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Extradition case threatens information sharing between Canadian and U.S. law enforcement

|Written By Julius Melnitzer

American officials are proceeding with an extradition matter despite the fact that Canadian authorities have withdrawn parallel fraud charges here in a case that threatens to upset the cosy tradition of informal police information exchanges in cross-border criminal cases.

The search warrants used to investigate the Canadian matter should be subject to judicial supervision, says Joseph Kappy.

The case also appears to be the first extradition matter in which a court has actually ordered disclosure of information and cross-examination on issues related to an alleged Charter of Rights and Freedoms breach.

While the law is fairly clear that such disclosure is available, the requirement that the Charter claim have an “air of reality” appears to have been fatal to the substantive grant of such an order in previous cases.

The matter dates back to May 2007, when U.S. authorities sent a letter to Canadian officials requesting assistance in obtaining telephone and Internet records to determine the identities of the alleged perpetrators of an online fraud seeking to have several large American retailers divert payments to suppliers to phoney bank accounts.

In June 2007, acting under the authority of the Mutual Legal Assistance in Criminal Matters Act, the Ontario Superior Court issued an order to gather the records requested. Toronto police Det. Carmine Palermo duly collected them.

In September 2007, Canadian police charged brothers George and Marc Fafalios with fraud over $5,000, possession of property obtained by crime, and theft of telecommunications services.

“The police threw big numbers around but so far they’ve managed to point to only one unsuccessful attempt to redirect a [US]$379,000 receivable,” says Richard Shekter of Toronto’s Shekter Dychtenberg LLP, who represents George.

At the time of the arrest, police executed search warrants on the Fafalios’ homes, cars, and offices. Among the items seized were a laptop computer and a hard drive.

Shortly thereafter, U.S. authorities identified the Fafalios brothers as the alleged perpetrators of the fraud and requested that Toronto police turn the evidence seized over to them.

In his affidavit in the extradition proceedings, Palermo said the federal Department of Justice authorized Toronto police to share copies of some of the evidence “through an established informal information-sharing process.”

Palermo forwarded the evidence. But after speaking to counsel, he realized he had erred in not obtaining an “order to send” under the provisions of the mutual legal assistance act from the court, according to a recent ruling.

He then requested that U.S. officials return the records but not the items seized under the search warrants. They did send the records back in February 2008, after which the Crown applied for and received a sending order for them.

In May, prosecutors withdrew the Canadian charges. This did nothing to deter the Americans, who sent a letter requesting supplementary assistance in the form of original equipment, digital evidence, and law enforcement records related to charges to be laid south of the border.

They also made an extradition request.

As a concession for the withdrawal of the Canadian charges, Shekter agreed to allow Palermo to send the items seized from his client under the search warrant.

U.S. authorities based their request for extradition on evidence obtained both in Canada and their own country. Shekter and Joseph Kappy, counsel for Marc, sought to exclude the Canadian evidence on the basis of Charter violations. To that end, they sought the production of materials relevant to their argument and leave to cross-examine Palermo.

Shekter and Kappy submitted that the Charter argument had the necessary air of reality because the search-warrant items were sent to the United States without proper judicial authorization, resulting in an illegal search and seizure that tainted subsequent orders purporting to validate the process.

As well, they claimed the computer and laptop were illegally taken after authorities withdrew the Canadian charges and that, in any event, the evidence should be quashed because the letter from Shekter on behalf of George allowing Palermo to send the items across the border didn’t bind Marc.

At the same time, they argued the brothers were in jeopardy so grave that it shocked the conscience and breached the Charter, particularly since U.S. counsel had noted they could face imprisonment for up to 212 years for allegedly attempting to commit an approximately US$379,000 fraud.

As Ontario Superior Court Justice Nancy Backhouse saw it, the Fafalios were entitled to full disclosure of the surrounding circumstances of what was sent, when it was sent, and under what authority.

“The [Crown’s] failure to particularize raises an inference that full disclosure would have revealed inappropriate actions,” Backhouse wrote earlier this month. “Accordingly, there is more than an air of reality to the Charter issues raised, other than the issue with respect to sentence.”

At the same time, as Palermo was central to both the Canadian charges and the U.S. request for assistance, granting leave to cross-examine him was “necessary for a proper determination to be made of the Charter issues and any appropriate remedy.”

At press time, the parties couldn’t agree on the particulars of disclosure.

“We’re going back to court because we have a four-page list of things that we want,” Shekter says.

“And once we confirm the list, we will explore the process under which the information was transferred, and that’s important because the case could well turn on the extent to which Canadian authorities can, without judicial approval, provide their American counterparts with domestically gathered evidence.”

However, s. 3(2) of the mutual legal assistance act may be a significant obstacle to the success of the defence argument.

The section contemplates informal cross-border co-operation, and Justice Canada counsel Richard Kramer of Toronto will possibly argue it obviates the need to slavishly follow the specific procedures in the act.

But Shekter relies on the rule of interpretation that states that the specific overrides the general.

“It doesn’t make sense that search warrants executed in respect of Canadian offences, as was the case here, aren’t subject to judicial supervision,” he says.

Kappy, meanwhile, believes quashing the Canadian evidence would end the matter.

“Not only will the extradition application fail, but the U.S. authorities will have no evidence upon which to base a prosecution in the U.S.,” he says.

Justice Canada wouldn’t comment on the case.

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