Wealth International, Limited

Offshore News Digest for Week of June 6, 2005

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

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Being in one office one week and another the next is not a big deal … as long as both offices are in the U.S. Where it gets sticky is when one of the offices is in another country, a situation happening more and more often in today’s multinational corporations. Even more surprising, the challenges facing the employees of these international firms are even greater for the smaller firms and consultants that help them succeed.

You do not have to be a traditional expatriate to get snared by tax and visa rules. You can get caught on a single business trip out of the country. The more trips you make, the more likely you are to find yourself on the wrong side of a guest worker laws or owing more taxes to more places than you realized. “A lot of times it’s an accident. It comes from the increased penetration of global markets where people are just traveling all over to get things done,” Brenda H. Fender, director of global initiatives at Worldwide ERC, told MarketWatch.

In order to prevent expensive accidents, both traveling workers and employers need to redefine what it means to be an expatriate. Companies need adjust their expatriate programs to meet the needs of both expatriates looking at years overseas and those making multiple short trips out of the country. Workers need to understand that not going through their company’s expatriate program because of the cost to their department may end up cost the company or themselves more than the program would.

Link here.


Although the conviction and harsh sentencing of Mikhail Khodorkovsky, a Russian tycoon, for fraud, embezzlement and tax evasion are only two of many steps that Russian President Vladimir Putin has taken to turn Russia back toward authoritarianism, they are two of the worst. In the years of Putin’s crackdown, the international media have predictably focused on the erosion of press freedoms – first against independent television and now against newspapers. But in the long-term, prospects for the reemergence of liberty in Russia may be most damaged by the loss of economic freedom, as dramatically illustrated by the Khodorkovsky case.

The international media have highlighted Khodorkovsky’s plight primarily because of his star quality – after all, he was once the richest man in Russia. Also, the media have focused on Khodorkovsky’s funding of opposition activities against the Putin government as the reason for his prosecution. He was indeed engaged in promoting opposition to the Putin regime. But there is another reason for his persecution. Khodorkovsky’s arrest allowed the Russian government to dismember his Yukos Oil Company and re-nationalize its most important parts.

Yet Khodorkovsky and his business colleagues are being prosecuted for transactions initiated and endorsed by the government itself during the sell-off of state assets in the 1990s after the fall of the Soviet Union. The uncertain business climate caused by the breakdown in the rule of law, illustrated by such capricious government reversals on what is legal business behavior, is disastrous for both local Russian business and the confidence of foreign companies and individuals who might be interested in investing in Russia. In a reaction to the Khodorkovsky prosecution, some foreign companies have torn up plans to invest in Russia. Even worse, capital flight has tripled in the last year into an $8 billion hemorrhage, and Russia’s economic growth has become more sluggish.

Russia will likely need to try political reform again when economic prosperity is more widespread. Unfortunately, the Khodorkovsky affair indicates that Putin’s regard for the sanctity of private property and the rule of law are very shallow. Thus, the bad business climate in Russia may well stifle the economic prosperity needed to eventually throw off the shackles of political tyranny. That will be a tragedy for the Russian people.

Link here.


China tightened security around Tiananmen Square to prevent commemoration of Saturday’s 16th anniversary of the bloody crackdown on pro-democracy protesters. But in Hong Kong, tens of thousands of protesters staged a candlelight rally. “Vindicate the 1989 democracy movement,” “Release all political dissidents,” “End one-party rule,” the crowd chanted at the annual rally in central Victoria Park in the former British colony, which returned to Chinese rule in 1997. Police estimated that 22,000 people attended the vigil, but organizers said the crowd numbered 30,000 to 40,000.

Many in Hong Kong feel a duty to speak out because they have freedom of speech and assembly, and those on the mainland do not. The territory is ruled under a “one country, two systems” formula that promises the region a wide degree of autonomy. “My heart is heavy,” said rally participant Shum Ming, 58, a construction worker. “Hong Kong people will not forget this history when a government uses guns and tanks to crush students. It’s very atrocious.”

On the mainland, there was no public mention of the anniversary nor any sign of attempts to commemorate it. Tiananmen Square, the symbolic political heart of China, was open to the public. But extra carloads of police watched tourists on the plaza. Hundreds, perhaps thousands, were killed on the night of June 3-4, 1989, when troops and tanks rolled into Beijing and, in the face of opposition from the city's residents, seized control of the square that had been occupied by students demonstrating for democracy.

Link here.


Britain suspended legislation to hold a referendum on a new European constitution, reinforcing the sense of a continent in crisis. Foreign Secretary Jack Straw told Parliament that rejection of the charter last week by France and the Netherlands had thrown its future into doubt. He said leaders of the E.U. must come together to find a way forward.“We reserve completely the right to bring back the bill providing for a U.K. referendum should circumstances change,” Mr. Straw told the House of Commons. “But we see no point in proceeding at this moment. It is not for the U.K. alone to decide the future of the treaty,” he added. “It is now for European leaders to reach conclusions on how to deal with the situation.”

The British announcement followed appeals by some other E.U. countries for Britain to stay on course for a referendum of its own, once expected next spring. In this largely Euroskeptic nation, Mr. Blair risked losing the referendum, shortening the third term in office, which he won in elections in May. Before Mr. Straw’s announcement, Mr. Blair’s spokesman insisted that the referendum plan was not being permanently cancelled.

Link here.


There is a nice variant of one of Aesop’s Fables which goes like this. A tiny frog shares a field with a giant ox. The frog tries to get the ox’s attention by puffing himself up. The ox fails to notice the frog. The frog puffs himself up some more. The ox continues not to notice him. The frog finally puffs himself up so much that he explodes. But the ox still does not notice him. Something much like this happened last Sunday. Many of the supporters of the European constitution nourish dreams of creating a United States of Europe. Valéry Giscard d’Estaing, the constitution’s leading light, frequently spoke of his admiration for the American constitution. But the American reaction to the French non vote was a giant yawn. The news networks gave as much priority to the simultaneous vote in Lebanon, and both elections seemed less important than the result of the Indy 500.

Most of the excuses for ignoring the French vote are perfectly understandable. The results were released in the middle of a sunny Memorial Day weekend. The constitution is a turgid document that few Europeans have read, let alone Americans. There is a widespread feeling in America, too, that Europe does not matter any more – or at least that America does not have a dog in Europe’s internal fights. The less polite version the sentiment is that Europe is a spent force, with slow economic growth, death-spiral demographics, unaffordable welfare states, simmering Muslim populations and little ability to project power abroad.

Europe is clearly not as important as it thinks it is – that would be impossible. Yet America’s indifference to it is wrong. It remains America’s biggest trading partner and closest ally. Which makes it all the more striking that so many of the people who did pay attention to the European result, including some close to Mr. Bush, were positively gleeful. It meant the humiliation of a political class that has been a thorn in the side of America since the second world war. It would be churlish to deny the White House some pleasure. But the no vote was driven by the most backward forces in France – the enemies of globalization and Americanization. In reality, a weak Europe is much more of a threat to America’s interests than a strong one. The no vote not only guarantees several more years of Eurodithering and introspection: it also makes it much less likely that Europe will be able to absorb Turkey, let alone Ukraine, anytime soon, if ever.

The paradox of America’s European policy is that it only has a chance of influencing Europe if it is seen to be doing nothing. America needs to do what it can to make sure that the frog does not explode again. But in public at least, the ox needs to give the impression of being indifferent.

Link here.

What is next for EU … and U.S.?

Winston Churchill’s postwar vision of a U.S. of Europe was shot down last week, the victim of a weak, jobless economy and the fear of losing national sovereignty. The back-to-back rejection of the EU’s constitution by the French and the Dutch sent a devastating signal to the EU’s paternalistic, often-arrogant leadership that it was moving much too fast in its rush to give new political powers to a centralized government in Brussels. The Europeans, after all, were still adjusting to a common currency and a central economic authority that held sway over everything from trade to antitrust issues – and many were unhappy with the results thus far.

We have a lot at stake in how Europe reacts to the political insecurities and anxieties expressed in last week’s resounding votes. A stronger, more vibrant EU means stronger U.S. exports overseas, and that would translate into a stronger bull market for investors both here and throughout Europe. The best economic advice we can give the Europeans now is this: “Look at what we’re doing here and copy it over there.”

Links here and here.

EU stands firm on bilateral accords with Switzerland.

EU foreign-affairs commissioner, Benita Ferrero-Waldner, said that Switzerland could only participate in the passport-free Schengen zone if voters come out in favor of opening the Swiss labor market to the ten new EU member states. A nationwide vote on the issue is scheduled to be held on September 25. This past Sunday the Swiss electorate approved the Schengen/Dublin accords on closer security and asylum cooperation with the EU. The agreements are part of two sets of bilateral treaties signed in 2000 and 2004. Some Swiss politicians have denied that the agreements are directly related.

Link here. Swiss unimpressed by EU interference in treaty vote – link.

European politicians concocting schemes to overturn the anti-EU Constitution votes.

As the EU’s leaders scramble around for a Plan B that they insisted all along (truthfully, as it turned out) they never contemplated, some pretty bad ideas are starting to surface. Austrian Chancellor Wolfgang Schüssel floated a trial balloon on a pan-EU referendum to get the thing approved. Aside from the considerable legal obstacles to the proposal, which Mr. Schüssel acknowledged, the obvious question the proposal raises is why France or the Netherlands, both of which have decisively voted the treaty down, much less the U.K., which now looks unlikely to hold a vote, would allow themselves to be outvoted in a broader referendum. Approval by all the member states, and not merely a majority of the EU’s citizens, was a requirement of ratification for a reason. The EU is a treaty-based organization of states. Direct approval by a majority of those citizens who showed up to vote on the day would be tantamount to the abolition of the member states as sovereign entities. Any insistence on keeping the process alive will only confirm the fears of the “no” voters in France, Holland and elsewhere – that the EU is an unaccountable, out-of-touch organization with little regard for the opinions of Europe’s citizens.

Link here.

“No” votes in EU nothing for neocons to be elated about.

I happened to be in Paris on the same day that the French people rejected the proposed EU Constitution – a vote that was described by analysts in the French capital as a defeat for U.S.–led globalization and American-style capitalism. After arriving a few days later in Washington, and reading neoconservative op-ed commentaries and watching the pundits on Fox-News television, I had no choice but to conclude that both the anti-EU Constitution votes in France and Holland were nothing less than a great victory for the U.S.

Of course, many of the American foreign policy “experts” who were spinning the French and Dutch votes as reruns of the collapse of the Berlin Wall, were also the same guys who had predicted that Americans would find weapons of mass destruction (WMD) in Iraq, uncover the links between Saddam Hussein and Osama bin Laden, and would be welcomed as “liberators” by the Iraqis. So in a way, I should not have been too surprised that Washington’s Faith-Based Community would once again impose their wishful thinking on the reality in Europe and elsewhere. Hence the new scene in the neocon-produced Theater of the Absurd. We are expected to buy into the notion that it is a Great Day for the US of A when a coalition of radical left-wing anti-globalization activists, veteran communists, anti-immigration groups, and ultra nationalists in France and Holland – anti-Americanism is the only idea that unites them – succeed in winning the support of the majority of voters.

Link here.


New security measures proposed by the U.S. for all Americans re-entering the U.S. from the Caribbean could have a devastating impact on the region’s economy, especially the tourist industry, according to a new report. A study by Caribbean Hotel Association (CHA), revealed at the Caribbean Tourism Organisation Board of Directors meeting in New York last week, warned that the Caribbean could lose as much as $2.6 billion in earnings from visitor arrivals as a result of the new passport regulation, putting more than 188,000 jobs at risk.

Under the proposal, all American citizens visiting the Caribbean must be in possession of a valid U.S. passport in order to re-enter the U.S. The new measure is set to be introduced in January 2006 – two years before the same rules go into effect for visitors to Canada and Mexico. CHA President Berthia Parle warned that traffic levels to the Caribbean would be severely reduced as a result. “CHA can appreciate U.S. concern for its security, but cannot lose sight of the impact of the new regulations on Caribbean travel and tourism, which will be a permanent realignment of traffic, with spontaneous, last minute travel significantly reduced,” Parle remarked.

Link here.

Travel requirements to be put in place soon.

Foreign nationals and US citizens will have to adher to new requirements as a result of the implementation of the Western Hemisphere Travel Initiative, which will require all U.S. citizens and foreign nationals to present passports at all U.S. ports of entry. According to the Intelligence Reform and Terrorism Prevention Act of 2004 (IRTPA), it has become mandatory that the U.S. Secretaries of Homeland Security and State develop and Implement a plan to require U.S. citizens and foreign nationals to present a passport or other appropriate secure identity and citizenship documentation when entering the U.S. It represents a major change, since in the past U.S. citizens were not required to present a passport to enter the U.S. from the Western Hemisphere.

Embassies across the world have started an education campaign, to make sure that all concerned are aware of the new requirements. It was also revealed that the relevant information on the change was posted on the websites of the U.S. State and Homeland Security Departments. Information was also made available in U.S. Post Offices and through travel agencies, so that airlines and cruise ship owners and personnel are also aware of the change and have been passing this information on to their customers.

Link here.


In the swashbuckling tradition of the China coast, where intrepid foreigners have for centuries made fabulous fortunes trading with the most populous nation on earth, American casino operators have begun tapping into a potential market of nearly a billion gambling-mad Chinese. Gambling is illegal in China, where the government says people save more than 20% of their earnings. In the past year, Sands of Las Vegas has regained a $300 million investment in the former Portuguese colony and is now poised to spend a further $2 billion to open more hotels and casinos by 2007. During 2004 Macau earned $5 billion from gambling, up 30% from the previous year. Tourism authorities say about 19 million Chinese visited Macau last year. In 2005 they predict the total will be more than 22 million, and more than 90% of them will be coming to gamble. The Chinese government takes up to 40% of the revenue in tax.

Macau was a Portuguese colony until 1999 when control of the small seaport reverted to Beijing. While the Portuguese were in control, gambling was permitted under a monopoly run by Stanley Ho, a local billionaire with 13 casinos serving mainly Hong Kong Chinese for nearly 40 years. Macau had a seedy reputation with organized crime gangs, known as Triads, particularly active in loan sharking to players who favored the private gambling rooms at Ho’s casinos where fortunes were won and lost at cards and roulette. The Chinese government allowed the gambling to continue, but cracked down hard on the Triads, ending gang wars in which rivals for the lucrative spoils of the gambling tables often fought street battles in broad daylight.

In 2002 the government opened the market to foreign investors and Sands of Las Vegas was among the first to arrive. Today, gambling moguls like American Steve Wynn and Australia’s Kerry Packer are in negotiations to expand the market even further. Financial analysts in Hong Kong say that if gambling revenue continues to rise at the current rate, Macau will soon surpass Las Vegas to become the biggest casino market in the world. Deutsche Bank has forecast that gambling income in Macau will increase by an average of 18% a year to reach $10 billion by 2008. And the market can only get bigger, according to Sands’ point man in Macau, Frank McFadden.

Link here.


Independence lobby group Bermudians For Referendum (BFR) will be travelling to London in July to present a petition to the British Government boasting support from more than 30% of Bermudian voters. BFR was formed in January of this year in opposition to Premier Alex Scott’s belief that the question of Independence should be decided by way of a General Election. A question as fundamentally important as sovereignty should not become bound up in multi-faceted election campaigns, the group argue, but should be decided through a one issue, one vote format – the “purest form of democracy” according to BFR representative Michael Marsh.

Mr. Marsh revealed that petition sheets – which have been available for people to sign at various retail stores and restaurants throughout the Island for several months – will be withdrawn on June 15. They will then embark on the “rigourous process”, he said, of verifying the legitimacy of all signatures and deleting any names which have been entered multiple times. The final estimated number of 13,000 bona fide signatures is significantly below the 20,000 BFR were touting as a potential target in February. But Mr. Marsh is far from dispirited, pointing out that they already commanded the support of 33% of registered Bermudian voters – well above the constitutional requirement of any other country to force a referendum.

The necessary support to make the use of a referendum obligatory on any issue varies considerably world-wide, from less than 3% of voters in Switzerland where referendums are common-place, to 20% in Venezuela, he said. And according to guidelines laid down by the European Parliament, whose Directives indirectly affect Bermuda as a British colony, a minimum of only 5% needs to be obtained.

Link here.


The UN Committee of 24 (C24) promised to respond to Gibraltar and do its job diligently after it was urged to put people first above political disputes over sovereignty, and to discharge its duty to Gibraltarians. Chief Minister Peter Caruana in his opening remarks in New York reminded countries charged with the decolonization process that they had a “sacred” duty to see that Gibraltar (under British rule and claimed by Spain) is decolonized and the right of self-determination be respected irrespective of any “sovereignty dispute”.

Mr. Caruana’s message acknowledged the improved climate with Spain but without any sacrifice to the Gibraltar position on the rights of the people to decide the future of the Rock as a whole. “The government of Gibraltar will certainly continue to take part in this new process of dialogue (with Spain), which is not incompatible with our right to self-determination and which is safe. But we will never compromise on our right to freely and democratically decide our own future in accordance with our right to self-determination,” said Mr. Caruana adding that Gibraltar would press for the continuation of constitutional reform talks with Britain.

Opposition Leader Joe Bossano fresh from his presentation at the UN seminar in St. Vincent made his central theme the argument that there must not be any resumption of sovereignty discussions between the UK and Spain. This, said Mr. Bossano addressing C24, is “totally unacceptable”. Mr. Caruana, who does not discard building improved relations with Spain, treaded a finely crafted path which combined robust statements on the Gibraltar position with a major emphasis on the human rights issues at the centre of the debate.

Link here.


Workers in advanced economies could gain the equivalent of a full year’s income over their working lives if countries increased competition in their domestic economies and reduced trade barriers, the Organisation for EECD said. The international body charged with improving the economic performance of its 30 member countries came down firmly on the side of market liberals after examining the effects of restricting competition. “At a time when Europe may be losing momentum in its drive to open product and services markets, the study shows that the economic rationale for such liberalisation remains very strong,” said Jean-Phillippe Cotis, the OECD’s chief economist.

The OECD estimated that reducing barriers to trade, foreign investment and domestic regulations to “best practice” levels could increase national income per person by 2-3.5% in Europe, by 1-3% in the US and by 1.25-3% in all advanced members of the OECD. Most of the gains, Mr. Cotis said, would come from deregulating product markets rather than reducing formal barriers to trade. “Tariff and non-tariff barriers are now rather small, while domestic product market regulations remain often substantial, especially so in the services sector,” Mr. Cotis said. The OECD said that “best practice” would mean more liberal policies than exists in any OECD country at the moment.

Link here.


Supporters of the welfare state around the world have for many decades pointed out the Scandinavian countries, particularly Sweden, as proofs of how this system can generate both wealth and social equality. Sweden is in fact one of the best examples of how economic freedom fosters development and individual responsibility, whereas big government destroys the foundation for economic growth and personal accountability.

During the 1870s Sweden was an impoverished nation, occasionally plagued by starvation. All this changed as capitalism was introduced in the country. Free markets, property rights and the rule of law created an environment where the Swedish people could achieve a long period of rapid economic development. Between 1870 and 1970 Sweden had the second highest economic growth in the world, second only to Japan. Socialism had played an important role in Swedish politics, where the social democrats and the labour unions had become the most important political force. But Swedish social democrats were pragmatic and had during the first half of the twentieth century maintained an economy that was one of the freest in the world. During the 1960s the social democrats radicalized. They abandoned their traditional pragmatic policies and started a large-scale expansion of the welfare state.

What makes Sweden interesting is that for a long time people were very reluctant to take advantage of the system. The Swedish population had a strong tradition of entrepreneurship and hard work and continued to work hard even though they now had the option to live off government. But people do adapt their morality to maximize their benefits in the economic system in which they live, although this might take a generation or so. During the last few years the number of Swedish citizens that are being supported by unemployment, sick leave or early retirement has increased dramatically. The social democrats maintain that Sweden is still a country where most people are willing to accept any full time job if offered.

This denial goes deep in Swedish mentality. Recently Jan Edling, an economist from Sweden’s largest labour union, LO, wrote a report where he explained that it was the welfare system that caused people to go on sick leave or early retirement. According to Edling, Sweden had a de facto unemployment rate of 20–25%. As LO refused to print the report Edling resigned after 18 years of service. I wish that Edling’s report would be translated and sent to all fans of the welfare state around the world. It shows that the Swedish welfare state has systematically destroyed personal responsibility and work ethics. There is a point where so many people start taking advantage of the system that each individual understands that they will be on the losing side if they do not maximize their own utility. A system that pays people not to work eventually creates a mentality where many people choose not to work. In the coming years the citizens of the European welfare systems will probably wake up to this reality.

Link here.


A strong global economy gave 600,000 people an entree last year into a highly envied group, the world’s millionaires. The annual World Wealth Report, released by Merrill Lynch and the Capgemini Group consulting firm, found that there were 8.3 million people worldwide with $1 million or more in financial assets at the end of 2004, up from 7.7 million a year earlier. Their total wealth rose 8.2% to $30.8 trillion in 2004, giving them control of nearly a quarter of the world’s financial assets, according to Petrina Dolby, vice president of Capgemini’s wealth management practice. The 8.2% increase was the strongest since an identical 8.2% rise in 1999, she said.

Not surprisingly, the expansion of the millionaire class was especially strong in North America because of the solid economic growth last year in both the U.S. and Canada. According to the latest figures, the number of high net worth individuals included 2.7 million in North America with a total of $9.3 trillion in assets, 2.6 million in Europe with $8.9 trillion, 2.3 million in the Asia-Pacific region with $7.2 trillion, 0.3 million in Latin America (including Mexico) with $3.7 trillion, 0.3 million in the Middle East with $1 trillion, and 100,000 in Africa with $700 billion.

The study also looked at what it termed “ultra high net worth individuals”, who have at least $30 million in financial assets. Their ranks increased by 6,300 individuals, or 8.9%, in 2004 to 77,500 worldwide, the study said.

Links here and here.

Wealthy lose appetite for risk.

The wealth of high-net-worth individuals – those with at least $1 million in financial holdings – is expected to rise at a compound annual rate of 6.5% between 2004 and 2009, reaching $42.2 trillion, a Merrill Lynch/Capgemini report said. That rate is slightly below an estimate made a year ago of 7%, as high oil prices and tighter monetary policy are expected to reduce growth, the report said. Well-heeled investors are expected to spread their risks more widely in the years ahead, pumping less money into hedge funds after piling into the $1 trillion sector, and they may put more assets into private equity funds instead, it said.

While the pace of inflows into hedge funds may slacken, however, investors are not expected to flee the sector, said Richard Turnill, chief investment officer of discretionary business at Merrill Lynch, at a media briefing. “We are seeing some pullback from hedge funds … that is more about the rate of growth than funds being pulled out.” Hedge funds, which can employ specialized techniques to make returns regardless of whether markets are rising or falling, hit a soft patch last year. Data providers in the industry estimate that returns averaged below 10% last year, less than the 15% gains investors could have made in the equity market.

Link here.

What is the perfect level of “rich”?

The notion of “rich” is frequent fodder for headlines. In the past month alone we have learned that: 1.) the number of millionaires in the U.S. grew 21% last year, 2.) the alpha-male career of the moment is hedge fund manager, a job in which Mr. Alpha can make tens of millions of dollars a year, and 3.) the gap between the über-rich and everyone else – including the run-of-the-mill rich – is wider than ever. In a column I wrote two years ago, various wealth experts weighed in on the question, “How rich is rich?”

You might think six- and seven-figure incomes suggest “rich”, but that is not necessarily the case. For her book The Secrets of 6-Figure Women, Barbara Stanny spoke to women who made anywhere from $100,000 to $7 million a year. But less than a third had a net worth over $1 million excluding their homes. Of those who did, few said they felt rich. Since the definition of “rich” depends largely on your social and professional circles, where you live, what really makes you happy and how much financial responsibility you have, it is likely your own ideal level of wealth will differ from the next guy’s.

Link here.

If I were a financial advisor for a day …

My formal academic training is not in economics and finance, beyond a spattering of several college courses. In college I first studied political theory and got a couple years worth of experience in running political campaigns and slandering opponents. I came extremely close to running for office myself. I did that for two years. Fortunately, I said goodbye to it all and was later called into Christian ministry. For the past four years I have accumulated higher degrees in Bible and ministry and spent a great deal of time serving people. So no, I am not a trained “economist”. Chances are, neither are you. But none of us need a state-granted degree to be wise with our finances and educated about our flawed money system. Most people, however, do not bother educating themselves and have dug financial holes for themselves that they appear to have no clue how to climb out of.

These people need help. Sadly, their children and the emerging generation appear to be following in their elders’ footsteps and marching towards the same cliff. The amazing thing is that most people could avoid these problems if they took some simple, preventative measures as they start their independent lives, careers and marriages. The following advice is not brain surgery. It is nothing new. It is actually quite elementary – but most people just are not getting it. So if I were a financial advisor for one day, here are eight easy, basic principles I would drill into everyone’s head, which if followed, would make any individual much wealthier and much more responsible.

Take it or leave it. I guarantee you, however, that these simple rules will lead you to a much happier, less stressful life when it comes to finances. You will be independent from lenders, develop your own safety net, resist destructive materialism, and you will desire to spend your money in much more altruistic ways that will help your fellow man. And you do not have to be an economist to figure this all out. In fact, judging from the advice you are getting from the financial establishment, it is probably better that you are not one. Now go out and enjoy life.

Link here.



President Bush gave former Sens. Connie Mack of Florida and John Breaux of Louisiana the unenviable task of trying to say something new and interesting about tax reform. When it comes to designing a simple tax system that does the least damage to the economy, it would be difficult to find a better role model than Hong Kong. As The Economist wrote a few years ago, “The territory’s tradition of simple and low taxes … is widely seen as a main reason for its stunning rise to prosperity.” Many advantages of the Hong Kong tax system have been widely emulated in Asia, yet remain poorly understood in this country.

What makes taxes in Hong Kong so uniquely simple and effective is that businesses pay all the taxes on income originating in business (profits), and employees pay all the taxes on salaries. Hong Kong has no payroll tax for Social Security, no general sales or value-added tax, no tariffs on imports and no personal tax on income from financial assets. What Hong Kong has is called a “Dual Tax” – progressive tax rates on labor income but a flat tax of 17.5% on corporate profits, 16% on property owners and unincorporated enterprises. The low tax on profits brings in substantially more revenue than the tax on salaries, in marked contrast to the U.S., which collects little from profits taxes that are nominally twice as high.

The Hong Kong tax system has one major advantage over even the most elegant theoretical alternatives. It has been tested for more than 50 years. It works.

Link here.


We are finally done paying taxes. The average American finished on April 17, two days after the filing deadline. But residents of Connecticut had to pay until May 3. Tax Freedom Day, as the Tax Foundation styles it, occurred on April 17. That is when people paid off all taxes to all levels of government. It was two days later this year than in 2004. It could have been worse, however. The Bush tax cuts pushed back Tax Freedom Day from May 3 in 2000 – a record, exceeding the tax burden even during World War II.

Citizens of Washington D.C. worked for government through April 30. New Yorkers paid until April 29. Other high tax states include Massachusetts, Wyoming, Maine, Rhode Island, Washington, and California. In sharp contrast are Alaska, at the bottom at April 2, several southern states, Idaho and North Dakota. The average American puts in 70 days to cover federal levies, vs. 65 days for home and household expenses. Health care clocks in at 52 days. State taxes run 37 days, more than transportation, food, or recreation. We work only two days to accumulate the money that we save.

Link here.


Study a map of the globe and you could miss them entirely. But discreet tax havens such as Guernsey, Jersey and the Isle of Wight, will become the focus of Inland Revenue tax avoidance legislation when the EU Savings Directive takes effect from next month. Under the directive, financial institutions in EU member states and some neighboring territories will be required to hand over to the relevant tax authority information about savings income received by EU individuals not resident in the country where the account is held. The rules will apply to all EU member states, certain dependent and associated territories of member states, including the Isle of Man, the Channel Islands and the British Virgin Islands.

Link here.

… except Bermuda escapes the directive’s reach.

The EU Savings Tax directive which goes into effect next month will target EU citizens who are have stashed funds in jurisdictions such as Guernsey and Jersey. The new Inland Revenue tax avoidance legislation does not, however, include Bermuda prompting some experts to anticipate that citizens may move their money here or to other jurisdictions that are out of reach of the directive. Under the directive – which was supposed to have been introduced six months ago and will now come into effect in July – financial institutions in EU member states, certain dependent and associated territories of members states, including the Isle of Man and the British Virgin Islands will have to submit information about savings income received by EU individuals not resident in the country where the account is held.

The directive, which is designed to ensure that funds are subject to taxation once they return to their home country, is part of a broader initiative to curtail money-laundering, to track the proceeds of drug-dealing and identify the source of money used to fund terrorism. Bermuda is the only British Overseas Territory not included in the list of EU countries and their Dependent Territories subject to the directive. A poll of 500 senior finance professionals from the Isle of Man, Jersey and Guernsey (jurisdictions that fall under the directive) found that more than half believed the directive was “bad news”. Many are uncomfortable with the information exchange aspect of the legislation and believe it will result in capital flowing to jurisdictions where interest reporting is not an issue.

Hedge funds, investments in films, venture capital funds and private equity funds may in fact benefit from the directive since they fall outside the legislation. Belgium, Luxembourg, Austria have been granted a transitional period in which they may apply a withholding tax instead of providing information, at a rate of 15% for the first three years (2005-2007), 20% for the subsequent three years (2008-2010) and 35% from 2011 onwards. Switzerland, Jersey, Guernsey and the Isle of Man will be able to continue to apply the withholding tax option going forward.

Link here.


On May 11, Steve Forbes testified before the President’s Advisory Panel on Federal Tax Reform. This body, headed by former U.S. senators Connie Mack (R-Florida) and John Breaux (D-Louisiana), will render its recommendations by July 31. To help prod the debate for real change, he has written a book, Flat Tax Revolution: Using a Postcard to Abolish the IRS, which will be published on the 4th of July.

“Twenty years ago President Ronald Reagan signed the Tax Reform Act of 1986, which swept away numerous tax loopholes and instituted a two-bracket system. Because of the reform the tax shelter industry suffered a heavy loss. But within only a few years it returned with a vengeance. By the 1990s the code had once more become a rule-encrusted thicket, giving rise to a proliferation of what are referred to as ‘abusive’ tax shelters, convoluted entities and transactions created for the sole purpose of avoiding taxes. Since 1993 the government has lost $85 billion in tax revenue because of these abusive tax shelters.

“A flat tax would eliminate the possibility of clever minds setting up complicated tax-avoidance schemes. The code would be too transparent, too simple to hide tax liabilities. A flat tax is the only way to end the clutter, confusion and distortions of the current system. Clamoring for smarter tax software, better-trained IRS staff and targeted tax cuts won’t solve our tax problems.”

Link here.


Why is the economy performing better, for instance, and why are tax revenues growing faster than projected today compared to what happened after the 2001 tax legislation? The answer is that not all tax cuts are created equal. Tax cuts based on the Keynesian notion of putting money in people’s pockets in the form of rebates and credits do not work – and these are the tax cuts that dominated the tax legislation approved in May 2001. Supply-side tax cuts, by contrast, do improve economic performance because they reduce tax rates on work, saving, and investment. And since lower tax rates on productive behavior dominated the May 2003 legislation, it is hardly surprising that the economy has responded positively.

A comparison indicates that the 2001 and 2003 tax cuts yielded significantly different results in terms of economic growth, job creation, and tax revenue growth. To be sure, tax policy is only one of many government policies that impact economic growth. Moreover, exogenous factors such as the terrorist attack in 2001 influence economic performance. So it would be wrong to attribute all of the good news since May 2003 to the supply-side tax cut, just as it would be incorrect to blame the Keynesian tax cut for all the job losses and economic weakness between May 2001 and May 2003. Furthermore, not every provision of the 2001 tax cut was economically misguided and not every component of the 2003 tax cut was based on sound economic policy.

To reiterate, it is not enough merely to cut taxes. Tax reductions only benefit the economy if the “price” of engaging in productive behavior is reduced. Keynesians argue that rebates and credits boost growth by injecting purchasing power in the economy, but this simplistic analysis fails to realize that government withdraws an equal amount of purchasing power from the economy when it borrows money to finance the rebates and credits. An examination of the major provisions of the two tax bills underscores the difference between Keynesian tax cuts and supply-side tax cuts. The 2001 tax cut, for example, included many provisions that had no positive impact on economic performance because of poor design. The 2003 tax cut was not perfect, but most of the major components were based on supply-side principles. And because the legislation focused on good tax policy, it generated much better economic results.

Link here.



A recent survey has revealed that over 95% of tax-payers and business owners throughout the world may have no knowledge whatsoever of the tax to be saved, deferred, and legally avoided, and other benefits to be enjoyed, by “going offshore”. And it is not just the rich who are beginning to see the advantages. Research conducted by Expatriate Financial, shows that both individuals and businesses could be paying in excess of 50% more tax than necessary – despite the fact that an estimated 62% of the world’s money actually goes through offshore centers.

Interviews with qualified international financial advisers revealed that most taxpayers did not seek specialist tax advice in order to pay less tax. Often the advice given by their accountants did not even touch upon the tax savings to be enjoyed by registering an Offshore Trust or IBC and thereby protecting their assets, income and estates from taxation, perfectly legally. However there are signs of a change in attitude. The larger legal and accountancy firms and specialist companies offering advice on international offshore financial centers are bringing about a new thinking in the offshore market so often associated with criminal activity.

The aura of mystery surrounding these centers has disappeared to the point where they are now recognized as an essential part of the world’s financial system. In the past there has simply been a general lack of knowledge, with people over-taxed and under-informed.

Link here.


Tax agreements and domestic Korean tax laws are being reformed to tax foreign capital that benefits from profits gained domestically, even if it was invested through establishing a paper company in a tax haven. However it is undetermined whether tax agreements will be able to be revised, due to the fact that tax treaties must be discussed with the country in question and it is difficult to get countries to surrender their vested rights. On June 6, the Ministry of Finance and Economy (MOFE) announced, “We will stipulate precise tax laws to enable the Korean government to tax incomes that have been invested in Korea through tax havens to evade taxes whether they are foreigners or Koreans.” They also added, “We will stipulate laws so that a resident of a third country will not be able to receive benefits by establishing paper companies in a country that Korea has formed tax agreements with.”

Link here.


Senator Dorgan (D-N.D.) has introduced a bill (S. 779) to amend the Internal Revenue Code to treat controlled foreign corporations established in tax havens, or “tax-haven CFCs”, as domestic corporations, and thus subject to U.S. income taxes. The tax havens listed in the bill include Bermuda, the British Virgin Islands, and the Cayman Islands. The corporation must be a CFC for an uninterrupted period of 30 days or more during the taxable year in order to be treated as a tax-haven CFC. Generally, a foreign corporation is treated as a controlled foreign corporation if more than 50% of its vote or value is owned by U.S. persons owning 10% or more of its voting stock.

Link here.


The Chrisitian Science Monitor has an posted an article entitled “Secretly, tiny nations hold much wealth” by David R. Francis from the April 25, 2005 edition. Here is the BIG distortion:Corrupt officials in poor nations, illegally, and multinational corporations, mostly legally, siphon huge amounts of money into bank accounts and shell companies in 70 tax havens, such as the Cayman Islands, Bermuda, and Jersey.

What a load of rubbish. OFCs like Bermuda, the Caymans and Jersey, now have “Know Your Customer” rules that far exceed those of London and New York and which specifically prevent “politically sensitive” persons (like corrupt Third World dictators) from opening accounts in those centers. Corrupt officials in poor nations do NOT and cannot salt away illegal monies in the OFCs that the article names. The only exception to this rule is possibly Switzerland, but Bermuda, the Caymans and Jersey are definitely NOT in that business anymore … but that does not stop the CSM from trotting out this old canard! Why does David Francis not name even one such corrupt official who has been shown to have siphoned illegal monies to one of the three OFCs that he names? Because he cannot, that is why!

Other ridiculous assertions follow in the article. I am saddened, but no longer shocked, that the Christian Science Monitor would publish such a poor piece of journalism, in which bold assertions are made which have no basis in fact and which clearly have not been fact checked by any editor.

Link here.


Offshore financial centers need thick skins. Not only are they under constant criticism from the governments of developed countries, those individuals who do not use their facilities are, generally speaking, less than flattering in their views of them as well. E.g., even before Monaco’s present offshore profile as a miniscule money center, when playing cards rather than presenting them prevailed, it was described by Karl Marx as a “robbers nest”. Paul Theroux felt that it was a place for “anal retentive tax exiles” and the writer, Katherine Mansfield, saw only “rich fat capitalists”.

Although perhaps not in such strident terms, China’s Ministry of Commerce has been critical of another offshore money center, this time the British Virgin Islands because of its strong connections with Hong Kong. The Asian dragon’s worry concerns banking not beaches and, more particularly, the Chinese money (not all of it legal) that could be passing through facilities provided by the British dependency’s financial services industry which is frequently (and unfairly) known more for its shell companies than for the shells on its beaches. It would be unfair to suggest that the BVI is the only offshore financial center at which a finger can be pointed but because of its runaway success as an offshore company location, it has earned a corresponding profile.

In Hong Kong a single portion of shark’s fin soup can cost $75, but the Chinese government is more concerned with the sharks in suits that facilitate the return of questionable monies, often via BVI, back into the Hong Kong banking system as fresh, untainted funds. These funds are then usually invested in China. The mainland is convinced that Hong Kong is central to its money laundering problem which is responsible for hundreds of billions of yuan flowing through an underground banking system. One estimate suggests that China’s tax-evading shadow economy represents about 15% of the country’s declared GDP.

The OECD has estimated that over 75% of all onshore registered companies can be described as family businesses. In another study it was discovered that around a third of the Fortune 500 listed companies had families in control and that these companies employ about 50% of the workforce in the industrialized world. Business families worry about management and succession. Very often keeping their affairs private is important to families as part of their defences against rivals, ambitious regulators, unreasonable plaintiffs and corrupt politicians. Some families have resorted to surrounding their castle with more than the usual moat to defend themselves against adversaries. They have located their financial castles offshore on one of many islands where the moat has been replaced by a surrounding sea. Essential elements in their armory commonly include trusts, foundations and companies that are readily available offshore.

Many trust funds today are administered offshore where fiduciary services have become big business. Professional offshore fiduciaries handling trusts and foundations of the kind used by family businesses and others are usually either accounting, trust or law firms. No one is in doubt about what services lawyers and accountants provide, but that is certainly not always the case with trust companies. The common denominator that these three types of professional share is the word “fiduciary”, whose fundamental meaning has not changed one iota since its Roman origin. A professional fiduciary controls assets that belong to another and from which the fiduciary cannot benefit beyond the receipt of fees and the refund of expenses for services rendered. Executors, trustees and foundation councils are clearly fiduciaries, but the scope of the meaning really does have a very broad application and touches our everyday lives more than many of us realize.

A traditional trust company neither practices law nor accounting but, unlike either a normal accounting or law firm, its primary work will focus on the liquidation of deceased estates and the management of trusts and foundations. Lawyers and accountants may be employed, but whether they are or not, the senior officers of the trust company will be both experienced and have formal training in fiduciary law, accounting and administration, all of which is fundamental to their work. But, unfortunately, when trust companies first started moving offshore the quality, in many cases, slipped. It must be said that the picture today is considerably improved, but caution is still called for. Those seeking the services of professional fiduciaries must not be lured by clever and intoxicating websites, gloss or logos alone; nor the slick sales pitch that promises quick-fix solutions. It is important that professionals understand your needs and that you speak the same language – sometimes literally. Do your research and go wherever it leads you. Remember what Deng Xiaoping once observed, “it doesn’t matter whether the cat is black or white, as long as it catches the mouse.”

Link here.


While the suffocating nanny state continues to grow at the local and national levels, some places are even more socialistic than what passes for normal in 21st century America. When it comes to these havens for people controllers and Karl Marx wannabes, the idea of “working within the system” to change things for the better is delusional. The only solution for freedom lovers is to get out and stay out of all seven of these hideous People’s Republics.

How did I come up with the worst places in America? What methodology was used? Never mind government economic numbers, Chamber of Commerce puffery and other completely unreliable data. Per capita spending on government schools and the number of Taco Bells in certain areas was not considered. Climate did not enter into the rankings, as that can be a subjective choice heavily skewed by personal preferences. Just one factor was used to pick the socialistic seven. Before you accuse me of laziness, rest assured that this single indicator provides utterly reliable and time-tested proof of a state government’s attitude towards freedom and taxation. What is the common denominator? Just check the state and local gun laws. Without exception, places where emotional, “don’t confuse me with the facts” shrieks of gun grabbers are the background music of daily life also overflow with nosy bureaucrats and ever-growing taxation and regulation.

Anti-Second Amendment laws and undisguised hatred of individual liberty in other areas of life are a natural and predictable combination. If the local commissars despise your AK-47 and Glock pistol, do not expect them to keep their greedy paws off your earnings or the right to do what you see fit on your acreage. In alphabetical order, America’s worst places to live are California, the District of Columbia/Washington, D.C., Hawaii, Illinois, Massachusetts, New Jersey, and New York. Dishonorable mentions go to Connecticut, Delaware, Iowa, Michigan and Minnesota. Wisconsin’s gun laws are average by current standards, but (as a 10-year cheesehead) I have to put the state on the list because of its confiscatory tax structure and gluttonous state and local government.

Link here.



For a decade, FBI agents covertly monitored every telephone call and fax sent and received by Florida university professor Sami al-Arian as he communicated with alleged top leaders of the Palestinian Islamic Jihad terrorist group about its suicide bombings of Israelis, shaky finances and high-level turf struggles. Many of those 20,000 hours of phone calls and hundreds of faxes will be revealed in a federal courtroom in Tampa, where al-Arian and three other alleged members of the terrorist group will be tried on charges of conspiracy to commit murder through suicide attacks in Israel and the Palestinian territories.

The trial, expected to last at least 6 months, will provide a rare view of what the government contends are the clandestine operations of a terrorist group. It is the first case in which vast amounts of communications monitored under the Foreign Intelligence Surveillance Act (FISA) will make up the bulk of the evidence in a criminal prosecution of alleged terrorists – demonstrating the enormous power the government now wields under that counterterrorism law.

The wiretaps, approved in 1993 through 2003 on as many as 10 phones by a secret FISA court, were originally intended for use only by FBI agents conducting open-ended “intelligence” probes, and not for use in criminal trials. But after the Sept. 11, 2001, attacks, the enactment of the USA Patriot Act and a ruling by the supersecret FISA court of appeals allowed much greater use of intelligence material in investigations such as this one.

Many civil liberties experts express grave concern about U.S. officials’ introduction into criminal court of years of wiretaps approved by FISA judges under a lower standard of proof than that demanded by criminal-court judges. But U.S. District Judge James Moody has rejected defense attorneys’ arguments that the information should not be heard in court. Using FISA wiretaps in court is “a serious problem” that puts defendants at a disadvantage, said David Cole, a Georgetown University expert on the law related to terrorism. “Unlike with criminal wiretaps, FISA doesn’t give defendants any meaningful chance to challenge the validity of the tap.”

Link here.


In the U.S., medical privacy is largely governed by a 1996 law called HIPAA. Among many other provisions, HIPAA regulates the privacy and security surrounding electronic medical records. HIPAA specifies civil penalties against companies that do not comply with the regulations, as well as criminal penalties against individuals and corporations who knowingly steal or misuse patient data. The civil penalties have long been viewed as irrelevant by the health care industry. Now the criminal penalties have been gutted. An authoritative new ruling by the Justice Department sharply limits the government’s ability to prosecute people for criminal violations of the law that protects the privacy of medical records. The criminal penalties, the department said, apply to insurers, doctors, hospitals and other providers – but not necessarily their employees or outsiders who steal personal health data. In short, the department said, people who work for an entity covered by the federal privacy law are not automatically covered by that law and may not be subject to its criminal penalties, which include a $250,000 fine and 10 years in prison for the most serious violations.

The healthcare industry has been opposed to HIPAA from the beginning, because it puts constraints on their business in the name of security and privacy. This ruling comes after intense lobbying by the industry at the Department of Heath and Human Services and the Justice Department, and is the result of an HHS request for an opinion. I have been to my share of HIPAA security conferences. To the extent that big health is following the HIPAA law – and to a large extent, they are waiting to see how it is enforced – they are doing so because of the criminal penalties. They know that the civil penalties are not that large, and are a cost of doing business. But the criminal penalties were real. Now that they are gone, the pressure on big health to protect patient privacy is greatly diminished.

This kind of thing is bigger than the security of the healthcare data of Americans. Our administration is trying to collect more data in its attempt to fight terrorism. Part of that is convincing people -- both Americans and foreigners – that this data will be protected. When we gut privacy protections because they might inconvenience business, we are telling the world that privacy is not one of our core concerns. If the administration does not believe that we need to follow its medical data privacy rules, what makes you think they are following the FISA rules?

Link here.


The U.S. is poised to drop its demand that European nations and other close allies adopt biometric passports by October, a move aimed at avoiding a serious disruption in transatlantic travel, according to U.S. and European government officials. However, the compromise could strain relations by differentiating between European countries, and in particular by requiring some French and Italian citizens to obtain visas before they travel to the U.S. The likely U.S. action, which comes amid travel industry concerns that overseas visitors are deterred from coming to the U.S., would be a significant shift in policy. For more than two years Washington has insisted for security reasons that countries whose citizens can enter the U.S. without visas begin issuing biometric documents that ensure the identity of the passport holder.

The plan is the latest in a series of twists since Congress passed legislation in 2002 that required the 27 countries in the so-called visa-waiver program to start issuing the high-tech passports by October of last year. Brussels has said that some European countries in the programme will not be able to meet that requirement until August, 2006. Congress last year passed a one-year extension of the October deadline, but James Sensenbrenner, chairman of the House judiciary committee, has made it clear he would not support another extension.

But in an effort to avoid travel disruptions, Mr. Sensenbrenner has said the law can be interpreted in such a way that nearly all European countries will meet the standard. The law requires visa-waiver countries to meet the passport standards set by the International Civil Aviation Organization, which currently call for biometric information to be contained in a smart chip on the passport.

Yet the compromise is politically awkward for the EU. Both France and Italy continue to issue passports with laminated photographs that do not even meet the digital standard and are seen as more vulnerable to tampering. It could also trigger tensions among the other European countries because Brussels would have either to accept the U.S. interpretation or consider action against Washington. The EU has lobbied hard for a further year’s extension of the deadline because countries are still developing their documents.

Links here and 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

The Senate Intelligence Committee is working behind closed doors to expand the powers of the Patriot Act and deliver another withering blow to the 4th amendment. This time the constitutional broadside comes in the form of “administrative subpoenas” – an Orwellian expression which indicates that law enforcement agencies, like the FBI, will be able to circumvent the courts to subpoena records. To understand the breadth of this new classification, we need to grasp the basic inconsistency in the terminology itself.

“Administrative subpoena” is a contradiction in terms, since a subpoena is a writ issued by a court and presumes judicial oversight. To confer this very explicit (legal) power on the FBI confuses the meaning of the language and implies that FBI agents can act as their own judge. It is the Bush administration’s way of pummeling the judiciary while providing law enforcement with the power to interpret the 4th amendment however it sees fit. The officious sounding term is clearly the work of right wing think-tanks, probably the Federalist Society. Many of the Society’s members are high-ranking officials in the Justice Dept. and have helped to shape the language and rationale for the increased powers of the executive, the diminished powers of the court, the savaging of the constitution, the text of the Patriot Act, and the justification for torture.

Senate Intelligence Committee Chairman Pat Roberts is the administration’s “go-to” guy in the Senate. Roberts knows as well as anyone that the subpoenas will not be limited to national security investigations, but will be used on routine criminal investigations or “fishing expeditions” on political enemies. If the law passes, we can expect that members of politically active anti-war, environmental and civil liberties groups will have their private records (medical, dental, credit, library, tax, etc.) investigated without the slightest indication of criminal wrongdoing. Probable cause will be a thing of the past.

Administrative subpoenas will preclude the “reasonable expectation of privacy” and will pave the way for unlimited and unwarranted government intrusion. Spying on the citizenry is not unique to the Bush administration. It is a practice that is commonplace in all police states. If the new legislation moves forward in its present form, the administration will be free to sidestep the probable cause requirement and probe every minute detail of the citizen’s life without any fear of legal retribution. For Bush, that is a winning combination.

Link here.


The Bush administration will require major dealers in gold, diamonds and other precious metals and gems to set up comprehensive anti-money laundering programs. The Treasury Department’s Financial Crimes Enforcement, dubbed FinCen, announced the action last week. Specifically, such dealers will need to take steps including establishing policies and procedures to identify risks and minimize opportunities for abuse, training employees and designating a point person to assess compliance.

The provision applies to dealers who have bought and sold at least $50,000 worth of precious metals and gems. Dealers whose activities for the 2005 calendar year fall into that dollar threshold will have until Jan. 1, 2006, to set up anti-money laundering programs. Given the dollar threshold, most retailers in this industry are not required to set up such programs, a statement issued by FinCen said.

Link here.


Spanish police said they have dismantled a gang which laundered as much as $130 million on the southern Spanish coast. Police believe the gang carried out assassinations, extortion and a variety of other crimes across eastern Europe, investing their gains in Spain and Andorra after transferring the cash via offshore accounts based in the Netherlands Antilles, Belize, the Bahamas, the Virgin Islands and Andorra. Investigators also sifted through data from some 60 bank accounts in Spain and several other European countries.

With the cash the gang constructed hotels and tourist flats on the Spanish Mediterranean coast, profits from which went into accounts in tax havens or snapping up works of art, police allege. Police said they had arrested nine Spaniards, three Ukrainians and a Russian in Barcelona and Tarragona in the northeast of the country and in the southern city of Almeria after searching some 50 apartments and a four-star Almeria hotel.

Link here.


Senator Bill Frist, the majority leader, has often invoked the founding fathers to make his case against delaying tactics like the filibuster, especially when such tactics allow a small number of senators to create what he calls “a tyranny of the minority”. But he has shown almost no interest in the founders’ similar concerns about tactics that accelerate Senate action, even when those tactics enable a handful of senators to effectively deny the chamber the possibility of reading a bill, let alone debate it.

There is plenty of minority tyranny, for example, in the conference committees that Congress uses to spur legislative agreement between the two chambers. Such committees clearly bypass the founders’ inefficient back-and-forth in which the House and Senate are supposed to trade versions of legislation until they finally reach agreement. These committees have become more powerful over the years, in no small part because Congress stopped instructing them to stay within the four corners of the versions of legislation at issue. In the 2003 conference over President Bush’s energy bill, which eventually failed, conferees added $277 million in subsidies for environmentally friendly shopping malls. As President Ronald Reagan once said, an apple and an orange could go into a conference committee and come out a pear.

There is also enormous opportunity for minority tyranny in the writing of omnibus bills, another legislative accelerant the founders might view as a violation of their constitutional design. Employed after the Civil War to handle the onslaught of private pension bills for disabled veterans, omnibus bills were not used for appropriations until 1950. Since then, they have become a commonplace vehicle for packaging everything from spending bills to highway projects. Last year’s $388 billion omnibus bill not only ran more than 1,600 double-sided pages and weighed 14 pounds, it arrived on the House and Senate floor only hours ahead of passage.

No wonder members missed the provision that allowed Congressional staff members to review the tax returns of individual taxpayers. Although Mr. Frist promised that Congress would work on reforming the use of omnibus bills, filibuster reform has taken precedence. The founders would also certainly object to the secret gangs that Congress and the president have used to reach compromises on Social Security, budget cuts and tax reform, not to mention the Gang of 14 that put the judicial filibuster on hold, pun intended. As James Madison noted late in his life, “A popular government without popular information or the means of acquiring it is but a prologue to a farce or a tragedy or perhaps both.”

Despite his rhetoric about the tyranny of the minority, the majority leader has been mostly concerned about the tyranny of the minority opposed to him. That is something the founders, politicians as well as philosophers, would surely understand.

Link here.


In a move that could expand the police powers in the Patriot Act, the Senate Intelligence Committee will meet behind close doors to discuss, among other things, “a little-discussed provision to enlarge the FBI’s ability to wiretap people who it suspects are national security threats.” The bill they will discuss is called the Patriot Reauthorization Act (PAREA). The Boston Globe reported that the provision in the bill, sponsored by committee chair Republican Senator Pat Roberts of Kansas, “would lift one of the last restrictions on special warrants the FBI can obtain through a secret court originally set up to monitor foreign spies: that the information the bureau wants must be related to international terrorism or foreign intelligence.”

“Instead, the FBI could use the warrants, which bypass normal constitutional safeguards, to look for evidence of unrelated crimes that it could use to get suspects off the street. The wiretap provision is one of three major additions in the draft bill, which would reauthorize the Patriot Act, the package of enhanced law enforcement powers enacted after the attacks of Sept. 11, 2001.

“If the bill became law, it also would give FBI agents the power to write their own subpoenas without permission from a judge, allowing them to seize records from hotels, banks, and Internet service providers. This provision would require the FBI to make periodic reports to Congress about how often it uses that power to obtain library records, bookstore and firearms sales receipts, and medical or tax records.”

Link here.

Don’t let Congress expand the Patriot Act in secret.

The Patriot Act passed a mere 45 days after the September 11 attacks with virtually no debate or discussion. Fortunately many of the sections that expanded government power were set to expire at the end of this year. Now, some in Congress are secretly considering legislation that would make these powers permanent and expand them. Hundreds of communities – and seven states – have signaled their rejection of the excessive powers in the Patriot Act by passing resolutions. But Congress is ignoring these and other public statements of concern against the Patriot Act and holding key hearings in secret.

Take action and let Congress know that you want secret Patriot Act hearings to be made open and public. A form to facilitate that is available below.

Link here.

Senate Intelligence Committee approves new FBI powers in Patriot Act.

The FBI would get expanded powers to subpoena records without the approval of a judge or grand jury in terrorism investigations under Patriot Act revisions approved by the Senate Intelligence Committee. Some senators who voted 11-4 to move the bill forward said they would push for limits on the new powers the measure would grant to law enforcement agencies. “This bill must be amended on the floor to protect national security while protecting Constitutional rights,” said Sen. Barbara Mikulski, D-Maryland. Ranking Democrat Jay Rockefeller, D-West Virginia, supported the bill overall but said he would push for limits that would allow such administrative subpoenas “only if immediacy dictates.” Rockefeller and other committee members, such as Sen. Dianne Feinstein, D-California, also are concerned that the bill would grant powers to federal law enforcement agencies that could be used in criminal inquiries rather than intelligence-gathering ones.

Portions of the Patriot Act are set to expire at the end of 2005. The bill would renew and expand the act. The bill also must be considered by the Senate Judiciary Committee, where Feinstein and other Democrats planned to again offer amendments. Overall, Rockefeller said, the committee gave a nod to most of the Patriot Act in its first few years fighting the nation’s new enemies. “We concluded that these tools have helped keep America safe … and should be made permanent,” Rockefeller said in a statement.

Still, civil libertarians panned the bill and the closed-door meetings in which it was written. “When lawmakers seek to rewrite our Fourth Amendment rights, they should at least have the gumption to do so in public,” said Lisa Graves, the ACLU’s senior counsel for legislative strategy. “Americans have a reasonable expectation that their federal government will not gather records about their health, their wealth and the transactions of their daily life without probable cause of a crime and without a court order.”

Link here. Draft bill would expand, not curtail, the USA Patriot Act – link.

Bush urges Congress to keep Patriot Act intact.

President Bush offered a ringing defense of a much debated law passed after the Sept. 11 attacks, asserting that it has not stepped on civil liberties, as its critics contend, but has protected America from terrorist threats. “The Patriot Act closed dangerous gaps in America’s law enforcement and intelligence capabilities, gaps that terrorists exploited when they attacked us,” Mr. Bush said in a speech at the Ohio State Patrol Academy in Columbus. The U.S.A. Patriot Act broadened the F.B.I.’s wiretapping authority and other surveillance powers in ways that its supporters say are helping to thwart terrorists but that its critics say are trampling on rights enshrined in the Constitution.

Sixteen provisions of the law are to expire at the end of the year, and a spirited debate is under way on Capitol Hill. Some lawmakers want to keep the current provisions, or even further bolster law enforcement’s powers. Other lawmakers say those powers have done little, if anything, to make the country safer and ought to be repealed. Senator Russell D. Feingold, a Wisconsin Democrat and member of the Senate Judiciary Committee, said Mr. Bush’s speech amounted to “a classic bait and switch”. “He once again ignored bipartisan concerns about the Patriot Act and presented a false choice to the American people – that we have to reauthorize the Patriot Act without any changes or leave our country vulnerable to terrorist attacks,” Mr. Feingold said. He said many lawmakers in both parties had concluded that portions of the act infringed on freedom.

The Bush administration and its Republican allies on Capitol Hill have argued for months that the law should be kept intact, if not bolstered. “The problem is, at the end of the year, 16 critical provisions of the Patriot Act are scheduled to expire,” Mr. Bush said. “Some people call these ‘sunset provisions’. It’s a good name, because letting that, those provisions expire would leave law enforcement in the dark.” The Patriot Act made it easier for intelligence officers to share information with law enforcement agents by lowering a bureaucratic “wall” long in place. Critics have said that that aspect of the law has led to situations in which law-abiding citizens who are neither spies nor criminals find themselves victims of snooping into their private affairs. The president categorically rejected those complaints.

Link here.


When a proposal surfaced last week to give the FBI administrative subpoenas in intelligence investigations, it set in motion a well-rehearsed order of battle. Civil libertarians immediately denounced the expansion of power, which would enable the FBI, in secret and without prior judicial approval, to obtain personal information on anyone. The Justice Department insisted that the authority was necessary for war on terror, and justified it by citing the widespread availability of administrative subpoenas in other areas like drug investigations and health care fraud. Both sides, however, are overlooking the proposal’s true potential.

Few dispute that, in national security cases, the FBI sometimes needs access to personal information held by third parties, such as banks, telecommunications providers and credit bureaus. Criminal investigative tools, which are designed for an open, adversarial environment, are not up to the task of collecting intelligence on spies and terrorists, since the government cannot risk either alerting the subjects of the investigation or revealing the sensitive sources that identified them. The FBI, therefore, needs the ability to collect information secretly. But how, absent overt checks and balances, do we ensure that the FBI does not abuse the nebulous cause of “national security” to abridge constitutional rights or harass political dissidents?

Today, the FBI can send a “national security letter” to the custodian of relevant data. Although the law limits the kind of information subject to this authority, the judgment as to whether the legal standard has been met is entirely that of the FBI official – no judge is ever involved. The recipient of such a letter is required to comply, is bound to secrecy, and has no clear recourse to any court. The FBI’s other option is to seek an order from the Foreign Intelligence Surveillance Court (FISC) under the infamous Section 215 of the Patriot Act. However, the language of the act limits the ability of that court to question the government’s application. For civil libertarians, the problem with both options is that there is no effective way to discover or challenge abuses.

The administrative subpoena represents a real improvement here. It lets the FBI obtain all relevant information, but is not self-enforcing. An uncomfortable recipient can file a challenge in any federal court, or can wait for the FBI to file an enforcement action. Either way, judicial review is assured. Although the ensuing litigation would be subject to secrecy provisions, those are not dissimilar to existing laws governing the use of classified information in court. If the government moves the case to the FISC, it remains adversarial (unlike all other proceedings in that court). Most importantly, the proposal invokes a well-established body of law addressing the use of administrative subpoenas in other contexts. The reviewing court could look to decisions of the Supreme Court, and dozens of lower courts, that have crafted principles to prevent the abuse of authority.

Civil libertarians, therefore, ought to embrace the administrative subpoena option as a means to institutionalize judicial oversight. Rather than arguing about the scope of the FBI’s authority, they should instead focus on ensuring that the proposed administrative subpoena power replaces, rather than supplements, the existing authorities. They might also push for secrecy provisions that are more challenge-friendly (perhaps some that vest more discretion in the reviewing court, or weaken the presumption for non-disclosure). Through legal challenges they could then address perceived abuses, and help create a body of law that defines the boundaries around constitutionally sensitive information.

Link here.


Former FBI official W. Mark Felt’s disclosure that he was Deep Throat rightly makes him a hero to some, but it also may throw roadblocks in the path of current street agents. On the one hand, Felt is a courageous whistle-blower to many, especially those of us who served under him in the FBI. He did the nation a great service in helping expose the wrongdoing in Richard Nixon’s administration. And he took the hit – with his criminal conviction – for many street agents who participated in the FBI’s controversial counterintelligence program (COINTELPRO) against left-wing groups. I worked at least peripherally on that program.

The other side of the coin is that current street agents may have to pay a price for Felt’s disclosure that he was the Deep Throat in the Watergate investigation. Since Felt was the FBI’s No.2 official and now admits he leaked information to The Washington Post’s Bob Woodward, informants could have more reason to bill not leak this to the media?” The FBI and other investigative agencies function only as well as their informants enable them to do so. One reason the U.S. has been having trouble dealing with al-Qaida is that, even in this era of high-tech investigative tools, on-the-ground informants are necessary, and we have trouble getting them inside al-Qaida.

For all the attention, there are some misconceptions about Felt’s significance in the Watergate investigation. He did not blow the case wide open for Bob Woodward and Carl Bernstein, as some believe. Watergate burglar James McCord, who warned federal Judge John Sirica about the White House cover-up, and former Nixon aide John Dean were more influential in that regard than Felt. But the truth is that the top editors and officials at The Washington Post wanted corroboration of information the paper was obtaining elsewhere. They would not have published it without corroboration – and that is what Felt provided. There is a feeling in some quarters that the government will not protect its sources. That hurts law enforcement. It would be a shame if Felt’s disclosure that he was Deep Throat hurts street agents’ ability to do their work.

Link here.

The PBS program, Snitch, investigates how a fundamental shift in the country’s anti-drug laws – including federal mandatory minimum sentencing and conspiracy provisions – has bred a culture of snitching that is in many cases rewarding the guiltiest and punishing the less guilty – link here.


Article one Section 8 of the U S Constitution states that the “congress shall have the power to regulate commerce among the several states….” This so-called “commerce clause” is the legal bedrock for all federal regulation of business activity that crosses state lines. Every piece of federal economic regulation from the Sherman Antitrust Act (1890) to all of the 1930s New Deal securities and banking law has been rationalized (made “constitutional”) by reference to the commerce clause.

In Wickard v. Filburn (1942), the Supreme Court expanded the original interpretation of the commerce clause to cover intrastate economic activity that was said to “affect” interstate commerce. Wickard grew wheat for his own consumption but the court reasoned that the wheat locally consumed could, theoretically, have been sold in interstate commerce; so when Wickard “withdrew” that wheat and consumed it, output and prices in interstate commerce were affected. Hence the Feds could regulate locally grown wheat and the legislation that prescribed that was constitutional. The “logic” of Wickard obliterated two original and important constitutional principles, namely (1) that the states can regulate their own commerce, not the Feds and (2) that the federal Constitution embodies only limited and clearly enumerated powers. Wickard substantiated the notion that the Feds could now regulate ANY economic activity (with little resistance from individuals or the states) since almost ANY good or service produced and consumed locally could, at least theoretically, affect interstate commerce. We have all lived in a post-Wickard regulatory world ever since.

So in some sense, the medical marijuana case decided June 6th (Gonzales v Raich, et al) in favor of the government (6-3) was an easy slam dunk. Reich and the other defendants in California grew marijuana for their own consumption but the majority asserted, following Wickard, that such private activity “affected” interstate commerce and, thus, could be regulated (prohibited) by the federal Controlled Substances Act (CSA), regardless of California state law which allowed (with supervision) such activity. If you do not like the decision, the majority suggested, get the votes and attempt to change the federal drug laws.

There are many problems with the majority opinion written by Justice Stevens. The most obvious is the continued acceptance of the logic of Wickard. As Justice Thomas argues in his brilliant dissent, if growing 6 marijuana plants on your own property for your own consumption is “economic activity” that can “affect” interstate commerce, then there is absolutely nothing under the economic sun (including pot luck dinners) that cannot be regulated by the federal congress. But, clearly, that was not the intent of the framers of the Constitution. But even more fundamentally, the Commerce Clause itself was never meant by the Founders to be a blank check for “command and control” economic regulation. Indeed, the economic purpose of Article one Section 8 was almost precisely the opposite of the conventional explanation accepted by the majority in this case.

Link here.



In the final days of May and the first day of June, 2005, two remarkable events took place, one in France and the other in Holland. A large majority of voters voted against the 332-page Constitution of the European Union. To get the Constitution ratified, there had to be 100% acceptance by member nations. This means that the EU’s Constitution is dead, although we may see some Dracula-like resurrections. This means that an 85-year conspiracy – no other noun will suffice – has suffered its largest setback so far. I can hear the responses from the mainstream media and the mainstream professorate: “Conspiracy? How can you say that? Why, nothing has been more aboveboard, more open, than the creation of the United States of Europe.”

Most people have never heard of Raymond Fosdick. Fosdick had been a minor city official in New York City when he was hired by John D. Rockefeller, Jr., to act on Rockefeller’s behalf, in 1913. Rockefeller began paying him $10,000 a year, which was the equivalent of $200,000 a year today, except that 1913 was the first year of the income tax, with rates for most people well under 6%. Fosdick’s career blossomed. By 1919, he was the American Undersecretary General of the Versailles Peace commission/League of Nations. He worked closely with Jean Monnet, who was France’s Undersecretary. The League of Nations had just been formed, although the U.S. was not yet part of it, and never would be.

In 1919, Fosdick sent a letter to his wife. He told her that he and Monnet were working daily to lay the foundations of “the framework of international government.” This was no idle boast. Fosdick returned to the U.S. in 1920 when the Senate refused to ratify the League of Nations treaty. He immediately went to work full-time for Rockefeller as the head of the Rockefeller Foundation. In Europe, Monnet became the driving force behind the creation of the European Common Market and the New European order. His connections to the American Establishment had made this possible. Monnet’s strategy was to conceal from the public the long-run political goals of the planners: a common European government possessing final sovereignty over the member nations.

Raymond Fosdick was a long-term strategist. He and Monnet adopted the same strategy: first free trade, then the creation of a regional government that possesses judicial sovereignty. This plan has been systematically promoted by the Trilateral Commission, created in 1973 by John D. Rockefeller, Jr.’s son, David. As yet, the plan has not taken root in the Western hemisphere. NAFTA is the equivalent of the old Common Market, but it has been granted only provisional regulatory powers, not actual sovereignty. In Europe, the EU does possess considerable sovereignty. Final sovereignty was to have been established by means of the EU’s Constitution. But the European ship of state has now hit two icebergs. The scraping sound was heard above decks. There are enough lifeboats on board for the passengers, but not for the crew. Will the crew graciously go down with the ship? Not this crew! Women and children had better watch out for themselves.

Even if they get another chance, even if winning means rigging the computers, they will never get what they want: legitimacy. No matter what happens next, they have failed. This turn of events may turn out to be as important as August 19–21, 1991, when the Communists’ attempted coup against Yeltsin went belly-up. There have been four major political movements in the West since 1776. 1.) The French Revolutionary tradition (Rousseau), which died with the Soviet Union. 2.) The limited political sovereignty movement, which I call the right wing of the Enlightenment (Adam Smith/Jefferson/Jackson). 3.) The Fabian socialist/social democracy political tradition, beginning in the late nineteenth century, which also went down with the Good Ship Marx in 1991. And 4.) Managed market/political bureaucracy (Rockefeller/Keynes/Monnet). The fourth movement has just suffered its biggest setback since the defeat of Wilson’s League of Nations treaty in 1920.

I call the process EUthanasia. The voters of France and Holland stuck a needle into the arm of the sclerotic Eurocracy. Next step: the final injection. I hope I am still around to see the death throes of that pretentious experiment in social engineering. But even if I am not, I can see it coming.

Link here.


“Papiere Bitte.” (“Papers, Please.”) Hearing those words, even now, causes dull echoes of sounds akin to bodies hitting dirt, or bullets penetrating flesh to thud into my mind. Because, if those papers were not correctly in order, or, if you were a Jew sneakily present in any place (including the grocery store) which displayed the usual “NO JEWS OR DOGS ALLOWED” sign, you were dead meat – literally. And, yes, of course I am talking about my childhood as a little Jewish kid in Nazi Germany.

No one ever forgets stench. Whether it is a long-forgotten encounter with a ripe skunk, or a ripe egg, or a ripe decomposing body, once one of those odors has been brain-documented, then even the slightest tinge of such an aroma pops back up immediately, along with the circumstances under which it first offended the nostrils. And, that is what is happening now. I smell the long-forgotten skunk, the long-forgotten rot of fascism. What is happening all around can no longer be denied. What I ran away from so desperately in 1938 is coming back full circle. Only the jack-boots have not yet arrived.

America quite literally saved my life. The love and gratitude deep in my heart for this country will never go away. But I am scared now. Haunted by deep fear for the generations to come, who may wind up as I did – looking over their shoulders, scurrying for cover, mute with terror. And it hurts. Think I am some kind of elderly nut-job neurotically manufacturing dictatorship? Well, let us look at the $82 billion defense bill passed just a few weeks ago, which (with a vote tally of 100 to 0) had the Real ID Act hidden inside it. This law allows a national identification process in which each and every person in the U.S.A. will be on computer. This ID will be based on driver’s license applications, although it is not just for driving. Just like the infamous “Internal Passport” of Nazi Germany, no one will need it unless needing to fly, cash checks, apply for jobs, walk the streets, enter federal buildings – or drive. Yes, “Papiere Bitte” has come home to roost. And, folks, that is only the beginning.

Link here.
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