Pubdate: Fri, 18 Aug 2017
Source: Globe and Mail (Canada)
Copyright: 2017 The Globe and Mail Company
Authors: Greg McArthur and Molly Hayes
Pages: 8-9


One of the Trudeau government's stated policy goals for ending
marijuana prohibition is to divert the profits reaped by gangsters
toward legitimate shareholders. But an investigation by Greg McArthur
and Molly Hayes offers a glimpse into the insidious nature of
organized crime, finding that criminal groups easily exploited
loopholes in the federal government's old medical-marijuana licensing

In the late afternoon of March 14 in the Toronto suburb of Woodbridge,
a masked gunman jumped out of the passenger side of a black Jeep
Cherokee, darted across a snow-dusted parking lot and unleashed a
flurry of bullets into a black BMW. Thirty seconds later, he was back
in the car, leaving Saverio Serrano - the son of a notorious Canadian
Mafia figure and cocaine importer - wounded, and Mr. Serrano's
28-year-old girlfriend dead.

Two weeks later, in the west end of Toronto, an SUV rolled into the
driveway of a bungalow at the end of a suburban cul-de-sac around 2:30
a.m. As 53-year-old Antonio Sergi, a beefy, cigar-chomping showman
known in Mafia circles as "Tony Large" or "T Large," got out of the
car and lumbered toward the front door, he was shot in the head and
killed, execution style.

The shootings were carefully orchestrated and kicked off a wave of
Mafia violence that has engulfed the Greater Toronto and Hamilton Area
for nearly seven months. This spate of bloodshed - blasts of gunfire
in public spaces, arson and the obliteration of an Italian social club
by a bomb - shows no signs of slowing. Just last week, the suburban
home of a suspected organized crime figure north of Toronto was set

But those two March shootings - the opening chapter to what is
increasingly looking like Toronto's very own Mob war - share an
intriguing, less discussed feature: Both male victims had been staking
a claim to the legal marijuana industry, which the federal government
hopes to have in place by next year.

No motive has been assigned in either case and it's unclear whether
even the homicide detectives know why these people were shot. But with
the rules of the soon-to-be-legal marijuana industry now being
hammered out by the Liberal government of Justin Trudeau, the March
shootings highlight a shortcoming in Ottawa's push for legalization of
recreational pot, as well as the loopholes that are allowing gangsters
to maintain their market share.

One of the Trudeau government's oft-stated goals for ending marijuana
prohibition is to seize the profits reaped by organized crime and put
those returns back in the hands of legitimate shareholders: "I can
absolutely confirm that we are moving forward on a framework to
regulate and control marijuana to … keep our communities safer from
organized crime," Justin Trudeau said just weeks before the March
shootings. It's a pitch frequently repeated by the government's point
person on the legalization file: MP Bill Blair, the former chief of
the Toronto Police Service. Not only will legalization spare
youngsters from a burdensome criminal record, Mr. Blair says, it will
have the added benefit of creating a legitimate marketplace in which
revenues are taxed and disputes are resolved with lawyers' letters,
not violence.

But wresting control of marijuana from the Mob is much more
complicated than the Liberals' talking points suggest. The slaying of
Mr. Sergi and the shooting of Mr. Serrano and his girlfriend, Mila
Barberi, are a stark reminder that organized crime groups are already
firmly enmeshed in the legal market. These groups have no intention of
relinquishing their grip on the marijuana trade, and because of court
decisions allowing for the personal cultivation of medical marijuana,
it's unlikely that any new rules will force criminals to relinquish
their dark corners of the market.

- ----------------------------------------------------------------------

If there is a moment in history that opened the door for criminals to
exploit medical-marijuana regulations that were created to help sick
people, it was July 18, 1996, the day Toronto police drug officers
blew into the home of Terry Parker.

Mr. Parker, an epileptic, had long fought for the right to grow and
consume marijuana to combat his seizures. Even before the 1996 raid on
his apartment, he had scored an earlier legal victory for medical
users in 1988, when an Ontario District Court judge acquitted him of a
simple possession charge on the grounds that he required the drug as
medicine. But that didn't deter Toronto police eight years later, when
they believed Mr. Parker was doing something they considered even more
nefarious - growing for the purpose of trafficking. They seized 71
plants from his home in the now gentrifying neighbourhood of Parkdale.
His arrest, and that seizure, set up a legal fight that would give
rise to Canada's first medical-marijuana regime.

Mr. Parker was acquitted by a lower court, and when the matter came to
the Ontario Court of Appeal, the panel of judges called upon
Parliament to recognize the right of patients such as Mr. Parker who
need to possess marijuana. The justices gave Ottawa a deadline of one
year to make things right for medical users.

The result was the first law that allowed medical users to grow and
possess marijuana-the 2001 Marihuana Medical Access Regulations, or
MMAR. The law allowed for "seriously ill persons" to lawfully possess
marijuana, grow marijuana or designate someone to grow it on their
behalf. Licence holders were permitted to produce a quantity "based on
the daily amount approved for the authorized person," with no upper
ceiling imposed by the legal framework. Predictably, Ottawa's solution
to the court's edict pleased almost no one.

Patients argued that the new rules left them without a mechanism to
legally acquire seeds, further criminalizing their own treatments.
Police and bylaw inspectors complained that the law was being abused
by gangs and criminals, explaining that without a cap on the amount
that individuals could produce, physicians were handing out licences
for more marijuana than any medical-cannabis patient could possibly
smoke. And with designated medical growers banding together to collect
licences and establish massive, industrial-sized grows, it was
inevitable that some of that pot was being diverted to the street.
More often than not, when officers entered a bungalow that had been
converted into a mouldy grow op, someone was waving a licence in their
face, rendering the police powerless. It didn't take long for Stephen
Harper's Conservative government, with its tough-on-crime agenda, to
dismantle the entire regime.

The Conservatives' vision, implemented in 2014, was meant to close those 
loopholes. The Marihuana for Medical Purposes Regulations, or MMPR, 
would take production out of the hands of individuals and limit it to 
only a small number of heavily regulated, well-capitalized companies. 
This new regime had other significant barriers to entry: Only the most 
heavily fortified facilities, overseen by corporate officers and 
directors who had passed a security screening, were to be considered for 
a licence. The law also tried to clean up the distribution process. 
Producers were only permitted to send medical marijuana to patients 
directly by mail order, with absolutely no storefront sales. This shift 
sparked what has been dubbed the Green Rush: hordes of investors and 
entrepreneurs racing to secure a foothold in the new market.

It was in 2014, as corporations began scrambling to apply for
licences, that Mr. Serrano - one of the victims of the March 14
shooting - jumped into the fray, with his brother, Silvio. The pair
had already been operating a company that sold commercial and
residential lighting. Now, they would become the official Canadian
distributor for Growlite, an Arizona-based lighting firm that was
marketing marijuana lamps to growers in those U.S. states where pot
had already been legalized.

Orders poured in, including from a number of MMPR-licensed companies,
and Growlite Canada became a coveted asset during the Green Rush. In
March, 2014, it was partly acquired by Canadian Cannabis Corp., a
company that, like many others at the time, was also pursuing its own
MMPR cultivation licence with Health Canada. Canadian Cannabis Corp.
was positioning itself for growth, purchasing an industrial building
northwest of Toronto, which, at 310,000 square feet, was supposed to
house its cultivation operations once it was licensed. Eager to enter
the market, it tried to buy its way in. A corporate team that included
Silvio Serrano began negotiating with some of the 20-odd companies
that had already secured their MMPR licences, hoping to purchase their
businesses, but their efforts were unsuccessful.

Unbeknownst to the Serrano brothers, at the same time they were
attempting to break into the legal-marijuana industry, there was
another phenomenon quietly unfolding all around them: a criminal
investigation into their 69-year-old father, Diego, whose various
drug-related convictions include the trafficking of cocaine in the
1980s and, more recently, heading up a ring that imported and
trafficked in ecstasy, the popular club drug. Diego Serrano has a
history of emerging from lengthy stays in prison and involving himself
in businesses run by his sons. In the mid-2000s, it was a
stone-countertop company, a business he was linked to before his
ecstasy-trafficking conviction. Now, after his latest stint in prison,
he became a frequent visitor to his sons' lighting company.

Undercover officers conducting surveillance spotted Mr. Serrano
regularly dropping by his sons' business. Police were also monitoring
his private phone activity, which showed that between fall, 2014, and
summer, 2015, he had several incoming and outgoing phone calls with
executives at the Canadian Cannabis, the company that had, by then,
bought into Growlite.

In fact, he was in phone contact with the company's then-listed chief
operating officer, John Esteireiro, a former Bay Street trader, as
well as with three other Canadian Cannabis executives. None of those
executives could explain to The Globe and Mail why phone records
showed they had spoken with Mr. Serrano. When asked about their phone
exchange, Mr. Esteireiro (who is now with investment firm Eight
Capital) said he did not know the man: "I just have, like, zero clue
on any of that, to be honest with you."

A lawyer for Mr. Serrano declined comment, explaining in a statement
that all of The Globe's inquiries were about matters that are
"currently being investigated by the authorities or are before the
courts." As for Mr. Serrano's sons, Saverio Serrano declined to answer
any questions. Silvio Serrano explained, through his lawyer, that he
is co-operating with the police investigation into the shooting of his
brother and the killing of Ms. Barberi and stressed that he has no
involvement with crime and no criminal record. His lawyer, Peter
Downard, denied that Diego Serrano had anything to do with his sons'
marijuana-related ventures. But documents discovered as part of the
police investigation suggest otherwise.

In a search of a fish-and-chips shop in Woodbridge run by Mr. Serrano,
police seized a number of documents pertaining to Canadian Cannabis.
They included an offering for shares in the company and an unsigned
agreement of sale for an MMAR grow site - a sprawling parcel of land
northwest of Toronto that, according to the documents, housed 700
marijuana plants, with the capacity to hold up to 1,000.

The police investigation - dubbed Project OPHOENIX - also linked Mr.
Serrano to Mr. Sergi, the man who was executed two weeks after Mr.
Serrano's son Saverio was shot. Although Mr. Sergi never had a
criminal record, he had a 20-year track record of popping up in
various schemes being probed by police. At various times, he had been
charged with, among other crimes, threatening death and bodily harm,
assault with a weapon and illegal drug trafficking, but he had always
managed to wriggle out of a criminal conviction. In recent years, Mr.
Sergi had turned to growing legal marijuana. He owned and operated at
least two legal grow operations and was angling to secure a
large-scale MMPR licence to grow even more marijuana. He had also been
in business with the Serrano brothers' marijuana-lighting company and,
based on police evidence, had dealings with their criminal father.

A search warrant on Mr. Serrano's home revealed an invoice for nearly
$13,000 worth of Growlite equipment that had been issued to Mr. Sergi
in September, 2014. Phone records - part of an investigation into
another cocaine-importation scheme - show Mr. Serrano and Mr. Sergi
contacted one another more than 300 times between 2014 and 2015.

A garrulous charmer who was always happy to talk, Mr. Sergi, who
fancied himself a cannabis connoisseur, spoke to The Globe about his
pot-growing business several months before he was slain. He complained
at length about Health Canada's unwillingness to grant him an MMPR
licence and railed about the government's preference for
white-collared, Bay Street types over street-educated, self-styled
horticulturalists such as himself. Speaking about the corporations
that Ottawa had approved for MMPR licences, he lamented: "When they
got into the business, they just got in because it was a stock play."
He encouraged a Globe reporter to "check the boards of all the …
licensed producers. See if there's any person that knows, when it
comes to marijuana, what they're doing. They're all ex-politicians or
big-shot businessmen."

Rather than wait for an MMPR licence, Mr. Sergi's company, Cannabliss
- - "I thought it was a cool name," he explained in the interview -
continued operating according to the rules of the old MMAR regime,
using designated-grower licences acquired under that system. He grew
scads of marijuana in at least two industrial-size locations and he
was able to do this legally. That's because, not long after the
Conservatives introduced their strict MMPR guidelines, patients who
had grown their own marijuana according to the rules of the old MMAR
system pushed back with court challenges. One of those cases, Allard
et. al. v. Her Majesty the Queen in Right of Canada, was ultimately
successful at the Federal Court of Canada, which found that forcing
patients to buy only from MMPR-licensed producers was

The decision forced the government to come up with a new law - and yet
another acronym - that would allow the corporate MMPR growers to
co-exist with the old MMAR regime. The result was the Access to
Cannabis for Medical Purposes Regulations, or the ACMPR, a legal
victory that effectively allowed growers such as Mr. Sergi to continue
operating with impunity. He was a prime example of the kind of MMAR
grower police had been warning about: Someone who strategically
acquired personal and designated-grower licences, transforming a
system for patients with a legitimate need into a vehicle for
illegitimate, industrial-sized grows.

Unlike the facilities being licensed under the MMPR program - modern
buildings with sophisticated security systems, temperature controls
and intricate ventilation, all designed to protect both workers and
neighbours - Mr. Sergi's operations were decidedly crude.

One of his grow ops was housed in a decrepit former Hamilton bar
called Boomers that once served as a strip club. Another operation was
housed in an industrial mall in Brampton, northwest of Toronto. These
DIY grow ops are notorious for attracting thieves, but Mr. Sergi had a
novel solution for that problem at his Brampton location: a wall of
sloppily mortared cinderblocks placed just inside the unit's
street-facing window. By night, the plants were protected by a German
shepherd dropped off by a guard-dog company.

The Brampton facility - seemingly still operational (a second
individual is licensed to grow at the same property) - is about the
length of an Olympic-sized swimming pool, a huge space that was
necessary for Mr. Sergi's inexplicably generous cultivation licence:
His "personal use" licence at the property allowed him to store up to
17 pounds of dried marijuana at any time, and to maintain an
additional 171 plants in production. According to Health Canada's own
calculator, that figure, 17 pounds, suggests that a doctor wrote a
prescription for Mr. Sergi for 35 grams of marijuana a day. That
prescription is more than eight times the average daily consumption,
4.2 grams, of Canadian medical users, according to a 2012 consultancy

In Hamilton, Mr. Sergi relied on three such licences to produce his
plants, licences he pointed to in a sworn court affidavit when he was
fighting an eviction from Boomers. Mr. Sergi did not specify in that
affidavit who the licence holders were who had asked him to grow on
their behalf.

Mr. Sergi isn't the only producer with a licence to grow
eyebrow-raising amounts of marijuana. Health Canada records obtained
by The Globe show that one grower holds a licence for 300 grams a day
- - which legally allows them to store 145 pounds of pot at any given
time. Unlike the 52 licensees operating under the old MMPR regime,
there is no public registry that lists where these MMAR grows are
located. Only police services are able to make such inquiries with
Health Canada, and only in the case of an active investigation.

- ----------------------------------------------------------------------

It remains unclear how the Trudeau government intends to address
operations such as Mr. Sergi's when it unveils its rules, slated to be
debated in the House of Commons this fall and to be put in place by
next summer. Back in November, when Ottawa's task force on cannabis
legalization released its final report, it recommended patients should
still be allowed to grow marijuana for themselves. However, it urged
the government to set a timeline for "phasing out" the ability for
such patients to designate others - such as Mr. Sergi - to grow it on
their behalf. The report does not address patients who, as Mr. Sergi
did, wield "personal use" licences for exorbitant amounts of cannabis.

Not long after Mr. Sergi opened his Brampton operation, he was
introduced to a potential buyer - Canadian Cannabis Corp. The
introduction was made by Silvio Serrano, who was then working with
Canadian Cannabis, after that company became a part owner of Growlite,
said Ben Ward, then-chief executive officer of Canadian Cannabis. But
after touring Mr. Sergi's facility, Mr. Ward said he quickly rejected
the idea, explaining that the operation wouldn't meet the government's
strict health and safety and security standards for an MMPR licence.
Mr. Sergi's grow operation "looked like a disaster," Mr. Ward said.

The Hamilton operation, too, would be fairly characterized as a
health-and-safety disaster. Makeshift ventilation and watering systems
left the already decrepit building mouldy and damp. Support beams had
been ripped out and wires dangled from the ceiling. The city had not
wanted Mr. Sergi's grow op there. Neighbours had long complained about
the smell wafting from the building, but police had said their hands
were tied because the property was appropriately licensed by the
federal government. Instead, bylaw officers went after Mr. Sergi on a
zoning issue and after a drawn-out legal battle with his landlord and
the city, he had finally agreed to vacate the property by March. Not
long after that, he was dead.

Two weeks after Mr. Sergi's death, Hamilton police - acting on
information they'd received about the operation growing beyond its
legal limits - searched the property. But all that was left was a
dumpy mess of hundreds of empty planters and lights, bulbs and other
grow tools. All of the plants had been removed.

In an interview with The Globe on the eve of his departure as
commissioner of the RCMP in June, Bob Paulson issued a warning to
political leaders across the country about the insidious nature of
organized crime. He called such groups a more serious threat to the
country than terrorists and suggested that some politicians are naive
about their influence.

"Without being a fear monger," he said, "we've got to have political
leaders understand what organized crime is, how [the perpetrators] get
their advantage, how they corrupt individuals and institutions, how
they get their hooks into people."
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