by the report. “Even if only half of the initial Sidewinder study’s allegations were true, the findings would be very threatening and very concerning to Canadians,” says Abbott. That may be why backup copies of Sidewinder were ordered shredded, physically removed or electronically deleted.

       Insight, however, obtained a copy that slipped through the cracks.

       Of particular concern to the authors of the Sidewinder report are the growing holdings of Canadian real estate in the hands of triad leaders. Men including Li Ka-shing and Henry Fok, described as well-known triad associates, reportedly were raised up by Deng Xiaoping when he came to power in China in the late 1970s to help him expand Chinese relations with the West as economic reform under the slogan, “To get rich is glorious.” Sidewinder reports that Li Ka-shing and his son, Richard Li, own as much as one-third of downtown Vancouver, British Columbia. The study also pays close attention to the business portfolios of other alleged triad members or associates often working in concert with Beijing. These coordinated efforts are said to pose a major challenge to Canada’s national security.

       The Sidewinder report says Red China’s business leaders will buy a Canadian company to obtain a local identity before investing heavily or buying other companies in key economic sectors. Moving carefully, their “influence over local, provincial and national political leaders has also increased,” write the authors of the Sidewinder report. In the game of influence, several of these important Chinese entrepreneurs have associated themselves with prestigious and influential Canadian politicians, in turn providing them positions on their boards of directors.

       One of these politicians happens to be Prime Minister Chretien, who is facing re-election as Insight goes to press. From 1986 to 1990, during a four-year hiatus from politics, Chretien served as senior adviser for the brokerage house of Gordon Capital. According to the spiked report, Richard Li bought 50.1 percent of Gordon Capital in 1985.

       Canadian political parties also have been on the receiving end of financial gifts from triad-controlled financial firms. The Sidewinder report says more than $120,000 was donated to the Conservative and Liberal parties in the 1990s. The Sidewinder report estimates that more than 200 Canadian companies are under Chinese control and lists 15 case studies that examine the links between Beijing, the triads and Canadian companies.

       China International Trust and Investment Corp. (CITIC) is the largest Chinese conglomerate operating internationally. Founded at the end of the 1970s, it has assets worth more than $23 billion. According to the Sidewinder report, in 1979 Beijing appointed to CITIC’s board of directors three Hong Kong financial giants: Li Ka-shing, Henry Fok and Wang Foon-shing. Beijing was planning to reach out to the West, but the game was not what it was made to seem.

       CITIC, as it turns out, is the parent company of China’s Polytechnologies, an agency that oversees Beijing’s acquisition and sales of weapons. It operates under the general staff of the People’s Liberation Army (PLA), which perpetrated the massacre at Tiananmen Square in 1989. The president of CITIC and chairman of Polytechnologies is Gen. Wang Jun  one of the Communist Party “princelings” implicated in the illicit shipment in 1996 of 2,000 AK-47 assault rifles to gang members in California.

       Li Ka-shing also fronts ownership of strategic port facilities worldwide. Fortune magazine said in March 1999, “He has quietly become the world’s largest private operator of container terminals, and his companies handle 10 percent of global shipments  from lucrative stakes in 17 ports in Europe, Panama, the Bahamas, South China and Hong Kong. His latest acquisition is in Rotterdam, Europe’s largest port.”

       In Canada, it is estimated that CITIC has invested nearly $500 million to buy Canadian businesses in strategic areas, such as Celgar Pulp Mill in British Columbia, Nova Corp. Petrochemical in Alberta and selected prestigious hotels and other real estate. Eventually, CITIC also developed close business links with Power Corp., which grabbed attention in Canada, in part, because Chretien’s son-in-law, Andre Desmarais, is the company’s president and shares the role of chief executive officer. Desmarais also is president of the Canada-China Business Council, whose directors include the president of CITIC Canada.

       The Sidewinder report also uncovered Chinese control of major businesses in Canada’s technology sector, entertainment and media, food-services industry and banking and financial institutions. Li Ka-shing owns 10 percent of the Canadian Imperial Bank of Canada and is the bank’s largest individual shareholder.

       While the spiked report says the banking industry is one of China’s most important economic leverages in Canada, it identifies high technology as the area most at risk. It cites cases of theft of Canadian proprietary information and/or technology, including the theft of information concerning nuclear technology.

       The Chinese intelligence services do not hesitate to expend great energy on pursuing their activities. “They have established companies on Canadian soil for traditional and economic espionage purposes. These companies are used as cover for Chinese agents to help them gain entree into Canadian business circles. These front companies have been observed to have contacts with the triads in Canada,” says the Sidewinder report.

       So how does this translate into Canada’s greatest national-security threat? According to the report, these significant Canadian holdings have allowed Chinese “entrepreneurs” to gain access to political leaders and business people, putting them in a position to seek power by influence. The intelligence report says that “the facts analyzed lead to the belief that a gain of influence has been the object of a concentrated plan and that could constitute a threat to Canada.”

       This threat becomes more daunting in light of recent reports on China’s military ambitions. Last month, Beijing issued its latest white paper, adding legitimacy to the repeated warnings of U.S. national-security specialists that China is preparing for war with the United States. In 1998, when China issued its second white paper on national defense, it mentioned the United States 10 times, each time positively. The most recent white paper cited the United States 13 times, with 11 of those references being negative. In reporting these numbers the Washington Post noted casually in mid-November that the United States now is regarded as a “threat” in China’s eyes.

       With an elaborate web of Red Chinese business contacts already in place throughout Canada and the United States, a threat of war by China takes on a very sinister tone. If Sidewinder is correct in its assertion that Western intelligence agencies do not understand the nature of the elaborate networks being built between some overseas Chinese and the PRC, McAdam’s fears may be well-founded.

       Meanwhile, McAdam walks a precarious line, trying to alert the Canadian public about the threats posed to his country by the triads while facing opposition from the compromised leaders of the very government he is trying to protect. “The problem I have is that I’m the only person coming out front and center to talk about this stuff,” McAdam tells Insight.

       Juneau also is concerned. Having left the CSIS earlier this year to set up his own security firm, he is under a gag order not to detail the classified material, but remains outspoken about his disapproval of the spiking of Sidewinder. Frustrated with management at CSIS, Juneau says, “We have not realized that the Chinese have their own way of doing things. We still try to use the Russian or KGB template. That’s why we miss all the time.” He says that’s what makes Red China such a grave threat to Canada. “With the Russians, you will find a smoking gun,” says Juneau, “but not with the Chinese.”