National Post

Illegal tipple

Mohawks’ latest sovereignt­y stand: Italian wine, bottled on reserve

- By Graeme Hami lton National Post ghamilton@ nationalpo­st. com Twitter. com/grayhamilt­on

The First Nations Winery on this Mohawk reserve south of Montreal does not look like much of a threat to the Quebec government’s liquor monopoly.

A hand-painted sign by the highway, with a drop of red wine jumping from a bottle into a glass, declares the winery open to the public, but on a recent weekday afternoon business was slow. Inside, the air was more reminiscen­t of a pungent home winemaking experiment than a château cellar.

The Amarone della Valpolicel­la on the shelves is “a wine of higher expression,” the label declares, that would make a perfect match with “lamb chops, venison stew or gamely dishes.” The Rubestro Chianti Classico is “a strong wine” to be served “with seasonned (sic) meals.”

The wines’ real selling point is not their flavour but their price. At $12.50 a bottle, the Amarone is the priciest. The Chianti sells for $7.50. Clear plastic four-litre bags of red, white or rosé wine can be had for just $26, the equivalent of less than $5 a bottle.

In the eyes of Quebec police and prosecutor­s, every bottle and bag sold by the First Nations Winery is illegal. They allege that its operations over the past five years constitute a multimilli­on-dollar fraud against the government of Quebec.

Last May, Montreal police moved in. Boasting that they had dismantled “a vast network of contraband wine,” they arrested the winery owner, its enologist, an associate who until last year was president of a large Niagara, Ont., winery and 10 others.

But as the case begins making its way through the courts, it has become clear that this is no ordinary criminal prosecutio­n. At a bail hearing in October for winery owner Floyd Lahache, Kahnawake Grand Chief Joseph Norton turned up to testify on his behalf and called the charges against him “bulls--t.” After the defence declared its intention to argue the principle of native self- government, the Crown added to its team Patrice Peltier-Rivest, a prosecutor whom a judge last week described as “the Wayne Gretzky of native law.”

Kahnawake, a short drive over the Mercier Bridge from Montreal, has long been a destinatio­n for cheap cigarettes and gasoline. The band maintains that treaty rights exempt its people from paying or collecting taxes, and the reserve’s dozens of smoke shops and 20 gas stations, selling mostly to non-natives, are a major economic force in the community of nearly 8,000 people. But with smoking on the decline, the band is making its next sovereignt­y stand around alcohol.

In an interview, Norton said the First Nations Winery had all the permits it needed to produce and sell wine — issued by the band’s licensing authority.

“This case has no business being in the courts and Mr. Lahache being criminaliz­ed,” Norton said. “If they want to go after anybody, then come after the Mohawk Council of Kahnawake. Come after our alcohol and beverages commission. Charge us with something. We’re the ones that have issued the permits for him to do what he’s doing.”

Montreal police say they began investigat­ing the First Nations Winery in December 2013 after stopping people with large quantities of its product. The 17-month investigat­ion, dubbed Project Malbec, involved physical surveillan­ce, video surveillan­ce, wiretaps and tracking devices.

What the police discovered, according to testimony at Lahache’s bail hearing, was that the First Nations Winery was importing wine in bulk from Italy in 24,000-litre bags. Shipments arrived at the Montreal port, but were marked as destined for Diamond Estates Wine and Spirits in Niagara- on- the- Lake, so they did not have to clear customs until arriving in Ontario. Once customs were cleared, the wine did a U- turn and was trucked to Kahnawake, where it was emptied into the stainless steel tanks of the First Nations Winery.

Luca Gaspari, an enologist from Italy who worked with Lahache, would add ingredient­s to impart different flavours to the wine, which was then bottled on site under several different labels. Police allege that the labels misreprese­nted the true contents — for example, that the Chianti Classico was not in fact from that Tuscan region.

Gaspari “looks after production and mixing,” Montreal police organized crime investigat­or Annie Boulianne told a Quebec court in October. “He also has contacts in Italy for the supply of wine.”

Another associate facing charges, Murray Marshall, a former senior executive with Diamond Estates whose employment was terminated in May 2014, had begun working with the First Nations Winery recently “with an eye to expanding the market,” Boulianne said.

The court heard intercepte­d conversati­ons in which Lahache, Gaspari and Marshall discussed how to proceed after the police seized a 24,000-litre shipment in November, 2014.

“You imported 40 containers last year,” Marshall says to Lahache in one call. “There should be no reason this got stopped.”

In another call, Gaspari suggests telling Quebec’s liquor board, the Société des alcools du Québec (SAQ), that there was a misunderst­anding and the seized wine was actually destined for Niagara. Marshall later tells Gaspari they have to find out what they have done wrong. “If we find out we did something wrong, and we continue to do something, then we’re in big trouble,” he said.

Boulianne told the court that police conducted more than 35 searches and establishe­d that First Nations Winery had received more than 1.8 million litres of wine since 2009 and bought more than 2.2 million labels. Financial records showed that between January, 2012, and September, 2014, Lahache deposited $ 1.3 million in cash in a First Nations Winery bank account he controlled.

Investigat­ors calculated that for the four years beginning Dec. 1, 2010, First Nations Winery sales deprived government­s of more than $ 14 million in revenue — $ 10 million in markups the SAQ would have charged if selling the wine, $3.2 million in provincial taxes and $1 million in federal sales tax.

That constitute­s a fraud, Boulianne testified, because “they are amounts not remitted to the government as the law stipulates.” She called Lahache “a producer of contraband alcohol” and said Gaspari “thinks Kahnawake is an independen­t country.”

The defence is not prepared to go that far, but it will argue that Kahnawake is within its rights to regulate the sale of alcohol on its territory. A 1999 agreement between Quebec and the reserve gave Kahnawake the power to license the sale of alcohol on the reserve, but it stipulated that everything sold had to come either from the SAQ or from a brewery. The agreement did not specifical­ly discuss alcohol produced on the reserve.

Testifying at Lahache’s bail hearing, Norton said that in 2005, Kahnawake unilateral­ly changed the 1999 agreement with Quebec and gave Lahache permission to produce and market his wine. “We assumed full authority over the law itself in Kahnawake,” Norton testified, prompting Judge Denys Noel to interject, “You can’t just say, ‘It doesn’t suit me anymore. We’ve evolved.’ ” Norton replied, “That’s the way we operate.”

Alwyn Morris, a former negotiator for the band council, testified that the SAQ sent a chemist in 2006 to test the First Nations wine and declared it fit for drinking.

“The whole government of Quebec knew that Floyd Lahache manufactur­es wine,” Morris said. “There has been hands-off on Kahnawake’s jurisdicti­on from the province of Quebec on this matter.”

Norton acknowledg­ed that Lahache, a former minor-league hockey player who played one season in the World Hockey Associatio­n, is a friend.

“He’s a hard- working man, loves his family, contribute­s to the community,” he said. “He’s not somebody who’s a criminal.”

The Crown asked Norton about a media interview in which he described the charges against his friend as “bulls-t.” “As far as I’m concerned, he had a legitimate licence to manufactur­e and to operate,” he said. “That’s why I said it was bulls--t. I still think the same thing … The rest of the community feels the same way.”

Norton said Kahnawake is prepared to take the case to the Supreme Court of Canada, if necessary. “When a member is in a situation that challenges our jurisdicti­on, it is our responsibi­lity to stand up for that person,” he said.

Lahache has already spent a week in jail after being arrested in October for allegedly breaching his bail conditions. One of the conditions was that he abstain from being involved in the wine industry, but the Crown says he remains active, communicat­ing regularly with the winery manager and depositing sales proceeds into the company bank account.

The court has not ruled on the alleged breach, but in October, Noel slapped harsher conditions on Lahache, ordering him to shut the First Nations Winery, close its bank account and return his recently renewed federal excise licence. Those conditions have been suspended — and the winery remains open — as Lahache challenges them on the grounds they are “excessive, abusive, unreasonab­le and unconstitu­tional.”

Defence lawyer Roberto De Minico said he believes the police began investigat­ing the winery at the behest of the SAQ, unhappy about the revenue it was losing as non-native customers snatched up the tax-free Kahnawake wine.

“They’re not doing anything differentl­y than the SAQ,” De Minico said of First Nations Winery. “They import the wine in bulk from Italy. The only thing our enologist does on location before bottling, he takes the wine and as an enologist — certified and graduated with honours in Italy — all he does is put in different tannins or different tastes to make different kinds of wine, like Valpolicel­la, like Chianti Classico. That’s all he does.”

The Mohawk approach to winemaking would likely make a vintner in Chianti shudder, but De Minico insists the wine tastes “fantastic. I think this is what bothers them. People could buy wine on the reserve for $6 or $7 that is really a good quality wine.”

At the winery, a customer who did not want to give her name said she stops there regularly as she drives between Montreal and her Chateaugua­y Valley home. She said she is no wine connoisseu­r but considers First Nations Winery products to offer good value.

“I think they should be allowed to sell them,” she said. “We need a little bit of competitio­n instead of the SAQ having the market all the time, and it creates employment for the people here.”

The whole government of Quebec knew that Floyd Lahache manufactur­es wine … There has been hands-off on Kahnawake’s jurisdicti­on from the province of Quebec on this matter. — Alwyn Morris, a former negotiator for the band council

 ?? Christine Muschi for National Post ?? First Nations Winery owner Floyd Lahache, top, is among those facing fraud charges after an investigat­ion
dubbed Project Malbec, which involved mobile and video surveillan­ce, wiretaps and tracking devices.
Christine Muschi for National Post First Nations Winery owner Floyd Lahache, top, is among those facing fraud charges after an investigat­ion dubbed Project Malbec, which involved mobile and video surveillan­ce, wiretaps and tracking devices.
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