Wealth International, Limited

Offshore News Digest for Week of May 31, 2004

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Scandals involving two of Ireland’s major banks have jeopardized the financial industry’s international credibility, Irish Prime Minister Bertie Ahern warned. Earlier this month Allied Irish Bank admitted overcharging foreign exchange customers. And in a second overcharging scandal it emerged more than 500 customers were being charged for mortgage insurance without their consent. And the chief executive of Bank of Ireland resigned after admitting accessing internet sites with pornographic links.

The scandal at AIB, Ireland’s biggest bank by market value, claimed its first victim on Saturday, when its former CEO, Tom Mulcahy, resigned as chairman of state airline Aer Lingus after being identified in the media as being among former executives who had “tax issues”. A statement from the Revenue said it had already commenced a full investigation of all tax matters from recent disclosures regarding AIB and related individuals and entities.

More on this story here, here and here.

Irish PM wants AIB wrongdoers punished.

Bertie Ahern, Irish prime minister, said that anyone found guilty of wrongdoing by an inquiry into inappropriate trading by Allied Irish Banks must be “punished”. Mr. Ahern’s comments during a European Union-Latin American political summit in Mexico. AIB is facing serious questioning after admitting former executives had used a British Virgin Islands company to channel trading profits on initial public offerings and other transactions.

Irish government officials say that the bank appears to have continued to operate Faldor, the BVI company, even while the bank was being probed by parliament’s public accounts committee over a scheme encouraging depositors to hide millions of pounds in bogus non-resident offshore accounts to avoid tax.

More on this story here.

Allied Irish Banks faces tax probe.

Ireland’s Office of Corporate Enforcement, which was founded three years ago to crack down on tax-dodging and other corrupt practices in Irish business, launched an investigation into tax evasion involving senior current and former executives at Allied Irish Banks, Ireland’s largest company. Allied Irish Banks, meanwhile, angered lawmakers by announcing it would not attend parliamentary hearings on the latest scandal to beset the company. AIB Chairman Dermot Gleeson said in a letter to parliament’s Finance Committee that the bank did not want to discuss the matter in public until it completed an internal investigation and a parallel one being conducted by Ireland’s Financial Services Regulatory Authority.

Last week, AIB announced that five former executives had invested €750,000 ($920,000) in an offshore tax haven run by the bank’s investment arm until 1996. It added that three current and two former executives were involved in apparent tax evasion in other accounts until 1998.

More on this story here.


It sounds unlikely but there is a small British property market where homes have spectacular sea views, enjoy year-round sun and share a village atmosphere -- yet where house prices have a mixed and uncertain future. This is Gibraltar, Britain’s troubled crown colony of 30,000 residents on a 6.5 square kilometer patch of land at the southern tip of Spain, overlooking the Mediterranean and the north Atlantic.

Now, its property market is facing two ways -- ultra-expensive developments try to lure wealthy tax-haven buyers just as a glut of land and properties going on sale may lead to price falls at the lower end of the market. A further reduction in the Ministry of Defence’s presence on Gibraltar is set to make prices drop as, later this year, the MoD will sell to the Gibraltar government 148 redundant homes, 14 sites for new developments and more than 20 other sites that may add hundreds of new homes to the Rock’s stock.

A risk for overseas buyers, of course, is that Spain still wants Gibraltar returned to its control, despite the 2002 referendum when 98% of residents voted against such a move. With the Royal Navy’s presence now negligible, would a third-term Labour government in Britain return the Rock to Spanish control as a pro-European gesture? If so, what would become of the tax status and Gibraltar’s burgeoning high-value property sector? No one knows.

More on this story here.


Regulators have hammered the final nail into the coffin of the failed Bahrain International Bank. In early May, the bank’s lenders and depositors signed an agreement on an asset realization protocol for the bank -- in effect, cutting their losses and taking what they could get from the once thriving boutique investment institution. Shareholders had already backed the deal, which was brokered by The Bahrain Monetary Agency, the country’s central bank and financial regulator.

The move brings to an end one of the sorriest episodes in Bahrain’s recent banking history. For 20 years, BIB epitomized the success of Bahrain’s offshore banking sector -- it was small, nimble and highly profitable. The same was broadly true of its local rival, BMB Investment Bank. Both made their money mainly by investing cash for wealthy Gulf clients in Western markets. Both banks saw earnings soar during the bull run of the 1990s. But things started to turn sour around the turn of the millennium, when US and European securities markets nosedived. Both banks lost money on holdings of US and European securities, particularly corporate bonds. Both defaulted on loans to Western banks in 2002. While BIB has breathed its last, BMB is still fighting for its life. The incidents have dealt a blow to Bahrain’s credibility as a sound banking center.

More on this story here.


Hong Kong’s GDP leapt 6.8% in real terms in the first quarter of this year vs. a year earlier -- the highest growth in more than three years -- a government economist said. Inflation is expected to return to Hong Kong before the year-end following six years of deflation as the economic recovery continued to pick up momentum in the first quarter of 2004, Elley Mao, acting government economist, said. Industries including tourism, catering, entertainment, finance and exports were those expanding fast. But sectors like construction remained sluggish despite increased activities in other housing-related fields like interior decoration.

More on this story here.


Lorna Smith, representative of the British Virgin Islands Government in London, says BVI has not received any grant aid from the UK government since 1976, and currently receives no monies from the UK for either capital projects or ongoing budget. Not only are they economically sound, therefore, but by any measure, are a well-governed and successful economy. Tourism and financial services combined provide over 80% of the BVI’s GDP, and both sectors have weathered the global economic slowdown since the late 1990s remarkably well. These sectors are today in strong growth mode, with both seeing high levels of international investment and ever increasing employment levels.

More on this story here.


The father of legalized prostitution in Nevada and former Mustang Ranch Brothel owner Joe Conforte, now 78 years old, still looks much the same as he did when he left the country 13 years ago to avoid paying millions in back taxes. His hair is inky black. He goes everywhere with his signature Cuban cigar and he still takes charge of all those around him. “I have a good life,” he says in his low gravelly voice veiled in the accent of his native Sicily.

Conforte left Northern Nevada in 1991 anticipating a federal indictment that was handed up in 1995 and included racketeering, bankruptcy fraud and other criminal charges. The government claimed he owed at least $13 million in back taxes made on the “working girls” at the Mustang Ranch, east of Sparks. At the time, he had a history of challenging local authority, pushing legal limits and evading prosecution. Fleeing to Brazil, which does not recognize nonpayment of U.S. taxes as an extraditable crime, was Conforte’s grandest of exit stunts.

Kemp Shiffer was the special agent in charge of the IRS investigation into Conforte and the Mustang Ranch. He was appointed to the case in 1988 and worked it long after Conforte’s flight. Shiffer recently retired from the IRS. “Is Joe Conforte a crook?” he asks. “Absolutely he is. He did everything we said he did. Extortion, conspiracy, bribery, racketeering, money laundering, wire fraud; he is guilty of it all. He’s a crook, but he is a brilliant crook. The man stayed a step ahead of us the entire time. I worked that case for 13 years … He slid right through and out of the country.”

More on this story here.


Guernsey Chamber of Commerce president Mark Gill believes local anti-money laundering regulations are excessive and he wants money spent on criminal intelligence instead. Speaking after the latest business trends survey showed a loss of confidence in the island’s economic prospects, Mr. Gill said that regulation was one of the main contributory factors to that loss in confidence.

More on this story here.


The Isle of Man was voted the best international financial services center at International Investment magazine’s fund and product awards. Guernsey, shortlisted with Gibraltar, was highly commended for the strength of its offshore fund sector. Deborah Benn, the chairman of the judges, said: “Guernsey gave the Isle of Man a particularly good run for its money this year, but the Isle of Man’s slightly more retail product focus gave it the edge this time.”

The awards event is largely focused on the life insurance and product end of the fund sector, which is Manx-dominated, and the Isle of Man was declared best center for the third year in succession.

More on this story here.


Thousands of demonstrators marched here on Sunday afternoon to mark the coming 15th anniversary of the Tiananmen Square crackdown and to protest the growing restrictions on this territory’s democratic development. It was the first rally in what promises to be a politically turbulent summer. Under leaden skies and in tropical humidity, the crowd marched from a palm-fringed park to the main government offices, carrying black banners and a black coffin representing the deaths of students in Beijing on June 4, 1989. Organizers estimated the crowd at 5,600 people, while the police said “more than 3,000” had taken part. The march coincided with an ongoing debate over why three prominent radio talk show hosts, all outspoken advocates of democracy, suddenly quit and left Hong Kong.

More on this story here.


Private banking services, aimed at helping the wealthy conserve and multiply their assets, are beginning to emerge in Russia. But while such services have an exclusive image it is often difficult to distinguish private banking from other widely available consumer banking services. Alan McGregor, partner with AVC Advisory, an investment and financial planning agency, explains that private banking is different from regular consumer banking in that it offers one point of contact to high net-worth clients for investment advice and all of their transactions with the bank. Services branded as “private bankin”q in Russia have an air of exclusivity, but they often lack the global investment services and total confidentiality guarantees that define leading Western private banking institutions.

Zenit Bank, one of the few banks that already offer private banking in Russia, requires a minimum deposit of $100,000. For now, it offers investment advice and a personal financial manager who is always on call at no extra cost, but service fees indexed to the sum being managed will start to be charged in approximately one month’s time.

More on this story here.


Imagine a club where members of the volleyball teams enjoy drinking and eating more than exercising and, as a result, are very fat and out of shape. The club decides to expand its membership to include a group of men who only recently gained their independence from abusive parents and now are working hard on bettering themselves. The newcomers wish to join the volleyball teams. The existing players say to the new guys, “This is ‘not fair’ because you are slimmer and more energetic than we, thus you must put on weight belts so you are as slow as we are.” Substitute France and Germany for the fat guys, and the 10 new entrants to the EU as the hard-working thinner guys, and you begin to understand the new European oppression.

Germany’s post-World War II “Economic Miracle” came by abolishing price controls, instituting sound money, avoiding repressive taxes and regulations, and instituting the rule of law. Having achieved prosperity, the French, Germans and some of their neighbors began increasing taxes to redistribute income, and evolved into stultifying regulatory states. The predictable result is economic growth in France and Germany has all but stopped, and Germany now has a slightly lower per capita income than the average income of the pre-enlargement EU.

Because the Eastern and Central European countries suffered under the communists for four decades, their real income levels average only 47% that of the E.U. Eight of these countries (plus Malta and Cyprus) entered the E.U. on May 1. For these new entrants to catch up, they need competitive advantages over their established neighbors so they can attract the necessary foreign investment and spur productive economic activity. These advantages can be lower taxes, fewer economic regulations and more labor mobility. But now the bureaucrats of the old EU are trying to make that impossible.

More on this story here.


A research report on Canadian millionaires shows that the wealthy are not fully satisfied with the advice and services offered by the financial services industry. Toronto-based Taddingstone Consulting Group tracks the profiles, attitudes and behaviors of Canadian millionaires and their financial advisors. “Close to 25,000 millionaires are on the lookout for a new financial advisor every year” said Keith Sjogren, leader of Taddingstone’s Wealth Management practice. “They avoid consolidation and spread their wealth across multiple providers. Millionaires are not yet content.”

Taddingstone’s Report on Mass Millionaires noted a sharp increase in market share of the alternative banks such as ING Direct and PC Financial. “The millionaires appreciate the focus on efficiency and attractive pricing. These institutions never targeted the wealthy investor but their offer has great appeal and the millionaires went after them. A complete reversal of the traditional role as the hunted have become the hunters” said Sjogren.

More on this story here.


While most banks provide mainstream services for the mass affluent, under banners which include Priority at Standard Bank and Absa’s Platinum suite of products, there is a growing focus on the very wealthy those with net assets of more than R10 million. Apart from niche players Investec and RMB Private Bank, Nedbank Private Banking, BoE Private Clients, Absa Private Bank and Standard Private Bank all target the high net market. Many banks migrate their customers into their private banking operations once they have accumulated the necessary assets.

It is difficult to tell how big the market is. According to Absa, half a million South Africans qualify as mass affluent, while only 20,000 families are considered to have high net worth. Investec says that only about 50,000 to 60,000 South Africans qualify as super affluent. It agrees that the high net worth market consists of about 20,000 people.

More on this story here.


By 2020, an extra 6 million Britons will venture abroad to work or live, according to a new report by Alliance & Leicester International (ALIL), the offshore savings bank. The ALIL report in conjunction with think tank, The Center of Future Studies, found that one third of Britons are considering moving abroad to work or live. The reasons given for considering moving overseas include, 39% searching for a better quality of life, 38% hankering after new experiences and 25% relishing a new challenge.

A growing number of Britons will contemplate emigration, some even believing they “deserve” to live abroad, as Britain’s “me-generation” matures and becomes more ambitious, the lender said. However, the biggest worries people have about moving and living overseas are missing their family (59%), the logistics of moving home (47%), healthcare (45%) and language (37%).

More on this story here.


Accenture LLP, a technology and management consulting company, was awarded a government contract worth up to $10 billion to develop and expand biometric technology for checking identities of foreigners visiting America. The system, known as US-VISIT, requires foreigners traveling with visas to be fingerprinted and photographed upon entering the United States at a major airport or seaport. Other types of biometrics, such as iris scans, exist, but they are not now used in US-VISIT. The Department of Homeland Security awarded Accenture the contract over two other bidders, Lockheed Martin and Computer Sciences Corp. Accenture’s parent company is Accenture Ltd., which is incorporated in Bermuda.

The contract award drew some criticism from Capitol Hill because the parent company is incorporated in Bermuda. Rep. Lloyd Doggett, D-Texas, contended the company has an unfair advantage over competitors because it is incorporated in Bermuda and is not subject to certain U.S. taxes. Roxanne Taylor, an Accenture spokeswoman, said the company pays U.S. taxes on business it does in the United States “just as we pay tax in each of the countries where we operate.”

More on this story here.

Anger as Accenture scoops major US contract.

Bermuda-based consulting firm Accenture has come under fire from US legislators, after it was announced the group had won a US government contract that could go as high as $10 billion. Bloomberg News reported a number of US representatives had spoken out against the decision to give the business to Accenture because of it being incorporated on the Island, including democrats Richard Neal, Rosa DeLauro and Lloyd Dogett and Republican senator Olympia Snowe. Rep. Neal, who has in recent years been one of the most vocal opponents of so-called “corporate inverters” -- or US corporations that move their headquarters offshore while leaving their operations in the US, in a bid to reduce their US tax bills -- and contracts being awarded to these companies, condemned the contract decision as unpatriotic and “outrageous”.

Although the company -- which was incorporated in July, 2001 after then big five accounting firm Arthur Andersen decided to spin off its consulting arm as Accenture -- has been based in Bermuda from its start, it has still been branded by some lawmakers and in media reports as an “inverter”.

More on this story here.

Bermuda premier denounces report of “strained” relationships with the U.K. and U.S.

Premier Alex Scott has denounced a report that describes the PLP government’s relationship with the U.K. and U.S. as “strained” and its ability to function efficiently as “compromised” by rival elements. Premier Scott addressed the report published last week by The Economist Intelligence Unit (EIU), which analyses political and economic trends in nearly 200 countries so businesses may see how national, regional and global events will affect them in the short to medium term.

The EIU said in its report that Mr. Scott is continuing the policies it inherited from former premier Jennifer Smith and his government “has yet to issue a definitive policy programme following its re-election to a second term in July 2003” and that the government suffers from an “apparent paralysis” which is due to the narrow margin of victory in last year’s election and because of divisions within the party. Mr. Scott said the report is “wrong, wrong, wrong, wrong” and that “They need to get their facts straight.”

More on this story here.


It is a spectacular tale of incompetence, greed and charges of corruption. It has pushed one of Germany’s biggest banks to the brink of collapse. It allegedly involves ingenious pyramid schemes, runaway debts and uncovered losses concealed in a maze of shadowy companies and Cayman Islands trusts. It features officials at the most senior levels of government and business ignoring -- and, by some accounts, suppressing -- auditing reports that could have stopped the shenanigans years ago. Worse, it represents a more general problem for Germany that shows no sign of going away.

Call it Europe’s Enron. For the financial scandal that has swept up Bankgesellschaft Berlin is every bit as breathtaking as its American counterpart, both in the scale of its losses and the connivance with which they purportedly were covered up. But here the parallels stop. In the United States, Enron touched off a public outcry leading to a criminal investigation, jailed executives, the collapse of a major auditing company and a host of new laws cracking down on intransparent corporate reporting. In Germany the response has been almost the opposite -- public indifference and an official response that, at best, has been tepid and, at worst, amounts to a deliberate effort to enshroud the case in “extreme secrecy”, according to corruption watchdog group Transparency International.

More on this story here.

Bank bail-out galvanises popular anger.

The city-funded bail-out of a bank that employs 14,000 people and aims to revive Berlin as a cultural and business center to rival New York, Paris and London would seem just the sort of thing to please the intelligentsia here. Instead, a crisis at Bankgesellschaft Berlin has prompted an unusual popular protest movement that symbolizes the discontent many Germans have come to feel with their business and political leaders.

This protest, which has taken the form of plays, cabaret, lectures and court challenges, focuses on a bank founded in 1994 by Berlin’s government to finance the reinvigoration of the new capital after east and west Germany were reunited. Instead, the bank financed risky housing developments by local politicians who made illicit campaign donations to bank executives who also were politicians. Berlin’s mayor resigned in 2001 because of the scandal.

More on this story here.

The IT specialist may have known too much.

From the very start, the two journalists Olaf Jahn and Susanne Opalka thought there was something suspicious about the death of the Berlin man in 2001. As they dug deeper, they found information, bit by bit, that continued to feed their suspicions. Eventually, they were able to compile a book-length story about the biggest case of white-collar crime in Germany’s postwar history.

The story begins on Sept. 29, 2001, when a Berlin resident out gathering mushrooms in the city’s Grunewald forest finds a man’s body hanging from a tree. The police quickly close the investigation, calling the death a clear-cut case of suicide. Weeks later, the man is identified as Lars Oliver Petroll. The two Berlin reporters find circumstantial evidence pointing to a possible murder. The case is reopened. But before investigators are able to have Petroll’s body re-examined, it is cremated along with the clothes he was wearing. An unfortunate mix-up, the police say.

Kurt Schulz, a retired police commissioner, contacts prosecutors in January with a tip linking Petroll’s death to his former boss, a Berlin politician and co-owner of the property management company at the heart of the scandal. Lars Oliver Petroll was responsible for the company’s entire IT system. When he started to realize how the company worked, he began collecting incriminating data and bringing it home. And when federal banking regulators and the company’s lead bank were forced to get involved, Petroll decided to turn his knowledge into money ...

More on this story here.


A number of EU economic and financial policy topics of interest to Malta were on the agenda at a formal meeting of the Council of Economics and Finance Ministers (ECOFIN) in Luxembourg. The ECOFIN Council also updated its Broad Economic Policy Guidelines of the member States and the Community for 2003-2005. The document identifies three major challenges for Malta: (1) Ensure a reduction of the general government deficit on a sustainable basis and the long-term sustainability of public finances; (2) Increase employment rates, especially among women; and (3) encourage effective competition taking into account the specific characteristics of the small domestic economy.

More on this story here.


Recent investment projects and others in the pipeline would boost the Bahamian economy by at least $600 million a year, Prime Minister Perry Christie told Parliamentarians. Projecting that the resulting “economic resurgence” could also reduce the 2.9% ($164 million) fiscal deficit, Mr. Christie enthused, “This enormous boost to the Bahamian economy, which is without precedent in this region, will generate huge increase in employment opportunities. Furthermore, the surge will increase government revenues significantly.”

Speaking about the government’s national debt, Christie said there had been some “misleading” talk about the size of the national debt, but it was important to bear in mind that the level of government debt to GDP, which was less than 40%, was quite modest by international standards.

More on this story here.



“Anyone may arrange his affairs so that his taxes shall be as low as possible; he is not bound to choose that pattern which best pays the treasury. There is not even a patriotic duty to increase one’s taxes. Over and over again the courts have said that there is nothing sinister in so arranging affairs as to keep taxes as low as possible. Everyone does it, rich and poor alike and all do right, for nobody owes any public duty to pay more than the law demands.” Judge Learned Hand in Helvering v. Gregory.

Offshore jurisdictions are often seen as nothing more than tax shelters and they are regularly called “tax havens” by the media. Indeed, one of the major usages of offshore jurisdictions is to minimize the taxes that are payable in one or more onshore jurisdiction. For example, a company that operates in multiple onshore jurisdictions may be able to legitimately lower its effective worldwide tax bill by having a group holding company incorporated in a “tax neutral” jurisdiction like Bermuda. Such structures are perfectly legal and, as Judge Learned Hand famously stated, it is not unpatriotic for a company or individual to lower the tax they are required to pay within the bounds of the law.

Of course in an election year in the US, the left wing candidates have all been rushing to condemn such offshore structures as “unpatriotic”. Senator Kerry derided them as “Benedict Arnold” companies (i.e., traitors), although now that he is the presumptive Democratic nominee he has been backing away from such a shrill categorization. There is nothing sinister about such tax minimization arrangements and the technical term for such a strategy is “tax avoidance”. Tax avoidance is legal and smart. What is not legal and not smart is tax evasion. Tax evasion is when you breach the letter of the law and it often boils down to outright deception or fraud.

Formerly, bank secrecy laws and a lack of co-ordination among tax collectors worldwide allowed simple deceptions, or schemes involving offshore legal structures and non-arms length sham transactions, difficult to identify and time consuming for onshore tax authorities to trace. But all that has changed now.

More on this story here.

US Tax Court overrules IRS in international tax case.

The United States Tax Court’s ruling against the IRS in an international tax case may have set a significant precedent for firms selling foreign subsidiaries. In a case involving New York-based manufacturer Dover Corp’s 1997 sale of a UK subsidiary, which was 100% owned by Dover UK Holdings, the court ruled that the parent could defer payment of income tax on the $25 million capital gain on the sale.

More on this story here.


The Serbian government intends to cut the country’s corporate taxes to the lowest level in Europe. Finance Minister Mladjan Dinkic explained that the government hopes that a reduction of the corporate tax rate from the current 14% to 10% will attract foreign investment, cut corporate tax evasion, and boost economic growth. The Serbian authorities are reportedly anticipating economic growth of 6% in 2004.

More on this story here.

Slovakia attacks Franco-German corporate tax proposals.

The Franco-German alliance call for harmonization of corporate tax rates across the EU to protect their high tax regimes attracted fresh fire, with a public rebuke from the Slovak government. “Harmonization means higher tax levels. That’s not bringing Europe forwards,” Slovak finance minister Ivan Miklos told Handelsblatt. “That is totally unacceptable for us,” he added. “We simply dismiss any efforts leading to harmonization in the area of taxes.”

In a bid to stimulate investment at home and from abroad, Slovakia has recently introduced a 19% flat rate tax, which includes personal and corporate income tax, a level which compares sharply with Germany’s 38.8% company tax rate. Other new EU entrants have chosen a similar low tax path with business taxes.

More on this story here.


The CF&P Foundation released its latest Prosperitas study, entitled “The OECD’s Dishonest Campaign Against Tax Competition: A Regress Report”. The paper explains that the OECD has engaged in unethical behavior as part of its “harmful tax competition” campaign against low tax jurisdictions. More specifically, the paper documents how the OECD has reneged on both its commitment to get its own member nations to agree to undermine tax competition and its commitment to impose equivalent sanctions on all jurisdictions with market-based tax law.

“The study sets the record straight once and for all that there is not a level playing field for the exchange of tax information between jurisdictions. The study also documents the OECD’s unethical attempts to gloss over this critical fact,” said Andrew Quinlan, president of the CF&P Foundation.

Commenting on his study, Dan Mitchell stated, “The OECD’s opposition to tax competition is misguided, but hardly surprising since uncompetitive, high-tax nations like France and Germany dominate the discussion at the Paris-based bureaucracy. But I am somewhat surprised that the OECD has chosen to renege on its commitments.”

Veronique de Rugy of the American Enterprise Institute was equally critical, commenting that there is no excuse for the OECD’s dishonesty. “The Committee on Fiscal Affairs [the division of the OECD in charge of the anti-tax competition project] has brought shame to the OECD.”

More on this story here. Full report here.


European Commission officials fear a new scheme to crack down on tax dodgers will fail to win final backing this week because of continuing problems with Switzerland, despite a recent, apparently successful summit between the two sides. EU finance ministers are scheduled to vote this week on whether to implement a new savings tax system next January. But it is growing more likely that the final decision will have to be made later in June and the new system be delayed.

At the heart of the issue is continuing distrust between the EU and Switzerland over timetables and the “bundling” of the savings tax with both the Schengen deal and a separate agreement on processed agriculture products, as well as uncertainty over whether other countries will meet the EU’s demands. Because details of the other two deals have yet to be finalized, this could hold up progress on all three.

More on this story here.

EU puts off decision savings account taxes. Luxembourg argues for delay.

EU finance ministers postponed a decision Wednesday on the application of a directive on savings account taxes in the absence of a commitment from Switzerland to implement the measure on January 1, 2005.

There are fears that any slippage in the timetable could delay the introduction of the system by up to a year until January 1, 2006, to coincide with the tax year start in most EU countries. Jean-Claude Juncker, Luxembourg prime minister, argued that if there were a delay, it would be hard to implement the tax retroactively -- implying that the measure might have to wait for a new tax year. Luxembourg, Switzerland’s financial rival, has always been unenthusiastic about the new regime. However, Dawn Primarolo, the UK’s paymaster general, argued that a delay would increase the chances that it might unnravel.

Bern argues that the EU also needs to move quickly. Swiss officials are concerned that Bern might be presented as the scapegoat for delays they believe stem more from EU problems. But EU finance ministers are growing increasingly frustrated at the talks with Switzerland. They ordered Frits Bolkestein, EU tax commissioner, to secure a firm timetable from Bern for introducing the legislation by the end of the year, to allow the EU to decide whether the regime can begin next year.

More on this story here and here.


In revealing its formal stance on the long-running issue, the Policy Council said that discussions on model agreements had improved general knowledge about Guernsey’s constitutional position and autonomy on tax matters, including recognition of the island’s independent international personality. “The process of demonstrating Guernsey’s equivalence in terms of legislation relating to undertakings for collective investment has also highlighted the island’s high standards of regulation,” said Chief Minister Laurie Morgan.

He said the model agreements would protect the island’s competitive position and would not come in until a level playing field applied across the EU and other territories. “The Policy Council believes that the model agreements represent the best-possible outcome for Guernsey in the negotiations with EU member states and strongly recommends their acceptance by the States,” Deputy Morgan added. The States will meet specially on Monday 21 June to debate the issue.

Only a limited number of Guernsey deposits are expected to be affected by the new agreements, as the draft EU directive applied only to EU resident individuals’ savings income and not to companies, most trusts or non-EU business.

More on this story here.


The General Accounting Office has recommended that the IRS should consider using private collection agencies in a bid to increase revenues from debt collections and help clear the billions of dollars in uncollected taxes. “The growth in the backlog of unpaid taxes poses a risk to our voluntary tax system,” explained Michael Brostek, director of GAO Tax Issues, adding that “Doing nothing more than has been done recently is not preferable.”

The GAO’s report went on to state that “When the majority of taxpayers receiving phone calls from IRS are those who respond to written IRS notices, taxpayers and practitioners may conclude that failing to respond to IRS is an effective tactic for avoiding tax responsibilities.”

Legislation is currently pending that would authorise the IRS to utilise private agencies in its debt collection activities, and Commissioner Mark Everson indicated recently that a study will be launched into the costs of hiring private firms, provided Congress approves the proposal.

More on this story here.


Top tax lawyers believe that Government attempts to clamp down on tax avoidance schemes could be illegal and may lead to a breach of human rights. Tory politicians have seized on the suggestion to attack Chancellor Gordon Brown’s efforts to stop people taking tax advice to minimize their tax bills. Shadow Chief Secretary to the Treasury Howard Flight said senior counsel opinion had identified potential human rights issues that could derail the Government’s efforts to clamp down on avoidance schemes.

Paymaster General Dawn Primarolo denounced Flight’s plans, saying that taxpayers who take advice before they employ avoidance schemes should be aware of the consequences if a Government decided to enforce the tax system as it was designed to operate. But Shadow Paymaster General Mark Prisk told This Is Money that the Government’s “excessive and heavy-handed” approach to tax avoidance ran the risk of alienating law-abiding taxpayers.

“The Chancellor is making a fundamental mistake, which is to take the view that anyone who pays for some tax planning advice from an accountant is somehow cheating the system. This is an extremely dangerous move in our view because it lumps criminal activity together with reasonable tax planning, which is a legitimate activity. It is that confusion between illegal tax evasion and legitimate tax avoidance that is getting blurred,” said Prisk.

More on this story here.

Inland Revenue announces crackdown on tax evaders in Northern Ireland.

The Inland Revenue is aiming to raise an extra £1.6 billion by 2006 as the result of a crackdown on tax evaders in Northern Ireland, claimed PricewaterhouseCoopers. David Hill, PwC’s Belfast tax investigations specialist, said one particular target was people in Northern Ireland who had undeclared offshore trusts. He said many local people were already finding out the hard way that it was difficult to conceal offshore assets. Mr. Hill said that the campaign was being led by a new special compliance office team which had been set up in Northern Ireland for the first time.

More on this story here.

U.K. corporate tax group confronts avoidance.

As an international task force meets to tackle tax avoidance, calls are made for a government probe into UK companies’ tax affairs. Austin Mitchell’s calls for a government inquiry into the tax affairs of a group of leading British companies was struck not just to the companies mentioned, but also the accountancy and tax professions. But do the companies listed on Mitchell’s early day motion really deserve to be there?

More on this story here.


Jeffrey Dubin, an associate professor of economics at CalTech, said a doubling of the criminal sentences for tax and money-laundering offenses could bring in another $17 billion in tax receipts. Dubin’s research suggested ways for the IRS to narrow the $200 billion tax gap or the amount of uncollected taxes. One way to narrow that gap is by boosting audits, which have fallen dramatically in recent years. The number of revenue agents examining returns fell from 18,000 agents in 1995 to 13,000 in 2002.

More on this story here.

Tax Freedom Day 2004 fell on 30 May.

The March 2004 Budget moved Tax Freedom Day later by 3 days, from 28 May in 2003, to 30 May in 2004. This might look as if it is just two days extra -- but since 2004 is a leap year, it is actually three days more. That is three days more of the year that we have to work for the government, rather than for ourselves. The situation is even worse if you take public borrowing into account, since borrowing has to be paid for eventually. Adding public borrowing into our calculations gave a “real” Tax Freedom Day of 2 June in 2002. After a huge borrowing binge in 2003, it had been pushed out to 11 June (12 June if not for the leap year).

More on this story here.



Tax experts say banks and financial advisors have for months been looking for ways to circumvent tax obligations in the recently-concluded bilateral agreements with the EU. “In my personal opinion, if you have a lot of money, you will be able to find a way of avoiding this tax,” Thomas Jaussi, a Basel-based tax specialist with accounting firm KPMG, said.

The bilateral accords include the introduction of a withholding tax of 15% to 35% on interest earned by EU residents with savings in Switzerland. However, the levy will not apply to income from dividends, share funds, insurance policies, derivatives and gold, nor to government bonds issued before March 2002 -- providing a loophole that at least one bank has openly sought to exploit. Product development teams at other banks have also reportedly been working on “individual solutions” for clients. For Switzerland’s wealth management industry, the loopholes could generate a healthy windfall.

A second source of weakness is the fact that the EU levy is not “withheld” at the source, but by the “paying agent”. “Normally, this will be a bank,” said Jaussi. But if the paying agent is outside Switzerland or the EU, the tax will not be levied. Related to this is the treatment of trusts and foundations, which fall into a grey area. For example, an individual could bundle ownership of a portfolio of securities into an offshore entity. Jaussi says that an added allure of such vehicles is the fact that the EU’s taxation directive contains no express penalties for abuse. Some analysts predict that only those who are not wealthy enough to afford good advice or set up a foundation will be hit with the new levy.

More on this story here or here. Official Swiss government summary of the EU Savings Tax directive here.

As EU nears deal on tax dodgers, a real solution is elusive.

The criminals can be spotted in the first-class cabins of intercity trains pulling into Luxembourg station, or stretching their legs in landscaped parking lots outside the rows of modernistic steel-and-glass banks. Mostly retired or close to it, they are casually dressed and clutch tote bags or backpacks instead of luggage. They know what they are doing is illegal, but do not believe it is wrong. “Of course it’s tax evasion,” said one newly retired Berliner, who would not give her name for obvious reasons, as she and her husband entered a Deutsche Bank branch to withdraw the savings they have hidden from German tax collectors. “But we don’t have a lot and our children need it more, and their children.” Governments, though, tend to disagree, and after two decades of debate, the EU is close to cracking down on tax dodgers who cross borders to deposit their cash and then neglect to report the interest income at home.

Cash-strapped capitals already are salivating over new revenue streams that will help to close budget gaps. But the starting date is still in doubt, as is whether the tax revenue generated will be anywhere near what is expected.

Those who will be affected are not waiting. Luxembourg banks have already begun advising their clients on the many loopholes for avoiding the new tax, which is to start at 15% and climb to 35% by 2010. Since it applies only to interest on savings, people can diversify their holdings into mutual funds or bonds, which can exempt them from the tax, notes Lucien Thiel, general manager of the Luxembourg banking association, ABBL. They can also set up a trust since the tax only applies to “physical persons”. “Today you don’t need to be really rich and wealthy man to set up such a structure,” Thiel said in an interview. He and other experts predict a wave of disappointment in countries like Germany, which was the original driving force behind the directive.

More on this story here. “Legal Observatory of the Luxembourg Financial Sector” here.


The International Police in Kampala, Uganda arrested Arthur Ziegler Van Brink, who has been on the US government wanted list for money laundering, pending deportation to the United States. The director of CID, Elizabeth Kutesa, confirmed the arrest. “We have him. He is going back to answer charges of money laundering in the US,” she said. Van Brink and four others were indicted in the US over a $206 million fraud.

Van Brink has been living in Uganda since 1998 when he wanted to buy the defunct Cooperative Bank and invest in the Democratic Republic of Congo. Until recently, he has been living in Luzira and was a regular guest at the Sheraton Kampala Hotel. His accomplices were arrested in the US on January 6. Van Brink faces 22 counts of mail fraud, 16 of wire fraud and 103 of engaging in monetary transactions with criminally derived properties. A Canadian-appointed FIBG liquidator had wanted Van Brink’s assets in Uganda seized on grounds that he illegally acquired them with the FIBG depositor’s funds. The property included a mansion on Mbuya Hill and Cape Town Villas at Munyonyo. Uganda’s parliamentary select committee probing the Immigration Department recently recommended that Van Brink’s activities and status in Uganda be investigated.

More on this story here.

FIBG principals deported to U.S.

U.S. authorities say two men who engineered an outrageous international fraud that wrangled $206 million out of more than 4,000 investors were seized last week in Uganda after a shootout with police. Gilbert A. Ziegler, 53, also known as Van A. Brink, and Douglas Ferguson, 71, were captured after the firestorm that a British news account said left one security guard dead. The two are wanted by federal authorities in Portland, Oregon for their roles in a complex financial fraud that promised investors 300% returns, 100% safe investments and a bank that was backed by a $20 million ruby carved into a statue of a boy on a water buffalo.

Three other people have been charged in the scheme, but Brink and Ferguson had been living in Uganda and eluding authorities. Brink has lived there since 1999, and Ferguson fled to Uganda in February -- one month after the indictment against them was unsealed in Portland, officials said. A diplomatic security official assigned to the U.S. Embassy in Uganda located the two last month in Kampala. After the two were arrested they were handed over to FBI agents waiting at the Entebbe airport in Uganda, federal authorities said. They will be brought to Portland to face charges.

Federal authorities say Brink’s offshore bank, the First International Bank of Grenada, collapsed in 2000, and a Canadian liquidator says there is little money left to recover. The government contends Brink and other bank officers solicited investors through church groups, get-rich-quick seminars, the Internet and shady financial advisers. Their promises of vast wealth were supported by a Grenada banking regulator who endorsed the bank even as allegations of corruption surfaced, according to an offshore banking watchdog. Brink and Ferguson are accused of using the money from the scheme to buy luxury homes in Oregon, Nevada and Grenada, as well as an organic vegetable farm in Mulino. They also bought cars, furniture, jewelry, a tanning machine and designer clothing.

More on this story here.

How did Brink get his Grenada passport?

The FBI has made an official request to the Government of Grenada relating to a passport issued to Van Brink in the late 1990’s, which expired some time last year. It is still unclear whether the Ministry of Foreign Affairs had issued any directive to its missions’ abroad to cancel the passport of Brink before it actually expired.

The First International Bank fiasco remains one of the most embarrassing experiences for the Grenada government, especially when under the Prime Minister’s watch as Minister of Finance the proper procedures for the setting up of that bank were not followed. Brink was allowed to pay only $110,000 and provided a photocopy of a picture of a jewel as the guarantee to get the license to operate the bank.

More on this story here.


Rich husbands looking to divorce their wives are being warned by legal and financial experts to leave England and Wales, which could soon become the most expensive place in the world to sever marital ties. New York is the most feared divorce jurisdiction, but England and Wales could overtake it if Court of Appeal judges in London -- in a judgment expected soon -- rule that future earnings as well as current assets should be shared. New York -- which has its own jurisdiction within the United States -- is currently the “scariest” places to divorce for the rich husband with a poorer wife. France comes third and Germany last in The Economist Globetrotters’ Guide to Divorce.

A “tongue-in-cheek” table has been devised showing where wealthy partners with divorce on their minds would be worst off. Prenuptial agreements, the treatment of assets accumulated before and after the start of the marriage, the extent of maintenance payments, whether conduct plays a role, and the time and money involved in getting a divorce were all studied.

More on this story here.


John Leo Cerizo and his wife, Janeth Rey, face conspiracy and fraud charges in the United States after cleaning out 70 people of life savings to the tune of $8 million. The two were arrested in Davao City on May 27 after the US Embassy in Manila and the FBI notified Philippines officials of the indictments. Immigration records show the couple has been hiding in the Philippines since November 2002. They allegedly continued their scam in the Philippines, their country of birth. The victims were promised large returns from investments in certain offshore companies which, it turned out, were bank accounts under the couple’s names.

More on this story here.


The criminals ran an Australia-wide spam e-mail campaign, targeting Westpac internet customers. Those who opened the e-mails were then lured to the bogus Westpac internet banking site by a link in the e-mail where they were asked for their account numbers and passwords, which allowed mobsters to loot their accounts. The money was moved to other accounts created specifically for the purpose by “mules” -- individuals recruited with offers of a 10% cut of the mobsters’ illicit haul. From these halfway accounts, the “mules” withdrew the money and wired it overseas in installments of no more than $5000, using money transfer.

Neither Westpac or the Australian Federal Police would confirm yesterday whether any of the “mules” had been identified. Security analyst Robert Lowe said “mules” were often recruited with offers of a percentage of any funds appearing in the accounts they were asked to set up. After withdrawing the funds the money was simply wired to a pre-arranged location offshore.

More on this story here.

Phishers put surfers on the hook.

Phishing scammers cast a wide net, luring victims into a nasty snare that often costs them critical financial data. Preventing the scams may be harder than anyone has imagined. Phishing scams use phony e-mail messages and fraudulent websites -- phishers like to pose as PayPal, a favorite tool of eBay customers, for example -- to dupe people into divulging personal financial data, especially credit card info. So far, only a few scam artists have been caught.

PayPal and EarthLink fight phishing by educating their customers, providing toolbar site-verification tools, encouraging community involvement and sending blacklisted sites to the FBI and other interested spam watch groups. They place a top priority on educating consumers about phishing spam messages via media outlets. However, unlike spam, which works when computer users respond to a junk e-mail, phishing scams work because the scam artists capture credit card data when someone visits fake sites. Most Web users will trust a site if it looks real and the domain name seems real. In lieu of consumer-centric methods, several companies are working to provide domain-level anti-phishing tools.

More on this story here.

Opera snips phishing lines.

Opera has updated its browser to prevent its software been manipulated by would-be fraudsters to display a fake address to surfers. A flaw in the “Shortcut Icon” feature of versions of Opera prior to version 7.51 made it possible for phishers to fool users into believing that they are in a domain they trust (their bank, web-mail, etc.) while serving and receiving content in a hostile domain.

More on this story here.


The Federal Court of Switzerland turned down three appeals against the Swiss authorities decision to freeze the bank accounts of several major shareholders of the Yukos oil company and Group Menatep. At the end of March the Swiss Prosecutor’s Office conducted searches and seized documents in several Swiss cities within the so-called Yukos case. This was done by request of the Russian prosecutors who accuse key shareholders of the company of gross fraud and the company itself of massive tax evasion. At the same time, the Swiss authorities froze over $4 billion worth of assets on Swiss bank accounts which reportedly belonged to several Yukos shareholders.

More on this story here.


The passage of the Segregated Accounts and Foundations Bills are important tools to facilitate cross border international business, Minister of State for Finance, Senator James Smith claimed. In the case of the Foundations Bill, it bridges legal systems, thereby enhancing the attractiveness of this country as a truly international arena for business, he said. Senator Smith, who was speaking during the Senate debate on the two measures, said the Foundations Bill has been successfully adapted to the common law legal environment of The Bahamas, providing a “comfort level” to potential clients from those systems that are unfamiliar with alternative corporate structures such as trust, that we are accustomed to.

Senator Smith said that after the transition adjustments, “starting with the blacklisting in 2000”, it is important for The Bahamas to continue innovative product development, consistent with market expectations. This was important for the reassertion of preeminence in a marketplace where competition to attract geographically mobile activities is intense, exists at all levels and involves all countries, including the developed, developing and those economies in transition, he added.

In explaining the Foundations Bill, Senator Smith said it is more readily understood and recognized in civil law jurisdictions than that of “Trust”, which is used in common law countries. The Foundations Bill establishes a regime for foundations to be used as vehicles for the holding of private/and or public assets transferred to the foundation under its charter for the purposes set out in the charter. The charter of a Foundation must state its name, details of the founder, its purposes or objectives, the initial assets being endowed, the designation of its beneficiaries or how they are to be ascertained or that it is a charity, the definite or indefinite period for which it is established and details of its secretary and registered office.

More on this story here.



U.S. and European airlines and reservation companies will exchange passenger information with customs officials up to three days before a flight’s departure. Some E.U. politicians who view the deal as a violation of Europe’s strong privacy laws could still challenge the agreement in the European Court of Justice. The U.S. Homeland Security Department plans to begin negotiations with other countries that are interested in forming a legal agreement to exchange information about their passengers, but would not identify those countries.

More on this story here, here, and here.


The Irish government is to build a national register of 3G mobile phones -- and by extension, their users -- that are capable of carrying video clips. The protection of minors is an “absolute necessity” which outweighs concerns over costs and practicality, Dermot Ahern, communications minister, said.

More on this story here.


When Sterling McBride hunted down escaped prisoners for the U.S. Marshals Service, Mr. McBride learned the value of lying low until fugitives trip up, leaving small clues on their whereabouts. Now, as an investigator for Microsoft, Mr. McBride watches carefully for tidbits of data that link some of the two billion pieces [Ed: !] of junk e-mail that Microsoft’s Hotmail service receives each day with the people who send them.

Once he finds an electronic key to the spammer’s identity -- a real name, address or phone number -- Mr. McBride uses all the tools of a regular detective: trailing suspects, subpoenaing their bank records and looking for disgruntled former associates to become informers. But first he must lift the cloak of anonymity provided by the Internet.

Spammers have been sending more junk e-mail than ever, despite a new federal antispam law that took effect Jan. 1. So far, few have been brought into court because it is hard to find them and link them to electronic offers of pills and pornography. So the vanguard of the fight against spam has turned from software engineers who try to identify and block spam from e-mail in-boxes to investigators in private industry, like Mr. McBride, and an increasing number of prosecutors and law enforcement agents who are learning how to combine traditional detective work with cyber-sleuthing. The F.B.I. is increasing its effort to investigate spammers, largely in response to the new law.

Using information provided by Internet providers along with their own decoy computers and e-mail accounts, these investigators have built a database of more than 100 spammers. Increasingly they are actually purchasing pills and responding to offers of get-rich-quick schemes to track down the spammers.

More on this story here.


Corporate America has suffered $30.7 billion in lost revenue and other costs over the past two years as a result of delays in visas for foreign business travellers, according to eight US business organizations. The finding marks the first serious effort by US business to quantify the impact of security restrictions put in place since the September 11 terrorist attacks. A survey found that nearly three-quarters of companies had experienced unexpected delays or arbitrary denials of business visa applications, while 60% said the delays had hurt their companies through increased costs or lost sales. In addition, more than half the 734 companies surveyed said the visa process was worse today than a year ago.

The findings come as the Bush administration is close to completing a review of visa restrictions that government officials say is likely to result in some streamlining of the procedures to address growing concerns from universities, business, and the travel industry.

The severest impact on business has come from procedures implemented in July 2002 that require background checks of anyone, including potential foreign business customers, who is working with technologies deemed sensitive for national security reasons, such as aerospace, chemicals or advanced computers. About 14,000 visa applicants were reviews under that program last year. Medium-sized companies were hit harder than large companies, most likely because many cannot afford to hire immigration law yers to help expedite visa applications.

More on this story here.


Federal Reserve Gov. Susan Bies said the central bank has expanded its anti-money laundering program greatly over the past decade. Testifying before the Senate banking committee, Bies also said banks need to be more involved in monitoring suspicious activity. The Fed set up a section within its bank oversight division dedicated to supervising compliance with laws to combat money laundering earlier this year.

More on this story here.



The case looked pretty damning. Fingerprints don’t lie, for one thing. And the fingerprints of Brandon Mayfield, a lawyer from Portland, Oregon, had been found on a bag of detonators linked to the terrorist bombings in Spain that killed 191 people in March. For another thing, Mr. Mayfield was a Muslim convert who attended mosque regularly. He had once represented an accused terrorist in a custody case. On top of that, he had advertised in a Muslim yellow pages directory published by a man who had business dealings with Osama bin Laden’s personal secretary. And Mr. Mayfield’s wife Mona was an Egyptian immigrant. Circumstantial? Yes, but try to explain away that fingerprint.

Mr. Mayfield, a U.S. citizen and father of three, was arrested and locked up as a “material witness”, which meant he could be held without bail or criminal charge for weeks. Then the case against him collapsed. The FBI had said it was “100 per cent sure” it had a fingerprint match. Turns out it had a poor digital copy of a partial print. Spanish police had raised questions about the match, but the FBI would have none of it. Then Spain found an Algerian whose fingerprints matched. Mr. Mayfield was set free. His case shows how an impressive-looking structure of accusation can be built on sand. Even fingerprints are not unassailable evidence. It may be small comfort to Mr. Mayfield, but he has made a convincing case for judicial safeguards and against a rush to judgment in the post-Sept. 11 world.

More on this story here.

FBI’S handling of fingerprint case criticized.

One of the FBI examiners who mistakenly linked Portland, Oregon lawyer Brandon Mayfield to the Madrid train bombings has made erroneous fingerprint identifications twice in the past, documents show. And the FBI’s explanation for the Mayfield bungle -- that agents relied on a “substandar” photograph of the Madrid fingerprint -- is being contradicted by an international fingerprint expert hired by federal public defenders representing Mayfield. The clarity of a photo of the Madrid print, lifted from a plastic bag of detonators found in a stolen van near a train station after the bombings, is good and no competent examiner should have called it a match, said Allan Bayle, who worked for Scotland Yard for 25 years. He called the FBI’s original analysis “horrendous”.

More on this story here.

Expert warns fingerprinting system is “riddled with flaws”.

A leading US forensic expert has called for a radical review of fingerprint testing to determine the extent of flawed identification. James Starrs, a professor of law and forensic sciences at George Washington University, in Washington, D.C., said that despite intense scrutiny prompted by high-profile cases, such as that of Scottish police officer Shirley McKie, the system was so riddled with flaws that the number of known misidentifications was “the tip of the iceberg”. He claims that the court transcripts of fingerprint examiners’ testimonies should also be scrutinized regularly by a third party in order to prevent miscarriages of justice.

More on this story here.


The HSBC banker convicted in Monaco of stealing millions from some of the bank’s celebrity clients, is to claim in court that he was a victim of a concerted cover-up by Britain’s biggest bank and the financial authorities in the Mediterranean tax haven. Stephen Troth was released last December after serving two years and three months, mainly in Monaco’s only prison. He was freed soon after being transferred to a French prison, but now faces two actions in the next month by the French and Monegasque authorities to re-imprison him. At the same time, Mr. Troth has launched the first of a planned series of legal actions against HSBC that he hopes will clear his name.

Mr Troth’s legal fight promises to throw fresh light on a financial scandal that deeply embarrassed HSBC and the authorities in secretive Monaco. To add to the pressure on the Monaco authorities, the principality’s former chief public prosecutor, now a lawyer in private practice in France, is leading Mr. Troth’s legal team.

Mr. Troth, now 43, was HSBC’s top private banker in Monaco before his sudden and sensational arrest in 2001. He handled 300 clients, mainly sports and entertainment stars, with cumulative assets of more than $1 billion. He was accused and convicted the following year of removing vast sums from client accounts: the eventual figure was put at €18 million.

More on this story here.


Brunei has threatened to whip foreigners who overstay their visas, under new rules to stop migrant workers from nearby countries settling illegally in the oil-rich sultanate. The Immigrant and National Registration Department said that from June 12 caning would be the mandatory punishment for people caught overstaying their visas by 90 days or more. The new punishment also applies to anyone who helps an immigration offender enter or leave Brunei illegally, a move directed at agents who employ foreigners to work in Brunei. Brunei is a tiny country of 360,000 on the north-east coast of Borneo island whose offshore oil and gas wealth has made it one of the world’s richest nations per capita.

More on this story here.


Federal law enforcement officials routinely seize money they suspect is connected to activities like money laundering, terrorism or drug smuggling. But in early April, United States marshals seized $3.2 million from Discovery Communications, the television and media company, in an aggressive effort to crack down on a new target, Internet gambling.

The money initially belonged to Tropical Paradise, a Costa Rica-based Internet casino operation, which in October paid Discovery for television spots to advertise an online poker room, ParadisePoker.com. According to court documents, the government seized the money and told Discovery, based in Silver Spring, Maryland, that it could be party to an illegal activity by broadcasting such advertisements.

Federal prosecutors contend that online gambling sites are illegal, but the offshore casinos fall outside their jurisdiction. So for nearly a year, the government has been trying to curb the sites’ activities by investigating and pressuring American companies that provide services to offshore gambling sites on the theory that they are “aiding and abetting” the operations. Until now, the effort has largely involved seeking information from American companies, including major broadcasters, Web portals and industry consultants. The seizure of money significantly escalates the government’s attack.

More on this story here.


Britain is set to soften its opposition to a new European public prosecutor to tackle serious cross-border crime, in a move which could help secure a deal on a new EU constitution. The move by Tony Blair suggests new flexibility as he prepares for the final round of treaty negotiations at a summit in Brussels on June 17th and 18th. His concession would meet one of the key demands of Jacques Chirac, French president, who wants the EU to be more effective in tackling international crime and terrorism. However Mr. Blair remains committed to retaining the national veto in a number of “red line” areas: tax, social security, foreign policy and the British budget rebate.

The proposed European public prosecutor is seen by many member states as vital in the fight against cross-border crime, including terrorism and the trafficking of weapons, drugs and people. Last year Britain persuaded the EU’s Italian presidency to amend the draft treaty to narrow the prosecutor’s powers to combating only financial crime against the EU budget. Now British officials say Mr. Blair is willing to go back to the original wording, under which the prosecutor’s remit is given a broad definition.

Mr. Blair is also willing to see more cooperation between member states on criminal procedural law, such as minimum standards for detainees, provided the system of common law was fully protected.

More on this story here.


The objective of the Patriot Act [is to make] the population visible and the Justice Department invisible. The Act inverts the constitutional requirement that people's lives be private and the work of government officials be public; it instead crafts a set of conditions that make our inner lives transparent and the workings of government opaque.” - Elaine Scarry, “Acts of Resistance”, Harper’s Magazine, May 2004

By May, 311 towns and cities and four state legislatures (Alaska, Hawaii, Vermont, and Maine) had passed Bill of Rights resolutions instructing the members of Congress from those areas to roll back the most egregiously repressive sections of the Patriot Act, subsequent executive orders, and other extensions of the act. According to Nancy Talanian, director of the Bill of Rights Defense Committee in Northampton, Massachusetts, and the primary organizer and coordinator of this campaign to preserve the Constitution, “Hundreds more communities and states are considering resolutions. Last December, the National League of Cities approved a resolution calling for amending the Patriot Act.”

Not the whole Patriot Act, but sections of it, come up for congressional renewal by December 2005. Bush is pressing hard for Congress to renew those parts now. Standing in his way, however, is Republican conservative James Sensenbrenner, chairman of the House Judiciary Committee. According to Washington publication The Hill, “Sensenbrenner has made it clear to colleagues that he will not consider reauthorization of the bill until next year.”

More on this story here.

U.S. Army general joins the ACLU in opposing provisions of the Patriot Act; calls current law a subversion of Americans’ basic rights.

U.S. Army Brig. Gen. (ret.) Evelyn “Pat” Foote joined with the American Civil Liberties Union and civil libertarians across the political spectrum in opposing current draconian measures contained within the Patriot Act. Brig. Gen. Foote also called on members of Congress to support the SAFE Act, a measure that will bolster civil liberties protections while enhancing law enforcement’s effectiveness. “Even in our darkest hours we can deal with enemies and safeguard our shores without subverting the basic rights of Americans,” said Foote, a Vietnam War veteran.

More on this story here.



I grow weary of national holidays that have been converted into public relations opportunities for the celebration of the war system. In my childhood, Decoration Day was an opportunity to honor the dead by decorating graves. It was eventually renamed Memorial Day, and its focus was narrowed to what it is today: the state-serving remembrance of military veterans. Memorial Day weekend will soon be followed by the Fourth of July. This day -- honoring the signing of the Declaration of Independence, a writing of a decidedly anti-statist nature -- has likewise been co-opted by the war-lovers.

November 11th was referred to as Armistice Day, a day set aside to celebrate the end of World War I; a day, in other words, to honor a return to peace in the world. By 1954, this day, too, had been hijacked by the war system, renamed Veterans Day, and once again used by the statists to remind Americans of the virtues of going off to foreign lands to kill others and to get killed or wounded themselves. Will Thanksgiving Day become a time to be “thankful” for all the military hardware -- including some ten thousand hydrogen bombs -- bestowed upon America? When, two Christmases ago, I saw a Christmas card with Santa Claus decked out in a red-white-and-blue suit, I knew the complete militarization of the culture was upon us.

These holiday celebrations of warfare are rendered even more distasteful by the nearly endless parade of speakers who praise war veterans who “fought for freedom”. Soldiers themselves are not free from personal responsibility for their participation in institutionalized butchery, but most are more victims of statist indoctrination in the “glory” and “heroism” of warfare than they are culprits. But just as the state found it useful to exploit their lives in wartime, it capitalizes on their deaths and sufferings in peacetime as a way of getting us to recommit ourselves to the perpetuation of the war system. To be for peace is to denigrate the memories of those who “sacrificed” for our “freedom”. As decent and compassionate human beings, let us remember the dead and wounded of war -- as well as their families -- as the victims of a kind of thinking that must be transcended if humanity is to survive. But let us stop glorifying butchery with parades, medals, gaseous speeches, and the erection of war memorials.

More on this story here.


Like conspiracies themselves, conspiracy theories are as old as gossip and politics. To understand the world one inhabits, it is impossible to credit the idea of contingency or chance as the root of all weirdness. Just as any psychotic tends to utter something true in the process of saying something crazy, there is usually a kernel of reality in even the most far-fetched conspiracy theory. While it is easy to distinguish a belief that aluminum foil wrapped around one’s head filters out alien brain waves from rational but dissident ideas, some modern writers on conspiracy theory tend to conflate nonconformity with the most bizarre and cognitively defective extremes of it. So-called “consensus historians”, following the lead of Richard Hofstadter’s famous 1964 essay, The Paranoid Style in American Politics, have effectively pathologized any suspicion of active conspiracies, however defined, into a synonym for “nut job” in public discourse.

Our mass media, its ownership consolidated among a handful of billionaires whose interests are identical with those of corporate cronies (globalized “free trade” for the wealthy nations, peonage for the third world, Chomsky’s “manufacture of consent” via a constant torrent of propaganda for the status quo), reflexively dismiss the most obvious or credible explanations for ugly phenomena as the perfervid fantasy of “conspiracy cranks” -- for instance, the idea that successive “preemptive” wars might be launched against demonized enemies in order to award reconstruction contracts to corporations formerly helmed by, say, the vice president of the United States and other exalted government employees, or that the strategic purpose of one such war might be the economic colonization of former Soviet republics rich in oil and mineral resources, and to guarantee a secure pipeline for the exploitation of said resources. Instead, the altruism and democracy-spreading goodness of the American power elite are portrayed as self-evident, taking all other motives off the media table.

The necessary proof of such a conspiracy, if we choose to call it that, often turns up 25 or 50 years after the fact, when the release of classified documents churns up no public outcry or indictments. Such was the recent case with the declassified revelation that the late Connecticut senator Prescott Bush, grandfather of the current president, along with his law partner W. Averill Harriman, a former governor of New York, managed a number of concerns on behalf of Nazi industrialist Fritz Thyssen. Briefly picked up by the Associated Press and buried deep in the pages of American newspapers, this half-century-late disclosure led to no media follow-up and left no impression on the potential electorate for the 2004 U.S. presidential contest. Contingency theorists would declare that the activities of one Bush 50-some years ago have nothing to do with those of subsequent Bushes. Yet the story confirms a pattern of corrupt profiteering through abuse of power that runs continuously through the Bush family dynasty.

Parts I and II here and here.


In recent days administration officials have warned the nation about possible terrorist attacks, subjecting us once again to color-coded threat charts and puzzling admonitions to go about our lives as usual. The message is clear: grave danger surrounds us, but ordinary citizens should do nothing and trust the government take care of it. But the obvious lesson of September 11th is that government cannot protect us. Even with trillions of tax dollars spent on “defense”, hijacked planes flew unchallenged over our skies and attacked national symbols of business and government. Yet now we are told to put even more faith into the same bureaucracies that failed us so miserably in the past? Self-reliance and self-defense are American virtues; trembling reliance on the illusion of government-provided security is not.

It is easy for elected officials in Washington to tell Americans that government will do whatever it takes to defeat terrorism, but it is your freedom and your tax dollars at stake -- not theirs. The misnamed Patriot Act, presented to the public as an anti-terrorism measure, actually focuses on American citizens rather than foreign terrorists. For example, the definition of “terrorism” for federal criminal purposes has been greatly expanded; future administrations may consider you a terrorist if you belong to a pro-gun group, a citizen militia, or a pro-life organization.

All the new law enforcement powers bear little relationship to fighting terrorism. Surveillance powers are greatly expanded, while checks and balances on government are greatly reduced. Most of the provisions have been sought after by domestic law enforcement agencies for years, not to fight terrorism, but rather to increase their police power over the American people. America was founded by men who understood that the threat of domestic tyranny is as great as any threat from abroad. If we want to be worthy of their legacy, we must resist the rush toward ever-increasing state control of our society.

More on this story here.


The recent events in Grenada, notably the personal threats reportedly made against Leroy Noel, a local journalist, by no less a person than the Prime Minister of Grenada himself, and Noel’s subsequent detention by police “for questioning,” further illustrate the totality to which some regional governments are out of touch with reality when it comes to the media.

The event that triggered the current confrontation in Grenada between the government and the local media was the publication by the Miami-based Offshore Alert newsletter of a story concerning an alleged cash payment of $500,000 to Dr. Keith Mitchell, the Prime Minister of Grenada, by one Eric Resteiner, a one-time General Ambassador for Grenada. Mr. Resteiner, who obtained a Grenada passport under its now-defunct economic citizenship program, has since been indicted on 33 counts of wire fraud, 9 counts of mail fraud, and 18 counts of money laundering in the US District Court in Massachusetts.

As we have come to expect from Offshore Alert, its story is supported by comprehensive documentation, copies of which are also made available online. Nevertheless, even in the face of such compelling substantiation, the Grenada government appears to have chosen to try to suppress republication of the story domestically by intimidation of the local media. What they fail to understand is that the world has changed dramatically in recent years, in that news and information that might have been regarded as purely “local” and thus capable of suppression, is now global and therefore available to anyone with access to the Internet. The time-honored methods of media suppression and intimidation, so beloved by third-world governments everywhere, just do not work anymore, and the sooner those in power wake up to this fact, the better.

More on this story here.


Whenever political catastrophe strikes, there usually arises a unique moment in which a battle of ideas ensues. The battle occurs to define the public’s consciousness for the reasons behind the disaster. It is at such times that paradigms for the future are created or destroyed. The outcome of this battle often determines the direction of the polity far into the future. One such moment occurred in the stock market collapse that heralded the Great Depression. As many libertarians have noted (including the ex-libertarian and current Fed bubble-boy, Alan Greenspan), the reasons for that economic catastrophe originated with the Federal Reserve’s policy of “easy money”. The wizards in our central bank thought, throughout the 1920’s, that they had found the magical formula for perpetual prosperity. Namely, they engaged in a decade-long policy of interest rate suppression and currency debasement. This strategy created impressive short-term opulence, but it also gave rise to numerous speculative bubbles that ultimately deflated... causing the collapse of the market and the nation’s downward spiral into depression.

But the battle of ideas that ensued was won by the forces of statism. FDR’s socialists succeeded in convincing the American people that the depression was caused, not by government intervention in the free market, but rather by the excesses of capitalism and a dearth of government regulation. This ideological loss by the forces of liberty carried with it devastating consequences for America which still haunt us today. Most of the socialist policies that are slowly eating away at our Republic had their genesis in this ideological defeat of freedom. What had been a golden opportunity to instruct the American people in the ideals of liberty and limited government became a hideous green light for statists to begin an exponential growth of government power.

As our Iraq adventure begins to rot around the edges, we are again approaching one of these critical moments in the history of our Republic. Neoconservatism is, in my opinion, ultimately untenable. The idea that America can exercise “benevolent world hegemony” is nonsense. It is not adequate that the American people should come to recognize the disastrous ideology that is neoconservatism. It is possible to be right for the wrong reasons. And if the wrong paradigms become embedded in the consciousness of the American people, the outcome could be even more devastating than the neoconservative calamity itself.

First and foremost, it is critical that the public comes to understand why this Iraq war was not a disaster. It was not a disaster because we failed to obtain the UN’s permission to attack Iraq. It was not a disaster because we ran roughshod over the opinions of our allies. It was not a disaster because we failed to create a significant “coalition” to accompany us in the invasion. Rather, the reasons why this war is a disaster revolve around the ideals and beliefs which accompanied the creation of our Republic. President Bush launched a pre-emptive attack without the constitutionally-mandated declaration of war by Congress. His paradigm for launching the war was in diametric opposition to the beliefs of the creators of our Republic. But the leftists who now seek to define this failed war’s aftermath are preaching an entirely different Gospel. In their view, the collapse of neoconservatism should be analyzed in the paradigm of Wilsonian internationalism and big-government socialism. Their differences with Bush are more stylistic and technocratic than moral or constitutional. In the long run, Wilsonianism is a far greater danger to our Republic than the ludicrous rantings of the neocons.

More on this story here.


I have taken a liking to an expression that frequently gets tossed about. I am referring to the one that tells us to “think outside of the bo”q. I often hear this offered as a suggestion when faced with seeking solutions to issues that have been hindering progress and the current practices are no longer effective. Educators in today’s American public education systems are often faced with the challenges of trying to solve age-old problems such as high failure rate, high dropout rate, low test scores, poor attendance, educational apathy, as well as a myriad of other issues. It is helpful to think outside the box because we obviously need new ways to look at old problems since some of these old problems just hang on forever and the old strategies and old ways of thinking are not solving them.

To me, thinking outside the box means to gain a new vision by stepping away from the issue far enough so you can see as much as possible and from as many different angles as possible. I believe it also means to challenge everything, question everything including your own conclusions, and to look through a bigger straw. We like to deny that we look at life through a straw, but if we are honest, I believe we can admit that some of us view our milieu through very thin straws, meaning we only see a dot of life in front of us, while others view through larger diameter straws and see a wider view, yet still with some peripheral limitations. In this sense, asking one to use a wider straw is less offensive than saying to completely quit looking at life through a straw.

Earlier this past week, I happened to have a copy of the questions the 9-11 Family Steering Committee wants to ask President Bush. This is the committee that had a hard time getting certain people to face them due to alleged national security issues. You may recall that Condoleezza Rice did eventually face the committee and gave her frowny-faced, bad hair day responses. But we are told that George W and Dick Cheney gave their responses in a closed session where we are also told no records were taken. I believe I read that George did not sit on Cheney’s lap and that Cheney did not make George’s mouth go up and down as he spoke but I cannot find that report so I will not say for sure that George spoke unassisted. Too snotty? Okay, back into the box I go.

Every American needs to look at the Steering Committee’s questions. In fact, everyone who intends to vote this November needs to read the questions and then re-read them a few dozen times before voting. A student on mine read the questions and returned later with an expression on her face that told me a bright light bulb had flashed. She sat down and said two words that reflect out of the box, outside the lines, and over the edge, maximum caliber thinking: “He knew!”

More on this story here.
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