09/26/2012 11:12 EDT | Updated 11/26/2012 05:12 EST

Mafia imposes 30 per cent 'tax' on construction in Quebec: witness at inquiry

MONTREAL - Images of an old Mafia don stuffing cash into his socks elicited online jokes from people watching Quebec's corruption inquiry Wednesday.

But a police officer explained why those videotaped scenes are no laughing matter: they're part of a monumental scam that drives up the price of construction, he testified.

The stacks of money being stuffed into Nicolo Rizzuto's socks came from players in a industry that, according to that Montreal municipal officer, would see its costs ramped up by as much as 30 per cent because of a "tax" imposed by the Mafia.

Eric Vecchio, a Montreal police detective now working for Quebec's Charbonneau Commission, said he hears that the levy continues to exist despite all the province's recent construction scandals.

The Mob's rates have decreased, he said. The fees being charged now are half what they were a few years ago, when the Rizzutos were still at the height of their power, he said.

"We'd heard that 30 per cent was billed and now that number is 15 per cent," Vecchio said.

"They've brought the number down to an amount they consider to be more reasonable."

He said there were no clear rules as to who paid what. One entrepreneur might pay two per cent while another might pay five. By the end of a project, Vecchio said, the average cost would have been driven up by about 30 per cent.

The higher cost of construction in Quebec was referred to three years ago, in investigative media reports that raised alarm bells about potential collusion in the industry. Such reports, over time, pushed the provincial government to call the inquiry.

Vecchio went further Wednesday in describing the alleged system.

"It was effectively a tax — a cut that was given to make sure things went well," said Vecchio, who described the cut as a way to get protection, to buy peace or gain the influence of certain individuals.

"It's clear the people who were paying this tax believed this — or they wouldn't be paying it."

The inquiry was told about, and saw, the cash flowing during hours of police surveillance video shared Wednesday.

Those images were gathered by the RCMP as part of surveillance operations in 2004 and 2005 — and they were largely ignored until now.

The memorable scenes included the onetime don of the country's most powerful Mafia family, the late Nicolo Rizzuto, at meetings with construction-industry players where he received wads of cash and hid them in his socks.

Construction industry bosses were seen handing cash to Rizzuto or other Mafia types; there were also scenes from a Christmas party where businessmen and senior members of the Cosa Nostra exchanged affectionate two-cheek kisses as they milled about a snack table.

At one point a high-level Mafia captain is seen giving a gentle tap on the face to a man involved in Montreal-area municipal snow removal.

"In the Italian culture you don't do that with someone you don't know," was how Vecchio summed up the scene while narrating the video from the witness stand.

"The ties are close."

The scenes were gathered by cameras hidden at an east-end Montreal "social club" that served as the Mafia's headquarters.

Among those featured in the videos was a construction businessman, Nicola Milioto, who was allegedly seen at the hangout 236 times over two years. Police had never heard of him before but, Vecchio said, it appeared he was a key "middle man" between the construction industry and the once-dominant Rizzuto clan.

The videos showed him arriving with money on different occasions. Sometimes those amounts were significant — with as much as $20,000 at a time exchanging hands.

The money was often divided into five parts. Different amounts would be sent to the five senior members of the Rizzuto clan, the inquiry heard.

After one deal, a reputed mobster was overheard griping that he wasn't getting a fair share. But an associate snapped back that he hadn't done much to earn it.

Several other construction bosses were spotted at the club including one who also owns a locally prominent ice-cream company. He recently vanished from Montreal after his business was targeted by firebombers.

From the tape, the inquiry investigators also identified two businessmen who have since been arrested in two separate corruption sweeps by Quebec provincial police over the last year.

The videos were shot during Operation Colisee, a five-year investigation that culminated in mass arrests in 2006 in the largest sweep against the Italian Mafia in Canadian history.

The operation helped precipitate the decline of the Rizzuto empire, many of whose members are now either dead or in jail.

The deceased include people in the videos shown Wednesday — like Rizzuto, who was killed in his own home by a sniper's bullet in 2010.

But the RCMP never used the evidence it gathered on the construction industry.

It deemed that material irrelevant to its investigation — which focused on illegal drugs.

The Mounties even fought in court, unsuccessfully, to keep from sharing the video evidence years later at the public inquiry. Quebec's Charbonneau Commission won a court battle to access the footage, and hours of it were broadcast Wednesday.

Asked why the RCMP would fight so hard to withhold the evidence, the office of Public Safety Minister Vic Toews responded with an email that: touted the government's record in fighting crime, called the inquiry a provincial matter, and declined to comment.

Vecchio said the commission has asked police forces to help identify certain players in the heaps of video. He said some forces haven't been quick to co-operate.

He said he's also had to deal with issues surrounding what the RCMP considered non-pertinent information. In some cases, surveillance microphones were shut off because the subjects were not of interest to the RCMP, Vecchio noted.

But it didn't stop investigators from identifying a prominent Montreal construction entrepreneur whom they say had a close relationship with the elderly Rizzuto.

Investigators say Francesco Catania was filmed meeting with Rizzuto at the club and was also photographed with the late Mob boss at Catania's construction headquarters.

Vecchio said a photograph they found on a laptop during a 2011 raid shows Catania and Rizzuto sharing a table with several other men during lunch in the company boardroom.

Rizzuto is seated at the head of that boardroom table. The Catanias' company has worked on major local projects at places ranging from the Port of Montreal to the Hochelaga Bridge.

In one recording, Rizzuto is heard referring to an associate by the affectionate moniker "Ciccarello," a variation on a popular southern Italian nickname for Francesco (or "Francis," in English).

The officer testifying says that suggests a bond between the men.

"We see a relationship," Vecchio said, "which I think is a friendship between the two men."

There were also two recorded conversations between Paolo Renda — the Rizzuto family consigliere, who went missing in 2010 — and two other men about a birthday party for a Francesco Catania.

While the Rizzuto brass couldn't make it, they agreed to chip in their share for a $4,500 cigar humidor for the man. Renda mentioned that his name should be on the card — as well as that of several other mobsters, including Nicolo Rizzuto and his son, Vito.

Vito Rizzuto, the most powerful member in the family when he was arrested in 2004, will be released from a U.S. prison on Oct. 6.

There has been ample speculation in Montreal about whether he will return to the city, or seek refuge elsewhere, and whether he will attempt to claw his way back to the position he once held.

His father, son, and some of his best friends have been killed since he went to prison for a 30-year-old U.S. murder case. Renda, his brother-in-law, has vanished.

The language spoken on the videos is mainly a Sicilian dialect, which caused issues for investigators trying to follow, Vecchio said. The room bugs also picked up a lot of the background noise in the coffee shop, making it difficult for investigators.

"It was difficult to hear, but we followed as best as we could," Vecchio said.