With help from various police agencies including the FBI, the Toronto Transit Commission has foiled the largest counterfeit scheme in its history, but not before it bled an estimated $10-million from the cash-strapped agency.
The scheme involved five million high-quality transit tokens, in circulation since 2004, which police said were made in the United States, smuggled into Canada and sold on the street.
The TTC announced the shutdown of the counterfeit ring yesterday after the arrests of four Canadians and an American in Toronto and Niagara Falls, N.Y., over the past week.
At a news conference at TTC headquarters, Special Agent Rob Gross of the U.S. Federal Bureau of Investigation’s Buffalo field office said the counterfeit lab was “in the eastern part of the United States.” He would not elaborate.
However, the Associated Press reported yesterday that a crime group called the Five Points Gang hired a Massachusetts casino-chip manufacturer to make the tokens. Peter Ahearn, top agent in the Buffalo FBI office, said the company was apparently not aware it was producing illegal goods.
The tokens were then shipped to Niagara Falls and smuggled across the border to Toronto, the AP reported.
News of the bust, the third in two years involving TTC fare fraud, was announced two days after transit commissioners decided to raise fares to offset a $16.5-million shortfall.
“Yes, this may have cost us $10-million, but we stopped the bleeding,” TTC chairman Howard Moscoe said at the news conference.
Still, there’s virtually no hope of recovering the lost revenue, although police did seize an undisclosed amount of cash, “hundreds of thousands” of bogus tokens and two sets of counterfeit dies.
“The public and our riders always bear the cost of this,” Mr. Moscoe said, since there is no insurance against fare fraud.
In the wake of the scam, they will also face an additional expense — a redesign of the token to improve security.
Rick Ducharme, the TTC’s chief general manager, said a new token will appear this year, but he could not say how much it will cost.
“I’m not going to rush into something that has even less security than these,” he said, referring to the current coins, in use for more than 30 years since they changed from brass to aluminum.
The investigation began late in 2004, when transit constables noticed the high-quality fakes. Among other anomalies, its embossed letters were spaced too tightly.
Throughout 2005, transit constables and city police uncovered what TTC Staff Sergeant Mark Russell called “a widespread but loosely organized network” of dealers. Tokens were sold, at a deep discount, outside subway stations, in bars, workplaces, on the Internet and, in a few cases, at legitimate outlets.
More than 100 charges were laid against 20 to 30 “low-level suppliers and middlemen,” Staff Sgt. Russell said. During some arrests, police found guns and illegal drugs.
When the probe led to a U.S. source for the tokens, the U.S. Attorney’s Office in Buffalo and more than a dozen FBI agents joined in. Officers from the Niagara County Sheriff’s Office, Niagara Falls Police, Niagara Regional Police, U.S. Immigration and Customs Enforcement, Canada Border Services Agency and U.S. Customs and Border Protection were also involved.
On Feb. 3, U.S. police seized thousands of tokens in the United States, while police in Toronto conducted four raids and arrested three brothers: Reginald Beason, 47; Alexander Beason, 36; and Alfredo Beason, 49. They face numerous fraud, conspiracy and possession charges.
On Thursday, the FBI arrested Andrea Nicole Dawson, 30, of Toronto in Niagara Falls, N.Y. She was to appear for a bail hearing in a Buffalo court yesterday on a charge of conspiracy to commit mail and wire fraud.
A fifth suspect, a U.S. citizen, was also arrested Thursday.