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JEFF SALLOT in Ottawa ANDREW MITROVICA in Toronto

An angry former undercover agent says he was part of a CSIS "dirty-tricks squad" that intercepted mail, broke into cars, rented apartments under false names and set up phony front companies.

The former agent and ex-petty criminal, John Farrell, said some of these covert operations were authorized by Federal Court warrants, but others, such as a car break-in to steal sensitive documents, were illegal.

Mr. Farrell said that after he stopped working for the Canadian Security Intelligence Service, he was offered "humanitarian assistance" of $6,000 by CSIS director Ward Elcock in return for abandoning a legal claim in which he sought to recover $50,000 in back pay that he insists CSIS still owes him.

In a series of interviews, Mr. Farrell made other allegations about CSIS, including that some intelligence officers used public funds to renovate their homes and to have additions built. Rented apartments that were supposed to be for covert operations were, in fact, used to house family members of senior CSIS managers, he said.

He added that he knows of other CSIS wrongdoing, but is not prepared to discuss it at this time.

Mr. Farrell also outlined a series of actions he performed for Canada Post Corp., including spying on union activists.

The allegations of lawbreaking by CSIS are particularly explosive because the agency was created in 1984 as a new civilian intelligence service to replace the old RCMP security service, which had been caught in a variety of dirty tricks, including burning a barn in Quebec to prevent a meeting between the Black Panthers and members of the Front de Libération du Québec.

CSIS said it does not break the law and does not suggest that anyone else do so on its behalf. Government documents suggest that senior CSIS officials have serious concerns about what Mr. Farrell knows about the dirty-tricks squad's ultrasecret operations and what he might say publicly about them.

CSIS offered him money and warned him not to violate the Official Secrets Act. Intelligence sources described Mr. Elcock's offer of $6,000 for humanitarian reasons as highly unusual.

Mr. Farrell said he rejected the offer because of the strings attached.

A CSIS lawyer also warned Mr. Farrell that he could run afoul of the Official Secrets Act if he publicly disclosed CSIS activities in any court proceedings.

"Mr. Farrell signed several non-disclosure agreements relating to his contractual arrangements," Mary MacFadyen, the CSIS lawyer, said in a letter to Mr. Farrell's lawyer in January.

Writing on behalf of Mr. Elcock, Ms. MacFadyen also said: "It is expected that he [Mr. Farrell]will honour his contractual obligations."

But Mr. Farrell described his work for CSIS only in general terms and has been careful not to disclose identities of CSIS targets or secret methods of operations.

He did, however, describe a 1995 incident where at the behest of a CSIS manager, he broke into a car to retrieve and destroy documents belonging to another man who was involved in a CSIS mail-interception program.

The victim of the break-in was attempting to go public with information about the operations of the dirty-tricks squad, Mr. Farrell said.

CSIS operations are reviewed for legality by the service's inspector-general and by a government-appointed committee, agency spokesman Dan Lambert said in an interview.

Naming CSIS officers involved in covert operations is an indictable offence under the CSIS Act, Mr. Lambert warned.

He declined to respond to detailed questions about Mr. Farrell's allegations, including the 1995 car break-in.

Mr. Lambert, who said The Globe and Mail seems to be pursuing a "vendetta" against CSIS with its reporting on the service, also declined to respond to specific written questions about why Mr. Elcock wrote Mr. Farrell last year offering him $6,000.

The letter stated that Mr. Elcock appreciates "that you are sensitive to your obligations to respect the confidentiality with which you have been entrusted."

Mr. Elcock also wrote, "Given that you had gone through a period of unemployment, the service offered you financial assistance in the amount of $6,000 to assist you in this period of transition. This offer . . . was meant to be a humanitarian gesture for the purpose of assisting you to fulfill financial obligations you would have incurred whilst unemployed."

Mr. Farrell said he never got the $6,000 because when he went to collect it from his CSIS handler in a room at the Toronto's SkyDome Hotel he was asked to sign a release for any other financial claims against CSIS.

Ernest Rovet, Mr. Farrell's lawyer, said he was baffled by the $6,000 offer.

"In my experience, employers don't go around offering people humanitarian assistance based on no specific claim," Mr. Rovet said.

Mr. Elcock's executive assistant, Tom Bradley, wrote Mr. Farrell on November 22, 1999, informing him the $6,000 offer was being withdrawn in part because he had complained to the agency's civilian watchdog, the Security Intelligence Review Committee, about his treatment by CSIS.

Mr. Rovet said the RCMP should investigate to get to the bottom of Mr. Farrell's allegations.

Mr. Farrell said he began working for CSIS in 1992 after a year and a half as an investigator for Canada Post. He left CSIS in late 1998. He was hired by both government agencies, he said, despite a previous criminal record. He acknowledged that he was in trouble with the law before his involvement with CSIS. As a youth he was convicted of several crimes, including breaking and entering.

CSIS informed Canada Post in October, 1990, that he had been pardoned by the National Parole Board.

Thus he was able to obtain a security clearance to begin his work at the Post Office as an auxiliary postal inspector.

Mr. Farrell said he was paid by CSIS in cash weekly or monthly so that his name never appeared on payroll records.

The cash arrangement was so CSIS could deny any connection with the dirty-tricks squad if their shady operations strayed over the line into illegalities, he explained.

Auxiliary postal inspectors, also known as APIs, performed a number of undercover functions for Canada Post management, he said, including spying on union activists. He said he was the co-ordinator of eight to 10 APIs in Toronto and there were about 30 other APIs across Canada.

Their main activity, Mr. Farrell said, was to intercept the mail of national security targets on behalf of CSIS. The mail-intercept program has apparently become so extensive that the work was contracted out ostensibly by Canada Post in 1997 to a private security company, Avada Consulting.

Intelligence sources expressed surprise when told of Avada Consulting's alleged working relationship with CSIS and Canada Post.

"It's very strange that they would contract out such sensitive work to a private firm," a veteran intelligence source said. "Who monitors the firm to ensure it abides by the [CSIS]Act?"

Corporate searches reveal the firm is operated by Alan Whitson, a former Mountie, and his wife Doris from Metcalfe, Ont., a rural community near Ottawa.

Other intelligence sources and federal officials have previously confirmed that CSIS intercepts the mail of people suspected of being foreign intelligence agents or terrorists. CSIS can ask Federal Court judges for warrants authorizing mail intercepts -- and telephone taps and bugging operations. Judges issue the warrants if they are convinced of the importance of the cases to national security and that other investigative methods have failed or are likely to fail.

Mr. Farrell declined to describe how the mail is actually intercepted, saying he does not wish to compromise legitimate national security cases. Most of the API intercepts are probably legal because of the warrants, he acknowledged.

But he also described how some mail intercepts at times involved not just the mail of the target named in the warrant, but also neighbours if the target lived in an apartment building.

This was done so that the target would not become suspicious if his or her bills arrived later than everyone else in the building.

Mr. Farrell also said that while working for CSIS, he intercepted and photocopied the envelope covers of mail of all the residents of apartment buildings so the service could quickly compile a current list of all the people who lived in the building of a target.

The list could then be checked against data bases to determine whether there were any other possible national security targets in the building.

The list could also turn up names of "friendly people" who might co-operate with CSIS by allowing their apartments to be used to install bugging devices in a target's apartment or allow their apartments to be used as observation posts, Mr. Farrell said.

Bob Stiff, director of security for Canada Post, acknowledged that APIs intercept mail with warrants, but said it is illegal to hold up the mail of neighbours of a target. He said he has never heard of this happening.

Citing national security concerns, officials at both Canada Post and CSIS were reluctant to reveal details of mail-intercept operations.

Avada Consulting ostensibly supplied services for Canada Post, but all of the money to finance the firm's work actually came from CSIS, Mr. Farrell said.

The company's arrival on the scene in 1997 was the start of Mr. Farrell's falling out with CSIS and Canada Post. Mr. Farrell said he told senior CSIS managers that he was uncomfortable with a private firm handling such sensitive work and that he did not get along with Mr. Whitson.

Other intelligence sources have confirmed the existence of Avada Consulting.

Mr. Whitson was tight-lipped about the firm's relationship to CSIS. "I have nothing to say to you," he said before hanging up.

Canada Post will not discuss its business relationship with Avada Consulting, spokesman John Caines said. He referred all questions about the mail intercept program to CSIS.

Mr. Farrell said that in addition to his mail-interception duties, he was asked by CSIS to set up and register front companies under Ontario corporation laws and to lease apartments under false names.

The apartments were used as observation posts in covert operations, he said, but he insisted on keeping details secret because operations may be continuing.

He did say, however, that he rented an apartment so that CSIS could keep track of a pair of Russian spies, Dmitriy Olshanskiy and Yelena Olshanskaya, who were living under false Canadian identities in Toronto as Ian and Laurie Lambert. The couple were exposed in 1996 and deported to Russia.

One of the apartments rented for a CSIS operation was actually used to billet the daughter of a CSIS manager, he said.

Mr. Farrell said he brought his allegations of CSIS wrongdoing and his claims for back pay to the attention of SIRC last summer when a SIRC investigator met him in a a cafeteria in the Royal York Hotel in Toronto.

It was hardly the ideal place to discuss national security operations, Mr. Farrell said.

The watchdog panel has been slow to act, Mr. Farrell and his lawyer, Mr. Rovet, insisted. "They have been passive throughout. Whatever John told them, it didn't whet their appetite to know more," Mr. Rovet said.

SIRC chairwoman Paule Gauthier, a prominent Quebec lawyer, said the committee is not ignoring Mr. Farrell's allegations. "The file is still there and we know what we have to do."

The case will be dealt with in SIRC's annual report in September, Ms. Gauthier said, or perhaps in a special report to Solicitor-General Lawrence MacAulay, the minister responsible for CSIS.

MISUSE OF FUNDS ALLEGED

Here are the allegations made by CSIS agent John Farrell, allegations that the security intelligence service does not want to discuss: Under instructions from a CSIS manager in 1995 he broke into a car and retrieved and destroyed sensitive documents prepared by another paid CSIS agent who was planning to go public with information about covert operations. He used false information when setting up front companies for CSIS and registering them under Ontario corporation law. He used false identities to sign leases for apartments to be used by CSIS as observation posts on targets of covert operations. CSIS paid the rent on an apartment that was supposed to be used for an operation but, in fact, was used to house the daughter of a CSIS manager. Some CSIS managers used service funds for renovations, additions and other improvements at their homes. Court-approved mail interception operations sometimes strayed into illegality by intercepting and delaying the delivery of mail of people who simply lived in the same apartment building as the target of the operations. The mail of people who had not been named in a court warrant was intercepted and envelopes photocopied to compile lists of all the residents in the apartment building of a person CSIS was spying on. CSIS and Canada Post Corp. farmed out mail interception operations to a private company run by a former Mountie.

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