Wealth International, Limited

Offshore News Digest for Week of May 17, 2004

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

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A twenty-year courtship between the 40-island chain of Turks and Caicos and Canada has been renewed under the leadership of Prime Minister Paul Martin. The PM has agreed to meet Michael Misick, the islands chief minister. Around 90% of the islands 25,000 citizens support of the idea of becoming the 11th province of Canada. Three previous attempts to hook up with the Great White North have failed, but renewed interest might make the dream (for some) a possibility before next winter.

Many Canucks also favor the idea, as it would provide the country with a holiday hot spot during eight months of winter; offer affordable tax haven offshore banking; and encourage year-round summer Olympic training, but most importantly, the former shipping magnet turned Prime Minister could then claim his ships are flagged in Canada and not the third world as is his current practice.

About 30% of the islands tourism destinations are owned by Canadian business people, and investment in general comes heavily from Canada. Wealthy seniors are building retirement homes and condos. Folklore has it that every islander knows at least one Canadian. Like Canada, Turks and Caicos’ annual budget is balanced and they do not have any debt. They do receive some financial aid funding from Great Britain, but Canada could easily take over this funding. Having both been colonized by the English both countries share similar government institutions, ideologies, and a simmering distaste for the U.S. Likewise, both countries draw the ire of the U.S. for their lax enforcement of drug laws.

More on this story here.


Riggs Bank agreed to pay a record $25 million in civil penalties for what federal regulators called a “willful, systemic” violation of anti-money-laundering law. Regulators said the bank failed to report, detect or even look for clearly suspicious transactions in accounts related to foreign embassies. Riggs officials have acknowledged years of deficiencies in reporting to law enforcement hundreds of millions of dollars in suspicious financial transactions by foreign customers, particularly those connected with the embassies of Saudi Arabia and Equatorial Guinea. They cited tens of millions of dollars in cash withdrawals and the writing of dozens of sequentially numbered cashier’s checks on Saudi accounts.

More on this story here.


The EU finally overcame internal differences to clear the way for Bern and Brussels to sign a set of nine bilateral treaties. These will give Switzerland membership of the Schengen agreement -- which would allow it free movement of people across the EU borders -- but with an opt-out on sharing information about tax evasion. Switzerland was concerned these would threaten banking secrecy. In return, Switzerland will sign up to the EU’s savings tax directive and levy a withholding tax (35%) on EU residents’ savings income in Swiss banks.

Luxembourg -- the EU’s most defiant defender of banking secrecy -- signaled its support for the compromise, as the compromise ensures that Luxembourg-based banks (as well as banks from Belgium and Austria) can offer the same terms to savers as those situated in Switzerland. However, several other EU member states have reservations about the shape of the deal. Formal concerns about the compromise were voiced by Denmark, the Netherlands, Sweden and Finland.

More on this story here, here, and here.

EU-Swiss leaders endorse tax, borders deal.

EU and Swiss leaders endorsed a long-awaited deal on offshore tax fraud that will in return see the Alpine state join the bloc’s passport-free zone. The accord to tax secret bank accounts held in Switzerland by EU residents will be initialled by the end of this month and signed in August. EU-Swiss negotiations on the tax deal and a host of other issues “have been going on for long and leaders considered that time should now be ripe for closure of all of them”, both sides said in a joint statement. The three EU member states that last week expressed reservations on a separate deal struck with Luxembourg and Switzerland concerning the savings tax directive, have now dropped their objections to the agreements.

The zone has abolished passport controls among its 15 participating member states. Switzerland is unlikely to join until early 2007, officials said. The Swiss government agreed to cooperate more with the EU in fighting customs fraud and money-laundering, and to grant full employment access to the bloc’s 10 new member states by 2011. It will also pay 200 million Swiss francs (130 million euros, 153 million dollars) annually into EU economic and social “cohesion funds”.

More on this story here, here, and here.

Switzerland will miss Jan. 1 deadline for EU Tax Plan.

Switzerland will not meet the EU’s Jan. 1 deadline for imposing a tax on foreign bank accounts. The savings tax pact takes effect only when all 25 EU countries agree that Switzerland and other neighbors are ready to comply. About 70% of non-domestic money in Swiss accounts is not declared to tax authorities, according to Deutsche Bank AG. The EU also has to sign similar arrangements with the independent European countries of Liechtenstein, Monaco, Andorra and San Marino. Offshore territories of the U.K., such as the Channel Islands and the Caymans, and the Netherlands, such as Aruba, also must participate for the plan to take effect.

More on this story here.

Swiss government faces domestic opposition over bilateral treaties.

Despite having provisionally reached an agreement with the EU over the EU’s Savings Tax Directive and the second set of bilateral agreements between Switzerland and the European bloc, the Swiss government faces a tough task to convince its political opponents at home to accept the agreement. According to reports in the Swiss media, right wing parties such as the Swiss People’s Party are opposed to the plans to cooperate more closely with Brussels on security and other matters, and are likely to attempt to force a referendum on the treaties.

More on this story here.


The death in a heliocopter crash of British lawyer Stephen Curtis set off alarm bells in Britain’s intelligence agencies and law enforcement circles worldwide. No one said so publicly, but the authorities were deeply suspicious of the circumstances surrounding the crash, although the official investigation has not yet been concluded. He was one of British intelligence’s latest informers. Curtis approached UK intelligence agencies in the weeks before the crash, offering to provide information about illicit Russian business activities in Britain.

In the days before his death, he had been assigned to a handler at the UK’s National Criminal Intelligence Service (NCIS), which collects information about organized crime in Britain. “My sense,” someone close to British intelligence said, “was that he was fearful of being prosecuted by the Russian authorities for being party to assisting in the capital flight and that he thought that going to the UK authorities would give him some sort of top cover.”

Curtis was likely to have needed a great deal of cover. For the 45-year-old lawyer had found himself in the middle of one of the highest stakes contests between state and private power in the world -- between Russia’s most powerful man, President Vladimir Putin, and its wealthiest man, Mikhail Khodorkovsky. The month after Khodorkovsky was imprisoned, and to widespread surprise, Curtis was put in charge of Khodorkovsky’s Menatep, a $30 billion holding group that owns a large portion of Russia’s second-biggest oil producer, Yukos. What was he doing for Menatep at the time of his death? And why did he approach the UK authorities? Unless his partner in many of his financial schemes, Peter Bond, talks, the secret may have gone with Curtis to his grave.

More on this story here.


More than two-thirds of voters have rejected a package of government proposals for tax breaks, pension reforms and a rise in Value Added Tax. The outcome is a blow to the government and parliament, which put forward all three proposals. The center-left Social Democrats, who opposed both the federal tax package and the pension reforms, said they were delighted by the results. Voters appear to have been swayed by the arguments of the Left that the rich stood to benefit the most from tax cuts and that the already cash-strapped cantons would suffer. Opponents also argued that the pension reforms would weaken the most important pillar of the country’s social security system.

The votes had been seen as a key political battle between Switzerland’s center-right parties and the center-left. They were also considered a vote of confidence in the Centre-right in parliament and the cabinet. For Emanuel von Erlach, a political scientist at Bern University, Sunday’s results were further proof that the Swiss do not like radical change or complicated proposals. “[The cabinet and parliament] have to realize that the electorate has a power of veto in the political process and that the Swiss favor compromise.”

More on this story here and here.


Complying with a European tax ruling could cost government £2.4 million. Treasury predicts the Island will lose that amount in direct tax if the EU savings directive is implemented. It also believes the GDP, standing at £1.1 billion at the last count, will be cut by 2.2% and the finance industry will have to fork out £4.4 million to implement new rules and £1 million every year to comply.

More on this story here.


The US’s Patriot Act is used as a means of denying funding to terrorist groups. But Advocate Mark Ferbrache said that if it used a heavy-handed and interventionist approach to freeze allegedly suspect assets, financial institutions could find themselves caught in the crossfire because local legislation might forbid the client from being told. Collas Day, where Advocate Ferbrache is head of litigation, is hosting a global fraud conference to examine the implications for the finance industry. “This conference is not only about how the Patriot Act is being used, but also about its potential for abuse,” he said.

Advocate Ferbrache, who is a member of Guernsey’s Fraud Network, said that local financial institutions could face a serious and potentially fatal threat. “To the extent that the threat has been considered, or indeed identified, so far it has been only on a legal theoretical basis. The conference will examine real, empirical evidence of the US authorities intervening in transactions to freeze assets.”

More on this story here.


US dollar investments in Costa Rica began to stabilize last week following a turbulent six weeks of market activity which saw investors withdraw almost half of the money deposited in these funds, according to the Tico Times. The report stated that between March 15 and Tuesday of last week, the money under management plummeted from $2.24 billion to $1.29 billion, sparked by a drop in the price of the Costa Rican Central Bank and Finance Ministry bonds.

More on this story here.


A clean bill of health from the Financial Action Task Force on Money Laundering, or FATF, and advances in telecommunications will help offshore financial centers like the British Virgin Islands thrive in coming years, the head of BVI’s Financial Services Commission said. In a recent interview, FSC Managing Director and Chief Executive Robert Mathavious said technology had eroded the effects of distance and allowed clients from across the globe to do business with BVI in real time. He also said close scrutiny by the FATF and other international organizations had shown BVI’s laws were compliant with global standards and that the Caribbean territory was not a depository for terrorist funds, providing assurance to legitimate companies that did business with BVI.

More on this story here.


Conservative leader Michael Howard went on what must have been one of his easiest hunts for new Tory voters when he flew to Gibraltar to campaign for the European elections. Mr. Howard was greeted by union flag-waving supporters and people bearing placards demanding “Self-determination, not serfdom.” He even had a busker strike up Rule Britannia as he walked down Main Street shaking hands with Gibraltarians who, on the whole, gave him a warm reception. Some 18,000 Gibraltarians will be eligible to vote for Euro-MPs at the June 10 elections for the first time as part of the South-West of England constituency.

Mr. Howard told a crowd that “I am here to assure you that my party will continue to support the right of the people of Gibraltar to decide for themselves what the status of Gibraltar should be.”

More on this story here.

U.K. Foreign Secretary set for new Gibraltar talks.

Spain’s new Socialist government hopes to jump-start talks with Britain on the sovereignty of Gibraltar to find a solution that will satisfy both countries as well as the disputed territory itself, Spain’s foreign minister said. Miguel Angel Moratinos will travel to London to meet Foreign Secretary Jack Straw and revive the negotiations between the two nations over future status of the Rock.

More on this story here.


Looking ahead to this weekend’s Grand Prix auto race, some interesting facts and history ...

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Moscow is a city of 10 million people where unemployment is negligible, property prices are ballooning, clubs are booked out and problems of transition to capitalism seem to be receding. Moscow is leading; Russia must soon follow.

Yet scratch the surface and you start to see how deep and perhaps unmendable are the wounds from communism. Moscow may have full employment but living standards are chronically low. For most, it is a daily struggle to survive, one Muscovite said. The newly emerging upper middle-class of executives may be doing well but average salaries are not much higher than £150 a month. Prices may be a third lower than in the west, but that scarcely compensates. Alcoholism is rife. Life expectancy is falling.

The legacy of communism -- and indeed Russia’s pre-communist past -- hangs over the country like a pall. Authoritarian traditions run deep; there is no conception of pluralism. In company law, and more importantly business practice, minority shareholders, for example, are powerless. In a takeover, either the victim owner or the managers simply wish the company’s assets away during the negotiations, leaving minority shareholders -- and the new owners -- with nothing but empty shells when the transaction is complete. The majority owner is tsar or tsarina of all he or she surveys. Revenues are organized through offshore tax havens. Fraud, racketeering and corruption is ubiquitous. Honest-to-God investment and business building is not the prevailing culture.

More on this story here.


In an exclusive interview with the EUobserver, Professor Friedman argues, “there is a strong possibility that the euro zone could collapse in the next few years because differences are accumulating between countries ... I’m not saying it is a certainty, just that it is a strong possibility.” He suggests that the euro could be replaced with the old national currencies.

More on this story here.


President Hipolito Mejia of the Dominican Republic has admitted defeat in Sunday’s presidential election. After a bitter election campaign with allegation of dirty tricks widespread fears of electoral fraud did not prove correct, with only minor irregularities reported. The country has been hit by rampant inflation and high unemployment. Analysts say there is nostalgia for the relative prosperity under Mr. Fernandez in the late 1990s, when the country’s economy grew more than 7% annually. President Mejia had blamed a world recession and a bank fraud scandal for the country’s economic woes.

More on this story here.


Moves are well underway to unseat the government of Prime Minister Dr. Keith Mitchell in light of allegations that he received some $500,000 from a former German diplomat who is now in prison in Singapore. During a rally organized by the opposition National Democratic Congress dubbed “People’s Parliament” and attended by close to four thousand people, a resolution was approved to use all legal and constitutional means to remove the New National Party government.

The latest corruption allegations are regarded as the most serious yet of an administration that has been continuously plagued by unproven claims of corruption. An April 30 article authored by David Merchant, a man who has made his name unveiling offshore scams, corruption and international rip-offs, among other things effectively accused top Grenada officials of bribery. The Grenada government says it will sue Merchant, who has had a 100% success rate in defending himself in court.

More on this story here and here.


Unitary statehood among Caricom member states is said to be the best constitutional option for the region, but is one which will be least acceptable. “The island territories of the Caribbean have had too long a colonial history of administrative separateness to make unitary statehood a constitutional possibility. A more acceptable constitutional option will be a federal union,” a paper on the subject, prepared by Trinidadian Dr. Cuthbert Joseph has argued. But it argues, nevertheless, that the model most likely to be accepted by the region’s leaders and its peoples will be a confederal arrangement. Joseph, a former Trinidad and Tobago Cabinet minister, is a historian and international lawyer working now as an adviser at the Ministry of Foreign Affairs.

This is the option which “may have a strong appeal to many governments,” the paper says, adding that “in spite of three decades of the Caricom experience, member states have not yet satisfied the rudimentary requirements of the harmonization of legislation governing public policy and fiscal and other incentives to industry, agriculture, fishing and tourism.”

The disjointed foreign policy picture is notably evident in bilateral and multilateral relations between individual Caribbean states and foreign states such as China and Taiwan, the paper noted. Under a confederation arrangement, each state will continue to claim its distinct sovereignty without even wishing to pass some of its powers to a distinct federal authority. The confederate option normally takes the form of only intergovernmental cooperation in certain matters relating to foreign affairs. But the paper declares that a union based on confederation will not be effective in enhancing the potential of its constituent member states in the globalized polity of today.

More on this story here.


Europe is celebrating. On May 1, 10 nations joined the EU: 8 from the Baltics and Eastern Europe, plus Cyprus and Malta. The accession, as it is called, brings the total number of countries to 25 and the population to 425 million -- 50% greater than the United States, though the GDP of the new EU exceeds the US’s by just 10%. The truth is that the EU is a remarkable accomplishment, a force for peace on the continent, and well worth cheering. But the 15 pre-enlargement EU members may regret admitting the 10 to their club. Revolutionaries are inside the gates.

Many of the new countries -- especially the largest, Poland (with a population of 40 million, about the size of Spain), and the most delightfully radical, Estonia -- are outdoing even Americans in their lust for free-market economic policies [Ed: Has he checked the US’s policies lately?]. The 10 new countries have an average corporate tax rate that is 12 points lower than the other 15, and Estonia’s rate is precisely zero. Personal tax rates are low, too; some of the accession countries have adopted the flat tax; others have radically reformed their welfare systems; and Poland has privatized its pension system along the Chilean model, “a policy that Western Europe will one day have to adopt in order stave off budgetary collapse,” writes Radek Sikorski, the former Polish government official who now heads the New Atlantic Initiative, co-host of the conference with Germany’s Konrad Adenauer Foundation. Also, the former communist countries, especially, are resistant to the bureaucratic nonsense that dominates the EU.

As a result, Poland, Estonia and several of the others meet the criteria for what I call “aspiring” nations -- willing to take chances and even endure some economic pain to allow their citizens more choices and prosperity. They are the European equivalent of Asian Tigers like Singapore and Taiwan. Now, the aspiring accession countries, which could prove an irresistible force, are confronting the complacent original members, which could prove an immovable object. Let us hope the former resist the pressure from the later to conform.

More on this story here.


Top global banking regulators meeting in Basel have agreed on a sweeping overhaul of rules governing the amount of capital that financial institutions must hold. Under the new rules, the amount of capital that a bank holds must be more in line with the risks it takes. The agreement will be implemented on a staggered basis, starting at the end of 2006. Analyst Robert Motyka at Switzerland’s largest bank, UBS, described the agreement as a “milestone” for the international banking world that would have significant effects on the sector in the coming years.

More on this story here.


Independent economist Nico Czypionka told a breakfast meeting of the Italian-South African Chamber of Trade and Industries that, “There is not enough debate about what transformation means and its implications for South Africa. Government does not admit to failure and business sticks its head into the sand. Both sides rely on wishful thinking in the belief that ‘alles sal regkom’ [Afrikaans for everything will be alright in the end]. Transformation means a redistribution of economic power and anybody opposing this is shot down as if he were opposing motherhood and apple pie. If we look at the sector scorecards, businesses have not come up with counterproposals, but rather just haggled about the percentages.”

He noted that the change in government in India has led to a sudden loss of confidence among investors, as the new Congress Party is perceived to move back to a more activist state role, which is what the African National Congress seems to moving towards after its victory in the April 14 elections. Czypionka said the dynamics of the debate are very one-sided, with the government setting the agenda and anybody in the private sector questioning the basis for transformation and its effect on efficiency coming under direct and personal attack. “The result is that investors have voted with their feet.”

More on this story here.


Defying a warning from China, Hong Kong’s opposition lawmakers pressed ahead with a motion in the legislature criticizing Beijing for ruling out quick democratic reforms here, but it was defeated by pro-Beijing legislators. China said last month it will not allow direct elections for Hong Kong’s next leader in 2007 or for all lawmakers in 2008. Beijing said a quick move toward democracy would threaten political stability and the economy. Citizens will be allowed to pick only half of the Legislative Council’s 60 members in September elections -- with the rest picked by special interest groups. Voters have no say in selecting the territory’s political leader. Earlier, a Hong Kong delegate to China’s national legislature said he had submitted his resignation because he could not effectively lobby for the territory’s interests in Beijing.

More on this story here.

3rd pro-democracy radio host quits, citing China pressure.

A third pro-democracy radio talk show host has resigned, citing pressures to limit his freedom of speech. Meanwhile, pro-democracy lawmakers complained of harassment and callers to talk shows said that mainland Chinese officials were putting pressure on the callers’ relatives to influence votes in elections in Hong Kong. The spate of incidents -- especially the resignation of Allen Lee, a prominent Hong Kong politician for many years as well as a talk show host -- prompted the Hong Kong government to promise protection for individual liberties.

More on this story here.



Tax policy can be a source of economic misery or a cudgel for reform leading to new or renewed prosperity. Forbes Global’s annual comparison of the burden placed on entrepreneurs, executives and their staffs is enhanced this year to include a more comprehensive peek at the actual tax rates in 50 of the world’s major business spots.

The United Arab Emirates (which includes Dubai and Abu Dhabi), has displaced the longtime low-tax leader, Hong Kong -- it probably has the world’s lowest levies on income. Although “Old Europe” continues to impose many of the heaviest loads on top producers, the Forbes Global Tax Misery & Reform Index many of those same nations to be making some of the biggest strides toward tax reduction. This may hold out hope for an economic stirring in a region that lately has lagged the world. And Asian countries such as Taiwan, South Korea, Japan and China look better at lower pay levels, reflecting their steeply graduated (and low) tax rates. France is the “world champion” of tax burdens. But foreign capital and businesses continue to flow into the country. This “French paradox” is explained here.

What about employees at various pay levels? Their pay after income and social taxes is shown in the Employee Happiness Index (PDF file), at incomes of €50,000, €200,000 and €1 million, as well as a fuller breakout for an ambitious, single €100,000 staffer and a married, €200,000 worker.

It is also important to look at the total taxes imposed in a country at all levels, national and local, as a share of GDP. In some countries the progressive income tax rates are applicable only to the top economic half of the population. This breakdown is available only for OECD member countries and uses end-of-2002 estimates, as summarized in the Tax/Spending Burden chart. A column on government spending to reflect the fiscal deficits being run in most nations, covered by debt, hidden taxes, profits from state-owned monopolies and the sale of government assets. Bureaucrats, ye shall not hide!

More on this story here.


Officials in Berlin are said to be working on plans to establish maximum and minimum bands for corporate tax within the EU. The proposals are set to be tabled officially at a forthcoming meeting of ministers from Paris and Berlin. The move follows expressions of concern from both capitals about the low levels of corporate tax in some of the ten new member states. Businesses are charged a basic corporate tax rate of 39% in Germany, compared to 15% in Latvia and Lithuania and 19% in Poland and Slovakia.

And leaders in Germany and France are worried that investment will drift towards these new countries if some form of harmonization does not take place. There have even been strong hints that German contributions to the common EU budget -- which will essentially go to the new member states -- could be called into question if these states do not increase their rate of corporate tax.

More on this story here.

Ireland PM rejects Franco-German call for EU tax harmonization.

As certain EU member states seek to check tax competition in an expanded EU, Ireland’s Prime Minister Bertie Ahern last week rejected calls for corporate taxes to be harmonized. “Tax harmonization in my view, and tax issues, are a matter of competence of member states and should remain so,” commented the Taoiseach, after talks in Lisbon with Prime Minister Jose Manuel Durao Barroso.

More on this story here.


A Scottish judge gave the go-ahead for a major tax investigation of Mohamed al-Fayed and his business empire, including Harrods and Fulham Football Club. Mr. Fayed had complained that Inland Revenue plans to sift through his financial affairs relating to two years in the late 1990s were unreasonable and an abuse of power. Lord Reed said tax officials could be criticized for a number of shortcomings in the case, but he ruled that their decision to launch a comprehensive inquiry into Mr. Fayed had been free of political interference and was made in good faith.

In a judgment issued at the Court of Session, Lord Reed said Mr. Fayed worked as a director of major companies, but did not appear to be paid a salary. He lived in expensive accommodation, but did not appear to own or rent it. The natural inference from the evidence he had heard, Lord Reed said, was that a great deal of ingenuity had gone into creating networks of offshore companies, trusts and other entities to minimize liability to tax. “In the face of such opaque and sophisticated arrangements, it is important that the Revenue should be able to ensure UK tax liabilities are accurately assessed and accounted for. The ordinary taxpayer is entitled to expect that the Revenue will exercise its powers, when necessary, to obtain any information which it reasonably requires for that purpose,” Lord Reed said.

More on this story here.


South Africa has scrapped a 30% tax on overseas corporate earnings in an effort to encourage businesses to bring more of their money home. The move could pave the way for hundreds of millions of rand to return to South Africa, local media reported. It was welcomed by economists who have been pushing Pretoria to lift restrictions on the flow of capital. Many South African firms invested abroad during the 1990s as an insurance against potential instability at home. The abolition of the tax coincides with an improvement in South Africa’s growth prospects, and greater confidence in the government’s handling of the economy.

More on this story here.


The IRS is offering high-dollar tax cheats another chance to play “Let’s Make a Deal” in hopes of recovering billions of dollars in lost tax revenue. The recently announced initiative is aimed at thousands of rich taxpayers suspected of improperly avoiding federal income taxes through a complicated shelter known as “Son of Boss”. The scheme involved transferring bond and option contracts between a series of shell companies to provide tax deductions to high-income filers. The ploy also involved funneling taxable income to charities and pension funds that would not have to pay tax on the money.

The IRS is using a carrot-and-stick approach. Those who come in now and concede 100% of the tax liability will be allowed to deduct some of their losses and avoid the most severe penalties. Those who do not will lose their right to administrative appeals, get no deductions for their costs and face maximum fines. “The IRS carrot is quite small, but the stick is severe,” said Elliott Kajan, a tax attorney in Beverly Hills, California.

The IRS says it gathered information on participants in the scheme, including their names and Social Security numbers, from many of the promoters -- making the chances of tracking them down fairly high. So why offer amnesty at all? Partly it is to save money. The expense of finding and then prosecuting thousands of tax cheats is daunting even for an agency with the IRS’s resources.

More on this story here.


Confirming the commencement of the next stage of the Revenue Commission’s crackdown on tax evasion, which saw some 15,000 people come forward by the end of March to declare and pay tax on previously undisclosed assets held overseas, Frank Daly announced that: “The high wealth individuals unit of our Large Cases Division, which deals with individuals with net worth in excess of €50 million will be auditing a number of claims to non-residence during 2004.”

However, somewhat alarmingly for the Irish government, Mr. Daly went on to reveal that: “Unfortunately, at this stage we have no way of knowing the number of Irish domiciled people there are who are non-resident for Irish tax purposes.”

More on this story here.


The corporate tax bill winding its way through Congress has been widely criticized for its mountain of special-interest loopholes and other provisions. But the bill is just the latest example of why we need to have the same debate about the fairness of corporate taxes that we have been having about individual income taxes. Over the past 50 years, the share of tax revenue coming to the federal government from business has collapsed. In fiscal 2003 corporate taxes represented just 7.4% of federal revenue, down from 32% in 1952. The 2003 figure was especially low because of depressed corporate profits, but other measures paint a similar picture of a declining contribution. Corporate taxes as a percentage of our gross domestic product dropped to 1.2% in 2003, compared with as high as 6% in the early 1950s.

The question of whether American business is paying its fair share is particularly relevant at the moment. Corporate profits are booming -- in part because of lower tax rates -- and a higher share of the benefits of this recovery has gone to business (as opposed to workers) than in any recovery since World War II, according to a recent Northeastern University study.

Some argue that the United States taxes business more heavily than do other nations, creating a different competitive disadvantage: a global one. But apart from the tax havens, with their exceptionally low rates, those statistics are at best ambiguous. What seems clear is that multinational companies that have worked hard to game the system have garnered a special edge. Thus, fixing the U.S. corporate tax system would be particularly helpful for domestic and other corporations that pay closer to the sticker rate of 35%. Those businesses are competing in the U.S. market at a disadvantage against companies paying much lower rates. The playing field needs leveling.

More on this story here.


Jenkens & Gilchrist, a Dallas-based law firm, surrendered the names of its tax shelter customers to the IRS under a federal court order, the agency’s third legal victory of its kind in a month. The order follows a separate court decision ordering accounting giant KPMG to release the names of its tax shelter investors to the IRS. In both cases, judges rejected claims that revealing the investors’ identities to the IRS would violate confidentiality privileges between attorneys and their clients. “The government is winning,” said IRS Commissioner Mark Everson. “The message to taxpayers who invested in these schemes is clear. We are going to find you.”

Jenkens & Gilchrist said in a statement that it had complied with the order. It added that the ruling should not be considered an admission that the tax shelter being questioned was illegal.

More on this story here and here.


An interesting policy debate is taking place in Paris. On one side is an international bureaucracy that opposes tax competition. This organization wants to hinder the flow of jobs and capital from high-tax nations to low-tax jurisdictions. It endorses tax harmonization and defends this policy as being necessary to facilitate income redistribution. This bureaucracy’s anti-tax competition campaign is explicitly designed to facilitate high tax rates and the double-taxation of savings and investment. This statist institution even persecutes jurisdictions with free market tax policies.

Fortunately, there is an international bureaucracy in Paris with a differing viewpoint. This organization recognizes that tax competition is a liberalizing force in the world economy. It has written that, “[T]he ability to choose the location of economic activity offsets shortcomings in government budgeting processes, limiting a tendency to spend and tax excessively.” It does not try to scapegoat so-called tax havens. Instead, this bureaucracy says the real problem is bad tax policy. It explains that, “[I]llegal tax evasion can be contained by better enforcement of tax codes. But the root of the problem appears in many cases to be high tax rates.” This pro-free market institution supports supply-side tax policy. Its economists have estimated, “that economies grow [0.5%] faster for every 10-percentage-point reduction in marginal tax rates.” This organization understands that the correct tax base is just as important as low tax rates, noting that, “the best way to improve economic performance would be to replace current wage-income and capital-income taxes by a general tax on consumption.”

Needless to say, this organization has views that are completely and diametrically opposed to the views of the other bureaucracy. But what really makes this debate interesting is that all of the aforementioned policies are advocated by just one institution -- the OECD. Funded by 30 of the world’s developed nations, this international bureaucracy was originally created in the 1960s to promote economic liberalization and market-based reforms. Unfortunately, not all parts of the OECD have stayed true to the original mission. The career economists who work directly for the OECD usually are market-oriented. But a division known as the Committee on Fiscal Affairs (CFA) consists of representatives from the tax authorities from member nations who meet sporadically, and a small permanent staff comprised mostly of lawyers. It has a “tax enforcement uber alles” mentality. The CFA’s agenda is controlled by high-tax governments, primarily France and Germany, but even representatives from low-tax governments often have the same statist mindset since tax collectors tend to identify with each other rather than the interests of their individual countries.

More on this story here.



Four men and a woman, all principals or employees of “Global Prosperity”, are accused of moving $50 million to bogus trust funds and offshore banks to avoid paying taxes on the money they made hawking get-rich-quick schemes, federal officials said. The five were indicted by a federal grand jury on charges of conspiracy to defraud the IRS. Prosecutor Mark Odulio said the men apparently made the classic mistake of believing their own hype: They used the same illegal methods they were teaching to their gullible customers.

Odulio said they generated sales of $50 million between 1996 and May 2002, and managed to conceal it in offshore and domestic accounts and trusts. The men and an extensive national network of salespeople were pushing “wealth-building” audiotapes and compact discs. They also staged seminars in the United States and abroad with tickets selling for $6,250 to $37,000 each. It is unclear whether anyone but the sellers got rich from viewing the tapes and following their advice.

Despite his fascination with riches, central Massachusetts millionaire Daniel Andersen, one of the three founders, apparently missed key episodes of Lifestyles of the Rich and Famous. He used much of the $3.7 million that has been traced to him to buy a $29,000 Dodge Ram; a $33,000 Harley-Davidson; a $125,000 Winnebago; and put a $256,000 down payment on a California home, Odulio said. Andersen is currently being detained in Los Angeles.

More on this story here and here.


An Orange County businessman arrested last week has been implicated in an international scam that defrauded investors of more than $200 million. Joseph Frederick Denson Jr., 52, of was charged with felony conspiracy to engage in securities fraud, mail fraud and wire fraud and felony conspiracy to commit money laundering. A federal indictment alleges Denson was one of seven leaders of the scam.

The accusations stem from a “Ponzi scheme”, where some of the investors’ money is used to pay off other investors, gaining their confidence, but most of the money is pocketed by the scammers. According to the indictment, the scam started in 1994, when Charles Richard Homa used his Atlanta car-title loan business -- Cash 4 Titles -- to solicit investors. Car titles were used as collateral for high-interest loans. The business had 150 retail outlets in 11 states, according to the indictment. Many were listed as pawnshops. Investors nationwide were duped into thinking that their money would be funneled into businesses specializing in high-interest payday and car-title loans and that they would see large returns. To elude the scrutiny of investigators from the SEC, Denson and others set up bank accounts in the Cayman Islands and the Bahamas, the indictment said.

More on this story here.

Major money laundering trial begins in Caymans for alleged Cash 4 Titles accomplices.

On 11 May a jury of twelve was sworn in in the trial of The Queen v. Lewis Denton Rowe and Patrick Thomas Tibbetts. The two men, Caymanian status holders though British and United States nationals respectively, each face two counts of assisting another to retain the benefit of the proceeds of criminal conduct between 23 December 1996 and 19 April 2000. Prosecutor outlined the scheme in which investor funds intended for Cash 4 Tiles, a United States company that financed high interest loans wherein customers used the titles to their automobiles as collateral, were channeled into accounts of offshore companies, many of which were established by Mr. Rowe and Mr. Tibbetts through their firms.

Cash 4 Titles had promised investors 7.5% per month return on their investment in the company. As a result, the company generated a vast investment pool. Eventually, the prosecution argued, these funds were used to payback new investors rather than being channeled into the company. The Cash 4 Titles business collapsed in 1999 following an investigation in the United States by the SEC. Two high-level executives for Cash 4 titles, Richard Homa and Michael Gause, the men whom the defendants are charged with assisting, are currently serving respective sentences of 60 months and 127 months in United States prisons.

More on this story here.


The Anti-Phishing Working Group received reports of more than 1,100 unique phishing campaigns in April, a 178% increase from the previous month. Phishing scams attempt to capture personal information from Internet users with a combination of unsolicited commercial e-mail messages and Web sites designed to look like legitimate online businesses. The large increase comes on the heels of a 43% rise between February and March. Citibank alone was the target of 475 unique phishing scams in April.

A recent study by Gartner found that as much as 3% of phishing scams may be successful, resulting in Internet users divulging sensitive information to the scam artists. Based on a survey of 5000 adult Internet users, Gartner estimated that as many as 30 million adults have experienced a phishing attack and that 1.78 million adults could have fallen victim to the scams.

More on this story here.


Federal agents arrested a Portland, Oregon foreign currency trader accused of defrauding hundreds of investors out of millions of dollars. The arrest followed Russell Cline’s indictment on charges of mail fraud, wire fraud and money laundering. The indictment alleges that Cline solicited investors throughout the U.S. to send funds to the now-defunct Orion Inc. Cline is accused of falsely representing to investors that they would get large returns with minimal risk. The indictment contends Orion invested less than a quarter of the money it received from investors in currency trades. Cline used the balance for a variety of personal expenses, prosecutors say.

Orion told clients in August 2002 that it had lost all their money. State and federal regulators filed a civil lawsuit against the company in May 2003, contending it had defrauded investors. Cline was a struggling house painter in the early 1990s. But he settled in Portland and reinvented himself as a financial entrepreneur in the mid-1990s, promoting an institution called The Bank of Business Western Samoa. The Bank of Business drew complaints from investors who thought they had been deceived.

Cline moved from offshore banking to foreign currency trading with his formation of Orion in 1998. With the help of a Web site and promises of 6% to 8% returns a month, Orion eventually drew a steady stream of money from small investors. Many investors successfully withdrew funds from Orion, which built customer confidence that the operation was legitimate.

More on this story here.



The UK ID card scheme will, it is alleged, greatly aid the forces of law and order in establishing the identity of offenders and suspects. But, as UK Attorney General Lord Goldsmith found himself blurting out in the House of Lords, there is an easy way out of this for the thinking minor offender -- give the police a false ID. ID cards would not make a significant difference to this situation because, in order to cultivate public support, the government would not be requiring the compulsory carrying of ID cards.

More on this story here.


An Auckland business is trying to lure Pacific countries into lucrative deals selling their passports to South Koreans wanting an escape route in case of invasion. Foreign Minister Phil Goff has already made sure one country did not sign up to the scheme, and is warning others not to be tempted. But the business, linked to an Auckland law firm, said it expected deals to be struck shortly with other countries, possibly including Nauru.

The scheme’s promoter, Bruce Porteous, a twice-discharged bankrupt, approached Niue last month seeking the right to sell Niuean passports and permanent residency visas to security-conscious Koreans. Niue, he said, stood to make $75 million through the deal under which passports would sell for $39,000 a person, or $79,000 a family. But Niue, a self-governing island in free association with New Zealand, has no right to issue its own passports because residents are citizens of New Zealand and carry New Zealand passports.

More on this story here.


Cell-phone use could be blacked out at Los Angeles International Airport, the Rose Bowl and Universal Studios under an anti-terrorism plan being formulated by Sheriff Lee Baca and other law enforcement authorities. Baca is exploring the use of jamming equipment -- already used widely in foreign countries and to protect President Bush -- to interrupt cell-phone signals if a terrorist attack was expected in Los Angeles. The issue gained urgency after terrorists used cell phones to detonate explosives March 11 in railway bombings in Spain. Baca, who recently returned from a fact-finding trip to Pakistan, said a cell-phone jamming device helped avert the attempted assassination of Pakistani President Pervez Musharraf on December 14.

Various companies already sell equipment on the Internet that block cell phone signals. The products include jammers that overwhelm cell phone frequencies, systems that mute cell phone ringers and sensors that detect cell phones. The products range from hand-held jammers costing a few hundred dollars that darken cell-phone signals over a range up to 15 meters, to nearly $10,000 suitcase-sized equipment sold to government and military agencies that can block signals up to several miles. The cell-phone industry objects to the use of the jammers, arguing that the airwaves are public property and jammers violate the rights of cell-phone users. Under law, the importation, sale or use of cell-phone jammers is banned in the United States and can result in Federal Communications Commission fines of up to $11,000 daily per device.

More on this story here and here.


European airlines will soon share information about their passengers with U.S. officials so they can be screened for security reasons, under an agreement approved yesterday by the EC. The agreement also calls for U.S. carriers to share information about their passengers with EU countries. The data swapping would likely begin in the next several weeks, officials familiar with the talks said. A Commission spokesman said credit card numbers would be among the details to be exchanged.

Under the terms of the deal, U.S. airlines would pass along information about each passenger such as name, date of birth, address and phone number to the European country of destination. In the U.S., each passenger’s information would be transferred to Customs and Border Protection agents and compared against various watch lists of known or suspected terrorists before the plane arrives in the United States. The information could also be used for international criminal probes such as drug trafficking.

U.S. Homeland Security officials agreed not to share the information with other agencies unless they can prove it is relevant to a criminal or intelligence investigation. U.S. officials also agreed to keep the data for 3½ years instead of the initially proposed seven years. The deal is opposed by the European Parliament and human rights groups, who say it does not provide adequate safeguards for individual privacy.

More on this story here and here.


In a bid to end repeated criticisms that the world market in illegal travel documents is awash with fake and stolen Belgian passports, the Belgian Foreign Minister unveiled a brand new passport that he insisted was almost impossible to copy. Foreign Minister Louis Michel explained that the new high-tech passports would be issued to Belgian citizens from next year onwards. The documents include a special microchip that contains biometric information about the their owner.

Not everyone is happy with the idea of biometric passports. Many civil liberties campaigners are worried that governments are now trying systematically to gather far too much personal data on their citizens. The U.S. has not only concerned about fake documents but also about a large number of genuine blank Belgian passports that have been stolen in recent years.

More on this story here.


In the near future, Americans returning from abroad will have their faces scanned by cameras at ports of entry, then compared by computer to digitized photos encoded on high-tech chips in their passports for verification. The goal is to prevent known terrorists from entering the country and to make the use of stolen passports virtually impossible. Because such biometric identification incorporates a person’s unique physical characteristics, including fingerprint swirls or iris patterns, it is considered the best method yet invented of authenticating someone’s identity.

The State Department plans to start issuing the first biometric passports in a trial run in the fall and hopes to ramp up to full production next year. Those who have traditional passports would not replace them with the biometric ones until they expire.

More on this story here.

US lubes passports with RFID snake oil.

Superstitious faith in biometrics is touching, but the technology is no worse than what we have got at the moment. Of course, it is also no better. Bogus credentials are easy to come by, so if biometrics are intended as a security measure, implementation is going to trip up only the thickest and laziest of attackers. Biometrics merely establish ownership of the document in question, regardless of whether it tells the truth or not. They do not establish who you are. Nevertheless, they are used as if they did, and adding a biometric feature only reinforces the popular illusion that they actually identify people.

One of the more dubious aspects of the new passport regime is the so-called “smart chip”, a spectacularly dumb RFID (Radio Frequency Identification) gizmo that might very well broadcast data indiscriminately to any device designed to receive it. It is likely, given the tech industry’s lust for adding “features” whether they are needed or not, that the chips will be readable from a distance. This would make it easier to move large herds of travelers through customs gates quickly, and it is likely to be pitched successfully on this basis. But this would also make it easy for street criminals to scan crowds in search of naive foreigners likely to be in possession of decent quantities of cash, like Americans and Europeans, say. The RFID lobby has consistently neglected to address issues of personal safety when sensitive, identifying information is being broadcast secretly and indiscriminately by their nifty gizmos.

Chipping personal documents such as ID cards and passports is tantamount to chipping people. A document that reveals your name, age, address, and more, that can be read from a distance without your knowledge by anyone for any reason, is a clear threat to personal safety, and, obviously, any semblance of privacy. There is nothing, beyond a few laws that get weaker every year, to prevent overzealous Feds and similar government busybodies from setting up surreptitious readers, and performing silent, automated ID stops that one knows nothing about. It is beyond doubt that the bureaucrats currently pushing the technology know perfectly well that this potential exists, and are secretly pleased by it.

More on this story here.


No one disputes the goal of security checks -- to block terrorists before they enter the country and obtain knowledge or technology that could foster their aims. The enhanced security checks are keeping out some terrorists, officials say. But the process is also impeding a huge number of applicants who pose no threat. Students from China and India have been among the most heavily affected, even though those countries are hardly known as terrorist breeding grounds.

Last week 25 leading scientific, engineering and educational organizations, claiming to represent 95% of the American research community, sent a statement to the Bush administration and Congress urging prompt action to ease the problems. The administration says it values the contributions of foreign scientists and students, and it has already taken steps to smooth out the visa glitches. But the complaining organizations are surely right that more needs to be done. They have offered six suggestions that deserve respectful consideration.

Rest of editorial here.


A federal advisory committee says Congress should pass laws to protect the civil liberties of Americans when the government sifts through computer records and data files for information about terrorists. The report, expected to be issued in about two weeks, says privacy laws lag far behind advances in information and communications technology.

The eight-member panel, which includes former officials with decades of high-level government experience, found that the Defense Department and many other agencies were collecting and using “personally identifiable information on U.S. persons for national security and law enforcement purposes.” Some of these activities, it said, resemble the Pentagon program initially known as Total Information Awareness, which was intended to catch terrorists before they struck, by monitoring e-mail messages and databases of financial, medical and travel information.

More on this story here.

Security with Liberty

The draft of a report -- “Safeguarding Privacy in the Fight Against Terrorism” -- of great importance to our personal lives as well as our nation’s security has been floating around Congress and the administration for the past two months. When Congress, aroused by the press, wisely refused to fund the Pentagon’s Total Information Awareness program, Defense Secretary Donald Rumsfeld appointed a Technology and Privacy Advisory Committee, unique in this administration, of heavy hitters in the law. They are serious old pros, mostly Democrats, who are not bedazzled by the ever-changing techiedegook.

In plain language, the committee finds that the defunded program “was a flawed effort to achieve worthwhile ends.” Then the panel tells the administration, in constructive detail, how to go about tracking terror without destroying all privacy. The committee is too trusting of judges; in 35 years, federal and state courts have approved 29,250 wiretap orders and turned down only 32. It also thinks that the main flaw in the original proposal was an insensitive presentation. But this is a good-faith attempt to strike a balance.

More on this story here.


Border-control officials, highway patrol officers and airline screeners all now have access to a centralized terrorist watchlist of 120,000 names. Prior to the center’s establishment by a presidential directive in September 2003, nine federal agencies maintained 12 separate, unshared watchlists. The centralized database, made available in December, is considered by many to be central to a post-Sept. 11 push to share relevant intelligence more widely within the government and to decrease the number of turf battles within the intelligence communities.

The number of people on it -- roughly equivalent to the population of Topeka, Kansas -- leads some to questions about what the criteria is for inclusion. “If there were that many, they would be popping out of manhole covers,” John Pike, director of the defense policy think tank GlobalSecurity.org, said. There were never more than a couple thousand trained al-Qaida terrorists in Afghanistan during the Taliban period, according to Pike.

Jerry Berman, president of the Center for Democracy and Technology, echoed Pike’s concern when he testified at a March 25 congressional hearing that the list’s size and lack of public scrutiny led him to suspect that American citizens with no connection to terrorism, such as environmentalists, were being put on it. Little is known about what safeguards are in place, how widely the list is being used or how someone who suspects they have been listed wrongly gets their name removed. The FBI, which houses the multi-agency operation, did not respond to repeated requests for comment or to a request for an interview with the Terrorist Screening Center’s director. The CIA referred all questions to the FBI. The State Department, the San Francisco and Los Angeles police departments, and New York State’s Office of Public Security did not return calls about their involvement in the program.

More on this story here.


Children may not have credit cards or homes. But they do have social security numbers and birth certificates. And that is all an identity thief needs. Identity theft expert Roy Michael says over the past five years, about 500,000 cases of child identity theft have been uncovered. But half of those cases have come in the past two years. Children have become targets because they are so easy and because thieves can often get a 10 to 15 year head start on law enforcement. In fact, most children who have had their identity stolen do not know it until they someday go to apply for credit, a student loan or buy a car. That is why identity theft experts say every parent should run a credit check on their child.

More on this story here.


UK public support for ID cards is declining, while opposition is hardening, and a surprising number -- perhaps five million -- would be prepared to take to the streets in opposition, according to a new opinion poll. The results, although they still show 61% in support of the scheme, show committed opposition in sufficient numbers for poll tax-style disruption to be a very real possibility.

Since last month’s Detica survey, numbers strongly opposed to any kind of ID card have doubled from 6% to 12%. Within the opposition 28%, which would translate as 4.9 million in the population as a whole, say they would participate in demonstrations, 16% (2.8 million) would get involved in “civil disobedience” and 6% (around a million) would be prepared to go to prison rather than register for a card. Talk is of course cheap at this stage, but this is still an indication of seriously vehement opposition just a few weeks after the scheme was unveiled, and even the more favorable (for the Government) Detica poll showed quite clearly that the vast majority of people knew practically nothing of what the scheme entailed. And the more they learn, the less they may like it.

More on this story here and here.


The EU will invest €11 million ($13 million) over the next four years to develop a secure communication system based on quantum cryptography, using physical laws governing the universe on the smallest scale to create and distribute unbreakable encryption keys, project coordinators said. If successful, the project would produce the cryptographer’s holy grail -- absolutely unbreakable code -- and thwart the eavesdropping efforts of espionage systems such as Echelon, which intercepts electronic messages on behalf of the intelligence services of the U.S., the U.K., Canada, New Zealand and Australia.

More on this story here.


The Defense Department, strapped for troops for missions in Iraq and Afghanistan, has proposed to Congress that it tap the IRS to locate out-of-touch reservists. The unusual measure, which the Pentagon said has been examined by lawyers, would allow the IRS to pass on addresses for tens of thousands of former military members who still face recall into the active duty. The proposal has largely escaped attention amid all the other crises of government, and it is likely to face opposition from privacy rights activists who see information held by the IRS as inviolate. For it to become practice, Congress and President Bush would have to approve the proposal, which would involve amending the tax code.

Ari Schwartz, an associate director of the Center for Democracy and Technology in Washington, said granting access to any IRS data would open the door to more requests from other arms of the government.

More on this story here.


Many companies are still struggling to define how they will deploy RFID despite having already begun investing in RFID pilots and tests, according to a new survey of U.S. and European retailers, manufacturers, distributors and transportation firms. The survey interviewed executives from 90 companies -- none of which have yet announced any plans for RFID deployment. Presented at the Retail Systems trade show in Chicago, the results of that survey reveal a lack of development, commitment and understanding of how to go about implementing RFID.

More on this story here.


The District collected $2.3 million in fines from its automated speed cameras in April -- the biggest revenue month in the program’s 2½-year history. But although revenue is up, there are signs that motorists are wising up to the cruiser-mounted cameras that take pictures of license plates as speeders race by. After three months of increases, the number of tickets issued dropped by about 15,000, to 65,077, which is also an indication that the drivers who are being ticketed are paying bigger fines.

City officials long have cited “safer streets” as justification for the growing number of red-light and speed camera programs, first instituted in 2001. Critics, however, contend that the program clearly is more focused on revenue than safety. The Washington Times reported earlier this month that three of the city’s most dangerous intersections do not have any automated traffic-enforcement cameras.

More on this story here.


An Internet service is about to test the frontiers of e-mail privacy. DidTheyReadIt.com allows anyone to secretly track e-mails they send. You will see whether someone opens your e-mail, how long the recipient keeps it open -- even where geographically the recipient is reading it. The reaction could be harsh. “It violates our electronic space in a way that’s as uncomfortable as someone violating our physical space,” says Mitchell Kertzman, a partner at technology investment firm Hummer Winblad. “Add this company to the long list of people who are making the Internet a less attractive place to live and work.”

The service comes from Rampell Software of Cambridge, Massachusetts. DidTheyReadIt.com will cost $50 a year. You register on the Web site, and then every time you send an e-mail, you add “.didtheyreadit.com” to the end. An e-mail address would look like this: president@whitehouse.gov.didtheyreadit.com.

You can also download software that adds tracking code to all outgoing e-mail. Next, you go to the Web site, log in, and see a list of all the e-mails you have sent through the service. A box shows what time each e-mail was read, how long it was kept open, whether it was read multiple times and the Internet service provider that was used by the recipient when opening it.

The tracking service could be used by job hunters who want to see if their résumés were read, or by salespeople wanting to track pitches. Today’s spam filters can sometimes block e-mail sent with attachments, leaving the sender thinking an e-mail got through when it did not. This is a way to check.

More on this story here and here.



President Bush has hit the campaign trail to save the Patriot Act, which will expire in 2005. In calling for its continuation, the President said, “we can no longer rely on false hope.” Which false hope is that? The hope that America’s free society will protect us like it has for more than 200 years? We who love American liberty have great fear of the Patriot Act.

Its aim, according to the Justice Department, is to give federal law enforcement agencies the surveillance and investigative tools they need to deter future terror attacks, but the quick, emotional passage of the Patriot Act only weeks after the September 11th attacks allowed little time for scrutiny of its measures. In fact, most members of Congress did not read it before voting. Congressman Ron Paul said he could not even get a copy before the vote. As a result, provisions of the Act offer major opportunities for government abuses of law-abiding private citizens.

The Act says that the government does not need to have a suspect or to even be conducting an investigation related to terrorism to monitor your visits into web sites on the Internet. The Patriot Act changes the definition of terrorism, allowing even legitimate protestors, such as pro-life activists, to be at risk of being labeled “terrorists” if violence erupted at their events. Here is an interesting fact: The Patriot Act only mentions protecting our northern border. It says not a word about the southern one. Our southern border remains, absolutely wide open, allowing anyone to literally walk into this country.

More on this story here.


A law professor on the Amnesty International Board of Directors argues that the proposed treaty would violate the most basic human rights of foreigners present in the U.S. whose extradition might be sought, and especially those foreigners of Irish Descent. It is obvious from the treaty’s text that it is primarily directed against Irish American citizens engaged in the lawful exercise of free speach to protest the occupation of Northern Ireland by the British Crown and accompanying human rights violations -- such a protest would be cause for extradition. Moreover, because of the treaty’s court-stripping provisions, there would be no judicial review by a U.S. federal court of the exercise of such free speach rights by Irish American citizens. Further, the treaty would retroactively extend to the indefinite past and has no statute of limitations requirement. Preventative detention, incarceration, and property confiscation would all be at the behest of the British Crown. He asks the Senate Foreign Relations Committee reject the proposed treaty outright, and concludes that the perfidy of the proposed treaty cannot be overstated or underestimated.

More on this story here (PDF file).


I have decided the Patriot Act is not an assault on our civil liberties, but rather one big practical joke. Any day now, the feds will kick down our doors in the middle of the night. They will drag us from our beds, tear off our pajamas, and frisk us in the name of freedom. And just when they have gagged us -- just when we are ready to cry -- that new age Allen Funt, Ashton Kutcher, will come walking out with his hat on backwards, screaming, “You got Punk’d!” And it will turn out Big Brother is a reality show after all. We will be shaken and stirred in front of very candid cameras. We will be victims not of tyranny but MTV.

Even if it is not a prank, what is happening here is a joke. Case in point: Early last month, the ACLU filed a lawsuit challenging parts of the Patriot Act. With me so far? Good. Well, it turns out the Patriot Act actually forbids them from discussing their own lawsuit. They were required to file it under seal. And so much for free speech: After printing some info in a press release a few weeks ago, the Justice Department demanded they remove two whole paragraphs. Because of the Patriot Act, you cannot discuss the Patriot Act. It is brilliant! In fact, the feds ought to ditch the legal jargon, tear a page out of Fight Club, and narrow the whole thing down to just two rules.

No. 1: Don’t talk about the Patriot Act.
No. 2: Don’t talk about the Patriot Act.

Some people do not have a problem giving up freedoms in order to “defend” them. They are entitled to think this way -- opinions are still somewhat legal in America -- but this gets to the heart of what we have said about freedom since September 11, 2001. I mean, here we are, fighting guys who supposedly hate us “because” we are free, and meanwhile we are giving up freedoms in order to win the war. Does that make sense to you? Doesn’t it mean the terrorists have won?

Samuel Johnson once said patriotism is the last refuge of scoundrels. Part of me wonders what he would say about the Patriot Act. The other part figures he would get in line like the rest of us and take his shoes off at the airport. The cycle never ends.

More on this story here.


Federal agents have raided 17 money-transmitting businesses in the Washington, D.C. area that allegedly sent millions of dollars abroad without obtaining licenses, part of a nationwide crackdown aimed at curbing the ability of terrorists to move cash. Authorities have seized $3.6 million in the local raids, which began after the USA Patriot Act took effect in October 2001, tightening regulations on money senders. Although authorities have released few details of the operations, they suspect that three of the firms have sent funds to countries accused by U.S. authorities of supporting terrorism. No terrorism-related charges have been filed.

“When you have an underground banking system, it tends to make us very vulnerable to terrorist activity” as well as other crime, said Kevin Delli-Colli, assistant special agent in charge of the local Bureau of Immigration and Customs Enforcement office, which has headed the effort. But some immigrants and crime specialists say the crackdown has targeted many mom-and-pop businesses that have nothing to do with financing terrorism. These informal money-senders are running afoul of the Patriot Act simply because they lack the resources to meet all of its licensing requirements, critics say.

The most recent raid occurred at the Eritrean Cultural and Civic Center at Sixth and L streets NW. Immigrants who gather at the club to swap gossip and watch Eritrean television programs were shocked at the raid on the office, which many use to send cash to needy families back home. “To include us like a terrorist group is unacceptable. Of course we’re offended,” said Estefanos Mesmea, 55, a cabdriver.

More on this story here.



“The enemy we’re fighting is a bit different from the one we had war-gamed against,” said General William Wallace after the first week of fighting in Iraq had not gone as planned. The comment speaks to a truth of which we are reminded in wartime: the military is a government operation that undertakes its activities according to a plan cooked up by nonmarket actors. The bureaucrats are denied access to prices, the signaling devices that serve as the basis for assessing the success or failure of any particular project on the market. As such, even the best military plans, even those that lead to a declared victory, will partake of features similar to that of any form of central planning.

Planners typically refuse to admit error and rather shift the blame. Wallace’s open admission that something was amiss was highly unusual. Planners tend to persist in ignorance. We might describe government planning as one in which ignorance persists no matter what. In war as in socialism, the world would be a much safer place if the planners would stick to their games and leave real life alone.

More on this story here.


I have noticed that people often attempt to justify the existence of the State by bringing up some place or some activity where there was little or no government at work and pointing out that, at some point, something bad happened. In 2001, in an New York Times book review of The Outlaw Sea, Nathaniel Philbrick mentions that it was suspected “that a ship containing a large chemical bomb was on its way to London.” Nothing happened and no such ship was tracked down, so here we have a case where there was not enough government involvement, and something bad might have happened. I assume we are not supposed to recall that when something really, really bad did happen, it involved the extensively regulated airline industry.

Philbrick is hardly alone in forwarding such arguments. When I mentioned to a friend of mine that I am an anarchist, he brought up the Triangle Shirtwaist factory fire of 1911, which killed 146 women: not enough government, and something bad happened. Certainly it was a horrible event, making any of the tragedies caused by governments, such as the Armenian genocide, the Ukrainian famine, the rape of Nanking, the Bataan death march, the Holocaust, the fire-bombing of Dresden, the atom bombs dropped on Hiroshima and Nagasaki, the Vietnam War, and the killing fields of Cambodia, pale in comparison. The logic is flawless: when a private business accidentally kills 146 people, we need to increase the power of the government, an entity that deliberately kills millions.

More on this story here.

A trip down Anarchy Lane.

“Things would spin out of control! People would run around killing and looting!” Those are common responses I get when I explain to someone that we do not need coercive government managing every aspect of our lives. And I am not just talking about government rules like the drug laws that kill people. Even the silly little meddling of our masters is costly as well as irritating. But while I can get agreement from most people that a little meedling rule is idiotic, they balk at my proposals to get rid of all coerced control, as if forced participation at the Department of Motor Vehicles is all that stands between us and running gun battles on the highways. Though most people lack the vision to entertain anarchy’s glorious possibilities, nowadays with popular entertainment, who needs an imagination? Lots of creative artists have already taken us on the trip down anarchy lane.

The anthropologists and sociologists have already had their work done for them by the entertainers. We can condense some of the following themes from their tales of fiction. First, the natural inclination of most people is to work together to reach common goals. When a serious issue of survival confronts most people, their first instinct is not to rape and murder the next door neighbors, but to work with them if that will better their chances of achieving a positive outcome. Secondly, most people are waiting to be led, and they will follow the orders of the individuals or institutions that appear to offer the organization and safety that they are seeking. And third, there are sociopaths waiting for opportunities to murder and steal. In fact, many of them have a habit of gravitating towards political office where they can accomplish their evil with efficiency and impunity. That is why we must do whatever we can to make these offices as rare and unattractive as possible.

In conclusion, anarchy will work if charismatic, competent and moral anarchists are on the scene to persuade the group to that way of living. Charismatic authoritarians and sociopaths will also have followers coalesce around them like cotton candy sticking to a paper cone. A state-less or minimal state community can develop and thrive where the ideas are implanted in the hearts and minds of the group and where they also have the capability to defend themselves against the competing authoritarian gangs that will rise up looking for a free meal ticket.

More on this story here.


In Maine, it is famously impossible to get there from here; so as I reflected on the loathing with which much of the world now regards the fair name of America as a bomb-spitting, empire-seeking, prisoner-torturing monster, I wondered how we got here -- having started 228 years ago with such a fervent passion for individual liberty, peace and trade. I went back to re-examine the Declaration of Independence. There in its second paragraph, sure enough, is that magnificent expression of the “Libertarian Axiom”: “We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness.” The right to one’s life -- self-ownership -- is “self-evident”. This right to life is possessed by “all men”; these things are true not just for some, but for everyone. From that it follows absolutely that nobody has the right to rule anybody else. Sublime!

But then I did what often we fail to do: I read further. The very next phrase is “That to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed ...” Oops! A total non sequitur, riddled with contradictions. Within a single paragraph, the Declaration has plunged from the sublime to the ridiculous. Already, I smell a rat. Jefferson was a very smart guy; he would not make a blunder that big by accident. This begins to look like a political tract, more than the summary of a philosophical treatise, the purpose of which was to arouse the rabble, not to enrich the mind.

What the Founders are actually saying here is that you need government, come what may. Change it as often as you like, but do not dare to think you can do without one altogether. Anarchists like me find that deeply disappointing and wholly illogical; the conclusion totally fails to follow from the self-ownership premise. Ultimately the Founders were not really different from any other revolutionary anywhere: They wanted to get rid of the present government so that they themselves could take power. Theirs was not a rebellion against power, just a rebellion against someone else’s power. Government junkies have little to worry about in the D of I, and that is the problem. The government those Founders put in place, based on the irrational thinking shown in this Declaration, has now come to its full flower. Garbage in, garbage out.

Link here.


A couple hundred years from now, long after the American Empire has crumbled, historians will attempt to provide their contemporaries with a detailed understanding of how a society that on occasion showed signs of promise ultimately failed to break free from its self-destructive addiction to spectacular violence at home and abroad. One of the texts that could help these new age historians decipher the thought patterns of the failed empire’s leaders and its inhabitants, as they blindly traveled down the path to ruin, is Kurt Nimmo’s Another Day in the Empire: Life in Neoconservative America, a selection of his highly acclaimed articles first published in Counterpunch. With Nimmo’s trademark clarity and wit, Another Day chronicles a seven-month period of the reign of George W. Bush. The book addresses, through a series of essays in chronological order, such all-American topics as militarism and government secrecy and deception.

Unlike Bob Woodward and almost every establishment reporter covering the inner workings of the US federal bureaucracy, Nimmo does not take for granted official pronouncements and policy statements issued by the governing elite in Washington. He conducts his research and writes his articles with the understanding that members of the US government deceived Americans in the past, are employing deception now, and are a sure bet to use deception in the future in order to protect their monopoly on power in Washington.

In the book, Nimmo, like many other authors before him, reviews the Reagan administration’s support of Saddam Hussein’s regime in the 1980s. What sets Nimmo apart from the other commentators is his ability to cut to the chase. Ronald Reagan and George H.W. Bush “were only interested in making sure Saddam gassed as many Iranians as possible,” he writes, “and thus pay back the Ayatollah Ruhollah Khomeini for evicting the despised Shah Reza Pahlavi and initiating an anti-western revolution in Iran.” Nimmo explains that Iran, as with Saddam Hussein’s Iraq, intrigues the US foreign policy elites because it is a nation in a strategically important region of the world that refuses to genuflect to Washington.

Nimmo is not a Bush-bashing liberal. When it pertains to the current Democratic leadership in Congress, he is not afraid to call a spade a spade. “The Great Spineless One, Tom Daschle,” Nimmo reminds us, signed onto Bush’s invasion of Iraq because, as the Senate Democratic leader said in the fall of 2002, “I believe that Saddam Hussein represents a real threat.” Liberals in Washington “stand four square behind Bush for new and improved mass murder,” he states. “One of these days maybe the whole lot of them can be indicted on charges of crimes against humanity.”

More on this story here. “Sample chapter” (which seems to segue into a book review) here.


The Bush White House checked with rapture Christians before its latest Israel move with Christian fundamentalists, where they passed off their views on gay marriage as if it were holy writ and issued fiery warnings that “the Presidents [sic] Administration and current Government is engaged in cultural, economical, and social struggle on every level” -- this to a group whose representative in Israel believed herself to have been attacked by witchcraft unleashed by proximity to a volume of Harry Potter. Apparently, we are not supposed to know the National Security Council’s top Middle East aide consults with apocalyptic Christians eager to ensure American policy on Israel conforms with their sectarian doomsday scenarios. But now we know. “Everything that you’re discussing is information you’re not supposed to have,” barked Pentecostal minister Robert G. Upton when asked about the off-the-record briefing his delegation received on March 25. Details of that meeting appear in a confidential memo signed by Upton and obtained by the Voice.

The e-mailed meeting summary reveals NSC Near East and North African Affairs director Elliott Abrams sitting down with the Apostolic Congress and massaging their theological concerns. Claiming to be “the Christian Voice in the Nation’s Capital”, the members vociferously oppose the idea of a Palestinian state. They fear an Israeli withdrawal from Gaza might enable just that, and they object on the grounds that all of Old Testament Israel belongs to the Jews. Until Israel is intact and Solomon’s temple rebuilt, they believe, Christ will not come back to earth.

Abrams attempted to assuage their concerns by stating that “the Gaza Strip had no significant Biblical influence such as Joseph’s tomb or Rachel’s tomb and therefore is a piece of land that can be sacrificed for the cause of peace.” Three weeks after the confab, President Bush reversed long-standing U.S. policy, endorsing Israeli sovereignty over parts of the West Bank in exchange for Israel’s disengagement from the Gaza Strip.

More on this story here.


If I hear one more time that it’s “Bush’s fault”, I am going to be ill. I do not care for Bush. I do not believe we should be in Iraq. I believe the Patriot Act that Bush signed into law is an abomination. I believe Bush sold out those who voted for him by pushing as much big government as the Democrats. For these and many other reasons, I am disgusted and disappointed with George W. Bush. The decision to invade Iraq was an abuse of power, an attempt to eliminate one evil by employing another.

But it was not just Bush’s fault, nor was it that of just the Republicans. It was the fault of the rest of the chimps in Congress as well. It was the fault of the majority of Americans, who bought into the idea of a revenge-based, neverending war on terror. By making Bush the only one complicit in this evil, we do ourselves an even greater disservice. Demonizing only Bush takes far too much attention from all the other troublemakers out there.

That we have not found WMDs yet is irrelevant. Only the most naïve believe that there never were any WMDs in production in Iraq. [Ed: After all, the U.S. gave some to Saddam.] The question is, given the existence of WMDs, was a preemptive strike a legitimate action? My answer is no. But when we began the war, the majority of Congress and Americans thought so. Yes, it is Bush’s fault, but it is also Kerry’s and Kennedy’s fault. It is the fault of anyone who supports a government that is out of control and that has overstepped its bounds. Hysteria over 9/11 took us into Iraq. Bush was a tool, the blind leading the blind. You bought it. Blaming Bush for everything only diverts attention from the real problem and hurts the cause.

Unfortunately, most of the vocal anti-war crowd repeats the mindless chant that “It’s all Bush’s fault.” That kind of thinking suggests that if we get rid of Bush, we get rid of the problem. It gives credence and power to equally dangerous people, such as John Kerry. It allows the root cause to continue: American intrusion.

More on this story here.


Presidential aspirant John Kerry likes to discuss “the wealthiest one percent”. In this he is following in the footsteps of Al Gore who, when running for president, excoriated the one percenters to drive a wedge between them and the rest of us, hoping that enough of the rest of us would vote for him. Fellow demagogue Paul Krugman also often attacks the top 1 percent.

Whom do you picture as the wealthiest one percent? Many of us think of the famous athletes and entertainers earning $10 million a year, trial lawyers wearing expensive suits, and heads of multinational corporations making important decisions in exquisite wood-paneled boardrooms. To be in the top one percent in 2001, the most recent year for which the IRS has released statistics, you had to have an adjusted gross income of $292,913 or more. But if you take a wider and longer view, you reach a striking conclusion: virtually every American who has heard John Kerry or Al Gore speeches is in the top one percent. This includes the middle-class family from Indiana, the barber in Florida, the K-mart clerk in Oregon, and the Virginia junkyard worker.

This is actually good news. Here is why.

More on this story here.
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