Je l'essay

Fans,

I undertand how disappointing it must be to come to this blog every day for the last 2 years, only to find that there is no new content. I have decided to remedy this situation by posting some of the essays that I have written over the years.

Enjoy!

The following essay was written for a course entitled "The Underground Economy," which covered many aspects of the black market (cool stuff).

The prompt asked us to describe a bar in which a variety of illegal activities were taking place, from bootlegging to money laundering...


Arts and Darts


Upon entering the Arts n’ Darts Bar, most visitors are surprised by the elegance of the establishment. More refined than its location would lead you to believe, the bar is an up and coming gathering place for Montréal’s cultural connoisseurs. The burgundy walls are adorned with original paintings. At the end of the bar there is a designated gaming area where clients can choose from a variety of pub activities. The bar itself is very spacious to accommodate many patrons; from the off duty, but
always vigilante police officer, to the beauties seated down at the end. Upon first glance, everything seems pristine, but underneath the surface the reality becomes murkier.

As you take a seat at the bar, you notice a platter of cigarettes designated for the clients. Take one, they’re free of charge. We want to treat the customer to more than just pretzels and Doritos. Complimentary cigarettes are an effective means of keeping the clientele satisfied, which will result in valuable word of mouth promotion. Although this practice is outlawed under the Tobacco Act, I don’t think it is enforced by the local authorities. I have seen for myself a bar at St. Laurent and Fairmount that distributed cigarettes for free. It seems unlikely that the owner would engage in such a practice if he had legitimate concerns for a surprise inspection by the Ministry of Health and Social Services. However that being said, Arts n’ Darts does not engage in the retail of cigarettes. This is because the sale of tobacco is far more conspicuous (and criminal) than the distribution of gifts. The maximum penalty for giving away cigarettes is $3,000, while selling without a permit can yield a fine of up to $25,000. This can be attributed to the significant increase in government regulation of tobacco including sales (restricting vending machines) and where it can be smoked (banning cigarette consumption in public spaces). The cigarettes at the bar are smuggled out of Native reserves, which equates to huge savings as we avoid paying excise taxes of up to $40 per carton. These discounts allow me to hand them out for free, knowing that the non-monetary benefits more than compensate for the purchasing costs.

On display behind the bar is an impressive collection of alcohols. Each bottle is affixed with a sticker indicating the appropriate duty has been paid to the Régie des alcools, des courses et des jeux. Since the Société des alcools du Québec is the regulating monopoly, they are able to charge huge excise taxes (over the already high GST rates) which account for most of the price of alcoholic beverages. In addition to the standard rates charged to consumers, a retailer must pay an additional 8% duty on each bottle. Realizing that these taxes are cutting into Arts n’ Darts’ profits, I have undertaken the following scheme to save some money.At the beginning of every month I legally purchase a believable quantity of alcohol at the SAQ in order to have legitimate expenditures in my records, thus shielding the bar from immediate suspicion. For the additional alcohol that is consumed, I will need to either purchase the alcohol from the SAQ as a regular consumer (and save the 8% duty) or find a trafficker of completely duty-free alcohol. A quick comparison of liquor prices in Montreal and New Hampshire, a state without any form of sales tax, shows that alcohol is about 30% cheaper across the border. Although this is more lucrative, I am unwilling to take on the risks associated with smuggling myself, so this option depends on my ability to find someone already engaged in cross border smuggling.

In either scenario, I will have a stock of duty-free alcohol which I am not permitted to sell. When a bottle runs out, I will save it and replace it with a second legitimately purchased bottle. Then, I will bring the first bottle home and refill it myself with the cheaper alcohol. Once this has been done I will replace the bottle behind the bar and remove the second bottle to bring home and refill, leaving a third, sealed, bottle behind the bar. In the case of a surprise audit from the Ministry of Public Security, they will have no evidence of tampering because they can only legally search the establishment, which only contains properly marked bottles. Since the duty stamps are numbered in sequential order, I will discard the earlier bottles after an appropriate period of time to indicate that customers are steadily making purchases. In order to keep “accurate” financial books, I will update them at the end of the day to reflect the expected amount of purchases of the legitimately bought alcohol based on the volume that I buy per month. I will then keep all excess cash to be cleaned later.

While enjoying a refreshing Martini, you notice an attractive young woman eyeing you from the end of the bar. As you walk
up to her, you see a posted sign marked, “reserved seating”. After easily striking up a conversation with her, she reveals that she and her friends come to Arts n’ Darts most nights to enjoy the cultured atmosphere. When asked what she does, she gives you her phone number and tells you to go ahead and call her for a good time. On the phone the woman reveals that she is a prostitute and is willing to go home with you, if the price is right.

How can this possibly be legitimate? Although prostitution is legal in Canada, the Criminal Code is structured to prevent almost every form of solicitation. Despite the criminalization of all public communication initiating a sex for money transaction, these negotiations are perfectly legal in a private conversation. A 1996 Supreme Court decision upheld that telephone calls of any kind are considered private, thus allowing for the discussion of prostitution. Nothing illegal is taking place when an individual gives their phone number to another, assuming no illicit acts are explicitly expressed during this conversation. As for her seating; any client of the bar has the right to right to reserve an area of the bar. Though, unlike my other clients, the sex-
workers pay me a cash fee at the end of each week.

If the prostitution does not appeal to you, then perhaps you will find more excitement in the gaming area? Unfortunately we are unable to offer video lottery terminals. After the establishment of the Société des loteries vidéo du Québec in 1993, there
has been a strong crackdown on privately run gambling machines. Now every machine needs to be registered and connected to the Société des loteries du Québec computer network. Although video lottery machines would be a very profitable addition, the fine for operating without a license can be as high as $75,000. It would also be difficult to stay hidden from scrutiny when more visitors start arriving because of the availability of gambling. I wouldn’t even be able to install legal machines to earn commissions, because the Régie des alcools, des courses et des jeux has not issued any new operating licenses for the
past 6 years.

For the final vice of the night, you head over to the corner booth to visit the resident hashish dealer. Even though I am not directly involved in his business, I know that he is inconspicuous enough to avoid detection, even in the policeman’s presence. In the event that he is caught, I need to minimize the risk of him pointing the finger at me. As an incentive to stay quiet, I have set aside a sum of money to contribute to his fine for trafficking Schedule VII substances. If he blames me, he will pay the full fine, but if he keeps silent, I will pay half. Given the high demand for drugs, I believe it is in my best interests to take advantage of any opportunities to profit from this lucrative business, despite the risks I may incur. Like the prostitutes, he pays me cash weekly for keeping his seat reserved.

With all of the cash flows coming in from illegal activities, I legitimize all of the profits through the sale of my art at the bar. Most of the “modernist” paintings on the walls have been gifted to the bar by me, and are for sale with prices in the hundreds. Even though I am not a professional artist, no one can prevent me from charging high prices, especially if customers are willing to pay them. Who is to say that one of my paintings is not worth $400 to the purchaser? In order to clean the dirty money, the record books will show that an anonymous client paid cash for a painting, when in reality the piece is removed from the establishment and destroyed. This apparent creation and sale of artwork provides a perfectly legal source of income. When it is time to face Revenue Canada and Revenue Quebec, there will be nothing to hide. Because I am providing the art to the bar as a gift, this transaction is not taxed. When the bar goes ahead and sells the painting, the profits will be taxed under the corporate income rate of 11.4%, which is better than if had I sold the paintings myself and paid the personal tax rate of 24%. According to the bar’s financial statements, the bar is not earning any more money than provided for by the expenditures and subsequent sales of alcohol. All of the illicit funds have been appended to the income of the bar as legitimate gains through art sales. Although I end up losing some profits by paying taxes, I can now spend the criminal money as if it had been legitimately earned. As a result, in the eyes of the government, Arts n’ Darts is able to uphold its image as a respectable business, despite the blatantly unlawful practices which account for a significant share of the profits.