Wealth International, Limited

Offshore News Digest for Week of December 12, 2005

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

Global Business Taxes Asset Protection Privacy Law Opinion & Analysis



The latest progress report by the European Bank for Reconstruction and Development (EBRD) on ex-communist countries in central Europe and the Baltics, holds important lessons for those regions of the world that still doubt the benefits of free trade and open markets. The Transition Report 2005 actually focuses on many areas where reform is still pending, including the remaining inadequacy of many institutions in some central and eastern European countries. But what has been achieved so far is impressive and also needs to be understood by Africans and Latin Americans if they are to shake their current morass.

The first lesson is that in almost all central and eastern European countries a consensus has been reached about the benefits of free markets. The real debate hinges on the depth of reform, but the general trend is not in real question. Whereas in Africa and Latin America free trade and open markets are still under fierce debate, with some countries pulling in one direction and others going the opposite way, ex-communist nations are beyond that stage. Some of the most backward countries have now become bold reformers and are reaping the benefits. The second lesson is that those countries that opened trade most radically are also the ones doing best. A third lesson coming out of ex-communist countries is that reform needs to be comprehensive. It is no use opening trade – that is, removing external barriers – if you do not also remove internal impediments to enterprise and exchange. A fourth and final lesson is that it is critical for a country to have a flexible labor market if it is to respond quickly and positively to the opportunities that come from lowering taxes and kicking away trade obstacles.

Thanks to bold reform, ex-communist countries have taken some 40 million people out of poverty in the last seven years. It is easy to forget that only one generation ago these republics were in the hands of regimes that had obliterated the institutional foundations of the free society. They all started from a position of disadvantage with respect to other developing nations where intrusive and corrupt governments had not debunked the institutions of the free society in any comparable way. Today, the best hope for the latter countries lies in heeding the lessons from central and eastern European nations that have turned themselves around.

Link here.


European Union Savings Tax Directive ironically increases jurisdiction’s attractions.

The recent issuing of a certificate of registration to The Rutland Fund, a hedge fund authorized by the Cayman Islands Monetary Authority, was significant on at least two counts. The first is that The Rutland Fund was the 10,000th fund to be approved by the Authority since the passage of the Mutual Funds Law in 1993 paved the way for the development of investments and securities businesses in and from the Cayman Islands. The second is that Rutland is part of the newest avenue of investments business into this jurisdiction – funds transferring from Bermuda and the Bahamas specifically to take advantage of exemptions Cayman has under the European Union Savings Tax Directive (EUSD).

Rutland, formally domiciled in Bermuda, is one of at least 80 such funds that CIMA has authorized since 1 July when the EUSD took effect here. Head of CIMA’s Investments and Securities Division Gary Linford, says the Authority has also been dealing with a significant number of enquiries since July. Why the interest? Under the terms negotiated for the application of the EUSD to funds domiciled in Cayman, approximately 98% of such funds are exempt from the reporting obligations of the directive.

The EUSD obligations require that paying agents provide information for EU tax authorities on the amount of interest payments on savings income to or for an individual who is a tax resident of an EU member state, together with details of the recipient. However, persons who are not resident for tax purposes within the EU, and other entities, including certain trusts and partnerships, corporate structures, other investment vehicles and institutions that do not fall within the narrow scope of the definition, are unaffected.

These specific exemptions have increased Cayman’s attractiveness as a fund domicile compared to jurisdictions like Bermuda and the Bahamas that are not subject to the EUSD. Paul Scrivener, partner of Solomon Harris, the law firm handling The Rutland Fund’s transfer and registration, says this is ironic, because although Bermuda and the Bahamas had initially seen the EUSD as a great opportunity to develop their funds business at the expense of Cayman, the opposite has happened. He feels a major reason for this turn of events is Switzerland. “Switzerland’s rules as to how the directive is applied mean that it is far easier for Swiss banks to invest in jurisdictions that are subject to the directive,” explains Mr. Scrivener. “This is because the concessions agreed by the Cayman Islands with the EU take hedge funds in particular outside the scope of the directive and therefore remove significant burdens on the Swiss banks under the Swiss rules. Since Swiss banks are major investors in offshore hedge funds, the Swiss rules have led to many Bermudan and some Bahamian funds being left with no option but to relocate to Cayman, resulting in a steady stream of redomicilations that has kept both CIMA and the Cayman law firms busy since the summer.”

Of the 10,000 funds that have been authorized over the years, more than 7,000 are still active, says Mr. Linford, and the pace of new authorizations, not only from Bermuda and the Bahamas but from elsewhere, continues to grow at an average of about 35 per week. Both men agree that a large part of Cayman’s attractiveness as a domicile for hedge funds is the jurisdiction’s approach to the regulation of these funds. “Cayman’s regulatory environment is ideally suited for the flexibility that hedge fund managers need,” says Mr. Linford. “That and the strength of our professional infrastructure place us in an enviable position compared to our closest rivals.”

Link here.

Cayman Islands press EU for level playing field.

The Cayman Islands Government continued to press for a level playing field in financial services on behalf of the Overseas Countries and Territories (OCTs) during a recently-concluded meeting with the EUin Brussels. Minister for International Financial Services Policy Alden McLaughlin called on the EC to give public recognition to the achievements of these countries and territories in financial regulation, exchange of information, and transparency. In the face of pressure from the EU and a number of international organizations in recent years for changes in the way many OCTs conduct financial business, Cayman has been calling for such targeted territories to be put on the same level as EU member countries and other groupings.

Link here.


Chief Minister Donald Gelling has criticized the OECD for its continued support of a blacklist drawn up in 1998 that features the Island. Mr, Gelling recently visited Washington, DC in an effort to remove the Isle of Man from various U.S. blacklists. He said that U.S. state and federal departments were adopting the OECD list automatically, without considering the consequences for jurisdictions such as the Isle of Man. The OECD drew up the list of tax havens in 1998 and published it in 2000, at the response of its member countries. At the recent global forum on taxation, held in Melbourne, steps were taken to reduce dependency on the list but it was not renounced – a move that should have taken place according to Mr. Gelling.

He said, “The OECD list should be updated as there is no system to get the Isle of Man off it. Individual senators come forward with private member’s bills about things that can take money away from the state and they all use the same definition of a tax haven.” The states of Montana, Maryland, Michigan and Pennsylvania all have current proposed bills that list the Isle of Man as a tax haven. There are also several bills at federal level that do the same. The legislation largely concentrates around treating any U.S.-owned companies in these jurisdictions as resident in the U.S. for tax purposes, or reducing the benefits given to them by their state of residence.

None of the bills has been passed, but if they were, it could threaten the continued or future existence of U.S.-owned operations based in the Island. Mr. Gelling said one of the reasons the Island appeared so often was the definition of low taxation based on direct income tax. “Other jurisidictions have comprehensive income tax systems and others have comprehensive tax systems and we have the latter, with VAT, property tax and corporate tax. International Tax Counsel Patricia Brown (from the U.S. treasury) accepted that it was more logical to look at total taxation systems as a percentage of GDP.”

Link here.


The founder of an offshore bank in Grenada accused of defrauding investors of hundreds of millions of dollars has died of a heart attack. Federal prosecutors say 54-year-old Gilbert Ziegler, also known as Van Arthur Brink, died last Saturday at the home of relatives in Wilsonville, Oregon while he was awaiting trial. Ziegler was facing 147 counts of conspiracy, fraud and money laundering involving the collapse of First International Bank of Grenada in 2000.

He was indicted by a federal grand jury in Portland in July 2002, and arrested in Uganda in June 2004, where a security guard was killed. The indictment alleges that Brink solicited investors through church groups, get-rich-quick seminars and the Internet. The U.S. Attorney says Ziegler’s death will not affect the case against his co-defendants.

Link here.


While many areas of Europe popular with second home buyers could see property prices fall by as much as 10% over the coming year, property markets in the low-tax countries of Andorra and Monaco are likely to continue to remain buoyant in 2006, according to overseas property specialist Tribune Properties. This year has seen the first signs of the property market slowing in the traditionally popular holiday home markets of Spain and Portugal, and with owners expected to drop asking prices in order to secure a sale, Tribune Properties believes buyers will be in their strongest negotiating position since the mid 1980s when property prices on the Spanish Costas dropped by almost one third. Moreover, the worst drought in living memory in the region has put off many prospective buyers and cast uncertainty over the viability of the rental market.

Demand for property in Iberia has also been curtailed by the emergence of new European markets in the former Eastern Bloc such as Bulgaria, where increasing numbers of British, Dutch, Belgian and German buyers have been snapping up apartments and houses at a fraction of the prices in Spain and Portugal. “Second home buyers are seeing properties offered in Bulgaria at less than half the price they thought they would need to own a home overseas, and the traditional markets of Spain and Portugal are losing out,” observed Mr. Munns. In contrast to lower prices on the Spanish Costas and Menorca, Tribune forecast that prices on the Algarve and Malta are likely to stay steady or increase as their domestic markets are strong. However, the two countries they see in Europe with growth potential for 2006 are Andorra and Monaco.

Tribune offered the following advice to potential overseas property buyers: 1.) Find out how long a property has been on the market for, 2.) Make provisional offers of between 5% and 10% off of the asking price on a shortlist of three or four properties as one owner is likely to accept, and 3.) Always employ an independent lawyer to handle any sale and deposits.

Link here.



A European court case brought by Cadbury Schweppes could force both U.K. Labour and the Conservatives to break their manifesto promises not to raise taxes, a leading accountancy firm said. Blick Rothenberg warned that the Cadbury case, due to be heard in the European Court of Justice later this year [hearings are scheduled to begin December 13], could end up costing UK taxpayers billions of pounds. Cadbury is bringing a test case against the Government over the way UK tax laws prevent multinational companies exploiting the different rates of business tax charged across the EU.

Currently, the Inland Revenue does not allow multinationals to channel profits through subsidiaries in other EU countries where tax rates are lower. In theory, businesses stand to benefit by declaring all their profits in the EU member state charging the lowest rate of corporation tax – in Ireland, e.g., the rate is just 10%, a third of the level charged in the UK. But unless companies can show that profits were actually generated in a different country, the Revenue demands tax on the income at UK rates.

Cadbury’s legal team will argue that such regulations breach the company’s right to organize its affairs within the EU as it sees fit. The Court will be told the Revenue’s approach contravenes freedom of trade laws. Steven Bruck, a partner at Blick Rothenberg, said the case could lead to a string of large companies seeking billions of pounds in tax refunds. “The tax figures on which all parties have based their projections could be completely undermined by decisions of the Court,” he said. The Cadbury case follows a similar dispute with Marks & Spencer, which was decided in favour of the retailer last year. Tax experts have since estimated that the M&S verdict will reduce government tax revenues by £1 billion a year.

Links here and here.


Householders who close the door on or refuse to cooperate with bureaucrats sent to check their property for features that will increase their council tax bills could be fined £500 and receive a criminal record. The fines will be imposed on anybody who “intentionally obstructs” Valuation Office Agency inspectors in their effort to record details of millions of homes. The move is likely to create more council tax rebels who refuse to pay fines, clog the courts and bring further chaos to the system. Conservatives last night that the inspectors’ powers be abolished and described the fines as “outrageous”.

Last month the Sunday Telegraph revealed how ministers planned to levy extra charges on homes that have a nice view, a swimming pool, a tennis court or a balcony, as well as those in conservation areas, next to a golf course or with more bedrooms or a bigger garden than average. These “value significant features” could push a house into a higher council tax band in a nationwide revaluation, which is due to be completed by 2007. This could cost householders hundreds of pounds extra in council tax each year.

Link here.


Minister for Finance Brian Cowen has closed off and placed limits on the use of a range of tax exemptions to ensure that Ireland’s richest citizens cannot avoid paying any tax in the future. Mr. Cowen, who said the new measures were aimed at forcing everybody to pay an appropriate amount of income tax relative to their ability to do so, has abolished many property-based tax reliefs and restricted the amount of exemptions that high earners can use to offset tax.

The department recently disclosed that in 2000-01 almost 30 people earning incomes over €1 million paid little or no tax. A further 67 people earning between €500,000 and €1 million paid tax at the marginal rate, while 10 earning that amount paid no tax at all. The Budget introduces an overall cap on the extent to which specific incentive reliefs can be availed of by individuals earning more than €250,000 a year. The cap will restrict the amount of specified reliefs that a person can use to reduce their tax bill in any one year to 50% of their income. The Minister said this measure would help eliminate the phenomenon of “tax free millionaires”.

Links here and here.


Voters in the small central Swiss canton of Obwalden have approved new laws which will substantially cut income tax for individuals and corporations, and are aimed at attracting higher numbers of wealthy persons and foreign businesses to the area. From January 1, corporate tax in Obwalden will be cut to 6.6%, making it the lowest rate in Switzerland. For individuals, those earning up to CHF70,000 will pay 8% (down from 10%). Those with income up to CHF300,000 will pay up to 6%, and those earning more than CHF300,000 will see tax cut to 1% from 2.35%. Property tax will also fall by at least 30%.

While the cantonal government has promised that everybody will benefit from the tax cuts, not just the wealthy, the move is likely to excite opposition from groups agitating for an end to special tax regimes designed to attract wealthy foreign celebrities and business people. For example, the Social Democratic Party has pledged to help coordinate a Europe-wide campaign against what it calls “increasing competition” among countries seeking to attract the rich and famous, and has warned that a “race to the bottom” on tax will endanger public finances.

In Switzerland, cantons are free to set their own tax rates within the framework of the 2001 Tax Harmonisation Act. This allows cantons to compete to attract foreign companies, and the country has gained a reputation for attracting wealthy foreign celebrities and business persons with special tax deals offered by certain cantons. It is estimated that around 3,000 wealthy foreigners are currently benefiting from fiscal incentives.

However, the Swiss tax system has also raised eyebrows in Brussels. In a letter sent to the Swiss Mission in Brussels in October, the European Union suggested that certain parts of the Swiss corporate tax regime “may be incompatibl”q with Switzerland’s obligations under the 1972 Free Trade Agreement between Switzerland and the EU.

Link here.


For Seattle peace activist Bert Sacks, the monthly act of resistance adds up to only 59 cents. Symbolically, however, refusing to pay the “war tax” on his Qwest phone bill represents a pocketbook protest against what he sees as misuse of U.S. military power. Sacks is one of thousands of Americans believed to be refusing to pay the federal taxes attached to their monthly phone bills – money that helps fund military operations overseas. Many are taking the step as a protest against the war in Iraq. And in many cases, the phone companies are helping them do it.

Although many activists have been withholding the phone tax since the Vietnam War, the act of disobedience is making headlines again as more Americans began to question the rationale for the Iraq war. The so-called tax resisters risk the wrath of the IRS. Yet that has not stopped them. Sacks said he has never been contacted about it, and he is not worried he will be. As it turns out, most phone companies are not shedding any tears over missed federal excise tax payments. It is not that they sympathize with protesters’ feelings about the war. They just do not like the tax.

Tax resisters such as Benn advise would-be protesters to include a note with their phone payments explaining why they are not paying the tax. The note will make clear to the phone company what is happening and, in most cases, deter the carrier from cutting off one’s service. The federal excise tax on phone usage dates back to 1898. It was adopted under the War Revenue Act as a temporary levy to help fund the Spanish-American War. The war ended in October of that year. The tax was repealed in 1902 but did not stay gone for long. The tax was given permanent status in 1990.

Link here.


Syndicated talk show host Neal Boortz and Congressman John Linder (R-Georgia) have joined forces to write The FairTax Book – a proposal to replace the current system of federal income taxes, corporate taxes, Social Security and Medicare taxes, capital gains taxes, gift taxes, and estate taxes with a national sales tax on new goods and services that does not reduce the government’s overall tax revenue. They have never been so right and never been so wrong.

Former attorney Boortz is the well-known Atlanta-based “libertarian” talk show host who, like Rush Limbaugh and Sean Hannity, spends an inordinate amount of time on the evils of liberalism, the Left, and the Democratic Party while turning a blind eye to big government Republicans and supporting Bush’s “War on Terror”. Boortz has drawn fire from Christians for his support of abortion and gay rights. Former dentist Linder represents Georgia’s Seventh District, which includes the highly gerrymandered parts of five counties. It is interesting to note that his rating on The New American magazine’s “Conservative Index” for his term in the 108th Congress was 45. For this same period, the universally acknowledged “taxpayer’s friend,” Ron Paul (R-Texas), scored a perfect 100.

Boortz is certainly right when he describes the evils of our current tax system. The FairTax Book contains whole chapters on the hidden evils of the withholding tax, corporate taxes, the cost of compliance with the tax code, the embedded costs of taxes in all consumer goods and services, and corporations moving offshore (“They’re moving for one simple reason: to escape a punishing tax structure here at home.”). The abuses of the IRS merit not only a full chapter, but are mentioned throughout the book. But rather than just calling for the elimination of Social Security and Medicare taxes, withholding taxes, corporate taxes, gift taxes, estate taxes, capital gains taxes, and personal income taxes, Boortz proposes to replace all of these taxes with the FairTax.

In addition to the unsubstantiated claims that Boortz makes for the FairTax, there are three ridiculous lies of the FairTax Plan, including that the FairTax would abolish the IRS. Besides the fact that it does not lower the amount of taxes seized from the taxpayers by the federal government and is based on unsubstantiated claims and ridiculous lies, the FairTax is fraught with other problems. Since Boortz never gets to the bad, I here present 17 problems with the FairTax. The FairTax is not the solution. And because it allows the federal government to confiscate the wealth of American citizens less intrusively and more efficiently, it will become part of the problem – the problem of the ever-increasing, ever-intruding, ever-destroying welfare/warfare state. The FairTax is a fraud. The antidote to the fraud of the FairTax is a good dose of the wisdom of Murray Rothbard, “There can be no such thing as ‘fairness in taxation.’ Taxation is nothing but organized theft, and the concept of a ‘fair tax’ is therefore every bit as absurd as that of ‘fair theft.’”

Link here.


About one third of Russia’s registered business companies do not pay taxes, Russia’s Deputy Prosecutor General Vladimir Kolesnikov has alleged. “Out of the 2.6 million companies registered in Russia today, about one third do not pay taxes at all, and the rest don’t pay them in full.” He said it has become popular among businesses to “optimize their spending”, which means that they strive to cut their tax and social security contributions, and that tax evasion was most prevalent among companies in the oil industry. “It often seems as if millions of tons of oil and billions of dollars were handled by a bunch of invalids who have never seen them.”

Link here.


The Italian government is set to introduce amendments to the 2006 budget including a corporate tax amnesty and a tax on pornographic material, as the government seeks to cut the size of its budget deficit. The tax amnesty will allow companies and the self-employed to declare hidden income relating to the years 2003 and 2004 in return for paying a levy on the income. Another measure will permit Italians to pay a limited, agreed sum on profits made between 2005 and 2007 in a bid to cut extensive tax evasion. The government estimates that the measures will bring in an additional €3.6 billion, although critics counter that frequent tax amnesty schemes merely encourage tax evasion.

The budget amendments package also contains a new tax of 25% on the income of companies that make or sell pornographic material and the government also wants to add an extra 10 percentage points to value-added tax (VAT) that is paid on subscriptions to pornographic television channels. The 2006 budget package aims to cut Italy’s budget deficit to 3.8% of GDP next year, down from 4.3% in 2005. However, this will still mean that Rome has breached the EU’s 3% of GDP deficit ceiling for the third consecutive year.

Link here.


KPMG LLP is embroiled in yet another tax-shelter controversy. The IRS has been looking into a tax shelter called Insureco that was sold by KPMG in the late 1990s. The New York Times citing papers filed by the Justice Department in a dispute involving Yum Brands, which is known for its Pizza Hut, Taco Bell, and KFC chains. Former executives of the accounting firm asserted that Insureco was marketed and promoted in the late 1990s and early 2000.

Regarding the specific transaction being examined by the IRS, in late 1999 Yum, then known as Tricon Global Restaurants, reportedly sold a small stake in its wholly owned insurer, Glenharney, to Credit Suisse First Boston for $8 million, including fees. Yum reported a $112.5 million tax loss from the transaction because Glenharney held offsetting liabilities in the form of unpaid claims, according to the paper. The IRS alleged that Yum effectively bought an Insureco shelter. According to the IRS, the sale served no legitimate business purpose and functioned solely to generate tax losses for Yum, to offset capital gains.

Link here.


This holiday season may be a little less cheery for some online shoppers. The sales tax break that had delighted many an Internet gift purchaser is going the way of free digital music downloads and the one-horse open sleigh. More and more companies voluntarily are collecting state and local sales taxes on online purchases – and an even greater number could be collecting by this time next year – under a tax-collection agreement with 19 states so far. “Most people already think they’re paying sales tax on online purchases. They just assume it’s included. So I don’t think it’s going to be a shock for people. Those people who like shopping online – for the convenience, etc. – will continue,” said Neal Osten, federal affairs counsel for the National Conference of State Legislatures (NCSL).

While retailers such as Wal-Mart – with both stores and online catalogs – have been collecting sales taxes for Internet purchases for years, most online retailers without a storefront have been exempt from collecting sales taxes from out-of-state customers under a 1992 U.S. Supreme Court decision. The court ruled that forcing businesses to navigate the myriad and diverse state and local tax codes – more then 7,500 nationwide – would constitute an unfair burden. It held that companies cannot be required to collect sales and use taxes unless they have a physical presence – or a “nexus”, in legalese – in a state.

That ruling has cost states more and more missed tax revenue as more and more shoppers have turned to the Internet – as well as buying through catalogs and TV shopping channels. All but five states – Alaska, Delaware, Montana, New Hampshire and Oregon – rely on sales taxes. NCSL estimates that states in 2004 missed out on $8.9 billion in revenue from online sales. Forrester Research expects online purchases to more than double between 2004 and 2010 to $316 billion. So NCSL, a bipartisan organization of state legislators, has helped spearhead an effort since 1999 to coordinate and simplify states’ sales tax structures, in large part to make it easier for states to collect sales tax on online purchases. While seeking a permanent fix in Congress, states meanwhile are settling for a voluntary system. At last count, 217 companies have agreed to use newly developed software to collect sales tax on online and other remote purchases, Osten said. Consumers, though, may not know which Web retailers are now charging sales tax until they go to the check-out screen.

Link here.



You win a big judgement, but the defendant has tucked his assets into an offshore account. Collecting will be a challenge.

When “Ms. X” pursued a civil case against John Gordon Jones, whom she accused of raping her, a judge awarded her $6 million in 2002. When the woman tried to collect, however, she discovered that Jones had transferred the bulk of his $8 million in assets to accounts in the Cook Islands – a favorite South Pacific haven of the wealthy to keep their fortunes beyond the reach of creditors, lawyers and ex-wives.

With Cook Islands law designed to attract business from people who want to protect their assets from judgments, it would have been next to impossible for Ms. X to collect her money in a legal action there. So she sued the Cook Islands bank that held the Jones trust in the U.S., winning a $3 million default judgment. But this judgment was no more enforceable than the earlier one. Reason? This bank had no discernible assets in the U.S. to attach. Needless to say, offshore banks in asset havens usually do not maintain correspondent balances in New York City. They do business with a daisy chain of other offshore banks.

Getting a court order forcing Jones to cough up his offshore assets was the next step. But such orders are neither quick in coming nor automatically granted. In the end Ms. X settled with Jones for an undisclosed amount. Then she went after some peripheral players. A suit against the financial consultant she blames for helping arrange the offshore scheme, Robert Lambert, got her a $60,000 settlement. Another suit, against Miami asset-protection promoters Patricia Donlevy-Rosen and Howard Rosen, was settled for $47,500. To consultant Lambert, mastermind of many offshore trusts, there is nothing wrong with shielding clients who have suffered financial reversals from creditors.

Yes, there are legitimate domestic asset-protection schemes to fend off ruinous legal awards against doctors hit by medical malpractice claims, executives by shareholder suits, spouses by divorce. But from the point of view of the plaintiffs, asset-protection trusts frustrate the public policy of accountability enshrined in common law. According to a Government Accountability Office study last January, only 7%, or $40 million, of the $568 million owed in restitution in five unnamed criminal cases – much of it tucked offshore – has been paid. Impenetrable as offshore trusts may be, their owners still are subject to U.S. law. That U.S. citizens must declare income from anywhere in the world, and the possibility that the defendant could get a contempt-of-court citation for failing to disgorge funds from offshore accounts, give plaintiffs some leverage. Here are tips for people trying to collect from wealthy, secretive deadbeats.

Link here.

So you are the defendant.

Here are some legitimate maneuvers for those worried they will be targeted by creditors in the future. Put a chunk of your net worth into a big house in one of eight jurisdictions (Florida, Texas, Arkansas, Iowa, Kansas, Oklahoma, South Dakota and Washington, D.C.) and creditors cannot get to it. Do this well in advance of trouble. Alaska, Delaware, Nevada, Rhode Island, Utah, Oklahoma and Missouri offer junior versions of offshore asset-protection trusts. While not as formidable as the overseas kind, they slow down creditors with one more layer of legal hassles. And tax-deferred IRAs and 401(k)s are exempt from creditor judgments, as are 529 college savings plans (almost never taxed). If filing for bankruptcy, you must have started funding one at least two years prior to prevent problems.

Link here.


The third quarter statistics for Jersey’s Finance Industry show that funds business continues to reach new record highs, whilst the banking sector has also grown and, to date, does not appear to have been adversely affected by the introduction of the European Savings Tax Directive on 1st July 2005, according to Jersey Finance. “These latest quarterly statistics provide further confirmation that Jersey’s Finance Industry is undergoing a period of renewed confidence and growth,” commented Phil Austin, Chief Executive, Jersey Finance Limited.

Mr. Austin went on to observe that, “It is particularly encouraging to note the continued growth in bank deposits, notwithstanding the introduction of the EU Savings Tax Directive on 1st July 2005. However it is clearly still early days as far as this Directive is concerned.

“Not only has the funds sector enjoyed another buoyant quarter, but year on year, the Net Asset Value of funds in Jersey has risen by almost 26% to reach a new record high of £121.9 billion. The more detailed analyses confirms that this growth is largely being driven by the alternative investment classes, including property, private equity and hedge funds, many of which have been established as Expert Funds.

“The growth in these specialist areas reflects the clear commitment of the Island’s government and regulatory authorities to support the Industry’s drive to establish Jersey as the European domicile of choice for alternative investment.”

Link here.


This issue marks the 8th anniversary of the Offshore Pilot Quarterly and I would venture to suggest that anyone seeking an introduction to the world of offshore financial services (with insight into some of the quirks and contradictions that are an essential part of it) will find an ample source of information in the back issues of the OPQ. Each year the OPQ has covered a wide range of issues, some of which have been recurring themes such as the combined efforts of the EU and the OECD to curb many of the activities of the offshore financial services centers. Other topics have included how to choose the right professionals and avoid the swindlers, regulatory and supervisory issues, the emergence and the future of offshore centers, money laundering, trusts, trustees and trust companies, succession planning, asset protection, bearer shares, tax evasion, and banking secrecy.

The very first OPQ issue concentrated on Panama as an offshore center and so will this one. In the past eight years the progress made in raising Panama’s profile as an offshore centre has been remarkable. Controls and supervision have been significantly strengthened but perhaps the most progress has been made in the area of banking. Maximilien Robespierre said that when a banker jumps out of a window, jump after him because that is where the money is. But in Panama such a banker is probably trying to escape from an angry mob who have been trying to get their bank accounts opened. The process can be arduous and reflects the profound changes which have taken place since the laissez faire days of 20 years ago. Government has imposed stringent rules regarding the due diligence required of banks and, indeed, trust companies.

Although trusts and foundations can open bank accounts, own real estate and manage investment accounts, many people want their testamentary affairs (which is what trusts and foundations deal with) to be as private as possible. They prefer to submit company paperwork rather than foundation and trust information. After all, practically every business or contractual relationship, bar marriage, can be entered into by companies. But unless you will be personally taking charge, the service provider representing your company needs to have both the experience and the qualifications that will enable your best interests to be served.

Bearing in mind that the offshore company is usually central to most offshore business plans, the quality of administration can be very important. All too often the unsuspecting and unknowing client is assured that no problem is insurmountable by the questionably-qualified company manager. A client might think that the agent really is a magician who can produce a rabbit from a hat, but the reality, of course, is often the opposite.

This brings us to Panama’s trust and foundation laws. Banking and offshore companies have been the superstars of Panama’s offshore services whereas in the past trusts and foundations have taken on the role of Cinderella. This is changing as strategies become increasingly sophisticated. A trust today can be established for any lawful purpose and execution of the trust deed can remain private unless real estate in Panama forms part of the corpus when the trust’s existence must be recorded at the Public Registry.

The trust falls within the ambit of the privacy protection given to other financial services in Panama. Trustees (including, where appropriate, their employees) are bound by strict confidentiality and breaches can mean both prison sentences and substantial fines. Settlors, trustees and beneficiaries can be companies rather than individuals if such arrangements will be conducive and even although the trust is managed in Panama, the law governing its administration can be that of another jurisdiction. Trusts created under a foreign law can, if permitted, adopt Panamanian law (but the formalities applicable to Panamanian trusts must first be complied with). In all other material respects Panamanian trusts are indistinguishable from those of most jurisdictions, even if they are governed by civil law and not common law.

The foundation law in Panama, however, is far more recent. What is the difference between a trust and a Panamanian foundation? This question is frequently asked. I often respond by saying that the foundation suffers from an identity crisis because it thinks like a trust but has the personality of a company except that instead of having shareholders, it has beneficiaries. It cannot, however, conduct commercial activities in its own name and normally uses a company which it controls 100% for such purposes. Being a fiduciary arrangement, it is very similar to a trust, having a founder (settlor), charter and regulations (trust deed), foundation council (trustee) and beneficiaries. Like the Panamanian company and trust, certain of the foundation’s activities can be kept confidential. Although the charter is required to be recorded at the Public Registry, the accompanying regulations (detailing such matters as information about beneficiaries, benefits and the main powers given to either the foundation council or other parties) are not. Once the charter is registered, the foundation in Panama takes on the complexion of a corporate body.

The only details regarding the foundation which cannot be confined to the private regulations, and which will appear on the Public Registry records, are the name of the foundation, its place of domicile, details of the initial corpus, the names and addresses of foundation council members (either 3 individuals or one or more corporations), details of the local Registered Agent (must be either a lawyer or law firm in Panama), the objectives, its duration (can be perpetual), how (but not their names) beneficiaries are selected, confirmation that the charter can be modified and, finally, the manner in which liquidation of the foundation is to be dealt with in the event of dissolution. By switching foundation council members for directors and noting many other similarities, it is easy to see how the Panamanian foundation has a DNA similar to a company but is readily identifiable with a trust also.

Link here and here (PDF file).


New York attorney general Eliot Spitzer submitted a report as part of his lawsuit against Maurice R. Greenberg, the former chief executive of American International Group, contending that Mr. Greenberg unfairly enriched himself and other A.I.G. executives in a series of transactions that violated the will of Cornelius Vander Starr, the company’s founder, and defrauded a foundation he created. The questionable transactions took place more than 35 years ago as the far-flung insurance operations built by Mr. Starr starting in 1919 were being melded into A.I.G., the report said. After Mr. Starr died in 1968, Mr. Greenberg and his colleagues, as executors of his estate, benefited by selling assets at fire-sale prices to companies they controlled, it stated. Almost immediately, the report said, these executives turned around and sold the assets at far higher prices to A.I.G., which then set some of them aside for use as a compensation pool for the company’s executives. Because those shares ultimately amounted to 12% of A.I.G.’s outstanding stock, Mr. Greenberg was able to cement his control of the company.

According to the report, Mr. Greenberg and his associates cheated the Starr Foundation, set up by Mr. Starr to benefit educational and cultural institutions, by selling assets that were worth more than $30 million for just $2 million. The Starr Foundation is one of the largest charitable organizations in the nation, with $3.5 billion in assets. The report turns up the volume in an already vehement battle between Mr. Spitzer and Mr. Greenberg, who was ousted by the A.I.G. board in March, when he refused to testify to regulators about a questionable insurance transaction.

Mr. Spitzer has decided not to pursue possible criminal charges against Mr. Greenberg. But he still has a civil case against him, as well as against Howard I. Smith, the former chief financial officer of A.I.G., and A.I.G. itself, contending that they manipulated financial statements and misled regulators and investors. The company, which is in settlement talks with Mr. Spitzer’s office, has restated its financial results for the last five years to reflect accounting practices it now says were improper. Mr. Greenberg, however, maintains that he has done nothing wrong. He and the three former Starr executors who are still alive called Mr. Spitzer’s report shameful, outrageous and insulting.

Link here.


Bahamian Minister of Financial Services and Investments (MFSI), Allyson Maynard-Gibson has announced that the government is in the final stages of developing additional financial services legislation to launch the country’s private trust companies product. According to Minister Maynard-Gibson, the Government has been “meticulous” in its approach to defining the new legislation to ensure that it will stand up to intense international scrutiny. The Minister also revealed that the results of the “Bahamas Strategy & Branding Survey”, which has been carried out by the professional services firm PricewaterouseCoopers, could be made public as early as January.

Link here.



The Transportation Security Administration (TSA) mistakenly put thousands of unsuspecting airline passengers on a “terrorist watch” list, according to Jim Kennedy, TSA’s director of “redress”. The individuals were “selectees”, meaning they were singled out for additional screening and verification before boarding an airplane. Kennedy said that 30,000 people were categorized as “selectees” for various reasons, including “fitting a certain profile, flying on a one-way ticket, or being selected randomly by a computer.” Passengers who have been repeatedly detained and screened in error can submit a “Passenger Identity Verification Form” to get their names removed, Kennedy said.

Much like the process for fixing credit report errors, the correction can take as long as 60 days, and involves sending numerous personal documents to TSA, including notarized copies of one’s birth certificate, passport, and driver’s license. TSA has been advocating the implementation of the “Secure Flight” passenger screening program in order to more easily distinguish normal passengers from possible terrorists or saboteurs. The Secure Flight program has been criticized by privacy watchdogs and government auditors for not properly protecting the privacy of passenger records, and for relying too heavily on commercial databases for its information. The TSA was forced to abandon using commercial databases in order to push the plan forward.

In addition, the TSA had previously helped defense contracting company TorchConcepts acquire millions of passenger records from JetBlue airlines in order to build “risk assessments” of airline passengers, in violation of the 1974 Privacy Act and JetBlue’s own privacy policy. A federal judge recently dismissed a lawsuit against JetBlue for selling the data without passengers’ consent.

Despite the millions of dollars spent on improving airline security and screening, there has been no clear indication that travelers are any safer or at any greater risk than they were prior to the September 11th terrorist attacks.

Link here.


Cuddly software giant Microsoft will use its new Windows Live geolocation finder as a Big Brother location device for the police. The service has a really good geolocation technique which can tell you where you are to five decimal places. Previous geolocation techniques, such as Intel’s PlaceLab, have done all this covertly which made it impossible for anyone to get access to the information. However the new Voleware makes this material available in a format that can be seen by the forces of Microsoft. Not only is this a little scary that Vole knows where you are, it also means that law enforcement groups can demand that Microsoft hand over the information.

In fact in Windows Live Local’s licence agreement Microsoft admits that it will use the information collected to provide you with a“qmore effective customer service, to improve Location Finder and any related Microsoft products or services.” MS will disclose location information if asked by a member of the constabulary. If you think it is only those U.S. colonials who will be signing up to having Vole spy on their whereabouts the licence states it applies to any country in which Microsoft or its affiliates, subsidiaries or agents maintain facilities.

Link here.


Eyeballs, a severed hand or fingers carried in ziplock bags. Back alley eye replacement surgery. These are scenarios used in recent blockbuster movies like Steven Spielberg’s Minority Report and Tomorrow Never Dies to illustrate how unsavory characters in high-tech worlds beat sophisticated security and identification systems. Sounds fantastic? Maybe not. Biometrics is the science of using biological properties, such as fingerprints, an iris scan, or voice recognition, to identify individuals. And in a world of growing terrorism concerns and increasing security measures, the field of biometrics is rapidly expanding.

“Today, biometric (identification) systems are popping up everywhere – in places like hospitals, banks, even college residence halls – to authorize or deny access to medical files, financial accounts, or restricted or private areas,” said Stephanie C. Schuckers, an associate professor of electrical and computer engineering at Clarkson University. “And as with any identification or security system, biometric devices are prone to ‘spoofing’ or attacks designed to defeat them.” Spoofing is the process by which individuals overcome a system through an introduction of a fake sample. “Digits from cadavers and fake fingers molded from plastic, or even something as simple as Play-Doh or gelatin, can potentially be misread as authentic,” she explains. “My research addresses these deficiencies and investigates ways to design effective safeguards and vulnerability countermeasures. The goal is to make the authentication process as accurate and reliable as possible.”

Fingerprint scanning devices often use basic technology, such as an optical camera that take pictures of fingerprints which are then “read” by a computer. In order to assess how vulnerable the scanners are to spoofing, Schuckers and her research team made casts from live fingers using dental materials and used Play-Doh to create molds. They also assembled a collection of cadaver fingers. In the laboratory, the researchers then systematically tested more than 60 of the faked samples. The results were a 90% false verification rate. “The machines could not distinguish between a live sample and a fake one,” Schuckers explained.

Link here.


Most Americans carry cellphones, but many may not know that government agencies can track their movements through the signals emanating from the handset. In recent years, law enforcement officials have turned to cellular technology as a tool for easily and secretly monitoring the movements of suspects as they occur. But this kind of surveillance – which investigators have been able to conduct with easily obtained court orders – has now come under tougher legal scrutiny. In the last four months, three federal judges have denied prosecutors the right to get cellphone tracking information from wireless companies without first showing “probable cause” to believe that a crime has been or is being committed. That is the same standard applied to requests for search warrants. The rulings, issued by magistrate judges in New York, Texas and Maryland, underscore the growing debate over privacy rights and government surveillance in the digital age.

With mobile phones becoming as prevalent as conventional phones (there are 195 million cellular subscribers in the U.S.), wireless companies are starting to exploit the phones’ tracking abilities. For example, companies are marketing services that turn phones into even more precise global positioning devices for driving or allowing parents to track the whereabouts of their children through the handsets. Not surprisingly, law enforcement agencies want to exploit this technology, too – which means more courts are bound to wrestle with what legal standard applies when government agents ask to conduct such surveillance.

Cellular operators like Verizon Wireless and Cingular Wireless know, within about 300 yards, the location of their subscribers whenever a phone is turned on. Even if the phone is not in use it is communicating with cellphone tower sites, and the wireless provider keeps track of the phone’s position as it travels. The operators have said that they turn over location information when presented with a court order to do so. The recent rulings by the magistrates, who are appointed by a majority of the federal district judges in a given court, do not bind other courts. But they could significantly curtail access to cell location data if other jurisdictions adopt the same reasoning. (The government’s requests in the three cases, with their details, were sealed because they involve investigations still under way.)

Link here.


A year ago, at a Quaker Meeting House in Lake Worth, Florida, a small group of activists met to plan a protest of military recruiting at local high schools. What they did not know was that their meeting had come to the attention of the U.S. military. A secret 400-page Defense Department document obtained by NBC News lists the Lake Worth meeting as a “threat” and one of more than 1,500 “suspicious incidents” across the country over a recent 10-month period. “This peaceful, educationally-oriented group being a threat is incredible,” says Evy Grachow, a member of the Florida group called The Truth Project. “This is incredible,” adds group member Rich Hersh. “I’qs an example of paranoia by our government. We’re not doing anything illegal.”

The Defense Department document is the first inside look at how the U.S. military has stepped up intelligence collection inside this country since 9-11, which now includes the monitoring of peaceful anti-war and counter-military recruitment groups. “I think Americans should be concerned that the military, in fact, has reached too far,” says NBC News military analyst Bill Arkin. The Department of Defense declined repeated requests by NBC News for an interview. A spokesman said that all domestic intelligence information is “properly collected” and involves “protection of Defense Department installations, interests and personnel.” The military has always had a legitimate “force protection” mission inside the U.S. to protect its personnel and facilities from potential violence. But the Pentagon now collects domestic intelligence that goes beyond legitimate concerns about terrorism or protecting U.S. military installations, say critics.

The DOD database obtained by NBC News includes nearly four dozen anti-war meetings or protests, including some that have taken place far from any military installation, post or recruitment center. One “incident” included in the database is a large anti-war protest at Hollywood and Vine in Los Angeles last March that included effigies of President Bush and anti-war protest banners. Another incident mentions a planned protest against military recruiters last December in Boston and a planned protest last April at McDonald’s National Salute to America’s Heroes – a military air and sea show in Fort Lauderdale, Florida. The Fort Lauderdale protest was deemed not to be a credible threat and a column in the database concludes, “US group exercising constitutional rights.” 243 other incidents in the database were discounted because they had no connection to the Department of Defense – yet they all remained in the database.

The DOD has strict guidelines, adopted in December 1982, that limit the extent to which they can collect and retain information on U.S. citizens. Still, the DOD database includes at least 20 references to U.S. citizens or U.S. persons. Other documents obtained by NBC News show that the Defense Department is clearly increasing its domestic monitoring activities. One DOD briefing document stamped “secret” concludes, “[W]e have noted increased communication and encouragement between protest groups using the [I]nternet,” but no “significant connection” between incidents, such as “reoccurring instigators at protests” or “vehicle descriptions”.

Link here.



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

Random police searches of subway riders’ bags to deter terrorism in the nation’s largest subway system do not violate the Constitution and are a minimal intrusion of privacy, a federal judge ruled. “The risk of a terrorist bombing of New York City’s subway system is real and substantial,” U.S. District Judge Richard M. Berman said in a 41-page ruling dismissing a lawsuit filed by the New York Civil Liberties Union. Citing testimony that up to 50% of terrorist acts were directed at transportation systems, he said the need for counterterrorism measures was “indisputable, pressing, ongoing and evolving.” He called the searches effective.

The judge said he had no doubt that the random searches were a reasonable method of deterring and detecting a terrorist attack. He cited testimony by police officials who said the policy might lead terrorists to choose a different target. In its lawsuit, the NYCLU said sporadic police searches, which began in July following deadly mass transit bombings in London, subjected innocent riders in New York to pointless and unprecedented invasions of privacy. “We remain confident that this program is unconstitutional, and we intend to appeal immediately,” said Christopher Dunn, NYCLU legal director.

Under the program, officers permit people to refuse inspection and leave the transit system. Officers are instructed to limit inspection to what is necessary to be sure a backpack or other large container does not contain an explosive device.

Link here.


My column of last week, dealing with uniformed cops shooting undercover cops, and the bizarre proposal that to solve this problem undercover cops must stop carrying guns so their uniformed brethren can continue to feel free to shoot any black man in “civvies” who is seen to have a gun, drew a scattering of the usual recycled nonsense from the eager boot lickers of the state. We have seen the lawyerly double-talk before … the Second and 14th Amendments do not really guarantee any pre-existing, God-given individual right to keep and bear arms; they were only intended (in 1789) to guarantee the right of the states to have their National Guards (established in 1917); blah blah blah.

No room here to recite my thorough evisceration of this nonsense from pages 321-349 of The Ballad of Carl Drega. Space also prohibits me from reprinting here all the relevant chapters of professor Akhil Reed Amar’s 1998 book The Bill of Rights, demonstrating that this long-discredited nonsense will no longer fly even at the reliably leftist Yale Law School. Instead, herewith the necessarily abbreviated, “Cliff Notes” version.

… These boot lickers of the oppressor, stained yellow from rolling over on their backs and peeing themselves in terror that this might again become a nation of proud, armed, independent and freedom-loving men, had better get themselves some new lies. The one that starts, “You forgot the introductory clause about the militia, nyah nyah nyah,” is starting to wear a little thin.

Link here.


The chair of the commission investigating the fatal shooting of Jean Charles de Menezes said it was “likely” its findings would be passed to the Crown Prosecution Service. Mr. De Menezes, a Brazilian national, was shot seven times in the head by armed police officers at Stockwell underground station, in south London, who thought he was a suicide bomber. Independent Police Complaints Commission chairman Nick Hardwick said the IPCC had to decide whether its findings indicated criminal offences might have taken place. The CPS would then have to decide whether to bring charges against any of the Scotland Yard officers involved. A spokesman for the De Menezes family expressed dismay at Mr. Hardwick’s decision to speak to the press before the IPCC investigation was finished.

Link here.


What do mandatory drug testing, cigarette taxes and methamphetamine restrictions have to do with protecting America from terrorists? As far as I can tell, the answer is “nothing”. But they nevertheless appear in a 219-page proposed law to renew the Patriot Act that Republicans have scheduled for a vote this week. A fraction – a mere 16 sections – of the Patriot Act’s awesome surveillance powers expire December 31. They expanded secret methods the FBI can use to obtain business records, authorized more information sharing between Internet providers and police, and listed computer hacking as an offense permitting increased eavesdropping.

The Bush administration and congressional Republicans spent last week arguing that speedy approval of the larded-up “conference report” was necessary to keep America safe. Attorney General Alberto Gonzales said, “I urge both houses of Congress to act promptly to pass this critical piece of legislation.” But what Gonzales did not say was that the conference report has become a political version of a Christmas tree. It is ornamented with dozens of senators’ pet projects. The result is a structure so weighty with irrelevant amendments it is nearly twice the size of the original Patriot Act.

Some bizarre (and some relevant) examples follow. The conference report 1.) Reduces the amount of contraband cigarettes that qualifies as a federal crime. The number drops from 60,000 cigarettes to 10,000. 2.) Creates a new federal crime of photographing or videotaping bridges, garages, tracks, warehouses, or other facilities used by railroads, boats, or airplanes – if such recordings were made with the intent of doing harm. Anyone attacking anyone else near such facilities with a weapon – the list includes “a pocket knife with a blade of less than 2½ inches in length and a box cutter” – can be punished with stiff prison terms and even the death penalty. 3.) Increases criminal penalties for smuggling goods into the U.S. from five years to 20 years, and creates an additional crime of exporting them. 4.) Expands what information the FBI can obtain using a Foreign Intelligence Surveillance Act (FISA) court order asking for telephone or Internet activity. It stresses that the recipient must divulge “any temporarily assigned network address or associated routing or transmission information.”

Some sections are more relevant to terrorism and FBI oversight. Increasing oversight of often-unaccountable police agencies is a welcome development, but the preparation of a few reports must not be confused with meaningful reform. The conference report will do little to stop an FBI that, according to previously classified documents, has spied on U.S. residents without authorization. Incidents have included obtaining email messages after a warrant expired and conducting an improper physical search. Nor will the proposed legislation fix the way national security letters (NSLs) are secretly employed to obtain business records on Americans. In addition to credit records and financial information, NSLs let the FBI obtain a list of all Web sites a person visits, a list of a person’s email and instant messaging correspondents and other subscriber records.

As the December 31 deadline nears, watch the White House and Republicans crank up the pressure on wavering Senate Democrats. Fortunately, most Democrats, and a handful of Republican dissenters, are objecting to the legislation and are demanding substantive changes. Some, like Russ Feingold, a Wisconsin Democrat, are even threatening a filibuster. Whether Feingold can muster the votes to carry it off is an open question. But it would be fascinating to watch the Bush administration explain why laws involving cigarette taxes, methamphetamine possession, and pocket knives are necessary to protect America in the War on Terror.

Link here.

At F.B.I., frustration over limits on Patriot Act.

Some agents at the F.B.I. have been frustrated by what they see as the Justice Department’s reluctance to let them demand records and to use other far-ranging investigative measures in terrorism cases, newly disclosed e-mail messages and internal documents show. Publicly, the debate over the law known as the USA Patriot Act has focused on concerns from civil rights advocates that the F.B.I. has gained too much power to use expanded investigative tools to go on what could amount to fishing expeditions. But the newly disclosed e-mail messages offer a competing view, showing that, privately, some F.B.I. agents have felt hamstrung by their inability to get approval for using new powers under the Patriot Act.

One internal F.B.I. message, sent in October 2003, criticized the Office of Intelligence Policy and Review at the Justice Department, which reviews and approves terrorist warrants, as regularly blocking requests from the F.B.I. to use a section of the antiterrorism law that gave the bureau broader authority to demand records from institutions like banks, Internet providers and libraries. “While radical militant librarians kick us around, true terrorists benefit from OIPR’s failure to let us use the tools given to us,” read the e-mail message, which was sent by an unidentified F.B.I. official. “This should be an OIPR priority!!!” A separate e-mail message, sent in May 2004 with the subject header “Miracles”, mockingly celebrated the fact that the Justice Department had approved an F.B.I. request for records under the so-called library provision. “We got our first business record order signed today!" the message said. "It only took two and a half years.”

The bureau turned the e-mail messages over to the Electronic Privacy Information Center as part of a lawsuit brought by the group under the Freedom of Information Act, seeking material on the F.B.I.’s use of anti-terrorism powers. Marcia Hofmann, who leads EPIC’s government section, said the e-mail messages “raise a lot of unanswered questions” about the F.B.I.’s use of Patriot Act powers and its relations with the Justice Department. Without fuller answers, Ms. Hofmann said, a reauthorization of the law by Congress “would seem premature.”

Link here.


It was revealed that four men deprived of their liberty for four years on suspicion of being international terrorists have not once been questioned by police or security services since being arrested. The four, who were among 16 suspects detained without trial under post-11 September terror legislation, later overturned by the law lords, give harrowing accounts of the treatment they have suffered. All are now under virtual house arrest. Although three face deportation, The Independent has learnt that there is no prospect of the men ever being questioned over the offences they are alleged to have committed.

In interviews with Amnesty International, the four – 3 Algerians and a Palestinian – say their detentions have harmed their physical and mental health. They also complain that their treatment has had a devastating impact on their wives and families. The men were interned in Belmarsh jail in south-east London – which has been called Britain’s Guantanamo Bay – and other high security prisons in conditions consistently condemned by human rights organizations. Their detentions were ruled illegal by the law lords a year ago and they have since been released on control orders with tough restrictions on leaving home.

Kate Allen, the director of Amnesty International, met the Palestinian Mahmoud Abu Rideh and an Algerian man known as “H” at their homes in the past month and spent about an hour with each of them, together with their wives. She said, “Both men expressed a profound sense of injustice that their liberty had been taken from them without their ever being charged, tried or shown any evidence against them. Both expressed amazement that this could happen in a country like the UK.

“But what struck me most was the impact that the detention and subsequent house arrest of these men has had on their partners and their families. Abu Rideh’s house doesn’t feel like the kind of bustling home you would expect of a family with five children. It is silent, sad and isolated. Friends and family are scared to visit – to do so they have to submit their name and photo to the Home Office, and in effect become a ‘known associate of a terrorist suspect’.”

The disclosure that the men have not been interviewed by the authorities will embarrass ministers, who have claimed that the men present such a terrorist threat that they have to be permanently monitored.

Link here.


A three judge panel of the Ninth Circuit Court of Appeals last month overturned a lower court decision that allowed the seizure of a family’s automobile out of its driveway after a husband was caught teaching his wife how to drive. In April 2003, Jorge Miranda accompanied Irene Miranda as she drove his Ford Aerostar minivan at 10 MPH in a Cornelius, Oregon neighborhood to and instructed her how to drive. A police officer witnessed her poor driving and issued tickets to both Mirandas after they had pulled into their personal driveway. 30 minutes later, the officer had a tow truck remove the minivan right out of their driveway. Miranda had to pay the city administrative and towing fees in addition to losing a day’s pay to come pick it up the next day.

A federal district court in Oregon upheld the vehicle seizure on the grounds that there is no privacy in a private person’s driveway. The Ninth Circuit, however, viewed the situation differently and took the City of Cornelius to task for assuming that merely passing a law gives them a right to seize personal property without a warrant. “We begin with the premise, apparently not recognized by the Defendants [the city], that the decision to impound pursuant to the authority of a city ordinance and state statute does not, in and of itself, determine the reasonableness of the seizure under the Fourth Amendment,” the court wrote.

Since the vehicle was not creating an immediate hazard and Jorge Miranda was a fully licensed driver, the court did not see a compelling reason for the city to seize the car. “We hold that, under the special circumstances of this case, the impoundment of Plaintiffs’ vehicle was an unreasonable seizure not justified by the community caretaking doctrine,” the court concluded.

Link here. Miranda v. City of Cornelius full opinion here (PDF file).


Two air marshals gunned down an American citizen last week in Miami, and most of the establishment media seemingly could not care less. Immediately after 44-year-old Rigoberto Alpizar died on December 7 in a hail of bullets from two air marshals, Dave Adams, a spokesman for the Federal Air Marshal Service told CNN that Alpizar had shouted “I have a bomb in my bag” while running up and down the aisle of an American Airlines plane as it sat on the runway. This was the version of events that the vast majority of the media repeated unquestioningly in the first days after the killing.

However, online articles on December 8 by Time and CNN contained quotes from passengers debunking the feds’ story. The Orlando Sentinel reported on December 9, “Seven passengers interviewed by the Orlando Sentinel – seated in both the front and rear of the main passenger cabin – said Alpizar was silent as he ran past them on his way to the exit.” No passenger the Sentinel spoke to offered any account akin to what the feds claimed. It is not yet clear exactly what happened at Miami International Airport. But the primary justification the feds offered for using deadly force did not survive even two full news cycles.

Nevertheless, the conservative press rushed to exonerate. Investors Business Daily, in a December 9 editorial, hailed the marshals’ action. The Washington Times derided any “second-guessing” and drew the happy moral to the story, “Mr. Alpizar’s death is a reminder of how seriously the marshals treat airline security. We should all take due notice.” But other publications also raced to take the government’s word. A Washington Post editorial on December 9 proclaimed, “There is, at this stage, no reason to doubt the official account of the slaying Wednesday of Rigoberto Alpizar by federal air marshals in Miami.” The Post editorial was reprinted in numerous papers the following day. The Boston Herald on December 10 used the killing to slap down anyone who would grouse about TSA checkpoint delays. Newspaper editorial writers were hellbent on promulgating the government version of events.

But on December 13, a Pittsburgh Post Gazette editorial quoted a statement that indicated federal officials are reacting to the unraveling of their story by slightly modifying the way they describe the killing: “According to law enforcement officials, Alpizar ‘uttered threatening words that included a sentence to the effect that he had a bomb.’” What sort of sentence includes threatening words “to the effect” that one has a bomb – but apparently does not include the word bomb? The Post-Gazette was less interested in asking these questions than in helping the feds backtrack, concluding, “[B]y all initial accounts, the marshals did their job.”

Some editorials called for an independent investigation of the shooting – a triumph of hope over experience, given how such investigations over the past 15 years almost always whitewashed federal action. Perhaps some truth will seep out as a result of jurisdictional conflicts between the Federal Air Marshal Service and the FBI or Miami police. Even in that case, if the media continue acting like South Park’s Officer Barbrady – “Nothing to see here, folks, just move along” – the odds of any such revelation go from slim to none.

In the old days, Americans were taught that the media would serve as a check and a balance on government powers. That platitude is fading as news professionals show less regard for private citizens than for government officials who can provide exclusive access and hot tips. Perhaps if Alpizar had regularly attended Georgetown dinner parties, the media would show more curiosity about his fate.

Link here.



Bill Bradford, founder and editor of Liberty magazine, dies.

Bill Bradford died on December 8 following a long battle with cancer. I met Bill a couple of times and communicated with him via e-mail occasionally over the years. I sent my last e-mail to him on October 30 of this year, having heard about his illness. He wrote back, “Thanks for your good wishes.”

Bill and I had started to part ways on some intellectual matters. I have grown increasingly critical of the libertarian movement. And I have never been satisfied with Bill’s handling of Ayn Rand’s theories, particularly her ethics. But I will always remember him as a man with a true zest for life and as someone who devoted his heart, soul, and mind to a project that he deeply loved.

Link here.

Eugene McCarthy’s opposition to campaign finance law was “a free speech kind of thing”.

Eugene McCarthy will always be remembered as the man who “toppled LBJ” in 1968. His campaign for the Democratic presidential nomination that year seemed futile. Whatever his problems, Lyndon Johnson had one advantage: he was the incumbent who enjoyed the benefits of office. But McCarthy’s upstart campaign managed to lose and to win the New Hampshire primary. By getting 42% of the vote (and holding LBJ under 50%), McCarthy paved the way for Johnson’s withdrawal from the race. Incumbents are still expected to win their reelection bids. Incumbents still have an advantage in running for reelection. What is missing now are challengers coming out of nowhere to challenge the status quo.

Eugene McCarthy’s campaign depended on two factors, shifting public opinion and money. Public support for the Vietnam War remained strong for a longer time than we now remember. Only in the fall of 1968 were a majority of Americans willing to say that the Vietnam effort had been a mistake. McCarthy sensed that his campaign could represent an emerging public sentiment against the war. But to enter the race for the presidency, he needed more than a message, more even than the volunteers that flocked to him that spring.

McCarthy needed money to finance his campaign. He got it. McCarthy received several six-figure donations from affluent individuals deeply opposed to the war in Vietnam. Herbert Alexander, a leading campaign finance expert, estimates that about one-third of McCarthy’s total fundraising in 1968 came from just 50 large donors. David Hoeh, the organizer of McCarthy’s New Hampshire campaign, recalled later that a single “financial angel” saved their media effort at a crucial point.

McCarthy spent the money effectively in spreading his anti-war message. The McCarthy campaign devoted $110,000 to radio and television in New Hampshire and over $150,000 on all communications media in that primary. That does not seem like much today. In those days such sums were large enough to get McCarthy into the presidential game, large enough to all but defeat a sitting president, and begin the winding down of the Vietnam War. McCarthy’s campaign made a difference in that year of living dangerously, 1968. It thus attracted attention, not all of it welcome. McCarthy had shown the electoral potential of television backed by political contributions in service to a political message. McCarthy had, in short, threatened the political status quo.

Congress moved quickly to deal with the threat. Early 1969, legislation limiting campaign spending on television and other broadcasting outlets appeared in Congress and was passed in 1970 (President Nixon vetoed it) and 1971. The purpose of the law was clear. If the campaign finance law of 1971 had been in effect in 1968, McCarthy would have been required to spend 80% less on the media in the New Hampshire primary. Congress had, as one member put it, “tamed the television monster.” More concretely, Congress had tried to make sure no more Eugene McCarthys rose up to challenge the status quo.

After Watergate, Congress replaced the limits on broadcast spending with more general spending limits, which the Supreme Court voided. Contribution limits, a weaker way to same end of suppressing competition, received judicial blessing. In our time the men who supported McCarthy’s 1968 effort would be liable for the crime of contributing too much money to a political campaign. Not surprisingly we have many fewer upstart campaigns like McCarthy’s and 98% of incumbents win their bids to be re-elected to Congress.

McCarthy himself believed that campaign finance restrictions complicated the lives of candidates and their supporters, increased the influence of special interests, and ultimately made lawbreakers out of people seeking to exercise their right to political association. Most of such laws, he said, violated the Constitution while upholding the privileged status of the major parties. His opposition to campaign finance law was, he explained near the end of his life, a “free speech kind of thing”.

Indeed it was. Contrarian and principled. A Gene McCarthy kind of thing.

Link here.

Epithet stung, even for Richard Pryor.

Richard Pryor’s death puts into painful relief hip-hop’s exploitation of the N-word. In 1993, Snoop Dogg said he used the word because “it’s me”. In 1996, Def Jam founder Russell Simmons said, “When we say ‘nigger’ now, it’s very positive. Now all white kids who buy into hip-hop culture call each other ‘nigger’ because they have no history with the word other than something positive. … When black kids call each other ‘a real nigger’ or ‘my nigger,’ it means you walk a certain way … have your own culture that you invent so you don’t have to buy into the U.S. culture that you’re not really a part of. It means we’re special. We have our own language.” In a documentary last year on the N-word, actor and rapper Ice Cube claimed the word was a defiant “badge of honor”.

Talk about reinventing the N-wheel. All these things were precisely what the comedian Pryor claimed at the beginning of the 1970s when he made a conscious decision to splatter his routine with the word. In his autobiography, Pryor Convictions, he said, “Nigger. And so this one night I decided to make it my own. Nigger. I decided to take the sting out of it. Nigger. As if saying it over and over again would numb me and everybody else to its wretchedness. Nigger. Said it over and over like a preacher singing hallelujah.” Pryor rose to commercial stardom.

As the 1970s wound down, it was spectacularly evident that embracing the N-word did not give Pryor the strength to rise above demons. His dismal childhood among whorehouses and barroom violence in Peoria, Illinois, mushroomed into Hollywood drug binges and threats to wives at gunpoint. Amazingly, Pryor matured on this issue. In 1979, he flew to Kenya. It was a trip recommended to him by his psychiatrist after his wife Jennifer hauled him out of a house full of hookers and drugs. After touring Kenya’s national museum, Pryor sat in a hotel lobby full of what he described as “gorgeous black people, like everyplace else we’d been. … Everywhere.” That caused Pryor to say, “Jennifer. You know what? There are no niggers here. … There are no niggers here. The people here, they still have their self-respect, their pride.”

In Pryor Convictions, Pryor said that he left Africa “regretting ever having uttered the word ‘nigger’ on a stage or off it. … To this day I wish I’d never said the word.” Today Ice Cube is 36. Nothing about the N-word or B-word has helped black people to rise above achievement gaps in schools or helped black males to be respectful to women and responsible to babies they father out of wedlock. Russell Simmons said the use of the N-word makes black people “special”. Pryor decided 25 years ago that it was stupid.

Link here.


Waging war is when you send your kids to kill someone else’s babies. It is nothing more noble than that, and all the good reasons in the world will not differentiate your war from Hitler’s, or Napoleon’s, or Genghis Khan’s, or Caesar’s, or any of the thousands of other little excursions into bowel spilling that humankind has indulged in with monotonous regularity over the last few millennia. The stated reason for going to war is always the same. As the prophet Orwell said, “Every war when it comes, or before it comes, is represented not as a war but as an act of self-defense against a homicidal maniac.” The actual reason for going to war is generally understood to be a grab for resources, whether land or gold or oil or peasant girls. But that is an old-fashioned notion. The reason modern wars are waged has nothing to do with resources, which can be secured through the liberal application of funds or the coercion of international banking structures. Rather, modern war is waged to sustain the status quo.

“Status quo” is Latin for “state in which”, or as Shaft would have said, “what it is”. And nothing matters more to the twits in power. After all, what else have they got to offer? Would George W. Bush have waged his little war just for oil? There is something rather feeble about this explanation. It lacks the proper scope, the requisite megalomania. Every last dram of Iraq’s oil would have been easy enough to secure with a little backroom business of the same type that Donald Rumsfeld was engaged in when America sold Saddam Hussein his first weapons of mass destruction. The only real competition there was the Russians and the French, and they drive Citroens and Ladas, so how much oil could they realistically be in the market for? Their cars do not even run. In reality, Bush needed a war not for oil, but to keep the increasingly fractious American people entertained, to dose them on cheap victory and win some tin laurels for himself. That is the stuff war is about, these days. As long as we are at war, after all, dissent is treason. How often has that hoary chestnut “giving comfort to the enemy” been served up during this military adventure? And nobody balks at spending money on war, so anybody in the war business stands to make a killing, so to speak: observe the creep veep.

The status quo is, after all, an instrument of control. It benefits only those who are well off. Anybody else would call the status quo a situation worth altering, not maintaining, which generally means stripping the haves of whatever it is they have. That would be our leaders, come to think of it. Suddenly war makes all kinds of sense. Until, of course, you do not win it. Ultimately, war is the purpose of war. It makes pacifists of a few, and passivists of the majority.

Link here.


If I am asked whether libertarians are on the “left” or the “right”, I would say that I cannot speak for others, I can only speak for myself. And that I am both on the left and the right. This reply would not be borrowed from the shallow and nearly-fraudulent “social liberal, economic conservative” definition of libertarianism. Nor would it imply a “centrism” or wishy-washy indecisiveness. Indeed, I really do strongly hold many values and beliefs long associated with the “Left”, and equal and corresponding beliefs and values associated with the “Right”.

Why are both the Left and the Right so often, and so justly, depicted as not just wrong-headed, but evil? The tendency of both the Left and the Right is to accuse the other of the very same charge. According to the Left, the defining characteristics of the Right are coercion and centralization. The Right supposedly wants to establish a fascist, imperial state with absolute executive power. But according to the Right, the Left is all about – you guessed it – coercion and centralization, with the goal of establishing a communist world government with unchecked judicial and bureaucratic power.

It is true that perverting my liberal values by imposing them through the coercion of centralized power will lead to a hellish society. But so would doing the same with my conservative values. They would look different in style and form, but war, subjugation, and moral and fiscal bankruptcy will be their fruits. I believe, however, that neither liberal nor conservative values are defined by the role of the State in our lives. They are primarily social, not political, values, and a well-rounded individual appreciates both.

Regardless of whether they are on the right or the left, do not those who oppose centralization and coercion have a lot more in common with each other than with the Bushes and Clintons of the world? Remember how the first George Bush promised a “kinder, gentler” America? That meant moving Reagan’s Republican Party leftward to the “center”. What we got was an unnecessary war and diminished liberties at home. Then Bill Clinton moved the Democratic Party rightward to “the center” and gave us more war while we lost even more freedoms. And then George W. Bush, with his “compassionate conservatism” moved Newt Gingrich’s Republican Party again leftward to “the center”. What did we get? Still more war, and an almost completely-eviscerated Bill of Rights.

Who opposed all these wars? The far – as in, anti-state – left, and the far – as in, anti-state - right. Both firmly opposed the PATRIOT Act and other War on Terror suspensions of our civil liberties while “moderates” on all sides blindly supported these measures. Both oppose the globalist agenda behind fraudulently named “free trade” agreements. Both bitterly oppose national education standards, and favor local control of schools. Whether the theme is “democracy” or “states’ rights”, both the far left and the far right oppose top-down, bureaucratic “solutions” to social problems such as poverty. Both seek radical changes in the federal tax code. The enemy of the libertarian is not the liberal, nor the conservative. Nor the Green anarchist, southern nationalist, Georgist, or Constitution Party activist. The enemy is always the Statist, the advocate of coercion and consolidated power.

Link here.


How should you understand reasons of State? You must learn, child, that what would be wrong for you or for any of the common people is not wrong in a great Queen such as I. The weight of the world is on our shoulders. We must be freed from all rules. Ours is a high and lonely destiny.” ~ the queen of Charn, in The Magician’s Nephew, by C. S. Lewis.

Why has it been so hard for the American freedom movement to achieve any lasting, meaningful victories? Is it because our enemies are so powerful? Is it because so few really desire freedom? Or is it just possible that the seeds of failure lie within the activists themselves? The battlefield on which we are fighting is the human mind. The State’s power rests primarily on the voluntary submission of its victims, and only secondarily on its guns. If any sizable minority of the American populace had a clear understanding of the principles of liberty and a firm resolve not to submit to unjust “laws”, their freedom could not be taken away. So the first order of business for the freedom movement must be to reclaim the territory of our own minds from the enemy.

How can the freedom movement ever have a hope of success so long as State worship maintains a grip on the minds of so many freedom activists? The essence of State worship lies in a double standard: there is one set of legal and moral standards for judging us, the peasantry, and another, much looser, set of legal and moral standards for judging acts carried out in the name of the holy State. The activities of the State are of such a lofty, noble, and quasi-divine character that they must be exempted from the petty moral standards that apply to mere mortals. Nowhere is this double standard more evident than in the reverential attitude many display toward the State’s hired killers, as exemplified by Lady Liberty’s article, “The Devaluation of Freedom”, a pean to the soldiers in Iraq “defending freedom”. What in the world did the U.S. invasion and conquest of Iraq have to do with American freedom? To quote Inigo Montoya from The Princess Bride, “You keep saying that word. I do not think it means what you think it means.”

The invasion of Iraq was simply an act of naked aggression, on par with Hitler’s invasion of Poland. It was an unquestionably evil act. We do not eulogize criminals who die while committing their crimes. None of us praised the bravery of the ATF agents who died assaulting the Branch Davidians at Waco. Why do the armed federal employees who have died in the conquest of Iraq deserve any more respect? It is high time that freedom activists stopped making excuses for those who commit crimes in the name of the State. It is time we took the State and its enforcers off their pedestal. It is time we uprooted any latent State worship from our minds. Only then will we have a shot at winning our freedom.

Link here.


The effort by some cable TV hosts and ministers to force commercial establishments into wishing everyone a “Merry Christmas” might be more objectionable to the One who is the reason for the season than the “Happy Holidays” mantra required by some store managers. I have never understood why so many Christians feel the need to see and hear “Merry Christmas” proclaimed to them at stores by people who may not believe its central message. While TV personalities, junk mail letters and some of the ordained bemoan the increasing secularization of culture, perhaps some teaching might be helpful from the One on whose behalf they claim to speak.

Jesus – the real one, not the Republican-conservative-Democrat-liberal one made in the image of today’s fractured political culture – said His kingdom is not of this world. Why, then, are so many who claim to speak for Him demanding that this earthly kingdom celebrate Him and His Kingdom? Paul the Apostle said, “We live by faith, not by sight.” (2 Cor. 5:7). Jesus spoke a parable about the Kingdom of Heaven resembling a treasure hidden in a field (Matthew 13:44). The Apostle John warned, “Do not love the world or anything in the world. If anyone loves the world, the love of the Father is not in him. For everything in the world – the cravings of sinful man, the lust of his eyes and the boasting of what he has and does – comes not from the Father but from the world. The world and its desires pass away, but the man who does the will of God lives forever.” (1 John 2:15-17)

Let us see. Should the crass commercialization of “Christmas” and the focus on accumulating and giving stuff (each sold separately, batteries not included) be part of this indictment? Even a casual observer or biblical illiterate might reasonably draw such a conclusion. The classic Christmas carol O Little Town of Bethlehem, composed in 1868 by Phillips Brooks and Lewis H. Redner, rebukes those who have transformed Christmas from what it is into what it is not. This rebuke is not to the “world” and the way it has cashed in on Christmas, but to those who commit spiritual adultery by embracing the world while simultaneously claiming fealty to their “first love”. About Bethlehem, Brooks says, “How still we see thee lie.” There is nothing “still” about the cacophony surrounding the modern Western observance of Christmas.

I do not care if a mall employee wishes me a “Merry Christmas”, or not, or if mall managers favor snowpersons over manger scenes, or erect what they call “holiday” and not “Christmas” trees. It is not about their observing this event, giving us a “religious rush” and creating a false sense of security that this culture is better than it is. It is about people who believe in this historic event observing it in a way that recalls the birth of who they see as the Savior of the world (not the savior of the bottom line). Let the world get drunk at its office parties. Let it consume material things, pile up credit card debt and embrace other trappings of this counterfeit “Christmas” road show. I prefer the “original cast”.

Link here.
Previous News Digest Home Next
Back to top