Wealth International, Limited

Offshore News Digest for Week of February 7, 2005

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

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Tax breaks, lower prices and a laid-back lifestyle draw a growing community of Americans to one of the nation’s small towns. “Boquete gave us the opportunity to have a great, comfortable lifestyle,” said Sutton, 50, who with wife Dinah put $5,000 down on their brand-new house without even seeing it. Loading groceries into his car in front of Romero’s, the local supermarket, he said, “This isn’t Albertson’s, but it’s close enough.” About 500 foreigners live in Boquete and its environs, but last year builders got permits to construct 2,000 more housing units in expectation of a real estate boom. Rising demand for property has caused a tenfold increase in land values in two years, said Judith Urriola, manager of the local branch of Banistmo Bank. Sutton and his wife pay $50 per month for government health coverage that would cost $1,200 in San Diego.

Other U.S. retirees are making similarly radical moves, attracted by Panama’s favorable tax treatment of foreigners -- a carrot dangled by most Central American governments, the relatively low cost of living, the lush surroundings, and the eternally mild climate. In recent years, retired foreigners have been drawn to Costa Rica, Nicaragua and parts of Mexico. But Panama’s moment seems to have arrived. Boquete has turned up on several “Best Places to Retire” lists published in recent months in U.S. newspapers and on Internet sites.

Asked to define what Boquete retirees have in common, John Villegas, an Arizona retiree who publishes the Internet newspaper the Boquete Times, said, “They have strong ties to their past and recollections of better times, nuclear families, respect for the law and civility. And they have no qualms about looking outside U.S. borders to recreate those good old days.” Like most other Latin American countries, Panama does not keep statistics on the number of foreign retirees living within its borders. But immigration officials here and throughout the region agree that the numbers are rising.

Links here and here.

Living in a free country.

I get mail saying, Fred, what is with this expat thing? Sounds interesting. But what do you do all day? What is it like down there in Guadalahorror, or whatever strange and doubtless hazardous oddly-diseased third-world fleshpot you infest? Who do you hang with? Can you breathe the air? Do they have food in Mexico? Girls? Come on, spit it.

Wanting to live in Mexico, I moved to Guad with Violeta -- a bright and extraordinarily decent woman. In the city we found a place near Fort Terror. This is the U.S. consulate, which looks like Dugout Doug’s bunker in The Fall of Corregidor. Nobody else’s does. If I were a country I think I would try being agreeable. But I am not a country. We have a three-bedroom place with lots of light for $380, which is a bunch because it is close to the Main Redoubt. The neighborhood is hagridden with bars, restaurants, and bookstores. Some have stuff in English and you can find anything you want in Spanish, which is the national language except in Ajijic. Gold’s Gym is several blocks up Vallarta.

What do expats do? Well, I am not sure. Lots of them wake up, incite the computer, and take the world’s temperature. I do, for example. Guad has 512 kbps broadband for about $40 a month, more if you want it. Computers are the connection to the planetary ganglia for lots of us, useful for news, banking, email, research, and stealing music. I use mine for VoIP telephone, as do many folk. I recently got the BBC Shakespeare on DVD and watch it on my laptop. Better living through circuitry. Mostly I guess Violeta and I do not do much. We read, listen to music, dance in the living room, go to the mildly pretentious open-walled bistro sort of joint nearby for a beer and a complicated cheese plate we like. I write so that misguided editors will send me money.

Travel always appeals. I just returned from Argentina, a magnificent country. Violeta recently got her passport, which takes a day here. I would like to take her to Washington to meet friends, but I am not going to have her groped by the Border Nazis, so we will probably go to Italy instead.

Link here.

Life in a Dominican beach town.

The town of Las Terrenas on the Samana Peninsula, the northeastern thumb of the Dominican Republic, was only a small fishing village 20 years ago. An influx of foreign expats, mostly French, have produced a boom in the real estate market, with the construction of lovely concrete houses and subdivisions. The local population has grown from 3,000 to 20,000 and the “foreign” population is now estimated around 5,000, predominantly French. But there is a large Italian complement and many Germans as well, assuring a good supply of garlic and cabbage. English is hardly ever heard. Many of the Europeans are here for the entire winter.

There are 14 real estate agents in town. Astonishing considering that all purchases must be made completely in cash. Prices have tripled in the last three years and it is hard to find anything for less than $100,000. Prices in both dining and real estate have not adjusted to the fallen dollar, which was at 50 pesos last year but this year is hovering around 28. I was very lucky to find a beautifully furnished apartment at a long-term rental rate of $400. I can walk to town along the beach. Electricity here is about twice what it costs in the States, five times what it costs in Europe. My luxurious full sized refridgerator with freezer is quicky identified as a luxury, along with my electric hot-water heater. I have taken to unplugging the heater during the days but the convenience of the freezer, guardian of half of every cooked meal, is a great boon.

I wanted a respectably large nation, not just an island I could circumnavigate in three hours. I wanted a proximity to the States so that my friends, primarily from the East Coast, could afford to visit. And access to the Internet available at a cybercafe. I wanted a place where Americans would be welcomed, something that is getting progressively harder to find. The Dominican Republic may be one of the few places on earth where they still actually like us. Baseball has, after all been very, very good to them. Phone rates from here to the U.S. are the same as a local call, allowing me ample time to visit with my friends.

Primarily, I wanted warmth, with year round tempertures that stayed in the 70’s and 80’s. It will be perhaps a bit brutal here in July and August but certainly no worse than Washington or New York City, as there is always a breeze from the sea. I wanted a friendly sea, in a place that had not been completely paved over and filled with high rises. Yet I did want a bit of tourist destination, with an influx of new energy and a rotating supply of books left behind in the hotels. I wanted a town rather than a resort strip of all inclusive resort hotels. I had, by Third World standards, a healthy secure retirement income of around $3000 a month which allowed me a large range of choices in Latin America but increasingly fewer options in the West Indies. I had already lived with the residual racism in the British territories and found it distasteful. Plus, I really wanted to live in “foreign”, i.e., non-English speaking environment. My decision was made when I discovered a French community as my French, after years of study, rivals my English and far exceeds my Spanish. The French, I knew, would have made the place picturesque and would have seen to a good supply of food.

The food in the DR is astonishing by any standards. In the high mountain valley to the west, near Pico Duarte, the tallest mountain in the Caribbean, farmers produce a sumptuous array of produce, citrus and tropical fruits, caulifower, lettuce, green beans and fresh tarragon along with the local assortment of strange and to me, still mysterious root vegetables. The prices for the imports are high. But the local fishermen ply the beachfront with buckets full of large fresh caught shrimp, mussels, and Dorado. One cannot, however, drink the local tap water and the “touristas” are not an uncommon ailment.

Link here.

Reflections on an expatriate life: Escaping To Asia.

Paul Theroux, the travel writer, commented in the beginning of Dark Star Safari that when he left on his trip through Africa he wanted to disappear. When I left the U.S. after 40 years of life there, I cradled the same thought. The American story of male middle-age crisis is the man who leaves the house to buy a pack of cigarettes and never returns. Where do they go? Texas? California? Florida? Bali? Some place warm probably and with a seeming surplus of young, available women.

When my entering middle age crisis hit, I had just finished up a long delayed Ph.D., separated from my wife of seven years, saw my son move off to live with his mother after spending most of his life with me, and realized that what I was doing was not making me happy or sane. One day I was planning for the new school year in my middle class school in Marin Country, the next day I had a job offer in the mountain jungles of Irian Jaya, one of the more remote places on the planet. What is it that makes a person leave their life, family, friends, and country for someplace unknown?

Link here.


“It’s the sort of place Norman Rockwell would paint, where everyone watches out for everyone else and we have block parties every year,” said Key, a 56-year-old Vietnam War veteran and former magazine editor who lists Francis Scott Key, who wrote The Star-Spangled Banner, among his ancestors. But leave it he intends to do, and as soon as he can. His house is on the market, and he is busily seeking work across the border in Canada. For him, the reelection of George W. Bush was the last straw. “I love the United States,” he said as he stood on the Vancouver waterfront, staring toward the Coastal Range, which was lost in a gray shroud. “I fought for it in Vietnam. It’s a wrenching decision to think about leaving. But America is turning into a country very different from the one I grew up believing in.”

In the Niagara of liberal angst just after Bush’s victory on Nov. 2, the Canadian government’s immigration Web site reported a surge in inquiries from the U.S., to about 115,000 a day from 20,000. After three months, memories of the election have begun to recede. Yet immigration lawyers say that Americans are not just making inquiries and that more are pursuing a move above the 49th parallel, fed up with a country they see drifting persistently to the right and abandoning the principles of tolerance, compassion and peaceful idealism they felt once defined the nation. America is in no danger of emptying out. But even a small loss of population, many from a deep sense of political despair, is a significant event in the life of a nation that thinks of itself as a place to escape to.

“The number of U.S. citizens who are actually submitting Canadian immigration papers and making concrete plans is about three or four times higher than normal,” said Linda Mark, an immigration lawyer in Vancouver. Other immigration lawyers in Toronto, Montreal and Halifax, Nova Scotia, said they had noticed a similar uptick, though most put the rise at closer to threefold. “We’re still not talking about a huge movement of people,” said David Cohen, an immigration lawyer in Montreal. “In 2003, the last year where full statistics are available, there were something like 6,000 U.S. citizens who received permanent resident status in Canada. So even if we do go up threefold this year, we’re only talking about 18,000 people.” Still, that is more than double the population of Gettysburg, Pennsylvania. “For every one who reacts to the Bush victory by moving to a new country, how many others are there still in America, feeling similarly disaffected but not quite willing to take such a drastic step?” Cohen asked.

Link here.

Winter In Canada.

As I write today, the temperature is a frigid -31º and snowy, so I feel particularly well qualified to share my thoughts with you about Canada’s winter experience. No doubt about it, winter weather conditions in many parts of Canada can be harsh at times. High windchills, heavy snowfall, blizzards, freezing rain and extremely cold temperatures all pose a hazard to those traveling or venturing outside. Some parts of Canada do not get much snow and ice in winter but many Canadians battle tough weather conditions and slippery roads for almost six months each year. The “white stuff” generally starts to arrive in late October and can often stay around until March or later. Although winter weather can be harsh, we are fortunate that the truly “deep freeze” cold snaps tend not to last more than a few weeks at a time and in many parts of Canada the sun shines all winter long, which is a great lift for the spirit.

If you have never experienced harsh winter weather before and your definition of cold is when you open the freezer door, then you may be tempted to spend your first winter in Canada taking refuge indoors. Resist the urge to hide from winter. Develop your winter survival skills, with help from the tips listed, and you too will learn, in true Canadian spirit, to embrace and celebrate winter in all its glory.

Link here.


Condominiums outsold family homes for the first year in history, according to the latest sales figures from Coldwell Banker JW Bermuda Realty. Data available at the end of September 2004, shows that condos outsold family homes by 46%. The realtor said in its monthly sales market update that this was due to a number of factors including continued lower interest rates, increased competition between lending institutions, limited inventory in the single family market with slightly less demand for the condo market, more affordable living space and excellent return on investment.

Overall high demand and dwindling supply caused all real estate to appreciate by double digits in 2004. The realtor reports that the scarcity of available building lots resulted in multiple offers pushing land prices up on average by 70%. Ultimately developers won out purchasing the majority of the lots. The land shortage also prompted developers to purchase existing buildings which they subsequently demolished and redeveloped.

Link here.

Bermuda further restricts foreign property ownership.

New restrictions on foreigners buying property in Bermuda have been introduced while Government has also pledged a crackdown on fake trusts used as a front to buy housing. New regulations will mean non-Bermudians will only be allowed to buy houses held under licence from other non-Bermudians. There are around 350 houses in this category. Previously non-Bermudians could buy any property as long as it had an annual rental value above $126,000. Condominiums will be exempt from this policy but non-Bermudians will only be allowed to buy units designated for the non-Bermudian market. They can no longer buy from Bermudian owners. Many early condo developments were designated entirely for non-Bermudians while more recent developments have been half and half.

Labour Home Affairs and Public Safety Minister Randy Horton said, “The policy change is to prevent more Bermudian land being lost to non-Bermudians while the Immigration Act is amended to allow the extent of ‘fronting’ to be exposed and corrected. The amendments to the policy will create new offences and penalties, strengthen the investigative and prosecution tools with respect to landholding offences and modernise and harmonise the laws relating to landholding.”

Finance Minister Paula Cox said there was financial evidence non-Bermudians were using fronts to buy property because revenue for licence fees for legitimate sales have fallen from $13 million in the late 1990s to just under $5 million today. This fall in revenue coincided with an unprecedented demand for real estate noted Ms. Cox. Trusts have been used as a way of bypassing the laws restricting foreigners to expensive housing and condos and to defraud Government of sales tax.

Link here.

The Top 10 Things to know before you come to Bermuda.

Last month, I wrote about how to remove one’s self legally from the Canadian tax system. Why did I do this? Well, late in 2003 I took the plunge and accepted an IT position in Bermuda. It has been a year of trials, tribulations, and great fun. I have made some great friends, lived a great lifestyle, and saved some money. If I had to make the choice again, I would not hesitate!

Bermuda is a great place to visit, and generally a great place to work. But unless you are independently wealthy (a single million does not count), this crazy little country is not the best place to retire. The country is the strangest place I have ever been. Nothing is quite what you would expect, and Bermuda information sites like Bermuda-Online do not quite tell the whole story of what you can expect here. With that in mind, I present to you the Top Ten Things to Know before you come to Bermuda.

Link here.


The number of people going bankrupt hit a record high in the last three months of 2004. Individual bankruptcies were up 34.6% on the same period last year and 8% on the previous quarter, suggesting higher interest rates are beginning to bite. On a seasonally adjusted basis, 13,013 individual insolvencies were recorded between October and December. But company liquidations fell 0.9% to 2,2938, down 11.1% year-on-year. Of those people in England and Wales unable to pay their debts in the last three months of 2004, 9,803 cases were bankruptcies and 3,120 Individual Voluntary Arrangements -- which allow debtors to come to an agreement with their creditors.

“The fact that the number of individual insolvencies rose significantly through 2004 ... indicates that higher interest rates have increasingly pushed heavily indebted people over the edge,” Global Insight economist Howard Archer said. The Bank of England has raised rates five times since November 2003, from historic lows of 3.5% to the current 4.75%. But as the Bank has increased rates in an effort to cool consumer spending, overall consumer debt has soared past the £1 trillion mark.

Link here.


Intoxicated by the buzz of Shanghai, a visitor is tempted to conclude that, like the city’s skyscrapers, China’s economy will keep growing to the skies. By contrast, teeming Bombay more readily conjures up India’s faded past than a glorious tomorrow. Yet as the finance ministers of Asia’s two billion-strong giants attend the Group of Seven meeting for the first time, some economists are making the case that India can boast better long-term prospects than its neighbor.

In the early 1980s, India and China both churned out annual output per head of about $500. Today, China is more than twice as rich, with GDP of $1,100 in 2003 dwarfing India’s figure of $530, according to the World Bank. While India notched up average annual GDP growth of 5.9% from 1993-2003, China raced ahead at a 9.0% clip. But a more favorable demographic profile, a stronger capacity for technological innovation and Western-style democratic institutions provide the potential for India to raise its game and catch up with its neighbor. “It will be much easier for China to go from $500 to $1,000 than from $1,000 to $5,000,” said Dominique Dwor-Frecaut of Barclays Capital in Singapore.

Unlike China, India has spawned a number of world-class firms with a strong innovative capacity underpinned by enforceable property rights and an independent, if lumbering, judiciary. “It has a political culture and civic society that is a lot more conducive to the development of technology and strong domestic global champions,” Dwor-Frecaut said. Daniel Lian of Morgan Stanley in Singapore agreed that the protection India affords to intellectual property rights would be crucial in luring Western capital. Allied to low wages, that could make it a better bargain than China for global investors. India’s democracy and Western-leaning institutions are also attractive for the West, Lian said in a report. Fast-expanding China, by contrast, is viewed as a rival.

Link here.

China’s direct investment overseas jumps 27% in 2004.

Direct investment overseas by Chinese companies rose 27% in 2004 from a year earlier to $3.6 billion, highlighting the country’s growing economic influence, the government reported. Meanwhile, contracted investment overseas, an indicator of future spending plans, soared 77.8% on-year to $3.7 billion in 2004, the Ministry of Commerce said. Of actual overseas investment, $2.5 billion was spent on equity in foreign companies, said the report. The rest was spent on reinvestment of profits, it said.

Foreign investment in China by foreign companies, which surpassed $60 billion in 2004, still far exceeds the amount of money Chinese companies spend abroad. But the gap has been narrowing as China has encouraged major companies to expand overseas. Many of the investments have been focused on acquiring scarce energy and mineral resources -- the ministry noted that 52.8% of overseas investment in 2004 was concentrated in the mining sector.

Link here.


Recent polls indicate that Martín Torrijos retains the support of most Panamanians but that his inaugural honeymoon with public opinion is over. One poll in mid-January, while the debate about the tax increase proposal was just getting underway, indicated that more than 50% of Panamanians thought Torrijos was doing a good or very good job, but that is low in comparison to the public approval ratings at the same point in Mireya Moscoso’s and Ernesto Pérez Balladares’s presidencies. But at those points in his predecessors’ terms they had not done many controversial things, while Torrijos stirred up protests even before he was inaugurated, with his constitutional proposals that were adopted by approval of the previous and current legislatures.

A second poll taken a week later showed 28% of those surveyed rating Torrijos’s performance as “good”, 15% as “very good”, and 42% as “regular”, with only 15% giving the president unfavorable ratings. Because of different methodologies used one cannot treat the two polls as tracking surveys that show a trend, but combined they do suggest that Panamanians are generally not outraged over taxes.

But there are other shoes to drop, so it seems, and people might not be so understanding in those instances. The second poll showed more than 70% disapproval among all adult age groups for any increase in the Seguro Social retirement age and 37% of those surveyed said that they would take to the streets to defend their rights if such a thing were proposed. So far the president has not unveiled his Seguro Social reform plan, which will be taken up in a special legislative session. It is standard political procedure in a democracy for a leader to do the unpopular things that he or she believes must be done early in his or her term in office, so that public anger can dissipate well before the next election season comes around.

Link here.

If you think the Torrijos tax increase was controversial...

The government, making some adjustments in the course of a whirlwind process, has raised our taxes. One way or another, it had to be done. On a several levels, however, it would have been better to have done it in other ways. Tax reform may have been a high-stakes game, but the risks and prizes are nowhere near as great as in the next major economic measures to come. Social Security reforms will be presented, debated and passed starting right after Carnival. There is a good chance that when the National Assembly meets in regular session again in March, at the top of their agenda will be a proposed free trade agreement with the United States.

The stakes in a free trade agreement would surely have more profound effects on Panamanian society than either the tax or Seguro Social reforms. The agricultural changes that the American side wants would shut down major parts of Panama’s rural economy, driving more people from the countryside into the cities and driving more landless farmers to try their luck at slashing and burning farms out of national parks and indigenous comarcas. The changes would convert classes of small business owners into Wal-Mart employees. They would make American-owned intellectual properties sacrosanct for Panamanians and transfer Panamanian-owned inventions, ideas and traditions to the most rapacious American pirates. They would raise Panama’s medicine prices and health care costs toward the astronomical U.S. rates. They would severely curtail the democratic right of the Panamanian people to change economic policies that do not suit this country.

From such sketchy reports as we have, it would appear that the Torrijos administration is resisting many of the most outrageous Bush administration demands. But because we have been for the most part kept in the dark it would be both unfair and provocative to use the procedures we have seen in the tax reform debate and will see in the Social Security reform process when considering a free trade deal with the U.S. To a much greater extent than was the case with the tax reform package, Seguro Social and free trade with the USA are likely to be “debated” with street blockades, strikes and other militant tactics.

Link here.


It started to dawn on me about five years ago in Auckland that I wanted to get out of business and law. At around that time it also dawned on me that I wanted to get into college teaching in the less developed world. I wanted to bless students in South Africa with my enormous insight and wisdom gained over the years and in various continents. My humble self unfortunately could not manage to land a teaching position at a university there. I tend to be rather an optimist by nature. I reckoned to do it in another country in the region. However, my applications to universities in Namibia, Botswana, Malawi and to a few private outfits in Kenya and Zimbabwe did not lead to a bunch worth mentioning. After expanding my search to other regions in the less developed world, I have eventually ended up spreading my wisdom in Latin America -- in Colima, Mexico.

In hindsight, I cannot claim to be awfully unhappy about how things have turned out. In private chats every now and then, I am fond of rambling about “my wild days in Africa”, a term that reflects my lifestyle there quite well. The alternative that has gradually materialized appears to be more appropriate for a junior elder -- a quiet and pleasant lifestyle in the boondocks of Latin America. However, there are other -- less personal -- reasons why I am now more inclined to live in Latin America than in Africa.

Link here.


There were 76 new captive insurance companies licensed with the Cayman Islands Monetary Authority in 2004, totalling 694 by the year-end, representing $6 billion and reporting assets of $22 billion. Most of the new captive insurance companies were healthcare with 40 new licenses. Other captives included workers compensation, general liability, property, product liability and auto liability. There were 13 segregated portfolio companies licensed, bringing the total number to 93 with 394 segregated portfolios operating within them. 43 new portfolios were established in 2004. “It was another fantastic year for the captive market and this growth is a remarkable show of continued confidence in the jurisdiction as a leading domicile for the establishment and management of captives,” said Mary-Lou Gallegos, Head of Insurance Supervision.

Link here.


Though the U.S. is not an “Islamic” country by conventional definition, in spirit and in real terms, its financing institutions offer more Shariah compliant financing and investment than that provided by all the Islamic banks combined. American venture capital firms provide in excess of $25 billion per year in equity financing to help finance the development and growth of thousands of new startups in health care, information technology, and other promising industries. By contrast, Islamic banking institutions invest less than $1 billion a year on a “Musharaka” basis (Musharaka -- partnership or joint venture -- is similar to venture capital).

Indeed, there is no better example of Shariah-compliant financing than venture capital finance. Venture capital allows entrepreneurs to build a firm without having to borrow and pay high interest charges before they generate revenues. It is a process of cooperation between entrepreneurs and venture capitalists, with risk sharing an essential element. Venture capital system has played a leading role in the industrial development of the U.S. Venture capital gives the U.S. a creative and forward looking dynamism that few nations can match because it is rooted in the very foundation of the country. In this regard America's most important advantage is a willingness to take risks. By contrast, if a scientist or an engineer with a new idea or invention wanted to raise financing to develop his idea or invention into a business in the Islamic world it would be virtually impossible for him to find funds. He or she would be told by a conventional bank or an Islamic bank to first produce some collateral.

It was not always so. The Europeans learned from Muslims. Muslims made original inventions. This was made possible by a culture and environment that encouraged learning, research and invention. Today most technology used in the Muslim world comes from outside the region. It seems that native springs of invention have dried up and nothing of mention has been invented in any of the Islamic countries in the last two hundred years! Muslims that once led the world in science, are dropping behind at a rapid rate in scientific research and information technology. A major factor in the Islamic world's underdevelopment is the non-availability of suitable financing for entrepreneurs. If the leaders in the Islamic world are truly interested in improving the living standards of their people, gaining economic independence, regaining their pride and days of glory, they must encourage original discovery, research and invention.

Link here.

Islamic banks begin quest for Shariah experts

Nazim Yaquby, an Islamic scholar based in Bahrain, is as familiar with the angular calligraphy of early Koranic manuscripts as he is with customized software engines for equity hedge funds. Yaquby is among a group of scholars who sit on the supervisory boards that are a cornerstone of Islamic financial institutions, examining all products and services to determine whether they comply with the Islamic legal code, or Shariah. The scholars wield tremendous power. An Islamic bank stripped of Shariah credentials has little future.

Now, however, the growth of Islamic banks in the Gulf and beyond is straining the supply of such specialized scholars -- something particularly troublesome as the banks bring to market increasingly complex financial products. Bankers worry that they are not seeing the emergence of a new generation of scholars. “There is a real need to educate more young Shariah scholars to Western transactional finance,” said Eric Meyer, senior managing partner at Meyer Capital Partners of New Canaan, Connecticut. Meyer has worked closely with Islamic scholars, including DeLorenzo and Yaquby, as he has built up a Shariah-compliant hedge fund over the past three years.

Link here.


I left the USA probably for many of the same reasons most do: the erosion of rights, the lawlessness of the courts, the intrusions of privacy, the omnipresence of big brother and the general mental decay of society. What once made America great, is now gone, or at best is quickly disappearing and I had had enough. It was time to go. My wife and I packed our things, put our little dog under the seat of the plane and headed south. Not being too sure of where we would end up, our original idea was Panama. However, we made a stop over along the way in Costa Rica five years ago, and have never gone any further.

We are not wealthy retirees. I am 46 and she is, well, she still will not say, but we had a very limited nestegg and the clock was ticking for us to find something to do to support ourselves. Neither of us spoke any Spanish (still do not very well) and we have been living on tourist visas for 5 years. Not a very stable situation.

I have always been enamored by the idea of living the “PT” lifestyle (Permanent Tourist – Previous Taxpayer – Perpetual Traveler) and now was my chance. It was very clear under this philosophy, that in order to sustain this without a substantial trust fund, that you must have a “portable business” which allows you to operate from anywhere in the world. I threw up a website and started offering financial privacy consulting services helping other “escapees” protect their financial affairs and did pretty fair with that, but never really seemed to get ahead.

Foreign Currency Exchange trading (forex) always fascinated me and I had dabbled in it some with a managed account. My account manager at the time promptly lost my account using poor judgment. I figured I could do “at least that well”. My wife and I found ourselves often making better decisions than my account manager, so we set out to learn this business ourselves, and to become more technically proficient. It was not until I took the time to learn the ins and outs that I truly became excited by the real possibilities, undaunted by our initial misfortune. ...

Link here.



U.S. corporations have rejected as incorrect the conclusions of a study released by Citizens for Tax Justice, which has claimed that more than 250 America’s top firms are failing to make adequate state corporate income tax contributions. The CTJ study calculated that by 2003, some 252 companies had reduced their state income tax payments to an average of 2.3% of their U.S. profits, which compares to an average statutory state corporate tax rate of around 6.8%, resulting in a decline in the total contribution of state corporate income taxes to the economy of almost 40% since 1989.

Link here.


The EC looks set to close a 35-year-old tax loophole that allows owners of Irish stud farms to pay no tax on the fees they charge for the sexual services of their stallions. The tax break has lured many of the biggest names in racing from the Aga Khan to the Makhtoum brothers to set up operations in Ireland. However, the Commission has now ruled the tax treatment “falls under the category of state aid which is incompatible with the common market because it can distort competition by giving Irish stallion owners a competitive advantage.” Unless Dublin appeals, tax at the current 12.5% will now apply for future fees, estimated at around €100 million a year.

Link here.


The anxiously-awaited PricewaterhouseCoopers study on the impact of the Economic Development Commission program on the Virgin Islands economy validates previous estimates that the program’s approximately 49 designated service businesses contribute a substantial amount to the government’s treasury. The bill has far-reaching, negative ramifications for the local tax benefit program and its beneficiaries -- and ultimately for the financial health of the territory.

The PWC report, dated Jan. 12, focused on the designated service businesses because they are on the shakiest ground due to the new regulations to be promulgated as a result of changes to the income tax law in the recently enacted American Jobs Creation Act. But the report admittedly reveals only part of the picture in terms of potential revenue losses under the new regulations, which include a 183-day residency requirement, and substantially change the source of income that was eligible for exemptions under the old tax law.

The conservative estimate of the direct income tax revenues paid by DSBs in 2004 is $114 million, roughly 20% of the territory’s revenue. But the report does not include indirect revenue generation coming from taxes paid by employees, or “generated by the indirect economic activity attributable to DSBs, such as the payments to DSB suppliers.”

Link here. Entire 30-page PriceWaterhouseCooper report here (PDF file).


Sen. John F. Kerry, who as a presidential candidate railed against companies shifting their addresses overseas to avoid taxes, has hired as a top tax counsel a woman who lobbied against cracking down on such businesses on behalf of a Bermuda-based firm. Kerry recently hired Kathleen M. Kerrigan as his new Social Security and Finance Committee counsel. She is a partner in the Washington office of the law firm Baker & Hostetler, where she is listed as a lobbyist on corporate and international tax issues for consulting giant Accenture (formerly known as Anderson Consulting), which incorporated in Bermuda in 2001. Accenture argues that it was a global business, never an American one, before it incorporated in Bermuda.

Link here.


The Japanese government intends to forge ahead with a proposal that will impose a new tax on foreign private equity funds, despite strong protests from the industry that the move could reduce foreign investment into Japan. Japan’s tax bureau has stated that it will introduce an amendment into parliament later this month that, if approved, will result in a 20% withholding tax being imposed on foreign funds. Officials hope that the tax could then be in place by April. It is thought that the tax bureau’s plans have come in response to profits made by U.S. private equity firm Ripplewood from the listing of Shinsei Bank. Ripplewood did not pay capital gains tax on the transaction in Japan, contributing to public discontent over alleged abuse of the domestic tax system by foreign firms.

Link here.


The Bush administration plans to ask Congress for an additional $500 million to strengthen the IRS’s enforcement efforts during the coming year, the Treasury Department announced. The department said the administration will seek an IRS enforcement budget of $6.89 billion for fiscal 2006, 7.8% more than what Congress approved for this fiscal year. The Treasury Department did not give a figure for its overall budget request for the IRS. The agency’s budget this year totals nearly $10.3 billion, a slight increase over the $10.2 billion of 2004, but about $380 million less than the Bush administration requested.

The administration and Congress have paid attention to the estimated $300 billion-plus “tax gap” between what Americans owe and what they pay. Tougher enforcement, which would generate more tax collections, has increased appeal in view of the large federal budget deficit. However, budget increases do not necessarily mean more enforcement capacity for the IRS. Congressionally approved pay increases for IRS employees and other increaded expenses often eat up some or all of the agency’s additional funding. According to the IRS Oversight Board, created in 1998 to help set the agency’s long-term strategies and goals, fiscal 2005 was the fourth year in a row in which “the administration has called for IRS staff increases while not covering pay raises or required expenses.”

Links here and here.

Boost for tax service points to crackdown on evasion.

In a budget that proposes cuts in most domestic programmes, a bumper increase for America’s tax service may seem politically courageous, and a marked departure from the broad hostility to the agency that culminated in the 1998 IRS Restructuring and Reform legislation. Through the mid-1990s there were mounting worries that the IRS was paying too little attention to the human cost of vigorous tax collection. The 1998 law extended attorney-client privilege to the relationship between a taxpayer and accountant and shifting the burden of proof to the IRS in non-criminal cases. Now some observers say the pendulum is swinging back.

In the budget, the White House said the IRS was targeting enforcement on high-risk taxpayers, “such as those potentially involved in abusive trusts or offshore tax evasion schemes.” Audits of taxpayers earning more than $100,000 topped 195,000 in 2004 -- a 40% increase from 2003, and a 74% increase from 2002. The move towards more aggressive tax collection is expected to be led by the Senate finance committee, which is planning an assault on abusive tax practices as a way of boosting the tax haul. Critics say the administration may be expecting more than tax enforcement can deliver.

Peter Sepp of the National Taxpayers’ Union, an anti-tax lobbying group said, “It is a standard response to a bloated budget that politicians hope that the bureaucratic machinery will turn out higher revenues if it is oiled a bit more. In the long run, however, this response has tended to produce a public backlash against the IRS.”

Link here.


Guernsey signed up in favour of retention tax in April 2003, but it took the Swiss Government until December to approve a similar agreement. Although the new rules are due to come into force on 1 July, Guernsey will monitor a “stocktaking exercise” due in April before putting legislation to the States for final approval. Guernsey, together with Jersey and the Isle of Man, chose the retention tax option over automatic exchange of information after consultation with the finance industry.

Now that the Swiss have signed, the next step is the publication of its tax guidelines, but it could delay this until the EU tax authority has confirmed its view on certain issues. A recent KPMG newsletter said that “for political reasons, the Swiss tax authorities do not want to play a leading role in this respect.” A spokesman for the company said there were rumours that introduction of the directive would be delayed until 1 January, although there is no firm information to suggest this will be the case.

Link here.



Tired of seeing so many people fall victim to online fraud, one government agency has taken an unorthodox tack: creating fake Internet companies to catch gullible investors in the act, then educating them through their own folly. The SEC’s campaign features phony Web sites that redirect duped investors to a tutorial on Internet fraud.

Though the SEC created its first site, mcwhortle.com, in late 2002, the program has received little publicity. Meanwhile, the agency has added four sites, updating content consistently. The sites mimic investment opportunities like hedge funds, mutual funds and offshore investment prospects. Visitors click through a series of links, and when they indicate they are ready to invest, a Web page comes up warning, “If you responded to an investment idea like this, you could get scammed!” The sites also list contact phone numbers and e-mail addresses. Calls and e-mails to the fake companies are received by SEC employees, who explain the hoax and direct consumers to educational resources.

Within weeks of its launch, the McWhortle site got more than 1.5 million hits and SEC staff received more than 500 e-mails. The sites are listed with online search engines and, because of their linking with the SEC, tend to come up higher on returned results on searches for, say, “offshore investment” or “hedge funds”.

Link here.


Between 1993 and 1998, Sani Abacha is said to have plundered up to SFr3 billion from the coffers of Nigeria. SFr870 million was frozen in Switzerland. The Federal Court in Lausanne has rejected an appeal from Abacha’s family and clan to stop the handover of the remaining $500 million still in Switzerland. The Swiss have said that the assets are mostly of “criminal origin”. It was not immediately clear when the handover would take place. Abacha’s family had argued that a new Swiss investigation into Abacha’s son, Abba, could change previous rulings. Last month, Switzerland sought Abba Abacha’s extradition from Germany, where he was arrested in December on a Swiss warrant.

Link here.


A top Swiss private bank has denied acting improperly in its handling of a multimillion dollar account opened for former Palestinian leader Yasser Arafat. A spokesman for Geneva-based Lombard Odier Darier Hentsch (LODH) said allegations that funds from the account were transferred without proper oversight were “completely unfounded”.

LODH head of corporate communications Jérôme Koechlin confirmed a report which revealed that an investment account worth at least $200 million (SFr243 million) was opened on behalf of Arafat’s Palestinian Authority in 1997. However, he told swissinfo that the then Lombard Odier -- which merged with a rival in 2002 -- had acted at all times in conformity with international standards and legislation, including due diligence procedures. LODH also denies that the decision by LODH to end its relationship with the Palestinian Authority was a consequence of U.S. pressure -- in particular, the introduction of legislation two months earlier aimed at combating funding for terrorism. The bank says the December 2001 decision followed the deterioration of the political situation in the region -- a reference to the Intifada.

Link here.


Following up on reports released last week on the current statuses of the laws, taxes, and business environments in serveral major offshore havens, U.K. legal industry consultant and servicer The Lawyer Group has made available a summary report on Gibraltar.

Link here.


Not long ago, a popular saying in German-speaking Europe was, “In Switzerland, the bankers don’t talk. In Liechtenstein, they don’t have tongues.” But all that has changed. After reports by Interpol that traces of practically every white-collar crime committed in Europe led to Liechtenstein, the OECD’s FATF put this tiny country on its money laundering “blacklist” in 2000. Swift and painful changes followed. Declaring that “Liechtenstein faces the biggest domestic and foreign political crisis since World War II,” Liechtenstein’s ruling prince spearheaded sweeping financial reforms that gave the government much greater powers to investigate suspect financial transactions, confiscate laundered assets and cooperate with authorities in other countries in investigations of serious crimes.

While Liechtenstein retains a culture of privacy, and bank secrecy laws remain on the books, it now has the same know-your-customer rules in effect almost everywhere else in the world. However, Liechtenstein still does not cooperate in foreign tax investigations. Any foreign tax official inquiring about an account in Liechtenstein is politely shown the door. Until the new laws took effect, it was possible to hire a lawyer to form a Liechtenstein company or trust and then operate a bank account for that entity without the bank ever knowing the identity of the owner. The lawyer was bound by law never to reveal his clients’ identity.

When the laws changed in 2000, a huge crisis resulted for Liechtenstein’s banks. Many trusts and companies wound up their anonymous accounts rather than identify their beneficiaries. Some banks lost as much as 20% of their clients. The influx of money slowed and, simultaneously, the dot-com boom ended, taking equity markets down with it and cutting deeply into the banks’ commissions and custody fees. It seemed that the world had conspired against Liechtenstein banks, with everything going wrong at once.

But in retrospect, the tough times did Liechtenstein a lot of good. The new laws forced the banks to stop being fat and lazy. They were forced to cut costs and fees to provide competitive services. They also learned a lesson about focusing on a single market -- asset management -- and how to market their services effectively. In short, Liechtenstein banks relaunched themselves as a safe and clean place for stashing away funds. And that is a principal reason why you should take a closer look at Verwaltungs und Privatbank, also known as VP Bank or VPB.

Link here.



British Columbians are fighting to halt an outsourcing contract recently signed by their government that could place millions of their health records in the hands of a private American company. Activists with the British Columbia Civil Liberties Association are concerned that the data could be susceptible to seizure by American law enforcement agencies if the data resides with a company whose parent firm is in the U.S. They fear the information could be used for data-mining exercises, such as those that previously involved passenger records from JetBlue and other airlines being passed to a government agency. Or the data could be passed to border patrol officials, who could use the information to prevent British Columbians with serious health issues, like AIDS, from entering the U.S.

Under the U.S. Patriot Act, authorities can force U.S. companies to relinquish information while preventing companies from telling customers or employees that it has been seized. And activists fear that reach will extend to subsidiaries of U.S. companies located outside the U.S. “It’s a very serious concern,” said Marc Rotenberg, executive director of the Electronic Privacy Information Center. “The level of protection in the U.S. is inadequate for non-U.S. persons. And it’s understandable that foreign governments would be concerned on behalf of their own citizens about what might occur.”

Data mining, the collection and sale of information, is a growing problem in the U.S. and elsewhere. Privacy activists are concerned not only with court seizures of data by U.S. authorities for specific investigations, but also with commercial companies that buy it and sell it in aggregate to government agencies that conduct fishing expeditions among large groups of people for various purposes. Data fears became prominent in Canada last spring when, to save money, the province of British Columbia announced its health and drug plans, BC Medical Services Plan and Pharmacare, would be administered by Maximus Can, a subsidiary of Maximus, which is U.S.-based. Canada has national health care, which is administered independently by each province.

Link here.


Shaken by scandals involving the black-market sale of body parts, University of California officials are considering inserting supermarket-style barcodes or radio frequency devices in cadavers to keep track of them. The high-tech fix is one of a number of reforms UC is proposing to reassure people that bodies donated to science will be used as intended and treated with respect.

Link here.


As the UK’s ID cards bill charges through Parliament, signs are starting to emerge that the Home Office’s dubious packaging plans might be coming apart at the seams. Asked earlier this week to provide a timescale for the addition of fingerprints and iris scans to passports, Immigration Minister Des Browne said a decision had yet to be made, and seemed to leave scope for this never happening.

Europe is currently committed to the mandatory inclusion of facial and fingerprint biometrics on passports, and while dab-happy Britain is not being allowed to play with that directly, we are still very enthusiastic about it all. Browne’s answer, to one of a battery of questions from Liberal Home Affairs Spokesman Mark Oaten, is however intriguing, because of the amount of manoeuvring space it leaves when measured up against previous announcements on the matter. Some skulduggery, readers, is definitely up, and if we consider the Home Office’s stated reasons for doing various ID-related things alongside the real reasons and the logistical pressures, we might be able to figure out what.

Link here.

Tory party set to withdraw ID scheme support.

The Tory Party is to withdraw support for the UK’s identity card scheme, following the Government’s failure to deal with the “five tests” the Tories put forward as a condition of their support. Tory leader Michael Howard personally favors ID cards, but substantial sections of his party are either sceptical or totally opposed to them. According to a report in the Sunday Telegraph, when the House of Commons votes on the bill on Thursday, the Tories will now abstain. This may induce more Tory refuseniks to vote against the scheme, but even if the party line was to oppose rather than abstain, it would still be approved because of Labour’s large majority.

The Liberal Democrats have opposed the scheme throughout the bill’s passage. The Bill will be likely to run into stiffer opposition in the House of Lords, where the LibDems have a number of highly competent opponents, and where Tory bill opponents may view their party’s tiptoeing away from support as carte blanche to cause mayhem.

Link here.


The system, intended to allow the FBI to better manage criminal and terrorism cases, will have to be scrapped or require a lot of additional work, the Justice Department’s inspector general, Glenn Fine, said. Mr. Fine blamed bad planning and management by the FBI for most of the problems in a system designed to move large amounts of investigative information into new digital databases that could be accessed throughout the FBI. Known as the Virtual Case File, the system is supposed to give FBI agents and analysts an instantaneous and paperless way to manage criminal and terrorism cases. Lawmakers have been sharply critical of the computer upgrade.

Link here.


Right on the heels of the de facto national ID system passed at the end of last year as part of the so-called “9/11 Intelligence Reform Bill”, a new bill set to be vote on next week sets up an even more repressive tri-national ID system. The “REAL ID Act”, HR 418 by House Judiciary Committee Chairman James Sensenbrenner, aims to secure the border and keep illegal aliens from receiving drivers’ licenses. But it also works to turn your driver’s license into a Real Orwellian National ID card. The bill would repeal the license/ID provisions of the recent intel bill and create a different system for turning drivers’ licenses into a national ID card.

The ID provisions are coupled with border-control measures such as hiring more agents and building more fences. Apparently some conservative House members regard the bill as an opportunity to head off at the pass the Bush Administration’s plans for “guest worker” programs, but integrating a national ID system with that of Canada and Mexico seems more likely to help lay the groundwork for such endeavors. This ill-thought endeavor to drag us in to a brave new world of international biometric ID cards is contrary to everything American.

Link here.

Rules aimed at forcing states to issue federally approved IDs approved by House.

Under the rules, federal employees would reject licenses or identity cards that do not comply, which could curb Americans’ access to airplanes, trains, national parks, federal courthouses and other areas controlled by the federal government. The bill was approved by a 261-161 vote. The measure, called the Real ID Act, says that driver’s licenses and other ID cards must include a digital photograph, anticounterfeiting features and undefined “machine-readable technology, with defined minimum data elements” that could include a magnetic strip or RFID tag. The Department of Homeland Security would be charged with drafting the details of the regulation. Republican politicians argued that the new rules were necessary to thwart terrorists, saying that four of the Sept. 11, 2001, hijackers possessed valid state-issued driver’s licenses.

States would be required to demand proof of the person’s Social Security number and confirm that number with the Social Security Administration. They would also have to scan in documents showing the perso’qs date of birth and immigration status, and create a massive store “so that the (scanned) images can be retained in electronic storage in a transferable format” permanently. Another portion of the bill says that states would be required to link their DMV databases if they wished to receive federal funds.

The Bush administration threw its weight behind the Real ID Act, which has been derided by some conservative and civil liberties groups as tantamount to a national ID card. The vote mostly fell along party lines. About 95% of the House Republicans voted for the bill, while more than 75% of the House Democrats opposed it. Civil libertarians and firearm rights groups condemned the bill before the vote. The ACLU likened the new rules to a “de facto national ID card”, saying that the measure would force “states to deny driver’s licenses to undocumented immigrants” and make DMV employees act as agents of the federal immigration service.

Link here.

ACLU, allies oppose the “Real ID” Act.

In one of its first major actions this session, the House of Representatives is debating anti-immigrant legislation introduced by House Judiciary Committee Chairman James Sensenbrenner (R-Wisconsin). The American Civil Liberties Union renewed its opposition to the measure, H.R. 418 -- the REAL ID Act -- joining a diverse coalition of privacy, immigrants’ rights and conservative organizations who have raised concerns. Specifically, the bill would make it easier to send asylum-seekers back to the countries they are fleeing if they cannot provide written “corroboration” of their claims, a move contrary to international law. Federal law already gives officials ample discretion to deny improper asylum claims, and asylum applicants are subject to much more extensive scrutiny than virtually any other pool of non-citizens seeking entry to the U.S.

Opposition to the bill is diverse, coming from, among others, the Ancient Order of Hibernians -- the oldest and largest Irish-American group, the American Conservative Union, the Free Congress Foundation, the Republican Liberty Caucus, Episcopal Migration Ministries, the U.S. Conference of Catholic Bishops, Human Rights First, Amnesty International, and September 11th Families for Peaceful Tomorrows. The Hebrew Immigrant Aid Society has also issued a report denouncing the measure.

Link here.


Parents in a northern California public school district and civil liberties groups are urging the district to terminate the use of Radio Frequency Identification tags (RFIDs) in mandatory ID badges that track students’ movements. In a letter, the ACLU of Northern California, the Electronic Frontier Foundation and the Electronic Privacy Information Center called on the Brittan School District to immediately end the use of RFIDs in student IDs. According to the groups, the RFID device transmits private information to a computer on campus whenever a student passes under one of the scanners. The ID badges, which students are required to wear around their necks at all times, also include the student’s name, photo, grade, school name, class year and the four-digit school ID number.

“Forcing our child to be tracked with a RFID device -- without our consent or knowledge -- is a complete invasion of our privacy,” parents Michael and Dawn Cantrall said in a statement. Jeffrey and Michele Tatro, parents of a 13-year-old student at Brittan Elementary School, added, “It is our goal that no child in the United States be tagged or tracked. We want it to be stopped here, in Sutter, California, and we don’t want any child to be tracked anywhere. Our children are not pieces of inventory.”

Links here and here.



Yukos’s chief executive said he considered Russia’s auction of a key oil production unit to be theft, even as details emerged that China gave an indirect loan to the state-controlled company that now owns the unit. Steven Theede, the American CEO of the shattered Russian oil giant, said the company has received no notice from Russian authorities since the sale of the unit in December, when he said armed bailiffs and officers entered the unit’s offices and took over production. “We have received no formal documentation from the Russian authorities that an auction took place. ... It feels very much like a theft to us in terms of the procedures that were actually carried out,” he said.

The government sold Yuganskneftegaz -- once the heart of Yukos, pumping 1 million barrels per day -- to cover part of Yukos’s multibillion dollar back tax claims. Yukos argues the auction and the tax claims are illegal and its officials have promised to sue Yuganskneftegaz’s buyer and the banks that back it. The company widely expected to buy Yuganskneftegaz was state-run natural gas giant Gazprom, but a U.S. bankruptcy judge banned Gazprom and its creditors -- a consortium of foreign banks -- from bidding at the Dec. 19 auction. Yuganskneftegaz was sold to an unknown bidder, which was then bought by state-controlled Rosneft.

Finance Minister Alexei Kudrin announced that a group of banks, including China’s Eximbank, had loaned state bank Vnesheconombank $6 billion and that money had been transferred to Rosneft. The head of Russia’s Federal Energy Agency announced earlier that China’s state oil company CNPC had paid Rosneft $6 billion under long-term oil supply contracts. Analysts said the supply agreements were effectively collateral for the Chinese loan to Vnesheconombank and Russia had found an elegant, if opaque, means to fund Rosneft, which is being folded into Gazprom. Speculation had been rife about how Rosneft was able to fund the $9.3 billion purchase of Yuganskneftegaz. “Two intransparent governments have combined their efforts to overcome an international court ruling,” said Chris Weafer, strategist at Moscow’s Alfa Bank. “It doesn’t say much about the state of emerging markets.”

Link here.

Yukos owner sues Russia for $28 billion.

The Kremlin last year seized and sold Yukos' main production arm, Yugansk, to state-run oil group Rosneft for $9.3 billion to offset a massive back tax bill. Group Menatep, the Gibraltar-based holding company which controls 51% of Yukos, says this was illegal. Menatep has already asked Rosneft to repay a $900 million loan that Yugansk had secured on its assets. The Russian government’s argument for selling Yuganskneftegaz -- the unit’s full name -- was that Yukos owed more than $27 billion in back taxes for the years from 2000 onwards. It accused the firm of using a web of offshore firms to avoid its tax liabilities, and the courts sent in bailiffs to freeze Yukos accounts and seize Yugansk. But critics say the sell-off, and the assault on Yukos’s finances, are part of an attempt to bring the energy industry back under state control.

Yukos is still waiting to see what will happen to its filing in a U.S. court for bankruptcy protection. It took the action to try to prevent the forced sale of Yugansk -- first to a little-known shell company, which in turn was bought by Rosneft.

Link here.

Russia bars foreign-owned firms from key assets.

Russia will bar foreign-owned companies from bidding for the country’s most lucrative natural resources this year in the most explicit and sweeping manifestation of a nationalistic state policy developed under the presidency of Vladimir Putin. The Ministry for Natural Resources said companies would have to be at least 51% Russian-owned to take part in this year’s tenders for strategic oil and metals deposits. The rule may prevent oil companies such as ExxonMobil and ChevronTexaco from developing new Russian oil reserves, and also stymie TNK-BP, a pioneering 50-50 owned Anglo-Russian oil company.

Link here.

Putin cronies exposed in new list of Russia’s rich.

Russia’s political class has amassed as much wealth as power under President Vladimir Putin, according to a new “rich list”. In revelations which will outrage many pensioners, who have recently campaigned against welfare cuts, Finance magazine reported that three regional presidents, 20 MPs, 11 senators, a regional governor and a deputy regional governor were among the country’s 468 wealthiest individuals. Five of the men were classed as dollar billionaires.

Most parliamentary deputies have backed Mr. Putin’s proposals to savagely cut Communist-era benefits for a quarter of the population, including pensioners. A series of concessions were obtained after street demonstrations gained international publicity. But the new list has redoubled popular suspicions that Russia under Mr. Putin is growing steadily more unequal. Up to now it had been imagined that Russia’s über-rich were drawn exclusively from the ranks of businessmen who made their fortunes by cashing in on the country’s treasure trove of raw materials -- whether oil and gas or metals.

Link here.


Airlines and business travelers are bristling over a Bush administration proposal to double the airport security tax created by Congress after the September 11, 2001, terrorist attacks. When he submits his budget to Congress, President Bush is expected to outline a plan to increase the security fee from $2.50 to $5.50 for a one-way airline ticket, and from a maximum of $5 to $8 for a trip that has multiple legs. The increase would generate an additional $1.5 billion for the Department of Homeland Security’s Transportation Security Administration.

Airlines plan to fight a security tax increase. Air travel is heavily taxed, with passengers and airlines paying billions of dollars to fund Homeland Security and the Federal Aviation Administration (FAA), said John Heimlich, chief economist for the Air Transport Association, which represents U.S. cargo and passenger carriers. Airlines and passengers pay 13 major taxes and fees, the Government Accountability Office said in a report completed last year. A $200 round-trip, domestic flight with one stop each way can include taxes of nearly $52, Mr. Heimlich said.

Link here.


International criminals are increasingly using the insurance industry as a way of laundering the proceeds of crime, leading barrister Jonathan Fisher QC, an expert in financial crime, asserted. He warned insurers and brokers of a need to detect and report suspicious transactions, or face fines from the City regulator. An estimated $1,500 billion (£800 billion) is laundered by criminal networks every year, according to the IMF.

While banks and building societies are a traditional target for money laundering gangs, the danger posed to insurers and brokers is a more recent development. “Insurance companies are not traditionally associated with this, but they are undoubtedly vulnerable,” Mr. Fisher said. The International Association of Insurance Supervisors, which represents insurance supervisory authorities, published a consultation paper last year outlining the vulnerability of the insurance sector to money laundering, including case studies of various scams. One scam is for criminal gangs to take out an insurance policy backing a bank loan for a bogus infrastructure project, often in the developing world. The policy is then canceled, and the money returned “clean”.

Mr. Fisher warned insurers to be particularly wary of the potential for fraud related to the recent tsunami in Asia. “Insurers are beginning to wake up to this. They have to look at who they’re dealing with and understand the projects they are funding,” he said. Nigel Moore, head of the Metropolitan Police’s specialist and economic crime unit, said recent anti-money laundering initiatives had led criminals to seek new ways of laundering money. London’s position as a global financial hub made it particularly vulnerable to financial crime.

Link here.


One of the key drivers behind the push to take up biometric technologies is that governments are beginning to mandate that biometric identifiers such as facial images and fingerprints be used in official documents, including passports. And biometrics is also seen as essential for the provision of e-government services to citizens to ensure accurate authentication to prevent fraud. To a lesser extent, corporations are testing the application of biometrics to their workplaces in order to improve the security of their operations. Issues within business include the need to improve the security of workplaces, from improving hiring procedures to securing access control to their premises.

But legal challenges remain to the use of biometric technologies by both public institutions and businesses. In Europe, the most pressing legal challenges are in the area of conforming to privacy and data protection requirements. As part of its remit, the European BioSec consortium is working to develop a legal framework for the use of biometric technologies that ensures full compliance with European regulations in the area of data protection. Another legal challenge is in ensuring that citizens have the right to correct information held on them, especially as biometrics holds so much promise for identification and authentication purposes. Without adequate means of redress, the fear remains that owners of data could conceivably never be able to take back control of their identities should their biometric data fall into the wrong hands.

Link here.


The recent ruling in the UK stopping Jamaica from replacing the Privy Council with the Caribbean Court of Justice (CCJ) as the court of final appeal should not delay the planned establishment of the Caribbean Single Market and Economy (CSME) or the operation of the CCJ. The Privy Council in the UK has ruled that the three Acts, collectively passed by the majority in the Jamaican Parliament to abolish the right of appeal to the Privy Council and to substitute a right of appeal to the CCJ, were not passed in accordance with the procedure required by the Jamaica Constitution and are accordingly void. Effectively, this means that the Privy Council is still the court of final appeal for Jamaica and, further, the CCJ, at the present time, has no jurisdiction in Jamaica even as a court of original jurisdiction for trade disputes within the Caribbean Community and Common Market (CARICOM).

This is a set back for the advocates of the CCJ who want a Caribbean Court to replace the British Privy Council as the ultimate court of appeal from the Courts of Jamaica and other countries in the Caribbean. These advocates regard appeals to the Privy Council as anachronistic, seeing the requirement for such appeals as a lingering left-over from colonialism and a mark against the true independence of sovereign Caribbean states.

By the same token, the Privy Council decision is being claimed as a victory for those who hold to the view that the Caribbean legal and judicial system is not yet mature enough to allow for a truly independent court of final appeal that could withstand local pressure and interference from whatever source, particularly governments. It is important to understand, however, that these were not the arguments that the Privy Council considered. It is equally important to appreciate that the ruling of the Privy Council applies to Jamaica only.

Link here.


The U.S. Justice Department is appealing a decision that trimmed back the FBI’s powers under the USA PATRIOT Act. But in a case already noted for unusual secrecy, the very fact of the government’s appeal was kept under seal for over two months. Last year the ACLU, representing an anonymous ISP, mounted a constitutional challenge to the FBI’s authority to issue “national security letters” that force a communications provider to hand over sensitive customer information to the bureau without a court order, and to keep the matter a secret for all time.

In September, a New York federal judge ruled that the secrecy requirements made the law unconstitutional, because it cheated the recipient of the right to challenge the FBI in court, and of the First Amendment right to free speech. Marrero revoked the FBI’s national security letter authority, but deferred the force of the ruling until the government could appeal to the 2nd Circuit Court of Appeals. The Justice Department made no secret of the fact that it intended to do just that. But when government lawyers filed their appeal notice last November 23rd, they did it under seal. It remained a secret until Wednesday, when the court ordered it released to the public docket, calling its sealing a mistake. It is all par for the course in case steeped in secrecy from the outset, says ACLU attorney Ann Beeson. "There was a very strict procedure for the filing of all the documents in the district court," says Beeson.

Link here. Decision in ACLU v. Ashcroft here (PDF file).


An unusual alliance of conservative and liberal state lawmakers wants Congress to limit the federal government’s eavesdropping, saying some of the tactics related to the war on terrorism overstep civil liberties. In a resolution to Congress, six Republicans and 14 Democrats argue that the Patriot Act, signed in the wake of the 2001 terrorist attacks, infringes upon the rights and civil liberties of Arizonans.The Senate’s Judiciary panel unanimously approved Senate Concurrent Resolution 1031, which reaffirms the Legislature’s strong opposition to terrorism but says the fight against it should not come at the expense of basic rights.

Link here.


Under investigation on suspicion of money laundering by U.S. banking authorities, Arab Bank plans to curtail operations at its New York office and gradually withdraw from the U.S. market, according to a statement issued Tuesday by its chief regulator, Jordan’s central bank. Arab Bank’s retreat comes under growing pressure from civil lawsuits and regulatory investigations as an alleged terror-funding conduit. A major Middle Eastern bank with $32 billion in assets and offices in 30 countries, the institution has $425 million in assets at its lone U.S. office on Madison Avenue.

The Treasury Department’s Office of the Comptroller of the Currency is investigating concerns the bank acted as a fence for the Hamas terror group in Israel, the West Bank and Gaza by forwarding charitable funds raised here for suicide bombings and terror attacks abroad. Civil lawsuits against the bank accuse it of paying death benefits to at least 200 martyrs.

Link here.


The tiny principality wanted recompense for assets it claims were handed by Germany to Czechoslovakia in 1945. It says the assets, including castles and artworks, were used to pay off its debts after World War II. But the court at The Hague, the UN’s highest legal body, said the dispute was too old for it to deliver a ruling, saying it was not competent to make a decision on the dispute because it dated back to 1945 -- well before Liechtenstein and Germany agreed in 1980 that the ICJ should rule in arguments between them.

Most of the assets are being claimed by Liechtenstein’s royal family, which wants millions in damages. Liechtenstein was neutral during the war, but it says Germany improperly handed the property over to the Czechs as war reparations. Berlin argues the assets were seized by Czechoslovakia after the German defeat in 1945, and Germany was not responsible for that seizure. Liechtenstein has had simmering disputes with Germany over the years.

Link here.


U.S. counterterrorism officials have set up a high-seas gantlet deploying Coast Guard cutters off Latin America and arresting foreign nationals trying to leave their own countries. Coast Guard crews have blocked at least 37 Ecuadoran boats and detained more than 4,575 suspected illegal migrants over the past four years, records show. Then, over the past two years, they have sunk a dozen emptied migrant boats they deemed “unseaworthy” -- setting them ablaze and firing on them with their .50-caliber guns.

The crackdown fits into a new worldwide strategy that U.S. Department of Homeland Security officials describe as “pushing our borders out”. Enforcing U.S. laws abroad is crucial, they contend, to control record illegal immigration, estimated at 500,000 a year, and close security gaps terrorists could exploit. Not only off Ecuador , but “anywhere in the world”, Lt. Cmdr. Brad Kieserman, operations legal chief at U.S. Coast Guard headquarters said, Coast Guard and Navy ships will “go to the source of transnational crime and interdict it before it gets to the United States.”

Some analysts see this as contemporary gunboat diplomacy. If foreign armed forces stopped U.S. boats in this way, “we’d call it an act of war,” said John Pike, director of the Washington think tank Global Security. “There is no world government to enforce international law. It’s always been the case that the strong do what they can, and the weak do what they must.” Others say U.S. officials are pushing too far, straining the already faint goodwill and support that the U.S. needs to fight terrorism, the illegal spread of weapons, and other threats.

“To have U.S. ships off the coast of Ecuador sinking boats is not the best public relations for the United States,” said Robert Leiken, director of immigration and security studies at the Nixon Center think tank in Washington. If stopping illegal immigration is the goal, cracking down on U.S. employers who hire illegal workers would be far more effective, Leiken said. “Basically, we have one continent which is so far not penetrated by Islam; there’s very little Muslim radicalism in Latin America,” he said. “I’d think we’d want these people on our side.”

Link here.



First, let me restate my intent in writing the book. My work was meant to inform Americans about the threat Islamist militancy posed to our country. The book is strongly nationalistic. I do not aspire to be a citizen of the world -- being an American citizen is enough honor for one lifetime. The message I wanted to deliver can be summarized in three points:

1.) Our Islamist enemies -- led and personified by Osama bin Laden -- attack America for what we do in the Muslim world, not for what we believe or the way we live. They attack us because they believe America, through its policies and actions, is tying to destroy Muslims and the Islamic faith. 2.) The war in which America is engaged is a war for survival, not a police action, a regime-changing or nation-building exercise, or, least of all, a law enforcement problem. We cannot talk our way out of this war, and we cannot appease our way out of it. Indeed, we are faced not by a choice between war and peace, but a choice between war and endless war. 3.) Today America is defending itself only through intelligence and military operations. These can hold the ring for a while, but to crush our Islamist enemy -- as we must -- the lethal power of these services must be complemented by a review of and debate about our policies toward the Muslim world.

I think any author would be pleased by the reception my book received. Notwithstanding these many positives, I have been disappointed by the failure of many reviewers to understand the book’s intent. My book has been embraced on the left by those eager to attack President Bush and his neoconservative advisers, especially on the issue of Iraq. I oppose the Iraq war because it made crushing our bin Laden-led Islamist enemies vastly more difficult, and because self-initiated, offensive wars are incompatible with the principles on which the Founding Fathers grounded U.S. foreign policy. This said, the book devotes only a few of 300 pages to Iraq, and rarely mentions President Bush. Simply, Imperial Hubris is not about either Iraq or President Bush.

For the most part, reviews of Imperial Hubris from the right have been more straightforward and less nuanced. I am simply and variously described as a “liberal appeaser”, an “Islamist fellow traveler”, and -- my personal favorite-- a “rightwing weasel” who always “blames the Jews”. The consensus on the right seems to be that my intention was to “blame Americ”q for the problems we are having at the hands of Islamist militants. The use of these epithets necessarily sets the tone and shapes the content of the reviews. Oddly, the reviews from the right have not noted the sharp nationalistic tone of my book, suggesting, perhaps, that the neoconservatives now in the saddle in Washington are truly more interested in the glories of empire than in the security of America. Many of the reviews of my book from the right seem to me to be grounded in nothing more than repackaged Wilsonianism, a set of ideological fantasies that have helped to soak the world in blood since Versailles.

Link here.


We have all heard the words democracy and freedom used countless times, especially in the context of the invasion of Iraq. They are used interchangeably in modern political discourse, yet their true meanings are very different. George Orwell wrote about “meaningless words” that are endlessly repeated in the political arena (in Politics and the English Language, 1946). Words like “freedom”, “democracy”, and “justice”, Orwell explained, have been abused so long that their original meanings have been eviscerated. In Orwell’s view, political words were “Often used in a consciously dishonest way.” Without precise meanings behind words, politicians and elites can obscure reality and condition people to reflexively associate certain words with positive or negative perceptions. In other words, unpleasant facts can be hidden behind purposely meaningless language. As a result, Americans have been conditioned to accept the word “democracy” as a synonym for freedom, and thus to believe that democracy is unquestionably good.

The problem is that democracy is not freedom. Democracy is simply majoritarianism, which is inherently incompatible with real freedom. Our founding fathers clearly understood this, as evidenced not only by our republican constitutional system, but also by their writings in the Federalist Papers and elsewhere. James Madison cautioned that under a democratic government, “There is nothing to check the inducement to sacrifice the weaker party or the obnoxious individual.” John Adams argued that democracies merely grant revocable rights to citizens depending on the whims of the masses, while a republic exists to secure and protect pre-existing rights. Yet how many Americans know that the word “democracy” is found neither in the Constitution nor the Declaration of Independence, our very founding documents?

A truly democratic election in Iraq, without U.S. interference and U.S. puppet candidates, almost certainly would result in the creation of a Shiite theocracy. Shiite majority rule in Iraq might well mean the complete political, economic, and social subjugation of the minority Kurd and Sunni Arab populations. Such an outcome would be democratic, but would it be free? Would the Kurds and Sunnis consider themselves free? For all our talk about freedom and democracy, the truth is we have no idea whether Iraqis will be free in the future. They are certainly not free while a foreign army occupies their country

Link here.

Iraq: Purple or still black and blue?

In the rich of tradition of “inside the beltway” political gimmicks, the all-too-giddy congressional Republicans at President Bush’s recent State of the Union address dipped their fingers in purple ink to show solidarity with Iraqis who voted in the U.S.-initiated Iraqi election. That smugness will likely come back to bite them. The predictable voter turnout in various areas of the country portends a precarious future for a unified U.S.-like federation. In fact, in the future, such Republican crowing might well be ridiculed as much as the President’s “Mission Accomplished” speech was after guerrilla warfare broke out in Iraq.

When armed guerrillas roam the countryside, even a free and fair democratic vote may be irrelevant to the outcome. According to a New York Times article from 1967, the Johnson administration was pleased as punch then about an 83% voter turnout in South Vietnamese elections. We all know how that conflict turned out: the majority went to the polls and the armed minority eventually went to the halls of power.

In Iraq, as in Vietnam, the key to peace and prosperity is to get the armed minority to cease committing acts of violence. To do that, the U.S. government must honestly examine why the Sunni insurgents are fighting. Instead, the president calls the rebels terrorists, criminals, and holdovers from Saddam’s regime. Iraq was carved out of three provinces of the defunct Ottoman Empire by the British in the 1920s and has been an artificial country ever since. The country, with fractious ethnic/religious groups, has been held together only by brute force. Instead of engaging in publicity stunts by dying their fingers purple, members of Congress could better spend their time pushing the Bush administration to give the Iraqis a real chance to end the violence that is making their country black and blue. Real freedom for the people of Iraq, which would most likely decentralize Iraqi governance, offers the best hope for long-term stability and prosperity there.

Link here.


Last week was a busy one on the creeping- fascism index. So busy, in fact, that I finally accepted there is even such a thing as a creeping- fascism index. Over the past few years, I have held fast to a belief that America is too sprawling, too diverse and too fundamentally committed to its Constitution to ever change its flag to red, white and black. Now I am not so sure. It was not a delayed reaction to the Patriot Act, Guantanamo, Iraq or the confirmation of torture hombre Alberto Gonzalez that did it, but a modest blip on the post-9/11 radar: a poll finding that a third of high school students think the First Amendment “goes too far”.

At least that is what they think of the First Amendment once it is explained to them. After interviewing 100,000 teens in the largest study of its kind, the John S. and James C. Knight Foundation reports fast shrinking respect for bedrock constitutional freedoms of speech, press and assembly. Among the findings widely commented on last week -- but not widely enough -- only 51% said newspapers should be allowed to publish content without state approval. Three-quarters actually thought flag burning was illegal -- and did not care -- while almost one-fifth said Americans should not be allowed to express unpopular views.

News of the poll triggered a few easy comparisons to the fear-driven conformity of the early Cold War. But that analogy is wishful thinking. Even at its worst, the paranoid patriotism of the 1950s existed uneasily alongside a respect for and knowledge of American history and the Constitution. What we have now is the worst elements of the 1950s without the literacy and understanding of the American creed that made possible the corrective revolts of the 1960s. The poll is an ominous sign of more than just another paranoid burst of American politics, one that will flame out or be eclipsed by some inevitable Aquarian renewal. It is a glimpse into the brain of the first videogame generation to come of age during the war on terror. Post-9/11 political culture plus ADD equals those poll results. There is no good reason to expect the trend to reverse on its own.

Link here.


The general trend in government during the 20th century, and presumably before, is the rapid growth in the role that government plays in society and the powers considered necessary to fulfill this role. It would seem to any bystander (if there are such) that most people in modern society agree with the concept of a far-reaching government with responsibility to take care of people, as well as to be a moral guide for both society and individuals or provide support where people lack confidence or ability. Libertarians generally do not accept this view of the state as a “nanny” or government as a parent, and there are many reasons for this.

One reason is one that the 17th century English philosopher Thomas Hobbes never realized. He proclaimed that free men in their natural state, i.e., without government or rule, cannot achieve a lasting social order. It is bound to inevitably degenerate into war, terror, and chaos. Man is inherently evil or would at least choose to forcefully take what can be taken from others rather than work for it if he has the chance. Thus the only possible state of free men would be a state of eternal war where the strong will eventually conquer or kill the weak.

From this Hobbes drew the conclusion that men would have (or really had) chosen to come together in societies for protection, security and order. In order to enjoy protection of their rights men would have to first surrender both their rights and their freedoms. This collective act created a government organization with the power to forcefully withdraw society from the state of war, and thereby create the security and order necessary for man to enjoy rights. Thus government is something good created from the chaos and war of the natural state.

It is easy to see how this idea in essence is corrupt. If man is inherently evil or at least frequently degenerates into thievery, fraud, violence and murder, how can people rely on a government created and run by men? The simple answer is they cannot. Bad people cannot be trusted if they are alone, and the same must still be true if they create a government through which to rule other people.

No matter what scheme is used to make government less powerful compared to the voting public, the guns of government cannot be stopped from growing and apprehending roles it was not intended for. The most important reason for this is in the very nature of government: it is an organization based upon the use of force and with the sole purpose to use that force. When force is institutionalized and legitimized there is no limiting its reach. What one can do is to stay out of its way or become part of the elite which controls it. Either way liberty is lost.

Link here.
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