Wealth International, Limited

Offshore News Digest for Week of July 4, 2005

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

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It is hard for most people steeped in the humane, liberal values of Western Civilization to understand the massacre of innocents. To slaughter to make a political point. But terrorism is not likely to disappear. Indeed, it is a surprisingly common practice. Although Americans were taken unaware on September 11, many other peoples have long suffered from the murderous attention of domestic and foreign terrorists. The attacks on Israelis have been frequent, in Israel and around the world. And killings continue, deterred neither by war measures nor peace processes.

Kurdish rebels used terrorism against the Turkish government. Urban leftist terrorists once bedeviled Germany and Italy. Ethnic and religious separatists have killed in Northern Ireland and Spain. Terrorism was a tool of leftists fighting military regimes in South America. Communist guerrillas routinely bomb urban targets, such as bars and nightclubs, in Colombia. Chechens kill in Moscow. In Algeria, terrorism was used against the French colonial overlords and continues today against the military-backed regime. Tamils and Sikhs kill in India. Tamils also have routinely deployed terror against the majority Sinhalese in Sri Lanka, making the former the most prolific suicide bombers on earth. Russian revolutionaries once killed czars and czarist officials. A Serbian terrorist shot down the Austro-Hungarian royal heir and his wife, triggering World War I. No other murder in human history – except perhaps that of Julius Caesar – had such profound consequences.

Terrorism is common, and will persist, because it is a tool of the weak versus the strong, a cheap military weapon to achieve expensive political goals. As long as there are people willing to kill to advance their ends, there will be terrorists. Awful but unsurprising are attacks on military targets, such as the Marine Corps barracks in Lebanon, the USS Cole on its visit to Yemen, and the Italian military-police headquarters in Iraq. Lacking the conventional weapons of war necessary to resist, opponents turn to the truck bomb. Horrific, careless of noncombatants, and brutally effective.

No one but the enemy gains from turning the war on terrorism into a war between civilizations. But it certainly is a war between the civilized and uncivilized.

Link here.


Commentary on China’s impact on the global economy ranges from extreme optimism (“all those extra consumers”) to extreme pessimism (“manufacturing will be decimated in developed countries like Australia and the U.S.”). The truth probably lies somewhere in between. For the next decade or so China is likely to impact the global economy in four critical ways. Firstly, via its impact on global growth. Secondly, in terms of the demand for raw materials. Thirdly, via competitive pressures. Finally, via its impact on Asian growth and intra regional trade. China may only be 14% of global GDP (adjusted for purchasing power), but thanks to its strong growth rate and sheer size (nearly 1.3 billion people) it has accounted for nearly 30% of global economic growth in recent years.

Link here.

Hong Kong democracy push falters.

No Tung Chee-hwa, no Article 23, no SARS, and an economy on the rebound. With many of the issues that drove people to protest in the past two years gone, a dramatically smaller number of protesters gathered Friday to mark the 8th anniversary of mainland rule by shouting slogans calling for democracy, while a cheerful gathering of roughly the same size danced in the streets and sang songs of praise for China. A peaceful crowd estimated at more than 20,000 marched for democracy as they had in past years but this was nowhere near the outpouring that brought a half million people out to mark the same occasion in 2003 and 2004.

Meanwhile, capitalizing on the current political calm in Hong Kong, pro-Beijing organizations staged a morning parade with about 20,000 people clanging cymbals and singing patriotic songs to mark the handover. On the streets, at least, it was a draw – with the best news for Beijing and the government being that most people just stayed at home and enjoyed a day off.

Beijing has tightened its political grip and ruled out full democracy anytime soon, but the mainland has nonetheless relented in some important ways. Chiefly, Hong Kong does not have Tung Chee-hwa to kick around anymore and Chief Executive Donald Tsang is in a honeymoon period with the public. For Tsang, it had to be a day of sweet victory. Selected by Beijing, unopposed at home and confident his brand of civil-service efficiency is just what Hong Kong needs, he begins his term with the streets relatively quiet and discontent seemingly at low ebb.

Links here and here.

Talk to us and leave Hong Kong alone, says Taiwan President.

President Chen Shui-bian had both welcoming and caustic words for China, suggesting that economic talks represented the way forward in cross-strait relations. Negotiations on economic matters could facilitate mutual trust in the cross-strait relationship, which could then help create favorable conditions for political reconciliation, President Chen said.

“Although a breakthrough in cross-strait political relations will be hard to obtain in the short term, both sides can still bring about improvements in relation to economic matters – such as direct cargo links, opening up Taiwan’s tourism market to Chinese visitors and cooperation in the fishery and agricultural industries,” Chen said. “That way, through government negotiations and expansion of exchanges, mutual trust can be cultivated, as can the conditions for eventual political reconciliation.” But Chen also had harsh words for Beijing, criticizing it for interfering in Hong Kong’s affairs.

Link here.

International law firms are finding opportunity in China.

When Liu Chuan-zhi started a personal computer business in 1984 off “Swindler’s Alley”, Beijing’s electronics black market, he could never have imagined it would one day buy IBM’s PC business. Similarly, the firm of Clifford Chance, which handled the Lenovo-IBM deal, would have had little idea that within 20 years of becoming the first European firm to set up shop on the mainland it would be acting in 65 jurisdictions on such a significant deal for a company based in the People’s Republic of China.

The IBM-Lenovo deal is a powerful symbol of the opportunity that is developing for international law firms in China. Although much of the work handled by foreign firms still relates to inward investment, or Chinese companies listing on the Hong Kong stock exchange, the development of Chinese companies into dynamic global entities is exciting for lawyers. Often young, entrepreneurial and with global ambition, such companies are a refreshing alternative to former state-owned organizations. More important, they are willing and able to behave like conventional multinational law firm clients.

For example, Chinese companies tend to be aggressive on pricing in their home markets. But this was not an issue for Clifford Chance acting for Lenovo. “Happily, we were able to persuade it about our value proposition,” said John Healy, one of the U.S. partners on the deal. The Chinese legal market is reflecting the rapid changes taking place in the economy and society as a whole. Most Chinese law firms focus on the domestic market, although they are increasingly sophisticated and developing fast. Many lawyers at these firms have foreign training and experience. Chinese firms also tend to have better networks than foreign firms as well as better government connections.

However, the Chinese legal profession, which has been allowed to exist properly only since 1979, and to form non-state-owned partnerships since 1996, is still young.

Link here.

China arrives: Unocal bid sign of more to come.

The Chinese are coming. That is the consensus among investment bankers and private equity players who are closely watching China National Offshore Oil Corp.’s $18.5 billion takeover bid for Los Angeles-based Unocal Corp. So far, there has been just a trickle of Chinese companies scouring Pacific shores for U.S. companies and brands. Yet the Unocal bid is widely seen as a harbinger of more aggressive direct investment in the U.S. from mainland China, where $691 million in foreign currency reserves is waiting to be put to work.

“They have to do something with their money,” said Steve Dollinger, managing director of Crimson Investments, a Palo Alto private equity firm that builds manufacturing plants in Asia for U.S. firms. Most Chinese firms operate offshore subsidiaries in Hong Kong that are flush with dollars and euros.

Southern California already has benefited from personal Chinese wealth being plowed into real estate assets. Bankers see a handful of local industries as ripe for Chinese buyouts: the textile and garment industries, automotive components suppliers and energy companies. But they also say a number of factors will make for a slow build-up, rather than a rush to buy. Among them: language barriers, cultural differences and distances that make purchasing a company, rather than a passive asset like real estate, more difficult from afar.

Link here.


Panamanian President Martin Torrijos, son of populist dictator Omar Torrijos, began his term with diplomatic and fiscal successes but has run into stiff opposition to a plan to raise the retirement age for state workers. After a month of strikes, riots and criticism from the influential Catholic Church, Torrijos backed down in a fight with unions and the opposition over a law that raised the retirement age for state workers by three years to 65 for men and 60 for women. It also required state workers to pay into the pension fund for 25 years to qualify for a pension, up from 15 years now.

Torrijos was forced to ask parliament this week to freeze implementation of the law, which the national assembly passed in early June. Parliament is expected to do so this week. The decision to back down was his first serious setback since taking office last September. The pension law was his key economic reform and he will now have to negotiate with the country’s unions to see if he can save it. Panama’s pension system has a $100 million annual deficit, say officials, and faces bankruptcy by 2012 if nothing is done. Mario Rognioni, a Panamanian political commentator, blamed the president’s troubles on inexperience. “The steps he has taken are difficult and dramatic, but the team, through lack of experience, did not know how to explain them to the nation,” he said. Political analyst Richard Millett added, “Unfortunately he listened to people who were good on economics and bad on politics.”

Torrijos’s rule started decisively when he restored diplomatic relations with Cuba, broken over Panama freeing four men jailed for plotting to kill President Fidel Castro. Next, Torrijos quickly used his parliamentary majority to push a tough fiscal reform package through in January. Wall Street welcomed the measures, which helped avert a foreign debt default and narrowed a 2004 budget gap of $700 million. But Torrijos’s political stock has plummeted in the botched pension reform as unions, the Church and foreign investors all question his rule. His popularity has dropped by half – from 60% to 30%, polls say – just 10 months after taking office following a landslide 2004 election victory. Foreign investors are anxious for the pension reform to stay intact. “The government has been weak over this. I would have expected the administration to stand by the reforms since it had already paid a huge political cost for them. I think investors are losing confidence,” said analyst Gustavo Baltar of Credit Suisse First Boston in Sao Paolo.

Link here.

Panamanian Social Security reforms postponed.

The reform law for the Panamanian Social Security Fund (CSS) was postponed for 90 days, after promulgation by decree in the Official Gazette. A communiqué from the Panamanian Presidency said that the measure reactivated the system existing before June 2, when the regulation became effective. Social sectors have condemned the controversial law that regulates the increase of retirement age from 57 years to 60 for women and from 62 to 65 years for men until 2015, and raises retirement quotas from 180 to 300. Andres Rodriguez, coordinator of the National Front in Defense of the CSS, said his organization would participate in talks with the government to try to resolve the crisis. The front, which includes people’s and union organizations, staged strikes against the reform from May 27 to June 27, and forced the administration to the negotiating table.

President Martin Torrijos said the talks would allow revision of aspects of the reform law, which will be reactivated after 90 days. Officials and business people, retired people and unions are participating in the talks. Government officials said the CSS should be reformed because its financial deficit of $4.5 billion may lead to a collapse by 2012.

Link here.


Nearly four years after the Sept. 11 terror attacks and after billions in security investment on both sides of this frontier stretching from Atlantic to Pacific, authorities and average folks are still jittery. At the edge of a sprawling raspberry field where Washington state meets British Columbia, a U.S. Border Patrol agent shakes his head at tire tracks that snake between rows of berries and over the international boundary, which is a gravel ditch so puny a person could leap it. “They’re long gone,” says agent Candido Villalobos, who raced to the scene after a surveillance camera spotted the vehicle – transporting contraband? Drug money? Something more sinister? Too late to know. “They beat us,” Villalobos murmurs.

At Sandwich, Ontario, across the river from Detroit, the Olde Town Bake Shoppe overlooks the Ambassador Bridge, the busiest trade crossing between the U.S. and Canada. Thousands of trucks rumble along its lanes daily, loaded with everything from Nova Scotia salmon to U.S. auto parts. But bakery owner Mary Ann Cuderman worries about what else might be passing, especially given public concern that infrastructure could be a terrorist target. A citizens group she heads, the Windsor West Community Truck Watch Coalition, wants closer scrutiny. “How do you feel secure,” she says, “knowing that anybody, at any time, could drive right up on that bridge?”

Near the eastern end of the border, where Maine and New Brunswick touch, the story prompted international headlines, comedians’ snickers and lawmakers’ ire: A man carrying a homemade sword, a hatchet, a knife, brass knuckles and a chain saw stained with what seemed like blood sought entry to the U.S.. After confiscating his weapons and questioning him, border agents let him in. Canadian-born Gregory Despres was a naturalized U.S. citizen returning home, U.S. Customs and Border Protection officials explained. But the day after he was admitted to America back in April, authorities in his Canadian hometown found two bodies – one decapitated, the other stabbed to death. Despres was arrested wandering a road in Massachusetts.

“The whole thing gives me a queasy feeling,” says Colin Kenny, chairman of Canada’s Standing Senate Committee on National Security and Defense. Balancing the historic openness of the U.S.-Canada border with today’s necessary wariness is a challenge the two nations still have not mastered – and some fear the continued ambivalence could be harmful.

Link here.


Pity poisons Africa when it stifles criticism. As leaders of the G8 gather to discuss aid, they should be pitiless in their resolve to make pariahs of black Africa’s cruel and rotten governments. A ruling class of greedy men, sheltered by a popular culture of passivity in the face of political swagger, is suffocating the people of Africa and neither tears nor money nor rock music should be our first response. Rage, not rock, is called for. This is no counsel of despair. If Africa were hopeless, why even write about it? If the leaders in Africa were all wicked and the led all feeble, then we might as well write off their debts, drop food on them from aeroplanes and turn away.

But the truth is otherwise. Everywhere on the continent there are people making a go of things. Everywhere there is a struggle between energetic self-improvement and an enervating corruption. There are good people and good ideas in African politics, fighting for survival. Across much of the continent the structures of administration are still in place and leaderships know how to work them – too often to line their own pockets. Chains of command and supply, the collection and exchange of information, the imposition of order and taxation may be shaky but they exist. It is not all like Congo where anarchy rules. Most of Africa is not anarchy – it is tyranny. But tyranny is not a bad place to start. Tyranny can be mended. Kleptocracy can be disinfected.

Link here.


Luxembourg’s Prime Minister, Jean-Claude Juncker suggested this past weekend that his country’s vote on the EU constitution may seal the agreement’s fate. The treaty has been ratified by 11 EU member states so far, but was recently rejected by both France and the Netherlands. Mr. Juncker told the BBC that, “If this country will say no then according to my colleagues in the European Commission this would clearly mean the treaty would be dead. But if Luxembourg says yes then it could be the signal that the process is still alive.” According to polls conducted last month, the “yes” camp was still in the lead, although objectors to the proposed constitution had racked up an estimated 45% of the vote. Mr. Juncker has pledged to resign if Luxembourg’s voters reject the planned agreement.

Link here.

Malta parliament ratifies EU constitution.

The Maltese parliament ratified the EU constitution, becoming the 12th member state to approve the treaty that has been rejected by voters in France and the Netherlands. The vote was unanimous by the Mediterranean island nation’s 65 deputies following a decision by the opposition Labour Party at the weekend to back the treaty. Twelve of the EU’s 25 member states have now voted in favor of the constitution, although only one of them – Spain – by referendum. Some other member states put their plans on hold after EU leaders announced a “period of reflection” in the middle of last month following the stinging rejection by Dutch and French voters in referendums in late May and early June. However, Luxembourg is to hold a referendum this weekend, with opinion polls suggesting it will be a close race.

Link here.


The OECD Financial Action Task Force will soon start to investigate if Icelanders are prepared to tackle international money laundering. According to Valgerður Sverissdóttir, Iceland´s Minister of Industry and Commerce, over the next few months the Ministry of Industry and Commerce and the Ministry of Justice will work together to survey whether Icelanders are prepared to take on such criminal activity should it occur. Valgerður says that the FATF has published 40 suggestions on how OECD member nations should fight money laundering. “This could mean changing some laws,” she said. “It will be looked into in the coming months.”

She points out, however, that there have been no known cases of money laundering in Iceland. “We have not prosecuted any cases to date, but we must ensure that there is no such activity taking place here. This is a big problem around the world, and money laundering is the basis for various kinds of criminal activity.” She says the last survey conducted by the FATF took place in Norway. The poor marks Norway had received pushed people in Iceland to look into these matters.

Link here.


Passports for Manx citizens could be ditched to help make travelers’ lives easier. Many people are proud that, although they carry British passports, the documents specify they are from the Isle of Man. However, that is under threat as pressure grows to introduce biometric passports. The U.S. is leading the call and, from October next year, it will require visitors to hold passports which contain finger print and eye iris data. The UK looks set to adopt similar measures. If that happens it could mean anyone from the Isle of Man would have to spend long periods of time clearing passport control or be forced to apply for a visa ahead of trips to places like America.

Chief Minister Donald Gelling admitted the government is having to examine the issue closely. He said not adopting biometric passports could cause massive inconvenience for Isle of Man travelers. However, moving to the new technology is not an easy choice. The cheapest option is to have all passports issued by the UK, which means documents may no longer carry details about the Isle of Man. The other option is to invest in the technology and administration – at a potentially huge cost – and continue issuing our own passports, including Manx details. Mr. Gelling said the situation is being closely examined.

Link here.



HM Revenue & Customs is to step up its campaign against tax-evaders after being given new powers to snoop on bank accounts held abroad. Officials at Britain’s tax-collecting agency hope that the EU savings directive, which allows EU states to exchange more details about bank holdings, will help the Exchequer recoup around £70 million annually in lost taxes. According to some estimates, the figure could even rise well above £100 million.

Links here and here.

Tax honesty is the best policy – now more than ever – says U.K. accountant.

Last week I promised to tell how recent changes have affected the information available to the Inland Revenue in looking at your case.

Link here.


THE EU Savings Directive, due to come into force last Friday is in chaos this weekend after it emerged that Gibraltar had not been fully signed up, and would not be for several months – indicating that the much-promised “level playing field” had not materialized. Paymaster General Dawn Primarolo was forced to rush out a statement on Friday afternoon, stressing that the directive had come into force, after other offshore havens, such as Guernsey, began talking of a suspension of the new procedures. If the discrepancy over Gibraltar is not resolved before July 25, the Guernsey authorities may also seek an opt-out from the ruling.

The EU directive which forces offshore havens to disclose details of customers’ financial affairs to their home tax authority, or deduct a retention tax, is already unpopular with many offshore centres – not least because of fears that there will be a flight of funds from Europe to locations outside the agreement, such as Singapore and Hong Kong. The EU has attempted to encourage Singapore and Hong Kong to sign up to the agreement, so far to no avail. Phil Austin, chief executive of Jersey Finance, explained, “The fear is that Europe could be shooting itself in the foot and driving money out of the European economy to the Far East. The EU’s answer to this is that they will get Singapore and Hong Kong to sign up to the agreement. But I don’t think there’s a cat in hell’s chance of that happening.”

Peter Symes, managing director of Yorkshire Building Society Guernsey, described Friday as the most “awful” day he had ever had experienced. “No one knows what is happening. We are supposed to have received assurances that the directive has come into force.”

Link here.

EU tax haven clampdown spurs cash outflow.

Hundreds of millions of pounds have been taken out of offshore tax havens in recent months ahead of an EU clampdown on tax evaders that came into effect last Friday. UK banks and building societies with operations in offshore centres such as the Channel Islands and the Isle of Man have reported cash outflows of about 5% of the funds from personal deposit accounts.

Link here (subscription required).

Guernsey is well set for new tax edict.

Around 40 jurisdictions have agreed to implement the long-awaited and highly controversial EU savings tax directive. “The issue is something that banks and other financial services have been looking at for some time and making preparations for it,” said International Business Association chairman Bob Moore. “I do not expect it to have a significant impact on business in Guernsey.” Tony Mealing, head of Investec’s EU savings tax directive project, said that the firm had been preparing for it for more than a year. He added that it would perhaps have more impact on building societies than banks.

The directive applies only to individuals, not to companies. Building societies tend to have more private individuals as clients whereas, relatively, the banks have more companies. “Skipton Guernsey is well prepared for the implementation of the EU savings tax directive,” said Skipton Guernsey managing director Alan Bougourd. “Great care was taken to ensure the communication was clear and concise so that what could have been a very complicated issue for clients was made as straightforward as possible. Having written to our EU-resident clients explaining the impact of the directive on their account, client reaction has been neutral. They appreciate that the directive doesn’t change their overall tax liability. In the past, it has been the client’s responsibility to declare the interest on their account. Now, for EU residents, if they request exchange of information with the tax authorities, we will do it for them.”

Link here.

Waiting game as EU directive takes effect.

The much-stalled EU Savings Tax Directive ran into yet another glitch on the eve of its implementation with the discovery of an apparent loophole in respect of the UK and Gibraltar. In the end, however, the directive did take effect last Friday, with leading players in the Island’s finance industry playing down its likely impact. The Manx Government was quick to respond to the Gibraltar anomaly with Chief Minister Donald Gelling confirming that he would be pressing for urgent action.

The Isle of Man is fully co-operating with the directive by applying a retention tax to the interest paid to savings depositors resident in an EU country. However, it appears the directive will not apply between the UK and Gibraltar because the latter is being treated as part of the former for the purposes of the directive. Mr. Gelling said, “The Isle of Man is an internationally responsible jurisdiction, but in complying with international agreements we expect a level playing field between the relevant parties. Clearly there will be no level playing field if, because of this outstanding loophole, Gibraltar is in a different position from the Isle of Man and the other Crown Dependencies in relation to the UK.

“All three Crown Dependencies – ourselves, Guernsey and Jersey – are pushing for closure of the loophole as soon as possible. As Chief Minister of the Isle of Man, I have an assurance in writing from the UK Paymaster General that the loophole will be closed as a matter of urgency, and we expect that to happen.”

As regards the likely impact the directive will have on the Island’s finance industry, worries that investments would flood into other jurisdictions not affected by the directive have, so far, proved unfounded and many finance houses believe all the hype may have been overplayed.

Link here.

Gibraltar “loophole” in Savings Tax Directive causes outrage.

The news that the European Savings Tax Directive, which went into effect on July 1, does not at the moment apply between Gibraltar and the UK as they are not separate member states of the EU, has caused outrage in offshore centers such as Jersey and Guernsey. Following consultation and discussion with the Gibraltar Banker’s Association and the Finance Centre Council, the Gibraltar Government agreed to the issue last week of the following statement jointly by the Chief Minister of Gibraltar, Peter Caruana, and the UK government’s Paymaster General, Dawn Primarolo:

“The Savings Tax Directive, which comes into effect today (July 1), applies to savings income payments made in one Member State to someone resident in another Member State. Accordingly, because the UK and Gibraltar are not separate member states, the Directive does not apply between them. The UK and Gibraltar Governments are in discussion and working together with a view to agreeing arrangements to close this gap between them as soon as possible during the next few months, on terms that would offer a choice between exchange of information and withholding tax.”

However, the Channel Islands, both of which agreed to implement information exchange regimes from July 1 in order to satisfy the requirements of the directive, have argued that Gibraltar will have an unfair competitive advantage in the interim. The Jersey authorities have reportedly already been in talks with the UK Treasury in an attempt to resolve the situation, whilst the Guernsey Policy Council plans to discuss the matter at a meeting set to take place on July 25.

Link here.


Gibraltar is taking legal action against the European Commission, opposing a ruling in Brussels that it should not be allowed to offer a more favorable tax regime than the UK. The British territory, which has become the registered home of 45 insurers and 15 gaming operators, is concluding its written submissions. Although no hearing date has been set, the case will be heard at the European Court of First Instance.

Gibraltar’s chief minister, Peter Caruana, said, “The EU Commission case works on the proposition Gibraltar simply is a region of the UK. You do not need to be a scholar to know that Gibraltar is not part of the UK - it has British sovereignty but is not part of the union of the UK.” The spat broke out after Gibraltar announced tax reform proposals in July 2002 to the European Commission, which were rejected in March 2004. Brussels argued that if it offered a corporate tax regime more favourable than the UK system, it would constitute state aid.

The original proposals included the abolition of tax on profits for all companies and introduction of a profit tax for financial services providers as well as the introduction of a payroll tax. It is estimated a blend of these measures would lead to an overall tax rate of less than 10% for all companies, with some paying less. Gibraltar had wanted the abolition of its corporation tax, which is currently 35%. UK corporation tax is 30% of a company’s taxable profits above £1.5 million.

Link here.


Boston’s mayor is continuing his push for the closure of a nearly 100-year-old tax loophole that reduces real estate assessments for telecom companies if their Massachusetts assets are owned by an out-of-state corporation. While MCI, AT&T and Sprint are among those accused of avoiding responsibility as corporate citizens, Verizon Wireless – which registered its Massachusetts subsidiary as a corporation based in Bermuda – is being regarded as the biggest offender.

For the 2003-2004 tax year, the Boston Globe reported that Verizon Wireless succeeded in lowering its assessable real property by 99.7%. It paid more than $3 million a year to the city of Boston when its legal ownership of assets was based in Massachusetts. Now, that it has moved the assets to a Bermuda-based corporation the company’s annual tax bill is $9,307. Mayor Menino wrote in a column that any revenue collected from the passage of the bill would be used for property tax relief and would mean the lowering of the business tax rate by 2% and savings for the average single family homeowner of $185 each year. Industry lobbyists argue that higher telecom property assessments would result in companies having to pass on their costs to customers.

Mayor Menino said telecom companies have saved $31 million on local property taxes this year through aggressive use of tax provisions including transferring title to telecom assets to new Bermuda- and Delaware-based companies. “Did customers see their bills go down? No,” Menino said.

Link here.



News that the EU is going after tax haven countries is good news for Singapore. New EU tax rules came into force on 1 July 2005. Under these rules, financial institutions in all EU member states will be required to either disclose tax and bank information to the relevant tax authority, or charge clients a punitive withholding tax. Singapore has long enjoyed a reputation for having high standards of client confidentiality and bank secrecy as well as being a highly regulated, reputable jurisdiction for international banking and company incorporation. With this latest development from Europe, Singapore company registration and corporate and personal banking options is becoming more popular with international businesses and high net worth individuals.

Singapore, Hong Kong and Dubai are reaping the benefits of the legal and fiscal developments in Europe, as these Asian jurisdictions are not signatories to the EU directive nor are Singapore, Hong Kong and Dubai are agreeing to cooperate with the OECD. Healy Consultants managing director Aidan Healy said, “We have witnessed a trend of capital flow from Europe and the U.S. to Asia, as a result of the threat to client confidentiality posed by OECD pressures on tax haven countries. Consequently, we are now seeing a significant upturn in demand for Singapore, Dubai and Hong Kong companies and corporate bank accounts from our clients.”

Links here and here.

Asian finance centers benefit from EU Savings Tax Directive.

The EU’s latest effort to crackdown on tax evasion among its citizens is thought to be a major factor behind a substantial increase in money flows to areas where the directive cannot reach, most notably Asian financial centers, and particularly Singapore, Hong Kong and Dubai. “We know that some of the banks in the countries with which we have passed agreements have already flown to Singapore or Hong Kong and created some activities there. That is very clear,” stated the European Commission’s head of tax policy, Michel Aujean, according to Agence France-Presse. According to the Bank of International Settlements, Singapore’s total foreign deposits doubled last year to reach $157 billion.

Aujean conceded that the directive is by no means watertight and opportunities are likely to be found to circumvent the new rules, precluding the need for investors to seek new, more tax friendly locations to park their money. “It’s true that this text and the equivalent agreements (with non-EU members) will leave room for a certain number of possibilities and the banks are thinking about ways of using these possibilities,” he noted. One of the most obvious “loopholes”, as many describe it, is the fact that the provisions of the directive apply to individuals, but not to companies or trusts, and industry watchers believe that many investors and account holders will simply choose to hold their assets in company form.

Moreover, so far, the directive only covers interest income generated from bank accounts, bond coupon payments and mutual funds holding more than 40% of their portfolio in debt securities. It leaves other forms of investment income, such as those from stock dividends and other securities, untouched. The EU is due to review the performance of the new legislation in three years time. However, Aujean hinted that changes may come a lot sooner if it is felt by the EU that the new rules are failing to prevent tax evasion.

Links here and here.


More than 230 Irish people have lost several million euro to a convicted fraudster in an elaborate scam involving fictitious investments in gold coins, precious metals and overseas property. A 34-year-old Briton, known to his Irish victims as Maz Khan, used money from investors to finance a lavish lifestyle, including a €1.3 million yacht, Ferraris and luxury travel by executive jet. Khan was born in Manchester of Pakistani parentage. He used a British passport, according to Dubai police sources, but was also known by at least one other name, and travelled to Ireland using multiple passports.

The Central Bank of Ireland warned in June 2002 that one of Khan’s companies, Lloyds and Associates Ltd (Spain), was not authorised to carry out investment activities. However, he continued to attract funds, and extended his scam to sell Spanish holiday homes and land that he never directly owned. The victims of the fraud come from all over Ireland, but many appear to be based in the Cork region.

Link here.


Keats, Connelly and Associates, a financial planning firm dedicated to helping Canadian snowbirds take advantage of U.S. tax shelters is opening its first branch office in Boca Raton. “Our client base is expanding significantly in south Florida, and we are confident this expansion will allow us to better serve those clients,” said Robert F. Keats, the company’s founder. As many as one million Canadians now use Florida as a tax shelter, according to Keats, who said Boca is right in the middle of Atlantic coast activity. The new office will focus on assisting clients capitalize on U.S. tax advantages through cross-border planning, including tax planning and preparation.

Although Canadian citizens pay higher taxes than U.S. citizens, they are permitted under the North American Free Trade Agreement (NAFTA) to move their primary residences and businesses or investments to the United States at a substantial savings. Keats, Connelly estimates that Canadians at or above a 48% tax bracket, which is about US$80,000, can cut their taxes in half in Florida. Business taxes can be reduced by about one third. “I’ve had clients pay hundreds of thousands in Canada and drop down to five-digit tax numbers in Florida,” Keats said.

Link here.


Recent data compromises involving outsourcing vendors in India are focusing renewed attention on offshore security and privacy safeguards. But so far, at least, they have not resulted in any calls for additional controls from U.S. clients, according to executives at several Indian firms. The most recent incident involved the alleged sale of information about more than 1,000 U.K. bank accounts to a British newspaper. The data was obtained by an individual in New Delhi from call center contacts and sold to a reporter from The Sun, according to a story that the London-based tabloid published on June 23. That was the second such security breach involving India’s call center and business process outsourcing industry to be reported in recent months. In April, 12 people, including three former call center employees of Mumbai-based Mphasis BFL Group, were arrested in India for allegedly defrauding four Citibank account holders in New York of more than $300,000.

“These things are scary,” said the vice president of technology planning and development at a large investment management firm in the U.S. The IT manager, who requested anonymity, said his company has outsourced several application development and maintenance projects to a firm in India and already has several security controls in place. For instance, the offshore team that is doing the development work has no access to production data and instead works with test and quality-control information. All access to nonpublic data, such as Social Security numbers and account details, is monitored, recorded and audited. The company also plans to roll out an event notification and management tool that is designed to give U.S. IT staffers even greater visibility into what is going on at the facilities in India, the IT manager said. Those measures are being reviewed as a result of the alleged security breaches, but there is no immediate plan to add more controls, he said.

“A very public security breach like this has naturally created some concern. But it has not created any backlash among customers,” said Marc Hebert, executive vice president at Fremont, Calif.-based Sierra Atlanta Inc., which has an IT services facility in Hyderabad, India. Much of that may stem from the fact that U.S. companies have been requiring greater security controls on the part of vendors in India for some time now, said Sumedh Mehta, senior vice president of financial services at Mumbai-based Patni Computer Systems Ltd.

Link here.



Britain’s House of Commons last week moved forward with plans to create a new national ID card, but a sharp reversal in support for the controversial measure signals a rocky road ahead. British lawmakers voted in favor of the bill on Tuesday by an unexpectedly thin margin of 314-283. At the last minute, some members of Prime Minister Tony Blair’s Labour Party revolted against the cards, which would carry fingerprints and iris scans of cardholders and be backed by a national database containing extensive personal information.

The bill still has to pass a number of stages and final votes, but the preliminary vote, along with a report released last week by the London School of Economics showing that the plan would cost two to three times what the government promised, makes some activists hopeful that the plan might be altered drastically or abandoned altogether. “This was the first test of Tony Blair’s new government,” said Gus Hosein, a senior fellow at Privacy International, a civil liberties advocacy group, as well as a fellow in the Department of Information Systems at the London School of Economics. “It was critical that they win this and they went hard. And instead the majority (lead) was halved. Clearly the government is going to have to start listening (to criticism) where it wasn’t before.” A Home Office spokeswoman said it is too early to comment on the bill’s future success.

The bill still has to go to committee, where it likely will be amended, before a final reading and vote in the House of Commons as well as the House of Lords, the higher chamber of parliament. But local papers referred to the Labour Party defection as “the first real test” of Blair’s new electoral mandate after his party’s re-election on May 5th. If the bill is made law, it will be the first time Britain has had national ID cards since just after World War II, when the government abolished them. The bill, introduced to combat terrorism, illegal immigration and fraud, proposes an ambitious and complex plan that, if approved, could be a model for other countries.

Link here.

Finance & Leasing Association calls for wider access to ID card register to help beat fraud.

Finance & Leasing Association called for an amendment to the ID Cards Bill to help finance institutions in the on-going fight against fraud. The amendment, tabled as the ID cards debate moves to committee stage, proposes access for lenders to the ID Cards Register when verifying credentials for credit applications. “The current wording of the Bill suggests that commercial organisations may not be able to access the ID Card Register or insist upon customers identifying themselves by reference to the Register or production of their card,” explains Ashley Holmes, FLA’s Head of Legal Affairs and Policy Development.

“As drafted, the Bill would mean that lenders would continue to be forced to take other forms of identification such as passports, which may be more ‘unreliable’ and prone to fraud – which would seem to conflict with the Government’s wish to prevent money laundering and fraud. We therefore support the amendment and urge Government to accept it.” FLA welcomes the introduction of ID cards as a potentially valuable tool in the prevention of fraud – which costs the financial services industry millions of pounds annually – but only if the system for their use is watertight as a secure and reliable means of verification over and above existing forms of ID currently being used.

Link here.


The head of the UK’s passport agency has confirmed that a tightening up of passport standards, including the inclusion of biometric information, will not eliminate sophisticated fraud or terrorism. Bernard Herdan, chief executive of the UK Passport Service, said that tighter passport standards “will make a huge difference” in combating organized crime and illegal immigration. But, he said, “when you get into the domain of terrorism and really sophisticated fraud I’m not saying this will stop everything from ever happening… It is less evident that tougher passport standards are going to prevent terrorism.”

Herdan was pretty candid on forgers’ ability to circumvent new security measures, saying the agency would have to keep changing designs and would have to change its technology “more frequently than every ten years” as it races to keep ahead of forgers. Herdan’s comments come as the U.S. continues to stampede the rest of the world into including biometric information in their passports even as further flaws are revealed in America’s own passport strategy.

Link here.


Some Wisconsin judges are making people accused of alcohol-related offenses wear special ankle bracelets to track whether they are drinking. The bracelet’s maker, Alcohol Monitoring System of Colorado, believes the device can replace random breath tests. A couple of beers can trigger the bracelet, which measures alcohol consumption through skin perspiration, according to the device’s maker. The bracelet takes a reading and sends the information via wireless modem to a monitoring center. Milwaukee and Racine county court systems have joined an increasing number of systems nationwide using the bracelets.

“It seemed a little Brave New World-ish, or a George Orwell type of thing,” Milwaukee defense attorney Martin Tanz, who had a client ordered to wear the bracelet. “I guess the next step will be to wire it to the nearest police cruiser, and they’ll come pick you up.” About 1,800 people nationwide wear the bracelets, more than two years since the company introduced them, said the company’s marketing director. Racine County ordered 14 people to wear the bracelets since it started using them as an experiment last year, said Cheryl Zimmerman, whose consulting company works with corrections officials there.

Link here.


The German airline Lufthansa has started testing tickets encoded with passengers’ thumbprint data in hopes of speeding up check-ins without compromising security. The 14-day trial started this past Monday with Lufthansa employees trying out the system. If all goes well, the airline wants to roll it out in 2006. Though people will still be able to check in for flights using the “classic system”, the voluntary use of biometric data would make the process quicker. Passengers would get tickets encoded with their thumbprint data, then check themselves in by placing their thumbs on a machine. Frequent fliers would have their thumbprint data encoded on their frequent flier cards instead of their tickets.

Link here.


He got 6 million votes when he ran for president in 1980, but John Anderson almost could not get on an airline flight to Europe in April because his name was similar to one on the government’s watch list for terrorists. The former Illinois congressman joins Rep. Don Young, R-Alaska; Rep. John Lewis, D-Georgia; and Sen. Edward Kennedy, D-Massachusetts, all of whom had trouble boarding flights last year for similar reasons. Anderson’s testimony came at a hearing of the House Homeland Security Committee, which criticized the Computer-Assisted Passenger Prescreening System, known as CAPPS I, launched in 1996.

“Some days before our departure on April 23, 2005, the group arranging my ticketing notified me … that I was on a no-fly list and Delta Air Lines would not issue the ticket,” said Anderson, who now lives in Florida. After he was invited to Germany as a member of the Former Members of Congress Association earlier this year, Anderson found himself unable to buy a ticket. Anderson contacted the office of Rep. Clay Shaw, R-Florida, for help. He had to supply his Florida voter’s card and driver’s license, his U.S. passport and his Former Members of Congress identification card. Some days later, Anderson received a receipt from TSA’s Office of the Ombudsman, which investigates complaints from people who believe they were unfairly treated: “We have provided sufficient personal information to the airlines to distinguish you from other individuals and assist them in issuing your boarding pass more efficiently.”

He made the trip. But, Anderson told the committee, “My concern today is for less-fortunate travelers without a congressman and his staff to get through quickly to the right person at TSA.”

Link here.



When Americans celebrate their freedom on Monday, not all of us will have the same freedom to celebrate it. Though about 84 million Americans live in 19 states that allow unrestricted use of consumer fireworks, 36 million other Americans live in five states, including New York, New Jersey, and Massachusetts, where they need a permit to light even a sparkler.

Safety is the major concern of those who ban our celebratory backyard light and noise shows: 21 health- and fire-safety organizations joined together this month as the National Fire Protection Association to ban the sale of all fireworks to consumers. Their ad campaign is “Leave fireworks to the Professionals.” But their fears are overblown. Media coverage makes the issue seem much bigger than it is: A computerized search of the top 100 newspapers found more than 100 news stories in June warning that fireworks could be deadly or hazardous if used improperly. Television was not much different. CNN headlined a segment, “A look at the dangers of fireworks.” But, despite this slanted coverage, on average just six people a year died in fireworks-related incidents from 2000 to 2003. And many of those deaths occurred at professional fireworks displays. In contrast, about 15 times more children under the age of 10 drown in bathtubs each year than the total number of people killed in fireworks accidents. Despite the fears raised by the media, fireworks deaths are not something that people should spend much time worrying about.

We can protect people from only so much, and if we banned all the products that caused more deaths and injuries than fireworks, there would be virtually nothing left to use. After all, what is the Fourth of July celebrating if we criminalize even the tiny risks associated with fireworks?

Link here.


One week after the Kelo decision by the Supreme Court, Americans are still reeling from the shock of having our nation’s highest tribunal endorse using government power to condemn private homes to benefit a property developer. Even as we celebrate our independence from England this July 4th, we find ourselves increasingly enslaved by petty bureaucrats at every level of government. The anger engendered by the Kelo case certainly resonates on this holiday based on rebellion against government.

The City of New London, Connecticut essentially acted as a strongman by seizing private property from one group of people for the benefit of a more powerful private interest. For its services, the city will be paid a tribute in the form of greater taxes from the new development. In any other context, what is happening in Connecticut properly would be described as criminal. However, the individuals losing their homes understand that stealing is stealing, even if the people responsible are government officials. The silver lining in the Kelo case may be that the veneer of government benevolence is being challenged.

Kelo has several important lessons for all of us. We are witnessing the destruction of any last remnants of the separation of powers doctrine, a doctrine our founders considered critical to freedom. The notion that the judicial branch of government serves as a watchdog to curb legislative and executive abuses has been entirely exposed as an illusion. Judges not only fail to defend our freedoms, they actively infringe upon them by acting as de facto legislators. Thus Kelo serves as a stark reminder that we cannot rely on judges to protect our freedoms. It is folly to believe we will regain lost freedoms if only the right individuals are appointed to the Supreme Court. We are supposed to be a nation of laws, not men, and the fixation on individuals as saviors of our freedoms is misplaced. America will regain lost freedoms only when her citizens wake up and reclaim a national sense of self-reliance, individualism, and limited government. A handful of judges cannot save a nation from itself.

The Kelo case also demonstrates that local government can be as tyrannical as centralized government. Decentralized power is always preferable, of course, since it’s easier to fight city hall than Congress. But government power is ever and always dangerous, and must be zealously guarded against. If anything, the Supreme Court should have refused to hear the Kelo case on the grounds that the 5th amendment does not apply to states. If constitutional purists hope to maintain credibility, we must reject the phony incorporation doctrine in all cases – not only when it serves our interests. The issue in the Kelo case is the legality of the eminent domain action under Connecticut law, not federal law. Congress can and should act to prevent the federal government from seizing private property, but the fight against local eminent domain actions must take place at the local level. The people of New London, Connecticut could start by removing from office the local officials who created the problem in the first place.

Link here.

Federalism and the Bill of Rights: The pros and cons of Kelo.

Libertarians are divided over the Supreme Court’s decision in Kelo v. New London to allow coerced property transfers to private parties to count as “public use”. No libertarian likes the decision as it stands (since, for one thing, it clearly authorizes an expansion not only of State-level but of Federal eminent domain power); the disagreement is over what the Court should have done instead. Some libertarians think the Court should have protected private property owners from this expanded assault on their rights by striking down the New London statute. Other libertarians think the Court should have declined, on federalist grounds, any jurisdiction over eminent domain at the State level.

I find myself in partial agreement and disagreement with both sides. Let me explain why. First we need to distinguish the normative question Would it be it a good thing for the Supreme Court to strike down the New London statute? from the legal question Does the Constitution authorize the Supreme Court to strike down the New London statute? After all, there is no a priori guarantee that these two questions must have the same answer.

Second, the normative question must be disambiguated into two further questions: Should the Supreme Court’s policy in general be one that would lead it to strike down the New London statute? and Given the Supreme Court’s actual policy in general, would it have been good in this instance for them to strike down the New London statute? These questions might turn out to have distinct answers also.

Indeed, I shall defend the following answers to these questions: 1.) Does the Constitution authorize the Supreme Court to strike down the New London statute? – Yes. 2.) Should the Supreme Court’s policy in general be one that would lead it to strike down the New London statute? – No. 3.) Given the Supreme Court’s actual policy in general, would it have been good in this instance to strike down the New London statute? – Yes.

Link here.


An Independent Commission Against Corruption bribery case came to a spectacular end when a District Court judge stayed proceedings against four defendants on the grounds the agency had illegally taped privileged legal conversations in a manner that was “a degradation of the justice system.” Deputy Judge Julia Livesey condemned the ICAC for violating Basic Law provisions which safeguard privacy and legal privilege and called on legislators to curb some powers of the anti-graft body to prevent a recurrence.

“Legislators also need to introduce the regulations required for lawful covert recording as was originally envisaged under the Basic Law with all due haste, so that the guarding of the guards is not just left to the Judiciary,” she said. “[The ICAC] must make sure they do not overstep the bounds of what is right in their enthusiasm for ridding Hong Kong of corruption.”

The four defendants were charged with two counts of falsifying accounts and two counts of offering bribes to a public servant. Nearly HK$2 million was alleged to have been offered to Housing Authority officers in order to win contracts. Proceedings were stayed against all four when Livesey said the defendants were not able to have a fair trial because the means by which evidence was gathered “set a dangerous precedent.” However, two defendants had their bail extended to face trial on false accounting charges.

Lawmaker Audrey Eu praised the ruling. Hong Kong is fortunate that “we have judges who would be able to speak robustly when they see what they regard as a flagrant breach of rights by enforcement agencies,” she said. Eu called on the government to respect the ruling. “It’s unfortunate that this administration somehow doesn’t seem to respect judicial decisions as much as they ought to and sometime you get the feeling if the judgment is not convenient they think of ways to get round it,” she said. Livesey was harsh in her ruling, calling the ICAC’s behavior so “unworthy or shameful that it would be an affront to the public conscience to allow the trial to proceed.”

Link here.


Despite efforts to reduce crime rates in Antwerp, the city council admits that almost 20% of the population still feels unsafe. One of out of every three people avoids certain city districts due to safety fears. Neighborhood disturbances remain a problem and residents are annoyed by mess and aggressive road behavior. In response, Antwerp Council recently approved the “Safety City Plan” to further reduce crime and boost the public perception of safety.

Antwerp’s new safety plan involves a controversial operation to keep closer tabs on some of the city’s residents. Teams of four public servants will soon start systematically checking the identity and living circumstances of residents in various city districts. The data gathered will be sent via email to other government authorities with a request to take action where necessary. The policy has been dubbed “Armed Management”. Inspection teams will consist of public servants from the city’s safety, population and housing departments, plus the OMCW social welfare institute. Police will not conduct the door-to-door checks. Public servants will request approval to enter a house and guarantee privacy, but the data will be registered and sent to other authorities where necessary. The email addressee will not gain insight into emails sent about the same person to other government authorities. Only Antwerp will retain oversight of the complete dossier.

Foreigners with inadequate Dutch language skills are a prime target of the searches. Their dossier will be sent to language institute Huis van het Nederlands with a request for the immigrant to be enrolled in an integration course. If a resident is unemployed, their dossier will be sent to the federal government’s employment service RVA. If someone does not have valid identification, public servants will conduct a background check. Authorities may turn over illegal immigrants to the federal immigration service DVZ. Antwerp will not hesitate either to take legal action against landlords if tenants in inspected premises are paying an inflated rental price. Residents can refuse to co-operate, but the Flemish Parliament has given the city mayor authority to investigate the condition of the premises.

The League of Human Rights in Belgium says the plans cannot be reconciled with the right to privacy. It will not hesitate to take any “necessary steps” to thwart the council’s operation. It raised concerns about the gathering of information, the possibility that refusal to co-operate might lead to intensified suspicion and the fact the information will be shared with other government departments.

Link here.


A new Pentagon strategy for securing the U.S. homeland calls for expanded U.S. military activity not only in the air and sea – where the armed forces have historically guarded approaches to the country – but also on the ground and in other less traditional, potentially more problematic areas such as intelligence sharing with civilian law enforcement. The strategy is outlined in a 40-page document, approved last month, that marks the Pentagon’s first attempt since the attacks of Sept. 11, 2001, to present a comprehensive plan for defending the U.S. homeland. The document argues that a more “active, layered” defense is needed and says that U.S. forces must be ready to deal not just with a single terrorist strike but also with “multiple, simultaneous” attacks involving mass casualties.

The document does not ask for new legal authority to use military forces on U.S. soil, but it raises the likelihood that U.S. combat troops will take action in the event that civilian and National Guard forces are overwhelmed. At the same time, the document stresses that primary responsibility for domestic security continues to rest with civilian agencies. “The role of the military within domestic American society, both by law and by history, has been carefully constrained, and there is nothing in our strategy that would move away from that historic principle,” said Paul McHale, the Pentagon’s assistant secretary for homeland defense.

Still, some of the provisions appear likely to draw concern from civil liberties groups that have warned against a growing military involvement in homeland missions and an erosion of long-established barriers to military surveillance and combat operations in the U.S. The document acknowledges, for instance, plans to team military intelligence analysts with civilian law enforcement to identify and track suspected terrorists. It also recognizes an expanded role for the National Guard in preparing to deal with the aftermath of terrorist attacks. And it asserts the president’s authority to deploy ground combat forces on U.S. territory “to intercept and defeat threats.”

“It’s a mixed message,” said Timothy H. Edgar, a national security specialist with the American Civil Liberties Union. “I do see language in the document acknowledging limits on military involvement, but that seems at odds with other parts of the document. They seem to be trying to have it both ways.”

Link here.


The government’s use of the Patriot Act to force financial institutions to report suspicious transactions has resulted in an avalanche of unwanted paper and computer tapes that officials who collect the data say is undermining efforts to detect money flowing to terrorists. The government’s money-laundering crackdown in the past two years has ensnared a handful of banks that were fined for failing to report suspect transactions. This has prompted executives to file more “suspicious-activity reports” – the majority of which involve activity that is not suspicious at all, government and banking officials say.

This defensive filing by banks is clogging the database of the Treasury Department’s Financial Crimes Enforcement Network, which collects the reports, say current and former officials of the network, also known as FinCEN. In 2004, 689,414 suspicious-activity reports were filed, up from 507,217 in 2003 and 281,373 in 2002, FinCEN data show. In the first half of this year, roughly 400,000 reports were filed. The volume indicates that banks’ tactic for avoiding regulatory scrutiny is “to file more reports, regardless of whether the conduct or transaction identified is suspicious,” said FinCEN Director William J. Fox in an April report. These defensive filings “have little value, degrade the valuable reports in the database and implicate privacy concerns.” Law-enforcement and intelligence officials can get detailed information about individuals from the database without having to request and justify subpoenas.

Banks have been required to file suspicious-activity reports since a 1992 amendment to the Bank Secrecy Act aimed at catching money launderers and drug smugglers. The Patriot Act expanded the requirement to include looking for signs of terrorist financial activity and increased banks’ responsibility for monitoring their customers. It also extended suspicious-activity reporting requirements to brokerage firms, casinos and firms that cash checks or transfer money overseas. Money-laundering laws also require banks to file currency-transaction reports on any deposit or withdrawal of more than $10,000 in cash. They file about 13.6 million of these reports a year, a number that has stayed consistent because these reports do not involve judgment calls.

Link here.



This (past weekend) is the weekend when the nation, amid hot dogs and fireworks, congratulates itself on possessing values that the rest of the year are lamented as endangered. Worries about the country’s values frequently take three forms, and all are sure to be displayed (if not brayed) in the clashes over a successor to Justice Sandra Day O’Connor. First, it is said that the country is losing its standards of right and wrong, its belief in God, respect for authority, taste for hard work, love of nation and dedication to family. Second, it is said that America is falling behind other nations in regard to such traditional values, or even that the U.S. is at the forefront of undermining them. Third, it is said that Americans are sharply divided over these values, engaged in a culture war between bitterly opposed camps hewing to irreconcilable moral visions.

Wayne E. Baker, a professor of sociology, management and organization at the University of Michigan, reviews the empirical evidence for these claims in a new book, America’s Crisis of Values: Reality and Perception. His conclusion? None of them are true. Professor Baker is one of the researchers who have devised and analyzed the World Values Surveys. Since 1981, these vast, highly respected surveys have been measuring cultural variation and change in a growing number of nations – now almost 80 of them – around the world. These scholars have identified two key dimensions of shifting values. One is a move from traditional values, like the importance of religion and respect for authority, family and nation, to what are termed secular-rational values, like personal autonomy, political independence and ethical relativism on matters like abortion, divorce and euthanasia. The other dimension is a shift from survival values, like assuring material well-being and physical safety, acceptance of hardship, political caution and wariness toward outsiders, to self-expression values, like political activism, personal fulfillment, intellectual and spiritual exploration, and tolerance of outsiders and cultural diversity.

As nations pass from agrarian to industrial societies, they undergo a shift from traditional to secular-rational values. As they grow still wealthier and the postindustrial service sector swells, values shift from survival to self-expression. America is the great exception. Although it outstrips all but a few other nations in shifting from survival to self-expression values, it still “has one of the world’s most traditional value systems,” Professor Baker writes, “more traditional than other wealthy societies, with the exception of Ireland, as well as more traditional than almost all other societies covered in the World Values Surveys.” Not only do “Americans have some of the highest levels of religious beliefs, conservative family values, absolute moral standards, national pride and other traditional values,” but these remained essentially constant from 1981 to 2000, while they continued to be abandoned in nations otherwise resembling the U.S. Nor does empirical research of the kind Professor Baker favors support the idea that the crisis of American values consists of a fierce internal culture war between irreconcilable moral camps. Professor Baker says empirical studies have actually found that “attitudes about race, gender, crime, liberals and conservatives, and sexual morality have become less polarized over time.”

Link here.


Patriotic Americans have a lot at stake this 4th of July. After the glare of fireworks has faded, the true test of American patriotism moves to Congress, where both the House and Senate Judiciary Committees will prepare to debate the fate of the USA Patriot Act. It is a debate that has long been anticipated. When Congress passed the Patriot Act – all 150 sections of it – just weeks after the Sept. 11 terrorist attacks, many lawmakers understood that some of these broad new powers should only be temporary. They wisely agreed that many of the most controversial sections of the act (about 10%) would automatically expire in four years. Thus, as the Dec. 31 expiration (or “sunset”) deadline approaches, congressional debate about the Patriot Act is finally beginning.

But the opportunity for a robust debate has been marred by a pre-emptive effort in the Senate, where the Select Intelligence Committee decided to hold its vote and debate on expanding the Patriot Act in secret. A copy of the unwise and unwarranted bill it approved was not made public until more than two weeks later. Far worse than cloaking the legislative process in secrecy was the outcome. The Senate Select Intelligence Committee approved a bill that would make permanent virtually all of the controversial provisions Congress originally made temporary. What is more, the measure would give the FBI the power to write its own subpoenas to demand any kind of record, with no judicial approval and without making a showing to the court that there are facts that connect the records sought to a terrorist.

Clearly, the senators meeting behind closed doors did not hear Americans calling for Patriot Act reform. More than 400 boards of supervisors and town councils from Elko, Nevada, to New York City spoke up. Seven state governments, including four “red” states with Republican majorities, called for reform. Meanwhile, a new coalition, “Patriots to Restore Checks and Balances”, brings together some unlikely allies, including the ACLU and the American Conservative Union. The outcry is all the more remarkable when you consider that three years ago, a bipartisan movement for Patriot Act reform was virtually unthinkable.

The Patriot Act in its current form includes provisions that threaten the American legacy of liberty and privacy. But it can be fixed easily to restore meaningful checks and balances while properly focusing our limited anti-terrorism resources on foreign terrorists rather than ordinary Americans. The question is, will Congress keep America safe and free by correcting the fundamental flaws in the Patriot Act? We will find out when it resumes after the 4th of July recess. Patriotism is so much more than flag-waving and pyrotechnics. It is about vigilantly guarding the fundamental American principles of justice and liberty that have come under siege with the Bush administration’s determination to hold itself above the law. It is time to restore the basic checks and balances that are fundamental to our constitutional liberties. That is the kind of patriotism we yearn for today.

Link here.


According to the Columbia professor being interviewed on National Public Radio this weekend, freedom is an amorphous concept that is primarily a state of mind. This would appear to be at significant odds with the principle of unalienable rights to life, liberty and the pursuit of happiness envisioned by Thomas Jefferson in the Declaration of Independence, as well as the list of specific freedoms delineated in the Bill of Rights.

The right to life has long been under assault, as the culture of death has successfully placed the aged, the helpless and the unborn on the list of those defined as inhuman and therefore legal to kill. The last vestiges of a right to private property have been eliminated, as the recent Kelo decision makes all property officially communal, held only at the seigniorial whim of the local council. The right to bear arms has been limited, too – while it has not yet been destroyed completely, it is obvious that an attack on it will soon be forthcoming.

White House spokesman Scott McClellan’s statement that Americans “obviously have to respect the decisions of the Supreme Court” are downright Toryish. After all, the founders of this country rejected the notion that they had to respect the decisions of the English Parliament and King George’s ministers, for they had decided that they were going to be a free people. But considering that President Bush, as an owner of Major League Baseball’s Texas Rangers, was the beneficiary of a pre-Kelo land seizure himself, what other position could his spokesman possibly take? As McClellan said, “the president has made his views clear when it comes to private property rights.”

There is always an inherent conflict between government and freedom. Nearly every act of government, almost every law and regulation that is imposed from above, is intended to limit freedom. What conservatives must understand is that it is not always possible to be a fine, upstanding, law-abiding citizen and be a free man at the same time. In fact, for most of human history, it has been impossible. The American revolutionaries were lawbreakers of the worst kind, for they were directly challenging those who were their rightful masters in the eyes of the law. And yet even today, few would argue that their disobedience was both just and right. The question of justice turns on the point of whether government – on all levels – has overstepped its lawful bounds. For if the laws of government have passed those limits, they are not law, but mere dictatorial assertions.

The genius of America was its independence. As that independence has been systematically reduced over the years, so too has its competitive advantage over other, less free, nations declined. The best and brightest have been leaving the country for years, and the American brain drain is accelerating as the Internet has made it possible to run a software company from the Bahamas or an import-export operation from Ireland, where the taxes are lower and there is no danger of losing your home to a Wal-Mart. In summary, this is not a day to celebrate American independence. It is, instead, a day to mourn America’s passing and pray for its eventual rebirth.

Link here.


U.S. national security bureaucracies, some members of Congress, and their special interest supporters are eagerly demonizing the next “insidious” enemy: China. Hawks and protectionists have seized on a bid by the primarily state-owned China National Offshore Oil Corporation (CNOOC) to take over California-based Unocal Oil. They allege that China could use the acquisition to meddle in oil pricing or even withhold supplies from the United States. U.S. officials have admitted heartburn over a communist-run corporation owning a major U.S. oil company.

But ironically those communists – now in name only – are trying to teach U.S. government bureaucrats and their protectionist pals in the “land of the free and the home of the brave” something about economic freedom and unfettered markets. According to Chinese Foreign Ministry spokesman Liu Jianchao, “The economic cooperation between China and the U.S. serves the interests of both sides. The bid by CNOOC for Unocal is a normal commercial activity between enterprises. We think that these commercial activities should not be interfered in or disturbed by political elements.”

The U.S. national security bureaucracies, dependent on public fears of oil shortages or high prices to maintain the flow of tens of billions of dollars into their agency coffers, have long had a vested interest in ignoring the fact that the worldwide oil market would function well without their meddling. For example, the key producers in that market, Saudi Arabia and the other oil-rich states surrounding the Persian Gulf, actually need to export their oil more than the West needs to buy it.

If the Chinese takeover of Unocal is blocked with a bogus “national security” justification, the world will merely see an attempt by the U.S. government to unfairly help Chevron, a U.S. company that was outbid by CNOOC in the Unocal takeover attempt. Such government meddling in a U.S. market traditionally seen as free by world standards could result in a chilling of foreign investment, which is important for U.S. economic prosperity. As indicated by CNOOC’s share price on the Hong Kong stock exchange, the market is already predicting that the U.S. government will stop the company’s acquisition of Unocal. Let us hope the market’s prognostication is wrong.

Link here.


There I was – a bratty, independent kid, with a twisted sense of humor who enjoyed doing illegal things: Entrance into anyplace at all displaying the “No Dogs or Jews Allowed” signs was fun, even though it was clearly understood that – if discovered – neither dog nor Jew would ever be seen again, regardless of age. The best game of all, though, was diving into the Berlin Olympic Pool, and, hiding behind my Teutonic looks, smiling innocently at the guards. But those men were just ordinary cops. When it came to the Gestapo, it was best to quickly and quietly disappear. Oh yes. The Gestapo meant business.

When Benjamin Franklin said, “Those who would give up essential liberty to purchase a little temporary safety, deserve neither liberty nor safety,” he was right on! In 1930’s Germany, “safety” meant “power”. The popular sentiment was, “Power will keep us safe. After all, we are the good people, the ones who want to clear the planet earth of all who hinder progress, of all who stand in the way of our good intentions – and the more power our Empire has, the safer we will be, the safer we will make the world.” The national slogan, shouted joyfully in the streets, was, after all, “Heute Deutschland, Morgen Die Welt” (“Today Germany, Tomorrow the World”).

The Germans, then, willingly gave up essential liberty to purchase that safety of power, and the Nazis did an excellent job of facilitating that. They invented the Gestapo, which was an acronym for Geheime Staats Polizei (Secret State Police). And the Gestapo was formidable, indeed. Black, form-fitting uniform jackets, complete with epaulets; black breeches tucked into jack-boots polished to such perfection that they gleamed in all weather; black hats with visors so glossy, they shone in the dark. Oh, yes, these men were quite rightfully feared.

In 1930’s Germany, it was completely proper, fitting and expected for persons to turn in to the authorities anyone even remotely suspected of in some way subverting the government. Neither a suspicion nor an informant was too small: Children over the age of eight, all of whom were members of the Hitler Jugend if they were boys and Bund Deutscher Mädchen if they were girls, were expected to turn in family members – including parents – if they were overheard speaking disrespectfully or seditiously of Hitler or any members of his administration. These kids were trained and propagandized to simply put the “safety” of their great country over the “liberty” of their families. Thus, if even one’s own kids were gleeful informants, can you imagine what the neighbors were?

When someone was turned in, the Gestapo showed up to do the honors. No warrant was needed. Time of day or night was irrelevant. Folks simply got hauled off, and, once taken away, never returned. Gestapo interrogation methods were simple: Torture them until they talk. Most of the time – even if these prisoners had absolutely nothing of value to report – they eventually broke under the torture and simply blurted out whatever they thought the inquisitors wanted to hear. Once they had spoken, off they went to their deaths at the local extermination camp, and if they chose not to speak, well, then the torture continued till they died in the interrogation chamber.

Now, here we are in 2005, in the United States of America, busily trading essential liberties for the safety of power. We, too, understand that “safety” means “power”…

Link here.


The Group of Eight finance ministers will meet this week in Perthshire, Scotland to address various weighty financial decisions that their governments have expropriated from the more-capable hands of their citizens. Thanks in part to the globally choreographed performances of dozens of famous, caring, and would-be-famous-and-caring rock stars, the G-8 – a group, not of countries, but of governments of countries – are being cajoled to “make poverty history” by … by … it is not very clear, but it involves a lot of things, most of all money. It seems to involve first “forgiving” the extensive debt (actual money amounts of which are incredibly elusive in media accounts) of “poor” countries to “rich” countries and then making even larger fresh loans that are forgiven in advance, making them grants in aid.

There are today, of course, more people than ever living in “extreme poverty”, despite many decades of lavishing foreign aid much like that being proposed on the very countries in which the millions in extreme poverty are to be found today. In fact, thanks to the stunning fecundity of poverty wherever it receives proper nourishment, it may now be seen that those long years of dribbling aid appropriations are finally bearing the tragic fruit that will finally empower governments to confiscate the wealth and energy of their populations on a truly grand scale. That fruit is the extremely impoverished themselves. And how might they themselves be the product of past years of misspent aid?

To start with, that aid, being rendered by governments to governments, has enabled dictators such as Robert Mugabe of Zimbabwe to gain, wield, and hold power quite independently of support from their own populations. This power to impoverish is in fact the root cause of the problem. Second, such aid as the Mugabes and their apparatuses allowed to filter down to their populations in the previous generation made its recipients dependent on handouts and withered such resources of skill, energy, and capital as they may have commanded before the manna descended. And finally, it fed this earlier generation better than they otherwise would have been, enabling many to give birth to and raise to adulthood the present teeming generation of the extremely impoverished.

As this bonfire of the vanities gathers its own fuel and rages ever higher, compassionate musicians and politicians throw themselves into it in a frenzied rush to ride the updraft. They will burn brightly this week – not only finance ministers but heads of state themselves, Tony Blair, George Bush and a cast of thousands drawn mostly from the governing class. It promises to be nothing short of the globalization of welfare from which only the powerful ultimately benefit. Make Poverty History, of course, has a web site, and its indignant opening line is, “Millions of people across the world said enough is enough …”

But it isn’t. And it never can be.

Link here.


Cui Bono is not the rock musician who fashions himself mankind’s ambassador to the governments of the world. It is, rather, the question asked when an official was murdered in ancient Rome: “who benefited”? It is the question gullible minds have long forgotten to ask themselves following politically-motivated atrocities. The state saves us the difficulties associated with asking and exploring such a question. Following the bombing of the federal building in Oklahoma City, as well as the 9/11 attacks on the WTC, the political establishment locked most Americans into one explanation, “terrorists”. It is amazing that, for all the criticism heaped upon so-called “intelligence agencies” for their “failure” to anticipate 9/11, federal officials were able to identify the alleged perpetrators of these crimes – complete with photographs of same – within hours after the attacks!

The state does not want disquieting questions to be asked. In fact, it urges the public to “remain calm”, and not be distressed by destructive events. The state will explain it all in terms that serve its ends, with no need for minds to be sidetracked by “cui bono” inquiries into other possible causal factors. Thus, one of President Bush’s first acts, following 9/11, was to remind people what their minds had already been conditioned to reject, namely, “conspiracy” explanations. That he immediately spouted conspiratorial theories of his own (e.g., “axis of evil”, al-Qaeda, Islamic terrorism) did not register, in the minds of most, as just one more of this man’s glaring contradictions.

I subscribe to the sentiments of a friend who said “I am not interested in conspiracy theories; I am interested in the facts of conspiracies!” Those who deny, outright, the existence of conspiracies, have a difficult time explaining the events of 9/11. Was there some kind of “harmonic convergence” that brought the nineteen hijackers onto these planes without any concerted intentions on their parts? Was it nothing more than fate – what Middle Easterners would call “kismet” – that brought these total strangers together that morning to bring about the unplanned orchestration of these deadly and destructive acts? Intelligent minds would reject such an explanation, leaving us to find causation in a conspiracy.

But Mr. Bush – and all the mind-setters in academia and the media – warns us to resist temptations to look to conspiracies for causation, that those who seek such inquiries are “paranoid” and probable hate-mongers. On the other hand, it is quite acceptable to embrace conspiracies identified by the state. We are to listen only to the booming voice of “the Great Oz”, and to “pay no attention to that man behind the screen.” The question becomes, then, not whether conspiracies exist, but who has conspired to bring about massive acts of death and destruction? A beginning point is to ask the question instinctively posed by Romans: “cui bono?” Who has benefited from these various acts? Such an inquiry does not necessarily provide one with the correct answer but, like police investigators who focus upon the spouse of a murder victim as the initial suspect, it is a rational way to begin.

This is an opportune time for intelligent men and women to begin formulating their own questions, rather than continuing to internalize answers fed to them by those with an interest in conditioning their minds. Such an inquiry ought to include the possibility that some of these events might be the product of provocateuring (i.e., the political establishment engineering attacks in order to arouse public sentiment on behalf of expanded police powers and a war agenda). The very existence of the word admits of its historic role in matters political. The burning of the German Reichstag facilitated Hitler’s rise to power, while Roosevelt’s conscious efforts to bring about the bombing of Pearl Harbor made it possible for him to overcome public opposition to entering the war. Those who might be inclined to consider such a possible explanation for 9/11 are invited to read David Ray Griffin’s book The New Pearl Harbor, in which he invites such an inquiry. To raise such a possibility as a question to be examined is not to make an accusation, but only to follow the “cui bono” question to embrace all who might have so benefited. If we are to understand the vicious nature of our world, we must follow wherever the evidence leads us; we must not foreclose any inquiry by political fiat.

So-called “Islamic terrorist” groups might also benefit from such attacks and must, therefore, be kept on the list of suspects to be examined. “Terrorists” who aspire to state power use such attacks – as well as American military attacks upon other countries – as a basis for recruiting followers of their own. To say, therefore, that state systems and “terrorist” groups each benefit from acts of violence upon others, is simply to identify the symbiotic nature of all politically-based systems. And thus do we come to the crux of the matter. Nations that war upon other nations ignite angry responses from the victims of such attacks. Politicians and the more observant members of the media know what they do not want you to know: the way to end “terrorist” attacks is to stop having foreign policies that make other people angry!

None of what I have said is meant to justify what are called “terrorist” acts. What these groups do is every bit as indefensible as Americans bombing Iraqi cities and torturing Iraqi citizens. What I am urging is an end to the divisive thinking that underlies the mutually destructive nature of all political systems. The state – whatever its form – is terror, for it depends upon threats and violence to obtain obedience to its will. Americans need to understand that their government, as long as it persists in using offensive military power against others, is making America a most insecure place. The real “homeland security” is to be found in the United States announcing to the world that it intends to live with others by free trade, not by force of arms; that Americans will, in the words of Lysander Spooner, “go home and content themselves with the exercise of only such rights and power as nature has given to them in common with the rest of mankind.”

Link here.

The failed war on terrorism.

The savage attack in London, for which al Qaeda has reportedly taken credit, is just one more indication that the War on Terrorism is not working. Just recently, the Bush administration cancelled the publication of the annual “Patterns of Global Terrorism” report, which would have embarrassingly revealed that major terrorist attacks worldwide increased from 175 in 2003 to 625 in 2004. The War Party has been arguing for almost four years that the Bush administration’s War on Terrorism has reduced the number of terrorist attacks throughout the globe, but all data seem to demonstrate an increase.

The horrific atrocity in London is simply the latest and most pronounced incident of the terrorism incited by the War on Terror, at least since the attack in Madrid. When the Spanish were attacked, they did the wise thing. They pulled out of Iraq, on schedule, and distanced themselves from the belligerent U.S. foreign policy of perpetual war for its own sake. They did not shy away from the principle of justice for actual terrorists, only from a policy of cyclical violence guaranteed to make matters worse. How horrible it is that innocent Britons would pay for the crimes of their own government and the U.S. government of which London is one of the most loyal satellites.

And yet, like clockwork, we can expect calls for redoubling the efforts to solve Islamic terror with State terror, to vanquish this fanatic violence with well-calculated and engineered violence of our own. Brute force is not our salvation, especially as directed by State central planning and done so with little regard for the innocents who inevitably die in warfare. Such violence did nothing to save the innocents who died in London, nor can it do anything to bring those people back or solve the underlying problem.

Link here.
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