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LUXURY HOUSING ON RISE IN EASTERN EUROPE
After the fall of communism, many visitors who fell in love with Prague dreamed of the same thing: buying a perfect – and inexpensive – apartment in historic Old Town. Real estate agent Maria Mihinova of the Prague-based V.I.P. Homes real estate agency said people wanted apartments with great atmosphere and a terrace with a view of Mala Strana, a cobblestone row of Baroque palaces and churches along the Vltava River. But the days when property in former communist states was cheap by Western standards are long gone. And more than a year after the Czech Republic became a member of the EU along with nine other mostly Eastern European nations, the tastes and expectations of house-hunters have changed.
A location in Old Town and a breathtaking view of the Hradcany Castle are no longer the only determining points for prospective buyers and renters in Prague. Clients – either newcomers from abroad or locals who are becoming more affluent – want the comfort and perks of 21st century living along with the medieval charm. A nearby garage, sufficient amount of bathrooms and larger bedrooms – often in newly built complexes – are becoming a must. Apartments in the historic part of Prague are scarce and expensive, with a price at times around 130,000 koruna ($5,240) per square meter, Mihinova said.
Prague is not the only former communist European capital – previously underdeveloped, with shortages of modern offices, apartment buildings and shopping centers – that has been getting a major facelift. Budapest’s luxury housing market took off several years ago when the more well-off started to leave the recently created satellite towns and move back into the city. Like the quest for modern amenities in Prague, developers in the Hungarian capital have added large terraces, roof gardens, swimming pools and saunas to their projects to lure people back. Also just like in Prague, few of the luxury apartments exceed 130 square meters (1,400 square feet).
While top-end projects are out of reach for many, with the average Czech salary being 18,763 koruna ($760), even the less affluent have been improving their living standards. Mortgages have increased from 51.1 billion koruna ($2.1 billion) in 2002 to 120.3 billion koruna ($4.89 billion) in 2004 nationwide. Still, Bohuslav Vendolsky of the developer Unistav said people are at times surprised by the skyrocketing prices. “They say that we have prices just as in Hamburg,” he said of some German buyers. “And we tell them that they are in Prague, not in some harbor.”Link here.
TENS OF THOUSANDS MARCH FOR HONG KONG DEMOCRACY
Thousands of demonstrators took to the streets of Hong Kong on Sunday, demanding the full democracy that was promised when the UK handed the colony back to China eight years ago. Marchers thronged the streets in the biggest show of public anger since Chief Executive Donald Tsan took office in June. The protesters, urged to dress in black for the event, chanted slogans as they left downtown Victoria Park, brandishing banners denouncing an unpopular government bill to change the city’s electoral system. Initial estimates from organizers put turnout at Sunday’s rally at about 70,000.
Tsang’s proposals would increase the size of the 800-strong committee of Beijing-backed elites that chooses the city’s chief executive, and would also enlarge the 60-seat legislature. But democrats say the proposals do not go far enough, and would amount to a step backward for the full democracy spelled out under the Hong Kong constitution, known as the Basic Law. The provision gives no timeline for when it might be achieved. Democrats in the parliament, known as the Legislative Council, say they will veto the legislation unless Tsang offers a timetable for democratic reform. “This is make-or-break time,” said the pro-democracy movement’s veteran leader Martin Lee. “The more people that come on the march, the more the government will have to do something about this.”Link here. Hong Kong democrats to use “people power” against Beijing, says reform leader – link.
CHILE’S PENSIONS UNDER FIRE
Would you disparage the two triple-expansion steam engines of the Titanic because the ship tragically hit an iceberg and captain Smith was slow to lower the boats so people could escape? Surely everyone realizes the engines had nothing to do with the problem. Well, a campaign has been raging against Chile’s private pensions, blaming the sound engines of the ship for the existence of icebergs in the water and the slowness of the captain’s reaction! The Presidential candidates in Chile’s upcoming elections have been drawn into the volatile battle over the country’s private pension funds. If it continues, one of the few success stories in Latin America’s economy – imitated in many countries – could begin to be overturned and the country’s march towards development severely hampered.
Almost 25 years ago, Chile’s salaried workers were allowed to opt out of the pay-as-you-go pension system and place part of their money in personal savings accounts managed by fund administrators of their own choosing. The majority of workers chose to become the owners of their own assets. Thanks to José Piñera’s reform, Chilean workers have seen their pensions earn an annual return of 10%. The cumulative pool of capital now amounts to $85 billion, if one includes the $15 billion that some retired workers have used to buy annuities from insurance companies – almost 90% of the nation’s GDP. Chile’s pension system is much less restricted than other countries’. There are no barriers to entry, which is why six companies are competing in that market as opposed to fewer in other Chilean markets. Commissions have been coming down. If more Chileans decide to participate, they will go further down.
The principled objection one can raise is that in a free society there should not be mandatory savings for salaried workers. True. But even the mandatory aspect, which applies to a fixed sum of pesos, is diluting with time because real wages have tripled since the reform was implemented. In any case, the privatized system is a great leap forward compared to the previous system that had no connection between workers’ contributions and their benefits, and when they could not dream of owning savings accounts with an average 10% rate of interest.
The current objections against Chile’s private pensions charge that half the Chilean workforce will not get a decent pension. But guess what: those are people who either have no job at all, have a part-time job, or who have chosen, as independent workers, to invest their money otherwise. Not to mention those who are simply part of the underground economy. Naturally, if you are out of a job or you have a short-term job, your account cannot grow like that of a long-term employee. And if you are a small entrepreneur or farmer who prefers to expand the business rather than open a retirement account, you will not get a “decent pension” but will probably get, unless someone wrecks the economy, a decent life! The critics of the capitalization system are actually celebrating private pensions without realizing it. By saying half the workforce does not get a decent pension, they are in effect saying, we would like to bring all of society into this successful venture.
If Chile wants everyone to get decent pensions, two things are needed, full employment and a Gestapo that will tell 40% of the workforce, made up of independent workers, how to invest their money. Whose fault is it that there is now 10% total unemployment and 26% unemployment among the poorest Chileans? Whose fault is it that most employment contracts are short-term? Rigid labor markets are to blame – one of the areas in which there have been some reversals in Chile – as well as high taxes. If 18% of Chileans are poor because there are no jobs to get them out of poverty, who is to blame – three million little guys who have been able to save a good pension or a political and regulatory environment that makes it hard for Chileans to generate full employment? This debate is a good opportunity to tell Chileans they cannot simply sleep on their laurels. Further reform is needed to achieve full development. But let us stop blaming the engines for the presence of icebergs in the water and for the slow reaction of the captain of the ship!Link here.
PANAMA, A SKYSCRAPER COUNTRY
A jungle? Perhaps George W. Bush thought this before his recent visit to Panama, but when he arrived he gave different account, as happens with many tourists. One of the few things that the president of the U.S. recognized, aside from the good handling of the canal, was his surprise of to have found a modern city. Some treated it as ridicule commentary, but it was not. Skycraper, an Internet site that measures the ranking of countries with more high buildings in the world, maintains that Panama is the city leader in Latin America in this matter, followed by Mexico. Skycraper has announced that Panama will have the highest building of Latin America in the 2010, Ice Tower, with 102 floors of height for residential use. The second highest building will be in Mexico City, with the Torrena project of 57 floors and 336.5 meters high, for mixed use (commercial and residential).
And the 3rd highest is again in Panama again, with the Palace of the Bay, to be finished in 2009. In 2010 Panama also will reach positions of 4th and 6th highest buildings in Latin America. The majority are residential buildings that are being marketed in the U.S., Canada and Europe. Altogether, Skyscraper has more than 20 building projects in Panama that compete for highest of Latin America. Each of these buildings represent an investment of approximately $200 million, said a local expert.
The direction of Urban Development of the Ministry of House announced that it has already approved five projects of more than 70 floors. Jose Batiste, director of the institution, said, “We cannot go against the development of the country, is only necessary to adapt urban infrastructures (sewage system, ample highways, water and energy services) so that it is possible to continue constructing these works.”Link here.
Panama – “market weight”
We maintain our market weight stance on Panama, which balances the country’s still high public debt burden with its improving fundamentals Events to monitor in the coming months are the passage of legislation on pension reform and fiscal performance. Our market weight stance balances Panama’s still high public debt burden with its improving long-term fundamentals. The Torrijos administration’s fiscal reforms have transformed primary deficits into primary surpluses and are expected to lower public debt to under 60% of GDP by 2008 or 2009 from 70% of GDP in 2004. Real GDP growth is expected to reach 6% in 2005, and remain in the 5%-6% range during 2006-07. Beyond that, Panama’s growth prospects and debt dynamics could improve even faster with the expansion of Panama Canal.
We expect the fiscal deficit to come down to 3.6% of GDP in 2005 from 4.9% of GDP in 2004, thanks to fiscal reforms implemented earlier this year. The improvement is attributable to a 13.5% increase in revenues compared to a 4.4% rise in primary expenditures. The 2006 budget envisages a decline in the NFPS deficit to 2.9% of GDP, but we expect the deficit to fall even further to 2.2% of GDP. The budget has two weak spots. It assumes full implementation of civil service reform and it does not incorporate potential costs of social security reform. But capital expenditures are budgeted to grow by 68%, an unrealistically high growth rate, in our view. On balance, we expect capital expenditures to be underexecuted by 1.2% of GDP, more than offsetting areas of potential slippage. Moreover, Panama’s external financing needs for 2006 have already been met, and its recent bond exchange has extended the maturity profile of its external debt to 8.3 years from 7.3 years before the operation.Link here.
GO SOUTH, OLD MAN
The gringos are moving where the living is easy.
You cannot really tell you are in Mexico. The menu is in English, so is the music, and seemingly every patron in the place is American – many of them extended families come together to celebrate Thanksgiving. San Miguel, a hillside town three hours north of Mexico City, has long played host to a community of expatriates from the U.S., many of whom have chosen to retire there for all or part of the year. Although neither the Mexican government nor the American one keeps statistics on the town’s foreign population, anecdotal evidence suggests that it is now growing at a faster pace than ever. Joannie Barcal of Allende Properties, an estate agent from California, who has lived in the town for 16 years, says that the number of foreigners looking for houses in San Miguel has increased hugely over the past year. It is a comfortable sort of place – one might describe it as the opposite of bohemian. Trinket shops sell silver plates embossed with the logos of Louisiana State University and the University of Texas. The houses bought by foreigners are rarely cheaper than $220,000. Several go for over a million every year, Ms. Barcal says.
Many of the American settlers barely speak a word of Spanish. They move south not so much in pursuit of the sun, which they could find just as easily in Florida or Arizona, but in a search for a cheaper way of life, along with the sense of community that foreign enclaves generate. Estimates for the number of Americans of non-Mexican ethnicity who have retired to Mexico, mostly in San Miguel and a handful of other towns, hover around 250,000, with at least as many Americans with Mexican roots more widely dispersed. But the house-price boom they and other foreigners, notably Canadians, have created is now driving others even farther south.
Panama, Costa Rica, Nicaragua and Honduras all offer tax breaks to foreigners seeking to retire there. Beachfront developments catering for pensioners have sprung up along both the Atlantic and Pacific coasts, with a house right on the beach often costing just half what you could expect to pay in San Miguel, smack in the middle of Mexico. Even an influx of a few tens of thousands of American “senior citizens” can have a big impact on the small economies of the Central American countries.
The numbers could grow even bigger if America agreed to change its public health-care system for those over 65. At present, Medicare, as the system is called, cannot be claimed abroad. So American pensioners tend to travel back to the U.S. to get treatment. The possibility of making Medicare “portable” has been talked about for years. But, apart from the introduction of a small pilot project, it has never got much further than just an idea. Yet the advantages are clear. Expatriate pensioners would find it easier to get health care. The costs for the crisis-ridden Medicare would be lessened. Mexico and other Central American countries with American pensioners would benefit not only from a rise in their health-care expenditure, but also from the big increase in their numbers that such a change would certainly bring.Link here.
GIFT FROM CANADA?
Why does President Bush hope Christmas comes a little late this year? Because on Jan. 23, Canada may elect the most pro-American leader in the Western world. Free-market economist Stephen Harper, leader of the opposition Conservative Party, is pro-free trade, pro-Iraq war, anti-Kyoto, and socially conservative. Move over Tony Blair. If elected, Mr. Harper will quickly become Mr. Bush’s new best friend internationally and the poster boy for his ideal foreign leader.
Both north and south of the U.S.-Canada border, this vote matters. Canadians are facing an election that may be the closest in a generation. The first opinion poll of the campaign finds Prime Minister Paul Martin’s center-left Liberal Party tied with Harper’s Conservatives at 31% support each. Over the cold, wintry 8-week campaign, there is everything to play for on both sides of the partisan and ideological divide. If Martin’s Liberal Party is re-elected for the fourth consecutive time, Canadian taxpayers will continue footing the bill for an expensive welfare state epitomized by its archaic government-run health-care system. And if the Conservatives win? Most important, Canada will have its first leader in living memory who actually believes Big Government is a real problem. A Prime Minister Harper may not be able to pass all the legislation he wants, but he would push to cut taxes and spending and the regulatory burden on Canada’s business sector.Link here.
GOVERNMENT WATCHDOG CHALLENGES U.S. DRUG WAR IN COLOMBIA
A U.S. government report to be released next week raises serious questions about the effectiveness of the multibillion-dollar U.S. anti-drug campaign in Colombia, despite moves by the Bush administration to extend the program. The 52-page report by the Government Accountability Office challenges administration conclusions that the drug interdiction effort known as Plan Colombia – a five-year program that ends this year – has reduced the amount of cocaine available in the U.S. The report was skeptical of the statistics the government relied on for its upbeat assessments, calling its information on cocaine production and use problematic. It also said the Office of National Drug Control Policy had failed to fully address previous “recommendations for improving illicit drug data collection and analysis.”
On November 9 in Bogota, John Walters, director of the White House Office of National Drug Control Policy, said Plan Colombia had been responsible for a substantial increase in the street price of cocaine in the U.S. and a drop in its quality from Colombia, which supplies an estimated 90% of the world’s cocaine, and an estimated $65 billion in illegal drugs to the U.S. market. But the GAO, the nonpartisan investigative arm of Congress, specifically criticized those figures, saying that they reflected trends that “could reflect law enforcement patterns rather than drug availability patterns” and that the number of U.S. cocaine users remained constant at about 2 million. “Other sources estimate the number of chronic and occasional cocaine users may be as high as 6 million,” the report stated.
The GAO also found the White House assessment of the amount of cocaine entering the U.S. in 2004 – 325 metric tons to 675 metric tons – to be too varied to be “useful for assessing interdiction efforts.”Link here.
OECD WANTS WASHINGTON TO FORCE CHANGES TO STATE CORPORATE LAW
In a report (PDF file) issued late last month following the OECD’s Global Tax Forum in Melbourne, Australia, the Paris-based bureaucracy reiterated its opposition to market-friendly incorporation laws and – in a swipe at America – urged nations with federal systems to pressure “political subdivisions” into changing their policies in order to help hinder the flow of capital from high-tax nations. The Center for Freedom and Prosperity Foundation and several members of the Coalition for Tax Competition today condemned the OECD for attacking America’s federal system, and also expressed their concern that the Treasury Department delegation at the Melbourne conference acquiesced to the attack.
Andrew Quinlan, President of the CFPR, stated, “Since the United States is the only nation with a decentralized system for incorporating companies, it does not take a Sherlock Holmes to figure out that the OECD is targeting Delaware, Nevada, and other states. It is very disappointing that the Treasury bureaucrats at the meeting allowed this attack on America’s Constitutional system.”
Daniel Mitchell, Senior Fellow at the Heritage Foundation, added, “The OECD’s report is an unambiguous attack on Delaware, Nevada, Florida, Wyoming, Montana, and other states that are internationally competitive in the market for corporate services. If these states are attracting business from Europe’s high-tax welfare states, then nations such as France and Germany should lower the burden of government rather than using the OECD as a vehicle to attack more successful jurisdictions.”Link here.
HMMM. WHAT IS THIS ALTERNATIVE TAX? HEY, WAIT! OUCH!
Do House Republicans harbor some sort of deep rage against moderately affluent families with lots of children? Maybe not, but take a close look at the $56 billion package of tax cuts that House leaders hope to pass before Christmas, and you have to wonder. If it were to become law, any family with two or more children and an income of $100,000 ought to run for the hills. Sift out dozens of nickel-and-dime provisions, and the essence of the House bill comes down to one provision that it includes and one that it omits. What the bill includes is a two-year extension of President Bush’s tax cuts for stock dividends and capital gains. Those provisions do not expire until the end of 2008, but the extension would cost $20 billion and is by far the most expensive provision in the House bill. More striking is what the bill does not include: any provision to prevent a surge in the alternative minimum tax, or A.M.T., next year.
The A.M.T. is a topic that makes most people’s eyes glaze over until it hits them personally. And if Congress makes no change, it will hit about 15 million new households in 2006 – with a surprise tax surcharge averaging about $2,000. The A.M.T. was created in 1969 to stop the very richest taxpayers from using tax breaks to avoid all or most of their income taxes. But it is set to engulf millions of families with fairly modest incomes, for two reasons: it is not indexed to inflation and it has a perverse interaction with President Bush’s tax cuts of 2001 and 2003. They lowered normal income taxes but not the A.M.T. If the A.M.T. turns out to be higher than the ordinary income tax, a person has to pay the higher amount.
For several years now, Congress has ducked the problem by passing temporary fixes that slowed down the expansion of the A.M.T. But those remedies are more expensive each year, and the one for 2006 would cost at least $27 billion. If Congress does nothing, the A.M.T. will kick in for millions of families, preventing them from taking exemptions for each of their children, deductions for state and local taxes and scores of other common tax breaks. As a result, its biggest impact would be on a classic Republican demographic: affluent families with roomy homes, two cars, high-achievers and lots of children. Think of leafy suburbs.
The A.M.T. becomes relevant for married couples who make as little as $58,000 a year. It applies a flat rate of 26% on the first $175,000 in earnings, and it strips out most standard tax breaks. According to calculations by the Tax Policy Center, here is what would happen for 2006 tax bills if no changes take place: 1.) 30% of the 12 million households that earn between $75,000 and $100,000 – about 3.7 million tax filers – would be hit with a tax increase. Since only 1% of people in that income range were affected in 2005, a lot of them would be in for a shock. 2.) Married couples with two or more children would be the most vulnerable – about 73% with incomes between $75,000 and $100,000 would face a tax increase. 3.) The total number of people paying the A.M.T. would shoot from 3.5 million this year to 18.9 million in 2006 and 30.9 million in 2010.Link here.
EVERSON TRUMPETS IRS ENFORCEMENT RECORD
Countering criticism from some quarters that the IRS has let audit rates slip over recent years, agency chief Mark W. Everson says that the IRS has collected more from its enforcement activities this year compared to last, while also improving its customer service performance. Marking the mid-point in his 5-year term, Mr. Everson said in a statement last month that, “When I was before the Finance Committee in March 2003 for my confirmation hearing, I articulated three goals for the IRS: better serving the taxpayers, continued modernization, and enhanced enforcement activities to ensure everyone pays their fair share. These remain the goals established in our strategic plan, and I am pleased to report that we are making progress in each area. We have augmented our enforcement efforts and brought in billions more to the Treasury, but not at the expense of services to taxpayers.”
According to the IRS, the agency achieved the following feats in the enforcement sphere in the fiscal year which ended September 30: 1.) Enforcement revenues increased by 10% to a record $47.3 billion. 2.) Total individual returns audited increased by over 20% to 1,216,000 from 1,008,000 in 2004. The number completed is back to a level last achieved in 1998. 3.) Audits of individuals with incomes over $100,000 surpassed 221,000, the highest figure in 10 years, and well over double the 92,000 completed in fiscal year 2001. The coverage rate in this category is still too low, but at 1.58% is double what it was four years ago. 4.) Audits of small businesses organized as corporations turned up after years of decline. 17,867 were completed in 2005 against 7,294 a year earlier. 5.) Audits of larger corporations – those with assets over $10 million – also increased, up 14% from a year ago to 10,878. The coverage rate of 20% has rebounded significantly from that of 12% just two years ago.
However, the IRS reported that Criminal prosecutions recommended to the Justice Department did show a modest decline of 6% from a year ago, which, the agency said, is attributable to lower numbers of narcotics and money laundering cases. Tax and tax-related cases were flat year over year.Link here.
GREECE SAYS THE FIGHT AGAINST TAX EVASION NEEDS STRICTER PENALTIES
If Economy Minister Giorgos Alogoskoufis persists with his drive against tax evasion, which would include the return of mandatory submission of periodic VAT statements and penalties for accepting bogus invoices, the recent rise in tax revenues will be sustainable and reach the set target of 7.9% in 2006 – equal to the projected nominal increase in GDP. Next year is especially crucial for revenues, as the government must lower the deficit below the EU-mandated ceiling of 3% of GDP. Alogoskoufis said in Parliament last week that the extent of tax evasion today is the economy’s most serious problem and the chief cause of the fiscal imbalance which led the country to be placed under a regime of EU supervision.
He noted that tax evasion has significantly increased over the past five years, as proved by the development of tax revenues as a percentage of GDP – particularly of indirect taxes, where there have been cuts in rates, from 15.3% of GDP in 2000 to 14% in 2003, 13.8% in 2004 and 13% this year. Greece is one of the few developed countries where tax evasion is not a penal offense. A senior Finance Ministry official claimed that the incidence of tax violations exceeds 75% (!), from mundane omissions to companies collecting VAT and not returning it to the government. The theft of VAT is basically done through the use of bogus receipts and invoices.
Separately, ordinary citizens insist that an effective measure against tax evasion would be the reinstatement of ordinary purchase receipts for a range of family expenses as partly tax deductible. It is well known that a high percentage of establishments, particularly in entertainment, do not issue receipts and consumers have no incentive to to demand them.Link here.
IRS WEB SITE SCREWUP USED BY PHISHING SCAMMERS
An email purporting to be from the IRS sends people to a legitimate government site but is really a phishing scam. It uses a vulnerability on the real IRS site. The email promises U.S. taxpayers a refund but leverages a security configuration error at the IRS site which then bounces the unwary to a bogus look alike site. Said Graham Cluley, senior tech consultant at Sophos, “The link in the email simply bounces the user off a U.S. government website onto a site owned by the criminals, who are ready and willing to steal their credit card details, social security number and other personal information.”Link here.
LUXEMBOURG CENTRAL BANK CHIEF SEES NO NEED FOR EU TAX HARMONIZATION
Governor Yves Mersch stated last week that tax harmonization is not an essential component of European Monetary Union, and that member states should be allowed to retain control of their own fiscal policies in order to counteract local inflation. Mersch went on to observe that there “is no connection” between EMU and tax harmonization, and that the latter concept represents one step beyond the former one. Having lost control of monetary policy, Merz noted that fiscal policy “is the only policy that is left to them (euro-zone countries) in order to counteract inflation.”
Mersch also disputed Franco-German fears of “fiscal dumping” by the new member states in Eastern Europe, which have been sharply cutting company tax rates in order to attract foreign investment, arguing that businesses were more concerned with the overall stability of a country’s fiscal system. While the EC is not committed to a policy of equalizing corporate tax rates across the EU, it is nevertheless working towards the harmonization of the company tax base in an attempt to reduce red tape and compliance costs for businesses. Taxation Commissioner Laszlo Kovacs has proposed that this process will be completed by 2009.Link here.
LIECHTENSTEIN HANDS SADDAM MONEY JET TO IRAQ
Liechtenstein today over to the Iraqi government a private plane said to have been used by former Iraqi President Saddam Hussein to transport money and senior officials. It was the first return of an Iraqi aircraft seized under UN Security Council resolutions linked to the 2003 U.S.-led invasion of Iraq, Liechtenstein said in a statement. The Falcon 50 business jet was seized in Amman, Jordan, shortly before the U.S.-led invasion of Iraq in 2003 in accordance with the UN sanctions committee at the request of Liechtenstein, where the plane was registered. With the approval of the committee the plane was then taken to Basel, where it was completely overhauled. The Liechtenstein government said the return “is the result of a close and protracted, but constructive, co-operation between the authorities of Liechtenstein, the United States and Iraq.”Links here and here.
TENNESSEE HIGHWAY PATROL CHIEF’S BID ON SEIZED BOAT MAY VIOLATE LAW
The commander of the Tennessee Highway Patrol went on a state Web site last week and purchased a fishing boat confiscated by his own agency, an apparent violation of state law. With the username “pitts”, Col. Lynn Pitts bought the 17-foot aluminum jon boat with a 40-horsepower engine for $1,700 in a competitive auction during which he placed 25 bids over four days. He did so in the midst of a crisis at his agency, including a TBI investigation of troopers with criminal records on the force.
The state General Services Department, which handles auctions of the state’s seized and surplus property, halted the transaction and has launched an investigation to determine whether Pitts has bid on or purchased such property before, spokeswoman Lola Potter said. The law forbidding state law enforcement officers from bidding on and purchasing property confiscated by their own agencies is clear: Anyone violating it “shall be dismissed and discharged from such person’s respective job.” It is at least the second time in less than a dozen years that a THP employee has been accused of misappropriating surplus property. The ban on officials’ bidding on property that their agencies seize is designed to make sure they do not take advantage of their position.
The “terms conditions” link on the Web page for the boat listing includes the disclaimer, “It shall be unlawful for any State, City or County Officer, employee or his/her agent directly or indirectly involved in the confiscation of such property to buy or offer to buy any of the seized or confiscated property to be sold hereunder.”Link here.
TAXING TRUSTS IN AN ERA OF GLOBALIZATION: THE ISRAELI EXPERIENCE
As anti-money laundering and anti-terrorist laws become more rigorous trustees are expected to be more alert to possible fiscal offences globally. To date, global law enforcement initiative against money laundering are continuously expanding. These initiatives spearheaded by the OECD particularly through the Fifteenth Session of the Hague Conference on Private International Law, at which 32 states were represented, was held at The Hague in October of 1984. This session ultimately resulted in the Hague Convention on Trusts. Notwithstanding the limited impact of the Hague convention on Trusts, globalization has given rise to progressive increase in the burden of regulation within the fields of corporate administration, financial or legal advice, company formation and finally also trusts management and are the focal point of this comment.
Trust regimes originated and are largely present in English law-oriented known as Common law jurisdictions, such as Great Britain, the U.S. or New-Zealand. This is the general position in most of Europe, where few countries have introduced definite legislation or has adopted the Hague Convention on Trusts. The mentioned OECD model treaty, furthermore, makes no reference to trusts further complicating the interpretation of double tax treaties. In the absence of specific provisions, numerous countries treat trusts as if they were the closest recognized legal entities. To illustrate, in France trusts are treated more like a contract. This is, especially given the absence of legal “consideration”, or the promise to give something in exchange for the contracted benefit, as a requirement to the formation of a valid contract.
In Holland the Hague Convention on Trusts has been ratified (perhaps unsurprisingly) and so trusts are recognized. Similar structures to trusts such as the shctichung (foundation) and vruchtgebruik (userfruct) exist in Holland, so interpretation is eased by familiarity. In other countries around the world, such as Lichtenstein, Panama or the Dutch Antilles there exists a separate legal entity other than an incorporated company or trust, namely a “Private Foundation” that resemble the trust structure in part. Another closely-related institution that is similar to the trust is the Swiss Fiducie, which allows the owner of the forwarded asset to maintain control over the managed asset. As much as these institutions resemble trusts, differences are nevertheless significant. Among the few countries who designed specific trust legislation is, however, the state of Israel.
This comment is a brief description of a principal Israeli imminent bill, upon its informative arrangements concerning the taxation of mixed trusts, which include foreign individuals and beneficiaries that want to invest in Israel.Link here.
UNEXPECTED CHALLENGES FOR U.K. OFFSHORE ADVISERS
The National Audit Office’s February 2003 report “Tackling Fraud Against the Inland Revenue” noted that offshore accounts and structures present a “major threat of serious fraud”. Since then the UK has seen a raft of new information-gathering approaches and a more robust approach to some longstanding reporting requirements. HM Revenue & Customs’ (HMRC) aim is clear: increased intelligence will throw up increased information about offshore structures and funds; disclose unreported distributions, remittances and profits; increase the number of investigations into taxpayers’ affairs; and increase the tax take. The Government envisages that the investigation of offshore accounts and structures can generate an additional £1.6 billion in revenue. It may well provide ammunition for the longstanding domicile and residence review.
But its width means that it may be a blunt instrument for distinguishing fraud from structures and funds which are run properly and legitimately. Advisers to international clients, offshore trustees and managers, then, need to be sure that they are fully in the picture about their clients and that all concerned understand the client’s UK tax profile and reporting requirements in the UK (and other jurisdictions).
The new Offshore Fraud Projects Team (OFPT) is seeking information from financial institutions about their customers and the movement of funds offshore. In particular, it is understood that the OFPT is approaching UK banks for information in respect of customers for whom they have moved funds offshore using sundry parties or suspense accounts, thereby bypassing these individuals’ UK bank accounts. HMRC has undertaken a project to identify UK taxpayers who have credit cards or debit cards issued by offshore banks, examining the use of those cards in the UK and extracting details from the credit card companies themselves.
The EU Savings Directive, which came into effect on 1 July 2005, requires certain information to be exchanged between national tax authorities to combat tax evasion by individuals on cross-border savings income. The directive has not changed the tax position, but it will enable HMRC to compare the information it receives from the tax authorities of the other countries with that contained in an individual’s tax return. This means that any past or future errors are likely to come to light.
HMRC’s intelligence-gathering efforts will doubtless reveal some crude tax planning and tax ignorance. But at the same time, none of this should undermine the position of the client in a well-run offshore structure where advice is taken and implemented properly. For the correctly advised client, the extent and limits of compliance will be understood. They will no doubt be reviewed and discussed as necessary, and any HMRC enquiries received will be dealt with effectively.Link here.
DUE DILIGENCE EXPERTS SAY BANKING SECRECY IS NO OBSTACLE TO HUNTING DOWN FRAUD
Do so-called “secrecy laws” really make it nigh on impossible to obtain details of fraudulent activity in an offshore jurisdiction? Not according to a panel of lawyers and investigators who regularly dig through offshore transactions to try and pin down alleged con artists. The panel, speaking at a due diligence conference in Miami, organized by investigative reporter and Offshore Alert publisher David Marchant, outlined the various ways to track down evidence, and intelligence that can be used as a stepping stone to gathering information that will hold up in a court of law.
Some of the means used follow standard legal channels like court orders allowing for discovery or a search of public files. Other more innovative ways used by professional investigators are also used to turn up harder-to-obtain information – including going through the trash. Cheryl Cartwright, a partner with Bahamas law firm Callenders & Co., said there are numerous public channels now to source information, but she would also do what she could to solicit the help of any institution involved, say a bank, in the case under investigation. “I would suggest they be careful with any transfer of funds etc. as they could be held liable as a constructive trustee,” she told the audience.
Various initiatives in recent years pushing for greater transparency of corporate information, especially banking and property records, has gone a long way to create greater information access in the so-called offshore world, the group said. But you have to have legitimate grounds for seeking the information, especially if it isn’t publicly available. “You have to make a specific request, it cannot be a fishing expedition,” said Mario A. Vlieg, a Panama-based lawyer with Mossack Fonseca & Co.
“Offshore”, a term that generally makes regulators in these domiciles see red because of its negative connotations, is defined by U.S. tax authorities as a jurisdiction that offers financial secrecy laws, securing the privacy of client information, in an effort to attract investment from outside its borders. The term continues to be used, many would say unfairly, despite efforts by a significant number of the so-called jurisdictions, including Bermuda, to follow the letter of international regulations, making investments from dodgy dealers unwelcome. The tag may continue to be applied, usually to small island territories, because fraudsters have not stopped trying to hide or launder ill-gotten gains through bank accounts with financial institutions based in these locations.Link here.
DEPARTMENT OF HOMELAND SECURITY HOTLINE A HOTBED OF WEAK TIPS
The tipster from Illinois first called the DHS’s hotline in Williston, Vermont on February 15, when he reported that while he was helping a “Russian lady” change a flat tire, he saw a pipe bomb in the trunk of her car. The tip set off a public safety alert in central Illinois, where state police and Naperville authorities responded to a bulletin from the DHS. The dragnet finally ended February 21, when officers found the woman, her car and a device in the trunk. There was a twist. The device had been placed in the car by the innocent woman’s ex-husband. He and his son were charged in what turned out to be a bizarre and unsuccessful plot to have his ex-wife, an immigrant, jailed and deported.
The incident was an extreme example of how the hotline – designed to help identify foreigners and others who could harm U.S. interests – has become a venting board for tens of thousands of tips from across the USA that have nothing to do with potential threats to the homeland. Each day, operators at the Law Enforcement Support Center hear stories that could be straight out of television drama – broken marriages that lead one spouse to report the other’s illegal immigration status, disputes that lead one neighbor to report information about another, business owners reporting that their rivals are employing illegal immigrants.
Scott Blackman, the center’s unit chief, says it is unclear whether information received at the DHS center and directed to law enforcement agencies across the nation has led to the arrest of a terrorism suspect. However, during the 2004 budget year, the center – which besides operating the hotline runs an immigration database for law enforcement agencies – reported identifying more than 6,000 illegal immigrants who were wanted by police.
Blackman estimates that about half the calls to the hotline contain false information that law enforcement agencies nevertheless have to check out. He says that is a reasonable cost for getting leads that local law enforcement can use. However, some civil liberties activists and immigrant advocacy groups are expressing concern that the hotline and others like it have merely awakened a nation of busybodies motivated by revenge, ethnic bias, or worse.Link here.
AIRLINE SECURITY A WASTE OF CASH
Since 9-11, our nation has been obsessed with air-travel security. Terrorist attacks from the air have been the threat that looms largest in Americans’ minds. As a result, we have wasted millions on misguided programs to separate the regular travelers from the suspected terrorists – money that could have been spent to actually make us safer. Consider CAPPS and its replacement, Secure Flight. These are programs to check travelers against the 30,000 to 40,000 names on the government’s No-Fly list, and another 30,000 to 40,000 on its Selectee list.
They are bizarre lists, people – names and aliases – who are too dangerous to be allowed to fly under any circumstance, yet so innocent that they cannot be arrested, even under the draconian provisions of the Patriot Act. The Selectee list contains an equal number of travelers who must be searched extensively before they are allowed to fly. Who are these people, anyway? The truth is, nobody knows. The lists come from the Terrorist Screening Database, a hodgepodge compiled in haste from a variety of sources, with no clear rules about who should be on it or how to get off it. The government is trying to clean up the lists, but – garbage in, garbage out – it is not having much success.
The program has been a complete failure, resulting in exactly zero terrorists caught. And even worse, thousands (or more) have been denied the ability to fly, even though they have done nothing wrong. These denials fall into two categories, the “Ted Kennedy” problem (people who are not on the list but share a name with someone who is) and the “Cat Stevens” problem (people on the list who should not be). Four years after 9-11, both these problems remain.
Alongside Secure Flight, the TSA is testing Registered Traveler programs. There are two: one administered by the TSA, and the other a commercial program from Verified Identity Pass called Clear. The basic idea is that you submit your information in advance, and if you are OK – whatever that means – you get a card that lets you go through security faster. Superficially, it all seems to make sense. Why waste precious time making Grandma Miriam from Brooklyn empty her purse when you can search Sharaf, a 26-year-old who arrived last month from Egypt and is traveling without luggage? The reason is security. These programs are based on the dangerous myth that terrorists match a particular profile and that we can somehow pick terrorists out of a crowd if we only can identify everyone. That is simply not true. It may be counterintuitive, but we are all safer if enhanced screening is truly random, and not based on an error-filled database or a cursory background check.
Exactly two things have made airline travel safer since 9/11: reinforcement of cockpit doors, and passengers who now know that they may have to fight back. Everything else is security theater. We would all be a lot safer if, instead, we implemented enhanced baggage security – both ensuring that a passenger’s bags do not fly unless he does, and explosives screening for all baggage – as well as background checks and increased screening for airport employees. Then intelligence, investigation and emergency response are security measures that pay dividends regardless of what the terrorists are planning next, whether it is the movie plot threat of the moment, or something entirely different.Link here.
NEW CONSUMER-TRACKING TECHNOLOGY THREATENS TO MAKE PERSONAL PRIVACY A THING OF THE PAST
Imagine a future in which your every belonging is marked with a unique number identifiable with the swipe of a scanner, where your refrigerator keeps track of its contents, where the location of your car is always pinpoint-able, and where signal-emitting microchips storing personal information are implanted beneath your skin or embedded in your inner organs. This is the future of radio frequency identification (RFID), a technology whose application has so far been limited largely to supply-chain management (enabling companies, for example, to keep track of the quantity of a given product they have in stock). RFID is set to be applied in a whole range of consumer settings. Already being tested in products as innocuous as shampoo, lip balm, razor blades, and cream cheese, RFID-enabled items are promoted by retailers and marketers as the next revolution in customer convenience. Consumer advocates say this is paving the way for a nightmarish future where personal privacy is a quaint throwback.
Katherine Albrecht has been at the forefront of efforts to sound the alarm about the (already) $10 billion-a-year customer surveillance industry. As the founder and director of the consumer advocacy group Consumers Against Supermarket Privacy Invasion and Numbering (CASPIAN, a nod to C.S. Lewis’ valiant prince), she has uncovered everything from hidden cameras to tracking devices in shopping carts to fake shoppers who follow you around stores. In her new book, Spychips (co-written with colleague Liz McIntyre), Albrecht, whose work is motivated in part by deeply held Christian beliefs, details how global corporations—and governments – are working to turn RFID into a way of tracking the day-to-day activities of ordinary citizens.
“Regardless of whether your beliefs are progressive or conservative, socially or politically, everybody’s got a reason to not want somebody spying on them,” she says. “Whether you’re afraid that Big Brother is going to take the form of an evil corporation or Big Brother is going to take the form of an evil government or take whatever form, everybody’s got a reason to be concerned.” Mother Jones recently talked with Albrecht about her consumer activism, the techniques of customer manipulation, and a future where RFID is ubiquitous and personal privacy in short supply.Link here.
SECRET ID LAW TO GET HEARING
Although John Gilmore lives just five blocks from San Francisco’s Department of Motor Vehicles, his driver’s license is expired. On purpose. The outspoken, techno-hippie, wealthy civil libertarian does not want to give his Social Security number to the DMV. Neither will he show his driver’s license at airports, or submit to routine security searches. This refusal to obey the rules led him to file suit against the Bush administration (Gilmore v. Gonzales) after being rebuffed at two different airports on July 4, 2002, when he tried to fly without showing identification. One airline offered to let Gilmore fly without showing ID, but only if he underwent more intensive security screening, which he declined.
On December 8, Gilmore and his lawyers will get 20 minutes in front of the 9th U.S. Circuit Court of Appeals to make their argument against identification requirements and government secrecy, in a case that time and shifting public opinion has transformed from a quirky millionaire’s indignant protest into a closely watched test of the limitations of executive branch power. “The nexus of the case has always been the right to travel,” Gilmore said. “Can the government prevent Americans from moving around in their own country by slapping any silly rules on them – you have to show ID, you have to submit to searches, you have to wear a yarmulke?” Gilmore has sunk thousands of dollars into fighting identification requirements, but he also personally committed to not traveling in the U.S. if he has to show identification. So Gilmore has not taken a train, an intercity bus or a domestic flight since July 4, 2002. He still flies internationally.
Gilmore has long been a prominent figure in the privacy and civil liberties communities – he co-founded the Electronic Frontier Foundation. But many civil liberties advocates begged Gilmore not to file suit in 2002 because they were certain he would lose and set bad case law, according to Gilmore’s lawyer, Jim Harrison. Things might be different in late 2005. “The same people that were telling John that you really should not do this while the country is inflamed are the same ones that filed friend-of-the-court briefs to the 9th Circuit,” Harrison said.Link here.
PATRIOT ACT NEEDS TO BE SQUASHED
With parts of the Patriot Act required to be reauthorized by Dec. 31, the Bush administration pushed hard to get it done before Thanksgiving recess. But a House-Senate conference committee draft report has been blocked by a coalition of Republican and Democratic senators who have pledged to stop a reauthorization conference bill unless significant changes are made when Congress reconvenes on December 16. December 15 is Bill of Rights Day, celebrating the first 10 amendments to the Constitution, without which our founding document would not have become the law of the land.
I congratulate the patriotic resisters – in and out of the Senate – for not allowing the administration to retain sections of the Patriot Act which 399 towns and cities across the country, and seven state legislatures, had told their representatives in Congress to change in compliance with the Bill of Rights. Begun in Northampton, Massachusetts, in November 2001, the Bill of Rights Defense Committee, led by Nancy Talanian, has been instrumental in the national organizing of these resolutions to Congress – through a subsequent alliance with the American Civil Liberties Union (ACLU) and a range of conservative libertarian organizations. Currently among those insisting on essential Patriot Act reforms are the American Conservative Union, the American Library Association, and such business groups as the U.S. Chamber of Commerce and the National Association of Manufacturers.
These business organizations have joined with civil libertarians to focus on the Patriot Act’s sweeping expansion of government powers to obtain a huge range of personal information by claiming only that the records are “relevant to an authorized investigation” on terrorism. I salute the senators who insist on these and other vital changes in the Patriot Act: Republicans Larry Craig (Idaho), John Sununu (New Hampshire), Lisa Murkowski (Alaska); and Democrats Dick Durbin (Illinois), Russ Feingold (Wisconsin) and Ken Salazar (Colorado). Also, Sen. Arlen Specter, who refused to sign the conference committee report. To their colleagues in both houses, I recommend advice from Alexander Hamilton (Federalist No. 8):
“The continual effort and alarm attendant on a state of continual danger will compel nations the most attached to liberty, to resort for repose and security to institutions which have a tendency to destroy their civil and political rights. To be more safe, they, at length become willing to run the risk to be less free.” To respect our Bill of Rights, it is up to Congress – that represents we, the people – to prevent this happening to us.Link here.
Agreement puts Patriot Act in line for vote – or filibuster.
House and Senate Republican negotiators, after arguing for months, have reached agreement to extend the USA Patriot Act. A Democratic senator immediately threatened a filibuster to block the compromise bill, however, and a bipartisan group of senators issued a joint statement saying they were “gravely disappointed” with the deal and will not support it. “This is not a perfect bill, but a good bill,” Specter (R-Pennsylvania) said at a news conference announcing the deal, which took months of often-tense negotiations to reach. The agreement makes permanent most parts of the Patriot Act and extends for four years two of the act’s most controversial provisions. Those authorize roving wiretaps and give FBI agents access to library, business and hospital records. The legislation would also extend for four years a provision of a separate intelligence law passed last year that sets standards for monitoring “lone wolf"” terrorists who are not connected to a foreign government.
The House-passed bill had authorized these provisions for 10 years, while the Senate version accepted only a 4-year term. Shortly before Thanksgiving, the House negotiators said they would accept a 7-year limit, but some senators kept pushing for a shorter time frame. 16 provisions of the Patriot Act are due to expire Dec. 31. The law expands the government’s surveillance and prosecutorial powers against suspected terrorists and their accomplices. Specter said the Senate will vote on the compromise bill next week. He said he did not expect Senate Democrats to use a filibuster to block the vote. And if they did, he did not expect it would be successful.
Sen. Russell Feingold (D-Wisconsin), who was the only senator to vote against the bill in 2001, quickly threatened a filibuster. “I will do everything I can, including a filibuster, to stop this Patriot Act Conference Report, which does not include adequate safeguards to protect our constitutional freedoms,” he said in a statement posted on his Web site. Feingold and five other senators issued a joint statement calling for more changes to the act. “There is still no meaningful judicial review,” said New Hampshire Republican John Sununu, one of the six senators who objected to the compromise. Congress should “do a better job of protecting civil liberties. Law enforcement is not undermined or threatened by a judicial-review process of any kind.” The American Civil Liberties Union denounced the deal and called on lawmakers to reject it because it impinges on the privacy of innocent citizens.
Specter said the deal includes changes that should win over those concerned about civil liberties, including: 1.) Federal agents must obtain a court review before obtaining library records. 2.) Individuals who receive national security letters will be allowed to consult with a lawyer. 3.) Law enforcement officials will be required to show to a court that they are targeting a specific person before obtaining permission for a roving wiretap, which allows investigators to monitor a person’s conversations as he or she moves from place to place. 4.) Individuals must be told within 30 days if FBI agents surreptitiously search their homes for up to 90 days to gather information for a counterterrorism investigation. The 30-day deadline could be extended by a judge.Links here and here.
NOT GUILTY VERDICTS IN FLORIDA TERROR TRIAL ARE SETBACK FOR U.S.
In a major defeat for law enforcement officials, a jury in Florida failed to return guilty verdicts Tuesday on any of 51 criminal counts against a former Florida professor and three co-defendants accused of operating a North American front for Palestinian terrorists. The former professor, Sami al-Arian, a fiery advocate for Palestinian causes who became a lightning rod for criticism nationwide over his vocal anti-Israeli stances, was found not guilty on eight criminal counts related to terrorist support, perjury and immigration violations.
The jury deadlocked on the remaining nine counts against him after deliberating for 13 days, and it did not return any guilty verdicts against the three other defendants in the case. “This was a political prosecution from the start, and I think the jury realized that,” Linda Moreno, one of Mr. Arian’s defense lawyers, said in a telephone interview. “They looked over at Sami al-Arian; they saw a man who had taken unpopular positions on issues thousands of miles away, but they realized he wasn’t a terrorist. The truth is a powerful thing.” Federal officials in Washington expressed surprise at the verdict in a case they had pursued for years.
The trial, lasting more than five months, hinged on the question of whether Mr. Arian’s years of work in the Tampa area in support of Palestinian independence crossed the threshold from protected free speech and political advocacy to illegal support for terrorists. Prosecutors, who had been building a case against Mr. Arian for 10 years, relied on some 20,000 hours of taped conversations culled from wiretaps on Mr. Arian and his associates. Officials said he had helped finance and direct terrorist attacks in Israel, the Gaza Strip and the West Bank, while using his faculty position teaching computer engineering at the University of South Florida as a cover for his terrorist activities. But ultimately, the jury in Tampa that heard the case found him not guilty of the charge of conspiring to kill people overseas, and it deadlocked on three of the other most serious terrorism charges.
Justice Department officials said they were considering whether to re-try Mr. Arian on the counts on which the jury did not reach verdicts. While expressing disappointment in the verdicts, the officials said the department had a strong track record of success in prosecuting terrorists, including the separate convictions last week of a Northern Virginia student and a Pakistani immigrant in New York on charges of supporting Al Qaeda. In bringing the case against Mr. Arian in 2003, the department relied on the easing of legal restrictions under the antiterrorism law known as the USA Patriot Act to present years of wiretaps on the defendants in a criminal context. In the conversations cited by prosecutors, Mr. Arian was heard raising money for Palestinian causes, hailing recently completed attacks against Israel with associates overseas, calling suicide bombers “martyrs” and referring to Jews as “monkeys and swine” who would be “damned” by Allah.
For the local Muslim community, the verdicts are “a huge relief, and people are just jubilant,” said Ahmed Bedier, director of the Tampa chapter of the Council on American-Islamic Relations. Mr. Bedier, who attended much of the trial, said he had doubted whether Mr. Arian could receive a fair trial in Tampa, especially in light of the publicity his case had generated, but “the jury proved us wrong,” he said in a telephone interview. “This was a very important case for us in that it tested both the Patriot Act and the right to political activity. The jury is sending a statement that even in post-9/11 America, the justice system works, the burden of proof is on the prosecution, and political association – while it may be unpopular to associate oneself with controversial views – is still not illegal in this country.”Link here.
TRASHING EVERY PRINCIPLE OF CONSTITUTIONAL LAW
On Tuesday, November 22, two cases that I had followed and written about since their inception took a strange turn. Jose Padilla’s case received the most attention. He is the American citizen who was picked up in Chicago in May 2002, taken into custody in New York, and held in New York on a “material witness” subpoena. This is a little-known-about trick the government can play on you when it wants to lock you up but does not quite know why. The New York prosecutors said they wanted to question him about a “dirty bomb” plot and they had to keep him locked up because he might flee the country.
When Attorney General Gonzales recently held a press conference to announce that Padilla was being charged with conspiracy to commit terrorism abroad, he refused to answer any questions about why Padilla was not charged with plotting to do what Ashcroft said he was going to do (even the Ashcroft story had morphed over time from planning to detonate a “dirty” bomb, to plots to blow up bridges or apartment buildings). Does Padilla’s indictment mean he will get a real trial under the Constitution and federal law, or will Gonzalez and gang try to play by different rules, as they are doing in so many other “terrorist cases”? I imagine the later.
The government played an even bigger “gotcha” on Ahmed Omar Abu Ali, a Falls Church resident, American citizen, who November 22 was convicted by an Alexandria, Virginia jury of conspiring to commit terrorism, including plotting to assassinate President Bush, bring in terrorists through Mexico, and blow up airplanes. The charges sound horrible, but if you read the indictment you would find that Abu Ali did nothing more that talk-not that talk like this is a smart thing-but there was no concrete plan. As Paul Wolfowitz had one time said of Padilla’s alleged “plot”, it appears to have been a lot of “loose talk”. But loose talk can get you life in prison these days.
What was unusual about Abu Ali’s case is that he was held, at the behest of the federal prosecutors, in a Saudi prison for 22 months, during which time he was repeatedly interrogated by Saudi law enforcement and the FBI. Eventually the Saudis obtained a confession, with FBI agents watching from behind a hidden camera. Though conceding that Abu Ali was interrogated for hours on end, day after day, the interrogations lasting throughout the night, during which he was often shackled and chained, and though he had no attorney (even though his parents were trying to provide him one), Judge Gerald Bruce Lee found his confession to be voluntary and uncoerced. Medical doctors testified that he had the marks of physical torture and the symptoms of having been mentally coerced, but prosecution doctors said he was faking.
Lee also said that Abu Ali was not entitled to the constitutional protections of an attorney and a speedy trial. Why? Because he was held by Saudi Arabia, not the U.S., and, further, he was never a criminal suspect and thus the Bill of Rights does not apply. The government did not explain how someone who was never a criminal suspect suddenly became a criminal defendant. As with Padilla, the charges kept shifting and, of course, each time they got more serious, more sinister. Abu Ali will surely receive life in prison even though, as one attorney put it, the charge is more like a conspiracy to conspire at some future time. But then, if you looked behind the grandiose press conferences of his case, Padilla’s, and others like theirs, you would find the flimsiest of facts.
I cannot speak to the facts surround the charges that Padilla faces and that Abu Ali was convicted of. What I can speak to, is the sorry methods of our government as it plays games with American citizens. In these two cases, our government has violated every principle of constitutional law and criminal procedure that at one time made our criminal justice system something to be proud of. The Bill of Rights held no hope for these men. Only the right of habeas corpus – that last hope for the hopeless that holds the President to account for imprisoning someone – got then in the court house door. But the government taught them a civics lesson they did not learn in school: the President, at least this President, thinks he can walk all over the Bill of Rights – your rights – and get away with it. You want due process? The Bush administration will make you sorry you asked. Gotcha.Link here.
THE ANCIENT CHINESE LIBERTARIAN TRADITION
The first libertarian intellectual was Lao-tzu, the founder of Taoism. Little is known about his life, but apparently he was a personal acquaintance of Confucius in the late sixth century BC and like the latter came from the state of Sung and was descended from the lower aristocracy of the Yin dynasty. Unlike the notable apologist for the rule of philosopher-bureaucrats, however, Lao-tzu developed a radical libertarian creed. For Lao-tzu the individual and his happiness was the key unit and goal of society. If social institutions hampered the individual’s flowering and his happiness, then those institutions should be reduced or abolished altogether. To the individualist Lao-tzu, government, with its “laws and regulations more numerous than the hairs of an ox,” was a vicious oppressor of the individual, and “more to be feared than fierce tigers.”
Government, in sum, must be limited to the smallest possible minimum. “Inaction” was the proper function of government, since only inaction can permit the individual to flourish and achieve happiness. Any intervention by government, Lao-tzu declared, would be counterproductive, and would lead to confusion and turmoil. After referring to the common experience of mankind with government, Lao-tzu came to this incisive conclusion: “The more artificial taboos and restrictions there are in the world, the more the people are impoverished. The more that laws and regulations are given prominence, the more thieves and robbers there will be.” The wisest course, then, is to keep the government simple and for it to take no action, for then the world “stabilizes itself”. As Lao-tzu put it, “Therefore the Sage says: I take no action yet the people transform themselves, I favor quiescence and the people right themselves, I take no action and the people enrich themselves.”
Lao-tzu arrived at his challenging and radical new insights in a world dominated by the power of Oriental despotism. What strategy to pursue for social change? It surely was unthinkable for Lao-tzu, with no available historical or contemporary example of libertarian social change, to set forth any optimistic strategy, let alone contemplate forming a mass movement to overthrow the State. And so Lao-tzu took the only strategic way out that seemed open to him, counseling the familiar Taoist path of withdrawal from society and the world, of retreat and inner contemplation.
I submit that while contemporary Taoists advocate retreat from the world as a matter of religious or ideological principle, it is very possible that Lao-tzu called for retreat not as a principle, but as the only strategy that in his despair seemed open to him. If it was hopeless to try to disentangle society from the oppressive coils of the State, then he perhaps assumed that the proper course was to counsel withdrawal from society and the world as the only way to escape State tyranny. That retreat from the State was a dominant Taoist objective may be seen in the views of the great Taoist Chuang-tzu (369 BC - 286 BC) who, two centuries after Lao-tzu, pushed the master’s ideas of laissez faire to their logical conclusion: individualist anarchism.Link here.
LAND-USE BATTLE RAGES IN FLORIDA
It is across the inlet from Palm Beach, but Riviera Beach, Florida – mostly black, blue-collar and with a large industrial and warehouse district – could be a continent away from the Fortune 500 and Rolls-Royce set. But its fortunes may soon change. In what has been called the largest eminent-domain case in the nation, the mayor and other elected leaders want to move about 6,000 residents, tear down their homes and use the emptied 400-acre site to build a waterfront yachting and residential complex for the well-to-do. The goal, Mayor Michael Brown said during a public meeting in September, is to “forever change the landscape” in this municipality of about 32,500. The $1 billion plan, local leaders have said, should generate jobs and haul Riviera Beach’s economy out of the doldrums.
Opponents, however, call the plan a government-sanctioned land grab that benefits private developers and the wealthy. “What they mean is that the view I have is too good for me, and should go to some millionaire,” said Martha Babson, 60, a house painter who lives near the Intracoastal Waterway. “This is a reverse Robin Hood,” said state Rep. Ronald Greenstein.
With many Americans sensitized to eminent-domain cases after a much-discussed ruling by the Supreme Court in June, property-rights organizations have been pointing to redevelopment plans in this Palm Beach County town as proof that laws must be changed to protect homeowners and businesses from the schemes of politicians. “You have people going in, essentially playing God, and saying something better than these people’s homes should be built on this property,” said Carol Saviak, executive director of the Coalition for Property Rights, based in Orlando. “That’s inherently wrong.”
“Unfortunately, taking poorer folks’ homes and turning them into higher-end development projects is all too routine in Florida and throughout the country,” said Scott Bullock, a senior attorney for the Institute for Justice, based in Washington, D.C. “What distinguishes Riviera Beach is the sheer scope of the project, and the number of people it displaces.”Link here.
OVER 500 CASES OF MONEY LAUNDERING INVESTIGATED IN ROMANIA
More then 800 people have been investigated in 550 criminal cases of money laundering in the first 11 months of 2005. The total sum of the damages caused by money laundering is €130 million, according to a press release from the Interior Ministry. The press release said 67 of these cases were complex and required the intervention of the Investigation Department of Organized Crime and Terrorism. The investigators sent 68 people to trial, out of which 28 are temporarily under arrest for crimes which have caused damages of €58 million.Link here.
PROPOSED CYBERCRIME TREATY A BACKDOOR ASSAULT ON U.S. SOVEREIGNTY
An internationalist assault on the sovereignty of the U.S. and the privacy of U.S. citizens is currently awaiting action by the full Senate. The Council of Europe Convention on Cybercrime is being aggressively pushed by Senate Foreign Relations Chairman Richard Lugar (R-Indiana), who reported the treaty out from his committee in early November. That should come as little surprise, in that Lugar has also been a leading proponent of the better-known Law of the Sea Treaty (LOST), another key building-block in the structure of world government.
Originally conceived as a tool to facilitate international cooperation in the pursuit of computer hackers and the like, the Cybercrime Treaty evolved during 15 years of negotiations to encompass any criminal offense that involves electronic evidence – which in the 21st century is essentially limitless. As written, it could require more surveillance on Americans who have been accused of violating the laws of foreign countries – even if they have not violated U.S. law. Treaty cheerleaders paint menacing pictures of hackers and child pornographers. But in reality the Convention is drafted so broadly that it encompasses virtually every area of law where the possibility exists of computerized evidence. That could affect thousands of innocent people, including not only political dissidents, but also the politically incorrect.
Fortunately, one heroic, albeit currently anonymous, conservative senator has placed a “hold” on this Cybercrime Convention, a procedural maneuver that prevents an immediate, unannounced vote on the floor of the whole Senate. Conservatives concerned with sovereignty and the Bill of Rights need to both become aware and raise others’ awareness of the dangers posed by the Cybercrime Treaty, lest the Senate acquiesce in this subjugation of Americans to European-style “hate speech” laws through an electronic back door.
Lugar’s pro-treaty rhetoric belies the broad, expansionary nature of the treaty. He claimed last year, in opening the sole hearing on the treaty, that “Prompt ratification … will help advance the security of Americans.” That is simply not the case when one considers that the treaty could allow European or even Chinese Communist agents to electronically spy on innocent Americans. The Convention on Cybercrime would be highly detrimental to American sovereignty and free people everywhere. The Senate should under no circumstances blindly approve such a document.Link here.
BUSH: THE CONSTITUTION IS “JUST A GODDAMNED PIECE OF PAPER!”
Last month, Republican Congressional leaders filed into the Oval Office to meet with President George W. Bush and talk about renewing the controversial USA Patriot Act. Several provisions of the act, passed in the shell shocked period immediately following the 9-11 terrorist attacks, caused enough anger that liberal groups like the American Civil Liberties Union had joined forces with prominent conservatives like Phyllis Schlafly and Bob Barr to oppose renewal. GOP leaders told Bush that his hardcore push to renew the more onerous provisions of the act could further alienate conservatives. “I don’t give a goddamn,” Bush retorted. “I’m the President and the Commander-in-Chief. Do it my way.”
“Mr. President,” one aide in the meeting said. “There is a valid case that the provisions in this law undermine the Constitution.”
“Stop throwing the Constitution in my face,” Bush screamed back. “It’s just a goddamned piece of paper!” I have talked to three people present for the meeting that day and they all confirm that the President called the Constitution “a goddamned piece of paper.” And, to the Bush Administration, the Constitution of the U.S. is little more than toilet paper stained from all the sh*t that this group of power-mad despots have dumped on the freedoms that “goddamned piece of paper” used to guarantee. Attorney General Alberto Gonzales, while still White House counsel, wrote that the “Constitution is an outdated document.”
Despite our differences, the Constitution has stood for two centuries as the defining document of our government, the final source to determine – in the end – if something is legal or right. Every federal official, including the President, who takes an oath of office swears to “uphold and defend the Constitution of the United States.” Supreme Court Justice Antonin Scalia says he cringes when someone calls the Constitution a “living document”. “We now have a Constitution that means whatever we want it to mean. The Constitution is not a living organism, for Pete’s sake.” Scalia says the danger of tinkering with the Constitution comes from a loss of rights. “We can take away rights just as we can grant new ones,” Scalia warns. “Don’t think that it’s a one-way street.”Link here.
BUSH’S “GREAT LEAP FORWARD”
There is no real need for a line-by-line analysis of the speech delivered yesterday by the Trotskyite-in-chief. A succinct summary will suffice. The president’s response to the polls, which show overwhelming opposition to the Iraq war, is “screw you”. To those Republican members of Congress who rightly fear for their seats as election day approaches, a similar message of disdain has been delivered. It is “victory or death” – the death of the GOP, that is, which is likely to lose control of the Senate, or the House of Representatives, and quite possibly both. In this, our president resembles those suicide bombers who are wreaking havoc in Iraq. He is willing to go down in flames, supremely indifferent that innocents are consumed in the resulting conflagration.
Such fanaticism masquerades as “idealism”, but is in reality a mental affliction, a kind of madness akin to megalomania in which the victim believes himself to be endowed with god-like powers. As Seymour Hersh and others relate, the president lives in a fog of “religious idealism” his apparent belief in his own near-supernatural abilities would seem to exempt him from the laws of God and man, and endow him with a mission that must be finished no matter what. The problem is that there is no end in sight.
It is futile to argue with this administration, to debate the terms of our engagement in the Middle East – or anywhere else, for that matter. Every attempt to remind them of the facts of reality runs up against a wall of indifference to the truth. These people believe they can create their own truth, by sheer coercion. The interaction of neoconservative intellectuals and administration policymakers is, in this instance, a perfect illustration of the co-dependence of what Ayn Rand called “Attila and the Witch Doctor”. As Attila moves in for the kill, the Witch Doctor rationalizes the carnage – without referring to facts, but to nebulous aims, goals, and words, words, words.
To such people, words have a mystical – even magical – significance. In the mind of an ideologue, words have the power to transform reality, to defy the laws of nature and overcome all earthly powers. Are we losing the war? Well, then, let us have more words – a presidential speech, preferably delivered before an audience of adoring Praetorians, is enough to turn the tide. The “Great Leap Forward” being attempted by this administration is the democratization of the entire Middle East, a goal explicitly referred to in the recently-published “Victory Plan”.Link here.
It used to be said that the moral arc of a Washington career could be divided into four parts: idealism, pragmatism, ambition, and corruption. You arrive with a passion for a cause, determined to challenge the system. Then you learn to work for your cause within the system. Then rising in the system becomes your cause. Then finally you exploit the system – your connections in it, and your understanding of it – for personal profit.
And it remains true, sort of, but faster. Even the appalling Jack Abramoff had ideals at one point. But he took a shortcut straight to corruption. On the other hand, you can now trace the traditional moral arc in the life of conservative-dominated Washington itself, which began with Ronald Reagan’s inauguration and marks its 25th anniversary in January. Reagan and company arrived to tear down the government and make Washington irrelevant. Now the airport and a giant warehouse of bureaucrats are named after him.
By the 20th anniversary of their arrival, when an intellectually corrupt Supreme Court ruling gave them complete control of the government at last, the conservatives had lost any stomach for tearing down the government. George W. Bush’s “compassionate conservatism” was more like an apology than an ideology. Meanwhile Tom DeLay – the real boss in Congress – openly warned K Street that unless all the choice lobbying jobs went to Republicans, lobbyists could not expect to have any influence with the Republican Congress. This warning would be meaningless, of course, unless the opposite was also true – if you hire Republican lobbyists, you and they will have influence over Congress. And darned if DeLay did not turn out to be exactly right about this! No prominent Republican upbraided DeLay for his open invitation to bribery. And bribery is what it is … not just campaign contributions, but the promise of personal enrichment for politicians and political aides who play ball for a few years before cashing in.
Like medieval scholastics counting the angels on the head of a pin, Justice Department lawyers are struggling with the question of when favors to and from a member of Congress or a congressional aide take on the metaphysical quality of a corrupt bribe. The distinctions do not really touch on what is corrupt here, which is simply the ability of money to give some people more influence than others over the course of a democracy where, civically if not economically, we are all supposed to be equal. Where do you draw the line between harmless favors and corrupt bribery? It is not an easy question, if you are talking about sending people to prison. But it is a very easy question if you are just talking. It is all corrupt bribery. People and companies hire lobbyists because it works. Lobbyists get the big bucks because their efforts earn or save clients even bigger bucks in their dealings with the government. Members of Congress are among the world’s greatest bargains. What are a couple of commodes compared with $163 million of Pentagon contracts?Link here.
HIGH RISES AND HIGH TIME PREFERENCES
50 years ago a Life magazine cover asked – “Las Vegas – Is Boom Overextended?” After all, three hotels had opened in the spring of that year costing a total of $15 million and two more were opening that summer including the $5 million Dunes. “Had Las Vegas pushed its luck too far?” Life wondered. Nearly 30 years later, Malcolm Baldrige, while serving as Secretary of Commerce in 1984 was quoted as saying, “the current boom in Las Vegas could last four more years.” But, of course here we are 20 years later, and Sin City continues to boom.
What Life and Malcolm failed to grasp is what really makes Las Vegas – Las Vegas. The town is ground zero for high time preference. People go to Las Vegas to have a good time, blow their money and maybe be a little bit naughty. After all, “what happens in Vegas, stays in Vegas” (or according to the Palms casino “didn’t happen at all”). Let’s face it. You do not go to Vegas to be civilized or prudent, just the opposite. As Las Vegas Mayor Oscar Goodman told the Denver Post, “People don’t come here from the Midwest to go to an AA meeting.”
Conspicuous consumption, as Thorstein Veblen called it, is what Las Vegas is all about. Even Mayor Goodman embraces the attitude, quickly admitting to anyone, including third graders he spoke to not long ago that he is addicted to Bombay Saphire Gin and sports betting. Former FBI agent Rick Baken says Goodman is “the poster child of being able to rationalize immorality.”
Hans Hoppe explains the Las Vegas boom in his book, Democracy The God that Failed. Hoppe points out that man prefers earlier goods over later goods, and for more over less durable goods. This is the phenomenon of time preference. The rate of time preference is different for everyone and determines “the height of the premium which present goods command over future ones as well as the amount of savings and investment.” The lower the time preference rate, the earlier the onset of the process of capital formation, and the faster the roundabout structure of production will be lengthened. Civilization is set in motion by individual saving, investment, and the accumulation of durable consumer goods and capital goods. Children have very high time preferences, living “day to day and from one immediate gratification to the next,” Hoppe explains. As we become adults, our time preferences fall as we save for future obligations. Old folks have higher time preferences, because they have little time left.
Time preferences tend to fall except if property rights are violated, and, in the words of Hoppe, “the process of civilization is permanently derailed whenever property-rights violations take the form of governmental interference.” This government interference reduces a person’s supply of present goods and raises his effective time-preference rate. Also, expected future goods are reduced by these systematic property rights violations, thus time-preference schedules are raised. What Democracy and government have done is to retard the natural tendency of humanity to build an expanding stock of capital and durable consumer goods. Man, instead of becoming increasingly more farsighted and providing for ever more distant goals, is tending toward decivilization. As Hoppe describes, “formerly provident providers will be turned into drunks or daydreamers, adults into children, civilized men into barbarians, and producers into criminals.”
That sounds like an average night in Las Vegas to me.
Commentators have been predicting Vegas’s demise for years. But, democracy and big government plays right into Las Vegas’s hand. The bigger and more intrusive government becomes, the more time-preferences rise, and Vegas seductively waits with open arms, waiting to exploit and cash in on each and every person’s weakness, making it hard to bet that Vegas will ever bust.Link here.
THE TOTALITARIAN IMPULSE
What is the difference between a drug addict and an alcoholic? A drug dealer and a liquor merchant? An international drug ring and an international alcoholic drink distributor? Nothing. The only difference is in legality – not in principle. In our culture, drugs are a “no-no”, although it was not always so. In other cultures, alcohol is a “no-no”. So take your pick. The fact is, alcohol is responsible for far more deaths and ruined lives than drugs. But do not let facts get in the way of a good policy!
Last week, a 25 year old Australian – Nguyen Tuong Van – was hanged by the Singapore government for attempting to carry nearly 400 grams (14 oz.) of heroin through Changi Airport. Apparently, he was taking this considerable risk in an attempt to pay off his twin brother’s drug-related debts. The state of Singapore imposes a mandatory death sentence for such “crimes”. Many Australians were up in arms. “How dare the Singaporean government hang an Australian citizen!” The debate focused on the “barbarity” of hanging and capital punishment in general. More than half of Australians agreed that what Van Nguyen did was bad, evil even, but that he did not deserve the death penalty.
Let’s take off the moralistic glasses and look at what was really happening here. Van Nguyen made a decision to trade in drugs, for the purpose of making a profit by selling it to drug users in Australia. He was undertaking a business deal. He was the intermediary between the drug supplier and the drug buyer. He also knew what he was doing was illegal and carried great risk to himself – particularly if caught in Singapore. This proposed transaction was based on the existence of willing sellers and willing buyers. And just as most people believe that what goes on between two consenting adults in the privacy of their own bedroom is no one else’s business, so this transaction was between consenting adults and was no one else’s business. But the state, and many people within such states, think otherwise.
The issue of whether taking drugs should be illegal or not is quickly sorted out by reference to one question: Who owns your body? Do you believe you should decide what to put into your body, or would you prefer OTHERS to decide that for you? What is at issue here is not WHAT you put into your body – but whether you have the RIGHT to determine such things. And the even more fundamental question is this: Do you have the right to ingest provably harmful substances? For the sovereign individual, the answer is a resounding “yes”. You are the owner of your life. Your neighbour is the owner of his or her life. If other people want to jeopardize their own lives by taking harmful substances, then that is their business, not yours.
The business of drugs exists because of the MARKET for drugs. If politicians were really serious about destroying this market, then they would be more successful if they were to imprison or kill all drug USERS! But I digress. Politicians are not known for clear thinking! Besides, it is unfair to totally blame politicians. As the well known saying goes, “we get the government we deserve.” In other words, government (our democratic form of government) is the result of what the majority of people want. Government reflects the values of the majority of people. So a government that spends its time chasing, imprisoning and killing drug dealers is doing so, precisely because that is the mindset of the average voter.
They say “charity begins at home.” Well, so does the impulse to totalitarianism. The seed which grows into into full blown dictatorship has small and modest beginnings – in the thought processes of your average Joe Blow. The impulse to tell other people what they can or cannot put into their own bodies, is the very same impulse that leads to the belief that one knows what is best for others. I call this the “busybody syndrome”. It is the impulse to “do good”. Do-gooders are forever justifying their desire to impose their will on others – for their own good, of course. In other words, they embrace the mantle of moral righteousness. Your typical politician is the logical outgrowth of this type of mentality – someone who has reached the pinnacle of do-goodness.
Next time you hear someone (or even yourself) demanding that so and so should NOT be allowed to say that, or ingest this, realize this very attitude is the root of, and the impulse to, what we term “totalitarianism” – the suppression of the individual in favour of the collective (the state). The totalitarian state is nothing more than the collective manifestation of the individual mindset – the sum total of a lot of individual “totalitarian” minds and attitudes. Such a state cannot exist where respect for true individual freedom is the predominant philosophy. Freedom is not achieved by mass rallies, protests or voting. No, freedom is achieved one step at a time, one person at a time, one thought at a time – when you put the morality of freedom at work in your own life and thinking. To eliminate totalitarianism, in all its forms, it is first necessary to eliminate the thinking that gives rise to it – the impulse to want to run other people's lives.Link here.
THE COST OF HAVING A STROKE IS HIGHWAY ROBBERY
According to PBS’s “American Experience”, Chicago’s first crime syndicate boss back in the 1800s, “King Mike” McDonald, coined the phrase, “There is a sucker born every minute.” King Mike’s operation included enticing an endless stream of customers to his gigantic, four-story gambling house known as “The Store”. This casino was located close to Chicago’s famous City Hall, thus providing a convenient location for prominent politicians of the day to fraternize with Mike’s gambling customers. To make sure he could run his various business enterprises without interference, King Mike gained the cooperation of the police force, powerful politicians, and an army of what the PBS writers described as “skilled confidence men to run his rigged games.” In short, the secret of ol’ Mike’s success was the gift of knowing how to control and use the political system to his advantage.
Mike’s contempt for his fellow man, however, seeing them only as marks to be schmoozed and suckered into crooked business deals, is sadly emulated by many so-called “legitimate” business people today. Some of us see no difference between crime boss King Mike’s schmoozing with Chicago’s City Hall power elite at his girls and gambling emporium and Big Pharma and its health industry associates with their Gucci-shoe-clad armies of lobbyists schmoozing in the cloakrooms with Washington DC’s political power brokers or hiring cheerleaders as drug sales personnel to add a little sex appeal while pitching the virtues of drugs directly to doctors. The drug and health products industry is the largest block of influence peddlers in Washington as well as the most successful.
While we do not know what kind of murder and mayhem existed in Chicago, thanks to King Mike’s reign of power, we do know the body count thanks to modern medicine’s control of the system and we also know the seamier side of how the system is actually run. Most of us in the health freedom movement are also eyewitnesses, if not direct victims, of the suffering imposed by modern medicine’s monopoly control. News reports now disclose how most published scientific studies are false. Whistleblowers in the FDA report the agency is bowing to Big Pharma at the cost of thousands of pill-takers lives. Whistleblowers in the drug industry itself and even former editors of prestigious medical journals or faculty members of prominent medical schools now testify in Congress about their own eye witness accounts or write best-selling book exposés condemning the very system they work for.
My book, Death by Modern Medicine, covers some of the details of how 784,000 die every year thanks to participation in America’s system of modern medicine, and discusses a myriad of other sorry aspects of the system as well. However, it barely scratches the surface on the many ways modern medicine has failed us in its mission to heal us. For example, how we treat strokes is just one example of why so many health freedom fighters are outraged at the way modern medicine treats the sick while it loots our pocketbooks. The underlying point of this column is to bring to your attention that if you follow modern medicine’s protocols in using these products, which are the only “official” treatment for stroke, your drug bill will be sky high. Those of us who use and advocate natural healing arts modalities can see the lunacy of paying such outrageous prices for products that offer little true healing and at the same risking life and limb in the process.Link here.
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