DEA Congressional Testimony
May 19, 2003

Statement of
William J. Walker
Associate Special Agent in Charge
New York Field Division
Drug Enforcement Administration
Before the
The House Committee on Government Reform
Subcommittee on Criminal Justice, Drug Policy, and Human Resources
&
Select Committee on Homeland Security
Subcommittee on Infrastructure and Border Security
May 19, 2003

Executive Summary

The New York/Canadian border is a prominent gateway for drugs entering the United States. The Drug Enforcement Administration (DEA) is represented in New York State by the New York Field Division (NYFD), which operates the Albany, Plattsburgh, Rochester, Syracuse, and Buffalo offices in order to investigate drug trafficking from the Canadian border and in the upstate region. The DEA continues to support bi-national and international investigations and drug intelligence activities, implementing a policy of interagency teamwork at all levels of government.

The burgeoning border traffic using the bridges, highways, and shared bodies of water provide drug traffickers with innumerable drug trafficking opportunities. For example, in 2002, over 17 million cars and trucks passed through the four points of entry in just the Buffalo Resident Office's area of responsibility in western New York. In northeastern New York, most of the border between ports of entry is porous, with neither natural barriers nor man-made ones, such as fencing, to deter smugglers.

Additionally, drug traffickers exploit Indian reservations situated between New York and Canada. Of particular note is the location of the Akwasasne/St. Regis Mohawk Indian Reservation in Franklin County that is bisected by the border between New York and Canada. Part of the reservation lies within the United States and is policed by the New York State Police (NYSP) with assistance from tribal police that have no arrest authority in New York State. The Royal Canadian Mounted Police (RCMP) and other Canadian authorities police the Canadian side of the reservation.

The most significant drug trafficking threats involving the border are marijuana, pseudoephedrine, club and predatory drugs, and Southeast Asian (SEA) heroin. Drugs smuggled through the Canadian border into New York are destined for either New York or other states, depending on the type of drug and organization involved. Generally speaking, pseudoephedrine is destined for other parts of the country, such as the West Coast, where it will be used to manufacture methamphetamine. The majority of marijuana and other dangerous drugs are destined for areas throughout New York State, and SEA heroin shipments are usually destined specifically for New York City. Money laundering does occur, however, the threat is less than that of traditional foreign money laundering venues.

Traffickers use tractor/trailers, trucks, vans and cars, as well as commercial trains, aircraft, and overnight package services to smuggle drugs into and through the area. Only imagination and capability in smuggling their product limits their efforts.

The DEA New York Field Division participates with other federal, state, local, and international law enforcement agencies in stemming the flood of illicit drugs. The Drug Enforcement Administration is grateful for the outstanding cooperation and assistance from the Royal Canadian Mounted Police (RCMP). The cooperative efforts of the RCMP were critical to the successful conclusion of a number of multi-agency counterdrug investigations such as Operation Webslinger, Mountain Express, and Northern Comfort, which targeted club drugs, pseudoephederine, and hydroponic marijuana, respectively. DEA's close working relationship with the RCMP aptly demonstrates not only the bi-partisan cooperation and commitment of both countries, but the significant results such successful operations can achieve when properly supported.

Good morning, Chairman Souder, and Chairman Camp. I am pleased to appear before you today to discuss the drug situation and the role of the Drug Enforcement Administration (DEA) in upstate New York. Before I begin, I would like to thank each of you and the members of your respective Subcommittees for supporting the men and women of the Drug Enforcement Administration and our mission. DEA's presence in the upstate area of New York continues to support joint state/local, bi-national, and international investigations, along with drug intelligence activities. Our employees continue to implement the policy of interagency teamwork at all levels of government, which is the foundation of our longstanding tradition of cooperation.

Since September 11, 2001, the law enforcement mission and strategy of the DEA has taken on an enhanced sense of importance, as it pertains to counter-terrorism. This is a "shared interest" with the various agencies within the newly formed Department of Homeland Security. It has been determined that the organizations that move narcotics into the United States from foreign sources, and money out, are also approachable by the various terrorist groups who would do harm to this great nation. "Whatever the market will bear" tends to be the motto of many of these unscrupulous smugglers, and although the profit in illicit drugs is tremendous, there is also a vacuum to be filled in the clandestine international trafficking of weapons of mass destruction, and individuals whom otherwise would be barred from entry into the United States, as well as an already existent conduit of funding for future acts of terrorism. This Agency commits to share in its part to combat the challenge of terrorism, and break its bond with the drug trafficking underworld.

The Region

DEA's New York Division investigates drug trafficking originating from the border and in the upstate region of New York State primarily through its five upstate offices of Albany, Plattsburgh, Buffalo, Rochester, and Syracuse. The 428 miles of the New York/Canadian border, with 26 points of entry, is one of the most active borders in the country as well as a favorite conduit for drug traffickers. Three of the four largest metropolitan areas in Canada - Toronto, Montreal, and Ottawa - are within two hours drive of New York ports of entry, resulting in extensive commercial and private traffic across the border.

In western New York, significant ports of entry (POEs) into the United States are located at Buffalo and Niagara Falls. In 2002, over 17 million cars and trucks passed through the four points of entry in the Buffalo/Niagara Falls area. In northeastern New York, significant POEs into the United States are located at Ogdensburg, Massena, Champlain, and Rouses Point near Plattsburgh. In addition to the above mentioned POEs, lesser POEs dot the land border between New York and Canada along parts of Franklin and Clinton counties.

The main POEs in Buffalo, Niagara Falls, and Champlain are on Interstate highways, efficiently connecting the most densely populated areas of Canada with most of the northeastern United States. Along with the commercial and private traffic headed to major northeastern United States cities, the POEs in northeastern New York also receive considerable localized private traffic. For example, all four counties in the Plattsburgh region are major tourist attractions for both summer as well as winter sports, particularly the Lake Placid Olympic Village area and Saranac Lake. This area is also part of the Adirondack Park, home to several large ski resorts, as well as popular camping, hunting, and fishing venues. The border between the United States and Canada that affects St. Lawrence, Franklin, and Clinton counties is itself a major transportation artery. The St. Lawrence River is home to thousands of islands and bays that are conducive to both recreational as well as smuggling activities.

Of particular note on the St. Lawrence River is the location of the Akwasasne/St. Regis Mohawk Indian Reservation in Franklin County. The border between New York and Canada bisects the reservation. Thus, part of the reservation lies within the United States and is policed by the New York State Police (NYSP) with assistance from tribal police that have no arrest authority in New York State. Efforts are underway to restore full law enforcement authority to the tribal police in New York State. The Royal Canadian Mounted Police (RCMP) and other Canadian authorities police the Canadian side of the reservation.

The St. Regis River flows through parts of the reservation that obscure the border with Canada. Therefore, it is possible for an individual to legally enter the Canadian portion of the reservation and transit into the United States without supervision. The St. Regis Mohawk Reservation has been, historically, a sensitive and difficult area of responsibility for the NYSP which, over the past several years, has responded to incidents of sizeable civil unrest on the reservation. The close knit community on the reservation makes the successful infiltration of criminal organizations via traditional law enforcement methods virtually impossible. The reservation has thus become a focal point for cross border smuggling of various illicit commodities. The recent focus on counter-terrorism underscores the difficult nature of controlling subjects who transit the reservation with relative ease and impunity. Most recently, the bitter cold temperatures experienced during the winter of 2003 caused the St. Lawrence River to freeze to a sufficient depth so as to permit illegal vehicular traffic between Canada and New York.

In response to the trafficking threat posed by the high volume of movement and the relatively open border in the northeastern New York area, DEA has realigned the existing resources of our New York Division to add a Special Agent position in Plattsburgh.

Currently, the Ottawa Country Office, staffed with three Special Agents and one Administrative Staff, is the only DEA presence in Canada. However, the Vancouver Resident Office will open in June 2003 with a staff of three Special Agents and one Administrative Support. As an additional show of commitment to the region, an Intelligence Research Specialist will report to the Ottawa Country Office by the end of 2003. The opening of the Vancouver Resident Office will enhance our enforcement efforts to address the smuggling of drugs and list chemicals through British Columbia into the Untied States.

Drugs and Drug Trafficking

Marijuana

Traffickers based in Canada smuggle significant quantities of hydroponic marijuana across the border into New York State. The marijuana shipments can be destined for New York State or for further transshipment to other states. Recently, Canadian marijuana traffickers have begun to grow marijuana by hydroponic methods that yield a very high-grade product with a high concentration of Tetrahydrocannabinol (THC). Hydroponic marijuana is being shipped via automobile, mail services and body carriers into western New York. Hydroponic marijuana has become a major concern because of the amount of marijuana coming across the border and, most importantly, the large amounts of money received by these organizations after the marijuana is sold in the United States.

The Canadian "hydro" typically sells for $3,400 (US) per pound (wholesale) and as much as $6,000 (US) per pound (retail) in New York City. Because of its high quality and potent concentration of THC, it has become the preferred illicit marijuana product on the market in the northeast region. Investigations conducted by DEA and the Bureau of Immigration and Customs Enforcement (BICE) indicated traffickers from across the northeast and as far away as New Jersey have traveled to the region to purchase wholesale quantities of "hydro" for distribution elsewhere. Additionally, BICE has been successful in effecting several seizures totaling hundreds of thousands of dollars in currency destined for Canada. These funds ostensibly represent the proceeds from the illicit sale of "hydro" in the United States.

Buffalo is a transshipment area for hydroponic marijuana destined for points throughout the northeastern United States. A significant portion of this hydroponic marijuana originates from Vietnamese drug trafficking organizations based in Southern Ontario. These organizations cultivate the marijuana in Ontario and arrange for it to be smuggled into western New York. They are organized into sophisticated, compartmentalized networks designed to thwart law enforcement efforts. As an example, their couriers are kept isolated from the rest of the organization so that if they are arrested, they cannot provide information about the organization, its members, or its hierarchy.

Despite its complexity, this increased marijuana traffic is being actively and aggressively targeted. Law enforcement agencies in northern New York, including DEA, initiated an Organized Crime Drug Enforcement Task Force (OCDETF) joint investigation entitled Operation Northern Comfort, which focused on the distribution of hydroponic marijuana from Canada by members of the Hells Angels Motorcycle Club. The Hells Angels members smuggled marijuana shipments through the Akwesasne Mohawk Reservation to various locations in the United States. This investigation revealed multiple distribution points for marijuana in Canada and the identification of smuggling networks within the United States. To date, approximately 34 defendants have been arrested and $1,082,718 in U.S. currency seized.

The DEA has assisted BICE and its predecessor agency, the U.S. Customs Service (USCS) in processing approximately 430 kilograms of hydroponic marijuana in the past two years. There is no indication that marijuana traffickers will cease their exploitation of the New York/Canadian border in the near future.

Club and Predatory Drugs

Traffickers based in Canada serve as a prominent source of supply for club and predatory drugs, especially GHB/GBL, Ecstasy, and steroids. The Buffalo Resident Office played a pivotal role in Operation Webslinger, a multi-jurisdictional investigation, which targeted the illegal Internet trafficking of "date rape" drugs such as GHB and its analogues, GBL and 1,4 Butanediol (1,4 BD). The DEA, together with the U.S. Postal Inspection Service, BICE, Internal Revenue Service, Federal Bureau of Investigation, the Royal Canadian Mounted Police, and the Ontario Provincial Police, arrested 115 individuals in 84 cities across the United States and Canada.

This two-year investigation represents law enforcement's most significant national operation targeting organizations trafficking in GHB, GBL, and 1,4 BD. Operation Webslinger encompassed investigations in Quebec City, Buffalo, St. Louis, Detroit, San Diego, Mobile, and Sparta, Tennessee. These investigations targeted individuals and organizations supplying large quantities of GHB, GBL, and/or 1,4 BD ordered over the Internet and delivered via mail. From these investigations, agents developed leads that resulted in the identification and arrest of individuals across the country involved in buying and selling these drugs. Agents conducted enforcement operations in over 80 U.S. cities with chemical and drug seizures representing a potential yield of more than 25 million dosage units.

As part of Operation Webslinger, the Buffalo Resident Office conducted DEA's first court authorized contemporaneous interception of an internet website, which led to the identification and arrest of Daniel Pelchat, a Canadian citizen who was a significant supplier of the club and predatory drugs GHB, GBL, and their precursor 1.4-Butanediol. Mr. Pelchat and others are included in the 24-count indictment, which carry a maximum penalty of 20 years imprisonment, a fine of $1 million, or both. The RCMP was instrumental in the identification, investigation and arrest of Mr. Pelchat, as well as the seizure of approximately 500 parcels from Canadian mail containing GHB and GBL destined for the United States, which was ordered from Mr. Pelchat's website. The Buffalo portion of the operation resulted in the seizure of approximately 1,500 gallons of GBL, ordered from Mr. Pelchat's website, which were destined from the United States. This investigation also resulted in the seizure of approximately $2.8 million dollars in the United States, $600,000 in Canada, and the restraint of $1.4 million in currency and assets in Canada.

Traffickers continue to smuggle significant quantities of Ecstasy (MDMA) across the border. Intelligence from DEA offices in New York indicates that shipments of pills in multi-thousand quantities are smuggled from Europe through Canada to New York via various points along the border including the Indian Reservations, Alexandria Bay, Buffalo, and the Niagara Falls crossings.

Pseudoephedrine Trafficking

The illegal diversion of pseudoephedrine is of particular concern to the DEA. Intelligence and recent seizures as well as investigations indicate that Canadian traffickers have capitalized on the vulnerability of the border region as well as the legal trade of pseudoephedrine in Canada to facilitate the shipment of pseudoephedrine into the United States. Pseudoephedrine, highly controlled in the United States, was not regulated in Canada until January 9, 2003.

This precursor for methamphetamine is continually diverted from legitimate and illegitimate sources for further transshipment, primarily to the West Coast of the United States. However, a dramatic increase in small clandestine methamphetamine laboratories in New York has been reported over the last few years. In 2000, DEA/New York seized four methamphetamine labs, followed by eight in 2001. The number of seized methamphetamine labs jumped to 40 in 2002, and was at 16 for just the first three months of 2003.

Middle Eastern violators, including a significant number based in New York, have figured prominently in this illegal diversion of pseudoephedrine for methamphetamine manufacture. DEA New York initiated and participated in numerous investigations of pseudoephedrine diversion intended to facilitate the manufacture of methamphetamine.

In Phase III of Operation Mountain Express, the first national enforcement operation targeting bulk suppliers of pseudoephedrine from Canada, authorities seized 16 metric tons coming into the United States. In this operation, the DEA, together with the BICE, Internal Revenue Service, and the Royal Canadian Mounted Police, arrested more than 100 individuals in twelve cities in connection with a nationwide investigation targeting the illegal trafficking of pseudoephedrine.

Overall, Operation Mountain Express (Phases I, II, & III) has resulted in over 300 arrests and the seizure of approximately 30 tons of pseudoephedrine, 181 pounds of methamphetamine, nine clandestine methamphetamine laboratories, and $16 million in U.S. currency. This would make about 37,000 pounds of methamphetamine. The majority of the traffickers are of Middle Eastern descent, and intelligence indicates that they send a portion of their drug proceeds back to the Middle East.

In Operation Northern Star, the DEA and the RCMP arrested over 65 individuals in ten cities throughout the United States and Canada. The arrests were the result of an 18-month international investigation targeting the illegal importation of pseudoephedrine. Operation Northern Star employed a comprehensive top to bottom strategy targeting the entire methamphetamine trafficking process, including the suppliers of precursor chemicals, chemical brokers, transporters, manufacturers, distributors, and the money launderers who helped conceal their criminal proceeds.

This case resulted in arrests being effected in New York, Detroit, Chicago, Cincinnati, Los Angeles, Riverside, Gulfport, Montreal, Vancouver, and Ottawa. As part of this investigation, agents targeted six executives from three Canadian chemical companies. The executives were arrested in connection with their role in the sale of bulk quantities of pseudoephedrine to methamphetamine manufacturers in the United States.

The average size of pseudoephedrine shipments smuggled into the New York is significant. In one example, the Buffalo Resident Office seized 1.2 million dosage-units of pseudoephedrine at the Federal Express terminal in Buffalo.

New Canadian Regulations

Canada's chemical regulations went into effect on January 9, 2003, and as a result, Canada now controls the 23 chemicals listed in Tables I and II of the 1988 United Nations Convention. The regulations establish a licensing and registration system for Class A (including pseudoephedrine) and Class B chemicals, respectively. Canada's Class A chemicals are similar to List I chemicals and Class B chemicals are similar to List II chemicals. In addition, the regulations require permits for the import, export, and transshipment of Class A chemicals and for the export of Class B chemicals to certain targeted countries.

While the regulations will not bring an immediate end to the problems encountered by the U.S., it is a positive first step toward making it more difficult for traffickers to obtain not only pseudoephedrine, but all regulated chemicals. In furtherance of the implementation of this legislation, the exchange of information between regulatory and enforcement agencies is of the utmost importance. An informal working group has been formed consisting of Health Canada, RCMP, and Canada Customs. The group meets regularly to discuss issues of mutual concern.

Southeast Asian (SEA) Heroin

Southeast Asian heroin organizations based in Canada, most commonly Toronto, store heroin shipments for further transshipment across the border into New York. Most of the shipments are destined for New York City. DEA investigations suggest that Southeast Asian heroin is smuggled from Canada into the United States, and indicate a departure from direct source zone shipment to New York in favor of indirect shipment through Canada. Heroin investigations with links to Canada tend to confirm a trend of heroin smuggling from Hong Kong to New York via Canada, and subsequently, on occasion, from New York to California. Reports indicate Chinese traffickers are stockpiling heroin in Canada and New York. This practice was most notable during October-December 2001 when intelligence indicated that newly imposed counter-terrorism measures were causing a temporary lull in smuggling activity. Reportedly, an oversupply of SEA heroin occurred in some areas of Canada, as several trafficking organizations delayed the movement of their shipments across the Canadian border into the United States.

Money Laundering

Presently, the threat of money laundering involving Canada is one of potential rather than actual laundering activity. While some money laundering does occur in Canada, the DEA/New York does not view the current threat of financial laundering to be as significant as other venues and geographical areas. The most significant money seizures involving the Canadian border are frequently effected by other federal agencies pursuant to border inspections conducted by the Bureau of Customs and Border Protection (BCBP). It is entirely possible that as law enforcement agencies increase their effectiveness in attacking traditional areas of money laundering, traffickers will shift their focus to laundering their proceeds in Canada.

Drug Trafficking Organizations

The border is continually exploited by drug trafficking organizations operating from Canada.
Unlike the Southwest Border, however, there is not a definitive organization or small group of organizations that controls the drug trafficking along the New York/Canadian border. The organizations using Canada as a base for drug trafficking into New York State are not centralized. The larger ones are organized into cells, with each cell serving a different function. Normally, two cells of the same organization will not know details about each other. There are numerous smaller organizations and entrepreneurs involved in the trade as well.

DEA investigations indicate that illegal drugs being transshipped from Canada across the New York/Canadian border are usually destined for New York, Atlanta, Chicago, or the West Coast. In response to this threat, the New York Division continues to conduct multi-jurisdictional investigations with other offices and agencies throughout the United States.

Interagency Cooperation

DEA is an investigative law enforcement agency, not an interdiction agency. The international nature of drug trafficking necessitates the sharing of information with other law enforcement agencies as the only effective way of combating drug trafficking, ensuring that we are not alone in our efforts. Operations Webslinger, Northern Star, Northern Comfort, and Mountain Express are excellent examples of effective joint investigations involving Federal, State, Local, and international law enforcement agencies.

Intelligence Operations

DEA/New York's Unified Intelligence Division (UID) provides the intelligence support necessary for NYD counterdrug operations in New York. The UID is a unique group encompassing both intelligence analysts and representatives from other law enforcement agencies. This combination of unique assets allows UID not only to support individual drug investigations, but also to provide various services including strategic intelligence, confidential source debriefings, tracking of heroin trends via the Domestic Monitor Program, and liaison services with other agencies.

Additionally, New York State is developing the Upstate New York Regional Intelligence Center (UNYRIC), based in Latham, New York, to facilitate the collection, analysis, and dissemination of criminal intelligence, including drug intelligence, in upstate areas. The DEA will be actively participating in the UNYRIC when it becomes fully operational later this year. This task force will provide unprecedented levels of cooperation and exchange of information on northern border investigative initiatives.

Conclusion

The New York/Canadian border is a prominent gateway for illegal drugs into the United States. I have attempted to provide you with a picture of the situation that DEA is facing along this area. Private and commercial vehicle border crossings, together with a variety of drug trafficking organizations and individuals, will require DEA's continuing vigilance and on-going cooperation among law enforcement entities in this region. The New York Division is dedicated to this law enforcement effort and stands ready to meet and overcome these challenges.

Chairman Souder and Chairman Camp, thank you for the opportunity to provide testimony on this very important and relevant issue. I will be happy to answer any questions that you or the other members may have.