Guns, jewels and a heist: Inside the fake world police built for accused killer Dean Penney

On the 7th day of remembrance of his estranged wife's disappearing, james dean Penney was on a racing yacht in Vancouver, discussing her death with a man he believed to be a mob boss.

This interview was the culmination of four years' work by the Royal Canadian Mounted Police to get Penney to open up about the disappearance of Jennifer Hillier-Penney on Nov. 30, 2016, in the rural Newfoundland community of St. Anthony.

While the interview has yet to be played for the jury in Penney's first-degree murder trial, the "architect" of the elaborate world around Penney for those four years testified on Monday in Corner Brook.

The man — who cannot be identified as he is an undercover operator — told the court the goal was to build trust with Penney, and create an environment where he felt comfortable sharing secrets, but wasn't intimidated.

It started in late 2019, when the RCMP placed an undercover officer in a cell with one of Dean Penney's last remaining friends — a man who had been convicted of a violent home invasion.

Making contact with Penney in a small town where everybody knew each other wasn't so simple, the architect testified.

“We have to have a reason why we are there and why we need Mr. Penney to assist us," he told the court.

In January of 2020, an undercover officer ran into Penney at the local fish plant. He asked to rent Penney's cabin, and hire him as a guide for a hunting trip. Penney obliged, and took two undercover officers into the woods.

While on the trip, the two officers faked a phone call and told Penney they had to fly to St. John's immediately. Penney was asked to drive their truck to the capital city — more than 1,000 km south from St. Anthony. He said yes.

On the way down, Penney was asked to stop in St. Barbe and pick up some thumb drives to bring to St. John's. The architect said Penney agreed.

The architect said they later explained to Penney that they had a contact inside RCMP headquarters in St. John's who was taking old laptops and thumb drives before they could be wiped and discarded, and selling them to their group.

He testified Penney was told they were transporting them to a corrupt military contact in Happy Valley-Goose Bay who could decrypt them so the intel could either be used by their gang, or sold to other criminals for cash.

On Oct. 21, 2021, Penney met the fake RCMP contact near headquarters on East White Hills Road in St. John's. She told Penney she wasn't happy with the RCMP because she had been denied leave to care for her sick child. The architect testified it was all a ruse to show Penney they could access confidential police documents — planting the seed that they could also access documents about Penney.

The scenarios became more sophisticated and elaborate as time went on. The undercover officers took Penney to Halifax in November of 2021, where he conducted surveillance on a man he believed to be a fellow gang member to see if he was drinking on the job. The man was caught and fired — which the architect said was staged to show Penney that nobody would get hurt while exiting the organization.

They gave Penney an exit for every scenario, the officer testified, saying he took part of his own volition. The jury heard there were significant delays in between scenarios at times due to the COVID-19 pandemic and the scheduling demands of Penney's fishing season.

In total, Penney was paid $27,200. There were 66 scenarios spanning nearly four years.

On Nov. 30, 2022, Penney played the role of "scout driver" in what he believed to be a fuel heist at the U.S. Border crossing in Coutts, AB. The architect testified they wanted Penney to believe they were an organization with influence on both sides of the border, and that Penney believed they had paid off a corrupt border official and stole a diesel tanker.

A few days later, Penney drove to a military base in Wainwright, AB, where he saw the group's second-in-command — the officer who testified on Monday — speaking with the commander of the base. Penney and another undercover officer then went to another part of the base to collect a crate full of firearms. In reality, the officer testified the crate was full of pipes and lead bars.

The men all went boar hunting afterwards, "as a reward for the fuel heist," the architect said.

In February of 2023, Penney took part in the transfer of diamonds by train from Ontario to Alberta. He was paid $2,000 for his part in the operation when he made it to Calgary.

The following month, the architect kicked it up a notch when he had Penney's closest contact within the organization — a man the defence described as his best friend — admit to Penney that he'd killed someone years before in a debt collection gone wrong.

The man told Penney the organization sent him to a Mexican rehab facility, and backdated his trip so it looked like he had an alibi for the time of the killing. The goal was to show Penney the power of the organization, the architect said, and that they could take care of anything if you told them the truth.

In October of 2023, Penney was part of a group that drove to Banff to collect a box and bring it back to Regina. The trip coincided with Penney's birthday. The architect testified they unboxed the items once they got back to Regina, and revealed to Penney that it contained 30 Glock handguns. They then threw Penney a birthday party, where his closest contact gifted him a pair of $300 boots.

Around the same time, the group introduced the idea of Penney taking over as yacht captain for the crime boss in Vancouver — a job for which they felt he was qualified.

Penney flew out to Vancouver in late November 2023, and spent a day on the yacht before sitting down with the boss on Nov. 30. It's not yet known exactly what Penney told him, but the jury will be shown video of the interview during the trial.

The architect testified they conducted a second interview with Penney eight days later at a covert location in Edmonton.

He said they kept Penney busy with non-criminal jobs in Edmonton for the next two weeks, while police in Newfoundland prepared to arrest him.

Penney landed in Deer Lake on Dec. 15, 2023, and was taken into custody. He's since pleaded not guilty to first-degree murder. His trial is expected to last all throughout April.

During cross-examination on Monday, defence lawyer Mark Gruchy hammered the undercover operative on the techniques used by the RCMP to elicit the disclosures from Penney.

Gruchy said Penney maintained his innocence during the first crime boss interview, before being confronted with a fake RCMP document stating he was about to be arrested for his wife's murder.

"Why target an individual who has professed his innocence?" Gruchy asked.

"Well we cannot just take everyone at their word," the officer replied.

“You keep saying it was all about truth and honesty," Gruchy said. "Your organization is intrinsically dishonest.”

Penney was in a hard place when he'd met the undercover officers in St. Anthony, Gruchy said. His wife was gone, his cat was dead, his friends had abandoned him, and the family business had been sold.

Gruchy said Penney didn't make enough money fishing in 2023 to qualify for unemployment, and suddenly there was the prospect of a salaried job in Vancouver. Gruchy questioned why they didn't bring up that opportunity until Penney was at his lowest point, to which the architect said it was just part of the progression of the investigation.

Gruchy closed by asking the architect if the details in Penney's two crime boss interviews were different.

“There were some details that changed, yes," the man said.

“I’d put it to you that one was an accident and one was not," Gruchy said. "Is that fair?”

“Yes," he replied.

Testimony continues Tuesday morning with another undercover officer in the witness box.

Ryan Cooke is a justice affairs reporter based in St. John's. He can be reached at ryan.cooke@cbc.ca.

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