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(Especially noteworthy articles’ headings highlighted in gold.)
IRS ‘AMNESTY’: “WE’RE FROM THE GOVERNMENT AND WE’RE HERE TO HELP YOU”
Vernon Jacobs warns about the IRS amnesty program. Essentially, a taxpayer who participates in the program is providing the IRS with full and complete details of a criminal activity which the IRS can then use to pursue criminal charges. They probably won’t - but they could.More on this story here.
Voluntary disclosure of unpaid taxes: There are two types of voluntary disclosure with the IRS: (1) informal; and (2) formal (negotiated).Discussion here.
US TREASURY ANNOUNCES DETAIL OF NEW SAVINGS PLANS
The plans announced last week for reform of the structure of the United States’ savings sector would create just three types of savings accounts to replace the existing jumble of schemes.
The Lifetime Savings Account, with a maximum $7,500 contribution in 2003 would be open to anyone can contribute annually, regardless of age or income. There is no tax deduction for contributions, but earnings and distributions from the account would be tax free. Funds can be used for any purpose and taken out at any time without a tax penalty.
The Retirement Savings Account, also with a maximum $7,500 contribution in 2003, also has no income limits, but contributions cannot be greater than a person’s wages. There is no tax deduction for contributions, but earnings and payouts are tax-free when withdrawn after age 58, or after a disability or death.
The Employer Retirement Savings Account would allow contributions up to $12,000 in 2003 with a scheduled increase to $15,000 in 2006. Savers 50 and older may contribute another $2,000 this year. It would be basically similar to existing 401(k) plans, but simpler. It would replace 401(k), 403(b) and governmental 457 plans, as well as SARSEPs and “Simple” IRAs.More on this story here.
A SINGLE TAX THAT CURES ALL ILLS?
Dr. Edgar L. Feige, a retired economist from the University of Wisconsin, proposes to eliminate the entire U.S. federal tax system - including corporate, excise and estate taxes - in favor of a tiny tax on all financial transactions. The whole thing would raise the same amount of money as today’s system does while saving hundreds of billions of dollars in compliance costs, tax evasion and inefficiencies, according to Dr. Feige.More on this story here.
CURRENCY FUNDS MAKING MONEY AMIDST THE EQUITY GLOOM
Proponents of currency overlay, still a relatively new concept, argue that the asset exposure and foreign exchange exposure of a portfolio should be separated and managed by specialists in each field. The problem is that it is notoriously difficult to make money consistently by taking currency positions. But currency managers have recently found it easier to add value as the dollar’s sustained slide over the past year has favored both technical and fundamental approaches to currency forecasting. Naturally, inflows to managed currency funds are picking up.More on this story here.
BOND FUND HEAD CLAIMS U.S. A BAD INVESTMENT
Bill Gross, director of the world’s biggest bond fund - Pacific Investment Management Co., or Pimco, manages somewhere in the neighborhood of $300 billion in assets - is ditching the U.S. bond market for greener pastures. On his company’s Web site he wrote: “While the United States rules the waves as well as turf and sky, I’m not so sure that we are, or perhaps will be, the economic powerhouse we once were.”
U.S. “hegemony,” as he puts it, is at an end. “The U.S. [economy] ... rests on a fragile foundation built upon consumer spending and trade deficits as opposed to mercantilism and trade surpluses. ... These deficits, coming at a time of American military expansion in pursuit of terrorist containment, threaten to reverse our hegemonic benefits and end our economic domination. Our SUVs, as well as our top cat near-monopoly of the good times are at risk.”More on this story here.
BUSH BUDGET BEEFS UP IRS - MORE AUDITS
Under President Bush’s budget plan the I.R.S. would get an additional $133 million for audits of taxpayers suspected of hiding income received from their businesses, partnerships, investments and offshore accounts, and for other law enforcement work in 5 areas: abusive corporate tax shelters, unreported income among higher-income taxpayers, failure by employers to turn over taxes withheld from paychecks or even to withhold them, misuse of trusts and offshore accounts to hide income, and “tax denial” schemes that are based on claims that the tax code does not apply to most Americans.
Over all the I.R.S. would receive $10.4 billion, a 5.25% increase, but still less per tax return, after adjusting for inflation, than it got five years ago. Law enforcement, which includes audits, takes up almost 40% of the I.R.S. budget. This year the vast majority of tax cheats the IRS identifies will get away without paying. Mr. Rossotti's report showed that the I.R.S has only enough money to pursue about a fifth of individual cheats.More on this story here.
Don’t be duped by phony US tax scams. Every year thousands pay for illegal tax “advice”. Here are three prominent scams. Illegal tax havens, slavery reparations, and tax protester arguments.More on this story here.
“PATRIOT II”: ASHCROFT AND BUSH PREPARE NEW ATTACK ON LIBERTIES
The Bush Administration is preparing a bold, comprehensive sequel to the USA Patriot Act passed in the wake of September 11, 2001, the “Domestic Security Enhancement Act of 2003”, which will give the government broad, sweeping new powers to increase domestic intelligence-gathering, surveillance and law enforcement prerogatives, and simultaneously decrease judicial review and public access to information. Senior members of the Senate Judiciary Committee minority staff have inquired about “Patriot II” for months and have been told as recently as last week that there was no such legislation being planned.
In addition to all but destroying American financial privacy, the 2001 USA Patriot Act gave government huge new police powers to use wiretaps, electronic and computer eavesdropping, searches. Now they want even more power over our lives and fortunes.
Let your Senators and Congressman know your views. Without the hysterical atmosphere post 9/11, it is doubtful that Congress will give the likes of John Ashcroft yet another blank check (some legislators had not even read The Patriot Act before voting for it) to destroy our rights. Your voice can help prevent this new threat to liberty.More on this story here, here (subscribers only), and here.
Text of new Ashcroft proposal here and here (PDF file).
USA PATRIOT ACT SHREDS AMERICAN PRIVACY
The cat-and-mouse crackdown on money laundering, a key component of the U.S. government’s battle against terrorism, could be coming to a car dealership, travel agency or jewelry store near you. If it does, be prepared to document who you are, even if you have done business with those places for years.
Many more businesses may eventually have to comply with the act, but some do not know it yet. They include jewelry dealers, insurance and travel agencies, and car lots. FinCEN, the Financial Crimes Enforcement Network of the Treasury Department, said those operations are still under consideration for inclusion in the act. Those businesses pose as potential outlets for money laundering - someone pays dirty cash for an item and then turns around and sells it.More on this story here.
Stringent provisions of the Patriot Act raise privacy concerns for banks. The act ushered in a wave of new provisions, mandating extensive recordkeeping and due diligence in the areas of foreign banking and customer identification. While Byzantine regulations are nothing new to the financial services industry, this set is different and deadly serious.
“This is bigger and more long-lasting than anything related to Enron,” says Mary Faith Floyd, a senior compliance officer with First Tennessee National Corp. “And I really think we are just at the beginning.”More on this story here.
U.S. TAX SHELTERS UNDER IRS, LEGAL ATTACK
Some wealthy Americans who paid millions in fees to two of the “Big Four” accounting firms to set up tax shelters are suing the firms after the IRS denied the tax savings that they had been promised. Although only a few lawsuits have been filed, tax experts and lawyers handling these cases said they expected a flood of similar cases as the IRS stepped up its hunt for tax cheating by hundreds and perhaps thousands of executives, business owners, athletes and entertainers with big incomes.
The “Opinion Letter” that blesses the tax shelter as a legitimate way to reduce taxes, written by tax lawyers using the embossed stationery of their firms, may not be worth the paper they were printed on. Larry A. DiMatteo, an associate professor of legal studies at the Warrington College of Business at the University of Florida who has written extensively on opinion letters, said that even financially smart people “treat opinion letters as if they were binding, when under American law they generally have no legal consequence.”More on this story here and here.
The 1990s boom produced a large pool of rich potential clients, most unfamiliar with tax-law complexities. At the same time, accounting firms were looking for new revenue as income from audits flagged. A 1991 change in the profession’s rules provided a helping hand: Accountants could now charge performance-based fees just like investment bankers, as opposed to the traditional hourly rate. So big accounting firms formed teams dedicated to promoting high-margin tax strategies. Fees to the accounting firm ranged from 10 to 40% of taxes saved.
Corporations and executives who find their shelters under fire stand to lose vast sums, should the IRS prevail. The disclosure that Sprint CEO William Esrey and COO Ronald LeMay could face a $123 million tax bill illustrates the stakes involved. Several Washington litigators said Esrey and the others would have a strong case against their advisers.More on this story here and here.
IRS SEEKS CLIENT LIST OF TAX ADVISOR WHO USED SECTION 861 ARGUMENT
Everte Farnell, of St. Petersburg, Florida, had his tax return preparation business shut down by court order after federal prosecutors alleged he markets a tax evasion scheme and prepares fraudulent “zero income” returns. The preliminary injunction against Everte Farnell was issued January 26 by a Tampa federal judge, who also ordered Farnell to provide the IRS with a list of his clients and returns he prepared. The lawsuit accuses Farnell of promoting what authorities refer to as the “U.S. Sources Argument” or “Section 861 Scheme”.
Farnell said he evaluated the positions of the National Institute of Taxation Education (N.I.T.E.), an Internet organization based in Pennsylvania run by Thurston Bell, including the Section 861 argument, and began working with the organization. He contended the federal government never specifically addressed the Section 861 argument before deeming it frivolous. “All we’re looking for is for the government to tell us why and how we’re wrong,” Farnell said.More on this story here.
THE CASE FOR GOLD
The paradox of gold is that it can be the finest speculation and the poorest investment. Though indestructible and lovely to behold, the barbarous relic earns no interest. And - what is much, much worse - it earns no interest on interest. Gold was the right thing to bury in A.D. 680 and the wrong thing not to dig up and invest in Microsoft at a split-adjusted price of 18¢ a share in March 1986 A.D. (Today, 17 years later, the price is $51.) Knowing when danger is advancing and receding is the rarest insight in investing.
So is risk advancing or receding? Jim Grant would say that it is advancing. Nominal interest rates are low, government bond buyers are complacent and central banks are easy. Bottom Line: He thinks inflation is coming back. [Note: For an alternative view go to the Elliott Wave International site. They think deflation is the danger.]More on this story here.
Despite bullion prices hitting six-year highs this week, gold mining company share investors have failed to catch the gold bug. The disconnect could not be more pronounced, since shares in leading goldminers have barely moved while the metal has been hitting its highs. This could be because bullion is trading at a “war premium”, rather than reflecting renewed inflationary times.More on this story here.
VERN JACOBS: SOME NON-TAX MOTIVATED REASONS TO GO OFFSHORE
“For those who are concerned or fearful about “going offshore” for asset protection, investments or even for business, it may be helpful to remember that risk is relative. Jumping out of a two-story window is certainly high on the risk scale, but if the building is on fire and you can’t get out any other way, the two-story jump is a lot less risky than staying where you are.
“Before discussing some of the ways in which you can reduce the risk of losing your assets by moving them offshore, let us look at some of the alternatives and the reasons why an increasing number of people in the US are moving some of their assets offshore.”
An outstanding introduction to the case for going at least partly offshore.More on this story here.
Excerpt from J. Richard Duke’s Critical Issues in Offshore Estate Planning for US Persons here. Includes a concise summary of offshore advantages and types of offshore trusts.
A DOMINICAN PERSPECTIVE
An interesting interview with a native of Dominica who is attending Stanford University. He feels blessed for the opportunities that he has had in the US, while appreciating the life and environment of his own country. The IMF meddlers are in there, poking around the island’s economic affairs.More on this story here.
CORPORATE OFFSHORE “INVERSIONS”
The rationale for a corporate inversion, as going offshore is known, is obvious. By moving its headquarters to one of the 25 or so tax-friendly offshore territories, an American company can avoid paying taxes twice on foreign profits - first in the overseas country where they were earned, then again in the U.S., and avail themselves of various other tax reduction manoeuvres.
Pithily summarizes the debate / charade as it stands today. Good quote: “Companies are voting with their feet. It’s the canary-in-the-coal-mine situation, and rather than beating up on them, we should be thinking about why they’re doing this.”More on this story here.
TAX COLLECTION, NOT ANTI-TERRORISM THE GOAL
If you want to catch a criminal or terrorist, does it make sense to “follow the money”? A “yes” answer makes sense if you can identify at least one of the individuals or institutions connected with the suspected wrongdoer. However, if you are trying to follow money flows in general or all money flows, it is not likely your work will be very productive, and it will also involve massive violations of civil liberties. Most terrorists’ money comes from legal sources and is used for illegal acts, which is the opposite of criminals using illegally obtained money for legal acts.
The major effort underway to do blanket [mass financial data on individuals who are not suspected of any illegal act] sharing of information between governments, under the guise of fighting money laundering or terrorism, is being driven by the Europeans who are more concerned about tax competition than terrorism. In fact, blanket information sharing will make us less safe because all governments leak information, and personal financial information has great value to criminals and terrorists.More on this story here.
SOCIAL SECURITY NUMBER USE MAY BE CURBED
Faced with growing pressure from constituents concerned about the risks of identity theft, lawmakers are [finally] contemplating ways to curtail use of Social Security numbers for purposes other than taxpayer identification.
“The request for a Social Security number is now often made as if it were the most natural thing in the world, when this number is actually the passport to your identity," said California Assemblyman Joseph Simitian.More on this story here.
TOTAL INFORMATION AWARENESS OUT, FOR NOW
House and Senate negotiators have agreed that the Pentagon’s Total Information Awareness project, intended to detect terrorists by monitoring Internet e-mail and commercial databases for health, financial and travel information, cannot be used against Americans. The conferees also agreed to restrict further research on the program without extensive consultation with Congress.
Senator Ron Wyden, the Oregon Democrat who sponsored the Senate amendment, said, “It looks like Congress is getting the message from the American people loud and clear and that is: Stop the trifling of the civil liberties of law-abiding Americans.”
Senator Charles E. Grassley, the Iowa Republican who co-sponsored the Wyden amendment, said: “Protecting Americans’ civil liberties while at the same time winning the war against terrorism has got to be top priority for the United States. Congressional oversight of this program will be a must as we proceed in the war against terror. The acceptance of this amendment sends a signal that Congress won’t sit on its hands as the TIA program moves forward.”More on this story here and here.
Bill Safire finds the bipartisan Congressional agreement to call a halt to the Executive branch’s power grab heartening: “Even as the nation braces for more terrorist murders, a Republican-led Congress absolutely refuses to give carte blanche to a Republican war president to treat all citizens as suspects. These legislators are attuned to the views of their voters; this means that a courageous constituency exists to defend personal freedom.”
Now he warns about what is next: “Among other abominations, Ashcroft’s ‘Patriot II’ would computerize genetic information without court order or our consent. As in the Pentagon’s Poindexter project, Justice’s aim is to avoid judicial or Congressional control.”Editorial here.
IRS CRIMINAL INVESTIGATORS EXPAND ACTIVITIES
While most people do not think of the IRS as a crime-fighting agency, agents from the IRS Criminal Investigation Division often investigate crimes which can involve millions of dollars and more serious crimes such as murder - many crimes are tied to greed, and solving them often means following the money trail.
Another expanding role for IRS criminal investigators is illegal offshore trusts. Upper-income taxpayers are setting up trusts in the name of charities and putting the money in banks in tax-haven countries. They then access that money by using charge cards.
An agent for IRS criminal investigators said, “What we’re finding in these abusive schemes, for example they might be putting the business in the trust [but] the taxpayer is truly not giving up control of that business. Usually the trust will be formed offshore and this is done to hide the income from the IRS. These trusts are clearly illegal. So, this money is literally coming from overseas banks back into the US and has never been taxed.”More on this story here.
PATRIOT ACT II: A TOTAL POLICE STATE TAKEOVER
The Secret Patriot Act II Destroys What Is Left of American Liberty. The Act is a mirror image of powers that Julius Caesar and Adolf Hitler gave themselves. Whereas the First Patriot Act only gutted the First, Third, Fourth and Fifth Amendments, and seriously damaged the Seventh and the Tenth, the Second Patriot Act reorganizes the entire Federal government as well as many areas of state government under the dictatorial control of the Justice Department, the Office of Homeland Security and the FEMA NORTHCOM military command. The Domestic Security Enhancement Act 2003, also known as the Second Patriot Act is by its very structure the definition of dictatorship.
Ninety percent of the act has nothing to do with terrorism and is instead a giant Federal power-grab with tentacles reaching into every facet of our society. It strips American citizens of all of their rights and grants the government and its private agents total immunity.Analysis here.
FOREIGN INVESTORS LEAVING U.S.A. BEHIND
Now that the dollar has tumbled to a 3-year low against the euro, having shrunk by 16.7% last year, and now that stocks are in their worst bear market in 70 years, the offshore folks are dog-tired. Their love of dollar-assets is no longer what it used to be.
The betting is that the dollar, after dropping in 2002 more on a trade-weighted basis than in any other year since 1987, still has not bottomed out. One reason is that currency traders have a tendency to overshoot on the downside in the same way they can overdo it on the upside.More on this story here.
INVESTORS SEEK WAYS TO SAFELY SHIELD INCOME
Sensational headlines and IRS crackdown-threats-of-the-day notwithstanding, the truth is that there are a number of tax “shelters” that, properly used, are perfectly legal. Some basic strategies involving different trusts and/or deferring compensation or capital gains are summarized. (Sensibly, readers are warned against transactions that seem to take place only on paper, with no real economic gain or loss.)More on this story here.
GET YOUR IMPORTANT PAPERS IN ORDER
While people prep their homes for a potential attack, they should also spend time straightening up their financial houses. Now is as good an opportunity as any for you to put in one place the financial and personal records you would need after a disaster, whether its a fire burning down your house, a hurricane flooding your neighborhood or terrorist cell bombing your city.
If disaster strikes, a pile of paperwork will become the building blocks you need to reconstruct your life. Wills, passports, birth certificates, recent bank and brokerage statements, etc.More on this story here.
“CONGRESSMAN NO” FROM TEXAS
Paul, who once ran for president as a Libertarian, has been ridiculed by opponents over the years for his role as an ideological gadfly. Challengers for his seat have accused him of holding positions so far out that they place him in outer space. Indeed many of the planks particularly repellent to progressives that Republicans adopted for their Texas platform mirror Paul’s positions. They include abolishing the IRS, eliminating the Department of Education, prohibiting abortion, and doing away with most environmental laws.
The Texas Observer visited with Ron Paul at his district office in Freeport on the Gulf Coast in late December. They wanted to question Paul more closely on the areas where he and progressives might coincide. Here are some of the results of that conversation.More on this story here.
HEAD OF UBS DEFENDS SWISS BANKING SECRECY
Peter Wuffli feels that pressure on Switzerland from the European Union to water down banking secrecy is neither fair nor appropriate. An interesting interview, where he makes a lot of good points in defending Switzerland’s intransigence on the matter.More on this story here.
BUY A SECOND RESIDENCE OFFSHORE
Not long ago, anyone seeking to buy a holiday property in Europe faced a severely restricted choice because of the difficulty of arranging a mortgage. But the rapid development of cross-border mortgage finance and internet-based global estate agencies has opened many opportunities for adventurous investors as far afield as Poland, Romania and Argentina.
It is not hard to see the attraction. With a one-bedroom apartment in Poland costing just $14,000, a three-bedroom house near a ski resort in Bulgaria on sale for £33,000 ($52,800) and a four-bedroom house in Argentina available for £40,000, prices are far lower than those in more traditional overseas destinations such as France and Spain. They are also a fraction of the cost of second homes in the UK or US.
If you need a mortgage you would be well advised to use an international mortgage broker because a loan against the property can be provided only by a lender based in the country where you are buying or offshore. Financial requirements also differ from country to country.More on this story here.
IS THE U.S. MOVING CLOSER TO A NATIONAL I.D.?
A little-known company called EagleCheck is hoping to provide a standardized identity check technique that governments and corporations will use to verify that you are who you claim to be. Whenever someone uses a driver’s license or a passport for identity verification, the ID’s authenticity will be checked through EagleCheck’s network, which is tied to state motor vehicle and federal databases. The databases will respond by saying whether the ID is valid.
EagleCheck is not limiting its marketing plan to airport security. “We are certainly looking at a variety of other applications other than airports,“ said company president David Akers, listing bars, banks, government buildings - in short, wherever ID is required - as possible customers. If EagleCheck or a similar system succeeds, it raises the specter of something akin to a national identity card.
A true national ID would be different from a driver’s license in two important ways: First, it would be tied to a back-end database so all verifications would be logged with the time, date and location. Second, you likely would be required to show it on demand to police.More on this story here.
1942 AMERICAN INJUSTICE RECALLED
The FBI arrived at his door carrying pistols and a terse message: Juro, the owner of a small sweater factory and dry goods store in one of Seattle’s ethnic neighborhoods, was under arrest. As his bewildered wife and children watched, the agents took Juro away without saying why, where he would be taken, or for how long. He spent the next year being held as an enemy alien in a federal prison nearly 1,000 miles away and died only three years later, never again seeing his home in Seattle. Juro was a Japanese-American. The year was 1942.
Each year, Japanese-Americans across the country reflect on that injustice by holding “Day of Remembrance” events to mark the anniversary of Executive Order 9066, which authorized the mass detention of 110,000 Americans of Japanese ancestry on February 19, 1942. This February, we do so in an environment that increasingly mirrors that of 1942: when the courts are too timid to challenge the wisdom of military decision making and when free-floating anxiety combines with racial suspicions to embolden those who would conduct witch hunts of the foreign-born and trample over the rights of the accused.
In a recent court case, as in a Supreme Court case 60 years earlier, the judiciary has failed to uphold the rights of individuals targeted by the state security apparatus. And if the courts stand aside for much longer, then this apparatus will use its new power to go even further, unchecked by the rule of law. The FBI is now setting numerical goals for how many secret wiretaps and counter-terrorism investigations each FBI field office conducts, with higher goals for neighborhoods that have more mosques.More on this story here.
MEXICAN AMERICANS HAVE UNTIL MARCH 20 TO RECLAIM NATIONALITY
Mexicans who became U.S. citizens before 1998 have until March 20 to reclaim Mexican nationality. And many are rushing to beat the deadline. The deadline is part of a five-year-old law designed to strengthen ties between Mexican expatriates and their families south of the border.
The advantages to reclaiming Mexican nationality can be substantial for some. Mexican nationals are granted land, tax, inheritance and university privileges that foreign citizens are not. Foreigners, for instance, cannot own land within 50 km of the coast or 100 km of the borders. Foreign nationals also pay much higher inheritance taxes and university tuitions than their Mexican counterparts.More on this story here.
U.K. BENEFITS FROM OUTFLOW OF ARAB FUNDS FROM U.S.
Gulf Arabs who withdrew funds from the U.S. on concern the authorities would freeze their assets as part of terrorism investigations, re-invested in the U.K., the Lord Mayor of the City of London said. Wealthy Gulf Arabs hold about $1.2 trillion in liquid assets overseas, mainly in U.S. and European markets, according to Saudi American Bank. They have withdrawn about $200 billion from the U.S. since the Sept. 11 attacks in 2001, partly on concern their assets would be frozen, the Financial Times reported.
“We don’t tolerate the kind of random actions that result in people’s funds being frozen” for no apparent reason, said he Mayor, who is visiting the U.A.E. and Qatar. Financial institutions in the City benefited from the U.K.’s “sacrosanct” private property laws and a loss of confidence in U.S. regulations, he said.More on this story here.
U.S.A. PATRIOT ACT II : A SNEAK ATTACK ON LIBERTY
A secret proposal to give the U.S. attorney general sweeping, arbitrary powers in the name of national security while eroding constitutional safeguards deserves to stopped dead in its tracks. Fortunately for the country, a copy of the so-called Domestic Security Enhancement Act of 2003 was leaked to the Center for Public Integrity, which made public this shameful sneak attack on American liberties.
The confidential document proposes a variety of changes in federal law that arguably could render the president the second most powerful person in American government - after the attorney general. The bill would give the AG wide latitude to detain people in secret. (We aren’t so arrogant as to believe that abuses like thousands of “disappeared” persons in Latin America can’t happen here.)
Habeas corpus would be suspended in antiterrorism cases, but the Catch-22 of this hideous stew is that Ashcroft would decide who’s a terrorist, domestic or foreign. The attorney general also would be allowed to deport anybody he considers a threat and to strip Americans of citizenship. The act would make the definitions of what constitutes terrorist activity so vague that unsuspecting people who innocently contribute money to the wrong group could find themselves ensnared in Kafkaesque legal nightmares.Editorial comment here.
SPECTER OF MCCARTHY IN FBI WATCH LISTS?
It takes about three minutes to find a “classified” FBI terrorist watch list on the Internet using a common search engine. At least half a dozen such lists are posted and on many, but not all, names appear with birthdates, Social Security numbers, telephone numbers and home addresses for the world to see. The FBI created the lists, some stamped “law enforcement sensitive”, soon after the Sept. 11 attacks. The lists were to help find and interrogate anyone the FBI suspected might know something about the plot that killed almost 3,000 people.
Although the FBI says the lists are insignificant and outdated, some people question whether the public’s access shows the bureau has lost control of sensitive information. Bay Area civil libertarians say that similar efforts in the McCarthy era did not threaten individuals’ privacy as much, even though the Cold War paranoia landed hundreds of people in jail.More on this story here.
Until recently, the United States and countries like Israel occupied opposite ends of the security spectrum: one a confident and carefree superpower, seemingly untouchable, the other a tiny garrison state, surrounded by fortifications and barbed wire, fighting for its survival. But the security gap between the U.S. and places like Israel is narrowing. Subways, sewers, shopping centers, food processing and water systems are all now seen as easy prey for terrorists.
As a possible war with Iraq - where, for the first time in history, it seems plausible that an enemy might mount a sustained attack on the United States, using weapons of terrorism - approaches, there is no clear consensus yet on how to go about protecting ourselves. A well written and comprehensive summary of existing and possible anti-terrorism avenues being pursued.More on this story here. Full article all on one page here.
Bankers and brokers required to spy on customers. What does your bank know about you and when did it know it? More and sooner than you think. In the late 1990s, the Federal Deposit Insurance Corporation proposed regulations that would have required banks to tell the Feds about any “unusual” financial activity in the accounts of individual customers. These so-called “Know Your Customer” regulations were chiefly aimed at helping the Feds prosecute the Drug War. Civil libertarians of all stripes denounced the regulations and they were shelved.
That was then, this is now. What the Drug Warriors could not enact was hastily revived as a “tool” to fight the War on Terrorism. “Perhaps surprisingly, given that the press reports have focused upon the electronic surveillance, ‘sneak and peak’ warrants and other anti-privacy provisions of the Patriot Act, in fact, the money laundering provisions of [the Patriot Act] comprise its bulk,” writes David Russell, who practices international law at Bose McKinney and Evans in Indianapolis. “The breadth and depth of the provisions is staggering.”More on this story here.
War on terrorism squeezes businesses. Florida tour operators complain that they are losing business to Canada and South America because it is taking Mexican travelers up to four months to get visas to visit the United States; newly painted Boeing jumbo jets sit for days on a tarmac in Seattle because their foreign buyers are unable to obtain visas for pilots to come to the United States for training to fly the aircraft home; and a $5 million metal-cutting machine has been stranded at a Cincinnati factory for four months because its Chinese purchaser cannot get its engineers into the United States for a final inspection.
U.S. companies, heretofore reluctant of appearing to be unpatriotic profiteers, are becoming increasingly unhappy - and vocal - about the campaign to secure America’s borders. Anecdotal evidence suggests that the homeland security effort is adding a huge amount of expense and uncertainty to a struggling U.S. economy.More on this story here.
MIAMI: Professor’s terrorism case will test new powers of Patriot Act. Tampa university professor Sami al-Arian and seven others are charged with conspiracy to commit murder via suicide attacks in Israel and the Palestinian areas, racketeering and money laundering - charges they strongly deny. Al-Arian says he was indicted because of his pro-Palestinian views.
Legal experts say the case will be watched closely because the indictment is a direct result of the new federal powers created by the USA Patriot Act. What makes the al-Arian prosecution a test case is the collaboration between federal agents gathering foreign intelligence and prosecutors bringing domestic criminal charges. Before the passage of the Patriot Act, that was not permitted under Justice Department guidelines.More on this story here.
PORTLAND, OREGON: Portland case will be key test of government’s domestic spy powers. Federal agents nabbed Patrice Lumumba Ford and four other suspects, mostly black American converts to Islam, last October, in what Attorney General John Ashcroft called a “defining day” in the fight against terrorism. U.S. District Judge Ancer Haggerty is expected to hear arguments Tuesday and Wednesday asking the government to reveal its justification for 36 secret warrants the FBI used to watch and listen to the suspects, who have all lived in the Portland area.
Defense attorneys plan to challenge evidence collected under the warrants issued by the ultra-secret Foreign Intelligence Surveillance court, or “spy court”, said defense attorney Whitney Boise. “Civil liberties for the defendants, and all citizens, certainly are at stake here,” said Boise, attorney for defendant Ford.More on this story here.
JUDGE REJECTS CHALLENGE TO FBI SPY POWERS
The FBI does not have to explain why it applied for search warrants to bug homes and tap phones of defendants in a terrorism case, a federal judge ruled Wednesday in an early test of the government’s new and expanded spying powers. The five defendants were charged in October with conspiring to support al-Qaida and the Taliban.
Robert Bloom, a California civil rights attorney, said the decision sanctioned government secrecy. “It would be nice if we lived in a country that abided by its Constitution,” he said.More on this story here.
NEW BRITISH PROPERTY SEIZURE LAW
Jane Earl, head of the Assets Recovery Agency - which opens for business today [February 24, 2003] as money laundering rules come into force under the Proceeds of Crime Act - said the agency would start investigating suspect assets in nearly three dozen cases this morning. But she denied the government would use the agency as an easy way of bypassing criminal courts to seize cash from suspects when it had little concrete evidence.
She also admitted that the agency was already gearing up to fight expected legal challenges to moves to freeze and seize assets. “These are groundbreaking legal powers, particularly for the UK. A lot of thought has gone into protecting the human rights of individuals, but that has to be balanced with the rights of the communities that are affected by crime. We are going to be looking for some wins to demonstrate this legislation has teeth. Certainly we want the message to go out to those people who think they are untouchable.”
The Proceeds of Crime Act makes money laundering a criminal offence, punishable by up to 14 years in jail. It opens the way for prosecutions of people who fail to report money laundering if they know it is going on or even if they have reasonable grounds for suspecting it.More on this story here.
But what amounts to suspicion? The act also makes it an offense for a person with reasonable grounds for knowing or suspecting that another is engaged in money laundering to fail to disclose that knowledge or suspicion as soon as is practicable. For those in the regulated sector there is no requirement for actual knowledge or suspicion. Liability arises where a person ought to have had such knowledge or suspicion. In other words, if a hypothetical “reasonable person” would have known or suspected another, the real person will be guilty of the offense of failing to disclose even if he had no such suspicion.
It is a test that should be of intense concern to those who will be affected. Suspicion is a much lower threshold than belief and is a relatively new trigger for criminal liability. There is no authoritative guidance from the Court of Appeal as to what “suspicion” means - yet conviction for suspicion carries a maximum sentence of five years imprisonment. A person too preoccupied to make the relevant checks, or merely indolent, or temperamentally inclined to think the best of others is liable to imprisonment. This is remarkable. These provisions represent a significant extension of criminal liability.More on this story here and here.
WHAT IS SPECIAL ABOUT INVESTING IN EMERGING MARKETS?
A pithy and useful introduction to this sector.More on this story here.
ASIA HAPPY TO FUND US DEFICIT TO STAY COMPETITIVE
Asia, keen for U.S. consumers to buy its goods, finds itself funding the U.S. trade deficit to ensure its own growth - and at the same time putting a floor under the U.S. dollar to preserve the region’s competitiveness. The U.S. export market has become a priority for Asia as the region fights worries of a global slowdown, deflation, and the competitive threat of China.
The U.S. trade deficit for 2002 hit a record $435.2 billion. The trade deficit with China topped $103 billion, and with Japan it was $70 billion. A large trade deficit normally pressures the currency of the debtor nation, while those with surpluses, such as many Asian economies, normally see their currencies tending to rise. One of the factors keeping a lid on Asian currencies has been the rapid growth in Asian central bank foreign reserve holdings. At the end of 2002, Japan, China, Taiwan, Korea and Hong Kong together held $1.15 trillion of foreign currency reserve assets, an increase of over $200 billion dollars in one year. The net position of the European Central Bank and euro zone central banks was about $252 billion at end 2002. Building reserves is not just about keeping currencies from rising. In a region still scarred by the financial crisis of 1997/98, reserves are also seen as one way of heading off another meltdown.
HOW LONG? Analysts said there are some obstacles that could limit Asia’s ability to underwrite the U.S. deficit and cap their currencies, no matter how much they want to.More on this story here.
THE ADEN SISTERS WEIGH IN ON GOLD, CURRENCIES, STOCKS, ETC.
“Mega change underway”. They believe that the 20-25 year trend where stocks performed well and gold poorly has reversed, and the new trend has much further to run. They do not mince their words: “The S&P has formed a huge top, which is the most massive top ever built in the history of the U.S. stock market. ... [W]e’re in for a long lasting and grueling bear market in stocks. Interestingly, this is exactly the opposite of what gold is showing.”More on this story here.
They believe the dollar’s downward trend is just beginning. These currency charts given you a quick indication as to why. Their favorite currencies are the New Zealand dollar, Swiss franc and euro.
THE RIFT BETWEEN “OLD” AND “NEW” EUROPE GOES BEYOND POLITICS
There are real differences between “New” and “Old” Europe. The accession of the new EU members threatens the post-war consensus regarding the social-democratic nature of the European economy. While the French and the Germans agonize about the preservation of their pay-as-you-go public pension systems in the face of growing expenditures and declining ratios between workers and retirees, the Poles and Hungarians have partially privatized their systems. While the governments in “old” Europe prepare for battle with powerful labor unions, the “new” Europeans continue to liberalize their labor markets and attract a growing share of foreign investment. While Brussels seethes over the “social dumping” and “unfair competition” of the new members, the Central and East Europeans see that the only way to escape the communist legacy of poverty is a vibrant free market.More on this story here.
HANDLING U.S. ESTATE-TAX RULES
At first glance, estate-tax rules may seem to apply only to the wealthy. But the rising value of homes, coupled with now generous pension and profit-sharing plans, could bring the average homeowner serious estate-tax consequences.
“It makes sense now for people with large estates to investigate trusts for their children,” said Phil Egger, estate tax attorney. “We often underestimate how quickly assets can appreciate. What you have today is probably going to be worth a lot more tomorrow, yet people often don’t take the time to handle it properly.”
Take the time to check with a tax attorney or an accountant before setting up a trust. Be clear about your goals. Accountants say a transfer to a trust could be treated as a taxable gift, unless the trust is treated as wholly owned by the donor or the donor’s spouse under the grantor trust provisions of the Internal Revenue Code. This provision was included in the new law to preclude individuals from attempting to shift income for income tax purposes to lower income tax bracket individuals, while avoiding gift taxes.More on this story here.
OUTRAGE OVER PATRIOT ACT II ABOMINATION CONTINUES
“Deliver us from Ashcroft”, says noted civil libertarian Nat Hentoff. Attorney General John Ashcroft, with support from President Bush, has increasingly forgotten that the Constitution is ours - not just his. The Center for Public Integrity has now exposed Ashcroft’s sequel to the Patriot Act for what it is: an assault on the Bill of Rights drafted without consultation with Congress. (You can download the proposed act at www.publicintegrity.org).
One of the most damaging abuses is found in Section 201. According to this section, a federal court decision can be overturned, mandating that the government reveal the identities of those persons it has detained in the investigation of the September 11 terrorist attacks. The new bill states that “the government need not disclose information about individuals detained in investigations of terrorism until ... the initiation of criminal charges,” no matter how long that might take. If passed, this would become the first time in American history that secret arrests would be specifically permitted under the American rule of law.
Moreover, under Section 501, an American citizen who provides “material support” to a group that the United States has designated as a “terrorist organization” can be stripped of his citizenship. Until now, an American could only lose citizenship by declaring a clear intent to abandon his country. Now, the bill says, an “intent to relinquish nationality need not be manifested in words, but can be inferred from conduct.” Who will do the inferring? An employee of Ashcroft? The same Ashcroft who has accused his critics of “(scaring) peace-loving people with phantoms of lost liberty.”More on this story here.
Patriot Act II jeopardizes freedom. Since January 9, the Bush administration has been sitting on draft legislation it intends to shove through Congress when that elected body is in a state of panic - for example, when we are at war with Iraq or suspect a massive terrorist attack is imminent. That is precisely the view taken by House Judiciary Committee Ranking Member John Conyers, D-Mich, in a letter he wrote to the Department of Justice.
The proposed Domestic Security Enhancement Act of 2003 is not merely radical, it grants the U.S. attorney general nearly unchecked powers in a wide arena of law enforcement. DSEA greatly expands the powers the USA Patriot Act granted the Department of Justice and federal law enforcement agencies. Speaker of the House J. Dennis Hastert, R-IL, and Vice President Dick Cheney, as president of the Senate, each received a copy of DSEA on January 10, according to a control sheet issued by the Department of Justice Legislative Affairs Office. No other member of Congress received a copy.
The DSEA is not a working paper. It is a complete proposal for legislation. One cannot escape the ramifications. The thoroughness of DSEA is meant to discourage congressional changes, deletions or amendments. In total, it contains another wish list for federal law enforcement authority, while minimizing any checks on that authority.Editorial here.
Administration Drafts “Patriot Act II” - activists concerned. While Justice Department public affairs director Barbara Comstock said in a recent statement that department staff “have not presented any final proposals to either the attorney general or the White House, and it would be premature to discuss proposals that are still being discussed at staff level,” many opponents of the legislation are not waiting to voice opposition or begin the fight to block its passage.
“Section 215 of the original Patriot Act allows the FBI to order libraries, universities and retail stores to turn over records of citizens and non-citizens. These entities are then prohibited from telling anyone if they’ve been subpoenaed,” said Jayashri Srikantiah, staff attorney with the American Civil Liberties Union of Northern California. “The provision allows the government to monitor anyone without a warrant and to seize property without leaving any proof - something the Constitution mandates. They would have the power to obtain records by violating both First and Fourth Amendment protections.”More on this story here.
The war on civil liberties heats up. While our attention has been on the threats of war in Iraq, North Korea, the Phillipines, and on the internal arguments in the Freedom Movement itself over whether our actions abroad are imperialist or defensive, the regime now resident in the dismal swamp of DC has been busily plotting still more restrictions on our civil liberties at home. All in the name of “homeland security” in the “war on terrorism”, of course.
Good list of links and proposed actions vis a vis the Domestic Security Enhancement Act of 2003 (Patriot II) and Total Information Awareness here.
REPORT SEES FBI FAILING TO APPLY ANTITERROR LAW
The FBI has done a poor job with an antiterrorism law that permits unprecedented levels of domestic surveillance, the Senate Judiciary Committee said in a committee report released yesterday [Feb. 25]. “The lack of professionalism in applying the law has been scandalous,“ said Senator Arlen Specter, Republican of Pennsylvania, who wrote the committee report with Senators Patrick Leahy, Democrat of Vermont, and Charles Grassley, Republican of Iowa. “The real question is if the FBI is capable of carrying out a counterintelligence effort.”
The report contended that the FBI and the Justice Department were guilty of excessive secrecy, inadequate training, weak information analysis, and the stifling of internal dissent in using the Foreign Intelligence Surveillance Act, a key tool in the war on terrorism.More on this story here.
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