In an exclusive extract from his new book Gangland: The Evolution of NZ’s Underworld, Herald reporter Jared Savage goes inside the covert investigation that unravelled a “fishing trip” with a huge haul of cocaine at the Port of Tauranga.
Three mates appeared to be heading out on a late-night fishing trip when their 5.7-metre pleasure-craft, the Boston, slipped into the dark water of Tauranga Harbour at 10pm on the night of Tuesday, 31 October 2017.
There are boats everywhere in the sheltered bays surrounding Tauranga.
The Boston was just one of many when the three men quietly backed their Volkswagen Amarok ute down the concrete Whareroa Boat Ramp, tucked away near the marina on the Mount Maunganui side of the harbour bridge, and launched their craft.
Nice night for it.
With long container terminals at industrial Sulphur Point lined with gantry cranes, and cruise ships docked at piers on the other side at the Mount, the Port of Tauranga had surpassed Auckland as the busiest port in New Zealand.
Its ongoing prosperity, as one of the Bay of Plenty’s rockstar businesses, had underpinned the region’s strong economic growth and rapid population boom.
The trio motored the Boston a few hundred metres into the middle of the channel, dropped anchor and waited patiently in the dark.
Their catch was about to arrive. The bow of the Maersk Antares appeared from behind Mauao – Mount Maunganui – the iconic mountain standing guard at the entrance of the harbour, and the huge container ship slowly pulled in to dock at the Port of Tauranga.
Nearly 337 metres long, and able to carry the equivalent of 9000 containers, the Maersk Antares was at the end of a journey that had taken her from Mexico, through the Panama Canal to Colombia, Peru, Chile and finally Tauranga.
Yet the massive vessel contained one item of cargo that wasn’t listed on her manifest.
Up came the anchor on the Boston and the small boat moved closer to the rear of the container ship.
With midnight fast approaching, one of the trio put down his fishing rod to don a wetsuit and pull on flippers, then dived in and swam towards the rudder of the Maersk Antares.
Reaching the stern, he clambered up a ladder and disappeared inside the bulkhead.
For the next half-hour there was no sight or sound of him, just darkness and the gentle lapping of the waves against the hull.
Then the bright glare of a single torch pierced the darkness from a beacon near the rudder.
A gentle splash was made by two duffel bags thrown into the sea. It was the signal the two men left in the Boston were waiting for.
They motored the boat over to their associate bobbing in the water, picked him up with the two bags, and turned around to head back to the boat ramp.
Once the boat was winched back onto the trailer, they drove the VW ute back to the Valley Road Airbnb house they had rented for the night.
With the ute safely parked in the garage, the men unpacked the bags. The strong smell of diesel wafted through the confined space.
They pulled out a total of 46 plastic parcels.
Each weighed about a kilo and was tightly wrapped in green, silver or brown tape. Inside each bundle was cocaine.
In scenes straight from a Hollywood heist caper, the three men had just successfully smuggled the largest ever shipment of cocaine into New Zealand.
And just like in any Hollywood crime caper, the authorities were watching, in darkness.
Investigators from Customs and the National Organised Crime Group had seen the entire movie screen live, as it happened. It made for surreal viewing, and it filled them with a nervous excitement, as if they were waiting for the moment when everything went wrong.
It’s not exactly typical for law enforcement to watch the illicit importation of drugs unfold right in front of their eyes.
But every move had been caught on night-vision cameras as almost irrefutable evidence. Usually drug syndicates try to conceal their illegal wares as genuine goods so they will slip through the border.
But in this case, the cocaine smuggling tried to bypass border control completely.
Just as remarkably, though, the joint investigation by the New Zealand Police and Customs had been able to stay one step ahead nearly the entire time.
It wasn’t just dumb luck.
The high point of Operation Heracles – a front-row seat at a midnight ‘fishing’ mission – had followed six months of hard work that had uncovered a ring of transnational organised crime groups working together to target New Zealand.
Ex-soldiers from Eastern Europe were behind this importation of South American cocaine.
The men receiving it were Australians with links to 501 motorcycle gangs.
There was also a separate Asian money-laundering syndicate shipping millions of dollars back overseas.
When they descended on a little country at the bottom of the world, these individuals from different parts of the globe all had the same thing on their mind: money.
In early 2017, ‘sole trader’ Matthew John Scott came to the attention of Detective Sergeant Andy Dunhill of the National Organised Crime Group.
Scott, a 44-year-old from Perth in Western Australia, was living in a rented apartment in the Wynyard Quarter, the former industrial edge of Auckland’s Viaduct Harbour, which had been redeveloped with swanky bars and restaurants for hosting fans during the 2011 Rugby World Cup.
Dunhill was surprised that Scott, without any prior connections in New Zealand, seemed to have been able to distribute significant amounts of methamphetamine, before switching to cocaine.
In a town where the drug trade had been dominated by the Head Hunters gang for so long, it was surely nigh on impossible for someone like Scott to parachute in from overseas and immediately start selling drugs on a commercial scale.
The fact he had been able to get to work straightaway indicated a sharp ground shift within the criminal underworld.
Someone like Scott would need the backing of an established gang, both as a distribution network and for his own protection.
Dunhill put it down to the influence of the 501 outlaw motorcycle gangs, which had true international connections.
Scott wasn’t a deportee, and had only a few minor driving convictions on his record – but police soon learned, through their Perth counterparts, that he had links to the Rebels motorcycle gang.
The Rebels were among the Australian gangs that had set up chapters in New Zealand. Some of the members had met secretly with Scott in Auckland.
Police surveillance teams also spotted him fraternising with a man working for a senior Hells Angel, another of the top-tier motorcycle gangs.
It was Customs investigators who brought Scott’s name to Dunhill. Their intelligence linked Scott to suspected ‘catchers’ who travelled to Auckland from Canada and China.
The job of catchers is to provide an address for drugs to be sent to in the mail. Once the risk of being caught fades, they pass the parcel to the true intended recipient.
When Operation Heracles began in March 2017, the working theory was that Scott was acting as the conduit between the international drug syndicates importing methamphetamine, and the deported Rebels, who could distribute it.
But the evidence was circumstantial.
It certainly wasn’t enough to allow them to lay criminal charges that would stick in court.
Dunhill and his team waited patiently, while Scott got on with his life – very happily. He seemed to be on a permanent holiday, playing the most prestigious golf courses on offer around New Zealand.
His friend Benjamin John Northway, also from Perth, tagged along with him, and the pair were often seen scooting around Auckland together.
It gradually became obvious that Northway was acting as Scott’s assistant. A new face appeared on 10 July 2017.
Mario Habulin, a 35-year-old from Croatia, landed at Auckland International Airport on an Emirates flight from Dubai and went straight to Scott’s apartment in the Wynyard Quarter.
Although they’d never met – or not as far as Operation Heracles could tell – Habulin moved in.
And while Scott continued exploring the country and playing golf, police surveillance revealed that his new flatmate spent more time in the apartment on Halsey Street, taking online lessons in Japanese and French.
Habulin was a former soldier who had fought in the ethnic wars that broke up the former Yugoslavia in the 1990s.
He kept up a disciplined regime, exercising every morning at the Les Mills gym on nearby Victoria Street.
He was also fastidiously neat and tidy.
The police officers conducting covert searches of the apartment were extremely careful to put everything back in its rightful place, fearful that Habulin would notice something was amiss and grow suspicious.
As the police and Customs investigators would eventually learn, the Croatian’s military experience and attention to detail were central to the success of the drug syndicate’s audacious smuggling plans.
Operation Heracles was yet to work out how the drugs were coming into New Zealand.
But police saw only too well how millions of dollars from sales were flowing out again.
On some of the busiest streets in Auckland, often in broad daylight, Scott and Habulin were both seen handing hundreds of thousands of dollars, hidden inside sports bags, to a Vietnamese woman they’d never met before.
She’d flown in from Sydney, and was a representative of a completely different criminal group: a syndicate of professional money launderers, whose sole role is to move dirty money around the world for other criminals or terrorists.
Police call these independent operators ‘international cash controller networks’. Their presence in New Zealand was a new development, and a stark illustration of the growing cunning and sophistication of the country’s latest organised crime evolution.
Contracts were drawn up to move the money overseas.
A token number – often the serial number of a banknote – was given to both parties to check before the cash was handed over.
To avoid detection, the cash was split up and deposited into multiple bank accounts in amounts under $9999.
Anything above that limit triggers a red flag for banks, which must report the suspicious transaction to financial intelligence police.
Once in the bank accounts, the funds don’t need to be wired overseas. The international cash controller network can simply release equivalent funds via paperless transfer, from a separate pool, to the individual or group in the country the money is destined for.
Sometimes ‘money mules’ are used to physically carry bundles of bank notes.
But that carries a greater risk in countries like New Zealand, where Customs have specially trained dogs at the airports to sniff out large sums of cash, so it’s easier to move money overseas through remittance or foreign exchange shops.
The Vietnamese woman seen with Habulin and Scott was Le Thi Lieu, a 52-year-old Sydney beauty salon operator.
She made several trips from Sydney to Auckland that year, and took bags of cash from Scott or Habulin four times, in amounts of $394,000, $298,000, $200,000 and $398,500 respectively.
On the fourth and final occasion, Customs investigators were secretly watching when Habulin met her outside Les Mills on Victoria Street.
The blue canvas bag was clearly very heavy; the surveillance team noted that Lieu struggled to lift it into the taxi she’d hailed.
One of Le’s money-laundering minions, Dean Yang, picked up the cash when she wasn’t available.
On 20 September 2017, investigators were watching as Habulin strolled from the Halsey Street apartment he shared with Scott to the Les Mills gym, carrying a large black canvas bag.
There was $500,000 inside.
A small Toyota Vitz hatchback pulled into the gym carpark, and Yang emerged to open the car boot.
Habulin slung the black bag inside and Yang drove straight home to Beachhaven on Auckland’s North Shore.
The first person he called was the wife of Xiaolan Xiao, who was well known to the police Financial Intelligence Unit.
He had 60 Suspicious Transaction Reports against his name as the director of Ping An Finance, a foreign exchange broker on Queen Street.
About a week after the $500,000 cash drop, in a separate prosecution, 61-year-old Xiaolan was slapped with a $5.3 million fine and banned from being a company director after a High Court judge found ‘serious systemic deficiencies’ in Ping An’s compliance with anti-money-laundering laws.
The Anti-Money Laundering and Countering Financing of Terrorism Act 2009 requires businesses – mainly casinos and banks but also lawyers and real-estate agents – to carry out due diligence on customers, monitor transactions, keep records and report suspicious transactions.
In a landmark ruling, the Department of Internal Affairs (DIA) successfully argued that Ping An had failed to perform any of these tasks across a period of time when $105.4 million went through the company books.
When the DIA asked to see Ping An’s records, Xiaolan concocted a bogus story that his digital files had been erased by a computer virus and paperwork removed by a cleaner.
Xiaolan might not have known whether the money flowing through his company was criminal. But he was wilfully ignorant, and by turning a blind eye, he allowed the lifeblood of criminal enterprises– money– to flow out of New Zealand.
Edited extract from Gangland: New Zealand’s Underworld of Organised Crime
By Jared Savage
Publisher HarperCollins NZ
Out 2 December
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