Articles

How Gold Thieves Get Away With Millions

The high-grading racket has its roots deep in the rich mines of northern Canada. The payoff is sometimes in New York, or even Morocco, at the end of a trail of graft, hijacking and murder

DON DELAPLANTE July 15 1950
Articles

How Gold Thieves Get Away With Millions

The high-grading racket has its roots deep in the rich mines of northern Canada. The payoff is sometimes in New York, or even Morocco, at the end of a trail of graft, hijacking and murder

DON DELAPLANTE July 15 1950

How Gold Thieves Get Away With Millions

The high-grading racket has its roots deep in the rich mines of northern Canada. The payoff is sometimes in New York, or even Morocco, at the end of a trail of graft, hijacking and murder

DON DELAPLANTE

ON JUNE 2 thieves blew the vault at the Delnite mine in Ontario’s famous Porcupine camp and carted off three newly poured gold bars worth $74,000. It was the biggest single robbery in Canadian mining history. And it was pulled off in spite of rumors of the coup which had been rampant for six weeks.

No single incident could more strikingly underline the great high-grading racket. The theft and smuggling of high-grade ore and gold cost Canadian mines more than $2 millions each year. It is bizarre, spectacular, cunning thievery marked by graft, hijacking and calculated murder. Its practitioners are masters of the double-cross; news of newly planned thefts often leaks out beforehand.

Its ramifications are international. Stolen Canadian gold usually winds up in the free world market in Paris or is sold privately in Central Europe or the Middle East at $40 an ounce. Three years ago (before Russia flooded the market) the price hit $100.

In April, 1945, Theodore H. Thompson, a U. S. citizen employed by the RAF as a ferry pilot out of Montreal, was nabbed with $50,000 of bullion as he landed at Rabat, French Morocco. The tip had come all the way from Timmins in Northern Ontario, where police shadowed an associate who was picked up in the Porcupine camp with $10,000 in gold.

In the Delnite case police swiftly recovered the gold and arrested two refinery workers. These were the first major arrests for high-grading in five years, though insiders in the industry are certain the crime is on the increase in Canada.

Ontario mines lose a million dollars a year to high-graders. Quebec and B. C. mines are robbed of another million. (One B. C. high-grader was stopped at the Blaine, Washington, custom station carrying $55,000 in a single shipment.) But police cases in recent years have amounted only to the apprehension of individual miners with small quantities of illegal gold. Yet, as one mining official said recently, “Fire a shotgun down the main street of Timmins or Val d’Or and it’s even odds you’ll hit half a dozen highgraders.”

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In Timmins before World War II high-grading grew so open that a public enquiry was held to investigate the police department. Two self-confessed high-graders, speaking under court protection, told an astonishing story: They’d been picked up by police, they said, afler buying $800 worth of gold. rl be police took the gold but instead of jailing them sent them away. Next morning the police told them that the stuff was actually brass and told them to get out of (own. Both testified they were positive they’d purchased gold.

Two other angry high-graders told the enquiry that they’d been driving to the east end of town when a police car forced them to the curb. The officers seized their gold but made no arrests, telling them instead to “beat it out of town.” Though nothing conclusive came out of the investigation there were some radical changes in the Timmins police department, which has been free of scandal or the suspicion of scandal since the shakeup took place.

Gold Under Their Armpits

An equally fishy occurrence took place at about the same time when high-grade detective Bob Allen—a man unique in criminal annals—raided a high grader who was keeping a rendezvous with a buyer from Southern Ontario. Allen was astonished to find the two criminals being battered with billies by two men in uniform. When the slaughter was halted it was found the pair had an official search warrant from the police department, official handcuffs, official revolvers, even standard police issue billies. They had broken in saying they were police officers and when the high-grader refused to turn over the gold they went to work with the clubs. Both got long penitentiary terms.

Today a revitalized Ontario provincial police team is stepping up the hunt for high-grading’s keymen. Two men were arrested in early June in a Toronto rooming house—a suspicious

closet ceiling when ripped open disgorged a hoard of gold dust, buttons and high-grade ore, plus weighing scales and a mold.

High-graders operate at various levels. Some are miners who pound the ore out of the ground and quietly smuggle it out of the mine. Others operate in the mill, where the ore is ground up, snatching it from conveyor belts as it is whisked by. Others are refinery workers who steal it in granulated form when it’s being melted down. The most spectacular form of highgrading is gold brick thievery, but it’s rare. Including the recent Delnite coup there have been only three brick robberies in 30 years.

The whole racket depends on the small miners within the industry. Recently, when the president of a big mine went north to attend a board meeting, the parish priest phoned him. Some men in the parish had shamefacedly told him they had been stealing gold. They wanted to pay it back, but how to explain this change of heart to their bosses? The mine president, a Catholic himself, was flabbergasted. He agreed the bosses wouldn’t understand. “Just tell them not to do it any more,” he told the priest.

Men like these bring gold out of the mines by the use of every stratagem human ingenuity can devise. It is carried in specially built false teeth, in false bottoms of lunch pails, within bars of soap, inside plugs of tobacco and hand-rolled cigarettes and within the body openings. Some simply carry it in their hands, or under their armpits, as they pass through a shower room completely naked, leaving their work clothes on one side and picking up their street clothes on the other. Their lunch pails travel across the change room—commonly called a “dry”—on a conveyor belt subject to police scrutiny.

The individual miners usually sell their smuggled gold to a buyer-refiner for $12.50 an ounce. This man usually works in a small shack back in the bush, for the refining process gives off a foul odor. The illicit refining is generally done over a coke fire in a Quebec heater. The ore is pulverized with mortar and pestle, then refined in a crucible. The finished product usually takes the shape of a small muffin, called a “button.”

The possession of refining equipment has been a criminal offense since 1927. Last summer a miner at Buffalo Ankerite was caught with a small electric furnace which could be plugged into the wall. In court he claimed it wouldn’t work. A mine technician testified it worked fine. The miner went to jail.

When the illegal gold is refined it passes into the hands of a more sinister group—the ring of Canadian and U. S.

criminals who ultimately dispose of it. They’ll pay the refiner up to $28 an ounce for the refined product.

Sometimes members of the ring make buying forays to the mines but most frequently the gold is carried by hired runners, often by women.

In 1927, Bob Allen, high-grading’s super sleuth, led an investigation which uncovered $5,000 in gold in a brassiere worn by a Montreal jeweller’s wife. The jeweller had bought the gold from a Timmins businessman and hidden it in his wife’s bosom. When Allen raided the Timmins man’s premises he found $30,000 in gold buried in a hole in the yard. In a safe was the cash the jeweller had paid and two loaded pistols.

Sudden Death in Buffalo

Guns and high-grading go hand in hand. The international smugglers who control high-grading are thugs who rule by fear. At least four unsolved murders have been tied in with the racket. A fifth appears to be connected with it. In addition, several persons thought to be involved in highgrading have vanished without a trace.

Frank De Luca, a known highgrader, was stabbed and restabbed in the stomach and left to bleed to death in his house near the Mattagami River three years ago. Authorities knew De Luca had either double-crossed someone in the racket, or hangers-on had tried to rob him. Cached in a wall in his house was $1,100 in gold.

Honest, blundering Harry Palmer, a farmhand, was bludgeoned to death in 1938 on a farm near Golden City, about three miles east of Dome mine. Refinery equipment was found on the farm. Police believe he stumbled upon highgraders refining their ore.

Joe Basil, a former Timmins restaurant keeper, was shot to death on a Buffalo street in 1921 just as detective Bob Allen was concluding a major roundup of the racket. Basil was the final link in a long chain connecting Canadian gold mines with U. S. gang-

Another man, Harry Kedeckel, who figured in the same high-grading roundup was beaten to death in Timmins in 1945.

In Welland last winter taxi operator Sam Delabasich was found in a field, his head battered in. His name was a familiar one to the special squad of Ontario provincial police which fights high-grading. Their report said he had been connected with the racket in Kirkland Lake where he’d accumulated enough to buy a half interest in a hotel at Fort Erie, border transfer point for gold. Sam’s old associates think he crossed up someone in the racket.

The return of the 10%premium on U. S. dollars last fall was enthusiastically received by the high-grading fraternity. It means that gold smuggled across the border is worth that much more. Much of the stolen gold actually winds up in the U. S. Treasury at Fort Knox. Fronts in the form of “old gold dealers “pick it up, sell it to the U. S. Government. Phony mining companies, usually located in the western states, also peddle it. Rut the bulk of Canada’s stolen gold winds up in Europe.

The average person in a mine town is curiously amoral about the racket. In the Army the troops used to scrounge what they could. “It’s the same here,” one miner said. “The gold is there in the ground and it’s owned by thousands of shareholders who are far away. Most high-graders could call you a crook if you stole an apple from a fruit store window. But they reason that mining is dangerous work and, if a miner is willing to risk the consequences, why shouldn’t he try to grab the odd ounce or two?”

A Gold Brick Simply Vanished

So, whenever blasting opens up veins where the gold stands out as in a jewelry store window, the mines’ private police force immediately posts a guard over the area. At Aunor mine police guarded one rich showing for two weeks this spring.

The best pickings are at new mines. Some infant mines, with no security arrangements yet set up, have almost been put out of business by highgraders. A year ago officials of the Porcupine Mine Workers’ Union rushed out to Porcupine Reef mine, a new producer, to protest the summary firing of an entire crew working a drift. Union spokesmen walked off the property with red faces when the management proved the whole gang had been high-grading.

The theft of a gold brick from McIntyre Porcupine Mine refinery in 1921 forms a curious tale. It disappeared while still warm in its mold, while the crew was at supper. Police were baffled.

About three months later a man named Cechi left town and went to Italy. His wealth astounded his neighbors, who wrote back to menfolk in the Porcupine camp. Mine investigators contacted the Italians who raided Cechi’s home and uncovered half the missing brick. The Italians jailed Cechi for smuggling and confiscated the brick. Later two of his henchmen were arrested in the Porcupine with parts of the other half of the brick. They went to the Penitentiary.

Exactly how the brick was taken from the refinery was never disclosed. Best guess was that it had been picked up in the refinery by someone wearing asbestos gloves and tossed out of the window.

Once provincial police at Timmins caught the caretaker of their own building with two large bags of high grade in the basement. One individual tried to sell high grade to none other than

Sgt. Russell Johnson, head of Ontario’s provincial police gold squad, in a beer parlor, then took the sergeant home to show him how much he had.

Bob Allen’s exploits as the “private eye” of the gold mining industry are legendary. When convinced a man is a major high-grader he makes a veritable monomania of capturing him with the goods. He came to the Porcupine Camp as a provincial policeman in 1915 and was hired a few years later by the mining association as a special investigator. Today he still does special assignments for the industry. Allen is a six-footer with ruddy chubby cheeks; when he smiles he might be mistaken for the president of a small town ministerial association. But his guileless blue eyes take on an agate quality when he gets onto his favorite subject, the theft of gold. He has outmanoeuvred the craftiest of high-graders.

Allen’s biggest coup came in 1921 when he broke up a ring extending from Timmins to Hamilton to Buffalo. Before he struck, he did two years of preliminary detective work.

The denouement came when a highgrade runner left Timmins to make two deliveries in Toronto. Through agents he had planted in the ring—Allen doesn’t like to call them stool pigeons —he knew the runner’s schedule to the last minute. At Toronto he called on two city detectives for aid, set up a watch a short distance down the street from a store on Queen Street West.

The runner appeared, entered the store, presently emerged. The detectives were walking quickly toward the store when the proprietor came out, moving in their direction. He looked up, saw the trio bearing down upon him, fled back into the store.

“He wasn’t quick enough,” Allen says with a grin. “We found him with his hand wedged into his hip pocket. The button of gold was so big he couldn’t get it out in time.” Allen’s next move was to trail the same runner to the Parkdale railway station in West Toronto. The runner got into a car with a Hamilton jeweller and drove to Sunnyside amusement park. Allen grabbed them as they drove out of the park. He found the gold on the jeweller.

Next he got on the phone to Timmins, ordered that warrants be executed on 14 persons whose names he got from informers. Twelve of these persons were town merchants (including a restaurant owner, a clothing salesman, a hotelman) and all were subsequently convicted.

The final move of the day was to Hamilton, to the restaurant of Joe Basil, on James Street. Allen’s information was that Basil was the deliveryman for a group of international criminals who operated an illegal refinery in Buffalo. The detective found Basil’s wife alone in the restaurant. She said her husband was expected to return that evening. At almost the identical moment Basil was shot to death on a Buffalo street. His confederates probably believed he was responsible for the leakage which led to the detection and

smashing of the highly lucrative ring.

On another occasion Allen’s curiosity about a Toronto jeweller’s frequent trips to Haileybury led to the smashing of a ring working out of Kirkland Lake. Twice a month the Toronto man took the Saturday night train north, took it back again Sunday. Allen decided to go back on the train. He followed the jeweller to his store on Church Street. The jeweller fainted when Allen found illegal gold in his possession.

When the jeweller revived he said he had bought the gold from a Haileybury man whom he thought was a legitimate mining man. It turned out the “mining man” was the front for a group which confessed to robbing Kirkland Lake Gold Mines Ltd. of $50,000.

In Kirkland Lake about that time one of Allen’s undercover operators walked out of a hotel room on a routine matter and was scheduled to return within an hour. He has not been seen or heard from since. Allen believes he was murdered.

The history of high-grading is packed with incidents where people have been gypped by shifty individuals peddling phony gold. Gold-bricking is partly an outcome of the practice some mines have had in the past of establishing agents to buy back gold from highgraders. Some mine operators reckon it is much better to pay a high-grader $12.50 an ounce for his gold than not have it at all. To high-graders it’s the joke of the season when one of these agents is sold brass or lead.

A Spy Got His Fingers Burned

One of the best-known frauds was pulled off by a machinist at the Dome mine. He was approached by a disguised agent of the mining association who said he wanted to buy high grade. The machinist had been tipped off. He told the agent he intended to steal a gold brick from the Dome refinery.

Two days later the machinist had the brick authentically stamped “Dome Mines Ltd., $26,000.00, No. 85162.” The agent was astounded; it appeared to be the real thing. The machinist asked $13,000, half of the brick’s value. The buyer was only carrying $2,000, but he took the brick and promised to pay the balance within 10 days.

A routine test told the agent his find was made of lead covered with gold leaf. When he protested to the machinist the latter said: “You damned spy, what are you going to do about it?” Nothing could be done. Today the brick is one of Bob Allen’s prized souvenirs.

The airplane is the high-grader’s newest tool and it is believed that much of today’s illegal gold is smuggled out by air. But road and rails must be guarded too, on the ceaseless hunt for the gold racketeers. A new route may have been devised to get gold out of the country: One official

believes that gold from Timmins and Kirkland Lake is routed north to Hearst where it is added to gold stolen from the Red Lake field of northwestern Ontario. Then the stuff could travel down the spidery Algoma Central Railway to be carried across the border at Sault Ste. Marie, a town that has not previously figured on the high-grader’s map.

One thing is certain: As long as gold is dug there will be men to steal it.

When Hollinger Consolidated Gold Mines built a golf course for its employees it erected an ornamental fireplace of rich gold ore in the clubhouse. The sight of that free gold was too much for someone. One night three years ago someone went to work with hammer and chisel and degolded the thing. ★