Wealth International, Limited

Offshore News Digest for Week of May 24, 2004

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

Global Business Taxes Asset Protection Privacy Law Opinion & Analysis



Sample articles from this issue include:

Croatia the Best Country For Tax-Advantaged Residence and Real Estate Investment In Europe: What country combines beautiful scenery, first-class amenities, low prices and a convenient location within a two-hour flight from virtually any point in Europe? Not to mention unique tax advantages for persons who receive certain types of foreign income or a foreign pension? The answer is Croatia -- a well-known European tourist destination 15 years ago, but only now recovering from the widespread perception that it is not a “safe” country to visit. That perception is false. Although most of Croatia remained untouched by the war with Serbia, the nation still suffers from a reputation as a (former) war zone. This has distracted attention from Croatia’s clear seas, the more than thousand islands, romantic fishing villages, beautiful beaches, vineyards, Roman remains and medieval towns -- and its fiscal advantages. More information is also available here.

11 Places Where Your Shrinking Greenbacks Still Go A Long Way: Americans are taking a beating abroad. The dollar is down 18% against the euro in the last year, for example. Down and falling, in fact, against most every major world currency. Tough enough these days to be a traveler with greenbacks... but, oh, the pain for the American residing in euro-land. Every week the cost of living grows greater. Not so everywhere, though. In some places, your dollars still can take you far. Following are our recommendations for 11 countries where even U.S. dollars can buy a grand adventure... or an enviable new life.

Moving To Canada: Ten Tips For Survival: Moving to Canada means leaving behind family, friends, familiar food, routines and your place in the community. In Canada, you have to start all over again, build a new life, make new friends and find your place in a new community. This is a challenge all newcomers face, but if you come here alone -- with no close family or friends to help and support you -- then this challenge may seem even more daunting for you. However, there are a number of steps you can take to help yourself through this “settling-in” period. Here are our ten tips for survival to get you started.

Issue table of contents here.


Lord Davies of Coity, the Chairman of the Cayman Islands All Party Parliamentary Group, made a speech in the British Parliament calling for a “rebalanced” constitutional relationship between the UK and the Cayman Islands. Lord Davies defended the rigorous financial regulatory regime which exists in the Cayman Islands, and the jurisdiction’s commitment to implementing international financial measures, including OECD and FATF initiatives.

Lord Davies said that “There is no doubt that, if there is not measured progress towards democratic accountability and elements of internal self-government, there is a risk that the demands for full-blown independence will become much greater. As different levels of internal self-government already exist among different territories, there is bound to be a feeling of some unfairness and a desire on the part of some territories to catch up.”

More on this story here.


Most investors see China as a mass market, betting on businesses that just might sell a $1 product to each of the country’s 1.3 billion people. But there may be just as much money to be made through selling high-margin financial services to the country’s swelling ranks of millionaires. Just how many there are is impossible to gauge, as Chinese millionaires are understandably reluctant to broadcast their wealth. This may be because exposure tends to coincide with arrest: Several of those who have been named as among the country’s richest have found themselves in jail shortly thereafter, generally for tax evasion.

But bankers are convinced that more fortunes are being created in China than in any other part of the world. Indeed, there may even be a few billionaires by now. All have made their own fortunes, and many are young; there are increasing numbers in their 30s and 40s in the technology sector. The more established paths of real estate and manufacturing continue to generate fortunes as well. These new rich, like most of their countrymen and in contrast to their counterparts in the West, seem to be as concerned with saving and investing as with consumption.

More on this story here.


The dispute over Gibraltar hijacked attempts by Britain and Spain to resume co-operation over Europe yesterday, as so often in the past. Spain’s new, Socialist Foreign Minister, Miguel Angel Moratinos, met his counterpart Jack Straw in London in what was supposed to be a discussion on the EU constitution, and what Mr. Moratinos hoped would help smooth the long-running row over the sovereignty of Gibraltar.

But Mr. Straw steamed into Mr. Moratinos for Spain’s refusal to allow cruise ships that visited Gibraltar to dock in Spanish ports. “I spelt out to the minister that we regard the disruption to the cruise ships as unacceptable,” Mr Straw said. He told Mr. Moratinos, who had hoped for some movement on the sovereignty deadlock, that Britain’s position on the Rock was unchanged.

More on this story here.


The Standing Committee of the National People’s Congress (NPCSC) recently resolved that universal suffrage shall not be introduced for the election of Hong Kong’s chief executive in 2007 and the legislature in 2008. Yet it ruled that the methods for the elections in 2007/08 could be appropriately modified, provided that they are consistent with the principle of gradual and orderly progress as stated under the Basic Law. Such a decision takes into account the unique situation of Hong Kong (where there was no democracy in the colonial era). It is also advantageous to Hong Kong’s political reform and will help it move ahead more steadily.

More commentary here.


Unable or unwilling to play an effective role towards regime change in Iraq, this week the UN launches a week of “Solidarity with the Peoples of Non-Self-governing Territories” in a drive to “liberate” them. The UN has sworn to make the world’s 16 remaining colonies independent whether their inhabitants like it or not. Describing colonialism as “an anachronism in the 21st century,” UN Secretary General Kofi Annan said, “Decolonisation is a UN success story but it is a story that is not yet finished. We must see the process through to its end.” More than 80 nations formerly under colonial rule have become independent since the UN was formed in 1945.

But the problem for UN purists is that most of the colonies are either too small to be viable, or are populated by people who do not want to be independent. Almost half of the 16 remaining colonies are in the Caribbean region and the UN list includes the US territory of the Virgin Islands and the British territories of Anguilla, Bermuda, British Virgin Islands, Cayman Islands, Montserrat, and the Turks and Caicos Islands.

Some could not function without hefty subsidies from the administering countries but Bermuda is one of the exceptions in that it is economically sound and the 65,000-strong population of Bermuda enjoys one of the highest living standards in the world. In Bermuda there is disagreement among the parties over independence. Earlier this year Prime Minister Alex Scott backed the UN’s call for decolonisation. But opposition leader Grant Gibbons said that the UN had no business “telling the people of Bermuda what’s good for us. We are a sophisticated and mature people and it’s a matter for Bermudians to decide when and how we wish to move to independence.”

More on this story here.


Long accustomed to being just a hub for Latin America and the Caribbean, Miami recently awarded itself an upgrade. It now advertises itself as the “Gateway of the Americas”. But why should an ambitious Florida city stop there, when “Capital of the Americas” beckons? Or even “Center of the New World”, as one of its glossy brochures has it? For that is what Miami is now pitching for: already it has launched a big campaign to host the headquarters of the proposed Free Trade Area of the Americas.

Only 20 years ago, Miami had a serious brand problem, mainly thanks to the corruption and drugs that provided such good storylines for the TV series “Miami Vice”. No longer. The FTAA office would further entrench the city’s burgeoning reputation as the business and finance capital of the Latin market, both in the United States and in Latin America itself. It faces competition to host the FTAA, but Miami has a head-start. Perhaps the strongest rival will be Puerto Rico, which could benefit from anti-American sentiment throughout Latin America that might Miami’s chances.

More on this story here.


The Hong Kong government is planning a radical overhaul of the territory’s company law, which is currently based on 19th century British law. A complete rewriting and restructuring is planned, with particular emphasis on reducing the regulatory burden on private companies, which at the time that the original legislation was written were the exception rather than the norm. A white paper on the matter is expected to be ready for public consultation in two years’ time.

More on this story here.

Hong Kong raises $380 million in land auction.

The Hong Kong government raised HK$2.96 billion (US$380 million) after developers bid fiercely for two residential sites in the first government land auction for more than 18 months, indicating robust confidence in the territory’s economy. In a bid to arrest a 60% slump in housing prices and restore confidence in the property market, the government halted land sales in November 2002. With the resumption of land sales, the government expected revenue from land transactions -- including stamp duties and rates -- to double from about HK$5 billion last year to HK$12 billion this year, or about 6% of forecast total income.

The auction fetched 76% more than expected. Tony Chan, of Tony Chan Surveyor, said based on the prices the sites fetched, the developers must be expecting property prices to rise at least 25% in the next two years.

More on this story here.


China needs to improve the quality of its investment spending and change the way it incentivises officials and bankers in order to manage successfully the country’s impending economic slowdown, the head of research at the IMF has warned. Fixed asset investment, which is currently running at around 40% of GDP, has been the principle driver of China’s recent 9%+ growth. However, much of the spending -- supplied by state banks and directed by local government bureaucrats -- has been lavished on prestige projects such as government offices, urban squares and industrial parks.

Currently, provincial officials use prestige projects to make a name for themselves and gain promotion, while most loans made by the big banks are decided at a local level, where there are close ties between bank managers and bureaucrats.

More on this story here.


The narrow risk definition held by most banks and financial services firms will be broadened as institutions worldwide prepare for the 2006 implementation of the Basel II Capital Accord that will expand the scope of risks faced by financial institutions to include operational risk. This expanded approach to risk for financial institutions was developed to address the growing realization that financial institutions are faced with other substantial risks that do not include the traditional market and credit, which most banks and financial institutions usually allocate for. Steve Giles, an expert in the area of corporate governance and risk management said that in most industries, risks faced by a particular company would also include factors such as reputation and operational risk.

Expanding on the concept of operational risk, Mr. Giles explained that at its most basic level it addresses problems that can result from people, systems controls and outside events, ranging from a glitch in an organization’s computer system to the 2001 tragedy of Sept. 11. Mr. Giles said that people could make errors, either as a result of in competency or fatigue, which could inadvertently lead the institution into a loss situation. Or he added, there was also the risk of a more deliberate form of error, fraud.

More on this story here.


The head of Interpol issued a warning to governments to help fight counterfeiting, which is estimated to yield more than €500 billion a year for criminal organizations. At the opening of a global congress on combating counterfeiting in Brussels, Ronald Noble, secretary-general of the Interpol, said that counterfeiting was, at best, “on the radar screen of a few countries.” He added, “What I find absolutely amazing is that this is a multi-billion dollar problem that affects the safety of people, the security of governments, that is connected to organized crime, drug trafficking and terrorism ... and nobody pressures me to say what I’m doing about this problem. There is no pressure to produce results.”

The sounding of alarm bells also comes amid signs that counterfeiting has become engulfed in the financing of terrorist activities. Mr. Noble said it was difficult to establish the scale of terror groups’ involvement in counterfeiting, but he suggested it covered goods ranging from car parts to compact discs. As an example, he cited the discovery of €1 million worth of counterfeit brake pads and shock absorbers in Lebanon last October. Interpol established that revenues from these vehicle parts had been earmarked for members of Hizbollah.

Mr. Noble indicated that counterfeiting could prove a particularly attractive source of financing for terrorists because it was “a low-risk, high-profit crime area” under less scrutiny by police than other activities such as drugs trafficking. Still, seizures of counterfeit goods have climbed, suggesting either that police have become more efficient or that the illegal trade is booming. Congress participants offered few clues as to what solutions they might bring.

More on this story here.


Traditionally, many offshore hedge funds have based their operations in the Caribbean; part of the reason comes from the jurisdiction’s low corporate tax rate. According to published reports from William Fry, Dublin’s hedge fund business has grown from only 14 hedge funds domiciled in the jurisdiction between 1995 and 1999, to about 104 today. A well-developed hedge fund skilled workforce, as well as a well-structured regulatory body, well in tune to the needs of the growing hedge fund industry, compliments hedge funds relocating to Dublin. Dublin also levies a low 10% corporate tax rate, which is comparable to taxes levied by some of the Caribbean offshore jurisdictions.

More on this story here.


The diplomatic US visa of a corrupt cabinet minister, Max Samuels, was canceled in February 2003. The Minister’s involvement in the 2002 illegal sale of thousands of Belizean citizenship documents and passports, (including some to suspected terrorists and traffickers in persons and narcotics) was well documented. To date three persons have been arrested in relation to the immigration scandal but no charges have yet been brought against Samuels. Confirmation of the reason for the cancellation of Max Samuels’ Visa to the United States finally came this week.

More on this story here. U.S. report on Belize drug, passport, corruption problems here (PDF file).


Prosecutors have called on a judge to put the founder of Parmalat and 31 other executives and financial institutions on trial for crimes in the Italian dairy group’s multi-billion-euro financial scandal. A factbox on the company and the legal case follows.

More on this story here.


Mauritius Telecom, faced with the indignity of rivals offering cheaper international calls, complained to the government. And the government acted -- the regulator ruled that all telcos should charge the same for international calls. Rival telcos say this makes it effectively impossible to challenge the incumbent telco. Mauritius is keen to become a cyber island by encouraging technology investment -- it is currently building a Cyber Tower, in CyberCity, and is hosting the 2004 African Computing and Telecommunications Summit in September.

More on this story here.


Dubai has some oil and gas, but they contribute barely 6% of its economic output and are due to run out in about ten years. Contrast that with a fellow member of the seven-state United Arab Emirates (UAE) federation, Abu Dhabi, which sits on the world’s fourth-largest oilfield. Dubai has been wisely using its oil and gas income over the years to invest in a different sort of future, replacing hydrocarbons with people as it has expanded to be the tourism and business hub of a region where 1.5 billion people are within two hours’ flying time.

Thirty years ago there was nothing in Dubai but a creek, a sheikh’s palace and a dodgy reputation as the smuggling capital of the Arabian Gulf. In most other respects, the sheikhdom has been magnificently transformed, and is now a beacon for legitimate, non-oil business in the Arab world -- where shining examples of capitalism are rare indeed. Today Dubai boasts 272 hotels with 30,000 rooms, 30 shopping malls and almost 5 million foreign visitors a year. Dubailand -- a $19-billion theme park twice the size of Disneyworld -- is under construction. The motto of the tiny sheikhdom, for long the poor relation of Abu Dhabi an hour or so’s drive up the Gulf, should be “If we build it they will come.”

More on this story here. CIA The World Factbook section on United Arab Emirates here.


One day after Washington warned of a new al-Qaeda attack in the United States, a top Treasury official has praised Swiss efforts to combat financial terrorism. Juan Carlos Zarate was speaking following talks in Bern with the Swiss federal prosecutor and officials from the finance ministry and Federal Banking Commission.

More on this story here.


Allied Irish Banks PLC, Ireland’s largest company, admitted that five former executives ran a tax-evading offshore account for seven years until 1996, the bank’s third embarrassing admission of improprieties this month. The statement, made as part of an internal investigation into deals inside a subsidiary called AIB Investment Managers Ltd., followed admissions this month that AIB had overcharged a range of its customers since 1971.

More on this story here and here.


The black township of Khayelitsha, a sun-scorched sprawl of shacks and shops, is only miles from the hip hurly-burly of coastal Cape Town, but it is light-years away in spirit. The city, whose name means “new home” in the Xhosa language, is a makeshift relic of the old South Africa, when racial segregation and minority white rule, or apartheid, were enforced by jackboot and truncheon. But there is a garden growing in the heart of this treeless metropolis. Its flowers are aluminum, and its roots are nourished by a “gardener” who goes by a single name, Golden, and daily he fashions flowers from empty soft-drink cans, performing artistic alchemy on street-side litter.

Tourists troop through his small home, paying the equivalent of a couple of dollars for one of his brightly colored blooms. While his work, also on sale in Cape Town tourist haunts, shows no signs of turning him into the next Donald Trump, Golden says it provides a far better life than he had in apartheid days when he sweated in the gold mines from which he got his nickname. Today, he is more in control of his destiny. “I don’t have a foreman,” the soft-spoken Golden, 47, says proudly. “I don’t have to go into the mines.”

In many ways, Golden’s story echoes his country’s story. Once laboring under the darkness of a system that disenfranchised the bulk of its population, South Africa is clambering into the light. Once a pariah state teetering on the brink of civil war, South Africa is emerging on the world stage as a beacon of hope and racial harmony. Although still juggling a combustible cocktail of domestic issues including AIDS, crime, unemployment, white flight and black empowerment, South Africa - which moved from authoritarianism to democracy without bloodshed - is on the path to becoming a multicultural global player. In some areas, South Africa is enjoying unprecedented success.

More on this story here.


Cruise liners carrying enough tourists to populate a small city and cargo ships carrying goods from Asia to the American East Coast move through the canal -- one of the engineering wonders of the world. Its locks function like elevators, each using millions of tons of water to lift ships the size of skyscrapers off the ocean and onto a manufactured passageway through the divide between North and South America. The jungle, by contrast, seems stuck in time. Most of the residents are Indians who live on little more than the food they grow, and die young. Some 70% of people live without electricity, even more without telephones.

The problem is that the 90-year-old canal is at risk of becoming obsolete as vessels being built in Asia -- as long as the Empire State building is tall -- will be too big to squeeze through its locks. And a planned renovation of the canal for the coming decade or two could devastate jungle villages like San Pedro, turning a part of the area into a lake and forcing thousands off their land. Given the canal’s history as a corner of colonial privilege, fears are rampant that the $6 billion renovation will not benefit those who most need it -- villagers like those in San Pedro.

More on this story here.


The global private banking industry now looks after a staggering $4.6 trillion on behalf of individual multi-millionaires. After two years of watching the amount under their management fall by an average of 8%, 2003 turned out to be a bumper year with the revival of stock markets helping to boost assets under management by almost 15%. That is the best improvement since the heady days of the late 1990s, says London-based wealth management think-tank Scorpio Partnership. The world’s wealthy took 2003’s bullish markets as a sign to reinvest savings, Scorpio said. The industry continued to shed staff, losing another 3.3% against 4.8% in 2002.

More on this story here and here.



The US-based think tax, the Center for Freedom and Prosperity, has announced a panel of internationally renowned tax experts who will speak at the upcoming Tax Competition Roundtable in Berlin next month. The conference, to be held on June 2nd, is set to discuss the virtues of tax competition and explore the adverse consequences of EU and OECD tax harmonization schemes, and is being co-sponsored by the Heritage Foundation and Germany’s Friedrich Naumann Foundation. It has been deliberately staged to precede the OECD Global Forum on International Tax Policy due to commence on June 3rd.

More on this story here and here.

Schröder tax plan dubbed “economically illiterate”.

Kevin Hassett, the director of economic policy of the American Enterprise Institute, a Washington think-tank, said the US “envies” the EU system which currently allows countries to compete for investment by setting their own corporate tax levels. But he said that listening to Schröder and getting rid of tax competition in the Union would wipe out one of its advantages at a stroke -- and would rob new member states of any chance of competing by attracting capital away from the EU’s economic powerhouses. At the same time, it would help to drive capital away from the continent, towards more receptive regions such as Malaysia, Singapore, Taiwan or China.

“Schröder’s idea is about as bad as any other idea I have seen from that government,” said the former Federal Reserve Bank economist. “It is economically illiterate. If you are going to harmonize taxes upwards, then newcomers [to the EU] would have no advantage -- and competition in Europe would be on infrastructure, where Germany has a clear advantage. But it is not going to help France or Germany, because capital is not going to go to Latvia. It is going to go to countries such as Malaysia. They are going to chase the capital away.”

More on this story here.


The date when the EU savings tax directive will come into force is still in the balance, despite further accord between Switzerland and the EU. The directive -- which is likely to cost the industry and the States millions of pounds to put in place -- is due to become operational on 1 January 2005. The Policy and Resources Committee lodged a proposition asking States Members to approve the model agreements that will enable the directive to proceed in Jersey.

The directive will impose a tax on EU residents who have savings in the Island. It will also apply in Guernsey, the Isle of Man, and in other dependent territories of EU member countries, but only if all parties concerned agree on a “level playing field”. Switzerland is regarded as a key player.

More on this story here.


Following the publication for consultation of the UK Inland Revenue’s new regulations on the disclosure by tax advisers of tax sheltering arrangements being offered to clients, the Association of Chartered Certified Accountants (ACCA) has condemned the legislation as “worse than we expected”. Under the new rules, advisers will be obliged to provide details of tax minimization schemes to the Inland Revenue within five days of their implementation, or face a fine of up to £5,000. The tax authority will then endeavor to provide a reference number for the scheme within a 30 day period. However, this does not, according to the Revenue, give any indication of whether the scheme will eventually be judged admissible.

Speaking earlier this week, head of tax at the ACCA, Chas Roy-Chowdhury condemned the truncated consultation period allowed by the Inland Revenue, arguing that “They’re flouting their own guidelines. If they really knew what they were doing and had it prepared they could have issued the consultation at the time of the Budget.” He went on to add that the new rules have the potential to become a compliance “paperchase” for tax professionals.

More on this story here.

Inland Revenue official speaks of desire to create “avoidance-proof” legislation.

In an interview last week, head of the UK Inland Revenue’s Special Investigations section, Paul Clark attempted to calm the furor which has been created by the government’s new tax shelter disclosure rules. Mr. Clark told the news service that his department is more interested in creating “avoidance-proof” legislation than in pursuing users of older avoidance schemes after the event.

More on this story here.

The U.K. taxman’s £1.6 billion tax shelter hunt.

Ever been persuaded to sign up to some new tax avoidance scheme by your accountant? Be afraid. The Inland Revenue has set up a special investigation unit to look into all such schemes and it will not be limiting the scope of its enquiries just to the schemes themselves. Any aspect of your financial affairs could be put under the microscope. The Revenue’s spring report reveals that the taxman is on course to collect £1.6 billion extra revenue over the next three years.

Accountants have long complained that the taxman is unable to differentiate between legitimate tax avoidance, that is using loopholes in the law to pay less tax, and illegal tax evasion, which is little more than not declaring income to the authorities. But now anyone who has taken advantage of a tax planning scheme can expect to find their affairs looked into.

More on this story here.


The rules will require limited partnerships to pay 4% stamp duty on transactions. An estimated £17 billion ($30 billion) of UK property is owned by limited partnerships; vehicles used by the industry in part because they have not had to pay stamp duty. But fund managers and companies are moving the ownership of partnerships to Jersey or other tax havens.

David Hunter, president of the British Property Federation, has written to Ruth Kelly, financial secretary to the Treasury, to try to halt the changes. He warned that the introduction of stamp duty would “wipe ou”q the legitimate use of LPs for property holding transactions. The BPF wants limited partnerships held for property purposes to be treated as unit trusts or company shares, where the sale of shares is taxed at 0.5%.

The funds are escaping the imminent stamp duty regime by offering investors the choice to move the ownership of their UK limited partnership to offshore “feeder funds”. The Treasury defended the new rules, saying that partnerships had other tax advantages beyond stamp duty. “This addressed the anomaly between those transactions entered into by individuals and by partnerships,” it said.

More on this story here.


Accounting firm Ernst & Young LLP said federal prosecutors are conducting a criminal probe of its promotion of tax shelters for clients. The Department of Justice probe comes around 10 months after E&Y reached a settlement with the IRS. E&Y was fined $15 million for its failure to comply with registration requirements on tax shelters.

More on this story here and here.


The Australian Financial Review estimates the Australian Tax Office’s new compliance program will reap that amount from big business this year, providing the federal government with an unexpected windfall. In the taxman’s sights are transfer pricing and international transactions, as well as any tax haven-related activity.

More on this story here.


Fire? Theft? Bum investments? Yes, you can deduct some losses. But the rules are tricky, and not all losses get equal treatment. When you have got gains, Uncle Sam is an eager partner. And when you have got losses? Sometimes you can force him to share your pain and sometimes not. Here is a guide.

More on this story here.


As communism was once described as “the longest road between capitalism and capitalism”, the EU savings tax law is in danger of turning into the longest road between doing nothing and doing nothing.

One week after Switzerland, supposedly the hardest nut to crack, agreed to sign on, the law cracking down on untaxed expat savings is being held up by other countries refusing to come on board. EU ministers finally approved the law -- which will see banks shopping EU citizens who try to hide savings in other EU states -- last June with the implementation date of January 1, 2005. But it can only come into force if five other territories, Switzerland, San Marino, Lichtenstein, Andorra and Monaco, agree to similar rules by the end of June. An official present at a closed meeting of EU ambassadors disclosed that Liechtenstein is now refusing to co-operate.

More on this story here. CIA The World Factbook section on Liechtenstein here. Liechtenstein News home page here.


Ottawa could take the Conservatives’ advice and cut taxes to levels paid in the United States, but Canadians might not like the final bill, experts say. The trade-offs between low taxes and a strong social safety net has once again become a political volleyball in the current federal election campaign. Experts agree that Canada has a higher overall tax burden than its southern neighbor.

More on this story here.



Former Miami financier Marc Harris received a 17-year prison sentence for masterminding schemes to help two groups evade millions of dollars in U.S. taxes. Harris must also pay $26.9 million in fines and restitution and serve three years’ probation after he is released, U.S. District Judge James I. Cohn said. Cohn called Harris the “go-to partner” in the scheme. Harris, a U.S. citizen who moved to Panama in 1989, was found guilty in November of 16 of 30 counts of tax evasion, money laundering and conspiracy to commit fraud.

At trial, Harris said he had nothing to do with the plots carried out by father-and-son Freon refrigerant smugglers, Tony and Joe Vigna, and health and beauty aid supplier Moises Krieger. Joe Vigna and Krieger testified that Harris masterminded schemes to evade corporate and personal income taxes.

More on this story here. Background piece here. Marc Harris’s Objections to Pre-Sentence Investigative Report here (PDF file).


The IRS issued a consumer alert advising taxpayers to be wary of promoters offering a tax evasion scheme that misuses “Corporation Sole” laws. Promoters of the scheme misrepresent state and federal laws intended only for bona-fide churches, religious institutions and church leaders. Scheme promoters typically exploit legitimate laws to establish sham one-person, nonprofit religious corporations. Participants in the scam apply for incorporation under the pretext of being a “bishop” or “overseer” of the phony religious organization or society. The idea promoted is that the arrangement entitles the individual to exemption from federal income taxes as an organization described in Section 501(c)(3) laws.

The scheme is currently being marketed through seminars with fees of up to $1,000 or more per person. Would-be participants purportedly are told that Corporation Sole laws provide a “legal” way to escape paying federal income taxes, child support and other personal debts by hiding assets in a tax exempt entity. While fraudulent Corporation Sole filings have happened sporadically for many years, the IRS has recently seen signs the scam could be starting to spread with multiple cases seen recently in states such as Utah and Washington. The IRS is concerned about this increase and is taking steps to pursue Corporation Sole promoters and participants.

More on this story here.


The federal estate tax exemption is now $1.5 million per person. So a married couple worth $3 million can pass on all their wealth to their kids or other heirs without any federal tax, right? Not necessarily. The biggest hitch lies in an often overlooked detail: whose name is on the property. Say the wife has $2 million of assets in her name and the husband $1 million. If he dies first, $500,000 of the couple’s combined exemption could be lost. As the estate tax exemption rises -- it will go to $2 million in 2006 -- wealthy folks, who never had to worry about this issue, are tripping over it. Less affluent families get caught in titling traps too, leading assets to be distributed in unintended ways and causing squabbles among heirs.

So review the five traps below and then pull out your own papers to see if you are at risk. Just because you have paid a lawyer to draw up an estate plan, do not think you are safe. “The documents may look beautiful and be well drafted, but they don’t do you any good if you don’t have the assets positioned correctly,” warns Len B. Cason, an Oklahoma City estate lawyer.

More on this story here.


Fraudulent letters of instructions have become one of the primary methods being used by perpetrators of fraud, against financial institutions in The Bahamas, participants in a week-long seminar, hosted by the Bahamas Institute of Financial Services (BIFS) were told. This type of fraud occurs when letters of instruction purportedly sent by a customer or client of a given financial institution arrive at the institution, with instructions requesting the transfer of a specified amount of funds to a certain bank, often in another jurisdiction -- and then discover later that the client never gave such instructions. Such instructions have often been sent by fax and acted upon without much investigation.

Seminar participants were also warned about a number of other fraud practices, including “Nigerian E-mail Fraud”, international business company schemes, real estate fraud, embezzlement, passport fraud and insurance fraud.

More on this story here.


Certain commentators in the US say there is no longer a use for any trust created and administered under the laws of a foreign country. They believe it is illegal and unpatriotic and that all foreign trust companies are crooks. Wrong on all counts!! Of course, the activities of certain individuals who have created foreign trusts and used them fraudulently or as a result of negligent advice are well publicized. No one would seriously attempt to justify their actions. However, to brand all foreign trusts and their trustees in this way is simply unfair.

Trusts used to be marketed for their tax efficiency. In this day and age, this is probably not true, as the tax benefits have gradually been whittled away by governments worldwide. Trusts now are set up for other cogent reasons, including: 1.) The protection of assets from creditors, etc. 2.) Generation skipping. 3.) Parents in the US with children scattered around the world and unlikely to return. 4.) Protecting children from themselves.

Provided you have the right advice and choose your trustees with care, the use of foreign trusts can be worthwhile as part of your overall financial planning. Properly constructed, foreign trusts can be a very dynamic tool indeed.

More on this story here.



To protect the privacy and civil liberties of Americans, the federal government may get a privacy czar if two congressional representatives have their way. Reps. Kendrick Meek (D-Florida) and Jim Turner (D-Texas), who are both members of the House Select Committee on Homeland Security, introduced a bill last week that would establish a federal chief privacy officer position, as well as separate positions at every federal department and agency.

Additionally, the “Strengthening Homeland Innovation by Emphasizing Liberty, Democracy, and Privacy Act” -- or Shield Privacy Act -- would establish a 10-member commission, appointed by various government bodies, for overseeing privacy and civil-liberty freedoms related to homeland security initiatives. “It’s important that we take into account the impact on our fundamental freedoms” when considering emerging technologies, Meek said in a phone conference. “We’re trying to be proactive in heading off major privacy violations. We don’t have to see a major, major violation of privacy or civil liberties for us to act.”

The privacy czar, who would be appointed by the president and positioned in the Office of Management and Budget, would hold primary responsibility for privacy policies throughout the federal government.

More on this story here. Information on privacy policies all over the world, by country, available here.


The ACLU released documents containing disturbing new revelations about the MATRIX database surveillance program, including the fact that it was under the direct managerial control of the U.S. Department of Homeland Security, and that Florida Governor Jeb Bush gave a personal briefing on the program to Vice President Dick Cheney. The ACLU also announced that it has written to Nuala O’Connor Kelly, Chief Privacy Officer of DHS, asking her to investigate DHS’s role in the Matrix program.

MATRIX (the Multistate Anti-TeRrorism Information eXchange) is the latest data-mining program to emerge from the government. This surveillance system combines information about individuals from government databases and private-sector data companies, and makes that data available for search by government officials to comb through the millions of files in a search for “anomalies” that may be indicative of terrorist or other criminal activity.

Another document obtained by the ACLU indicated that Matrix operators sent to federal law enforcement authorities a list of 120,000 names of individuals who had been scored with a high “terrorism quotient”. Seisint, the company that operates Matrix, claimed that scores of arrests resulted from the list. “If this is how our officials are operating in the war against terrorism, it not only raises the chilling prospect that any innocent American could become vulnerable to having their name spit out by some unreliable computer as a suspect, but it fails to inspire confidence in how our nation is being protected against attack,” said Barry Steinhardt, Director of the ACLU’s Technology and Liberty Program.

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

Gov. Jeb Bush defends pick of computer firm.

Gov. Jeb Bush said Friday he did not know that the company he recommended to Vice President Dick Cheney for the Matrix national anti-terrorism computer network was run by a former drug smuggler. But the governor said it would not have mattered because the firm, Seisint Inc., is a Florida-based company that developed a “great” database for combating crime. Seisint was founded by Hank Asher, who resigned from the company in August after the FDLE questioned his background during negotiations on a $1.6 million state contract related to Matrix.

More on this story here.


The Department of Homeland Security is on the verge of awarding the biggest contract in its young history for an elaborate system that could cost as much as $15 billion and employ a network of databases to track visitors to the United States long before they arrive.

Link here.


Four Alaskans are filing a legal challenge to the federal government’s proposed new airline passenger-profiling plan, charging the program could prevent ordinary Alaskans from being able to travel to their state capital. The complaint asks the court to prohibit the U.S. government from issuing a secret order compelling airlines to turn over passenger data to the Computer Assisted Passenger Pre-Screening System, or CAPPS II. They said the order essentially would impose secret laws on Americans without giving them the right to challenge them in court.

Under CAPPS II, passengers would be assigned a color code -- green, yellow or red -- denoting how much of a terrorism risk they pose. The program would assign the risk by checking passengers’ personal information against databases owned by Acxiom and LexisNexis and against government watch lists of suspected terrorists and those wanted for violent crimes. A green score would result in no extra screening while a yellow score would lead to more intensive bag and hand-wand screening. A red score would alert the police to arrest or detain the passenger.

But CAPPS II has met a lot of opposition from privacy advocates and frequent travelers. On government websites seeking public comment about the program, CAPPS II has received thousands of critical comments, some of which can be found on the Department of Homeland Security's privacy office’s homepage. In addition, in the wake of lawsuits and bad publicity caused by revelations that major airlines including JetBlue, Northwest and American secretly turned over data to the government, the airline industry has made it clear that it will not participate in CAPPS II unless ordered to do so.

More on this story here.


Cats and dogs living together? Fat chance. That is what Washington insiders would have said five years ago if anyone had suggested agents from the FBI and the CIA would one day sit in a room and freely trade secrets. Then September 11 happened, and it appeared that an unwillingness to share data across the federal government was a key factor in the ultimate intelligence failure. So in May, 2003, the Bush Administration launched the Terrorism Threat Integration Center (TTIC).

The idea was simple: Take people from a number of key intelligence agencies, place them in a room together, and give them a common computer network. Ideally, their proximity would trigger information-sharing. But no one expected that to happen overnight. For the TTIC to be anything more than window dressing, the new team would need access to the most current data from across a wide swath of government computer systems. The task of making that possible fell to William F. Spalding, a career CIA officer and one of the agency’s alpha-geeks, who became the TTIC’s chief information officer.

Spalding’s efforts have yielded real fruit. TTIC members can now access in real time 14 separate government information networks, including those of the CIA and the FBI. Spalding hopes to add a handful of other government networks later this summer when the unit moves into its new digs in Virginia. He is also developing a top-secret portal, dubbed TTIC Online, to serve as an entry point and clearinghouse for the G-men and spooks now sitting nose-to-nose.

More on this story here.

New York, Vermont cops to use terror databases.

Police officers in New York and Vermont will be the first in the nation to get nearly instant access to federal counterterrorism information under a pilot program. Officers will be able to check whether there is information about suspects on anti-terrorism databases maintained by the FBI, CIA, State Department, immigration services and other federal agencies, as well as report activities of suspected terrorists to the FBI.

If a police officer has reason to believe a person might be involved in terror-related activities, state officials with security clearance will share data with their counterparts at federal agencies in Washington. The procedure is designed to keep sensitive information from becoming public.

More on this story here.


The Kingdom of Bahrain is the first country in the Middle East to implement an electronic visa system and related technology solutions from aviation IT provider SITA Information Networking Computing working in partnership with CPS Systems. Bahrain joins Australia and New Zealand as users of SITA’s intelligent borders services. This includes tracking systems to monitor and analyze the travel patterns of high-risk passengers. Phase one of the eBorders project is operational and the trial version of the new eVisa service went online May 4th. To begin with, the service will be limited to visitors from countries eligible for obtaining visit visas on arrival in Bahrain. Gradually, the service will be expanded to include additional countries and visa types as procedures are put in place to manage their travel requests. In time, it is expected to handle over 90% of all eligible visa requests.

More on this story here.


Manx nationalist group Mec Vannin has slammed the idea of compulsory national identification cards. At the group’s annual meeting members resolved to campaign against the possible move towards compulsory ID and a letter has been written to the Department of Home Affairs outlining members’ views. Chairman Mark Kermode said that “We utterly reject the notion of a compulsory national identity card. The meeting concluded that there were no grounds for such compulsory identity primarily due to the fact the ‘pro’ lobby had singularly failed to demonstrate the value of such measures.”

More on this story here.


The Enhanced Border Security and Visa Entry Reform Act sets Oct. 26 as the deadline for biometric passports to be required for entry into the U.S. No visa, no entry. The net result, if the deadline is not extended, is that millions of travelers from nations that include our top trading partners and allies -- the UK, France, Germany, Canada, Italy and Japan -- will be unable to visit the U.S. without a visa. Acquiring the visa will require a personal interview at an American embassy, a $100 fee and a frustrating wait for approval. Considering that this might affect more than 5 million visitors, you can imagine the impossible bottleneck.

Instead of acting in unison with the other nations in this pact, our national legislature pre-empted them, and set a deadline that no one else can meet. This arrogance has created a dilemma that Secretary of State Colin Powell and Secretary of Homeland Security Tom Ridge have admitted is grave. At stake is an annual volume of more than $1 billion spent in Chicago by more than one million foreign visitors. Would-be visitors face delays in visa processing, postponement or cancellation of travel plans. Worse yet, they will travel to competing nations for trade, vacations or study. The economic pain would compound an already serious erosion of foreign visitors to Chicago, whose spending has slid steadily from a peak of $1.72 billion in 2000.

More on this story here.


Maybe the surveillance state is like a glacier in an Ice Age. We can see it coming. It moves slowly. But in the end, it covers just about everything. The government is reportedly getting ready to spend up to $15 billion of our money on a computer-based system to track foreign visitors to the United States -- in the name of fighting terrorism. The New York Times reported that three big companies are among the finalists for a Department of Homeland Security (DHS) mega-contract.

Ah, technology to the rescue -- that’s the American credo. Were it only that easy, even if the consequences to liberty were not so dismal. It is not that easy, of course. But we live in a world where people are so fearful that they are willing to forfeit freedom for even the possibility -- most likely the illusion -- of more security. And money is no object.

In theory, the proposed system -- combining database mining, biometric tracking (including radio chips in passports) and other technological measures -- would help U.S. authorities spot some bad guys. In practice, it will undoubtedly crumble under the weight of administrative woes and the vast number of “false positives” (tagging innocent people as suspects) that will make identifying actual bad guys almost impossible. But even it did work, we would be wise to ask ourselves a few questions before spending those billions. Such as: If we build a surveillance system that can track foreigners so efficiently, how long would it take for the same technology to be used to track American citizens? The surveillance state glacier is moving, and picking up speed. Will this one ever melt?

More on this story here.


A survey of federal agencies has found more than 120 programs that collect and analyze large amounts of personal data on individuals to predict their behavior. The survey by the General Accounting Office found that the practice, known as data mining, was ubiquitous. The GAO found that 52 agencies were systematically sifting through computer databases. These agencies reported 199 data mining projects, of which 68 were planned and 131 were in operation. At least 122 of the 199 projects used identifying information like names, e-mail addresses, Social Security numbers and driver’s license numbers.

The survey provides the first authoritative estimate of the extent of data mining by the government. It excludes most classified projects, so the actual numbers are likely to be much higher. The Defense Department made greatest use of the technique, with 47 data mining projects to track everything from the academic performance of Navy midshipmen to the whereabouts of ship parts and suspected terrorists. In its catalog of data mining, the accounting office listed projects by the I.R.S., the Defense Intelligence Agency, the Department of Homeland Security.

Senator Daniel K. Akaka, Democrat of Hawaii, who requested the report by the accounting office, said, “I am disturbed by the high number of data mining activities in the federal government involving personal information. The government collects and uses Americans’ personal information and shares it with other agencies to an astonishing degree, raising serious privacy concerns.”

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


When Kevin Malin scooped up the mail that had dropped into his garage through a slot, he did a double take. “At first glance, I read ‘Kevin, they’re out to get you’.” What he saw was his name in large type on the cover of the June issue of Reason magazine -- a respected, nonprofit libertarian journal dedicated to “free minds and free markets” -- and an aerial photo of his Tulsa, Oklahoma, neighborhood with a red circle in the middle, near his home. The actual cover line is, “They Know Where You Are!”

The cover article, by Declan McCullagh, outlines ways data are collected -- some of it given up voluntarily when, for example, someone signs up for a supermarket discount card -- and the ways it can benefit consumers, such as by making instant credit available. “I thought it would be another one of those boring ‘we’re losing all our privacy’ articles,” said one subscriber. Reason’s gambit is anything but boring, as it startled 43,000 subscribers and others across the nation. The overwhelming response has been positive, say editor Nick Gillespie and publisher Mike Alissi. “One of the important points of the story,” Alissi says, “is that database nation is a place where mistakes will be made.”

More on this story here.



Deputy Bailiff Geoffrey Rowland said that the island would prevent terrorists, criminals and fraudsters abusing the local finance industry. Speaking at a global fraud conference, Mr. Rowland was confident Guernsey’s judiciary, government, regulator and finance companies would continue to do all they could to bring any perpetrators to justice. The island had responded “vibrantly” to a US-led crackdown on suspected terrorist assets and had a strong system in place to tackle dirty money.

More on this story here.


The Justice Department is seeking to expand its anti-terrorism powers again, adding among other things a FBI subpoena power so secret that even a lawsuit challenging it had to be kept under wraps. Experts say the changes, which have are moving piecemeal through Congress in several bills, are among the most significant since Congress passed the USA Patriot Act in the frightening days after the Sept. 11, 2001, terror attacks. Some of the measures being sought have been recycled from a controversial Justice Department draft of a bill, dubbed “Patriot II,” which was abandoned after details of its provisions leaked to the media.

“But while Congress and the administration working together have made significant strides in improving the department’s capacity to gather the intelligence necessary to prevent terrorist attacks, there is still more that needs to be done,” Daniel Bryant, the assistant attorney general for legal policy, told lawmakers at a May 18 hearing. Critics oppose giving law enforcement officials more power, complaining that not enough information has been made available about how the Justice Department is using the tools in the Patriot Act. “Are its provisions being used widely -- in ordinary cases having nothing to do with terrorism? The attorney general has said he has not used some powers. If so, are such powers needed?” asked former Rep. Bob Barr, a conservative Georgia Republican and civil liberties advocate. “These questions should be examined before we consider new legislation.”

More on this story here and here. ACLU’s USA PATRIOT Act page here.


The government can seek $280 billion in tobacco industry profits as part of its case against cigarette manufacturers, a federal judge ruled, clearing the way for a high-stakes civil racketeering trial this fall. U.S. District Judge Gladys Kessler said the companies will be liable for the $280 billion if the government proves its case that the cigarette makers knowingly deceived the public for decades about the dangers of smoking and the addictive qualities of nicotine. Kessler said that under federal law the government has the right to seek the money if it can prove the billions were earned through fraud, and if it can demonstrate that paying the money would prevent future wrongdoing.

More on this story here.

What are they smoking at the Justice Department?

Ten months after tobacco companies and 46 state attorneys general settled their differences for a skimpy $250 billion, the federal government decided that it wanted a piece of the pie. So the Clinton Justice Department filed suit, alleging that industry executives conspired to lie about the dangers of their product, manipulate nicotine content, and aim ads at kids. According to the complaint, those practices continue today. Shortly after the Republicans took over, Attorney General John Ashcroft, who opposed the suit when he was in the Senate, decided not to fund the litigation because it was too weak for trial. Apparently there has been a change of heart: No explanation, no new legal claims, just an astonishing demand for $289 billion in damages.

Clinton insiders knew the charges were trumped up. So it is politics and money, not law, which is driving this litigation. The federal lawsuit is part of an all-out strategy to plunder big tobacco -- while keeping it alive for future plundering, of course. Even prior to the November 1998 settlement, for every pack of cigarettes sold domestically, the industry earned about 23 cents, the feds got 34 cents, and the states averaged 37 cents. In effect, the feds and the states were 76% stockholders in an enterprise that, according to government reports, kills 400,000 Americans every year. If indeed there has been a RICO conspiracy, government has been the major co-conspirator.

The American public need to know that our legal system is rapidly becoming a tool for extortion. Sometimes the politicians seek money; sometimes they pursue a policy agenda; often they abuse their power. When Clinton was unable to persuade Congress to enact another tax on smokers, he simply bypassed the legislature and asked a federal court to impose damages in lieu of taxes. Bush can do better. Yes, he has absorbed with establishing the rule of law around the globe, but the President needs to remind his Justice Department that the campaign begins at home.

More on this story here.


Re-electing President Bush will mean a loss of freedoms and “create an America we won’t recognize,” Sen. Hillary Rodham Clinton is telling potential Democratic donors. In an e-mail appeal distributed by the Democratic National Committee to help Sen. John Kerry’s presidential campaign, the former first lady said “the stakes in this election are incredibly high.”

“If they get their way, you and I will be living in an America governed not by our hopes, but by our fears,” Clinton wrote. “We’ll be living in an America where we see our freedoms diminished when they ought to be embraced, our rights restricted when they ought to be strengthened. We’ll be living in an America that shrinks away from the political and economic challenges of the 21st Century,” she added. Clinton’s fund-raising appeal, which went out last week, comes at a time when Democrats are scrambling to offset Bush’s multi-million dollar, pre-general election campaign financial advantage.

More on this story here.


Police Chief Commissioner Christine Nixon will get new powers to compel underworld figures to give evidence and seize the assets of suspected criminals to help combat organized crime. Under the new laws, set to be introduced to Parliament next week, Ms. Nixon will be able to force witnesses to give evidence even though it may incriminate them. She will need to apply for a court order each time before using the powers and the evidence obtained will not be able to be used against the person providing it.

Premier Steve Bracks said police and the Office of Public Prosecutions will be able to seize the assets of suspected criminals before charges have been laid. Those suspected of having gained their assets through criminal activity will be required to prove that they obtained them through legitimate means. At the same time, pressure continued to mount on the Government to establish an independent commission to examine police corruption and links to underworld crime. Former Premier Jeff Kennett told The Age that the standard of policing in Victoria had deteriorated to such an extent that an independent body was necessary to root out corrupt officers.

More on this story here.


Ultra-tidy Singapore is lifting its notorious ban on chewing gum after 12 long years -- but getting a pack will not be entirely hassle-free. Wrigley’s Orbit gum has just started appearing in pharmacies along with several other brands. Before Singaporeans even think about unwrapping a pack, however, they must submit their names and ID card numbers. If they do not, pharmacists who sell them gum could be jailed up to two years and fined $2,940.

Singaporeans, many of whom have long derided the chewing gum ban, seemed unimpressed by the change. “It’s ridiculous that it’s easier for 16-year-olds to visit prostitutes than it is to get chewing gum here,” said Fayen Wong, a 22-year old college student. Prostitution is legal in parts of Singapore -- and no registration is required.

More on this story here.


Ms. Stewart never was charged with insider trading. People forget, but she was charged instead with lying to prosecutors and obstructing justice. Prosecutors never could come up with evidence to make the insider trading charge stick, so they had to trap her in having over-aggressively defended herself instead. But it is now clear at least as much aggression was on the side of prosecutors. And it was not just the lawyers, it was the prosecutors’ witnesses too.

Secret Service investigator Larry Stewart had testified that certain ink notes on Martha’s broker’s spreadsheet did not match, implying that the exculpatory note that pointed to a prearranged point to sell ImClone stock was actually added as an ex-post defense for her decision -- making it incriminatory instead. But while he was so busy playing “Quincy” and grand-standing on the witness sstand, he neglected to mention that he ... ahem, was not involved with the forensic examination of the spreadsheet the way that he said he was. Matter of fact, he had no role at all in the initial examination of the spreadsheet.

While prosecutors might understandably wish that a key witness’s perjury did not matter, they are likely to be among a relatively small group of people feeling that way. This trial was a showpiece, a kind of circus court that was intended to make an example of Ms. Stewart. In the march to make an example of Ms. Stewart, despite billions being lost at Enron, Worldcom, and elsewhere, prosecutors wanted to go after the frosty home decorating doyenne. If the perjury charge is enough to at least give the case a second hearing, and by then more than a few of the billion-dollar business malfeasants of the last five years will have had their day in court, then perhaps that will give courts time and opportunity to put Ms. Stewart’s case in appropriate context -- that it is overdone, malicious and unnecessary.

More on this story here.


Spain had doubts before U.S. held lawyer in Madrid blasts.

Days after the train bombings in Madrid last March killed 191 people, the Spanish authorities, unable to find a match with a set of fingerprints found on a plastic bag full of detonators, sent the F.B.I. a digital copy, hoping the bureau could find what they could not. The F.B.I. quickly and confidently found a match to a Portland-area lawyer, setting in motion a chain of events that led U.S. authorities to link the wrong man to those fingerprints, tie him to Islamic terrorists, arrest him on a material-witness warrant, jail him for 14 days, drop the entire case, and then face withering questions about how the investigation could have gone so wrong.

Court records unsealed Tuesday showed that the Spanish authorities had raised questions about the F.B.I.’s fingerprint match to the lawyer, Brandon Mayfield, 37, weeks before his May 6 arrest. Yet F.B.I. officials were so confident of a match they described as “100 percent”, the court papers show, that they never bothered to look at the original print while they were in Madrid on April 21, meeting with Spanish investigators.

More on this story here.

Why Ashcroft must go: What happened to Brandon Mayfield could happen to anybody.

Brandon Mayfield told his family that he had faith in the system, that it would all turn out alright. And so it did -- but not until John Ashcroft’s Justice Department had done everything to keep him jailed, defenseless, and smeared as a “terrorist” in the eyes of the world. The attorney general of the United States has been on a witch-hunt since 9/11. How many others are being held, without charges, without the possibility of defending themselves, and without anyone either knowing or caring?

Using the excuse of “fighting terrorism”, Ashcroft and his apologists have sought to shut down the Constitution, demolish the Bill of Rights, and set up what can only be described as a police state. We are all enemy combatants in Ashcroft’s war on the Constitution -- except for the tiny minority of militant neocons, who play the indispensable role of volunteer stool pigeons and rationalizers of the police state mentality.

The new totalitarians speak the language of “democracy”, liberality, and modernity. They pose as the champions of Western civilization against an encroaching barbarism, and claim that their goal is to “liberate” the earth, starting with the Middle East. It’s a bald-faced lie. The neoconservative agenda is topped, as always, by the glory and utter necessity of perpetual war. That is their number one principle. Luckily these would-be world-conquering commissars are totally incompetent. The Mayfield case is another instance in which Ashcroft’s Raiders came on like the Gestapo but wound up looking more like the Keystone Kops. Vicious, and stupid -- that is the best one can say about John Ashcroft and his crew of Justice Department Torquemadas.

More on this story here.

FBI lab scientist pleads guilty to falsifying more than 100 DNA reports.

A former biologist in the FBI laboratory pleaded guilty Tuesday to submitting falsified DNA analysis reports in over 100 cases. Jacqueline Blake, 40, admitted that from August 1999 to June 2002 she wrote and submitted more than 100 reports containing false statements about her DNA analysis work. In particular, she falsely certified she had performed certain control tests designed to ensure the reliability of the DNA analysis. It was unclear, based on the court documents, whether any of the cases involved were compromised. The case is part of a broader investigation by Glenn Fine, the U.S. Justice Department inspector-general, into the FBI lab unit in which Blake worked.

More on this story here.

The Office of Inspector General releases a report, The FBI DNA Laboratory: A Review of Protocol and Practice Vulnerabilities -- press release here, report here.

FBI whistleblower says former colleague lied at bombing trials.

An FBI whistleblower testifying at the state murder trial of Terry Nichols claimed a government scientist lied about key physical evidence found at the Oklahoma City bombing. Frederic Whitehurst told jurors Wednesday that FBI forensic scientist Steven Burmeister, whom he trained, had told two lies: that ammonium nitrate crystals found on bombing debris had been embedded by the force of the blast and that the crystals came from the kind of fertilizer believed used in the bombing. Whitehurst said there was not enough evidence to support either of Burmeister’s conclusions about the bomb that destroyed the Alfred P. Murrah Federal Building on April 19, 1995, killing 168 people.

More on this story here. [Nichols was subsequently convicted for participation in the Oklahoma City bombing -- story here.]


The “war on terror” led by the US is behind a surge of human rights abuses around the world, according to a report by Amnesty International. The organization said America’s assault against global terrorism had “made the world a more dangerous place”. US officials said they took Amnesty’s report “seriously”, but said America was a “leader” in human rights. Amnesty also criticized other countries for their treatment of terror suspects.

“Sacrificing human rights in the name of security at home, turning a blind eye to abuses abroad and using pre-emptive military force where and when it chooses, have neither increased security nor ensured liberty,” said Amnesty’s Secretary General Irene Khan. The report cites the hundreds of detainees from around 40 countries who are being held by the US without charge in Iraq, Cuba and Afghanistan. The world should have expected the shocking photographs of Iraqi prisoners being tortured at Abu Ghraib prison in Iraq, Ms. Khan said.

More on this story here.



Would anyone believe that “just voicing your opinion” could land you in prison? Would anyone believe that you could be sleeping soundly in your bed only to be invaded by the local Marshal and his deputies without a warrant? Would anyone believe that you could be transported hundreds of miles away from your home with just the clothes on your back? Want to take a guess as to what country this happened in? The Soviet Union? Nazi, Germany? Guess what, folks? This happened already right here in the United States during Lincoln’s regime.

American Bastile written by John A. Marshall, originally published in 1881 and reprinted by the Crown Rights Book Co., describes (in 767 pages) the false arrests of innocent citizens during Lincoln’s dictatorship, and their ordeal in the different prisons around the North. Were these citizens from the South? Actually, they came from the “loyal” states, and they were Democrats. These innocent citizens were judges, lawyers, doctors, U.S. Senators, U.S. Representatives, farmers, ministers, women, editors, state legislators, merchants, colonels, captains, professors, etc. There is a high probability that those mentioned in the book are only a sampling of those falsely arrested during Lincoln’s reign of terror.

Most of the prisoners were never told of the charges against them, never knew who their accusers were, when asked about their authority to arrest, there was none, no trials except occasionally a prisoner would be brought in front of a “military commission” which was, of course, illegal. They were imprisoned without knowing what they had done wrong, and when they were eventually released months or years later, they still did not know. Just voicing an objection to Lincoln’s administration, supporting the Constitution of the United States, voicing an opinion against the illegal draft, refusing to pray for Lincoln, discouraging enlistments, etc. could land you in prison.

More on this story here.


An authoritarian push is often seen as coming from above, forced on an unsuspecting public by would-be autocrats. But today’s global trend toward what might be called the Daddy State is propelled by the anxious demands of majority blocs of citizens. The Russians recently re-elected Vladimir Putin, a former KGB colonel, with 71% of the vote, handing him a mandate to continue his crackdown on Chechen terrorists. The Israelis are demanding the Fence -- envisioned as a sniper-patrolled, electrified national barrier aimed at keeping out Palestinian suicide bombers. Not only do Americans broadly support Bush’s Patriot Act, but women -- who worry more than men do that they or someone close to them will fall victim to terrorism -- tend to view the measure as not tough enough, according to a recent Gallup poll. Europeans are demanding closer policing of their rapidly growing Muslim minority, which now stands at 15 million in the EU.

Leaving aside the question of military power, the necessary response to terrorism is not to limit the power of the state but, rather, to bolster it, so as to preserve the basic order without which the defenseless citizen has no prospect of enjoying the splendors of liberty. In the wake of Madrid, in the wake of 9/11, in the wake of suicide bombings in Moscow subway stations and Jerusalem cafés, the state is impelled to become even more intrusive and muscular than it already is. How well today’s leaders meet this obligation to construct more-vigilant states is very likely to stand as one of history’s most important criteria for assessing their stewardship.

To say that we are at the beginning of an authoritarian age is not, of course, to end the conversation but to begin it. The challenge is to get authoritarianism right, and it is important to identify what could go wrong as we try to meet the demands of this new era. One obvious danger, fascism, already lurks at the door of Russia. Life in a Daddy State global order promises to be a somewhat mixed affair. Life will be best for majority groups in well-fortified but not overly heavy-handed Daddy States. As ever, life will be rough for anyone under the boot-heel of an unconstrained autocrat. But perhaps the most terrible fate awaits those trapped in the primeval chaos, without any sort of state protection. That condition of extreme vulnerability is borne by, for instance, Palestinians living in the Israeli-occupied West Bank and Gaza Strip.

More on this story here.


Even people who hate math actually love it. They depend on it, and they have faith in it. The only moral truth that everyone agrees on is that “2 + 2 = 4”. Why do I say that this is a “moral” truth? Because it brings order to our lives. That almost every person knows the simple rules of addition and subtraction goes a long way toward explaining how civil society functions. The essential function of a store clerk is to count the money received and give exact change back, and it is normally not a difficult thing to do.

Nature, too, imposes order. Jumping off cliffs or tall buildings can normally be called suicide, and it is understood that humans cannot fly. The belief that people “ought” to fly does not make it so. Instead, one must find ways to move through the air that accord with the laws of nature. Wishing something to happen does not make it happen. Feeling that something ought to be right, does not make it right. Anyone who wants a world in which 2+2 can equal 5 whenever it is convenient, is essentially asking for the world to go to hell. To willfully believe such a thing is to negate one’s own rational faculties.

The study of mathematics is the study of an abstract universe, which only means that reason itself recognizes the abstracts, the patterns -- as opposed to the absolutes -- of our actual universe. Curiously, reason is not held in much regard in the field of ethics or the social sciences. For the most part, social scientists defer to history, statistics, conventional wisdom, and ideology to understand the premises, and then only use “reason” to reach the conclusions. The purpose of social science often seems to be to find data to prove ethical and ideological points. Pick the best arguments of your favorite economist, statistician, sociologist, and historian, and your ideology may appear to be quite rational. That creates random judgments based on generalizations. Hey, we rebuilt Japan and Germany, why can’t we do the same in Iraq? Many believe that democratic institutions provide a check on this randomness; the moral preferences of the majority prevail. But this does not prove that the majority’s preferences are based on reason. Majority rule is still arbitrary rule.

Mathematics is based on our recognition of the real world; our rational faculty is based on recognition of objects and the recognition of structure and patterns. It does not tell us what ought to be or what is “perfect” or “ideal”, but in telling us the patterns and structure of what is it brings order to our lives. For ethics to be ethics, it must do the same thing: bring rational order to our lives. Like mathematics, it must provide rules to be heeded for an ordered universe. And in ethics and social science as a whole, it is the logic of human action itself, as opposed to finding the quirks of this or that individual or the beliefs of this or that population, that ultimately explains social phenomena.

And this is the ultimate, supreme debt we owe to Ludwig von Mises. He established, in Human Action, the premises and logic of human behavior. Not that human behavior is moral, or even reflects “rational self-interest”. But rather, that human beings act by making choices through time, and that these choices are a reflection of costs and benefits according to one’s values at the time of his decision and action. Politics can influence us by imposing additional costs on certain behaviors, and provide rewards for others. But politics can not control behavior or control values. In establishing these axioms, Mises systematically destroyed the conceit of The State, that its laws and coercion can function as values that can persuade people to become “good” in The State’s eyes. Instead, he advanced the idea that The State only imposes additional costs and impediments on human action and thereby distorts it and takes away the freedom and prosperity we otherwise would have had.

More on this story here.


Ever wondered why you are always in the slow-moving queue or why you hate the sound of fingernails on a blackboard? These kinds of everyday annoyances have been making people scream for decades but now a new book promises to explain all. The Pocket Encyclopaedia Of Aggravation, by Laura Lee, reveals the scientific facts behind life’s most infuriating irritations. Here, we list the 25 biggest pains. Annoyingly, we could not fit all 97 on one page...

Link here.


Once upon a time, long, long ago, in a faraway place (actually, a contrary-to-fact made-up one), there lived a group of human beings without benefit of government. Any government at all. How did they manage? Well, whenever there was a dispute between two neighbors, or friends, or merchants, or between a retailer and a customer, the plaintiff and defendant together would hire someone to mediate between them. This would be a leader of the community, or a prince, or leader of the clan, or an old wise man, someone renowned for his wisdom and sense of fair play. If there were a robbery, or a rape, or a murder (or a commercial dispute in which one of the parties refused arbitration), the victim would resort to the same kind of person who, for an agreed-upon fee, would mobilize the community to bring about justice by use of force or banishment or both.

All was well in this idyll until a community leader, or prince, or wise man -- the most respected and powerful of them all -- decided that he did not much like the competition from others of his own type. So, instead of allowing disputants a choice, he insisted that they all patronize services from only himself. But securing a monopoly over protection, defense and insurance was not enough for this ambitious man. In addition, he demanded that all members of the society pay him fees (taxes) whether or not they had any need of his assistance in such matters. He hired a bunch of intellectuals, professors and journalists (for a cut of the increased pie) to bruit it about that this new system was only proper and natural, and that the previous one was fatally flawed: morally, intellectually, spiritually and pragmatically.

This, in a very small nutshell, is the beginning of the downward slide of the human condition for Hans-Hermann Hoppe, Professor of Economics at the University of Nevada, Las Vegas, and author of the new book, Democracy: The God that Failed. But this is only the merest beginning of the record of human history, economics, sociology and politics told to us by this amazingly gifted storyteller. At least this Prince (for that is what we plebeians must now call him) ruled in a reasonably wise and humane manner -- it was in his self-interest. But then a second tragedy befell mankind, one far more serious: we moved from monarchy to democracy. Now, all bets were off. “Grab now and make hay while the sun shines” became the mottos of the elected officeholder. This short-sighted behavior pattern transferred from ruler to ruled. It not only ruined the economy, but promoted war, exacerbated crime, increased interest rates (due to societywide impatience) and drove up all sorts of other indices of disarray (unemployment, homelessness, divorce, perversity).

More on this story here.


I have heard it said that “Rome was built on hydraulic cement.” That is, the secret of burning lime and mixing it into a hard-drying, waterproof concoction that would bind stone together, was key to the expansion of Roman power. Not the least of Rome’s accomplishments were the aqueducts. These engineering marvels carried more water, further, to more locales, to serve more people than any other water diversion system in history, excepting only what has been accomplished in California in the past forty years or so. The movement of water down slopes of one or two inches per hundred yards, using only gravity and channels, without the aid of mechanical pumping, and over distances of hundreds of miles, gave millions of ancient people the opportunity to concentrate in cities, to focus their efforts on things over and above mere subsistence, and to build their empire.

Part and parcel of the decline of Rome was the loss of status over time of those who held the position of Aquarius, the engineers who laid-out, constructed and maintained the Aqueducts. For some reason, people simply stopped being interested in those “dirty-shirt” jobs like maintaining the water system. As the Aqueducts deteriorated and failed, and water supplies no longer met demands, Roman life became more difficult. For this, and for many other reasons, common interests that had united diverse peoples began to unravel.

What prompts me to think of Roman aqueducts, and the aquarii who serviced them, is an article by William Broad in the May 5New York Times. The U.S. is failing to produce adequate numbers of scientists and engineers to support its economy, with serious negative implications for the medium and long-term prospects of the nation. The Times states that “other countries, especially in Europe and Asia, have realized that science and technology are crucial to economic growth and prosperity and are rapidly catching up to the United States in the pursuit of science excellence.”

When I graduated “cum laude” in a hard science major at Harvard in the 1970s, I thought I had achieved something quite special. Little did I know or understand, and I could not have foreseen, that I would come to maturity in a nation whose fiat currency would be the “world’s reserve”, leading to an economy of easy money, “EZ credit” and low interest rates. This being the case, why study hard, to be able to comprehend and master difficult subject matter in nature and science, when all you really have to do is hire someone else to do the work for you, and hey, you can even pay them with borrowed funds?

More on this story here.


The Diplomat who quit over Nixon’s Invasion of Cambodia asks Americans on the front lines of Foreign Service to resign from the “Worst Regime by far in the History of the Republic.”

“The havoc you feel inside government has inflicted unprecedented damage on national interests and security. ... In its militant hubris and folly, the Bush administration has undone the statesmanship of every government before it, and broken faith with every presidency, Democratic and Republican (even that of Bush I), over the past half century. ...

“Sooner or later, the neoconservative cabal will go back to its incestuous think tanks and sinecures, the vice president to his lavish Halliburton retirement, Bush to his Crawford, Texas, ranch -- and you will be left in the contemptuous chancelleries and back alleys, the stiflingly guarded compounds and fear-clammy, pulse-racing convoys, to clean up the mess for generations to come.”

More on this story here.


The recent production of Homer’s Troy was decent, with splendid scenery, credible acting, and reasonable fidelity to the ancient epic’s tale of the conflict which embroiled the Mediterranean several millennia ago. As the movie progressed, one could not help but draw parallels with our current foreign policy predicaments. The great thing about Homer is that his epics were not merely white-hat/black-hat adventure stories, but were rather complex literary explorations of some of the most profound issues that still plague mankind. His tales transcend time and place... and still speak to all of humanity. As the movie progressed, I saw four themes that are relevant to America at this crucial stage of our history.

More on this story here. What Hector Could Teach Rummy: In Defense of Troy -- story here.
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