Wealth International, Limited

Offshore News Digest for Week of January 5, 2004

Note:  Investing and economics-related items now have their own pages. This week’s may be found here.

Global Business Taxes Privacy Law Opinion & Analysis



An IMF review of the British Virgin Islands’ financial sector has given the jurisdiction’s regulatory environment a clean bill of health. The IMF report rated the jurisdiction’s information sharing systems and overall level of cooperation with global anti-money laundering initiatives as “excellent in all areas.” However, the IMF identified a number of areas where regulatory supervision could be tightened. These included more onsite reviews of banks and trust firms, more stringent regulations in the mutual fund and insurance sectors, and tighter controls on the state-owned development banks.

More on this story here.


The UK government has reportedly given the Cayman Islands until January 31st to formulate an acceptable compromise plan that will enable the British Caribbean territory to be bound by the rules of the European Savings Directive when it comes into force in 2005. According to reports, in return for the jurisdiction’s acceptance of the unpopular interest reporting rules a Caymans delegation has asked for three major concessions including: recognition by the EU of the Cayman Islands Stock Exchange; increased access for Cayman financial instruments to the European market; and investment in the country’s airport expansion.

More on this story here.


Consultations between Beijing and Hong Kong have stepped up sharply in the countdown to the territory’s most important annual policy statement -- the first since the July 1 march brought 500,000 on to the streets and put democratic reform at the top of the political agenda. Tung Chee-hwa, Hong Kong’s chief executive, will deliver his address on Wednesday, less than a week after some 100,000 locals gathered for another rally, showing the government that despite an economic pick-up, a widespread desire exists for constitutional reform leading to universal suffrage. Sources in government said Mr. Tung’s speech had been “devised by committee”.

“There has been a lot of last-minute, top-level toing and froing -- particularly after the New Year’s Day march -- and you can be sure that the end result will have had Beijing’s blessing,” the source said. Democratic reformers want Mr. Tung’s address to set down a formal timetable for a review of the political system. “We were promised a timetable by the end of 2003 but it did not appear,” said Joseph Cheng, professor of political science at City University and a convener of the Power for Democracy movement.

Supporters of constitutional reform, to allow direct election of the chief executive from 2007 and the legislature from 2008, believe any plans the government may have had to implement a consultation process were derailed last month when a number of mainland legal experts said change would undermine the “one country” principle. Representatives of foreign governments in Hong Kong have been supportive of the democratic movement. Most recently, James Keith, the US consul general, called on Mr. Tung to begin “full and public consultations as soon as possible”.

More on this story here.

Hong Kong postpones timetable for reforms.

Hong Kong’s chief executive, Tung Chee-hwa, indefinitely postponed plans Wednesday to set a timetable for democratic reform, breaking a promise made after huge street demonstrations last summer. Senior aides blamed the delay on a last-minute request from Chinese leaders for consultations on “matters of principle and legislative process.”

The postponement, announced by Tung in his annual policy address, prompted an immediate outcry from the territory’s pro-democracy opposition, which threatened a new round of protests demanding direct elections to choose Tung’s successor and the city’s lawmakers. By requesting the delay and asking for talks just before preliminary discussions about political reform were to be scheduled in Hong Kong, China’s Communist leaders signaled a new willingness to intervene openly and directly in the affairs of the former British colony, which was promised a high degree of autonomy after its handover to Chinese rule in 1997.

“I think it is a very bad scenario for the Chinese government. I think it will upset the Hong Kong people again,” said Richard Tsoi, one of the protest organizers. “It sets the people of Hong Kong more against Beijing now, not just the chief executive.”

More on this story here.


In his New Year message to the people of Gibraltar earlier this week, Chief Minster Peter Caruana said: “I believe that during 2002 and 2003 we have successfully seen off the attempt by the UK and Spain to try and deal with our future bilaterally between them. There now appears to be a realization and acceptance in London that, since this is our homeland, we have to be the primary players in all discussions, processes and decisions about our future -- since only we can decide that future.

“If only the UK could persuade Spain to show similar respect for our undeniable political and democratic rights as a people, then this would augur well for helpful dialogue and greater friendship and normality in our relations with Spain. It has to be understood that it is those who seek to deny and challenge our rights, wishes and aspirations at every turn, that bear the primary responsibility for any abnormality in the relations between Gibraltar and Spain.”

More on this story here.


Money laundering legislation is already generating an increase in demand for people resources, skills and technology to detect and report what may be described as suspicious transactions in the financial services sector. Are further ill-considered regulations, “a sledge hammer to crack a nut?” Although not yet officially published, it has emerged that changes to wording of the Money Laundering Regulations 2003 “companies providing business services in relation to the formation, operation of a company or trusts” will be required to appoint money laundering advisers and train staff to identify and report suspicious transactions. The regulations have little sense of proportion. There is no minimum limit to the value of any suspicious transaction.

The legal profession is as always ready to deploy the “fear” factor, take the widest interpretation rather than a strict constructionist view of the regulations. There are suggestions the provisions encompass companies, which provide services to companies beyond lawyers, accountants and professional advisers. There is concern that those who provide cleaning, advertising, auctioneering and management consultancy services are enmeshed by the regulations. They have three months to comply with the regulations. If in doubt they probably will have to comply.

More on this story here.


Ratings agency Standard & Poor’s has affirmed Bermuda’s AA long term and A-1+ short-term foreign and local currency ratings and praised the island’s regulatory and taxation systems along with the government’s sound economic management. “The fixed exchange rate, favorable macroeconomic policy mix, and well-regarded tax and regulatory regimes will continue to attract the international business sector -- particularly insurance -- thus ensuring its continuance as the main engine of economic growth in Bermuda” S & P’s credit analyst Philippe Sachs predicted.

More on this story here.


Several arrests have been made in connection with the former FIBG, which went into liquidation in 2001, with losses estimated at more than $200 million. Five former officers, directors, and promoters of the bank, including Founding Chairman and CEO Gilbert Allen Ziegler (also known as Van Arthur Brink) face charges in the United States on multiple counts of wire fraud, mail fraud, money laundering, and conspiracy. Laurent Barnabe, Rita Regale, and Robert Skirving were all arrested on Tuesday, but Douglas Ferguson and Ziegler are still at large.

More on this story here.



In a statement released last week, the US Treasury Department and the Internal Revenue Service issued final regulations amending the definition of income under section 643 of the Internal Revenue Code. The new regulations are also designed to clarify the circumstances under which capital gains are included in the distributable net income of an estate or trust. Section 643(b) of the Code defines income for purposes of numerous federal tax provisions, including determining qualification for the estate and gift tax marital deduction, and computing required distributions from pooled income funds and certain charitable remainder trusts.

More on this story here.


“Congress is concerned by a new report that indicates tax evaders no longer fear the IRS.” Apparently, some people have seen the light at the end of the tunnel. “The result is billions of dollars are lost to the U.S. treasury -- billions that put more of a burden on honest people who do pay their taxes.” Non sequitur and false. The U.S. Treasury cannot lose what it never had and what one person pays has absolutely no bearing on what anyone else pays. The notion of paying a “fair share” is a red herring at best. The Internal Revenue Code is silent on the issue, telling you all you need to know about that popular urban legend.

“The number of Americans who believe it is OK to cheat on their taxes has gone from 11 percent to 17 percent in just the last four years,’ IRS Commissioner Mark Everson said.” Cheating is one thing, complying with the law, as written, is quite another. The fact that Congress has instituted an income tax system that is an unworkable abortion is not the employee’s problem. If the IRS cannot function within its own system, it should be abolished. Any company that functioned as poorly as the IRS does would have gone out of business decades ago.

More on this story here.


US State governments hungry for tax revenues to fill their emptying coffers have reaped a bumper harvest from tax amnesty programs in the past year, with eleven states waiving penalties and fees to those paying back taxes, figures have shown. Statistics from the Federation of Tax Administrators reveal that states have received about four times more than they anticipated getting from tax amnesties, and in most cases have received an overwhelming response from taxpayers wishing to clear their debts.

More on this story here.


A proposal that would require US banks to report the interest income paid to non-resident aliens was defended by the Treasury last week after attracting criticism from Senators who fear the measure will lead to capital flight from American banks.

“The proposed regulation, if finalized, would reduce opportunities for offshore tax avoidance or tax evasion by facilitating the exchange of information important to tax compliance,” said Assistant Secretary for Tax Policy Pamela Olson in response to a written protest from ten Senators calling for the proposal to be dropped, adding that greater transparency is a must if financial crime is to be prevented.

More on this story here.


The German and Belgian governments have both launched tax amnesties in an effort to repatriate funds held by their citizens in offshore locations. While Luxembourg has reacted strongly to what it feels is a discriminatory move by the Belgians, Switzerland appears largely unconcerned, probably because of the unattractive German tax penalties.

The amnesties for repatriating funds incorporate a one-off fine that differs markedly in scale between Belgium and Germany. Belgium is proposing to charge taxpayers between 6% and 9% of interest earned depending on when the funds are repatriated, while Germany is to penalize at a higher rate of 25% this year and 35% between January and March 2005 when the amnesty expires.

It is estimated that Belgians and Germans hold around €300 billion and €160 billion offshore respectively. Most of the Belgian money is held in Luxembourg, while Switzerland is the most popular destination for German money. Perhaps because of the popularity of Luxembourg as an offshore center for Belgians, the Duchy has hit back over what it feels is a discriminatory move by complaining to the European Commission. The Swiss banking community on the other hand does not appear too concerned over plans to attract its assets away, despite the fact that the country has already been affected by a previous Italian tax amnesty. The Italian amnesty offered a token penalty of only 2.5% on interest earned, which resulted in many Swiss banks losing a substantial amount of assets and prompting many of them to set up offices in Italy.

More on this story here.


IRS officials announced a massive restructuring plan, which will result in 2,400 layoffs at the agency. The IRS plans to close its Memphis, Tennessee, tax return processing facility in October 2005, and will significantly streamline collections procedures, Commissioner Mark Everson said. In 2005, the agency will shift collection and insolvency caseworkers currently spread among 92 different offices into four locations. These changes, made possible by a substantial growth in electronic tax filing, are “fiscally responsible” and will allow the agency to hire new investigators, Everson said. “Consolidation of back-office case processing is the kind of thing done years ago in the private sector," he added.

More on this story here.


Attorney General Alfred Sears says there are different avenues by which the IRS can request records of tax evaders in The Bahamas. The IRS has served a summons on Credomatic of Florida for all documents of affiliates and subsidiaries pertaining to MasterCard, VISA, and American Express payment cards issued through, or for banks or other financial institutions in a number of countries, including The Bahamas.

“Depending on the request, if the IRS is seeking assistance under the Mutual Legal Assistance Treaty, they would come to the attorney general. But if they are seeking assistance under the International Cooperation Act, then they would go to the courts,” Mr. Sears told The Guardian. Meanwhile, no official requests have yet come from the U.S. government.

Responding to subpoenas by the IRS for records in Bahamian institutions as part of its tax-evasion investigation, Mr. Sears said that based on mutual agreements with The Bahamas, the IRS has jurisdiction over its citizens said to be evading their taxes.

More on this story here.


The IRS wants to know whether Alticor’s independent dealers and other customers are using offshore bank accounts to shield income and escape paying taxes. The IRS is playing detective, seeking the identities of people who bought soap, vitamins, cosmetics or other Alticor -- formerly known as Amway -- products with credit cards drawn on accounts in the Bahamas, Barbuda, Antigua and the Cayman Islands. A federal judge has ordered the company to turn over certain sales records from 1998 through 2001. Since August 2002, the IRS has gone to court in several states to get records from 123 businesses.

A former IRS lawyer now in private practice said investigators must have uncovered something to lead them to Alticor’s sales records. “A summons first has to go through an incredible amount of review” by federal officials in Washington, Pendery said.

More on this story here.


The IRS started cracking down last year on companies taking excessive deductions for donating patents to universities and research centers. It has already disallowed tens of millions of dollars of deductions, although it will not name its first targets. Now, in a surprise step, the IRS says it is casting its enforcement net wider. In a Dec. 22 advisory statement, IRS Commissioner Mark Everson said that the agency intends to penalize not only companies taking improper deductions, but also promoters and appraisers who help with the deals. Criminal penalties are not out of the question.

“We’re seeing an increasing number of donations that don’t pass the smell test,” Everson wrote. Two significant problem areas: inflated appraisals and giving only a partial interest in the patent (you have to give away the whole thing to get a deduction). That is bad news for some patent holders. Accounting firms which promoted patent donations as a tax avoidance strategy and issued tax opinions on the deals, could be called on the carpet as well.

And there is more trouble looming for patent holders. The IRS has two more issues on its patent enforcement agenda. First, it intends to review patent transfers to offshore holding companies (if the patent is held offshore, the patent holder only sometimes may be able to avoid capital gains). And second, it intends to verify that companies taking “in process” research tax credits for new innovations that might result in a patent are really doing something new -- and really qualify for the credit.

More on this story here.


After deliberating for more than 13 hours over two days, a federal jury convicted Texas businessman Simkanin on 29 counts of violating U.S. income tax laws. The jury of six men and six women remained deadlocked on two counts within the indictment, leading U.S. District Judge John McBryde to declare a mistrial on those charges.

Arch McColl, the Dallas lawyer representing Simkanin, said his client was denied a fair trial because McBryde did not allow him to present key evidence on whether Social Security, Medicare and income taxes are voluntary. McColl said he expects to win on appeal, but he added that it is time for Americans to pay attention to what happened in court.

This is the second time Simkanin has gone on trial. In November, McBryde declared a mistrial when jurors who deliberated for eight hours said that they were deadlocked and could not reach a unanimous verdict. Simkanin is almost considered to be a political prisoner by groups that question the validity of the nation’s tax laws. They contend that most Americans are not required to pay income taxes.

During the trial, Simkanin testified that he did not withhold employees’ taxes for Medicare and Social Security benefits because his research did not produce a law showing that participation in the programs was mandatory. When McColl tried to query witnesses on legal definitions of “employee” and “wages”, McBryde cut him off. The judge told jurors they could not question the constitutionality of the tax code.

More on this story here.


Under the system introduced by the government in the year 2000 linking income tax margins with inflation, all tax brackets will be increased in line with the index in order to prevent “bracket creep” eating a larger chunk of people’s income. Also effective January 1st, the general rate of corporate tax has been reduced from 23% to 21%, part of a larger program of cuts begun in 2000 when the corporate tax rate was 28%.

More on this story here.



I went to the bank today. My debit and ATM card had stopped functioning on New Year’s Eve. I was told, in no uncertain terms, that I must visit the bank to review my account because of “possible fraud”. I arrived at the bank and went to my banker’s office. Once pleasantries were out of the way he asked how he could help me. I explained that my card had stopped working and that I had been informed over the phone that I would have to come in and look over my past transactions, that I would have to look for anything suspicious. That only then could my ATM card -- my sole link to cold, hard cash -- be reactivated. So he pulled up my account on his computer and rotated the monitor so that we could both see the details of my financial life. He rolled the history back several months and, together, we set to find anything suspicious. As the pages -- the days -- rolled by on-screen I realized that these transactions, these little digital notes, brought back memories. There was that time, at that place, where I was with that person. It was all there, in green and black.

Once we had examined the sum of my daily financial life spanning several months we determined, together, that no fraud had been perpetrated. It was at this point that my banker reactivated my ATM card. I thanked him very much for the service. As we returned to unrelated conversation I noticed a small sign on his desk. It was a small advertisement, designed like a piece of campaign literature, as if it were trying too hard to appear patriotic. It read “USA PATRIOT Act compliance by...”

My time with my banker today was innocuous. His hopefully brief foray into the details of my life were largely at my request, largely for my protection. But the USA PATRIOT Act requires financial institutions to report “suspicious activity” to federal law enforcement agencies. As the Web site of Aquilan, which offers a product it calls Aquilan Patriot Manager, notes, “For most financial institutions, complex distribution channels, clients with multiple relationships, and disparate adminstration and transaction systems make compliance with the USA PATRIOT Act expensive and nearly impossible.” But here Aquilan’s software -- and the software of so many other companies, including the one that provided that patriotic sign to my banker -- make the “impossible” possible.

Aquilan’s software works, I am sure, much the same way as the software that identified possible banking fraud. It works quite the same way as the software that prevented me from removing cash from my own bank account, the software that forced me into my bank branch for a half-hour long meeting with my banker. The software that was wrong, that “red-flagged” my account as showing fraudulent activity when, in fact, it did not. Aquilan’s software, and, I am sure, all other PATRIOT Act verification software, is deeply flawed. This software is prone to false positives, just like the fraud detection software that brought me into the bank on my day off. The PATRIOT Act verification software is as likely to bring the FBI to my door as the fraud detection software was to bring me to my bank branch. It is likely to necessitate a full government examination of my finances, of my habits, of my life. It is likely to cause the FBI to pour over my financial records just as my banker and I did today. And those little innocent vignettes, those little guesses at my life that my banker engaged in... it is likely to cause the FBI to construct similar vignettes, to “watch” as I have coffee with a friend and later take in a show.

More on this story here.


In this data-mining society, privacy advocates shudder.

Databases have become remarkably efficient and inexpensive to query. Many employers, schools and even volunteer organizations now trust them in making decisions about whom to take on and whom to avoid. But these databases are not infallible. They can be misinterpreted or only partially accurate, showing arrests or criminal records that were later wiped clean -- just enough to cost someone a job.

At the very least, the Internet has made it far easier for anyone to obtain not only someone else’s birthdates and Social Security numbers but also liens, lawsuits, divorces and other personal and potentially embarrassing -- but technically public -- information.

More on this story here.

Police database called intrusive by rights group.

A powerful tool called MATRIX, for Multistate Anti-Terrorism Information Exchange, combines a variety of public and law enforcement databases, allowing law enforcement agents to quickly search addresses, Social Security numbers, credit card records, criminal histories, drivers license files, property records and other databases to quickly track down suspects. But MATRIX, which is being tested by eight states as part of a pilot program, is opposed by members of civil liberties groups who say its purpose is largely undefined. They note that MATRIX offers unprecedented access to information about average citizens.

More on this story here.

U.S. begins foreign visitor-tracking program.

Foreigners entering the United States through airports and seaports began getting their fingerprints scanned and photographs taken Monday. The Homeland Security Department ordered U.S. airports and seaports to fingerprint and photograph foreigners from all but 28 nations as part of “US-VISIT” -- U.S. Visitor and Immigrant Status Indicator Technology. The program will check an estimated 24 million foreigners each year traveling on tourist, business and student visas who enter through an airport or seaport.

More on this story here and here.

Inaccurate databanks pose challenge for new visitor tracking system.

The Homeland Security Department is undertaking a massive effort to integrate more than two dozen criminal and terrorist databanks as part of a new immigration tracking system, but some immigration advocates fear inaccurate information will cause problems for people entering the country.

More on this story here.

US plans to retain visitors’ fingerprints for 75 years.

Fingerprints taken from Irish citizens on entry to the US will be retained indefinitely by the US authorities, even after the visa-holder has left the country. If fingerprints were to be used in the long term, then the public should have the right to know so that they could choose whether they wanted to go to the US, the Dublin spokesman said. It was a matter for the US authorities but they should publicize the fact that fingerprints would be retained.

The US-VISIT scheme in Ireland affects travelers on non-immigrant visas. Those who must be fingerprinted include people travelling to the US on temporary working visas or to study.

More on this story here.

Secret police force to be set up in Iraq.

Nine months after the end of Saddam Hussein’s regime and his feared intelligence force, Iraq is to get a secret police force again -- courtesy of Washington. The Bush Administration will fund the agency in its latest bid to root out the Baathist loyalists behind the insurgency in parts of Iraq. Its ranks will comprise Iraqi exile groups, Kurdish and Shiite forces -- and former agents who are now working for the Americans. CIA officers in Baghdad will play a leading role in directing their operations.

A former US intelligence officer said: “If successfully set up, the group would work in tandem with American forces but would have its own structure and relative independence. It could be expected to be fairly ruthless in dealing with the remnants of Saddam.”

More on this story here.

Alabama workers clock in with their fingerprints.

Jefferson County, Alabama is calling time on fraudulent overtime claims by making non-salaried employees clock in with their fingerprints. The County Commission last week placed a $460,000 order for 30 biometric time clocks, doubling numbers in use by the administartion.

More on this story here.

Bush grabs new power for FBI.

The Intelligence Authorization Act for Fiscal Year 2004 grants the FBI unprecedented power to obtain records from financial institutions without requiring permission from a judge. Under the law, the FBI does not need to seek a court order to access such records, nor does it need to prove just cause. The new law lets the FBI acquire these records through an administrative procedure whereby an FBI field agent simply drafts a so-called national security letter stating the information is relevant to a national security investigation.

And the law broadens the definition of “financial institution” to include such businesses as insurance companies, travel agencies, real estate agents, stockbrokers, the U.S. Postal Service and even jewelry stores, casinos and car dealerships. The law also prohibits subpoenaed businesses from revealing to anyone, including customers who may be under investigation, that the government has requested records of their transactions. Bush signed the bill on Dec. 13, a Saturday, which was the same day the U.S. military captured Saddam Hussein.

More on this story here.

Homeland data mining efforts will differ from Pentagon’s.

The Homeland Security Advanced Research Projects Agency (HSARPA) is researching ways to mine large amounts of data, but its work will differ from that of a Defense Department agency that had one project killed because of privacy concerns, according to HSARPA’s director, David Bolka. The Defense Advanced Research Projects Agency (DARPA) made news last year for its Total Information Awareness (TIA) project, which called for technologies to search commercial databases in order to identify potential terrorists. Mr. Bolka said his agency will research data mining but, unlike DARPA, will not seek to mine individuals’ data.

“The application of data mining -- which databases do you look at, and what data do you extract from them, and for what purpose -- was where TIA got into trouble and the perceived violation of privacy, particularly the Privacy Act. We’re not doing any of that stuff,” Bolka said.

More on this story here.

U.K. supermarket loyalty cards may help government monitor population’s eating habits.

The mass of information stored in supermarket loyalty cards could be used to persuade shoppers to eat more healthily. Politicians and retail leaders have backed the idea of using the information stored by chains such as Tesco and Sainsbury’s to create a massive database on the UK population’s eating habits. About one million Scots use loyalty cards which tell the supermarket everything a shopper buys at the checkout and how often.

It is not thought individual consumers will be targeted because of privacy and data protection issues, but the British Retail Consortium, which represents many of the biggest shop chains, has suggested it could work with government to tap into the resource. For instance, that could mean sharing food-buying trends with ministers who could then alter healthy-eating messages accordingly.

More on this story here.

Access to U.K. telcommunication company customer data opened this week.

Certain public authorities other than the police and intelligence agencies this week gained rights of access to customer data held by telcos and ISPs when a controversial Order came into force on Monday, a restricted version of the so-called “Snoopers’ Charter”. The 2001 Act required the retention of communications data by ISPs and telcos on the grounds that these were needed for the purpose of fighting terrorism. However, once retained, the RIPA provisions permit access to many other agencies for purposes unconnected with terrorism.

Communications data are those data, retained by telcos (including ISPs and interactive television service providers), which describe the caller and the means and details of communication. Communications data do not include the content of the communications. This information is valuable as it can be used to create a comprehensive dossier on the contacts, friendships, interests, transactions, and movements of an individual. Since nearly everyone in the UK uses electronic communications, the provisions impact on most adults in the UK.

More on this story here.


The agencies have asked the Federal Communications Commission to order companies offering voice over Internet Protocol (VoIP) service to rewire their networks to guarantee police the ability to eavesdrop on subscribers’ conversations. Without such mandatory rules, the two agencies predicted in a letter to the FCC last month that “criminals, terrorists, and spies (could) use VoIP services to avoid lawfully authorized surveillance.” The letter also was signed by the Drug Enforcement Administration.

This is not the first time the Bush administration has expressed concern about terrorists and other lawbreakers using VoIP to evade wiretaps. A proposal presented quietly to the FCC in July sought guaranteed surveillance access to broadband providers. But the latest submission, which follows a recent FCC forum on Internet telephony, is more detailed than before and specifically targets VoIP providers as a regulatory focus.

Federal and local police rely heavily on wiretaps. In 2002, the most recent year for which information is available, police intercepted nearly 2.2 million conversations with court approval, according to the Administrative Office of the U.S. Courts. Wiretaps for that year cost taxpayers $69.5 million, and approximately 80% were related to drug investigations. Those statistics do not include approximately the same number of additional wiretaps authorized by the Foreign Intelligence Surveillance Act.

More on this story here.


New casino chips with built-in radio identification tags (RFIDs) may pave the way for traceable banknotes. A RFID in the chips will enable casinos to spot counterfeits and monitor the behavior of gamblers, allowing them to check that big winners are not cheating the house. The tags broadcast a unique identification code when triggered by a reader device and can work over distances of up to a few dozen meters.

If the technology can be transferred to notes, banks and stores will easily be able to check that money is not counterfeit. Last year there was speculation that the European Central Bank was planning to fit radio tags in euro banknotes to “combat fraud”.

More on this story here.


The new security measures imposed on travel to the United States have sparked strong and starkly different reactions around the world, veering from loud cheering to swift retaliation. In a sense, the response provides a fresh global analysis of the trauma of Sept. 11, 2001, as countries and airline companies, unions and associations frame their views according to their perceptions of their own vulnerability to terrorism and of the likelihood that a plane could be transformed into a guided missile against the United States. Rather than one deep divide, in which players line up either with or against the United States, several fissures have been exposed.

Biometrically coded identification like fingerprinting is either the only reliable way to track passengers or a racist act that violates human rights as it singles out citizens of certain countries. A plan to install armed marshals on some airplanes entering the United States is accepted by countries like Israel, which has long used the practice, but is opposed by countries like Portugal, Sweden, Denmark, South Africa and Thailand, which view it as potentially chaotic and dangerous.

Some critics of the new measures are suspicious that they are part of a crass political campaign by the Bush administration to keep Americans on guard at least through November’s presidential election. There is widespread agreement, however, that coming to the United States will not be more enjoyable because of what William Gaillard, head of communications at the International Air Transportation Association, calls “the hassle factor”.

More on this story here.


A mother’s asking about buying Microsoft Flight Simulator at a Staples store in Massachusetts for her ten-year-old son prompted a night-time visit to her home from a state trooper. She is a USAF Reserve pilot. So alarmed was the Staples clerk at the prospect of the ten year old learning to fly, that he informed the police. The authorities moved into action, leaving nothing to chance. A few days later, a state trooper flashing a torch into the woman’s home through a sliding glass door at 8:30 p.m. on a rainy night.

The Staples manager simply explained that staff were obeying advice. Shortly before Christmas, the FBI issued a terror alert to beware of drivers with maps, or reference books. At one time it was rare to find US citizens, in the safest and most prosperous country in the world, jumping at their own shadows. Now we only note how high.

More on this story here and here.


A new Bank of America program allowing Mexican nationals in the United States to wire cash home has raised concern among law enforcement officials and others who question whether it also gives terrorists and drug smugglers a new way to route illicit cash out of the country. The program, known as “SafeSend”, provides online access for Mexican nationals to transfer money from “any phone or computer” to relatives or associates in Mexico who hold a SafeSend automated teller machine card.

More on this story here.


Sixty per cent of respondents to a poll gave the idea the thumbs-up, with 32% opposed and 8% uncommitted. The response suggests a major mood switch since the overwhelming rejection, because of privacy concerns, of Labor’s planned Australia Card in the 1980s. The swing in attitude since the September 11 and Bali attacks could allow the Federal Government to follow the British Government, which recently announced plans for a compulsory ID card for the first time in more than 50 years.

Queensland Council for Civil Liberties president Ian Dearden said any move to increase surveillance using terrorism as an excuse should be resisted. “I think this government has conned the people into believing huge intrusions into their personal privacy will bring benefits in respect to the war on terrorism,” he said.

More on this story here.



The dictionary definition of nihilism is as follows, at least in the political realm: “The doctrine that all existing social, political, and economic institutions must be completely destroyed.” What replaces those institutions is the exercise of raw power by those who have taken the seats of authority. And while Ashcroft does not openly subscribe to some of the tenets of nihilism, he is actively destroying rule of law and replacing it with the doctrine of “I do this because I have the power and authority to do it.” That, in my opinion, is a practical definition of nihilism.

More on this story here.


Every day many Americans commit crimes of which they are unaware. Many of the crimes with which Americans are charged are absurd. One recent case brought to light by Ellen Podgor and Paul Rosenzweig is that of three Americans sentenced in federal court to eight years in prison for importing lobster tails from Honduras in plastic bags instead of cardboard boxes. Why this matters, no one knows. Moreover the importers of the lobster tails have no responsibility for how the seafood was packed in Honduras.

To insure a harsh sentence the prosecutors loaded up charges against the defendants by bringing indictments for smuggling, money laundering and conspiracy. Smuggling is inferred from a few of the tails allegedly being undersized and illegal. Money laundering is charged because the lobster purchase and sale required money to be deposited in a bank. Conspiracy is charged on the basis that more than one person was involved. In other words, these are totally trumped-up crimes. The upshot is that three Americans have had their lives ruined by federal prosecutors and judges for violating a Honduran law that the Honduran president, attorney general and embassy say is not on their country’s statute books. For reasons no one knows, federal prosecutors spent six months trying to find reasons in Honduran law to indict the American importers of the lobster tails.

Legal scholars such as Mr. Rosenzweig at the Heritage Foundation and Erik Luna at the University of Utah Law School are calling attention to the overcriminalization that has made it impossible in America to conduct ordinary business activities without risk of indictment. Naïve Americans tend to regard miscarriages of justice, such as the lobster import case, as rare examples of legal idiocy that somehow will be corrected by the legal system. However, such cases are routine and are seldom if ever corrected. In America today law enforcement boils down to the exercise of power by unaccountable prosecutors.

More on this story here.


A New York law firm can be ordered to turn over the non-privileged documents of an overseas client not itself subject to U.S. subpoena, a federal appeals court has ruled. The decision by the 2nd U.S. Circuit Court of Appeals overturns a January district court ruling that had shielded the law firm, Davis Polk & Wardwell, from producing documents relating to a Securities and Exchange Commission investigation into one of its clients, Ernst & Young Netherlands.

"[D]ocuments held by an attorney in the United States on behalf of a foreign client, absent privilege, are as susceptible to subpoena as those stored in a warehouse within the district court’s jurisdiction,” the appellate panel wrote in Ratliff v. Davis Polk & Wardwell, 03-7194. “Documents obtain no special protection because they are housed in a law firm.”

Davis Polk had represented Ernst & Young in the course of its voluntary cooperation with an SEC inquiry into audits that the accountancy performed between 1995 and 1997 for the Baan Co., a Netherlands-based software maker. Ernst & Young sent documents to Davis Polk to be shared with the SEC, and the law firm also retained transcripts of testimony given by Ernst & Young employees before the SEC. Ernst & Young paid a penalty to settle the SEC investigation in June 2002. The documents relating to the investigation were subsequently sought from Davis Polk by plaintiffs suing Baan for securities fraud in federal court in Georgia.

More on this story here.


The Supreme Court announced that it will decide upon President Bush’s claim that he can order the indefinite detention of U.S. citizens captured abroad fighting for terrorist groups, a key element of his legal strategy in the war on terrorism. The justices rebuffed repeated Bush administration requests to turn down the appeal of Yaser Esam Hamdi, a U.S.-born Saudi and alleged Taliban fighter captured by U.S. forces in Afghanistan in late 2001. He has been held by the U.S. military without access to a lawyer or any other outside contact ever since. A federal appeals court had ruled in the administration’s favor, accepting the argument that the judicial branch should not second-guess the executive to consider military matters.

The court’s action was the latest sign that the justices believe the time has come for them to exercise oversight of the executive’s conduct of the fight against terror. Only a month ago, the justices brushed aside strong Bush administration opposition and agreed to rule on an appeal by foreign terrorism suspects currently being held at a U.S. naval base in Guantanamo. Many legal observers believe the justices will also likely review a separate appeals court ruling in the alleged “dirty bomb” case of Jose Padilla, who has also been held without a hearing or legal representation.

More on this story here.


As al Qaeda threatens a new round of spectacular mayhem, and America steps up requests for armed marshals on incoming flights, the latest warning from the FBI cuts straight to the heart of the terrorist threat in America today. No, we are not talking about lethal chemical weapons owned by disgruntled militiamen -- we are talking about something so dangerous it could only be possessed by a farmer, or perhaps even your grandmother. We are talking about an almanac.

Indeed, reported the Associated Press on December 24th, this threat is so serious that the FBI issued a nationwide police dispatch: “...the FBI is warning police nationwide to be alert for people carrying almanacs, cautioning that the popular reference books covering everything from abbreviations to weather trends could be used for terrorist planning.”

This gripping announcement symbolized a new low in the “war on terror”. The fact that it was reported without even a smirk shows that the American media is, as feared, brain dead. The AP report contained only this line: “...the Associated Press obtained a copy of the bulletin this week and verified its authenticity.”

More on this story here.

Civil rights advocates protest FBI almanac warning.

The FBI alert for people carrying almanacs has prompted objections from civil liberties advocates who say it might encourage police to arrest or interrogate people based on their reading habits. “Basically, it makes it potentially illegal for somebody to walk around with their almanac,” said Carol Moore of the D.C. Anti-War Network (DAWN) in Washington. “DAWN is protesting the absurdity of this almanac warning, which infringes on the liberties and privacy of all Americans." Members of the group marched in front of the FBI building Thursday holding up almanacs.

“Founding Father Ben Franklin probably never imagined that the almanac he created could be the subject of an FBI terrorism bulletin,” said Nadine Strossen, American Civil Liberties Union president.

More on this story here.



Speaking of Liberty is Rockwell at his best. The Rockwell who muffles “loud-mouthed” statist, talk-show hosts. The Rockwell who turns collectivist environmentalists green. The Rockwell all the neocons, from David Frum to Bill Bennett, hate and fear. The Rockwell who is quick and funny -- and deadly -- when tossed into the lion’s den. The Rockwell who brings a steel-edged consistency to the defense of liberty.

The essays cover a huge diversity of topics, but are united by a set of fixed principles: the corruption of politics, the universality and immutability of the ideas of freedom, the centrality of sound money and free enterprise, the moral imperative of peace and trade, the importance of hope and tenacity in the struggle for liberty, and the need for everyone to join the intellectual fight.

More on this story here and here.


The year 2003 dramatically and dolefully illustrated Lord Acton’s famous dictum that absolute power corrupts absolutely. An almighty United States, unrestrained by any rival, international body, or world opinion, bestrode the globe, a belligerent colossus determined to monopolize global oil reserves and use its vast military power to crush lesser nations or malefactors that disturbed the Pax Americana.

For America’s hard right -- a curious farrago of Armageddon-seeking southern Protestants; neo-conservative supporters of Israel’s right-wing Likud party; and the military-industrial-petroleum complex -- the Bush administration’s aggressive foreign policy of world domination, and utter contempt for international laws and old allies, marks a new era of national greatness. But for those Americans whose primary loyalty was to their country, rather than to religious cultism, foreign nations, or financial profit, the rapid emergence of the U. S. as an imperial power waging two hugely expensive colonial wars in Asia was a disaster, both for America’s democratic system and for the rest of the world.

Those who truly love and respect the United States, like this writer, a conservative and U.S. Army veteran, see the very qualities that made America a beacon to the world -- its very soul -- now under heavy assault by a cabal of religious fanatics, foreign-leaning ideological extremists, and self-enriching Enron-Republicans. That is a danger considerably greater than al-Qaida.

More on this story here.


It is tantalizing to think we believe things that people in the future will find ridiculous. What would someone coming back to visit us in a time machine have to be careful not to say? That is what I want to study here. But I want to do more than just shock everyone with the heresy du jour. I want to find general recipes for discovering what you cannot say, in any era.

Let’s start with a test: Do you have any opinions that you would be reluctant to express in front of a group of your peers? If the answer is no, you might want to stop and think about that. If everything you believe is something you are supposed to believe, could that possibly be a coincidence? Odds are it is not. Odds are you just think whatever you are told.

Of course, we are not just looking for things we cannot say. We are looking for things we cannot say that are true, or at least have enough chance of being true that the question should remain open.

More on this story here.


The gym has Fox television on, and perhaps I should be grateful, because otherwise it would not have dawned on me just how popular and widely embraced stupid is. By stupid, I do not really intend insult. Stupid is a mental outlook that affirms the crude and base while eschewing the noble and thoughtful. It is an attitude of mind that can be adopted by both low lights and bright lights. That low lights be can be stupid is not a surprise. The thinking goes: Rush doesn’t bother with footnotes so why should I?

More puzzling is when stupid is adopted by the bright-light set after its members have come to the conviction that some modes of thought are more useful to achieving socio-political goals than others. Intellectual affectations, long deductive processes, self-control, and abstract ideals are fine in many cases, they conclude, but not as effective for some purposes as bad instinct, first thoughts, anger unleashed, and raw emotion.

Stupid Vogue represents the triumph of irrationalism, but it is more than that. It is the fulfillment of intellectual trends that have developed over many decades. It comes down to the rejection of the merit of logic and even the existence of truth itself and the culminating insight that nothingness can become meaning only through the working out of mass passion. What is left in this nihilist scenario but brute force? If you want a piece of the action in this world, you had better give up old-fashioned longings for virtue and meaning and start being stupid.

More on this story here.


Like the vast majority of Americans, I do not harbor blind, irrational, or any other kind of hatred for George W. Bush. In this, I am in good company with at least 52% or 53% of the population. That is all it will take in 2004, by the way. In an era where Wal-Mart shoppers like me have tightened our belt a bit, we can certainly appreciate that, for those who donate money to George W. Bush’s re-election campaign, he is a penny pincher extraordinaire. I commend the President on his tightwad ways with a political donation. It is too bad he does not extend this same courtesy to our money otherwise extracted.

Sadly, the cash wrung from already squeezed taxpayers, small businesses and investors through taxes and fees is not treated with the same tender concern by our Great Leader. One observer likens the Bush economy to the guy who maxed his credit cards, pawned his property, and mortgaged his house and now has “a big wad of walking around money.” It is amazing that we have not seen more in the media about the financial mess we are in. An unnecessary mess, one created by the very Republican Party once known as “conservative”, meaning among other things, “restrained in style”, “moderate”, “cautious”.

Ironically and unexpectedly, Bush’s own government in the past three years has helped move the rest of us in a more traditionally American direction. Our cynicism about King George’s Washington approaches the late 1700s level of cynicism about a different King George, in a different far away city. Then as now, we are turning to self-reliance in our personal economies, education, and spirit. Like an absentee father, our current George pays little attention to our real needs. While generally vacant and unproductive, he periodically showers us with extravagant gifts that we never needed and he cannot afford. Like children of the absentee father, we feign interest in his rare but always urgent advice (Orange? Yellow? War on whatchamacallit...) and then continue on with what we were doing.

More on this story here.


One of the most frustrating parts of watching the Democratic presidential debates is the poor questioning from moderators, journalists, and fellow debaters. The questions tend to be vague, predictable, too focused on the “horse race” aspects of the campaign, and usually leave the candidates too much room to maneuver away from the thrust of the question. Here, is a list of questions I would like to see them answer.

More on this story here.


At the beginning of a new year, it is traditional for columnists, commentators and other harmless drudges to take a look at their crystal ball and forecast what the year may bring. Fortunately, I have superior technology. My home telephone was made in 1918. When I need to see down the road a bit, I just call the Kaiser. I got through to Potsdam a few nights ago, and here is what der Allerhoechste thinks may be in store for us in 2004.

More on this story here.


Politicians lie because that is what a politician does for a living -- lie to convince us to give him more power over our lives. And Americans fall for the lies over and over again. How do you deal with this? Simple: Whenever a politician starts talking, just close your innocent little ears and pay no attention to him. He is most likely lying -- simply telling you what he hopes will persuade you to give him another chunk of your life.

There is probably no more important lesson that you can learn and take to heart than the simple lesson that politicians do not tell the truth -- and the government program the politicians promise will cure some problem will in fact almost certainly make matters worse. More government means trouble.

There is only one thing a politician can do to help us: repeal laws. Repeal thousands and thousands of laws. And I do not mean promise to repeal laws, but actually do it. Only their actions are meaningful. Pay no attention to what they say. They make their living by lying.

More on this story here.  (Harry Browne’s book Why Government Doesn’t Work is now available for downloading at LibertyFree.com.)


A story that goes back, but an instructive one nonetheless. How government agents are willing to lie about and obfuscate the facts, while endangering us all, in order to serve special interests, and yet you do not hear anything about the issue in the mainstream press or in the allegedly objective academic journals. All linked-to articles are short.

More on this story here, here, here, here, here, and here.
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