Wealth International, Limited

Offshore News Digest for Week of May 10, 2004

Note:  This week’s Financial Digest may be found here.

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Italy will try to stave off an official warning over its ballooning deficit at a meeting of EU finance ministers this week joined by 10 new member states. Portugal will be taken off Europe’s list of fiscal delinquents during the talks, which will also cover long-running negotiations aimed at getting Switzerland to comply with EU rules designed to clamp down on offshore tax fraud. Italy risks breaching the EU Stability and Growth Pact’s deficit limit -- 3.0% of GDP -- this year, according to the EU executive. Germany and France have failed year after year to meet the 3.0% target. However, the rest of the EU has shown no stomach for a fight with the eurozone’s two biggest economies. Italy’s Deputy Prime Minister, citing the French and German precedents, has brushed aside the prospect of EU sanctions. And the Italian Finance Minister will argue that his government is taking steps to avert a deficit breach and should therefore be spared an early warning.

More on this story here.


Swiss parliamentarians have voted in favor of a series of measures aimed at tightening the country’s immigration laws. Under the proposed legislation foreigners from outside the European Union will only be allowed to take up jobs if no Swiss candidates are available. Despite opposition from the center-left Social Democrats, the House of Representatives voted in favor of giving priority to EU and European Free Trade Association citizens who seek employment in Switzerland.

More on this story here.


The group of people who meet the international criterion to be classified “ultra-millionaires” has ballooned from an elite of fewer than 150 white, old-moneyfamilies and entrepreneurs into a class of nearly 700 from all races. Unpublished research data from the World Wealth Report 2003, compiled by Cap Gemini and Merrill Lynch in the U.S.,shows South Africa had 690 “ultra-high-gross-worth individuals” at the beginning of last year, with assets totalling at least $30 million each.

Responding to the report, Pepkor chairman Christo Wiese -- a pioneer “ultra-millionaire” worth R912 million in 1995 -- said the ultra club had become so big so fast that he had met businessmen “worth a couple of hundred million and I’ve never heard of them before”.

More on this story here.


The EU could finally conclude a long-sought deal with Switzerland to clamp down on offshore tax fraud later this month, and has penciled in a bilateral summit do so. “A summit is scheduled for May 19 if a positive result can be hoped for,” said one diplomat, adding that the gathering would also discuss Swiss relations with Europe’s Schengen grouping of border-free countries. Switzerland has linked an accord over the savings tax issue with its bid to join the 15-nation Schengen group, but wants an exemption from judicial cooperation in tax fraud issues which usually applies to Schengen members.

Pressure is growing as a June deadline approaches for a deal to be struck to allow for a harmonized “directive” -- or EU law -- on taxation of savings to come into force on January 1 2005. The new EU rules were agreed last year. But they can only be implemented if an accord on similar rules is reached with third countries including Switzerland. The EU directive obliges countries to exchange information on savings held by non-residents, so that they can be taxed in their country of origin. The Swiss government came onboard the new EU tax rules last year, after overcoming concerns about their impact on its cherished tradition of banking secrecy. Under the new system, EU states Austria, Belgium and Luxembourg have all retained their right to banking secrecy, in exchange for a withholding tax applied at source. Switzerland has won a similar arrangement.

More on this story here and here.


The historic enlargement of the European Union with the addition of ten new countries on May 1 was a cause for celebration in many national capitals, but the accession party could be followed by a hangover. Joining the EU may be akin to boarding the Titanic halfway across the ocean. The pre-expansion EU is very uncompetitive in the world economy. With an average tax burden consuming almost 45% of GNP and high levels of regulation, many of the original 15 EU countries face a double-digit unemployment rate and economic stagnation. And since many of them have huge government unfunded liabilities for pensions and health care, things could get worse before they get better.

As a result of these anti-growth policies, unemployment remains very high and a large amount of capital is fleeing to places like the United States and Switzerland. The post-communist countries that just joined the EU also have been benefiting from these capital flows. After decades of communism, most Eastern European nations have reformed their tax systems and have become low-tax jurisdictions. The interesting question is whether these new EU nations will be allowed to keep their free-market policies. The bureaucrats in Brussels who run the EU can decide to welcome the competition from these lower tax jurisdictions and urge the nations of “Old Europe” to reform their tax systems and cut tax rates -- responding to tax competition with tax competition. The EU’s second option is to undermine tax competition by bullying the newcomers into increasing their rates. German Chancellor Gerhard Schröder has made his position very clear by telling his Eastern neighbors that their low tax policies and the competition they induce are unacceptable and should not be tolerated.

This is all very strange. For years, economists have argued that low tax rates and tax simplification are effective tools to promote growth and to prevent capital and company flights. In addition, lower tax rates often bring in more revenue than high tax rates as demonstrated by the Irish and the Eastern European experiences. So instead of trying to force other nations to adopt their bad tax policies, Schröder should try to finish what he started in 2002 when he cut the German corporate rate and impose more tax reforms on his own country.

More on this story here and here.

OECD warns Finland of consequences of lower taxes.

According to the latest OECD Economic Outlook, “The room for new tax cuts [in Finland] is narrow, and will require significant spending restraint by central government and municipalities.” According to the assessment, further tax cuts “will ultimately make it more difficult to cope with the future fiscal implications of ageing”. The OECD feels that the Finnish state has no need to accelerate economic growth by taking money from state coffers.

Sharply disagreeing with the OECD assessment was Timo Lindholm, head economist of OKO Bank. “The growth in state tax revenue has continued in spite of the tax cuts”, he points out. According to Lindholm, the government should actually accelerate its tax cuts. “We can afford that. When taxation is high, domestic demand cannot be increased.” Lindholm suggests different means to deal with the economic burdens of an ageing population. “It is most important to create as many jobs as possible in order to generate tax revenue.”

More on this story here.


Britain’s financial services industry could be put at a competitive disadvantage if the UK implements EU legislation too strictly, a leading industry body has warned. The Association of Private Client Investment Managers and Stockbrokers urges legislators and regulators in a new report not to make unnecessary additions to EU rules or to implement them sooner than they need. “The UK has a history of ‘gold-plating’ EU rules -- almost whatever the issue, UK firms have to abide by more rules than other EU members,” said Angela Knight, chief executive of the association. “What’s more, our rules are fully enforced. The potential benefits of a single market in financial services are huge, but only if they are implemented evenly and fairly, and if the UK watches and learns from what our peers are doing.”

Some 39 measures have been agreed by EU member states and the European parliament, although many have not been implemented. Measures include a harmonized financial disclosure regime, market abuse rules and a European company statute. But the association warns that the EU states will implement the directives differently.

More on this story here.


Where should you locate new businesses and subsidiaries in the United States? In states with the fewest regulatory body blocks and fiscal obstacles. To give you a handle on those choices, the Pacific Research Institute for Public Policy in San Francisco has, with the help of economists Ying Huang and Robert E. McCormick of Clemson University, created a U.S. Economic Freedom Index. In coming up with our ratings 143 variables were evaluated for each state, using the most recent data. This snapshot includes tax rates, state spending, occupational licensing, environmental regulations, income redistribution, right-to-work and prevailing-wage laws, tort laws and the number of government agencies.

Kansas came up number one, thanks largely to its respect for property rights: It engages in less income redistribution and attracts less tort litigation than most states. With the fewest regulatory barriers, Colorado places second. The state also ranks high in the fiscal sector, thanks to its constitutional tax limitation. Virginia, which shows restraint in income redistribution, is third. But it turns out that the South on the whole does not live up to its image as a business-friendly region. The most hospitable states tend to be in the Great Plains and Rockies. In contrast, Rhode Island, Connecticut, California and New York have the most punitive policy environments for economic opportunity.

More on this story here.


The Chinese Communists have decided that enough is enough in Hong Kong. Last Wednesday, Beijing ordered a naval battle group into Hong Kong’s Victoria Harbor for the first time since the colony’s 1997 handover from Britain. Made up of two submarines, four frigates and two destroyers, the group of warships sailed slowly through the world’s busiest port and passed the skyscrapers of Asia’s economic hub. Hong Kongers crowded the shoreline to gawk unbelievingly at a show of force that could only mean one thing, that Beijing is threatening the use of military force to kill Hong Kong’s yearning for democracy.

More on this story here.


Canada is a haven for money launderers and there are more active terrorist groups operating in the country than anywhere else in the world, a Toronto conference was told. Money launderers are attracted to Canada because of the country’s lenient prison terms for criminals, strong banking system, and privacy laws that allow them to conceal the proceeds of crime, said Sandra Brown, a senior officer at the fledgling agency set up by Ottawa to crack down on money laundering and terrorist financing. The agency, known as the Financial Transactions and Reports Analysis Centre or Fintrac, suspects that terrorist groups moved $22-million through Canadian financial institutions last year.

Fintrac has uncovered $500 million in suspected dirty money stashed away in Canadian banks, mutual funds and other financial institutions as of its latest fiscal year, which ended March 31, 2003. The tally appears to be on the low side compared with the $17 billion worth of criminal proceeds that the federal government says are laundered through Canada every year.

More on this story here.


Following in the footsteps of the Italian, Belgian and German authorities, French Prime Minister Jean Pierre Raffarin has mooted the idea of raising additional revenue for the government through a tax amnesty on assets held “secretly” in foreign accounts. However, Raffarin’s proposal has come under fire from many sides. Many economists believe that an amnesty would be largely ineffectual, and if the poor results of the German amnesty so far are anything to go by, they could well be proved right. Critics of Raffarin’s proposal contend that France would be better off overhauling its punitive tax system to encourage wealth to remain in the country in the first place. The unions and the Socialist opposition, on the other hand, have condemned the idea for rewarding the wealthy for evading tax.

More on this story here.


Australia is sending police and government officials to run the riches-to-rags Pacific island of Nauru in the latest effort to shore up its island neighbors. A police commissioner and officers will maintain law and order while financial experts will try to repair one of the world’s most dysfunctional economies. The announcement follows Canberra’s decision to dispatch troops to restore stability in the Solomon Islands last year and its plans to send police and officials to troubled Papua New Guinea later this year.

Australia fears that, without robust intervention, some of its neighbors could degenerate into havens for drug runners, money launderers and terrorists. Nauru is the world’s smallest republic, covering just eight square miles, and has a population of 12,500. Despite its small size and parlous finances, Nauru is important to Canberra because since 2001 it has accepted hundreds of asylum seekers rejected by Australia, housing them in a bleak detention center. The country has been plagued by political instability and has had five presidents since early 2003.

During the 1970s, Nauruans enjoyed the world’s highest per capita income, thanks to the island’s extensive reserves of guano, or bird droppings, the purest natural phosphate in the world. But, bizarrely, most of the wealth was squandered in a series of ill-conceived investments. Decades of mining have left the island an environmental basket case, with erosion turning the hinterland into a surreal moonscape of jagged limestone outcrops. Nauru’s past wealth has been a mixed blessing for its people, who developed a taste for junk food and now suffer high rates of obesity, diabetes and heart disease. With few job opportunities, most Nauruans spend their days watching television.

More on this story here.


Every second year the British and Caribbean governments meet to consider, at the level of ministers of foreign affairs, matters of common interest. This year, the fourth UK/Caribbean Forum will take place on May 9 and 10 in London. The 2004 meeting will be different to the previous meetings. In the past, the issues covered were relatively evenly balanced between trade, economic relations, security, investment, public health and immigration.

The meeting takes place at an important moment for relations between Britain and the Caribbean. The region is hoping that the UK can do more to support it in Europe and in multilateral meetings. However, Britain is in the throes of reorienting its foreign policy. It is also implementing new approaches towards its international trade relations and its bilateral development assistance. The overriding theme that runs through the new thinking in London places emphasis on thematic approaches at the expense of geography in regions such as the Caribbean that are considered to be relatively marginal to the UK in strategic terms.

It is an approach driven by an over-commitment in Iraq, concerns about terrorism and new global priorities, none of which correlate well with the region’s concerns about a gradual and stable economic transition out of preferential arrangements or the need to have better understood the implications for individual Caribbean nations of smallness and vulnerability. Whether the region as a whole has yet recognized that this has happened, or is willing to change the nature of its dialogue, is far from clear.

The dialogue between the Caribbean and the United States has sunk to a record low. In recent months senior members of Washington’s fundamentalist and increasingly dysfunctional administration have sought to coerce the leaders of democratic and stable governments in the region on issues as diverse as the United Nations and Iraq, Cuba, Haiti, homeland security and trade policy.

More on this story here.


The OECD countries have reached agreement on a new code of corporate governance designed to stop any future Enron-style scandals. International regulations are expected to be endorsed at an OECD meeting in Paris. The OECD is urging governments to tackle three major problems. Firstly, it believes that the shareholders should have more power to hold management to account. Secondly, it wants to abolish unfunded executive share options, which encouraged many managers to manipulate share prices for financial gain. Thirdly, it argues that checks and balances must be strengthened in the corporate sector, for example by forbidding accounting firms to also act as consultants (as happened in the case of Enron and its accountants Anderson, now defunct). The OECD code of conduct has no formal legal status, but it is likely to form a basis for legal revisions in many of the 30 OECD countries.

More on this story here.


In an interview with Madrid ABC newspaper, Spanish Minister of Foreign Affairs Miguel Angel Moratinos said that in his May 20 meeting with Foreign Secretary Jack Straw in London he will pursue the fundamental idea of recovering the Gibraltar dialogue process under the Brussels process. Further on he insisted that the proposals based on the concept of joint sovereignty for Gibraltar were “still ideas and they have not been closed”, but added that the essential is to recover the dialogue process.

More on this story here.


France and Germany will raise the threat of marginalization or even possible expulsion for Britain from the EU if it fails to ratify the new constitutional treaty within two years. A joint declaration by Paris and Berlin will revive the idea that the constitution could be adopted if 20 out of the EU’s 25 members agree, leaving others facing a legal limbo or possible expulsion.

The proposal was immediately denounced as unworkable by Britain, and deemed unhelpful by the EU’s Irish presidency, which is working to finalize the treaty in time for next month’s summit in Brussels. However it reflects frustration in France and Germany that a British referendum on the constitution -- viewed by bookmakers as virtually unwinnable -- could wreck a treaty which has been under construction for more than two years.

Under EU law, new treaties have to be agreed unanimously by all member states and then ratified by all, either through parliamentary votes or through national referendums. The British referendum, announced by Tony Blair last month, is a big obstacle to ratification, but other referendums in countries such as Denmark, the Netherlands and Poland could also be problematic.

More on this story here.


The number of incorporations in Bermuda for the final quarter of 2004 reached the highest levels since the September 11 terrorist attacks. The Bermuda Monetary Authority has reported that 428 new companies, partnerships and permits were issued during the three months ended December 31, 2003. And since the BMA took over publishing the results in 2001, it is the second highest figure after the second quarter of 2001, when there were 429 incorporations. The BMA revealed that incorporations were still high at the beginning of this year, with 416 companies incorporated in the first quarter of 2004, up on 296 for the same quarter a year earlier.

More on this story here.


The struggling economy of Dominica appears to be seeing improvement after nearly three years of decline, officials announced. The island is forecast to have economic growth of about 1 per cent this year. The improved economic outlook stems from increased tourism -- with nearly twice as many cruise ship passengers visits in the first quarter of 2004 than in the same period last year -- and increased manufacturing and banana production.

With a national debt of Eastern Caribbean $778 million (US$287 million), or three-fourths of GDP, Dominica has been struggling to cut spending and since its two main industries -- tourism and agriculture -- declined severely in 2001-2002. About 15% of the former French and British colony’s 70,000 people remain in extreme poverty, according to an IMF report released earlier this year.

More on this story here and here.


Prime Minister Dr. Keith Mitchell is threatening to take legal action against Miami-based KYC News for an article published in their Offshore Alert newsletter on April 30, 2004 alleging that Mitchell received half a million dollars from a former German diplomat.

Meanwhile, the Media Workers’ Association of Grenada (MWAG) issued a statement saying it views with grave concern the recent attempts by Government to intimidate the local media as it relates to the article and remarks by the opposition leader on the issue. The Leader of the Opposition said they planned to quiz the Government about the contents of a recent article by Offshore Alert which accused the Prime Minister of allegedly receiving money from a fraudster.

However, in a release issued by the Government through the Government Information Service, it warns that if media houses proceed to publish the contents of the article, “The full force of the law will be brought to bear against anyone responsible or associated with the publication of this story”. MWAG believes it is inappropriate for the Government to issue bold threats of legal action and views this as an attempt to censor the media in Grenada.

Meanwhile, the publisher of Offshore Alert, David Marchant, commenting on these developments said that “I am fortunate to live in the United States, whose laws encourage and protect free speech and have libel laws that are considerably more beneficial to society than in the UK and its overseas territories. However, I can successfully defend my articles under any fair legal system.”

More on this story here and here.


In their new book Pay to the Order of Puerto Rico, economist Arthur Laffer along with businessman and Puerto Rico resident Alexander Odishelidze reveal the onerous burden that Puerto Rico places on the United States. According to Laffer and Odishelidze, American families pay $22 billion per year to maintain a dependent colony. “Since the 1920’s industries on the island, particularly U.S. pharmaceutical companies have enjoyed a targeted tax break that essentially relieved them of all U.S. corporate income tax on their earnings in Puerto Rico. This tax giveaway no longer accomplishes any meaningful purpose for the Puerto Rican economy. Instead, it benefits a wealthy and well-connected few. Moreover, it punishes the Puerto Rican people who suffer the fraud of dependency,” said Odishelidze.

Today Puerto Rico is ranked 52nd in per capita income among U.S. states and territories. The foreword was written by CNBC commentator Lawrence Kudlow and the book received advance praise from former Rep. Jack Kemp and former U.S. Attorney General Richard Thornburgh.

More on this story here.



Mark W. Everson, reaffirmed the government’s pledge to improve the agency’s enforcement record in a speech to the American Bar Association last week. Everson conceded that since a Congressional mandate in 1998, the agency’s focus had been on making improvements to customer service, to the detriment of maintaining staffing levels in the enforcement departments. “What happened as we sought to fix the service side we dangerously moved down the enforcement side,” the Commissioner observed.

He continued that wealthy taxpayers and corporations will be the IRS’s primary target, although tax-exempt and not-for-profit organizations can also expect increased scrutiny. Highlighting the IRS’s declining enforcement standards, a report published by the Treasury Inspector General for Taxation last month revealed that the IRS reviewed only one out of every 182 corporate tax returns in 2003, compared to one in 52 in 1997.

More on this story here.


The EU has confirmed it will not carry out a threat to impose new tariffs on re-exports from Switzerland to member states. The news comes as a relief for Swiss businesses, which feared a re-export tax would cost the economy billions of francs and put thousands of jobs at risk. Negotiators agreed to abide by an existing trade agreement dating back to 1972, under which products and materials imported to Switzerland and subsequently exported back to the EU are not subject to customs charges.

More on this story here.


A loophole through which New Zealand residents receive income from Australian unit trusts that is taxed neither in New Zealand nor Australia will be closed, Revenue Minister Michael Cullen announced.

More on this story here.


After months of delay and relentless corporate lobbying, the Senate voted, 92 to 5, for a bill that would create $170 billion in new tax breaks for business while trying to crack down on a variety of tax shelters. The original goal of the bill had been to replace a tax break for exporters that the World Trade Organization had declared illegal. But the measure that passed was a 900-page behemoth that offered something for almost every business interest.

Keith Ashdown, vice president of Taxpayers for Common Sense, a research group, said the bill had become “stuffed to the brim with unrelated giveaways and payoffs to almost every special interest with Gucci-clad hired guns.” Even so, the bill faces major hurdles. House Republicans have been unable to muster agreement on a similar bill of their own, and they are quite likely to fight a number of provisions in the Senate bill. The $170 billion price tag would be offset by repeal of the export subsidies and by curbing a number of corporate tax abuses by increasing penalties for violations, making it easier for the IRS to pursue tax shelters and other such steps.

More on this story here and here.


Democrat John Kerry’s wife, Teresa had over $5 million in income last year, but paid a lower tax rate than an ordinary person earning $50,000. The campaign said Mrs. Kerry, who files her returns separately from her husband, had $5.1 million in income and paid at least $587,000 in federal taxes -- a rate of 11.5%. The average person earning about $50,000 pays taxes at an effective rate of 13.8%. One reason for the first-lady wannabe’s low tax rate is that more than half her income -- $2,777,000 -- came from tax-exempt bonds, according to the campaign.

More on this story here.



The government last week passed the Segregated Accounts Companies Bill and The Foundations Bill, 2004. The Segregated Accounts Bill was the final bill in a series of new financial legislation set to enhance The Bahamas’ reputation of proper and transparent governance, with a state of the art legislative regime in the financial services industry. Other financial legislation debated in recent months included The Foundations Bill, the Purpose Trust Bill, the International Business Companies Act and an Amendment to the Perpetuities Act.

The Foundation Bill is the first of its kind for The Bahamas, allowing the country to be the first off-shore jurisdiction to provide a common law version of the a foundation, which is a civil law product that is equivalent to a trust in some countries. The Segregated Accounts Companies Bill establishes a system of registration of segregated accounts companies, based on proper accounting principles so that creditors would be encouraged to invest in such companies because of the appropriate regulatory safeguards.

More on this story here and here.

Central Bank of the Bahamas Governor says small states should cooperate more closely.

The Governor of the Central Bank of the Bahamas, Julian Francis, has urged small states to cooperate more closely with one another to ensure that their presence is felt by the OECD and onshore jurisdictions when new tax initiatives are being discussed. “The OECD have sought to isolate small states by accusing them of engaging in harmful tax practices, notwithstanding the fact that countries like The Bahamas do not engage in the direct taxation of the income of its citizens or residents,” Mr. Francis told an audience of finance industry professionals at the recent annual Society of Trust and Estate Practitioners Caribbean Conference.

By working more closely, small states would be better positioned to present a unified strategy and oppose those initiatives which may be harmful to the interests of many less powerful nations, Mr. Francis pointed out. He also suggested that the offshore world should establish bodies of intellectual opinion and formulate its own initiatives to challenge the prevailing opinions of the onshore nations.

More on this story here.


The European Commission has opened a consultation period on its controversial “e-money” directive. The EC wants businesses to tell it how the directive could be improved to “avoid unnecessary burdens for industry”. Under the directive, providers of e-money will have to provide a way for people to redeem their e-money for real world money. They must also take action to ensure the system is not used for money laundering.

At present, the e-money directive could be applied to the purchase and use of pre-pay mobile phone cards, which some countries have decided are covered by the new rules. The definition of electronic money is monetary value stored on a chip card or computer memory which is accepted for payment by someone other than the issuer. In interpreting this for use at a national level regulators have disagreed as to how the directive should apply in practice. Because of the confusion, the Commission decided last year to seek a common interpretation of the law.

More on this story here.


Facts: 1.) The top-earning 1% of US taxpayers pay one third (33.9%) of all federal individual income taxes collected while earning only 17.5% of all federally taxable individual income -- a 12.8% higher tax rate than they did ten years ago; 2.) The top-earning 1% of US taxpayers are facing frivolous lawsuits in phenomenal numbers, simply because our lax tort laws make them easy targets of opportunity; 3.) The top-earning 1% of US taxpayers are in more danger of government seizure (“forfeiture”) of their private property than ever before in our history; 4.) The top-earning 1% of US taxpayers are Leaving the USA at the highest rate in history. The IRS numbers cited above are not some bureaucrat’s pie-in-the-sky projections, but rather, they are are totals of actual IRS receipts.

Not only the Income Tax, but other legislative and regulatory attacks on wealth are forcing many of the people who pay the lion’s share of taxes, to leave the U.S. and because of some of that legislation, they are taking their wealth with them, thus, very disproportionately reducing the tax and investment base in the United States. Each new law attempting to stem “capital flight” represents yet another brick in an economic Berlin Wall that the wealthy see being erected by our government and meant to limit their financial options. But instead of forcing the wealthy to stay here, those laws are actually forcing them to move more of their wealth out of the US, while they still can.

Since the original publication of “Tick-Tick-Tick -- The Economy Bomb”, the earlier version of this article, in 2000, more oppressive legislation, aimed squarely at the top-earning 1% has made matters even worse. This is presenting a serious problem for the top-earning 1%. But, before you start shedding crocodile tears for those poor top income earners, remember that these people are almost all problem solvers. To them, this is only a speed bump. But their legitimate and justified response to the problems being created for them by US laws and the US tax structure represents a ticking time bomb that presents an even more serious threat to the remaining 99% of taxpayers. If you make less than $292,913 per year, then that is you.

It is no longer simply a matter of equity in taxation nor of the tracking of terrorists’ funds. As a result of recent and continuing legislation aimed at the wealthy, the economic future of United States of America is now seriously at risk, as those who can save our economy, are precisely the people who are being forced to leave. The wealth expatriation snowball is growing, day by day. I cannot say when it will reach critical mass, but at the rate it is going, it will not be long.

Link here.


The Foreign Office has launched an unprecedented, thinly-veiled attack on the Treasury over its agreement to a EU-led crackdown on offshore tax havens in what is left of the former British Empire. The FO’s annual report makes clear the frustration of officials responsible for the UK overseas territories, who are being compelled to force Caribbean offshore island groups and other territories to accept the provisions of the EU directive on taxation of savings, which the territories “believe could adversely affect their economies”.

More on this story here.


The EU Savings Tax Directive will arrive in 233 days. The legislation affects all European member states, as well as dependent territories such as the Channel Islands and “third” countries, including Switzerland, Andorra and Monaco. The directive will apply to all businesses in Jersey that pay, or directs others to pay, interest to individuals who live in a country that has signed up to the initiative. The majority of countries have decided to exchange details of interest paid but a small number of jurisdictions, including the Channel Islands and the Isle of Man, have decided to offer “paying agents” (which includes financial service providers) and their clients a choice between exchanging information or paying a withholding tax.

Mindful of the directive’s imminent arrival, accountancy firm Deloitte recently held a seminar in Jersey to outline what needs to be done ahead of the 1 January 2005 implementation date. Although Jersey has signed up to the directive, it is yet to publish detailed notes that will turn the directive’s broad proposals into practical guidelines. But the States has stated its intent to adopt a flexible approach and indicated who and what will be outside its scope. These include payments to residual entities such as company, trust or partnership, an unincorporated association or society, or an individual where it is known that they do not have to pay income tax, such as a non-domicile UK resident.

More on this story here.


EU diplomats have agreed to guarantee Swiss banking secrecy in exchange for Bern’s cooperation in taxing EU residents’ savings. Ministerial level negotiations between Switzerland and the EU will now take place to finalize a series of agreements after years of wrangling. Non-EU member Switzerland had refused to sign the taxation dossier until the EU agreed to give Bern an exemption on part of another treaty -- Schengen -- to protect banking secrecy.

Diplomats from the 25 EU member states on Thursday finally overcame the last stumbling block -- opposition from Luxembourg -- by giving that state the same guarantees. Luxembourg -- which also has banking secrecy rules -- had refused to countenance an opt-out for Switzerland, saying it would have given the alpine nation’s banks an unfair advantage over its own. Two years of negotiations between Brussels and Bern have been marked by the dispute over Swiss banking secrecy and further complicated by the enlargement of the EU on May 1.

The compromise proposal foresees that Switzerland will apply legal assistance in cases of indirect taxes (customs, value added tax, and levies on alcohol and tobacco). But Bern would be exempted permanently from granting the same rights in cases of direct taxation (income tax, corporate tax and capital gains). Two other issues -- granting access to the Swiss labour market to the ten new EU members and Switzerland’s contribution to the special fund to help the least prosperous states -- have since been added to the compromise package.

More on this story here, here, and here.


Two men charged with running a multimillion dollar pyramid scheme have been arrested in Phoenix on an indictment issued by a Florida grand jury. They are accused of cheating investors to obtain an undisclosed amount, targeting victims across the country from 1996 through mid-2000 by promising to invest their money in high-yield banking transactions with little or no risk. Prosecutors said the men used some of the money received from new investors to pay profits to older ones to keep the fraud going while laundering remaining funds through domestic and offshore entities. The defendants operated investment programs called European Marketing Group (EMG), Mammoth Capital Corp. and Skyward Enterprises, according to the indictment.

More on this story here.


Five people have been charged by the IRS with conspiracy to defraud the United States. The government alleges that the group sold “Global Prosperity” wealth-building products, including videotapes, CDs and seminars, which “included fraudulent methods of income tax elimination”. The seminars cost up to $37,000 to attend, according to the government, adding that the group then concealed income earned from the products by using bogus trusts and offshore bank accounts. One of the five, Laura J. Struckman, was found guilty on a charge of conspiracy to structure a financial transaction and was recently sentenced to 21 months in jail, according to the government’s statement. Each of the five face up to five years in jail and $250,000 in fines.

More on this story here.



Big Brother is not just watching you, he is listening too. The period after the 11 September terrorist attacks saw a massive increase in the development of technologies that can analyze and report on communications between individuals and organizations. Much of the resulting new technology is just starting to make its way into the public domain and we should all be concerned about its use.

Civil liberties groups find themselves on the defensive, with terrorism being used as an excuse for most incursions into our privacy. The next five years will see an avalanche of technologies being made available to governmental and commercial organizations, and there seems to be little education on how they can or cannot be used. Employees appear to be the least informed and tend to be ignorant that e-mails and telephone conversations are being investigated -- possibly in real time.

More on this story here.


Moves towards a Trans-Atlantic fingerprint database will top EU-US security talks in Washington this week. EU justice commissioner Antonio Vitorino meets US “Homeland Security” chiefs for negotiations centered on travel documents. Under plans currently set for agreement between the EU and US, European -- and American -- citizens face mandatory fingerprinting when applying for biometric passports.

Vitorino’s three day trip aimed at greater Trans-Atlantic security cooperation will see officials move further to agree electronic standards for including digitalized fingerprints on travel documents. He will also discuss EU plans to hand air passenger data to security agencies -- a US scheme is to be challenged in the European courts. The EC is set to propose an EU-wide storage of “Passenger Name Records” in June. Brussels has already proposed that EU passports include a digital facial image and fingerprints embedded in computer microchips.

More on this story here.


Proposed legislation in Congress could have some important privacy and security implications for companies outsourcing work to offshore destinations. The bill (S1232), called the Safeguarding Americans From Exporting Identification Data Act, was introduced by Sen. Hillary Rodham Clinton (D-N.Y.) last month.

Driving interest in such legislation are the growing privacy concerns relating to financial and health care information being sent offshore as part of outsourcing initiatives, including medical transcription work, he said. The bill proposes a set of privacy-related conditions that need to be met by U.S. companies transmitting personally identifiable information to a foreign affiliate or subcontractor. Under the proposed act, companies could transmit such information to any country that is deemed by the Federal Trade Commission to have a legal system that provides for “adequate privacy protection”. But the law as proposed does not address data that has already been transmitted to and stored in foreign locations, said Stephen Wu, CEO of a law firm in Mountain View, California.

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Air travelers are waiting longer and longer at security checkpoints in numerous airports, and airlines and congressional leaders are warning of possible gridlock this summer as air travel reaches record highs in some cities. Concerns are mounting as the Transportation Security Administration has struggled to hire security screeners and left some airports understaffed. Last year, the TSA cut 14,000 screener positions to reduce its screener work force to 45,000, a level mandated by Congress and now criticized by aviation and airport officials as inadequate. The number dropped to about 44,000 this year as screeners left and were not immediately replaced.

At the same time, the agency increased its non-screening personnel by about 600 employees, adding to its staff of 5,600 administrators, attorneys and analysts, according to personnel records. The TSA said the employees were essential and work in security areas other than aviation. But some aviation and congressional officials criticize what they call a growing bureaucracy at a time of security staffing shortages.

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DHS remains committed to contested passenger-screening program.

The Homeland Security Department plans to issue a directive this summer that will require airlines to turn over traveler information that the Transportation Security Administration will use to test the Computer Assisted Passenger Pre-screening System II program, spokesman Dennis Murphy said. “We’re working to develop the plan for putting out a security directive and a regulation to obtain the data,” Murphy said. “We’re hopeful to have it out this summer so we can do a full test of CAPPS II and analyze the full results of that test to determine what needs to be modified, if anything, so we can move forward and implement the program.”

CAPPS II has been criticized on privacy grounds. Airlines have been unwilling to provide passenger data to the TSA unless they are compelled by the government to do so, or privacy protections are put in place. The system would check information, such as a passenger’s name, address, phone number and birth date against terrorist watch lists and law enforcement information and commercial databases. Each passenger will then be graded on a color-coded risk assessment scale. Criticism of CAPPS II is growing due to recent disclosures that agencies obtained passenger information from airlines in the past without appropriate public notice.

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The cost of airport security tech.

The technology to screen for security risks without the knots that bedevil and delay today’s business travel is already online at some of the world’s airports, but its widespread use hinges on cost and other issues. The issue is of more than passing interest since airport delays are costing businesses millions of dollars annually.

Evan Scott, president of ESGI, a Philadelphia-based consulting company specializing in homeland security technologies, predicts a much wider use of fingerprint technology, with electronic scanners checking all 10 fingers when passengers place their palms down at a checkpoint. Those who have put their prints on file beforehand can be verified as to their true identity. The other common techniques involve pictures taken and electronically stored at checkpoints to be pulled up and compared when the traveler passes such a point again. Also, biometric data can be stored in passports or other travel documents, and technology can verify such documents.

But getting such systems to work in tandem with the same standards across the world, while answering concerns about privacy, is the challenge -- along with who foots the bill, said Scott. He is also a corporate board member for New Hampshire-based Imaging Automation, which sells technology that can verify documents -- rooting out fake or tampered-with passports, for instance.

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Some people are using cell phone cameras for nefarious purposes, such as taking pictures beneath women’s skirts and posting them on the Internet. Lawmakers want to make taking such surreptitious photos and other illicit uses of video technology a federal crime punishable by up to a year in jail. While there are no official studies on the intrusive use of camera phones, lawmakers and anti-crime advocates say “video voyeurism” is a serious crime that deserves a serious response by the government.

Simple voyeurism, secretly photographing or videotaping someone in a compromising position or in a private place, already is against the law in most states. The proliferation of tiny cellular telephones that can take pictures silently has facilitated the taking of illicit photos in public places such as grocery stores, sidewalks and restaurants. Even when a person finds out about a peeping Tom, the hodgepodge of laws around the nation sometimes let criminal cases avoid prosecution. Currently there is no federal law protecting citizens from secret and intrusive videotaping in public places.

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Anyone caught trying to enter Switzerland illegally from June 1 will be fingerprinted and the information stored on a national database. Up until now, only those without a valid passport or identity card have had their prints taken. Now fingerprinting is being extended to anyone who does not have the correct entry visa -- whether or not they hold a valid passport. Last year a quarter of Switzerland’s 8,000 illegal immigrants were found to be in possession of a valid passport and therefore had not been fingerprinted. The government says the new measures should reduce the number of bogus asylum applications and simplify “considerably” the work of the authorities.

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Secretary of State Colin Powell said the Bush administration is making headway in speeding the processing of foreign visitors, despite increased security needs following the 9/11 terrorist attacks. Mr. Powell told a business group in Washington the United States cannot afford to lose its more than $80-billion-a-year tourist trade. Security-related delays in the issuance of visas have been a major irritant in U.S. relations with Muslim and other countries since the terrorist attacks of 2001.

But Mr. Powell says innovations including the high-tech US-VISIT system that went into effect in January have dramatically reduced the waiting times for U.S. visas and entry formalities at American airports, at a time when international tourism has begun to return to levels that prevailed before 9/11.

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U.S. visa-waiver program “on autopilot”.

Shortcomings in the Homeland Security Department’s implementation of a program that allows foreigners to enter the United States without visas have created potential security risks, the agency’s inspector general said. “One ... official described the [program] as being ‘on autopilot, in an orphan status, with no designated manager or overseer,’” the office of the inspector general said in the report.

The program has had a series of acting managers in the department and has been run by various officials who share responsibilities, the report said. In addition, it said, many workers within the agency are unsure who is in charge. Disorganization and floundering management have prevented the agency from collecting good information on lost and stolen passports from participating countries and from avoiding their use by people who could be security risks, the report said. It also has affected biennial reviews of participating countries to determine whether they can continue in the program. A copy of the findings were given to Homeland Security in March, but the agency did not provide a written response.

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EU seeks visa-free travel to US for all EU members.

A top EU official formally asked the US government to expand to all 25 EU countries a program under which citizens of friendly nations are allowed to enter the US without visas. At the same time, EU Commissioner for Justice and Home Affairs Antonio Vitorino and EU Counterterrorism Coordinator Gijs de Vriest outlined the European Commission’s plans to adopt new EU-wide rules covering the exchange personal data for law enforcement purposes.

The request comes as the US is tightening its immigration rules in response to potential terrorism threats and will require nearly all US visitors, including those traveling without visas, to be photographed and fingerprinted on arrival by the end of September. Secretary of State Colin Powell had earlier lauded the impact of the new fingerprinting and photographing regulations which were imposed earlier this year on citizens of non-visa waiver countries. Powell told a meeting of travel and tourism executives that since January more than 200 known or suspected criminals had been stopped from entering the United States under the new rules, known as US-VISIT. He made no mention of adding to the 27 nations, mainly in Europe and Asia, that now participate in the visa waiver program.

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The EU expects to start issuing new biometric passports with digital photographs and fingerprints by the end of 2005 and hopes the United States will continue to allow visa-free travel as a result, a top EU official said. Under current U.S. legislation, visa-free travel for 27 U.S. allies -- including many EU states -- is in jeopardy. It requires all new passports from these “visa waiver” countries to contain a biometric identifier, like a fingerprint or a face-scan, from Oct. 26, a deadline most of the states say they cannot meet.

Both European and U.S. officials are eager for Congress to extend the deadline. Unless this happens, the United States risks a huge shortfall in traveler spending and a consular nightmare when millions of visitors suddenly require visas. Some 15.1 million people came into the United States under the visa waiver program last year, and their spending accounted for about two-thirds of spending by overseas visitors.

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Serbian customs seize fake Belgian passports.

Serbian customs officers seized 1,315 fake passports purporting to come from several European countries including Belgium. The customs officials made the find during a raid on a vehicle in the Bulgarian town of Lkw, just over the border from Serbia. Aside from forged Belgian passports, the haul also included fake travel documents claiming to have been issued in Italy, Portugal, Spain, Denmark and Greece, as well as a large number of fake driving licences. The documents were destined for the EU, where they would have sold for €1,000 to €5,000 apiece.

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G-8 nations vow to share information on lost, stolen passports.

The G-8 leading industrial nations agreed to share information about lost and stolen passports and vowed to work together to secure borders, ports and skies to help thwart terrorism.

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A Chinese government plan to force kids to show ID when they go to Internet cafés has resulted in a youth revolt. Staff members of an Internet service chain in Xi’an have all quit after suffering retaliatory assaults for barring minors. China has imposed an R18 ban on Internet cafes, rating the net as dangerous as alcohol to young minds. This has placed the staff in the position of having to ask teens for ID and the kids are not having any of it.

In one café they have threatened to beat up anyone who dares to check their ID cards and had been forcing their way into cafes. Often they will get one or two taking over the reception desk to prevent owners reporting the incident to the police. Other times they just lay into the staff with make shift weapons. In one incident police backed up the café’s security guards, but were not enough to stop the assaults.

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Thomson Wadsworth, a leading provider of higher education textbooks, including those for the criminal justice discipline, released survey results indicating that many of the nation’s top criminal justice experts harbor deep concerns and negative views of the USA Patriot Act. Nearly all the criminal justice experts polled for the survey say the Act was passed too quickly and without adequate regard for the long-term legal repercussions of the Act’s provisions. In addition, a solid majority says the Act violates the rights of individuals.

Key findings include: 1.) 95% of the respondents feel that the Patriot Act was passed too quickly without considerable thought on how it may impact existing laws or public policy; 2.) 74% of individuals feel that the Patriot Act violates individual rights; 3.) 68% believe that existing laws could be leveraged to protect the nation from terrorism.

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Mend it or end it? A better question is why Bush wants to make the Patriot Act an election issue.

President Bush has gone out of his way to mention the act at recent campaign stops and administration people at the 9/11 hearings made a point of contending that the Patriot Act was the key to tearing down barriers between the FBI and the CIA and other agencies of domestic law enforcement and foreign intelligence so that different parts of the government could communicate with one another. Does it really make much difference whether the Patriot Act is made permanent or not? In a word, yes. The fallout of it becoming permanent would include long- term deleterious effects on your freedom and mine. That is why it is important to understand the most dangerous provisions and the political campaign now underway to keep it in place.

Robert Levy, a constitutional scholar at the libertarian Cato Institute, finds the administration push just now rather strange. Grover Norquist, head of Americans for Tax Reform, does not think it is vased on a sound calculation. Reservations, from perhaps unexpected sources, are rampant. In March the city council of Richmond, Virginia, became the 62nd governing body in the country to pass a resolution asking Congress to pass the “Safe and Free” reform legislation. That legislation is co-sponsored by Idaho Republican Sen. Larry Craig -- who just might be the most conservative member of the Senate -- and moderate Democrat Dick Durbin of Illinois. Critics of the Patriot Act include not only the predictable ACLU and American Library Association, but the National Rifle Association and American Conservative Union.

Whether it makes sense or not, the Patriot Act is in play. Here are some of the key provisions that are either now unnecessary, having been overtaken by other events and practices, or are downright harmful to individual liberties.

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Presidential push fails to quell GOP fear of Patriot Act.

A group of libertarian-minded Republicans in Congress is blocking President Bush’s effort to strengthen domestic counterterrorism laws and reauthorize the USA Patriot Act, which the president has made one of his top domestic priorities this year. As a result of this opposition, Rep. Jim Sensenbrenner (R-Wisonsin), the chairman of the Judiciary Committee, was forced last week to cancel panel consideration of legislation that would have given law-enforcement officials more tools to pursue suspected terrorists.

Among other powers, the legislation would have given law-enforcement officials the power to compel compliance with administrative subpoenas, one of the most controversial elements of the Patriot Act that a sizeable group of Republicans on the Hill are trying to abolish. Administrative subpoenas may be issued by law-enforcement agencies without the approval of a court. Last week’s minirebellion is symptomatic of broader opposition among Republicans in the House and Senate to provisions of the Patriot Act that the administration has deemed essential to its battle against terrorism. Fifty-eight lawmakers, including six Republicans, have co-sponsored legislation sponsored by Rep. Butch Otter (R-Idaho) in the House that would rein in aspects of the Patriot Act.

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Switzerland’s biggest bank has been fined $100 million for violating U.S. trade sanctions by issuing dollars to countries on Washington’s blacklist. UBS admitted “very serious mistakes” had been made and said it would now stop banknote trading outside Switzerland. The fine is to be levied by the United States Federal Reserve.

The Fed said the transactions were conducted through UBS’s Extended Custodial Inventory (ECI) facility in Zurich which was operated through a contract with the Federal Reserve Bank of New York. ECIs act as cash depots run by banks on behalf of the Fed to help distribute new banknotes and retire old ones. UBS had agreed not to do business in US banknotes with countries under a US trade embargo. But following an internal investigation after queries from the Fed, UBS found dollars had been traded with Yugoslavia, Iran, Libya and Cuba. The investigation revealed that UBS employees had submitted false reports to the Fed to conceal the transactions.

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Officials in cities with large immigrant populations are criticizing a federal proposal that would require local police to enforce immigration laws, saying the shift would ruin community relationships and hurt crime-fighting efforts. Two bills pending in Congress would require police to play a larger role by giving the nation’s 600,000 local and state police officers the authority to detain illegal aliens. Much of that work currently is done by about 2,000 agents working for the U.S. Department of Homeland Security. In the 12 months ending Feb. 29, they removed about 180,000 illegal immigrants, a 21% increase in a year.

Officials in cities such as Dearborn, Hamtramck and Sterling Heights say directing police to investigate the status of immigrant residents makes residents suspicious of police -- drying up important sources of information. Residents worry that the proposals will hurt response times by local police departments, already struggling under tight budgets with state revenue sharing cuts and Michigan’s lagging economy. Dearborn officials say the proposals come at a time when the responsibilities of police have multiplied in the wake of September 11.

Other cities in Michigan and across the nation are weighing in against the proposed legislation. In Ann Arbor, the City Council has directed its officers not to enforce immigration laws, unless a particular case affects public safety. Mayor Gordon Quan of Houston has ordered his department not to enforce immigration laws. And major city police departments, including New York, Los Angeles, Boston, Chicago and Denver also oppose the tactic.

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May 17 is the 50th anniversary of Brown v. Board of Education, the Supreme Court decision that used federal force to integrate public schools in the US. The anniversary will be widely celebrated in print. Jumping the gun by several weeks, The Nation devoted its May 3 issue to celebrating Brown. The magazine celebrated early, because the editors fear that Brown’s anniversary might pass with insufficient notice by those who should most treasure the decision. Many on the liberal-left and in black civil rights circles have soured on Brown and regard the decision as contributing little to the “black freedom struggle” and even as a disservice to blacks.

David Garrow, author of the Pulitzer Prize-winning biography of Martin Luther King, Bearing the Cross, writes that Brown still matters to the left because the power the Court seized in its Brown ruling can be used to mandate homosexual marriage. The Massachusetts court has taken the lead, and on May 17 homosexuals will be able to obtain state marriage licenses. This, Garrow writes, is a fitting tribute to Brown’s constitutional vision on its 50th anniversary. Whether one looks with favor or disfavor on homosexual marriage, Garrow is correct. Brown gave the judiciary the power to impose its morality on society, regardless of legislation or societal values.

Brown has gained acceptance, because people have come to regard segregation as wrong. Brown got rid of a wrong and, thus, cannot be wrong itself. This is fine as far as it goes. But Brown did something else. It ushered in kritarchy -- government by judges -- as Supreme Court Justice Stanley Reed recognized. Kritarchy is fundamentally at odds with the separation of powers and the character of the American political system. Now that judges rule, the fight over Court appointments has become a life and death matter for the two political parties. Even worse, in place of good will and persuasion Brown substituted coercion as the basis for reform.

May 17, 1954, is a day of infamy, because it is the day Marxism triumphed over liberalism in America. The Brown decision was based on Swedish socialist Gunnar Myrdal’s argument that all Americans (even Northeast Liberals) are so racist that democracy would forever uphold segregation. To get rid of the great evil, an elite would have to seize power and rescue America from immorality. With Brown, the Supreme Court elevated Myrdal’s doubts about American democracy above James Madison’s confidence in it. Ignoring Madison’s warning, the Court made itself a “will independent of the society”. In so doing, the Court upheld Karl Marx’s dictum that good will is not an effective force in human affairs. Brown’s true legacy is rule by judges, the destruction of equality before the law, the replacement of persuasion with coercion, the end of freedom of conscience, and the rise of insatiable racial grievances.

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The UK has a new anti-money laundering law and Jersey must decide if it wants to follow suit. Hoping to stimulate debate on this issue, law firm Carey Olsen recently held a seminar to brief finance industry representatives on latest developments in the UK. The UK Proceeds of Crime Act became law on 1 March and although Jersey’s 1998 law has the same name, there are significant differences. “In the past it’s been fairly safe to assume that it is only a matter of time before Jersey replicates a UK law in full,” said Paul Sugden, a partner at the firm. “But now we tend to look at the UK experience with a more critical eye and we don’t necessarily adopt a one-stop shop approach.”

“The UK legislation, for instance, covers all crimes but the law in Jersey only applies to crimes that have a minimum sentence of a year or more in prison. But the result of removing that threshold in the UK has been an upsurge of suspicious transaction reports arriving at the National Criminal Intelligence Service, which has stretched their resources. We have to see what effect a similar quantum rise in reporting would have on the Joint Financial Crimes Unit should we extend our law.”

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I have argued that the Bush administration’s attacks on the Bill of Rights, egregious as they are, do indeed have their precedents in history. I never meant to defend Bush on this basis, but merely to give historical perspective. I stand by what I said. Bush, bad as he is, has not violated the Constitution any worse than Lyndon Johnson, Richard Nixon or Harry Truman, and not as badly as Woodrow Wilson, Franklin Roosevelt, or Abraham Lincoln.

Nevertheless, Bush did swear an oath to uphold the Constitution, and he has shirked that duty considerably. We should not hold him to the standard of past American tyrants, but rather to the finest of America’s founding principles. It is useful, though perhaps depressing, to see the many ways in which president Bush has trashed the most noble and inspiring of all attempts to limit government through law, the Bill of Rights. Even as he advocates a new amendment to the Constitution to set national standards on marriage, the most important amendments already in place have each fallen prey to the ravages of his government.

The Bush administration has been utterly hostile to the entire Bill of Rights. I did not focus on it, but one can quickly realize that Bush has violated all the principles of the Bill of Rights in regard to the Iraq War alone. During wartime, the Bill of Rights and its corresponding liberties tend to suffer extraordinary abuse. Bush prides himself as a “war president,” and so it should come as no surprise when he treats his foreign and domestic subjects accordingly. We must have a clear understanding and appreciation for how much George Bush and the present government are undermining the principles that made America so special. The first Ten Amendments of the Constitution provide a blueprint for an incredibly free society. Perhaps Bush, who has a phobia against reading anything aside from what his advisors give him, should break with personal custom for at least half an hour and read the Bill of Rights.

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U. S. Constitution: Thirteenth Amendment:
Section 1. Neither slavery nor involuntary servitude, except as a punishment for crime whereof the party shall have been duly convicted, shall exist within the United States, or any place subject to their jurisdiction.

Since it is being studiously avoided by the print and television media, there is no effort to expose and strangle the Universal National Service Act (HR 163/S 89), which violates the 13th Amendment, in its crib. The UNSA language mandates that all young people, “including women,” between the ages of 18 and 26 “...perform a period of military service or a period of civilian service in furtherance of the national defense and homeland security, and for other purposes.” In April a sponsor of UNSA, Rep. Charles Rangel, D-NY, was seen on every network complaining that the majority of U.S. combat deaths in Iraq were among minorities because a disproportionate number of minority youths join the military service. To continue the American Domino Effect of inserting puppet governments controlled by US-based banking and trade interests, Rangel, who we see as a slave descendant, is attempting to create yet more black slaves, with the excuse that their slavery is not slavery if captives from other races are thrown onto the federal plantation with them.

UNSA is not about money. The globalist elite have already all the oil and banks along with the Federal Reserve to print all the money they could ever use. This is about global socialism. Convert America to socialism and every country must follow or die, as did Afghanistan and Iraq. The writing is not only on the wall, but the Hand is poised to flatten the observer. One day, those that refuse enslavement will not be able to run to Canada. Those that object to their collars will be sent to janitorial jobs for almost no pay. Refusing that will result in re-education camps. We can envision those that resist all these measures will become fugitives and “Enemies of the State” subject to imprisonment under the PATRIOT Act.

There will come a time when apathetic Americans will, indeed, turn and fight only because it is better to die than to live on their knees scratching for survival since all the young people in their families were removed. And the greatest pain Americans will suffer is the memory of their foolishness, that they refused to even TRY to fight when they had the chance for easy victory at a cost that was not, at that time, too dear. That time is now. Until then, may the global socialist yoke of UNSA settle gently about the shoulders of our children.

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No Draft -- Ever!

Iraq has become a bottomless pit for American blood and treasure. (To the Bush administration, Iraqi casualties seem unworthy of counting.) Congress will provide the treasure, compliments of the taxpayers. But who will provide the blood? At the moment, there are not enough men and women under arms. Troops are being made to stay in Iraq beyond their promised tours. Reservists and national guardsmen have been called up. And the discharges of several thousand military personnel have been delayed; they are now in the armed forces against their will. It is still not enough. That is why we are hearing talk of conscription.

If politicians are going to discuss reviving conscription, could they please have the decency to do so honestly? Draft advocates want the president to order young people into the army and to send them to Iraq where they may have to kill and may be killed (or maimed as so many have already been). There. Was that so hard to say? Now let’s say something else: The draft is slavery. No patriotic euphemisms about service to one’s country and shared responsibility can hide this fact. When the government says you must surrender a portion of your life (not to mention perhaps life itself) -- for whatever purpose -- that is slavery. No one has ever come up with argument to refute that statement.

Remember, President Bush says he is keeping Americans in Iraq because it is his calling to bring freedom to the world. Freedom. If Bush decides to reinstitute the draft, he be will destroying Americans’ freedom so that he can spread freedom to Iraq, the Middle East, and beyond. Does that make sense? It makes as much sense as anything else about the Iraq operation -- namely, none at all.

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Something wicked this way comes...

There is an ill wind in the air that chills my bones whenever I hear it whispered: the draft. In broaching the subject of the draft, I had a number of ways in which I could write this column. I tried fiery indignation and humor, but now it’s painfully clear to me that the only way I can even attempt to approach this very significant issue is through simple appeal to anyone who considers the draft as a solution; an appeal to the reason and common sense of everyone.

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So Dubya and his crew of dimbulbs are scratching their heads over all the the problems in Iraq. Goodness. A four-year-old child could have told them their screwball ideas would not work. So, as Groucho Marx said, someone get a four-year-old child! Have none of the people in the administration ever heard of Murphy’s Law? “If something can go wrong, it will”? Or in their hubris do they believe they are immune from mistakes? Apparently, they do.

So, in the spirit of educating them and improving their morals, I will give them a list of easily-memorized laws, to save them from making these embarrassing mistakes next time. Of course, all of us know they won’t listen. They never do.

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The further away they are from politics, the more honest and value-giving businesses tend to be. The closer they are to politics and government, the lazier they are, and the more prone they are to the three deadly sins. Concerns about dishonesty or bad value in business, when reduced to their essentials, are really concerns about people in business not behaving in a business way, but in a political way.

Recall what business is based on: peace, value to others and honesty. Business is about treating others with the respect due to human beings. Politics, on the other hand, is about controlling people. It is based on the three deadly sins: violent aggression, theft and mental manipulation. Honest business people are better human beings than the politicals. And the politicals know it. That is why they hate business, and business people, with such intensity. They are like school bullies, that pick on the bright children in the class. They hate us for our virtues.

There has been, in recent years, a new attempt by lovers of freedom to lighten and brighten people’s view of business. To concentrate on positives, not negatives. To celebrate the benefits of business and free trade, and in particular to celebrate the capitalist system which supports them. I think this emphasis on positives is good. But I am not sure that capitalism, with its rather 19th-century feel, is actually the right thing to be celebrating. I am coming to the view that what we should be celebrating is the moral beauty of business. We should be celebrating the peace, purpose, energy, honesty and value of business as virtues in themselves. We should be helping honest business people to realize that they are morally far superior to the political scum that want to rule over them. And we should be promoting and celebrating the common-sense justice, which brings rewards and pleasures to those who earn them, and contempt to those that deserve it.

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It is close to impossible for conservatives to get any but rah-rah kick-their-terrorist-butts commentary on the Iraqi conflict. Anyone who relies on Fox News, the Weekly Standard, National Review or the Wall Street Journal Editorial Page for understanding the US invasion and occupation of Iraq is as propagandized as Germans during the Nazi era. The TV networks are not much better. Indeed, it is a legitimate question whether the invasion could have occurred without television’s interest in exciting news. American conservatism was killed by the September 11 terrorist attack on the US. Overnight conservatives became neoconservatives, determined to protect America by remaking the world in our image.

Neocons are not conservative. They are, as Professor Claes Ryn has conclusively shown, neo-Jacobins. Their roots lie in Robespierre and the Trotskyite left. Conservative media voices have become neocon propaganda organs. Prior to the US invasion of Iraq, it was clear that the US was making a strategic blunder. An invasion that would clearly outrage the Muslim world, breed terrorism, and even unite long-feuding Muslims was not in our interest or in Israel’s interest. The new conservatives, however, would brook no dissent about the righteousness of the American cause in Iraq. With their policy in ruins, neocons now claim that Bush failed because he was not forceful enough. Prior to the torture scandal, neocons were calling for Defense Secretary Rumsfeld’s resignation for being a wimp and not invading the entire Middle East.

There is a large contingent of neocon brownshirts who believe that Americans have let the millennium-old crusade against Islam go unfinished for too long. This is not an environment in which sound judgments are likely to be made. Just as Hitler, stalemated in his war against England, marched off into Russia, neocons argue that to win in Iraq we need to attack Syria and Iran. If Bush is reelected, wider war and a draft to feed it seem a certainty.

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In the heart of the heart of the “Homeland” -- the verdant fields and quiet townships of rural Ohio -- the fate of the world is being decided. There, the sway of a few votes could sway a key state whose political bent could sway the entire U.S. presidential election in November. That is why the Bush campaign has adopted the methods of Amway, the quasi-religious cargo cult/pyramid scheme that has suckered millions of rubes into peddling cheap tat and passing the profits up the ladder to the leaders, who sit in stern judgment on any disciple who fails to follow the prescribed rituals or feed enough new converts into the machine’s ever-grinding maw. “Amway [is the model], no question,” campaign officials cheerfully told The New York Times this week.

The cheap tat being peddled by Bushway is, of course, the candidate himself -- or as campaign director Ken Mehlman describes the product, “it’s love and belief in the importance of the president.” The cult’s vast command-and-control machinery has now descended on rural Ohio, where campaign volunteers -- who once merely had to “support” candidates but now must “love” them -- are toiling to meet Mehlman’s whip-cracking corporate targets for contacts, converts and cash.

Beyond its grimly fascinating portrait of a Stalinist-Moonie personality cult at work, the article also reveals a new phenomenon on the American scene, a disturbing development that goes a long way toward explaining the profound, persistent and widespread disassociation from reality that pervades American society and may yet carry the Potemkin president to victory: Fake horses. Bushway operatives are now trolling heavily in the “exurbs” -- middle-class and upscale housing developments sprouting all over the countryside. Developers lure stressed-out city-dwellers to these gilded holding pens by constructing a cozy image of an old-fashioned rural community, complete with fake storefronts -- beguilingly realistic, but only a few feet deep -- and, yes, fake horses, made of metal, gently nosing over white picket fences.

Mehlman’s minions believe exurbia offers rich pickings for the Bush cult -- and they are probably right. People who live in fake towns, with fake stores and fake horses, are likely to be happy with a fake president, who uses fake evidence and fake words about “freedom” and “peace” to launch all-too-real wars of conquest while turning the national treasury into a candy store for his cronies. The exurbanites’ virtual reality is a perfect reflection of the dreamworld where half the nation now dwells, snug in the continuing belief that Saddam Hussein actually had weapons of mass destruction, that he was a staunch ally of al-Qaida, and that every lie their cult leader told them before the war was, quite literally, the Gospel truth, as Knight-Ridder reports.

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The conservative case against George W. Bush.

Some liberals admit that they hate President George W. Bush. Many conservatives say they are appalled at this phenomenon. Indeed, some of them believe any criticism of the president to be akin to treason. So much for the political tone in Washington. American politics have never been for the faint-hearted. Even George Washington suffered some public abuse, and presidential campaigns involving revolutionary luminaries John Adams and Thomas Jefferson were vitriolic.

Now Jonathan Chait of the New Republic says simply, “I hate President George W. Bush.” James Traub in the New York Times Magazine says that “George Bush is a craven, lazy, hypocritical nitwit.” Chait’s recent essay has triggered a spate of conservative responses. Bush is wonderful, liberals are irrational, and the whole thing is bad for America. These are rather hilarious arguments coming from conservatives.

Much of the liberal case against President Bush is barely short of silly. His election was not illegitimate. Whether or not the candidate with the most votes should win, that is not what the U.S. Constitution says. Blame the Founders, not George W. Bush. Complaints about Bush’s fabled inarticulateness and privileged background are superficial. More worrisome are his partisan focus, demand for personal loyalty, and tendency to keep score, but these are hardly characteristics warranting hatred. The charge that he is a crazy right-winger is beyond silly. Other than tax cuts -- which have benefited the rich only because the rich paid, and still pay, most of the taxes -- virtually nothing of conservative substance has happened. Government is more expansive and expensive than ever before. The Republican Party that is increasing spending faster than during the Clinton years. Right-wing extremists? For the Left, liberal means centrist, and moderate conservative approaches fascist. Really conservative is off the spectrum.

But this president deserves to be criticized. Sharply. By anyone who believes in limited, constitutional government. Liberals should identify with the Bush record. He is increasing the size and power of the U.S. government both at home and abroad. He has expanded social engineering from the American nation to the entire globe. He is lavish with dollars on both domestic and foreign programs. For this the Left hates him? Whether or not he is a real conservative, he is no friend of limited, constitutional government. And for that the American people should be very, very angry.

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The confrontation between the individual and the collective has long been the topic of literary and philosophic examination. Socrates taking the hemlock, Galileo forced to recant his scientific discoveries, Gulliver being tied down by the Lilliputians, or John Galt forced to retreat to his Colorado gulch, are among the more vivid examples of individuals repressed by collective forces. Artists, writers, and other intellectuals are ever on the alert to warn of threats to the kinds of creative conduct in which they deal. But the virus of collectivism insinuates itself into our lives long before men and women are beheaded or sent to gulags for their politically incorrect opinions.

If our minds are to become fully collectivized, we must learn the catechisms upon which the existence of institutions depends. Having severed the consistency of purpose between individual and social needs that is implicit in all voluntary behavior, the state -- largely through its school systems -- has conditioned us to believe that we are the state, that political systems are but an extension of our will, that politicians and bureaucrats are our “agents”, desirous not only of defending our liberties and advancing our interests, but ever mindful of their status as public servants to our will.

We eagerly embrace this doctrine as a way of silencing those inner voices that whisper to us the falsity of the proposition. We are inwardly troubled by the thought that we might be nothing more in the scheme of things than institutional chattels, to be employed as best suits our owners. We attempt to resolve such a dilemma by reciting the dogma that the institutional order exists to serve us. Many of us still pretend that politicians, judges, bureaucrats, police officers, members of the military, and other government officials, go off to work each morning with no more paramount purpose than the elimination of barriers to our sense of self-fulfillment.

I am suggesting is that the collectivist mindset is the most dangerous social condition mankind faces, whether it finds expression in the form of suicide bombers, a willingness to become a cog in a government’s war machinery, or simply in resigning oneself to a lifetime of control by institutional bureaucrats. State collectivism does not begin at the point of a gun, but culminates there. Its origins are to be found in our attitudes about the independence of individuals who choose, for whatever their reasons, to live outside prescribed herds.

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In 1914, Kaiser Wilhelm II, whom history has underrated, told his Chief of the General Staff, von Moltke the Less, that he wanted to remain on the defensive in the West and take the offensive in the East, against Russia. Such a reversal of the Schlieffen Plan would probably have won the war for Germany. France would have bled to death throwing bodies against bullets in Elsass and Lothringen, England would have remained neutral, at least for a while, and Russia would have gone under in a couple years. Unfortunately for Germany and for history, von Moltke Jr. collapsed in a fit of nerves and said it could not be done. In fact, the plans for just such a campaign were in the file. They were there because it was the job of the General Staff to make plans for every contingency.

The disastrous course of America’s war in Iraq has created a new task for the Great General Staff, in the form of more contingency planning. America needs to make sure it has a plan in the file for a fighting withdrawal from Iraq. It is still possible the end may not come this way. We may still manage a shaky hand-off to a U.N.-designated Iraqi government, and that government might last long enough for us to withdraw with some shreds of dignity. George W. might awake some morning a new man, announce he was swindled, sack the neo-cons and bring in someone like Marine Corps General Tony Zinni, who opposed the war all along, to handle our disengagement. The Archangel Michael might appear over Mecca and convert all the Mohammedans to Christianity.

But the growing probability is that we will be driven out of Iraq by a general uprising, an intifada in which every American will be the target of every Iraqi and our boys (and, in America’s Neo-Model Army, girls) will have to fight their way out in a scene like that which faced Gordon in the Sudan. It is not a pleasant prospect. It means thousands, perhaps tens of thousands, of American and “coalition” casualties, many times more Iraqi casualties, and one of history’s more memorable defeats, right up there with Syracuse, Waterloo and Stalingrad. The aftershocks will be severe, as regimes tumble from Pakistan through the Persian Gulf and Egypt to Britain and America itself. You can look forward to seeing the Dow at 3000, if not 300.

Facing such a contingency, we can have only one priority: the lives of our troops. Their chances of making it out alive will be far greater if we have done some planning beforehand. Our great vulnerability is that our lines of supply, communication and retreat are long, and they almost all run through hostile territory.

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The champions of the Iraq War are in transition phase, already assuming that history will hold them accountable for an ongoing fiasco and thereby trying to put the best spin on it. The way to think about their efforts is by analogy to the early supporters of the Bolsheviks, during the period of war communism. The supporters of the Iraq War were no less fanatical than the Bolsheviks in their conviction that power could accomplish miracles at the push of a button. People like David Brooks are now saying that the embrace of power was a mistake. “We were blinded by idealism,” he explains in a manner reminiscent of every apologist for a fanatical despot in the history of the world. Idealism!

Let us state the lesson in ways that might penetrate the brains of these scribblers. When a person’s “idealism” is contingent on issuing a dictate that people must obey or be killed, and on the assumption that human beings will do what they are told to do so long as the knife is at their throat, and on the further assumption that the people paying with their money and lives will believe every lie you tell, it is time to rethink your ideals. Otherwise they will end in mass suffering and devastation.

The core problem in Iraq right now is not some rogue corporals engaged in sadomasochistic torture; the problem is the “idealists” who think nothing of attempting to reconstruct an entire region of the world using bombs and bloodshed. War is idealism in the same way that Communism and Nazism were idealism: the fanatical dream of people who insisted that the world conform to their vicious imaginings, and just so happened to get hold of the power of the state and used it to make their “ideals” happen. They are the people who give us killing fields. War too is a god that has failed.

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