Wealth International, Limited

Offshore News Digest for Week of May 23, 2005

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

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A freighter slides slowly into the first of the Miraflores Locks, red, orange and white cargo containers stacked six or seven high on its deck. Gates swing shut and the lock begins to drain, water flowing into the lock below. The water to operate Panama Canal locks like Miraflores flows down from Gatún Lake, which depends on the health of the surrounding watershed forest. A few minutes later, when the water levels are equal, gates at the other end of the lock swing open, and the ship moves into the next chamber. Once again, water drains, gates open and the ship and its tons of cargo head out to the Pacific Ocean.

Something else is moving, too – about 26 million gallons of water, the amount that drains from the Pedro Miguel and Miraflores Locks each time a ship goes through them to or from the Pacific. The same amount drains into the Atlantic when ships pass through the Gatún Locks on the other side of the isthmus. So each trip through the canal, or lockage, means 52 million gallons of water. On a busy day, there may be as many as 40 lockages. The water comes from Gatún Lake, one of the largest artificial lakes in the world, created during construction of the canal. The canal depends on the lake and its water, and they in turn depend on the health of the surrounding watershed forest. But in the last few decades, half of it has been lost to logging and slash-and-burn agriculture. Panamanians know what will happen if they cannot maintain an adequate supply of water for the canal. In the drought winter of 1990-91, lack of water forced canal operators to curtail lockages to fewer than 30 a day, something no one there is eager to repeat.

Although Panama City is a major financial center now, by some estimates the canal and its associated businesses still contribute 40% or more of the nation’s economy. And if Panamanians vote to upgrade or expand the canal, an issue they are expected to confront in a referendum this fall, the reliability of Gatún Lake’s water supply will be even more crucial. The Panama Canal Authority and an array of scientists are working together to study Gatún Lake’s hydrology, to restore its watershed and to teach the people who live there the importance of preserving it. Water per se is not its problem. The Chagres drains a tropical jungle where it rains 10 feet or more each year – in theory more than enough to keep the locks operating at capacity. On forested slopes, much of this water soaks into the ground and feeds slowly into watershed streams and then into Gatún Lake. But deforested slopes cannot absorb heavy rains.

Link here.


Canada, squeaky clean? Surely you jest. The nonstop revelations in Canada these recent weeks of federal corruption are hilariously reminiscent of the good old days of Tammany Hall where mysterious little tin boxes produced bundles of unaccountable cash. Except it is not quite so hilarious since Canadian Liberal governments, from their Trudeauvian celestial perch, enjoy preaching morality to us Americans. Revelations at hearings before an independent government commissioner of corruption in the ruling Liberal Party have been so startling it led a Canadian columnist in the National Post to write words believed never before published in anti-American Canada.

“We’ve never had anything like the salutary shock to our system,” wrote Robert Fulford, “that Ronald Reagan provided for the Americans 20 years ago. … The tragedy of contemporary Canadian politics is that we never had a Reagan.” Mr. Fulford, one of Canada’s most distinguished journalists, writes a column in the Toronto National Post. Such heresies as his are rarely encountered in Canadian media and most certainly not on the anti-American Canadian Broadcasting System.

According to another National Post writer, Andrew Coyne, millions and millions of taxpayer dollars have been handed over by our friendly northern neighbor to politically well-connected Canadian firms “that did no work in return except to funnel a percentage of it back to the [Liberal] ruling party, by a combination of donations (legal) and kickbacks (illegal), or by employing Liberal ‘volunteers’ to do party work.”

Link here.

Was Canada just too good to be true?

The news from Canada has been very un-Canadian of late. Or has it? A government program sponsoring sporting and cultural events in Quebec has been tainted by allegations of millions of dollars in kickbacks and money laundering. Witnesses before a federal inquiry into the scandal have described envelopes full of cash left on restaurant tables to advance the cause of the governing Liberal Party. But even as the “sponsorship scandal” has unfolded, one unseemly chapter after another, Prime Minister Paul Martin has held fast, in the face of overwhelming evidence to the contrary, to a cherished Liberal Party script: Canada as a singularly virtuous country that adheres more than most to values like honesty, decency, fairness and multiethnic equality, not to mention publicly financed universal health care.

“We will set the standard by which other nations judge themselves,” Mr. Martin boasted to his party caucus only minutes after his government was saved on May 19 by a single vote in the House of Commons – the vote of a lawmaker who had turned her back not only on the Conservative Party, which she helped found only a year ago, but on her boyfriend, a Conservative leader, in return for a Liberal cabinet seat. This notion of national rectitude and compassion, long promoted by the Liberals, has been captured in the slogan of a national book chain: “The world needs more Canada”.

Of course, quite a few nations have an embellished sense of righteousness, not least among them, many would say, Canada’s southern neighbor. But perhaps no other country puts such a high premium on its own virtue than does Canada. The recent spectacle of scandal and tawdry politics has some Canadians now wondering if all the self-congratulatory virtue is not mixed with some old-fashioned hypocrisy, or what Robert Fulford, a leading literary journalist and columnist characterizes as “a fable” expounded by generations of Liberal leaders. “During recent decades our politicians have told us a sweet bedtime story about Canada being an exceptionally compassionate country, a world leader in multiculturalism and wonderfully generous to the poor countries,” Mr. Fulford said. “All of this expresses something called ‘Canadian values’. All lies.”

Most Canadians would probably consider that assessment harsh. Canadian cities are among the most ethnically diverse and safest in the world. Canadian tolerance took real form during the past two years with the extension of marriage rights to gays and lesbians in most of the country. Canada’s reputation as an exemplary world citizen comes from its strong support of the International Criminal Court, a ban on land mines and the Kyoto climate control accord. But there is another side to the story. …

Links here and here.


By all reports, last week’s general elections in the Cayman Islands, which were postponed from November 2004 due to Hurricane Ivan, ran smoothly with no reports of violence or other problems at the 34 polling stations in six districts across the islands. However, politics in the Cayman Islands changed overnight when the results of the poll on 11 May were finalized and showed the People’s Progressive Movement (PPM) winning over the rival United Democratic Party (UDP).

Link here.

Cayman Friends welcome change of Government.

It is not just Caymanian voters that are reportedly breathing sighs of relief with last week’s change in Government. Ex-pats and friends of Cayman abroad also appear to be pleased with the result. Matthew Banks, 43, a former British MP and founder of the UK All Party Cayman Islands Parliamentary Group, was present in Grand Cayman in the run up to the election and in their immediate aftermath. Mr. Banks was also a guest anchor on Cayman Net News Group’s new streaming on-line video service CiNTV’s live coverage of Election night, which was broadcast both locally and internationally. He told Cayman Net News this week “I am delighted that a much needed change has been brought about peacefully and I like what I hear so far, about all Parties now trying to work together for the benefit of the Cayman Islands as a whole.

“The Cayman Islands had been gaining a poor reputation as a result of its Government both at home and overseas. For the financial, legal and insurance markets to prosper for the benefit of all Caymanians, a strong and good reputation is essential and I hope that the new Government will make that one of their first priorities”. Such a reputation also affects important areas such as Tourism and Mr Banks added that it was important for Cayman to revamp its image.

Link here.


The SA Constitution could soon be altered to include a Bill of Morals that would govern behavior and exhort South Africans to “greet warmly, speak gently and behave in a courteous manner”. The proposal, from the National Religious Leaders’ Forum, envisages an act of parliament and possibly based on “biblical values” and certainly in line with general religious principles. In a presentation made to President Thabo Mbeki two weeks ago, the forum suggested that the bill “articulate a moral vision that can unify, uplift and inspire us to build a great society”. The meeting agreed on the need for such legislation. “The Bill of Morals can also be based on biblical values (or values of all religious traditions) such as giving charity and acting with compassion,” the proposal states.

The head of the forum, Ashwin Trikamjee, said that the desirability of allowing people who broke the moral regulations to be sued had not discussed. “We do not envisage these matters being dealt with in the courts as we still have to agree on whether we would want some form of sanction if one breaches the moral code,” he said. “Moral character cannot mean different things to different people. We all know what moral character is about – no matter which faith we belong to.”

He said other examples of what the code might contain were prohibitions on “stealing, killing, damaging, destroying, lying, being spiteful and deceitful, not being caring, not treating your neighbour as your own and being respectful to elders and colleagues”. “Even those who do not subscribe to organized religion surely recognize ordinary moral principles that have governed human conduct since evolution began.”

Link here.


Independence campaigner Walton Brown has warned that if the EU’s proposed constitution is adopted, the EU could gain control over Bermuda’s ability to levy Customs duties on goods from EU member countries. Mr. Brown issued the warning at a UN Caribbean regional seminar on decolonization this month. He said at the meeting in St. Vincent that Bermuda and other British overseas territories were already being “Eurofied” by stealth.

Mr. Brown said Britain’s grant of British citizenship – and by extension the right to live and work in the EU was something greatly valued by a number of people in the overseas territories and acknowledged it was a reason for some OT citizens to oppose Independence. “This is, fundamentally, a right granted to individuals and does not in any way alter the constitutional relationship between the UK and the Overseas Territories,” he said. “But by providing the opportunity for work and residence in any of the member states of the European Union this provides a compelling (reason) for some to maintain the status quo.”

But he warned that “the second element of this Eurofication should, however, make it patently clear that the status quo is shifting ground and may do so rapidly in the years to come” because the EU was gradually eroding the autonomy of the overseas territories, both legally and economically without any consultation with the territories themselves. “We are already aware that the European Court of Justice has a level of involvement insofar as it now represents the de facto final court of appeal on legal matters,” he said. “What is less obvious is what the European Constitution portends for the overseas territories.

“This constitution recognizes the overseas territories – albeit in an appendix – as part of the areas covered by it. More revealing, there are a set of parameters laid out in this document that refer to the levels of tax/duty an overseas territory can impose on imports from a European Union member state. While this provision offers flexibility in terms of not restricting the ability of the overseas territory to raise revenue for the public purse, it nevertheless grants constitutional authority to the EU over a matter that until now had been the exclusive preserve of the overseas territories themselves. This is a serious precedent that more fully ties the OT’s to the EU than any grant of citizenship. And this has taken place without, as much as I can determine, any consultation with the OTs, no input from the people.”

He added, “In one deft move the precedent has now been set for the EU to assume tremendous control over the overseas territories. It represents a much closer integration with the administering power yet there are no greater political rights accorded.” Mr. Brown also dealt with the issue of whether countries should pursue Independence via a referendum or a General Election.

Link here. The UK’s position on independence for Bermuda – link.

Bermuda’s tax system based on a fairytale premise.

Once upon a time Bermuda’s tourist industry, like Jack’s Beanstalk, just grew and grew and grew. In that far-off “once upon a time”, the Trotts, Tuckers, Triminghams and that lot, conceived, created, and legislated Bermuda’s tax system. Tourism stopped growing. Hotel beds peaked at 11,000. They now lie at 7,000. In 1987, tourist air arrivals reached 477,000. In 2001 they shrank to 278,000. Now the hopes are to grow air arrivals back up to 400,000. In the “once upon a time” of 45 years ago, Bermuda’s tax system was eminently logical. The concept? With over 10 tourist consumers for every one Bermudian, get most of the beans from “Jack Tucker’s” ever-growing tourism beanstalk. 45 years later the beanstalk is sadly wilted and unlikely to return to its 1987 peak.

Additionally, there is a slight need to find relatively more beans. It is crazy to try and get more beans from a withered beanstalk. The bean harvest must ultimately match – and unless we create a physical and fiscal miracle, cannot exceed – the beanstalk’s ability to produce beans. Put another way, Bermuda’s total customs duty tax take at about $190 million out of a Budget of $800 million – about 25 cents out of the generic tax dollar – is still based on a tax concept put in place – “once upon a time” – when the fairy princess of tourism danced brightly over these sea-girt sun-kissed isles. “Once upon a time” has passed Bermuda by. Bermuda is unlikely to return to 477,000 air arrivals. Bermuda must therefore consider shifting its tax/bean collecting to a system where beans are collected from healthier and more productive beanstalks.

What must happen? Bermuda must eventually move to extracting tax dollars from a tax on corporate profits. I know! You have just broken into a cold sweat and your hands are shaking! Grab a “dark and stormy” and calm yourself. In part two, I will tackle the reality.

Link here.


Europe will “break down” if France fails to back it, Chirac says.

Jacques Chirac, France’s president, appealed to the “historic responsibility” of French voters urging them to back Europe’s constitutional treaty in this Sunday’s referendum. In a 10-minute television address to the nation, Mr. Chirac said the adoption of the constitutional treaty by all 25 members of the EU would create a stronger Europe, better able to humanize globalization and compete with the U.S. and China. A more cohesive Europe could deal with economic and environmental challenges more effectively and better defend itself against terrorist threats, he said. It could also project European values across the world.

But the French president also warned about the consequences of a No vote. “It is also my duty to tell you the consequences of the No [vote]. Rejection will be seen as a No to Europe. Europe will break down,” he said. Mr. Chirac has only made four other national announcements of this kind during his 10-year presidency, the last two being at the outbreak of the Iraq war in 2003 and after the terrorist attacks in the U.S. on 11 September 2001. However, the two latest opinion polls on Thursday showed the “No” camp widening its lead to 55%. The euro fell to fresh seven-month lows in anticipation of a No vote.

In an earlier television interview, Nicolas Sarkozy, leader of the ruling center-right UMP party, also urged voters to back the treaty. But he said the strength of the No campaign highlighted the need for French politicians to respond to public concerns. “Even if the Yes wins that could mean that 48 to 49 per cent voted No. Surely we have to take heed of the consequences. We have to change our way of doing politics,” he said. François Hollande, secretary of the Socialist party and a Yes campaigner, once again appealed to voters to draw a distinction between their national discontents and their European destiny. “Our conviction is that Europe should not be the victim of the mistakes of the government and the president of the republic,” he said.

Link here.

Bold statesmen or serial liars?

His majority may be dented but Tony Blair has taken Labour to a record third term. But how did he do it? Blair, and others like him – Berlusconi, Chirac – are they bold statesmen or serial liars? According to a new UK poll, successful leaders may need to be both. “The public think that Tony Blair may be a liar, fairly slippery and not to be trusted – but they respect him, and believe he has the charisma required of a prime minister,” writes Guardian correspondent Alan Travis. Drawing from an ICM survey, he notes how 44% of UK voters think Mr. Blair is a liar – although 49% think the opposite. And even among Conservative voters, more than half say the Labour leader has the necessary charisma to be Prime Minister.

So does charisma trump integrity? Looking across Europe, Jacques Chirac has been linked to several cases of alleged corruption from his time as mayor of Paris (1977-1995). Some of these ended in other politicians or aides being convicted. But a contentious legal decision from 1999 means Chirac enjoys virtual immunity so long as he is president. Indeed, he has even refused to testify, saying it would be inappropriate in light of his presidential functions.

For his part, Silvio Berlusconi has faced trial for tax fraud, false accounting, corruption and bribery of judges and police officers. But Berlusconi has never received a definitive conviction for any trial concluded to date. For some he was fully cleared, while for others he was acquitted because the case was not proven or because the “statute of limitations” expired. No smoke without fire? Whatever you believe, the fact is that Berlusconi has led Italy’s longest-serving government since World War II, and Chirac has been French President for a decade. At the helm since 1997, Tony Blair won on 29 May a significantly lower majority than in the last election, with British voters focusing more than ever on his personal integrity. A key element of this was a report raising new doubts over the legality of the war in Iraq, released just weeks before the election. This caused major waves, and was certainly more than a “damp squib”, as Blair first retorted.

Integrity and transparency are cherished democratic values, but “in wartime, truth is so precious that she should always be attended by a bodyguard of lies,” remarked Winston Churchill in very different circumstances from today. The problem now is that the war on terror could be endless, so our liberties may need constant restriction. It comes as no surprise therefore that following Labour’s election victory a new Identity Cards Bill is already on the table, ready to be rushed through Parliament in a new window of opportunity. What is equally worrying, however, is that the truth may also need constant reconstruction, as per George Orwell’s 1984. In this world, no fact is above argument: everything is subjective, everything is political. And clearly, we are already on the slippery slope.

Back in 1997 Mr. Blair announced, “I only know what I believe” and “I can only tell the truth”. He now has another chance to paint the world his shade of “whiter than white”, rubbing shoulders again with the other great survivors, the other Europeans who are writing the history books: Chirac and Berlusconi. And, of course, Bush is bound to be in touch …

Link here.



The Forbes annual capitalist tool-kit to global taxation shows rates coming down – and getting flatter. Flat-tax momentum is the big fiscal policy story of the year in much of Europe, with potential fallout in the U.S. Increasingly, entrepreneurial capitalists and skilled talent are in the driver’s seat, able to move their activities to an ever wider range of places to do business. No wonder that high-tax fiefdoms like France and Sweden are feeling besieged. In late March the present chief executive officer of Intel, Paul Otellini, told a U.S. presidential panel on tax reform that his biggest worry in deciding where in the world to build and operate a semi-conductor chip factory is taxes. They represent 20% of the almost $7 billion, ten-year build-and-operate cost for Intel. Forbes’s 2005 Misery & Reform Index shows more countries decreasing marginal rates than hiking them, a five-year trend.

In the mid-1990s, about the time U.S. reform advocates (including the editor-in-chief Steve Forbes) picked up on a flat-tax notion tried successfully in Hong Kong for decades, the newly free Baltics and central Europe put the idea into practice. Then, ironically, it took root in Russia, thanks to U.S. Tax Court Judge David Laro, a consultant to Moscow. By lowering and flattening marginal rates, these states are counterintuitively increasing their total tax revenues through better compliance and economic expansion.

Links here, here, and here.


The government signaled its continued determination to combat tax avoidance when it published a new finance bill containing a swathe of measures aimed at multinationals. The Treasury has modified some of the provisions that were previously announced in the Budget in an effort to target them more precisely. But industry experts complained that the overall impact of the bill would have a detrimental effect on the competitiveness of the UK as a base for multinational companies. Christopher Sanger, a partner of Ernst & Young, professional services group, said, “There is still a big issue here that the Treasury has not tackled. This will still place UK companies at a disadvantage.”

The bill, which is the third finance bill published this year, reintroduced legislation announced in the budget 2005 which was omitted from the shortened Finance Act that was passed after the announcement of the General Election. Dawn Primarolo, paymaster general, said that the measures were “essential for an effective, principled, targeted and fair tax system, that maintains the UK’s competitiveness, but acts where there is a loss to the UK Exchequer.” The government said it had responded to representations from business who had complained that many measures were so broadly drafted that they would catch innocent transactions. John Whiting, a partner of PricewaterhouseCoopers, professional services group, said, “It seems that we have got some changes in the areas that we were most concerned about. But I still need to be convinced that it will just target abuse, rather than capturing legitimate transactions.”

Tax experts had been particularly concerned about a provision known as “Section 91B”, which was aimed at tax schemes that involved converting interest into capital through the use of shares. It was originally drafted in a way that many companies believed would impose double taxation on common transactions. But the government said that the newly-drafted clause had been “tightly targeted to ensure it does not catch normal commercial structures which do not involve avoidance.”

The government also modified legislation involving tax “arbitrage”, which exploit differences between national tax systems. These measures, which were some of the most controversial anti-avoidance clauses introduced in the Budget, have been criticized by international companies for reducing the attractiveness of the UK and introducing uncertainty. The amended legislation will extends a “grandfathering period”, which gives transitional protection to some companies, to 31 August 2005. It will also allow companies to amend their returns to adjust the amount of deduction claimed. The new legislation has also amended the rules involving “financial arrangements” to ensure that they are targeted more precisely. The original proposals – aimed at transactions that ensured that income was not immediately taxable – were broadly framed in way that hit many deals involving preference shares and other routine transactions.

The government had made it clear that it would reintroduce the anti-avoidance provisions that were dropped from the original bill before the recent general election. But companies, which had complained that their tax planning had been impaired by the uncertainty over the exact nature of the new measures, were disappointed that all the measures contained in the latest bill would be backdated. Chas Roy-Chowdhury, head of taxation at the Association of Chartered Certified Accountants, said, “Retrospection – back to March 16 – and complex anti-avoidance measures are precisely what business does not need and exactly what this finance bill introduces.”

Link here.

British funds sector “under threat from tax regime”.

Tax and regulatory burdens could pose a threat to Britain’s position as a leading global centre for asset management, according to a report. Currently the 3rd-largest global center for fund management, the UK’s £2.8 trillion industry could lose assets and jobs to low-cost rival centers, a study by the Investment Management Association and Corporation of London concluded. The industry is critical of the “overly rigid” implementation of EU directives and wary of the competitive threat of offshore financial centers such as Dublin and Luxembourg.Nearly one in four respondents to the survey said regulatory or tax regimes were the single greatest disadvantage of being located in the UK.

Link here.


PricewaterhouseCoopers partner Steve Le Page said that although the firm was not advocating a VAT-type tax, the advantages and disadvantages should be looked at closely. Jersey last week voted in favour of a 3% general sales tax and other jurisdictions such as Ireland and Cyprus also have variants of the VAT model. “It’s vitally important that we get this right,” he said.

Link here.


The Center for Freedom and Prosperity Foundation released a Prosperitas study, entitled “Territorial Taxation for Overseas Americans: Section 911 Should Be Unlimited, Not Curtailed”. The paper explains that Americans living and working overseas are at a competitive disadvantage with workers from other nations since they are taxed twice on their income. The U.S. is the only industrialized nation that taxes labor income outside its borders.

“This CF&P Foundation study is a comprehensive review of how best to make Americans more competitive overseas. This is a critically important issue since some politicians on Capitol Hill want to eliminate Section 911,” said Andrew Quinlan, president of the CF&P Foundation. “This study,” he added, “explains why it is foolish to double-tax Americans working abroad and even more foolish for the Congress to try to eliminate the policy – Section 911 – that tries to mitigate some of the damage.”

Heritage Foundation Senior Fellow Daniel Mitchell, the author of the study, stated, “We live in a global economy, and this increases the importance of good tax policy. Sadly, America’s onerous worldwide tax system undermines the ability of American workers and companies to compete around the world. All pro-growth tax reforms such as the flat tax would shift to a territorial tax system, meaning there no longer would be any extra-territorial taxation by the IRS. Policy makers could take a big step toward tax reform by making Section 911 universal.” Veronique de Rugy of the American Enterprise Institute said, “Even though I am a French citizen living and working in the United States, the French government does not double-tax me on my American income. This is the right tax policy, so it is rather ironic that the United States has a more oppressive approach than the tax-loving French.”

The executive summary of the study reads: “The United States is among the tiny handful of nations that imposes double-taxation on the labor income that individuals earn in other nations – even if the U.S. citizen is a full-time resident of the foreign jurisdiction. Yet since the ‘foreign-source’ income of U.S. citizens already is subject to all applicable taxes that exist in other jurisdictions, an additional layer of U.S. tax is double-taxation – thus violating one of the most important principles of good tax policy. Almost every other country in the world taxes only income earned inside national borders – the common-sense principle of ‘territorial taxation.’ American legislators have tried to mitigate the adverse impact of worldwide taxation by allowing workers to protect annual earnings up to $80,000 from double-taxation. This policy, known as the Section 911 exclusion, is a small step in the right direction. Ideally, the U.S. government should not be taxing any income earned abroad – just as foreign governments should not be taxing any income earned in America. If policy makers created a level playing field by making Section 911 universal, more Americans could find jobs in the global economy, U.S. companies would become more internationally competitive, and U.S. exports would substantially increase.”

Link here.



If you are like many pet owners, you want the best for your dog or cat. You give it premium food, good veterinary care and bring it with you on vacation. But what happens to your pet if you die or become incapacitated? Unless specific provisions have been made, your pet could wind up in a shelter and be put to death. If you plan ahead, though, your pet can be well cared for. In addition to arrangements with friends and family, there is, increasingly, a formal option. Laws in 27 states – including Arizona, Colorado, Florida, New Jersey and New York – now allow owners to establish trusts for pets. These arrangements set aside money for the care of one or more animals in the event of an owner’s disability or death.

Leaving money to a pet became legally possible in 1990, when a section validating trusts for domestic animals was added to the Uniform Probate Code. More states may soon allow it. Pet trust legislation is pending in Connecticut, Hawaii, Massachusetts, Oregon, Pennsylvania, Rhode Island and Texas. Setting up a trust for your pet is, in many ways, similar to creating one for a child. A trustee and caregiver are named. The trustee is in charge of the money and pays the caregiver a set amount each month for expenses, like food, grooming and veterinary care. At any point, if the caregiver is not doing a good job, the trustee can find a replacement. These new statutes “allow people without lots of money, without detailed consultations with lawyers, to create a simple provision to take care of their pet,” said Gerry W. Beyer, a law professor at St. Mary’s University in San Antonio.

Creating a trust can cost as little as $100 if you draw up a will for yourself at the same time or up to a few thousand dollars. Most people, though, do not make formal arrangements, assuming they will outlive their pet, or that friends and family will take care of it. Consequently, more than 500,000 pets are killed in shelters and veterinary offices each year after their owners die, according to 2nd Chance 4 Pets, a nonprofit organization in Los Gatos, California, that raises awareness of this problem.

While volunteering at Tri-Valley Animal Rescue in Pleasanton, California, Amy Shever frequently saw dogs and cats whose owners had died. She noticed many of the pets never adjusted to living in a shelter and became fearful or defensive. Consequently, nobody wanted to adopt them. “I personally witnessed a lot of these animals getting euthanized,” said Ms. Shever, who is the director of 2nd Chance 4 Pets. Last year, she started PetGuardian, a company in Los Gatos that creates pet trusts for birds, horses, dogs and cats. For $500, her company enrolls its customers in a program that includes a comprehensive pet trust document, a cost analysis to determine how much money to set aside for the pet’s care and emergency identification cards for owners to post at home and carry in their wallets.

As part of the program, she said, the Best Friends Animal Society, a large no-kill shelter in Utah, finds homes for pets, no matter where they reside, if the caregivers named in the trust are no longer available. A detailed instructional sheet is also created so animals continue to receive care in the manner they are accustomed to. So far, 500 clients have either started or completed the program, she said, and owners typically leave between $8,000 and $15,000. The largest sum a client left was $200,000 for the care of two African birds that can live 90 years or more. If clients have a hard time setting aside money for the trust, Ms. Shever recommends they talk to their insurance agent. “One really great way to fund these trusts is to have the beneficiary of your life insurance policy use the money to cover the pet trust,” she said.

Estate planners warn, though, not to put excessively large amounts of cash or property in the trust because it may encourage heirs to contest the arrangement. Courts have the power to reduce the amount if deemed unreasonable. Another concern is that a dishonest caregiver could fraudulently extend the life of the trust by replacing an animal when it dies with a look-alike in order to continue receiving the funds. The best way to prevent fraud, trust experts say, is to get a DNA sample from the animal. Then, if the trustee becomes suspicious, a comparison can be made. Instead of a trust, owners can include a provision for pet care in their will. But William A. Reppy Jr., a professor at Duke Law School in Durham, N.C., said there were some drawbacks to that approach. A will takes effect only upon your death, not if you become ill or incapacitated. And it must go through probate, which can temporarily freeze funds for your pet's care and delay determining the rightful new owner.

Link here.


The UK is about to complete the crackdown on offshore tax havens required to avoid being subject to the proposed EU withholding tax regime. The House of Commons is expected to approve four more regulations tomorrow authorising the exchange of information about the holdings and tax liabilities of EU citizens required under the Savings Directive with the Netherlands Antilles, Aruba, the Virgin Islands and Monsterrat. Similar orders have already been approved covering Jersey, Guernsey and the Isle of Man, and non-reciprocal arrangements have been agreed with Anguilla, the Cayman Islands and the Turks and Caicos Islands. Gibraltar – whose compliance caused difficulties – does not require a separate agreement, as it is technically part of the UK.

Link here.


Federal authorities have begun to seize sports cars and other assets from a 25-year-old Minnesota man whose online prescription drug business has been the focus of a yearlong inquiry by the FBI and other agencies. A U.S. District Court in Minneapolis agreed to seize control of some $18 million in assets related to what court documents described as a sprawling Web sales empire built, investigators contend, with millions earned in a separate spamming operation. Law enforcement officials say Christopher W. Smith and two companies he controlled, Online Payment Solutions and Xpress Pharmacy Direct, illegally sold prescription drugs like Ambien, Xanax and Vicodin via numerous Web sites.

No criminal charges have been filed, but the Web sites have been shut down and Online Payment Solutions, an 85-person company that court documents described as the telemarketing arm of Xpress Pharmacy Direct, was raided by federal agents on May 10. Fourteen other businesses and individuals, including Mr. Smith’s wife and father, are named in the continuing investigation. Mr. Smith is named on several antispam Web sites as one of the world’s most prolific spammers, and papers filed in the Minnesota case allege that he used proceeds from previous spamming operations to establish the Xpress Pharmacy enterprise.

Link here.

Forfeiture Endangers American Rights (F.E.A.R.) home page here. Selected Federal Asset Forfeiture Statutes: all the forfeiture statutes and rules together in a concise format you can print out and put in a notebook to keep on your desk (in three parts for size reasons) - link 1, link 2, link 3



Well, now we have done it. Congress just passed it and Dubya has promised to sign it and the Homeland Security Department is giddier than Mel Gibson in a nail factory over it and marketers nationwide are salivating at the groin at the prospect of it, and the next big step toward America becoming an even more delightfully paranoid and draconian Big Brother wonderland has now officially been taken.

It is called Real ID. It is, in short, a new and genetically mutated type of driver’s license for all Americans, replacing your current license and replacing your Social Security card and replacing your sense of well being and privacy and humanity and part of a new, uniform, deeply sinister, national uniform card system whereby every person living and breathing in these paranoid and tense times shall henceforth be much more traceable and watchable given how we will all soon be required by law to carry this super-deluxe computerized ID card with us at all times, packed as it will be with more personal, digitized info about you than even your mother knows.

The new law will require everyone to hand over not one, not two, but fully four types of documentation to renew their driver’s license, such as a photo ID, a birth certificate, proof that their Social Security number is legit and something that validates their home address, like a phone bill. DMV employees will then have to verify the documents against giant teeming federal databases and store the documents and a digital photo of you in a database. Doesn’t that sound gratifying? What is more, the card’s design plan includes multiple openings for the Homeland Security Department to add on whatever features they deem necessary, with or without your knowledge, consent or who the hell cares what you think because we do what we want now please shut the hell up and quit asking questions.

Make no mistake. Real ID, in short, takes us one happy step closer to a total surveillance state, where everyone is stamped and everyone is watchable and everyone is traceable and unless you live way, way off the grid out in the increasingly nonexistent hinterlands, you cannot escape the spazzy and twitchy and paranoid eye of Homeland Security. This is the funny thing. This is the sad thing. This is the terrifying thing. We have suffered one major debilitating act of terrorism in this nation and we have recoiled so violently, so rabidly, so desperately that we are still more than willing to give up whatever freedoms necessary in a vain and silly attempt to control chaos and plug every hole, when of course the nation is basically one giant hole to begin with.

Link here.


The race to tighten the nation’s borders began just after the terror attacks on Sept. 11, 2001. Authorities learned that hijackers had lived illegally in the country, renting apartments, taking flying lessons and moving around freely. Congress demanded changes in border controls and tight deadlines for building a computer network that would screen foreign visitors as they seek to enter or leave the country by scanning their fingerprints and matching them against databases of suspected terrorists.

Pressing to meet that goal, the Homeland Security Department last year awarded one of the most ambitious technology contracts in the war on terror – a 10-year deal estimated at up to $10 billion – to the global consulting firm Accenture. In return, the company and its subcontractors promised to create a “virtual border” that would electronically screen millions of foreign travelers. Documents and interviews with people familiar with the program, called US-VISIT, show that government officials are betting on speculative technology while neglecting basic procedures to ensure that taxpayers get full value from government contractors.

“There’s no question we could end up spending billions of dollars and end up with nothing,” said Steven A. Camarota, the director of research at the Center for Immigration Studies, a nonprofit group that has been monitoring efforts to improve border controls. “It creates an illusion of security that doesn’t exist.” Although the government has already spent or budgeted about $1 billion for the US-VISIT program, the new system is being built on top of aging computer databases and software that government scientists concluded two years ago are out of date, poorly coordinated and ineffective. Among them is a fingerprint system that does not use the government’s state-of-the-art biometric standard.

The technology problems diminish the current effectiveness of US-VISIT, according to audits and government documents. Today, only a small fraction of foreign visitors – fewer than 1% – is fully screened by the existing system.

Link here.


The prime suspect in a double murder case here was carrying around key evidence in his pockets, investigators said. Tests revealed that money on Anthony Paul Shields, when he was being chased by police who arrested him, contained the DNA of Eddie Robinson, 54, and his girlfriend, Tasha Nerve, 22. The couple was found stabbed to death following a fire at Robinson’s home on May 4. Having received tips that Shields had previously beaten Nerve, his ex-girlfriend, authorities arrested Shields on a battery warrant shortly after the double killing. Authorities have said several hundred dollars fell from Shields’s pockets as he was being chased down by police, and investigators believe the money was taken from Robinson.

Link here.


New Belgian identity cards have been printed with spelling mistakes in a bid to fool forgers. The identity cards include the country name in the three official Belgian languages of French, German and Dutch as well as English. Instead of “Belgien” in German, the ID cars incorrectly say “Belgine” and instead of “Belgium” in English, they say “Belguim”. According to Luc Vanneste, of the government department in charge of issuing the cards, other errors will be printed on the card to further confound fraudsters. He said a similar system had proved successful in the U.S.

Link here.


Home Secretary Charles Clarke is “aware of the genuine concerns” over the UK ID scheme, but the Bill his department reintroduced to Parliament is, according to Home Office Minister Tony McNulty, “in essence … the same Bill” as the one that fell prior to the general election. So, it would seem that the new-look listening Government hears the concerns, and says, “tough”. According to McNulty the new version of the Bill changes “some elements around the information commissioner”, but that “some of the other [changes] are quite minor.” New Labour had made a “very strong commitment” to ID cards in its manifesto, and “the essential principles are as they were then.” There will however no doubt be changes in detail to look out for in the new version.

The pro-ID arguments the Government has put forward in the run-up to the publication have been well-rehearsed, some of them over a period of years, and are as flimsy now as they were in previous Parliamentary sessions. It will, it claims, be necessary to have all of the biometric data to comply with global biometric passport standards, the public overwhelmingly supports ID cards, 30% (or sometimes 35%) of terrorists use false ID, and ID theft costs the UK over £1.3 billion a year.

Did we miss one? Possibly, but these old faithfuls serve the latest New Labour junior minister rotated into the Home Office ID card hotseat well as ammunition to bore the press with. Alongside them the form of words “we never said ID cards were the complete answer to … [insert terrorism, ID theft, benefit fraud, etc. here]” comes in handy, and now they can also say (as Tony Blair did last week), “It is a manifesto commitment and we will honour it.”

All of the claims are however either false or grossly misleading, the “we never said …” that the Government never mentions is what the ID scheme is the solution to, and while one might be inclined to applaud a determination to honor manifesto commitments, one cannot help noticing the numerous previous commitments that have not been honored, and the things the Government has done in the past (e.g., the odd war, scads of repressive legislation and the attempted destruction of the judicial system) that unaccountably failed to appear in the 2001 manifesto.

Link here.


Before Sept. 11, 2001, when federal law-enforcement officials asked FedEx Corp. for help, the company had its limits. It would not provide access to its databases. It often refused to lend uniforms or delivery trucks to agents for undercover operations, citing fears of retribution against employees as well as concerns about customer privacy. Then came the attacks on New York and Washington and pleas from the government for private-sector help in fighting terrorism. Suddenly, the king of overnight delivery became one of homeland security’s best friends.

FedEx has opened the international portion of its databases, including credit-card details, to government officials. It has created a police force recognized by the state of Tennessee that works alongside the FBI. The company has rolled out radiation detectors at overseas facilities to detect dirty bombs and donated an airplane to federal researchers looking for a defense against shoulder-fired missiles. Moreover, the company is encouraging its 250,000 employees to be spotters of would-be terrorists. It is setting up a system designed to send reports of suspicious activities directly to the Department of Homeland Security via a special computer link.

FedEx’s newfound enthusiasm for a frontline role in the war on terror shows how the relationship between business and government has changed in the past few years. In some cases, these changes are blurring the division between private commerce and public law enforcement. After Sept. 11, the U.S. government altered the definition of a good corporate citizen to include help running down al Qaeda operatives, often asking companies to act as the eyes and ears of federal law enforcement. The Bush administration and Senate Republican leaders are currently pushing an updated version of the Patriot Act that would expand the ability of law-enforcement agencies to demand business records without a warrant. Already, some companies are voluntarily increasing their level of cooperation with the government, say law-enforcement officials.

Federal agents privately praise Western Union for sharing information with Treasury and Homeland Security investigators about overseas money transfers. Time Warner’s America Online has set up a dedicated hotline to help police officers seeking AOL subscriber information and also proffers advice about wording subpoenas. Wal-Mart Stores, which has a sophisticated supply-chain security system, has been helping U.S. Customs and Border Protection agents figure out how to better track international shipping, say Homeland Security officials.

Spokespeople for Western Union, AOL and Wal-Mart all say their companies take consumers’ privacy seriously and that they cooperate with legal investigations. They would not provide details about their cooperation with the government. Cooperation between businesses and federal law-enforcement agencies generally is not advertised and customers are seldom aware of it. In some cases, people waive their right to privacy when they use a particular company’s service. With FedEx, customers consent to having shipments inspected as soon as they hand over their packages and sign the shipping forms.

Link here.



In a stunning slap at the democratic legislative process, the Senate Intelligence Committee, headed by Sen. Pat Roberts (R-Kansas), has suddenly and quietly scheduled a closed-door session for this week to mark up its version of a renewed USA PATRIOT ACT, the frankenstein legacy of former Attorney General John Ashcroft and his then assistant Michael Chertoff (now secretary of Homeland Security). The controversial act, many provisions of which seriously undermine basic Constitutional rights and protections, was just being examined in hearings by the Senate Judiciary Committee headed by Sen. Arlen Specter (R-Pennsylavia), where it came under heavy criticism from both right and left. Both the Intelligence and Judiciary committees have jurisdiction over the act, but the Judiciary committee, with its open hearings, was widely seen as having primacy.

Critics of some of the act’s provisions, such as the notorious library records provision, which allows federal agents, or local law enforcement authorities working for them, to inspect the patron or customer records of libraries, video stores and bookstores, without a warrant and without notification, or the sneak-and-peek provision, which lets federal agents spy and surveil on people without later notifying them, carry a “sunset provision”, which means if they are not renewed this year, they would expire.

The administration has been arguing for renewal or for making the provisions permanent, but a coalition of conservative and liberal groups calling itself Patriots to Restore Checks and Balances, has expressed hopes of convincing a majority of the Judiciary Committees of both House and Senate to modify those and several other rights-threatening measures in the PATRIOT Act before sending the renewal legislation to the full Congress in June. This surprise move by the Intelligence Committee, which is packed with senators from both parties who have not been particularly friendly to civil libertarians, appears to be an end run by supporters of the White House.

“One reason that people across the political spectrum are concerned about the Patriot Act is that so much of it is shrouded in secrecy. Many provisions are implemented secretly, and the government has kept secret key information on how it is being used. Now, lawmakers are trying to keep legislation to reauthorize the Patriot Act secret as well,” said Anthony D. Romero, ACLU Executive Director.

Links here and here. Index to the Cato Institute’s Patriot Act publications here.

FBI asks Congress for power to seize documents.

The FBI asked the U.S. Congress for sweeping new powers to seize business or private records, ranging from medical information to book purchases, to investigate terrorism without first securing approval from a judge. Valerie Caproni, FBI general counsel, told the U.S. Senate Intelligence Committee her agency needed the power to issue what are known as administrative subpoenas to get information quickly about terrorist plots and the activities of foreign agents.

Civil liberties groups have complained the subpoenas, which would cover medical, tax, gun-purchase, book purchase, travel and other records and could be kept secret, would give the FBI too much power and could infringe on privacy and free speech. “This type of subpoena authority would allow investigators to obtain relevant information quickly in terrorism investigations, where time is often of the essence,” Caproni testified. The issue of administrative subpoenas dominated the hearing, which was called to discuss reauthorization of clauses of the USA Patriot Act due to expire at the end of this year.

The act was passed shortly after the Sept. 11, 2001, attacks. However administrative subpoena power was not in the original law. The proposed new powers, long sought by the FBI, have been added by Republican lawmakers, acting on the wishes of the Bush administration, to the new draft of the USA Patriot Act. Committee chairman, Kansas Sen. Pat Roberts, noted that other government agencies already had subpoena power to investigate matters such as child pornography, drug investigations and medical malpractice. He said it made little sense to deny those same powers to the FBI to investigate terrorism or keep track of foreign intelligence agents. But opponents said other investigations usually culminated in a public trial, whereas terrorism probes would likely remain secret and suspects could be arrested or deported or handed over to other countries without any public action.

Links here and here.

Plan to let F.B.I. track mail in terrorism inquiries floated.

The F.B.I. would gain broad authority to track the mail of people in terror investigations under a Bush administration proposal, officials said, but the Postal Service is already raising privacy concerns about the plan. The proposal, to be considered next week in a closed-door meeting of the Senate Intelligence Committee, would allow the bureau to direct postal inspectors to turn over the names, addresses and all other material appearing on the outside of letters sent to or from people connected to foreign intelligence investigations.

The plan would effectively eliminate the postal inspectors’ discretion in deciding when so-called mail covers are needed and give sole authority to the FBI, if it determines that the material is “relevant to an authorized investigation to obtain foreign intelligence,” according to a draft of the bill. The proposal would not allow the bureau to open mail or review its content. Such a move would require a search warrant, officials said. The Intelligence Committee has not publicly released the proposal, but a draft was obtained by The New York Times. The provision is part of a broader package that also strengthens the FBI’s power to demand business records in intelligence investigations without approval by a judge or grand jury.

Officials on the Intelligence Committee said the legislation was intended to make the F.B.I. the sole arbiter of when a mail cover should be conducted, after complaints that undue interference from postal inspectors had slowed operations. “The F.B.I. would be able to control its own investigations of terrorists and spies, and the postal service would have to comply with those requests,” said an aide to the Intelligence Committee who is involved in the proposal but insisted on anonymity because the proposal remains confidential. “The postmaster general shouldn’t be able to substitute his judgment for that of the director of the F.B.I. on national security matters,” the aide said. The proposal would generally prevent the post office from disclosing a mail cover. It would also require the Justice Department to report to Congress twice a year on the number of times the power had been used.

Civil rights advocates said they thought that the proposal went too far. “Prison wardens may be able to monitor their prisoners’ mail,” said Lisa Graves, senior counsel for the American Civil Liberties Union, “but ordinary Americans shouldn’t be treated as prisoners in their own country.”

Link here.

After talk of compromise, panel is again split on Patriot Act.

Just a few weeks ago, critics and supporters of the sweeping antiterrorism law known as the USA Patriot Act had reduced their differences to only a handful of substantive issues, and the two sides were talking openly about finding room for compromise in renewing the law. But now, a new proposal in the Senate Intelligence Committee – backed by the Bush administration – has sent the two sides scurrying back to their war camps. The central question is no longer whether the government’s antiterrorism powers should be scaled back in the face of criticism from civil rights advocates, but whether those powers should be significantly expanded to give the F.B.I. new authority to demand records and monitor mailings without approval from a judge.

The divergent views were on full display Tuesday as the committee began its debate in earnest over the future of the Patriot Act and 16 provisions in the law that will expire at the end of the year. On Thursday, the committee will hold a closed-door hearing on a proposal to renew and expand major provisions, but critics are attacking the committee’s decision to hold the debate in secret. Critics of the law acknowledged that the Bush administration and Republican leaders, through the proposal to expand the F.B.I.’s powers, might have succeeded in shifting the focus of the debate and putting advocates of civil liberties on the defensive.

Link here.


Some really scary things are happening around Washington these days. Congress has become a place of great incivility and rancor, which threaten to undermine any hope of legislative remedy to a myriad of problems, from Social Security to soaring health-care costs to immigration to a steadily crumbling manufacturing base once the envy of the world. But perhaps the most frightening prospect for Americans is an unfettered national police force with the sole discretion to determine who can be investigated as a potential terrorist. That is the impact of little-known proposals to greatly expand the powers of the FBI, permitting its agents to seize business records without a warrant and to track the mail of those in terrorist inquiries without regard to Postal Service concerns.

Because the government can label almost any group or individual a terrorist threat, the potential for abuse by not having to show probable cause is enormous, prompting civil libertarians to correctly speculate about who will guard against the guardians. Up until now the answer was the Constitution as interpreted by the judiciary. But it is clear that sidestepping any such restriction is the real and present danger of the post-9/11 era.

A wise man, the late Sen. John Williams of Delaware, once counseled that any proposed legislation should be regarded in the light of its worst potential consequence, particularly when it came to laws that enhance the investigative and prosecutorial powers of the government at the expense of civil rights. This is most likely to occur in times of national stress, when the Constitution is always vulnerable to assault, e.g., the internment of Japanese-Americans during World War II.

Think it cannot happen? Well, it does all the time. Ask the lawyer in Oregon whom the FBI misidentified as having taken part in the terrorist bombing of the Spanish railway. Ask any number of persons since Sept. 11, 2001, arrested and detained for months without charges or counsel before they were released. If that is not enough to satisfy you about the inadvisability of these proposals, think back to the Cold War days when the most casual acquaintance with a group or person on J. Edgar Hoover’s anticommunist watch list could land one in water hot enough to make life miserable for a long time – maybe even put him or her on one of the infamous blacklists.

If you were not around in those times, read about them. One thing you will learn quickly is that the sole determination of who or what had communist inclinations belonged to the FBI. Even then, however, Congress was smart enough not to rescind the checks and balances that protect our civil liberties. Federal law-enforcement officers outside the FBI have complained of late about the bureau’s penchant for seizing jurisdiction over almost any crime by relating it to terrorism. Both of these over-reactive proposals are as fearsome as the threat of another al Qaeda attack, for they accomplish the same thing: the intrusion on and disruption of the rights of Americans. Like portions of the Patriot Act, which are rightly being challenged by conservatives as well as liberals, they are medicine worse than the cancer.

Link here.


In 1995 Kenneth Trentadue was murdered by federal agents in a federal prison in Oklahoma City. A coverup immediately went into effect. Federal authorities claimed Trentadue, who was being held in a suicide-proof cell, had committed suicide by hanging himself, but the state coroner would not buy the story. Prison authorities tried to get family consent to cremate the body. But Trentadue had been picked up on a minor parole violation, and the story of suicide by a happily married man delighted with his two-month old son raised red flags to the family. When the Trentadue family received Kenneth’s body and heavy makeup was scraped away, the evidence (available in photos on the Internet) clearly shows a person who had been tortured and beaten. His throat was slashed and he may have been garroted. There are bruises, burns and cuts from the soles of Trentadue’s feet to his head, wounds that obviously were not self-inflicted.

As the state coroner noted at the time, every investigative rule was broken by the federal prison. The coroner was not allowed into the cell, and the cell was scrubbed down prior to investigation. The federal coverup was completely transparent. A U.S. senator made inquiries, but the US Department of Justice (sic), knowing that it would not be held accountable, stuck to its fabricated story. That was a mistake. Trentadue’s brother, Jesse, is an attorney. He believes that federal officials, like everyone else, must be held accountable for their crimes. He has been battling the Justice (sic) Department and the FBI for a decade. Jesse Trentadue has amassed evidence that his brother was mistaken for Tim McVeigh’s alleged accomplice in the bombing of the federal building in Oklahoma City. Federal agents, believing that they had Richard Lee Guthrie in their hands, went too far in attempting to force him to talk.

Jesse Trentadue learned that the FBI had informants planted with two groups on which McVeigh may have relied: a white supremacist paramilitary training compound at Elohim City and the Mid-West Bank Robbery Gang. The implication is that the FBI had advance notice of McVeigh’s plans and may have been conducting a sting operation that went awry. In his effort to uncover the DoJ’s coverup of his brother’s murder, Jesse Trentadue may have uncovered evidence of the FBI’s failure to prevent the bombing of the Murrah Building. It is bad enough that the murder of Kenneth Trentadue is covered over with many layers of DoJ perjury and the withholding and destruction of evidence. Evidence that the FBI was aware of McVeigh’s plan to bomb the Murrah Building and failed to prevent the deed would be an additional heavy blow to the prestige of federal law enforcement.

Link here.


If you shop with a major bank, chances are that all the transactions in your account are scrutinized by AML (Anti-Money Laundering) software. Billions of dollars are being invested in these applications. They are supposed to track suspicious transfers, deposits, and withdrawals based on overall statistical patterns. Bank directors, exposed, under the Patriot Act, to personal liability for money laundering in their establishments, swear by it as a legal shield and the holy grail of the on-going war against financial crime and the finances of terrorism. Quoted in Wired.com, Neil Katkov of Celent Communications, pegs future investments in compliance-related activities and products by American banks alone at close to $15 billion in the next 3 years (2005-2008). The U.S. Treasury Department’s Financial Crimes Enforcement Network (finCEN) received aproximately 15 million reports in each of the years 2003 and 2004. But this is a drop in the seething ocean of illicit financial transactions, sometimes egged on and abetted even by the very Western governments ostensibly dead set against them.

Israel has always turned a blind eye to the origin of funds deposited by Jews from South Africa to Russia. In Britain it is perfectly legal to hide the true ownership of a company. Underpaid Asian bank clerks on immigrant work permits in the Gulf states rarely require identity documents from the mysterious and well-connected owners of multi-million dollar deposits. Hawaladars continue plying their paperless and trust-based trade – the transfer of billions of U.S. dollars around the world. American and Swiss banks collaborate with dubious correspondent banks in offshore centers. Multinationals shift money through tax free territories in what is euphemistically known as “tax planning”. Internet gambling outfits and casinos serve as fronts for narco-dollars. British Bureaux de Change launder up to £2.6 billion annually. The €500 note makes it much easier to smuggle cash out of Europe. Intelligence services cover the tracks of covert operations by opening accounts in obscure tax havens, from Cyprus to Nauru. Money laundering, its venues and techniques, are an integral part of the economic fabric of the world. Business as usual?

Crime is resilient and fast adapting to new realities. Organized crime is in the process of establishing an alternative banking system, only tangentially connected to the West’s, in the fringes, and by proxy. This is done by purchasing defunct banks or banking licences in territories with lax regulation, cash economies, corrupt politicians, no tax collection, but reasonable infrastructure. The countries of Eastern Europe – Yugoslavia (Montenegro and Serbia), Macedonia, Ukraine, Moldova, Belarus, Albania, to mention a few – are natural targets. In some cases, organized crime is so all-pervasive and local politicians so corrupt that the distinction between criminal and politician is spurious. Gradually, money laundering rings move their operations to these new, accommodating territories. The laundered funds are used to purchase assets in intentionally botched privatizations, real estate, existing businesses, and to finance trading operations. The wasteland that is Eastern Europe craves private capital and no questions are asked by investor and recipient alike.

The next frontier is cyberspace. Internet banking, Internet gambling, day trading, foreign exchange cyber transactions, e-cash, e-commerce, fictitious invoicing of the launderer’s genuine credit cards – hold the promise of the future. Impossible to track and monitor, ex-territorial, totally digital, amenable to identity theft and fake identities – this is the ideal vehicle for money launderers. This nascent platform is way too small to accommodate the enormous amounts of cash laundered daily – but in 10 years time, it may. The problem is likely to be exacerbated by the introduction of smart cards, electronic purses, and payment-enabled mobile phones.

Trust-based, globe-spanning, money transfer systems based on authentication codes and generations of commercial relationships cemented in honour and blood - are another wave of the future. The Hawala and Chinese networks in Asia, the Black Market Peso Exchange (BMPE) in Latin America, other evolving courier systems in Eastern Europe (mainly in Russia, Ukraine, and Albania) and in Western Europe (mainly in France and Spain). In conjunction with encrypted e-mail and web anonymizers, these networks are virtually impenetrable. As emigration increases, diasporas established, and transport and telecommunications become ubiquitous, “ethnic banking” along the tradition of the Lombards and the Jews in medieval Europe may become the the preferred venue of money laundering.

Link here.



An interventionist U.S. foreign policy, fueled by the Bush administration’s messianic zeal to make the world more democratic, has contributed to a dramatic rise in radical political Islam around the world. In fact, the current administration’s campaign is even more ambitious than Woodrow Wilson’s naïve policy of “making the world safe for democracy”. Provided that the Bush administration is actually sincere about its rhetoric (which is questionable given its mild criticism of despotic allies, such as the governments of Egypt and Uzbekistan, which have recently cracked down on dissidents or simply shot them en masse), both the Wilson and Bush policies derive from a virulent strain of American “exceptionalism”, the idea that the United States is special among the nations of the world.

Some evangelical Christians (during Wilson’s time and now), seem to think that the U.S. was founded as a “Christian nation” and that the world would be better off if more foreign governments resembled the U.S. government. This idea goes far beyond the proven empirical fact that most of the U.S. population are self-described Christians. Questioning orthodox views of American history, many such evangelicals believe that the nation’s founders imbued the new government as a theocracy with Christian principles.

In fact, some of the nation’s key founders were not really Christian, but Deists, and the U.S. Constitution does not mention the word “God” – on purpose. For example, Thomas Jefferson had bitter disputes with the organized church and was a vociferous advocate of the separation of church and state. Jefferson, James Madison, and other founders correctly believed that state involvement in religion corrupts both government and faith. More important, if the government does not endorse or support any one religion or denomination, citizens can freely practice any form of faith without fear of government suppression or oppression.

The U.S. has made a great error in conducting a messianic, albeit often hypocritical, campaign to convert the world to “democratic” government using an interventionist foreign policy. Instead, U.S. policy makers should spend more time defending liberty at home from al Qaeda and other real threats and becoming a peaceful refuge of human rights for the world to emulate – the kind of American exceptionalism that the founders originally intended.

Link here.


This year, Washington will spend an eye-popping $22,039 per household. That is the inflation-adjusted highest since World War II, and $5,000 per household more than spent just four years ago. With difficult decisions ahead, government waste should be the easiest place to start controlling spending. Amazingly, Congress has not looked seriously at government waste since the 1984 Grace Commission. Lack of information is not the problem: Hundreds of recent government program audits collect dust on bookshelves across Capitol Hill. Instead, cutting waste would distract lawmakers from shipping pork-barrel projects home and shoveling money to favored interests. So it is not surprising the federal government costs 33% more than in 2001.

While lawmakers focus on expanding government, the Heritage Foundation uncovered the following ways in which Washington wastes tax dollars: First, the federal government cannot account for $25 billion it spent in 2003. Federal auditors know someone spent $25 billion, somewhere on something, but do not know who, where or on what. That is more than total federal taxes paid by all residents in each of 28 states. Another audit shows the Defense Department purchased and then left unused approximately 270,000 commercial airline tickets at a total cost of $100 million. Even worse, the Pentagon never bothered to file to get the money back on these fully refundable tickets. And that is not counting the 27,000 times the Pentagon paid twice for the same airline ticket, at a total cost of $8 million.

Credit-card fraud is another problem. Federal employee credit-card programs were designed to streamline government procurement rules by allowing government employees to buy job-related products with agency-paid credit cards. But this idea was quickly abused. In a recent 18-month period, Air Force and Navy personnel used government-funded credit cards to charge at least $102,400 on entertainment events, $48,250 on gambling, $69,300 on cruises and $73,950 on exotic dance clubs and prostitutes. Not to be outdone, investigators randomly sampled 300 Department of Agriculture (USDA) employee credit cards. They found, over six months, 15% charged a total $5.8 million in personal expenses that included Ozzy Osbourne concert tickets, tattoos, lingerie, bartender school tuition, car payments and cash advances. The USDA has pledged a thorough investigation, but it will have a huge task: 55,000 USDA credit cards are in circulation, including 1,549 held by people no longer USDA employees.

From the Redundancy Department: Washington runs 342 economic development programs, 130 programs serving the disabled, 130 programs serving at-risk youth, 90 early childhood development programs and 72 safe-water programs. This means not only additional bureaucracies to run these overlapping programs, but an administrative nightmare for program beneficiaries who must navigate each program’s distinct rules and requirements.

Link here.


Perhaps the only working class that China’s Communist president, Hu Jintao, is still assisting is the American. I am not referring to the flood of cheap Chinese products that are keeping prices down, although that helps the average household. I refer to Hu’s policy of using what is widely regarded as an undervalued Chinese yuan to buy U.S. Treasury securities and so help keep American interest rates down.

The U.S. is awash in debt. Median household debt has risen to more than $100,000 from less than $60,000 in 1990 even as median incomes have increased only slightly. Much of the debt is held by workers ramping up their loans on one credit card after another, or obtaining dubious mortgages in a bid to secure some fraction of the heady lifestyle of an upper class that keeps getting richer. As Bob Davis of The Wall Street Journal pointed out in a recent article, the amount owed by U.S. households with at least one credit card rose to $9,205 in 2003, an increase of almost 25% from five years earlier. This increase has occurred as the gap between rich and poor has continued to widen and the visibility of coveted luxury goods on television and the Internet has continued to grow.

Some laud the democratization of credit, seeing its availability to wider swaths of the American population as broadening opportunity; some criticize it as the ruthless seduction by financial institutions of working people who will one day face bankruptcy because they will be unable to pay credit-card bills and mortgages. But this much is clear: The spread of debt is one of the more significant social phenomena in the U.S. today, allowing the less well-off to spend more than they have and so assuage feelings of being left behind by the conspicuous rich. As long as interest rates do not rise steeply, this social process will continue to function. Hence Hu’s heft on Main Street.

But what are the politics of debt? You might be forgiven for thinking that rank-and-file Americans seeing their wages eroded by international competition as executive compensation rises, and facing burgeoning credit-card bills, would be inclined to vote for the Democratic Party, which has traditionally represented the have-nots. But of course you would be wrong. Perhaps the single most significant U.S. political phenomenon of the past two decades has been the process that has seen working-class and middle-class Americans with constant or declining incomes identify more with God, the armed forces and the Republican Party than with the Democrats. They have tended, with the conspicuous exception of African-Americans, to be less moved by the strain on their finances than by three other “Fs” – faith, family and freedom – as successfully promoted by Republicans. Thomas Frank, the author and political analyst, calls these average working people who seem to be voting against economic logic “backlash conservatives”.

According to its central mythology, conservatives are always hardworking patriots who love their country and are persecuted for it, while liberals, who are either high-born weaklings or eggheads hypnotized by some fancy idea, are always ready to sell their nation out. This narrative, in which the defining characteristic of liberalism becomes what Frank calls “deracinated upper-classness”, has proved effective. It was precisely as a “high-born weakling” that Karl Rove, the brilliant political strategist of President George Bush, portrayed the Democratic candidate John Kerry.

So America today presents the picture of a country with wide swaths of its citizens drifting economically, using ever-increasing debt as a means to cushion the blow, but convinced that the Democratic Party has parted company with them by embracing values – same-sex marriage, abortion, secularism – that are unacceptable, not only in their eyes, but also in God’s. In this vision of things, it does not matter that Bush spends his time tightening bankruptcy laws to favor the very credit-card companies that are offering loans that may prove unpayable. It matters that Bush is seen as rooted, patriotic, a real man, and, for some, a divine agent in the White House. The Republicans’ success in purveying this message is striking. But there is nothing very new in people confronted by economic difficulties turning to God, patriotism and the armed forces.

Which brings us back to Hu. Could the Chinese leader do what the Democrats have failed to do – get more ordinary Americans to focus squarely on their economic situation and conclude that it may be better to vote for a party that might just act in their interests? The U.S. Treasury, alarmed at those spiraling Chinese imports, and under growing protectionist pressure, has now urged Hu to revalue the yuan. If China then reduces its purchases of Treasury bills, and other Asian central banks follow suit, one thing is certain: Interest rates will rise and Joe Six-Pack, from Kansas to Nebraska, will be hurting a lot more when credit-card bills arrive. If the pain is sharp enough, a political alternative – the Democrats – may look more attractive. It could just be that a Chinese Communist, leading a society hell-bent on capitalism, and prodded by a Republican administration, ends up helping what still passes for the left in America by driving the economic reality of personal debt home to the point where “moral values” become secondary.

Link here.


It has always been an article of faith on the “loony” right that the black helicopters of the Jewish-United Nations fascist government would arrive to take over America and turn it into a hellish police state through the machinations of the liberal Democrats. Who would have thought that it would be the conservative Republicans who would be waving the landing lights to guide the troop planes in? But there it is. In four short years, following the 9/11 attacks, we have moved a long way down a very dark and dead-end alley.

First we had the Patriot Act, the handiwork of John Ashcroft (now out to pasture nursing his wet dreams of a restoration of slavery and the Confederacy) and his able assistant Michael Chertoff, now Sith overlord of the Department of Homeland Security. This obscene 362-page pile of totalitarian legislation has dangerously undermined the First and Fourth Amendments of the Bill of Rights. Then we had the assertion of a Justice Department and Presidential right to revoke one’s citizenship (as witness the cases of Mssrs. Hamdi and Padilla, the latter of whom, a native-born American citizen, remains in jail in a military lock-up now for two years, with no access to family or even an attorney, with no charge against him and no right to challenge his arrest).

Couple that with the Bush/Cheney-sanctioned policies of rendition, where people are kidnapped by government agents and whisked away on unmarked planes to other nations like Syria and Egypt where torture and extra-judicial killings are routine, and torture (see Guantanamo, Abu Ghraib, Bagram, etc.), and you have the very real threat of American citizens being disappeared, just they way they did it for years (under American instruction and direction) in Guatemala, El Salvador, Honduras, Argentina and Chile).

Sadly, while they are leading the parade, the Republicans are not alone in this march to fascism and a 21st Century police-state tyranny. They have been doing it with the willing connivance of a number of conservative Democrats, including the likes of Joe Lieberman, Hillary Clinton and Diane Feinstein (this is hardly a complete list). And the way was paved, of course, by anti-Democratic police-state measures introduced earlier by the Clinton administration. They have also had the help of a somnolent corporate media and a blissfully ignorant public caught up in American Idol and the Michael Jackson trial or whatever the latest entertainment diversion might be.

I used to think that right-wing warnings about jackbooted agents of the federal government landing in black Cobra gunships and storming our homes in dead of night were the fevered ravings of lunatics, but no more. With the push to stack the courts, create a computerized national ID card, equate protest with support for terrorism, and make citizenship a revocable privilege, comes official government promotion of an intolerant, medieval Christian fundamentalism which provides the whole thing with an ideological gloss that makes any outrage not just permissible, but “God’s will”. Still, it is surprising to see the right turning off the lights of liberty, after all those years of warnings about liberal Democrats and the “nanny” state.

Link here.


Two weeks ago, a small, single-engine plane inadvertently strayed into the closed air space above Washington. The result was panic. Both the White House and the Capitol were evacuated, with police shouting “Run! Run!” at fleeing staffers and visitors. Senators and Congressmen abandoned in haste the floors of their respective Houses. Various RIPs (Really Important People) were escorted to their Fuehrerbunkers. F-16s came close to shooting the Cessna down. The whole episode would have been funny if it were not so sad.

I suspect that more than a few of our soldiers and Marines in Iraq and Afghanistan, enjoying as they do a daily diet of IEDs, ambushes and mortarings, were less than amused at watching Washington flee from a flea. More importantly, what message does such easy panic send to the rest of the world? Osama bin Laden has whole armies trying to kill him, but as best I know he has shown no signs of fear. Here again we see the power of the moral level of war. In cultures less decadent than our own, few men are likely to identify with leaders who fill their pants at one tiny blip on a radar screen.

The episode also reveals what has become one of the main characteristics of America’s “homeland defense”: a total inability to use common sense. We have already seen that in our airport security procedures, our de facto open borders immigration policy and the idiotic “Patriot Act”. Here, it seems that no one was willing to act on the obvious, namely that if a small plane is approaching Washington, it is probably because the pilot got lost (which pilots do frequently). Why? Because to bureaucracies what is important is not external reality but covering your own backside politically. Putting on shows serves that purpose well, even if the shows make us look like both fools and cowards.

There was also a message to the American people in the Cessna affair, and from a Fourth Generation perspective it was not a helpful one. The message was that the safety of the New Class in Washington is far more important than the safety of other Americans. As the first really serious terrorist incident is likely to show, America remains ill-prepared either to prevent or to deal with the consequences of a “dirty bomb” or a suitcase nuke or an induced plague. Not only will ordinary people die in large numbers, it will be realized in retrospect that many of the deaths could have been avoided had the New Class cared about anyone other than itself. But, of course, it doesn’t.

As I have said many times before, what lies at the heart of Fourth Generation war is a crisis of legitimacy of the state. In America, that crisis can only be intensified by any instance where the Washington elite draws a distinction between itself and the rest of the country. When the same people who have sent our kids to die in Iraq and left our borders wide open run in panic because of a Cessna, the American people get the message: Washington is “them”, not “us”. At some point, that gap may grow wide enough to swallow the state itself.

Link here.


Every season there is a new contender for the conservative mini-treatise of the day. Usually written by the newest would-be Buckley, it offers readers a new way of understanding the ideological climate and a new perspective on how conservatives should fit within it. National Review used to publish these all the time in the 60s and 70s, and the conclusion was always the same: feel no guilt about your support of big government in such and such an area because conservative philosophy can be twisted and re-rendered to make that not only permissible but necessary.

In more recent years, the cause has been picked up by other publications. The American Conservative calls for supporting the protectionist state. The Weekly Standard calls for supporting the national-greatness state. The Wall Street Journal is all for boosting welfare for warfare. Many formerly libertarian writers have seen the light and come to support the interventionist state in foreign policy. Innumerable e-zines call for tearing down the Democratic Party-ruled state in order to support the Republican Party-ruled state. And vast numbers of religious right outlets see a rationale for the moralizing state.

The upshot after all these decades is bitterly ironic. The only thing that seems to unite the myriad special interests on the right is that each one has some special project for the state to support, so they all agree to support big government as a kind of vast logrolling project. If each group does its part, everyone stays on top. If this plan sounds familiar, it is because the political right – the red-state fascist right – has only recently fully come around to discovering what the left discovered long ago: you do not have to agree with the goal of your compatriots so long as you agree on the statist means to achieve that goal. This is how the Democratic National Convention can look like the cantina scene in Star Wars, but somehow it all works. What has been lacking on the right has been an attempt to present a rationale to the multitudes on how the right can operate the same way.

Link here.


The right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures, shall not be violated, and no warrants shall issue, but upon probable cause, supported by oath or affirmation, and particularly describing the place to be searched, and the persons or things to be seized. ~ The Fourth Amendment to the Constitution of the United States of America

In the most recent episodes of Star Wars, George Lucas takes his audience on a journey through the process of political decay. He illustrates the ironies and absurdities inherent in the collapse of a limited, republican form of government. He portrays the defenders of the republic as confused and impotent while he exposes the vile and conspiratorial nature of their imperial adversaries. In what surely must be one of the fascinating examples of life imitating art, the typical observer of American politics ought to be awestruck by the events unfolding around him on a routine basis. Hardly a day passes now without some new outrage being perpetrated on our republic by those in the halls of power. It is happening with such regularity that one could almost excuse the concerned citizen for simply throwing in the towel and tuning out.

But occasionally something so egregious occurs that even the most jaded and cynical among us have to stand up and take notice. Just such an event unfolded in the halls of the U.S. Senate this week in the form of a hearing concerning the FBI’s quest for new investigative powers included in the latest Patriot Act. In essence, the FBI wants the power to issue “administrative subpoenas” to execute searches without the annoyance of having to show probable cause in a court. (One wonders why they even bother with a subpoena at all. Can anyone envision a circumstance where the FBI would refuse to issue a search warrant to itself?)

The Republicans, who have discarded their previous concerns for the Bill of Rights like a snake shedding its skin, are the primary supporters of this scheme. Intelligence Committee chairman, Kansas Senator Pat Roberts, noted that other government agencies already had subpoena power to investigate matters such as child pornography, drug investigations and medical malpractice. He said it made little sense to deny those same powers to the FBI to investigate terrorism or keep track of foreign intelligence agents. One has to admit certain logic in his argument. After all, if other government agencies are already disregarding the constitution, then why can’t the FBI?

But the really fascinating parts of the testimony came later. The first example was when the FBI counsel claimed that these powers were needed to prevent terrorist attacks such as car bombs. When challenged on that point, she responded that she could not cite a case where a bomb had exploded because the FBI lacked this power, but that did not mean one could not explode tomorrow. Whether she appreciated it or not, this is the pure, undiluted logic of a Sith Lord. In essence, she contends that we should discard our constitutional protections here and now in the theoretical hope that we can avoid a terrorist attack at some undefined point in the future. We are, in short, to abandon our freedom for the mirage of security.

While the advocates for the empire are obnoxious and tragically predictable, their odiousness is petty compared to the nature of the bill’s opponents. If anyone dares look down upon the defenders of Lucas’s Republic as being ineffectual and spineless, I give you the junior Senator from West Virginia: “I am not aware of any time in which Congress has given directly to the FBI subpoena authority. That doesn’t make it right or wrong. It just needs to be thought about,” said West Virginia Democrat Jay Rockefeller. An agent of the executive branch paraded into the Senate Chamber with a proposal that directly trashes one of the most important protections in our Bill of Rights, and the legislator’s only reply was that he cannot say if it is “right or wrong”. With friends like these, liberty hardly needs enemies. Patrick Henry, he is not.

In better times, any government official openly agitating for the evisceration of our constitution would be immediately relieved of his job. After all, are not members of our security forces sworn to protect and defend our freedoms? And how has our system degenerated so badly that those advocating authoritarian policies are outspoken and arrogant while those supporting our freedom are wishy-washy and pathetic? Truly, we are seeing the visions of Yeats come to life before our very eyes. “The best lack all conviction, while the worst are full of passionate intensity.

A glance at the structure of our government in this late era of republican governance demonstrates a variety of oddities and ironies. The most interesting is the observation that each branch of our government is now ignoring those areas where its actual responsibilities lie while simultaneously intruding into areas where it was once explicitly forbidden. We have a judiciary that wants to be a legislature, a legislature that wants to be a sugar daddy, and a president who wants to be an emperor. It is a sorry sight to behold, and one that will probably make for a great tragic adventure series someday. Unfortunately, we are all cast in the role of the “innocent bystanders”. And everyone knows what usually happens to them.

Link here.
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