Justice Marianne Rivoalen issued a 34-page decision denying custody to the Winnipeg stepfather and mother of the 9-year-old girl and her 4-year-old half-brother, the Winnipeg Sun reported.
The children were taken by provincial officials in 2008 after the girl showed up at school with swastikas and white supremacist slogans drawn on her arms and legs, the Winnipeg Free Press said.
At home, the court heard, the children saw drug use, violence and the stepfather shooting squirrels and birds to feed the family dog, the Free Press said.
A social worker testified that during an interview at school, the girl comfortably spoke of violent racism.
"What people don't understand is that black people should die," the social worker quoted the girl as saying.
"Now add to this milieu neo-Nazi flags hanging in the windows and neo-Nazi regalia on display elsewhere inside the home," the judge wrote. "What is clear from all of the evidence is that these two children have been exposed to a whole constellation of parental inadequacies."
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