Wealth International, Limited

Offshore News Digest for Week of November 28, 2005

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

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Ever since the OECD took the Cayman Islands off its blacklist for tax havens, this country has campaigned for the same standards of regulations to be applied among all nations, not just offshore jurisdictions. The Minister with International Initiatives affecting the Financial Services Sector, Hon. Alden McLaughlin, said OECD member countries were quite happy to have strong anti-harmful tax laws implemented in offshore jurisdictions, but were not enthusiastic to have the same rules applied to their own countries. The Cayman Islands as well as other offshore jurisdictions said this was discriminatory, given that OECD members did not have to abide by the same rules and regulations. So the concept of a level playing field was put forward.

The recently-concluded OECD Global Forum in Australia reviewed the progress of the level playing field of other countries. “The objective of trying to get 82 nations to implement the principles of a level playing field is a work in progress,” said Mr. McLaughlin. “There has been substantial progress, but just the mere acknowledgement of acceptance of a level playing field is a huge step by the OECD.” The principle of a level playing field at the OECD Global Forum requires that all jurisdictions, whether OECD member or OECD non-member, should abide by the same high standards for exchanging information on criminal and civil taxation.

Mr. McLaughlin explained that if an investor has to jump through several hoops to comply with regulations in one country, but in another country that same investor does not have to go through the same red tape, then it gives the second country an unfair advantage. “The issue becomes discriminatory when certain nations comply with several standards and operating requirements while bigger OECD countries do not have the same regulations. Whatever the jurisdiction, similar regulations should apply,” he said.

Link here.


Hundreds of single females could flood the Island looking for a husband, after a UK tabloid with a daily readership of one million, voted Bermuda the world’s number one place for a woman to find a man. “Mr. Wonderful” – read the headline of the Daily Express article published two weeks ago. “Are you looking for love?” it asked. “Take our tour of exotic locations where eligible bachelors far outnumber single women.”

Listed first among Silicon Valley (California), Nathan (Australia), Lisdoonvarna (Ireland), Beijing (China), Shetland (UK), Richmond (UK) and Nome (Alaska) – the Island did appear exotic. The article continued, “Thanks to its status as one of the world’s premier tax havens, Bermuda has become a prime hunting ground for single women. “Their target: the hundreds of male lawyers and accountants who have been shipped to the Island to keep their company’s accounts in order.”

Link here.


Some areas of Europe popular with second home buyers could see property prices fall by 10% or more in the year ahead, according to overseas property specialists Tribune Properties. 2005 saw the first signs of a property slow down, and even the reverse of sharp gains in holiday home prices over recent years in Spain and Portugal. With owners unable to sell their property likely to drop their asking prices in 2006 to secure a sale, buyers will be in their strongest negotiating position since the mid to late 1980’s when prices dropped by nearly a third on the Spanish Costas.

Europe’s worst drought in living memory had an affect on the markets in Spain and Portugal earlier this year, with many would be buyers wondering if they would be able to use their pool in years to come, with consequential rentals possibly tailing off. “Some buyers rely on renting their holiday home out as they take out a mortgage to buy”, says Roger Munns of Tribune, “and if they can’t rely on this it creates doubt as to whether to buy or not. Some buyers were taking the view that they should wait to see what happens.”

But it is not just the possibility of more droughts and unreliable rental income that is beginning to see prices drop in some areas, according to Tribune. The emergence of new European markets in the former Eastern Bloc has seen British, Dutch, Belgian and German buyers head for countries like Bulgaria where apartments and houses can be bought at a fraction of the price of Spain and Portugal. Already we have seen villas in Menorca drop in value by around 10%, and they could, and probably will, go lower.

In contrast to lower prices on the Spanish Costas and Menorca, Tribune forecast that prices on the Algarve and Malta are likely to stay steady or increase as their domestic markets are strong. The two countries they see in Europe with growth potential for 2006 are the tax havens of Andorra and Monaco. Monaco and lesser known Andorra both offer no income tax for residents, and Andorra has seen double digit property price inflation for the last two years, with the 2005 figures likely to match. After a slow start to the year Monaco has seen strong buying in the last quarter. With the new government in Germany increasing the top rate of income tax, Tribune forecast demand continuing through to 2006, as that will mean more Germans seeking residency in a country with low tax levels.

Link here.


The OECD is an international bureacuracy controlled by high-tax European welfare states. As such, the OECD pursues left-wing initiatives such as a campaign against “harmful tax competition”. According to the OECD, it is unfair for jobs and capital to escape fiscal hell-holes like France and Germany and migrate to less oppressive jurisdictions such as Hong Kong, Switzerland, Ireland, and the U.S. But this is hardly big news. As John Berlau notes in Human Events, the OECD routinely proposes big-government policies that would hurt America. What is big news, by contrast, is the fact that American taxpayers are paying one-fourth of the OECD’s bloated budget. In other words, American taxpayers are paying bureaucrats in France (who pay no tax, by the way) to advocate higher taxes on the U.S.

Link here.


As disruptive as they have been, the oil shocks of the past have all had a silver lining: A significant portion of the revenue windfall accruing to oil producers – especially those in the Middle East – has been recycled back into dollar-denominated assets. In earlier oil shocks, the flows associated with these “petro-dollars” have been sizable enough to have contained the damage to U.S. interest rates and to the interest-rate-sensitive components of the U.S. economy. The energy shock of 2005 is different. While sharply higher oil prices may have generated close to a $300 billion revenue windfall for Middle East oil producers, the reflow back into dollars through the petro-dollar effect is largely missing in action.

That conclusion came through loud and clear in my recent trip to the Middle East. While I only spent a few days in Abu Dhabi and Dubai, I had the opportunity to gather views from a large group of decision makers who attended our second annual Middle East institutional investor conference. That conference, in conjunction with a number of private meetings, exposed me to a broad cross-section of investors, businessmen, and government officials from all of the region’s major oil-producing states. They were emphatic and virtually unanimous in stressing several reasons why the financial recycling of this oil shock is very different from shocks of the past.

First, a significant portion of the oil revenue windfall has been plowed back into surging domestic equity markets. Awash in newfound revenues, Middle East oil producers now feel strongly about supporting their home markets. Second, booming domestic real estate projects have also absorbed a meaningful portion of the windfall. Dubai reminds me of Shanghai’s Pudong a dozen years ago. Third, post-9/11 security concerns are seriously hampering Middle Eastern capital flows into dollars. Many cited great frustration over the new regulatory requirements of the U.S. Patriot Act, which require extensive documentation of Middle East portfolio flows into U.S. financial institutions. At the same time, given the ongoing political turmoil in the region, many Middle East investors simply do not want to risk being exposed as pro-American in their asset allocation decisions. Fourth, Saudi Arabia, the region’s and the world’s largest oil producer, has a public sector debt problem that could absorb a significant portion of the nation’s windfall from higher oil prices. Fifth, there is deepening concern over the dollar outlook in the Middle East. Despite this year’s rally following nearly three years of decline, most of the asset allocators I spoke with felt there was more to come on the downside.

Interestingly enough, the lack of petro-dollars also shows up in the U.S. capital inflow data. OPEC holdings of U.S. Treasuries have fallen from a peak reading of $67.6 billion in February 2005 to $54.6 billion in September 2005. There could well be broader macro implications of this development. Many have cited the petro-dollar effect as a key reason behind the dollar’s surprising strength in 2005. The above arguments strongly suggest this line of reasoning is not well founded.

I was pleasantly surprised by what I found in the Middle East. In the short span of some 32 years since the first oil shock, there has been an impressive transformation of the region’s financial and economic base. In the two oil shocks of the 1970s, OPEC was largely unprepared for the staggering revenue windfall. Today, the region is far more advanced – it has a much greater menu of internal investment options to choose from. Each country has its own development projects, rapidly expanding internal capital markets, and increasingly sophisticated fund managers who look at a wide range of global portfolio choices. Dollar-based assets are now only one item on the region’s investment menu.

Link here.


In the run-up to last month’s passage of the Central America Free Trade Agreement (CAFTA), the anti-globalization doomsayers were out in force with bold predictions about the “final blow” the deal would mean to the economies of Central American countries. Pro free-traders argued just as vehemently that CAFTA was a major step in building the foundations for a democratic community of nations in our hemisphere. What is largely been overlooked from both sides however may have little to do with CAFTA at all. Instead, one of the biggest economic forces reshaping Central America in the coming years may be a demographic shift occurring right here in the U.S. spurred by the massive retirement of the baby boomer generation.

According to a recent New York Times story, starting in January of next year baby boomers – defined as those born between 1946 and 1964 – will start turning 60 at a rate of more than four million a year. The leading edge of the baby boomers is beginning to turn 59½ now – the age when Americans can start collecting certain retirement benefits without penalty. The number of Americans 55 and older is expected to skyrocket from 67 million this year to 97 million by 2020.

In many ways boomers are a different breed altogether than the generations that preceded them. They are healthier, live longer, and are more active, mobile and adventurous than prior generations. Trends suggest many will continue working beyond the traditional retirement age of 65, launching second careers, becoming entrepreneurs or focusing more on charitable and volunteer projects. But in one fundamental way, baby boomers may not be so different than their parents and grandparents. William Serow, professor of economics at Florida State University in Tallahassee has been studying migration patterns of the elderly for years, and believes that since the end of World War II younger, more well-off “roving retirees” in their 60s still instinctively seek out warmer climates in “fun” places like Arizona, North and South Carolina, and Florida.

According to Serow, the other key goal of this more affluent group of retirees is reducing living expenses by moving to sun-belt communities with cheap housing and lower taxes. And therein lies the big conundrum for today’s boomer retirees: Just as millions of retiring baby boomers are getting ready to migrate to warmer sun-belt states, these attractive retiree destinations are experiencing skyrocketing real estate prices and property tax assessments that may put these locations out of reach for all but the most wealthy boomers.

So, what is the significance of all of this for Central America? Tomorrow’s elder migration will not necessarily be to the sun-belt states in the U.S. It is just as likely that a large subset of boomer retirees – call them “boomer gringos” – will bypass southern sun-belt states altogether for more affordable Central American alternatives like Nicaragua, Costa Rica, Mexico, Panama, Belize and Honduras. Most Central American countries are still only a two or three hour flight back to the states and have adequate infrastructures allowing retirees to stay in touch with friends and loved ones back home – good cell phone coverage, broadband Internet connections, even satellite television. Having recently returned from vacation in Nicaragua and Costa Rica, the anecdotal evidence suggests it is already happening.

What is known is that governments in Central America are luring gringos with new laws that include impressive incentive packages for retirees. And despite the inherent volatility and political risks that remain in many of these countries, boomer gringos (and Central American governments themselves) are betting that the economic benefits of a retiree migration to Central America will be a two way street. Retirees get a lower cost of living, warm weather and cheap housing and create a virtuous cycle in return – more retirees equals more local jobs, resulting in more economic stability and less political instability, resulting in more retirees.

Link here.


Westerners who travel to the Middle East often pass through Dubai and sigh deeply. “If only the rest of the Muslim Middle East were as free as Dubai,” they say before flying back to Amsterdam, London, New York or wherever they call home. Dubai is a city of about one million people and one of the seven hereditary sheikhdoms that make up the United Arab Emirates (UAE). Dubai’s ruling family, the Maktoums, have built a forward-looking, prosperous and relatively liberal enclave in a region where those three qualities are rarely found together. In Dubai, alcohol is legal. Christians can build churches. And many grocery stores sell pork. These three measures seem unimportant to people in the West, but they all put Dubai years beyond most of the Muslim Middle East in terms of tolerance for outsiders and for different faiths.

I worked in Dubai from late 2004 to June 2005. In many respects, Dubai certainly could serve as a model for its much larger (and more conservative) neighbors, such as Iran and Saudi Arabia. The Maktoums want their city to become one of the great global entrepots of commerce, like Hong Kong or New York. They know Dubai cannot rely forever on its energy sector to fuel its prosperity. To integrate their city into the global economy, the Maktoums constantly seek out advice from outside the country. This sets an example for their subjects. If entrepreneurs in Dubai want to build something – whether it is a hotel for foreign tourists or a legal code for Dubai’s growing banking hub – they seek out foreign experts, without hesitation. Dubai is fast becoming a global crossroads as a result.

In contrast to the rulers of Iran and Saudi Arabia, the Maktoums have confidence in themselves and their people, and do not fear the outside world as a source of cultural pollution. Nor do they appear to want Dubai to become a world leader in exporting either Islamic revolution or extremism. Rather, the Maktoums have emphasized peaceful economic development as their goal (although Dubai hosts a massive annual aviation show that includes a large military component). If more Middle Eastern elites shared the Maktoums’ courage and pragmatic openness to foreign trade and investment, as well as their pious but restrained religiosity, it could only help the region.

Economically, Dubai is certainly a model for the rest of the Muslim Middle East. In terms of its political status quo, Dubai does not shine nearly as bright. For one thing, Dubai is definitely not a democracy – and neither is the UAE. Many Westerners frequently become mesmerized by Dubai’s glitz and overlook this. Dubai has a working stock market, rule of law and a fairly honest police force. (Unless you happen to be Indian – another story for another time.) It has no elected parliament or legislative branch, no political parties and little state transparency, however. Dubai may be a benevolent despotism, but it is still a despotism and its political culture is fiercely autocratic.

Over time, Dubai’s example should exert a salutary influence on the policies of its neighbors. Still, Dubai has a long way to go before it becomes an equally inspiring political model. Considering how hopeless the cause of economic and political liberalization in the Middle East appears at times, half a loaf is definitely better than none.

Link here.


The U.S. Financial Crimes Enforcement Network (FinCEN) estimates that up to 1.5 trillion dollars is laundered annually around the world .Much of this is laundered by rich institutions in rich countries, rather than by tropical offshore centers. In the world of high finance, PEP is not a stimulant to keep you awake on the trading floor. It means “politically exposed person”. Handling a PEP bank account is big, though risky business. FinCEN estimates that up to $1.5 trillion is laundered annually around the world. Much of this is laundered by rich institutions in rich countries, rather than by tropical offshore centers. Where does it come from? Money laundering is widely defined as inserting money of illegal origin into the legal financial system. The origins can include drug dealing, illegal arms trafficking and bribery.

The Bank of Credit and Commerce International (BCCI) collapse in 1991 is regarded as the biggest bank fraud in history, involving billions of dollars in dirty money. The bank had its head office in Luxembourg and was run from London, but its $1.2 billion liquidation involved court proceedings around the world. In 2001, the House of Lords allowed the case against the bank to proceed. Hearings began in 2004 in London. Banker Agha Hasan Abedi founded BCCI in 1972 with an intricate structure of multiplying layers designed to evade control by authorities in the more than 70 countries in which it operated. The bank ownership and management has been charged with crimes including money laundering, bribery of PEPs, supporting terrorism, and arms and drugs trafficking. Legitimate depositors lost millions of dollars when the bank was closed down after it was discovered that BCCI, which at its height was shown to hold assets of $20 billion, had disguised huge losses and was insolvent. The liquidators who have recovered 75% of the lost assets blame the Bank of England for doing nothing despite knowing BCCI was poorly managed. The problems at the bank dated at least as far back as 1985 when Price Waterhouse investigated BCCI losses.

In 1988 a branch of the BCCI in Tampa in Florida was closed after being accused of money-laundering. BCCI records and the testimony of former BCCI officials document its systematic securing of central bank deposits of developing countries, its favors to PEPs, and its reliance on them for pulling strings. “While they are undoubtedly neck-deep in money laundering, it is nevertheless a common misconception that most money is laundered in offshore financial centers and developing countries, an impression that is cultivated by governments of major countries seeking to put the blame somewhere other than on their own doorsteps,” says David Marchant, editor of Offshore Alert, an investigative publication based in Miami.

More money is laundered in New York and London than anywhere else in the world, says Marchant in a written interview. “Also, much of the money that is laundered in poorer countries is done by banks which are branches, subsidiaries or affiliates of banks in major countries such as the U.S. and the UK.” A BBC report published March 2002 says “London, New York, Tokyo, Paris, Frankfurt and of course Switzerland have their own thriving offshore businesses. And many crooks prefer dealing with the big places, where the sheer volume of money changing hands covers their tracks.” The island territories often point out that “the $1.6 billion found to have been looted from Nigeria by the family of the late dictator Sani Abacha was found, not in the Caribbean or the Pacific, but in reputable banks in the UK and Switzerland,” the report says.

Link here.



General Shaikh Mohammed bin Rashid Al Maktoum, Dubai Crown Prince and UAE Defence Minister, said that the UAE would remain free of taxation. “We do not have tax (and) we do not need to have tax,” he said. Saudi Arabia’s agreeing to levy sales and income tax after getting the WTO membership was sparkling some concerns that the UAE would follow suit. The thorny issue of taxation recently arose in connection with the government intervention in the soaring rental costs problem in the UAE.

Shaikh Mohammed recently said that the UAE authorities were discussing the possibility of introducing sales and income tax in the country. “We are (still) under discussion (and) we have not decided yet. They are just bringing the idea (of levying tax),” he said. In a recent interview with Reuters, Shaikha Lubna Al Qasimi, Minister of Economy and Planning, said that the UAE was planning to impose sales tax on tobacco products which becomes effective from next year. “We are looking for imposing sales tax in some sectors such as tobacco,” the agency quoted her as saying. This was regarded by observers as a possible first step to introducing sales tax on a larger scale in the country.

Earlier this year a report by the IMF has recommended that the UAE should diversify its revenues by introducing a value-added tax (VAT), which raised concerns about the attractiveness of the country to foreign investments.

Link here.


The following information is intended for U.S. tax practitioners who do not have extensive experience with cross-border (outbound) tax reporting requirements. There are a variety of tax forms that are required for taxpayers who have cross-border transactions. This practice aid provides a brief description of 21 of the most frequently required forms for foreign investments, grantors or beneficiaries of foreign trusts and U.S. owners of foreign corporations or foreign limited liability companies. A comparative tabulation of most of these forms is available by linking to Foreign Forms. Additional information about the U.S. treatment of international transactions may be found here.

Free copies of IRS Tax Forms and Instructions are readily available from their web site. The following links are to brief (one or two page) summaries of the elements of different tax forms that are often required in connection with foreign investments, foreign trusts or foreign business interests. The IRS instructions to these forms are often very confusing and the following reports attempt to provide a plain English “bottom line” explanation of who is required to file, what information is required by the form, when is the form due, how long does it take to prepare the form, what are the penalties for not filing, and practical comments about the form.

By putting this information into separate web pages, practitioners can then refer to these web pages in connection with other other reports or articles and can avoid constant repetition of information about frequently mentioned forms. This is not a comprehensive list of the forms that may be required in connection with any international transactions. These are simply the forms that are most likely to be required for U.S. grantors of a foreign trust, U.S. investors in foreign securities or U.S. entrepreneurs with international transactions.

Link here.


A landmark two-day case to determine the tax position of thousands of firms run jointly by married couples under Section 660A settlements legislation got underway in the Court of Appeal earlier this week. The case in question centers on Geoff and Diana Jones, who are contesting a £42,000 tax bill relating to their company, Arctic Systems. According to HM Customs and Revenue’s interpretation of the settlements legislation, the couple had sought to illegally reduce their tax bill by allocating income to the less active partner, who pays tax at a lower rate. It is said that about £1 billion in annual tax revenues depends on the outcome of the case.

Link here.


Turkish Prime Minister Recep Tayyip Erdogan, announced that the government will seek to bring about a substantial reduction in the country’s personal and company tax burden in order to compete more effectively with the EU and reduce tax evasion. Mr. Erdogan told the ruling Justice and Development Party conference that the standard rate of corporate tax will be cut by 10% to 20% while the overall tax burden for companies will be reduced to about 28% from the current 37%. “These cuts will attract investment from abroad and greatly increase our competitiveness with neighboring countries and with the European Union,” Mr. Erdogan stated.

Turkey is now facing intense tax competition from nearby countries in Eastern Europe that joined the EU in 2004, some of which are aggressively reducing rates in order to attract foreign businesses. However, there is also another reason for Turkey’s sweeping tax reform programme, and that is to reduce the size of the country’s enormous untaxed black economy. At present, it is estimated that about half of all economic activity in Turkey is unregistered and untaxed, while those who do pay tax are often penalised by punitive rates. The government’s tax reform proposals have come about largely as a result of recommendations from the IMF.

Link here.


Peter Costello issued a sharply worded warning to Western governments and tax havens alike against pursuing a “race to the bottom” by trying to attract business from tax avoiders. Opening the Mid-November two-day OECD forum in Melbourne on tax havens, Mr. Costello revealed that Australian tax officials had broken new ground by negotiating their first information-sharing agreement with a tax haven, Bermuda. The deal, intended to be the first of many with tax havens around the world, means tax officials from Australia and Bermuda will exchange full information on criminal and civil tax matters, ending the shroud of secrecy that tax havens have traditionally offered to tax evaders.

But, while congratulating Bermuda, the Treasurer warned other tax havens and OECD countries they needed to move faster to lift their shrouds, pointing out that they were being used to shelter criminals and terrorists. “Our revenue authorities have recently uncovered extensive information suggesting international promoters are marketing cross-border tax schemes, allegedly of a criminal nature.”

While closer integration was in the interests of all countries, he said, the rules for integration needed to be defined, and they needed to be clear and transparent. “There are no long-term benefits from a race to the bottom, with countries competing to attract financial activity on the basis of reduced transparency and a willingness to turn a blind eye to tax abuses. Highly mobile capital will shift the moment a better option is presented.”

Link here.



In low-tax Ireland, profits of subsidiaries of U.S. multinationals have doubled in four years, from $13.4 billion to $26.8 billion between 1999 and 2002. Profits from operations of U.S. multinationals in no-tax Bermuda have tripled, from $8.5 billion to $25.2 billion. Not surprisingly, those two tax havens rank as the number one and number two locations in terms of profitability for U.S. corporations operating abroad – surpassing long-time leading investment partners like the U.K. and Canada. But Ireland and Bermuda are only part of the story.

Martin Sullivan, a former U.S. Treasury Department economist who specialized in international taxation, say in his Tax Notes report that the big rise in profits recorded in tax havens like Bermuda had no relationship to economic activity there. U.S. companies booked $25.2 billion in profits in Bermuda in 2002, although total revenues there were only $34.3 billion, according to Commerce Department data. Many companies seek to lower their taxes by setting up foreign units and using internal lending so profits are taken primarily in tax havens and costs are incurred in high-tax countries.

The rise of U.S. profits in low tax countries has been matched by a decline in profits in the large industrial countries where U.S. companies conduct most of their business. Sullivan says as a group, Canada, France, Germany, Italy, and the U.K. saw the profits of U.S. companies operating in their borders fall 25%-from $72 billion in 1999 to $54 billion in 2002 (a drop from one-third overseas profits in 1999 to a little more than one-fifth in 2002). While these five countries accounted for 44% of foreign sales, 44% of foreign plant and equipment, and 56% of foreign employee compensation in 2002, they accounted for only 21% of foreign profits. In countries where effective tax rates have fallen, profits of U.S. companies operating within their borders have risen significantly.

Link here.


The head of Kazaa, Nicola Hemming, has been ordered to answer claims she has hidden assets in the Pacific tax haven of Vanuatu. The CEO of LEF Interactive and Sharman Networks – which owns Kazaa, the file-sharing software used to download music from the internet – is believed to have left the country in September. Her departure followed a landmark decision on the civil suit taken by the recording industry, saying Sharman had authorized internet users to breach copyright. Judge Michael Moore ordered that Ms. Hemming, 35, take the stand to be quizzed about her assets for the first time since the case began a year ago. The recording industry has been waiting for this opportunity since raiding Sharman’s Sydney offices in February last year.

Ms. Hemming has fended off attempts by the music industry to force her to answer questions. She was not present at the trial. Nobody knows who really owns Sharman because it is held by nominee companies and blind trusts based in Vanuatu. The court order is regarded as a win for the big recording companies who have been unsuccessful in determining who controls the trusts. Justice Moore said the examination would clear up whether Ms. Hemming actually had an interest in the Sharman Trust, which owns Sharman Networks. She was responsible for setting up the “opaque” structure of the trusts, he said. Ms. Hemming’s local assets were frozen in March, along with $30 million of Sharman’s assets.

Link here.


Terry R. Horn very nearly called a private detective before investing with John H. Whittier in November 2004. But then he thought, “Why bother?” The promising young hedge fund manager had all the right credentials – UC, Berkeley graduate and onetime analyst at Donaldson, Lufkin & Jenrette. His father was a former executive at Intel who could give Whittier the scoop on promising high-tech stocks. Besides, Horn was giving Whittier only $3 million, just a slice of the $130 million in the cash account at PNM Resources, a utility in Albuquerque, N.M., where he is acting chief financial officer. Still it stung when he learned he had been had. On October 7 Wood River Capital Management, Whittier’s hedge fund firm, disclosed that it owned 40% of Endwave Corp., which makes wireless transceivers and whose price had plunged 74% between July and September. Among the red-faced investors who got scorched was an unnamed client of BNP Paribas who tried unsuccessfully to yank $49 million from Wood River before it collapsed into receivership.

“We went into it knowing these things are risky,” says Horn, who claims a 17% annual return on his hedge fund investments, including the Wood River wipeout. “Sometimes some of them go wrong.” Sometimes unnecessarily. There were plenty of signs that Whittier was skating close to the edge. A little due diligence would have unmasked his unpaid taxes and the lawsuits accusing him of failing to pay for securities his fund had purchased. Yet, like Horn, investors focused on Whittier’s credentials and family connections. How could he have failed them? “He was part of the information network, and people thought that would translate into returns,” says Richard Klitzberg, a hedge fund consultant who was familiar with Whittier’s pitch but did not represent the fund. What makes smart investors so dumb?

Greed, of course. But we are talking about sophisticated investors who rarely take people – or balance sheets – at face value. Avarice alone cannot explain why so many of them fall for flimflammery, from hedge funds and secretive offshore commodities pools to ordinary Ponzi schemes. How, for example, could a buyout artist like Thomas H. Lee be taken in by Phillip Bennett, the Refco chairman eventually caught hiding (so say prosecutors) $430 million in bad debt?

A certain predisposition to folly is hard-wired into the human species. Decision making means processing an immense amount of data, and so the brain takes shortcuts. “Authority, scarcity, consensus, social proof – these are relatively primitive decision-making strategies we deploy,” says Robert B. Cialdini, a professor of psychology at Arizona State University and author of Influence: Science and Practice (2000). In other words, we are all susceptible to suggestions by influential people. We gravitate to something if it seems to be unavailable to everyone else, and we trust strangers who appear to be like us. One of the most effective – and potentially dangerous – shortcuts is relying on someone’s family background and pedigree as proxies for reliability. Investors in Samuel Israel III’s Bayou Management learned that painful lesson when the hedge fund turned out to be little more than a vehicle for Israel to squander money on bad trades and personal expenses.

Link here.


Many clients want to invest in the various investment markets around the world, but also want to make sure they do so in a safe and prudent way. In addition, investors might be interested also in protecting these investment assets from taxation, especially estate taxes. What is the solution? One answer for many clients is to invest through an offshore variable annuity or offshore variable life insurance policy. In fact, while many American investors might be concerned about investing with a company that do not know, many such plans offer mutual fund investments with the very same U.S. Mutual Fund companies investors do know and trust.

Annuities are basically retirement savings plans offered through Life Insurance companies. They have been around long before things like IRA accounts and 401K plans came into vogue. The U.S. Life Insurance industry is on far more secure footing financially than any bank. They must maintain assets equal to 102% or greater of all policy liabilities, i.e., if every single policyholder cashed in their policy on the same day (or died in the case of life insurance death benefits, another important part of a retirement annuity) the insurance company by law must be able to make good.

Many people are confused when the term offshore is thrown in, but the fact is that offshore life insurance and offshore annuity policies work the same way as U.S. based products do. The only difference is that they are domiciled outside of the U.S., which allows for some very worthwhile tax planning strategies for the investor, especially in the area of estate taxes.

n the case of U.S. mutual funds, investors are forced to pay tax each and every year, regardless if they reinvest or not and regardless if they liquidate their mutual fund account or not – regulations and rules are written in such a way that ALL U.S. Mutual Funds Companies MUST pay out and declare capital gains and interest to shareholders. Thus the IRS can tax the investor annually. This is not the case with many European Funds, often called SICAV funds, which retain capital gains and interest, to be automatically reinvested without a tax consequence (until the investor liquidates their mutual fund holding). A benefit of an Offshore Annuity is that investors can participate in such SICAV funds without having the hassle they normally would trying to open an account as an individual investor. Also, investors can also participate in the very same U.S. mutual funds they might be familiar with – tax-free and secure through an offshore insurance company annuity product.

Link here.

WIL Note: However, as we note here, as of April 7, 1995 the annual income on most foreign annuity contracts is taxable. A foreign annuity can still provide valuable asset protection benefits, but, if its income is reported every year then the annuity’s existence is known and the privacy benefit is gone. Thus we do not see see foreign annuities as providing truly effective asset protection and tax reduction benefits although, as the above article notes, it can be a good way to invest offshore with some additional benefits to boot.


At the root of the accelerating decline of financial privacy in many jurisdictions once considered secure are the hyped-up “wars” on drugs, money laundering, and terrorism. The war on drugs gave birth to money laundering laws, and together these legal weapons are being used to destroy privacy and bank secrecy. Rising terrorism (inspired by a rising resentment of American intervention in the politics of foreign nations) engenders the need for random searches, wiretapping and 24/7 surveillance. Where two or three decades ago there were numerous haven nations where privacy was expected and delivered, the high-tax nations have pushed, cajoled and threatened until the field of choices has been dramatically reduced.

How do individuals interested in privacy and security choose the best haven for wealth? To begin with, you should understand that each “offshore” haven is unique. A country that provides the best banking regulations will not necessarily be the best place for incorporating a business, just as the best jurisdiction for privacy will not necessarily be the best for an offshore trust. Yet, there are general guidelines for choosing an asset haven that apply across the board. The following are the more important considerations.

1.) Is the haven a completely independent sovereign nation? Or is it a territory, dependency or colony of a larger country? While the government of a dependency or territory may enact favorable legislation to attract foreign investment, such legislation will be hostage to the political and economic environment prevailing in the mother country.

2.) Does the haven respect privacy? And is privacy built into its law? Under what circumstances can creditors or the government obtain information about your wealth, or even seize it? Financial privacy has gotten a bad reputation in recent years. The prevailing attitude is, “if you are not committing a crime, why do you need privacy?” This attitude ignores the very real need for privacy in a nation such as the United States where there exist very few legislative protections for it. It is worth noting that a sue-happy lawyer or identity thief, armed with nothing more sophisticated than a personal computer, can in a few minutes unearth a great deal of financial information about whatever U.S. assets you own as a prelude to plunder. Ideally, secrecy should be built into the legal code and violations should be prosecuted with civil or criminal sanctions. From the standpoint of the tradition and legal basis for banking secrecy, the four countries that stand out are Austria, Liechtenstein, Luxembourg, and Switzerland.

3.) How long a tradition has the haven had? A country like Switzerland with centuries of traditional respect and protection of privacy, or like Luxembourg with decades of stability, are unlikely to change for transient reasons. 4.) Do the citizens support the haven’s offshore status? In some havens, such as the Bahamas, the local citizens are not the primary beneficiaries of banking secrecy. This contrasts with Switzerland, Austria and now Panama, where privacy laws and traditions affect a significant segment of the citizenry. 5.) Is the haven important to your government? The United Arab Emirates, because it is a “friendly” nation in an unstable region, enjoys the favor of the U.S. government.

6.) Does the haven wave a “red flag?” Public dealings with high-profile havens can raise a “red flag” in tax collector’s offices around the world. The Cayman Islands, Switzerland and Liechtenstein are examples. Panama, Austria, and Luxembourg are another step below that level. Bermuda is lower still, though it does not offer the secrecy the others do. 7.) How efficient and convenient are the services? 8.) What taxes are levied on the haven’s users?

Sovereign individuals select haven nations for placement of our assets according to the relative safety and privacy such places guaranteed by law. Those who move all or a portion of their assets offshore simply recognize reality, that governments in the major nations are engaged in a systematic destruction of their citizens’ right to financial privacy. Sadly, we must look to foreign asset havens for the sort of economic freedom once guaranteed by our homeland. The number of safe havens is dwindling, but they still exist.

Link here.


Global cybercrime turned over more money than drug trafficking last year, according to a U.S. Treasury advisor. Valerie McNiven, an advisor to the U.S. government on cybercrime, claimed1 that corporate espionage, child pornography, stock manipulation, phishing fraud and copyright offences cause more financial harm than the trade in illegal narcotics such as heroin and cocaine. “Last year was the first year that proceeds from cybercrime were greater than proceeds from the sale of illegal drugs, and that was, I believe, over $105 billion,” McNiven told Reuters. “Cybercrime is moving at such a high speed that law enforcement cannot catch up with it.”

Wider penetration of technology in developing nations is likely to increase levels of fraud, McNiven predicts. She called for investment to be made in creating more secure systems capable of thwarting fraudsters who are “often idle youths looking for quick gain.”

Link here.



The Defense Department has expanded its programs aimed at gathering and analyzing intelligence within the U.S., creating new agencies, adding personnel and seeking additional legal authority for domestic security activities in the post-9/11 world. The moves have taken place on several fronts. The White House is considering expanding the power of a little-known Pentagon agency called the Counterintelligence Field Activity, or CIFA, which was created three years ago. The proposal, made by a presidential commission, would transform CIFA from an office that coordinates Pentagon security efforts – including protecting military facilities from attack – to one that also has authority to investigate crimes within the U.S. such as treason, foreign or terrorist sabotage or even economic espionage.

The Pentagon has pushed legislation on Capitol Hill that would create an intelligence exception to the Privacy Act, allowing the FBI and others to share information gathered about U.S. citizens with the Pentagon, CIA and other intelligence agencies, as long as the data is deemed to be related to foreign intelligence. Backers say the measure is needed to strengthen investigations into terrorism or weapons of mass destruction.

The proposals, and other Pentagon steps aimed at improving its ability to analyze counterterrorism intelligence collected inside the U.S., have drawn complaints from civil liberties advocates and a few members of Congress, who say the Defense Department’s push into domestic collection is proceeding with little scrutiny by the Congress or the public. “We are deputizing the military to spy on law-abiding Americans in America. This is a huge leap without even a [congressional] hearing,” Sen. Ron Wyden (D-Oregon), a member of the Senate Select Committee on Intelligence, said in a recent interview.

Links here and here.


The public is evenly divided on whether or not identity cards are a good idea, with 50% supporting the introduction, and 48% opposing it, according to a new poll conducted on behalf of campaign group No2ID. No2ID says the results show a fall in support for the government’s plans. It asked exactly the same question back in June. Then, 55% of respondents said they were in favour of identity cards, and 43% opposed them. Phil Booth, NO2ID’s national coordinator, says the results indicate that support has now reached tipping point, and that the government can no longer claim clear support for its plans. He argues that in the last five months, the Home Office has failed to make its case to the British public. “For public support to slip still further after the terrorist atrocities in London this summer reveals just how little the public actually trust the reasons they are being given for ID cards. In fact, the more people hear, the less they like the idea,” he said. “Introducing compulsory registration and State ID control when half the country is against you has more than a hint of the jackboot about it.”

The poll asked whether the person thought the government proposals for a £93 combined ID card and passport is a very good, good, bad or very bad idea. The group says it stuck with the £93 figure despite the government’s proposed £30 ID card-lite because “Home Office ministers have admitted that this price is merely ‘indicative’ and detailed costings by the LSE and others still appear to place the unit cost of registration and issuing an ID card at or above £300,” according to a press statement.

Link here.


The entertainment industry is trying to commandeer the proposed European directive on data retention to help it prosecute filesharers in the EU, it has emerged. The newly-formed Creative and Media Business Alliance (CMBA), an informal grouping (it says) of companies including Sony BMG, Disney, EMI, IFPI, MPA and Universal Music International, says it wants the data protection directive to be modified specifically so that it can be used to go after pirates. In a letter to all MEPs, the CMBA said, “We would appreciate your support in ensuring that this becomes an effective instrument in the fight against piracy.” It went on to ask MEPs to amend the directive so that it covers all criminal offences, not just the “serious” ones of organized crime and terrorism, and that law enforcement’s access to the data should not be limited.

When it voted, the European parliamentary committee on civil liberties did keep the word “serious”, but only as defined in the European arrest warrant, which includes piracy. According to Suw Charman, founder of the Open Rights Group, this means the door is officially open for the entertainment industry to use legislation designed to protect European citizens from terrorists to prosecute them instead. “The industry is attempting to pervert this legislation, to back up a failing business model based on little more than speculation [that downloading is harming the music business],” she said.

Link here.


The European Commission last week adopted two measures designed to assist in the fight against terrorism and serious crime by improving the development of and access to common European databases. Of particular interest to the Commission in this context are the databases for the planned Visa Information System (VIS), the Schengen Information System (SIS) and EURODAC.

The VIS is intended to be a system for the exchange of visa data between Member States and thus primarily an instrument to support the common visa policy. It will also facilitate checks at the external borders and within the Member States, assisting the exchange of data between Member States on applications and on the decisions in respect of those applications. Following a recently adopted proposal on accessing the VIS, Member States authorities responsible for internal security and Europol will be entitled to consult the database for the purposes of the prevention, detection and investigation of terrorist offences and the types of crime and offences in respect of which Europol is competent to act.

SIS is the system that currently enables competent authorities to obtain information regarding certain categories of persons and property in relation to the free movement of people and police cooperation. SIS II will replace the current intergovernmental Schengen Information System with EU legislation and enable the enlargement of the Schengen area to the new Member States. It works by allowing authorities, through an automatic query procedure, to obtain information related to alerts on persons and objects, and is used, in particular, for police and judicial cooperation in criminal matters, as well as for the control of persons at the external borders or on national territories and for the issuance of visas and residence permits. SIS II will allow for the integration of new Member States into the system, and allow all members of the Schengen states to benefit from improvements in technology, bringing about, says the Commission, more security and more efficiency.

Since 15 January 2003, the fingerprints of anyone over the age of 14 who applies for asylum in the EU (except Denmark, for the time being), in Norway and in Iceland have been stored in a database called EURODAC. EURODAC was created in the context of the development of an asylum policy common to all the Member States of the EU. Agreements have been recently signed with Denmark and Switzerland in order to make EURODAC applicable to those states as well. URODAC is the first common Automated Fingerprint Identification System (AFIS) within the European Union.

Link here.


Meet Mr. Big. He is the boss of all he surveys. And, these days, he does not just rely on his eyes. Sitting behind his large mahogany desk, from where he runs a large organization, he can watch his staff on a video monitor which allows him to select from dozens of channels, depending which office or department he wants to “observe”. With a click of a button, he can observe which web sites a particular employee is visiting, or even who that person is e-mailing. Checking on when an employee arrives and leaves, or visits the cafeteria or the bathroom? Old hat for Mr. Big.

Ah, yes, the pleasures of power. Mr. Big always knew he was important, but until technology allowed him to get an insight into every nook and cranny of the lives of the people who made his organization function, he was always worried that he was not truly in control. Now, if only those scientists could come up with a device to read their minds… Do you work for Mr. Big? If you do, chances are you are looking around for a new job with a new boss who trusts his staff and gets on with running the company rather than micro-managing it.

More and more, however, corporate bosses are being turned on to the idea of employee surveillance. In certain kinds of business it makes sense. Where productivity is measured by the minute, or where a large workforce has to be paid based on time spent on the job, the age-old concept of the punch-clock was the answer for more than a century. In the 21st century, we have “smart buildings” that can do anything from automatically switching on the light when you walk into a room to giving your boss a printout of your precise movements throughout the working day. A building that responds to your needs sounds great. A building that serves your boss’s needs for micromanagement is a recipe for human resource disaster.

Link here.



Trial lawyers in Palm Beach, Florida have a leak scandal almost as good as Valerie Plame’s. In early October somebody with access to a members-only Internet discussion group sent Circuit Judge Diana Lewis unflattering remarks that Brian LaBovick, among other attorneys, had made about the judge’s jury selection technique in an accident case he had recently lost. Hello, Patrick Fitzgerald! The Palm Beach County Trial Lawyers Association, which runs the Web discussion, hired a forensic expert to investigate the breach. The perpetrator, if found, might be hauled before the Florida Bar Association for violating the oath of privacy each lawyer and paralegal signed before joining the group.

One legal ethics expert says LaBovick would not have much of a case against the leaker. “If you’re going to go on something and yap, you have to expect a client confidence would be breached,” says Carol Langford, coauthor of two books, including The Moral Compass of the American Lawyer. Whether a fellow lawyer signed an agreement not to leak does not matter, Langford adds. “Morally, he may have an obligation, but morals and ethics are not the same thing.” Something even nonlawyers can understand.

Link here.


Miami police announced they will stage random shows of force at hotels, banks and other public places to keep terrorists guessing and remind people to be vigilant. Deputy Police Chief Frank Fernandez said officers might, for example, surround a bank building, check the IDs of everyone going in and out and hand out leaflets about terror threats. “This is an in-your-face type of strategy. It’s letting the terrorists know we are out there,” Fernandez said. The operations will keep terrorists off guard, Fernandez said. He said al-Qaida and other terrorist groups plot attacks by putting places under surveillance and watching for flaws and patterns in security.

Police Chief John Timoney said there was no specific, credible threat of an imminent terror attack in Miami. But he said the city has repeatedly been mentioned in intelligence reports as a potential target. Timoney also noted that 14 of the 19 hijackers who took part in the Sept. 11 attacks lived in South Florida at various times and that other alleged terror cells have operated in the area. Both uniformed and plainclothes police will ride buses and trains, while others will conduct longer-term surveillance operations.

“People are definitely going to notice it,” Fernandez said. “We want that shock. We want that awe. But at the same time, we don’t want people to feel their rights are being threatened. We need them to be our eyes and ears.” Howard Simon, executive director of ACLU of Florida, said the Miami initiative appears aimed at ensuring that people’s rights are not violated. “What we’re dealing with is officers on street patrol, which is more effective and more consistent with the Constitution,” Simon said. “We’ll have to see how it is implemented.”

Link here.

Miami Model: ACLU shysters stab America in the back again.

In response to the news that Miami police were going to conduct random sieges, checks of ID’s and patrols of buses and trains, the ACLU stabbed America in the back again by shrugging their shoulders and stating that the new measures did not violate anybody’s rights. Consistent with the Constitution? This is the most clear violation of what it means to live in a free society than you are ever going to see short of when they cart us all off to those cozy ex-Soviet gulag camps.

The Miami model is akin to the police looking for a man driving a red Volkswagen in the western U.S. They decide to raid a bank building in Albuquerque because the felon just might happen to be in that one building out of a list of potential hundreds of thousands. It makes absolutely no sense unless it is designed to scare people into groveling to the overlords in black ski masks.

Miami police are amongst the most notoriously brutal in the country. During the November 2003 FTAA protests, police Chief John Timoney employed paramilitary tactics to crush what were overwhelmingly peaceful protests. Police indiscriminately beat, arrested, searched, gassed, pepper sprayed and shot rubber bullets at protesters in a psychotic orgy of jackbooted tyranny. Reports of plain clothed police agitating amongst the protesters matched similar tactics used during the 1999 WTO protests in Seattle.

Local chapters of the ACLU are staffed by well intentioned but often misled and deluded people. However, the state and national branches are firmly infiltrated and used to take big national attention cases, lose them and create bad case law. The ACLU announcement was intended to put Americans to sleep when the cold hard facts of the Miami model should have everyone up in arms. “Gee Martha, those random sieges, ID checks, searches and patrols sound like what we were told was bad about the Soviet Union, but look here, the ACLU says it doesn’t violate our rights so I guess we don’t have to worry about it.”

One only has to peruse the historical origins of the ACLU to get a sense of who really controls this shill organization. Radical Marxists, feminists, socialists and communists completely dominate the roster of the ACLU founders. Built on a legacy of destroying everything that America stood for, how can we expect the ACLU to stand up and defend the virtues of American freedom today? The ACLU is more interested in removing monuments outside courthouses and attacking Christianity than it is in opposing the police state. The ACLU’s response to the Miami police state model proves that the organization should be viewed as part of the problem and not the solution.

Link here.


LUOYANG, China: Judge Li Huijuan happened to be in the courthouse file room when clerks, acting on urgent orders, began searching for a ruling on a mundane case about seed prices. “I handled that case,” Judge Li told the clerks, surprised that anyone would be interested. But within days, the Luoyang Middle Court’s discipline committee contacted her. Provincial officials had angrily complained that the ruling contained a serious political error. Faced with a conflict between national and provincial law, Judge Li had declared the provincial law invalid. In doing so, she unwittingly made legal history, setting in motion a national debate about judicial independence in China’s closed political system.

In many countries, including the United States, a judge tossing out a lower-level law would scarcely merit attention. But in China, the government, not a court, is the final arbiter of law. What Judge Li had considered judicial common sense, provincial legislators considered a judicial revolt. Their initial response was to try to crush it. Judge Li, who had been on the bench less than three years, feared her career might be finished.

Faced with the complex demands of governing a chaotic, modernizing country, China’s leaders have embraced the rule of law as the most efficient means of regulating society. But a central requirement in fulfilling that promise lies unresolved – whether the governing Communist Party intends to allow an independent judiciary. The 2003 ruling by Judge Li has become, quite unexpectedly, a landmark case for the evolving Chinese legal system. Her plight exposed the limits on judicial autonomy in China and the political retribution faced by judges. But it also revealed the rising influence of legal reformers. Scholars and lawyers rallied to Judge Li’s defense and embraced her ruling as a test case, if an accidental one, for a more autonomous court system. “For the first time, a judge announced a local law or regulation was void,” said Xiao Taifu, a member of the Beijing Lawyers Association, which petitioned the central government on Judge Li’s behalf. “It was historic. For the legal process in China, it was a first, and it carried deep meaning.”

Today, China’s court system is far from an independent entity that can curb government power. Often, the courts remain a pliable tool to reinforce that power. Many judges are poorly educated in the law and corrupt. Judges often must answer to government officials as much as to the law. Political pressure is common, and private trial committees often dictate rulings. There are also signs of change. One of the busiest courts in Beijing announced in November that it would stop punishing judges if a ruling was later deemed politically or legally “wrong”. A budding idealism about the law, and its potential to transform Chinese society, is evident not only in the number of new lawyers but also in the emerging civic belief that ordinary people have “legal rights”. The case of Judge Li illustrates how such changes continue to meet enormous resistance within the system. Judge Li, now 32, a Communist Party member, is among the new generation of younger judges expected to become the future backbone of a strengthened court system. That Judge Li and others granted interviews for this article reflects, to some extent, the evolution of China’s legal system and an effort by the judiciary to be more assertive. But the dispute over the seed case taught her that being a judge involved far more than simply interpreting laws.

Link here.


When Attorney General Alberto R. Gonzales announced last week that Jose Padilla would be transferred to the federal justice system from military detention, he said almost nothing about the standards the administration used in deciding whether to charge terrorism suspects like Mr. Padilla with crimes or to hold them in military facilities as enemy combatants. “We take each individual, each case, case by case,” Mr. Gonzales said.

The upshot of that approach, underscored by the decision in Mr. Padilla’s case, is that no one outside the administration knows just how the determination is made whether to handle a terror suspect as an enemy combatant or as a common criminal, to hold him indefinitely without charges in a military facility or to charge him in court. Indeed, citing the need to combat terrorism, the administration has argued, with varying degrees of success, that judges should have essentially no role in reviewing its decisions. The change in Mr. Padilla’s status, just days before the government’s legal papers were due in his appeal to the Supreme Court, suggested to many legal observers that the administration wanted to keep the court out of the case. “The position of the executive branch,” said Eric M. Freedman, a law professor at Hofstra University who has consulted with lawyers for several detainees, “is that it can be judge, jury and executioner.”

The government says a secret and unilateral decision-making process is necessary because of the nature of the evidence it deals with. Officials described the approach as a practical one that weighs a mix of often-sensitive factors. “Much thought goes into how and why various tools are used in these often complicated cases,” Tasia Scolinos, a Justice Department spokeswoman, said. “The important thing is for someone not to come away thinking this whole process is arbitrary, which it is not.” Among the factors the government considers, Ms. Scolinos said, are“qnational security interests, the need to gather intelligence and the best and quickest way to obtain it, the concern about protecting intelligence sources and methods and ongoing information gathering, the ability to use information as evidence in a criminal proceeding, the circumstances of the manner in which the individual was detained, the applicable criminal charges, and classified-evidence issues.” Lawyers for people in terrorism investigations say a list of factors to be considered cannot substitute for bright-line standards announced in advance.

The courts have given the executive branch substantial but not total deference, often holding that the president has the authority to designate enemy combatants but allowing those detained to challenge the factual basis for the administration’s determinations. Some courts have suggested that a detainee’s citizenship, the place he was captured and whether he was fighting American troops should play a role in how aggressively the courts review enemy-combatant designations. A look at the half-dozen most prominent terrorism detentions and prosecutions does little to illuminate the standards that have informed the government’s decisions.

Link here.


If we wish to be free, if we mean to preserve inviolate those inestimable privileges for which we have been so long contending, if we mean not basely to abandon the noble struggle in which we have been so long engaged, and which we have pledged ourselves never to abandon until the glorious object of our contest shall be obtained – we must fight!” ~ Patrick Henry

Anyone who does not recognize that a police state is being erected right in front of their eyes is either in a state of denial or welcomes a repeat of Nazi Germany under Adolph Hitler. Two months ago a woman named Deborah Davis was reading a book while riding to work on a public bus. When her bus stopped outside the gates of the Denver Federal Center in Lakewood, Colorado, a guard climbed aboard the bus and demanded that all the passengers produce identification. Mrs. Davis did not bite: “I told him that I did have identification, but I wasn’t going to show it to him”q Davis explains. “I knew that I was’qt required by law to show ID and that’s why I decided I wasn’t going to. The whole thing seemed to be more about compliance than security.”

This guard who obviously has no understanding of the U.S. Constitution and the Bill of Rights, called the federal dragoons who proceeded to drag Mrs. Davis off this public bus, handcuffed her like some criminal, shoved her into the back seat of their Barney Rubble guard car and transported her to a police station within the Federal Center. For all this guard knew, Mrs. Davis could have been going anywhere outside the fencing of the Denver Federal Center (there is a post office just outside the gated entrance on the south side) once she got off the bus. His apprehension of her in my opinion is not just unlawful detention, but kidnapping. Mrs. Davis’s son is in Iraq fighting Bush’s war to control the oil in the middle East while his mother is being subjected to the same treatment as those who live in communist countries and did under Hitler’s regime.

Mrs. Davis will be arraigned on December 9, 2005, and faces up to 60 days in jail on federal criminal misdemeanor charges. These charges would be that “citizens must, when requested, display Government or other identifying credentials to Federal police officers or other authorized individuals.” The second would be that citizens must comply with “the lawful direction of Federal police officers and other authorized individuals.”

Open your eyes America. First, Mrs. Davis was on a public bus, she was not on federal property. This guard had no right to demand any American produce papers of any kind whether they are riding a bus or walking. Second, under the U.S. Constitution, Congress has the power to make criminal only four types of conduct – treason, piracies and felonies on the high seas, counterfeiting, and offenses against the laws of nations. Just because Congress has been getting away with passing a zillion laws with all kinds of “offenses” does NOT make it legal. They have only gotten away with it all this time because the American people have refused to hold their elected public servants accountable. What you are seeing right now in this country is the result of foolish voters. Despite the refusal by the sheeple to boot out rotten politicians, the law is still law.

The same nonsense is about to be unleashed upon innocent, law abiding citizens in Miami, Florida. The announcement came November 28, 2005: local coppers will “… stage random shows of force at hotels, banks and other public places to keep terrorists guessing and remind people to be vigilant. Deputy Police Chief Frank Fernandez said officers might, for example, surround a bank building, check the IDs of everyone going in and out and hand out leaflets about terror threats.” … “This is an in-your-face type of strategy. I’qs letting the terrorists know we are out there,” Fernandez said. “People are definitely going to notice it. We want that shock. We want that awe. But at the same time, we don’t want people to feel their rights are being threatened. We need them to be our eyes and ears.”

Deputy Police Chief Frank Fernandez is a fool who should be removed from his job as well as the Mayor and any member of the Miami City Council who approved this BS. First, there is no legal authority for coppers to demand anyone entering or leaving a bank, hotel or other public places “show their papers”. Second, the CIA’s creation called “al-Qaida” does not give a hoot about a bunch of local coppers acting like testosterone pumped goons harassing little old ladies. Walking into or exiting a hotel, bank or “other public places” is a fundamental right and an action freely chosen by an individual. It is not a mandated activity by any federal, state or local law, ordinance or statute.

We the people are not going to lay down and take this flavor of tyranny. Oh, there will be those who quiver at the very thought of standing up for their rights, but there will always be cowards who want others to fight for their freedom. Mrs. Davis drew her line in the sand and so should the tens of millions of Americans in this country who claim they will fight for their rights. We must let our local, state and federal elected servants hear the roar of NO from coast to coast, border to border.

Link here.

Denver woman who refused to show ID draws a busload of support.

Deborah Davis said that she has been overwhelmed by the support she has received via the Internet and telephone for her stance against having to show her identification while riding on a bus that crosses the Federal Center in Lakewood, Colorado. But she is trying to keep up with her daily routine. Bill Scannell, who has publicized other challenges to government ID requirements, said the Web site he created for the Davis case had received visits from 2.4 million individuals by about 2 p.m. Wednesday. Scannell said the Web site also has received more than 1,800 e-mails about Davis’s case, and that all but about 20 have been supportive. “I never thought this would happen,” Ms. Davis said. “I was just trying not to show my ID because I don’t have to. That’s all.”

Davis, 50, refused in September to show her identification when federal police boarded RTD’s No. 100 bus when it entered the Federal Center. Davis was not getting off there but riding through on her way to work elsewhere, as were some other passengers. Federal police removed her from the bus and handcuffed and ticketed her for refusing to show her ID. She is scheduled to appear in federal court December 9. The most critical responses she had read, she said, were from people wondering why she did not just comply with the police order.

Link here.



According to news reports, on Wednesday President Bush will announce plans for withdrawing U.S. troops from Iraq. It will be diverting to watch the propagandists at Fox “news” flip-flop with the White House line and explain that now is the time to cut and run after all. What this means is that Republican pollsters have made it clear that the Republicans cannot win next year’s congressional elections if the U.S. is still mired in Iraq. The war is unpopular. A large majority of Americans do not believe the war was justified, and they no longer support it. Republicans have no prospect of rehabilitating Bush if he keeps the country bogged down in a pointless war. The war, in other words, no longer serves the Republicans’ political interest and must be got rid of. So much for “staying the course”.

What will happen to Iraq and the Middle East no one knows. Our concerns need to be directed at what happens here in the U.S. Bush’s war against Iraq might be over, but the police state Bush built at home is still in place. On November 27 Walter Pincus reported in the Washington Post that the Pentagon is expanding its domestic surveillance activity and that all sorts of proposals are afoot to allow military agencies to spy on law-abiding Americans and to build secret dossiers on citizens. The demand for police state powers is said to be necessary in order to fight the “war on terror”.

Considering the drastic gestapo-type activities for which Washington is clamoring, a person would think that America is being overwhelmed by terrorist attacks. Yet, despite an aggressive and brutal war that Bush has been waging in Iraq for going on three years, terrorist attacks in America are even more rare than a honest politician. The Bush administration’s hype about terrorism serves no purpose other than to build a police state that is far more dangerous to Americans than terrorists.

A police state has to catch enemies in order to keep the people frightened and appreciative of the watchful eye of the police state. Now that the José Padilla case has evaporated, the Bush administration has come up with a replacement. An American student of Arab descent, who was studying at a Saudi Arabian university, has been indicted by a federal grand jury for conspiracy to assassinate President Bush. The indictment rests on the confession wrung out of the young man by torture in a Saudi prison. What kind of a country have we become when we put a citizen on trial on the basis of a confession obtained under torture by a foreign government? Is the case against this student anything other than an attempt to enlist the sympathy factor for Bush in order to repair his standing in the polls?

Americans need to understand that a police state has to produce results in order to justify its budget and its powers. It does not really care who it catches. Americans need to wake up. The only danger to Americans in Iraq is the one Bush created by invading the country. The grave threat that Americans face is the Bush administration’s police state mentality.

Link here.


After condemning the suggestion of many Democrats that the U.S. should create a timetable for troop withdrawal from Iraq, the Bush administration’s Pentagon is tentatively constructing just that. Secretary of State Condoleezza Rice, returning from a visit to Iraq, seemed to support that plan by insisting that the training of Iraqi troops was going so swimmingly that the current level of U.S. forces in Iraq would not need to remain much longer. What gives?

The convergence of pressures—from plummeting public support for the war at home, calls for the withdrawal of U.S. occupation forces by Iraq’s political factions, and the U.S. military’s campaign for an exit strategy to save a force at the breaking point – are causing the administration’s flip-flop on the issue. An astute cynic would realize that the first factor, Bush’s plunging public support, trumps the latter two. Republicans are deathly afraid to face the public in both the 2006 congressional elections as well as the 2008 presidential elections, without the return of at least some percentage of U.S. forces from this unpopular war.

Although a partial drawdown of U.S. forces, including moving most of those remaining to bases in the rear, may reduce U.S. casualties, help elect some Republicans, and take some of the fire out of the Sunni insurgency, it is likely to end in disaster for Iraq and the Bush administration’s legacy. The new U.S. plan is to clear Iraqi towns of insurgents with U.S. forces and then hold them using newly trained Iraqi security forces. But once the U.S. troop drawdown begins, pressure for further withdrawals will outpace the training of Iraqi security forces – the capabilities of which have been vastly overstated by the Bush administration and the U.S. military in their rush to show progress in getting out.

The only hope that Iraq has for a avoiding a chaotic civil war as U.S. forces begin to withdraw is to remove the Sunnis’ incentives for fighting. They are rebelling to prevent paybacks for the Saddam Hussein era from Shi’ite and Kurdish militias, which essentially control key parts of the Iraqi central government. Also, the Sunnis are fighting to avoid being cut out of Iraq’s oil bonanza, which lies mainly in Shi’ite and Kurdish areas. Saving Iraq will require the Bush administration to alter its fundamental goal in Iraq: a unified country. Iraq is an artificial country that has been held together over the years by the brute force of dictators. It is now being held together only by a foreign military. As that military exits, Iraq will break apart one way or another. In fact, with all of the armed factions policing parts of Iraq, the country already has a de facto partition.

To recognize the facts on the ground, the U.S. should mediate a controlled partition of Iraq so that each group’s militia can rule its own area free of fear of oppression from a strong central government. Most likely, either Iraq will be partitioned in a controlled peaceful way or violently by the civil war that will intensify as the U.S. conducts its gradual troop withdrawal.

Link here.


Last month, the national debt reached yet another miserable milestone, passing the $8 trillion mark for the first time. And it will only get worse. Brian Riedl, chief budget analyst at the conservative Heritage Foundation, said the Bush administration is expected to return to Congress within the next few months to ask lawmakers – once again – to raise the nation’s debt ceiling so we can borrow even more. “A debt of $8 trillion is certainly a daunting number,” Riedl told me. “I’m not sure we’ll ever pay it off.” You heard right. The top number cruncher at the Washington think tank that is arguably friendliest to the Bush administration has come to the conclusion that our debt has gotten so out of hand, it may never go away.

Riedl estimates that the annual budget shortfall will reach $873 billion 10 years from now. Two years after that, he predicts, the annual deficit will hit $1 trillion. By the time that happens, Riedl’s calculations show the national debt doubling to about $16 trillion, or a staggering 74% of the country’s projected GDP of $21.5 trillion. “Long term, the deficit and debt projections are completely unsustainable,” Riedl said. “Eventually, taxes will have to go through the roof or spending will be cut.” The fiscal recklessness of the Republican-controlled White House and Congress cannot go on forever.

Bush has borrowed more money – $1.05 trillion – from foreign governments and banks since taking office than all other presidents combined. From 1776 to 2000, the nation’s first 42 presidents borrowed a combined $1.01 trillion from foreign interests, official statistics show. In just five years, Bush has out-borrowed them all. A Treasury spokeswoman confirmed that the numbers are indeed correct. She declined to comment on the ramifications of the administration’s overseas borrowing. The danger, of course, is that if foreign governments and banks decide that they are tired of holding our IOUs, interest rates would skyrocket as the nation is forced to beg for high-priced handouts elsewhere. “We’re creating a huge vulnerability,” Robert Bixby, executive director of the Concord Coalition, a bipartisan budget watchdog group said. “It’s mortgaging our future to someone else.”

This has become a core issue for the Blue Dog Coalition, a group of 35 economically conservative Democrats who form a voting bloc in Congress. “The seriousness of this rapid and increasing financial vulnerability of our country can hardly be overstated,” Tennessee Rep. John Tanner, a Blue Dog leader and member of the House Ways and Means Committee, said in a statement. “The financial mismanagement of our country by the Bush administration should be of concern to all Americans, regardless of political persuasion,” he said. The Bush administration, which has not vetoed a single spending bill (or any other bill) since taking power, has repeatedly countered such criticism by blaming Congress for unchecked spending. “The administration remains committed to reducing the deficit,” said Treasury Undersecretary Randal Quarles. All appearances to the contrary notwithstanding.

Link here.


The Christmas Truce, which occurred primarily between the British and German soldiers along the Western Front in December 1914, is an event the official histories of the “Great War” leave out, and the Orwellian historians hide from the public. Stanley Weintraub has broken through this barrier of silence and written a moving account of this significant event by compiling letters sent home from the front, as well as diaries of the soldiers involved. His book is entitled Silent Night: The Story of the World War I Christmas Truce. The book contains many pictures of the actual events showing the opposing forces mixing and celebrating together that first Christmas of the war. This remarkable story began to unfold, according to Weintraub, on the morning of December 19, 1914.

Weintraub reports that the French and Belgians reacted differently to the war and with more emotion than the British in the beginning. The war was occurring on their land and “The French had lived in an atmosphere of revanche since 1870, when Alsace and Lorraine were seized by the Prussians” in a war declared by the French. The British and German soldiers, however, saw little meaning in the war as to them, and, after all, the British King and the German Kaiser were both grandsons of Queen Victoria. Why should the Germans and British be at war, or hating each other, because a royal couple from Austria were killed by an assassin while they were visiting in Serbia? However, since August when the war started, hundreds of thousands of soldiers had been killed, wounded or were missing by December 1914. It is estimated that over 80,000 young Germans had gone to England before the war to be employed in such jobs as waiters, cooks, and cab drivers and many spoke English very well. It appears that the Germans were the instigators of this move towards a truce. So much interchange had occurred across the lines by the time that Christmas Eve approached that Brigadier General G.T. Forrestier-Walker issued a directive forbidding fraternization. Later strict orders were issued that any fraternization would result in a court-martial.

As night fell on Christmas Eve the British soldiers noticed the Germans putting up small Christmas trees along with candles at the top of their trenches and many began to shout in English “We no shoot if you no shoot.” The firing stopped along the many miles of the trenches and the British began to notice that the Germans were coming out of the trenches toward the British who responded by coming out to meet them. They mixed and mingled in No Man’s Land and soon began to exchange chocolates for cigars and various newspaper accounts of the war which contained the propaganda from their respective homelands. Many of the officers on each side attempted to prevent the event from occurring but the soldiers ignored the risk of a court-martial or of being shot.

Some of the meetings reported in diaries were between Anglo-Saxons and German Saxons and the Germans joked that they should join together and fight the Prussians. The massive amount of fraternization, or maybe just the Christmas spirit, deterred the officers from taking action and many of them began to go out into No Man’s Land and exchange Christmas greetings with their opposing officers. Each side helped bury their dead and remove the wounded so that by Christmas morning there was a large open area about as wide as the size of two football fields separating the opposing trenches. The soldiers emerged again on Christmas morning and began singing Christmas carols, especially “Silent Night”.

Beginning with the French Revolution, one of the main ideas coming out of the 19th century, which became dominant at the beginning of the 20th century, was nationalism with unrestrained democracy. Two soldiers, one British and one German, both experienced the horrors of the trench warfare in the Great War and both wrote moving accounts which challenged the idea of the glory of a sacrifice of the individual to the nation in an unnecessary or unjust war. The British soldier, Wilfred Owen, wrote a famous poem before he was killed in the trenches seven days before the Armistice was signed on November 11, 1918. The German soldier was Erich M. Remarque who wrote one of the best anti-war novels of all time, All Quiet On The Western Front, which was later made into an American movie that won the Academy Award in 1929 for “Best Movie”. He also attacked the idea of the nobility of dying for your country in a war and he describes the suffering in the trenches. I would imagine that the Christmas Truce probably inspired English novelist and poet Thomas Hardy to write a poem about World War I entitled “The Man He Killed”, which ended, “Yes, quaint and curious war is!, You shoot a fellow down, You’d treat if met where any bar is, Or help to half-a-crown.

The last chapter of Weintraub’s book, entitled “What If – ?”, is counterfactual history at its best. He sets out what he believes the rest of the 20th century would have been like if the soldiers had been able to cause the Christmas Truce of 1914 to stop the war at that point. Like many other historians, he believes that with an early end of the war in December of 1914, there probably would have been no Russian Revolution, no Communism, no Lenin, and no Stalin. Furthermore, there would have been no vicious peace imposed on Germany by the Versailles Treaty, and therefore, no Hitler, no Nazism and no World War II. With the early truce there would have been no entry of America into the European War and America might have had a chance to remain, or return, to being a Republic rather than moving toward World War II, the “Cold” War, and our present status as the world bully. The Great War killed over 10 million soldiers and Weintraub states, “Following the final Armistice came an imposed peace in 1919 that created new instabilities ensuring another war.” This next war killed more than 50 million people, over half of which were civilians. He writes:

To many, the end of the war and the failure of the peace would validate the Christmas cease-fire as the only meaningful episode in the apocalypse. It belied the bellicose slogans and suggested that the men fighting and often dying were, as usual, proxies for governments and issues that had little to do with their everyday lives. A candle lit in the darkness of Flanders, the truce flickered briefly and survives only in memoirs, letters, song, drama and story.

Link here.


As human beings, we are the only species stupid enough to actually poison ourselves. As part of modern living, we create a wide variety of chemical toxins that go into the ecosystem through rivers and streams, the air, the soil and so on. Not only that, we actually synthesize toxic chemicals and then inject them directly into the food supply – knowing full well that they are poisonous and are major contributors to the epidemic rates of chronic disease we are experiencing today.

What are these chemicals I am talking about? Well, you are about to get a whirlwind tour of humanity’s toxic chemicals. And if you look at toxic chemicals, you have to start in the realm of dentistry, because in no other profession (save medicine) will you find the use of so many toxic chemicals that are deliberately prescribed to patients or injected into their bodies. We are talking about, of course, mercury fillings and fluoride dripped into the public water supplies.

If we do not actually poison ourselves in just one or two ways, we do it in half a dozen different ways! Then we regulate that poisoning, we make it federal law! And we have lobbyists and groups out there defending this use of poison in the food supply, and defending the use of it in cosmetic products and personal care products. We have defenders of the drug industry, people who say, “Yeah, well there was a study five years ago that showed a 1200 percent heart attack increase, but we thought that really wasn’t relevant to this drug and we decided to go ahead and market that drug anyway.” That is what we have today. And the real details of this gruesome story have only begun to be uncovered. Wait until the rest of the story comes out …

Link here.


The Latin ‘panem et circenses’ (literally ‘bread and circuses’) is a derogatory phrase which can describe either government policies to pacify the citizenry, or the shallow, decadent desires of that same citizenry. In both cases, it refers to low-cost, low-quality, high-availability food and entertainment.” ~ Wikipedia

As you probably know, Thanksgiving is followed by the busiest shopping day of the year. “Black Friday” is widely known as such because it is the first day of the year for many retailers to book a profit. They make a loss on the first ten months and then clean up in the final stretch. That is the plan, at least. Following this year’s Black Friday, a story was reported under the waggish headline, “Season’s Beatings”. At a South Florida electronics store with a deliciously awful name – BrandsMart USA – a 73-year-old woman was trampled. According to the local paper, “The crowd of shoppers … angry at being forced to wait by security personnel … pushed their way under the security gate and down a hallway into the store.”

“Crowd” is an overly polite choice of words in this case – “Mob” would probably be more accurate. Poor Josephine Hoffman, the 73-year-old in question, never stood a chance. “I was trying to get out of the way, but they knocked me down,” she said. “I hit my head on the floor, and people stepped on me … I don’t understand why people do these things.” Apparently they do it for the discounts. The mob knew that Black Friday would be chock full of bargains, and there was no time for civility – even if someone’s grandmother had to pay the price.

“There is more than enough for everybody. The sale is going on all day,” a BrandsMart manager shouted. “We have your money out here. We need to go to other stores,” an angry mob leader shouted back. In other words, We’ve got the bread. Now give us our damn circuses. Panem Et Circenses. “Dear Lord,” your editor mutters to himself. “Are these people even human? All that is missing are the bearskin pelts and bones in their noses. Like the raiding hordes – Visigoths sacking the coliseum.”

We may not be reliving the last days of Ancient Rome, but it sure feels like it. The sacking of BrandsMart has transfixed us. The Roman fixation has another likely source: We recently finished Empire of Debt. Why are the parallels so striking? And so ubiquitous? It is not just the wolven shoppers howling for discounts that intrigue us, but also the rivers of “bread”, i.e., paper money, flowing through the streets. Goldman Sachs is reportedly handing out more than $500,000 worth of Christmas bonuses per employee. Corporations in general are embarking on the grandest series of dividend payouts and share buybacks in financial history. American consumers withdrew $600 billion from their homes in 2004 – and likely a good chunk more in 2005. Emperors of old juiced the money supply by reducing precious metal content in the coins. How easy the job becomes when there is no content at all!

The curiosities continue to pile up. Yet another oddity is the strange turn the media has taken. USA Today has baldly compared America to Ancient Rome. The Washington Post recently spoke of financial MADness. And just this week, the Financial Times declared, “Decadent America must give up Imperial Ambitions.” Why? Too expensive, of course. Sound familiar? All this is more than enough to raise an eyebrow. With the price of gold around $500, it is enough to raise two eyebrows. But a piece de resistance is still needed. To really send a shiver up the spine – to get that eerie feeling of twilight in the bones – a mysterious sign is required. This AP snippet does the trick: “Nov 28th, Washington. A basketball-sized piece of marble molding fell from the façade over the entrance to the Supreme Court, landing on the steps near visitors waiting to enter the building. No one was injured when the stone fell.”

Link here (scroll down to piece by Justice Litle).
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