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THE 9/11 ENIGMA, REVISITED
A thousand years from now, who will observe this doleful anniversary? From that perspective, will the worst terrorist attack in U.S. history seem like a blip on the wide screen of history, or a turning point in the saga of the rising American Imperium? We cannot know, but one thing we do know for sure – 9/11 looms large over the world of 2006. Its gigantic shadow cast a pall over the West, paralyzing rational thought and inaugurating a new age of perpetual war – a “clash of civilizations”, in Samuel Huntington’s phrase. In the five years since the twin towers fell, the clear victor in this epic battle is Osama bin Laden, still at large and threatening us with fresh attacks.
His trail long since grown “stone cold”, as the Washington Post puts it, bin Laden is a hero to millions. I would venture to say he is the most popular Muslim leader, and certainly the preeminent Middle Eastern Arab leader. The inspirer and progenitor of 9/11 has attained the status of a living myth, and, as long as he remains at large, his mythic stature will only grow. And yet President Bush, after initially declaring he wanted the al-Qaeda leader “dead or alive”, did not mention him by name for years. However, that kind of pretense is hard to keep up, and certainly this dark anniversary required the White House to suddenly recall Osama bin Forgotten.
One can see why they would rather forget, because the mere mention of his name is enough to invoke the circumstances whereby he was allowed to get away. In what sense this result was “allowed” is for history to judge. The diversion of resources away from the fight against al-Qaeda and toward effecting “regime change” in Iraq and elsewhere in the Middle East has been a godsend to the Islamist radicals who burn with hatred for America and yearn to top the terror of 9/11. In an excellent CNN documentary on bin Laden shown the other night, Peter Bergen reported the post-9/11 judgment of many of bin Laden’s comrades was that the whole thing was a mistake. Suddenly they had this unrelenting nemesis on their backs. A whole layer of the top leadership was lopped off, and those that survived were on the run. The big news, covered in a Washington Post story, however, is that bin Laden’s own flight from the mountains of Tora Bora was apparently captured on videotape, which has been obtained by the CIA.
Perhaps just as appalling as this eerie video, which makes one wonder just how closely we tracked bin Laden. Unless they just plucked it off the Internet – could it have been part of al-Qaeda’s propaganda effort, posted on some jihadist Web site? – our government’s possession of the tape indicates just how close they came to him, and how just a little more sustained effort might very well have nabbed him. We can say, with fair certainty – and a certain rectitude in our voice – that bin Laden was allowed to get away. Not inadvertently but as the result of a conscious decision that made the invasion of Iraq a higher priority than the capture of the terrorist leader. It was more important to carry out the neoconservative agenda in the Middle East – to raise the flag of the president’s “global democratic revolution” – by force of arms.
Bin Laden? 9/11? Forget it, buster – that was just a pretext, a catalyzing event that allowed a well-organized network with a preexisting agenda to move quickly and with determination to implement its plan. There are those who deny the very existence of bin Laden and disdain al-Qaeda as a myth, the creation of the “real” perpetrators of the worst terrorist attack in American history – the U.S. government itself. You and I saw those two planes crash into the World Trade Center, and we saw the Pentagon hit – but who are you going to believe, those Alexander Cockburn calls the “9/11 conspiracy nuts” or your lying eyes? I agree with Cockburn’s critique of the utterly daffy “controlled demolition” thesis, and the equally crackpot delusion that the Pentagon was hit by a missile instead of a jetliner. Yet there is more here than meets the eye…
A whole movement has grown up, apparently, the so-called “9/11 Truth” movement, which seeks to show … well, it is not quite clear. Some 9/11-Truthers think an evil cabal within the U.S. government plotted the whole thing from beginning to end, although when it comes to naming names and drawing up a bill of indictment, the Truthers stumble on their lack of specifics. The jet fighters that might have intercepted the hijacked planes were delayed – deliberately, of course, since no government has ever been guilty of incompetence, heaven forfend! – and the rest is history. And if you think these people are just fringe nut-jobs, take a look at the polls. The Seattle Times reports, “A recent Scripps Howard/Ohio University poll of 1,010 Americans found that 36 percent suspect the U.S. government promoted the attacks or intentionally sat on its hands. Sixteen percent believe explosives brought down the towers. Twelve percent believe a cruise missile hit the Pentagon. Distrust percolates more strongly near Ground Zero. A Zogby International poll of New York City residents two years ago found 49.3 percent believed the government ‘consciously failed to act.’”
These people are not crazy. They are smart enough to question the “accepted” narrative, and their skepticism of governmental beneficence is healthy and quintessentially American. The problem with the 9/11 Truthers is not that they question the conventional 9/11 narrative, but that their alternative explanations defy common sense – and divert attention away from the core mystery of 9/11. How in the name of all that is holy did a conspiracy envisioned on such a large scale, and stretching over at least five years, go undetected? Yes, governments are incompetent, but there were key people in government who were fully aware of the threat posed by bin Laden and his followers. In the months and weeks leading up to the attack, the president was presented with the evidence. It is not as if the terrorist threat had never been raised before.
Yet, in spite of the multi-billions spent on “anti-terrorist” measures, 19 hijackers managed to penetrate American society and carry out a synchronized terror assault on two major targets, twin symbols of U.S. financial and military power. For all the scrutiny invited by bin Laden, it surpasses understanding how not even an inkling of his plan was picked up by any intelligence agency, anywhere. None of our allies picked up the scent – not even the Mossad, with its legendary prowess as the most ruthlessly efficient of the lot.
Of course, if you believe Fox News, which reported that the Israelis did indeed know that something pretty awful was going to happen on September 11, 2001, and somehow neglected to tell us all they knew, then this last does not apply. But, “evidence linking these Israelis to 9/11 is classified.” So how come the 9/11 conspiracy nuts are not demanding the immediate declassification of the evidence? On account of its pro-administration, pro-Israel orientation, Fox News’ reporting on this subject is all the more credible. You would think the conspiracy theorists would be all over it. But you would be wrong. Instead, they prattle on about “controlled demolition”, a missile striking the Pentagon, and other wild “theories” that only discredit all attempts to examine and revise the official 9/11 narrative. Like Bush going into Iraq, the “demolitionists” and their brethren divert scarce resources – and limited attention spans – away from the really baffling anomalies, like this, for example.
The suspicions many Americans have about the official 9/11 narrative do not seem all that unreasonable to me. What does seem unreasonable is the attempt to deride any effort to put 9/11 in its full context as “conspiracy theory” and worse. The unsolved mysteries of 9/11 continue to haunt us, and will remain with us as long as the real history of that signal event is shrouded in murk and protected by taboos.Link here.
CORNERED EMPIRE AND THE LEGACY OF 9/11
With the collapse of the Berlin Wall, American leaders declared “victory” in the Cold War no less firmly or repeatedly than our President has promised “victory” in his Global War on Terror – no less than 12 times, in fact, in an August speech to the American Legion National Convention. However, as Andrew Bacevich, author of The New American Militarism, recently wrote, victory in our times turns out to be a remarkably quicksilver concept, especially since “the East has solved the riddle of the Western Way of War … [T]he Arabs now possess – and know that they possess – the capacity to deny us victory, especially in any altercation that occurs on their own turf and among their own people.” Triumphantly here today – as your generals sit grinning behind a marble table in one of Saddam’s palaces – victory is gone tomorrow – as the IEDs start to explode and the suicide car bombs begin to mount. In the case of the Cold War, the question remains, was that victory actually gone yesterday? Was it gone by the time officials danced their victory jigs in the corridors of the Pentagon and the White House?
In retrospect, it may be – as perceptive scholars of imperial decline have long argued – that we were already definitively on the way down. To put it another way, that there was no victor but there were two losers in the Cold War. The Soviet Union, the weaker of the two great powers, simply imploded first, while the U.S., enwreathed in a rhetoric of triumph and self-congratulation, was slowly making its way to the door without waving goodbye. In the 15 years since the USSR evaporated, most indices of power, especially military power, have been challenged. To offer but a single sobering example, historian Gabriel Kolko, cited how destructive power has been “democratized”.
When, back in the 1960s, Senator J. William Fulbright wrote of “the arrogance of power” as a defining trait of America’s leaders, few in power took him seriously. So many years later, the question is, do our present arrogant leaders have the faintest idea how limited their powers really are? As Ira Chernus, author of Monsters To Destroy: The Neoconservative War on Terror and Sin, suggests below, on this fifth anniversary of the September 11th attacks, the leadership of an increasingly cornered empire continues to put its emphasis not just on striking back, but on striking first … and wherever. This is the most dangerous, the most blinding and fearful legacy of the 9/11 attacks. In the long run, it threatens a world in rubble.Link here.
A good story gives you something to care about. If it makes you care deeply enough then the story becomes a great one, and a great story can attract people by the millions. The promise of a great story helps me understand why New York City attracts more than 40 million visitors each year. The city is also uniquely able to be both a story and a storyteller. Even if you have never been there, movies alone offered enough great New York stories to make people care for more than 70 years: King Kong, Rear Window, Breakfast at Tiffany’s, Raging Bull, Annie Hall, Moonstruck, Quiz Show.
Every civilized person was a New Yorker on this day five years ago. I use “civilized” with care, as the best word to separate the perpetrators of 9/11 from the rest of us. Today I have no more words beyond a lament I posted on September 11, 2002. …Link here.
THE QUESTION NEVER ASKED: WHY?
As the media orgy over 9/11 subsides and the President’s speech is still ringing in people’s ears, there is one aspect of 9/11 that has somehow managed to evade examination in 5 years. The question which is never asked is “why?” Why did so many American citizens die on American soil that day? Why would people want to attack us in such a vicious and grandiose fashion? No answer? That is because the question is never asked. The reason it is never asked is because most Americans are like my father-in-law. When asked yesterday why he thinks people hate us, his response is that he does not care why and does not want to know. Sadly, neither do most Americans.
Certainly the government does not want you to know the answer to that question. That is why it offers up its own canard – “They hate us because we are free.” Yet, a simple examination of other nations which are free demonstrates how thread-bare this explanation is. Canada, Switzerland, Austria, New Zealand – they are all free, and they are all free of “the threat.” We are back to “why?” The 9/11 Commission spent millions of dollars and countless months investigating the cause of 9/11. Despite their publication of volumes of research, there is no answer in their report to the question of “why?” That is because the question was never asked. If the real answer were known, it would lead directly back to Washington like a fuse burns to its point of origin, and the result would be just as explosive.
Of course the easiest source for the answer is to ask the people behind the movement. They are hardly shy, and have on many occasions expressed their motivations for their campaign against this country. Even the Pentagon knows the painful answer to the question of “why?” “Muslims do not hate ‘our freedom,’ but rather, they hate our policies.”
The federal government, using tax dollars coerced from its citizens, has pursued foreign policies which are contrary to Americans’ best interests and have infuriated those who are the object of the polices to the point that they are willing to sacrifice their own lives to strike back at America. The very same government whose twisted foreign adventures brought about 9/11 was also impotent to protect Americans from the disaster it had sown. Why? The answer lies in the very essence of centralized government. Removed geographically and philosophically from the people it is supposed to serve, it remains absorbed in a perpetual quest to gain and hold power. When the bombs start falling here, the politicians will be the first ones out of town in armored limousines en route to fortified bunkers. Do you really need to ask why?Link here.
ESCAPE TO HAWAII
Yes, Hawaii! Not exactly ex-pat, since technically these islands are American – but we found that our new home offers a unique blend of an exotic, multi-cultural lifestyle that still retains the ease and familiarity of American real estate practices, banking, licensing and laws. And in spite of misconceptions, there are still areas here which are affordable, especially in comparison to the west coast of the USA. The largest Hawaiian island is known as The Orchid Isle, or The Volcano Isle or simply the Big Island. It is not only large enough to contain most of the major islands in the chain, it is the most diverse and the least developed. We bought our land a couple of years before we moved, then by selling our San Diego home had enough equity to build the home we had been dreaming of for years. Like many before and after us, we traded that equity to create our dream. We are living the life we imagined.
Some people think Hawaii is not foreign enough, or is too American politically, or worse – that all of Hawaii is spoiled, overpriced, and overcrowded. Others actually find it too different to the mainland, and would not be able to adjust to the lack of freeways and shopping malls, and assumed they would be bored. That is a mindset – we could never be bored because we have so many things we are interested in. We looked at the pros and cons and examined what we wanted from our tropical experience and found Hawaii worked perfectly for us. We do not feel we are lacking anything here we had on the mainland, unless we account for traffic and stress!
Ever since I stepped foot in the lovely, turquoise waters of the Caribbean when I was still in college, I knew I would one day move to a tropical island. For the next couple of decades I traveled to the ends of the earth falling in love with every exotic locale. I lived in Europe a bit and different regions of the USA, but kept dreaming of a tropical life. I was also sure I would meet my soulmate on my travels and perhaps in this way start my ex-pat life. To my own surprise love found me with a true blue American in between travels. But when we did meet we discovered we shared the same dream, so we quickly set a plan in motion to “retire” early at 55 and build a new life in the tropics. We stayed focused and managed to reach our goal two years earlier than we planned. And we had fortunate timing with the real estate market in both states, when we bought and sold.
The only question we had while saving for our big move was to choose a place. A spontaneous trip to Hawaii a few years ago concentrated our minds. We remembered Kauai island as spectacularly beautiful, very tiny, and too expensive to move to, but we were pleasantly surprised to discover the island was more diverse and had affordable property.
We were looking primarily for the lush beauty, the quieter, slower pace of life. We wanted a more healthful, peaceful warm environment with clean air, no traffic to speak of, and low crime. Land had to be affordable enough to buy several acres for privacy, to build our dream house, and to grow all of the tropical fruit and flowers and foliage we loved. We needed to be near the ocean, but not necessarily beachfront. We wanted a simple, real estate process. We wanted to interact in a community rich with another [or several other] culture[s]. We wanted to be able to purchase basic goods and services locally, and we wanted access to some good restaurants, art and music and theatre on occasion. We wanted a place big enough for an art studio and wood workshop, and with quiet for writing. We looked at the possibly higher cost of living in the islands, but concluded that we have enough savvy to make that work regardless of where we are. We see the political climate in the whole world more or less insane, so feel as fine here as anywhere. Our move to the islands provided all of our requirements and more.Link here.
MINIMUM WAGE LAWS MULTIPLY IN U.S. STATES
This year’s election could bring a watershed in the nearly 70-year history of the federal minimum wage. For the first time, a majority of states could require higher pay than the federal rate of $5.15 an hour. This year, legislatures in 10 states have enacted laws mandating a higher minimum than federal law requires, bringing 23 states and the District of Columbia above that threshold. On November 7, voters in six states will decide ballot measures to raise the minimum wage to as much as $6.85 an hour, with automatic adjustments for inflation. Some of the states would allow lower pay for small companies and for workers getting tips.
If the initiatives all pass, it would equal the number of minimum wage ballot measures adopted in the 14-year span ending in 2004, says Jennie Bowser of the National Conference of State Legislatures. “I expect to see most or all of them pass,” she says. “I imagine it’s going to be a pretty popular subject.” The battles over the minimum wage come as government figures show wages are not keeping up with inflation and amid fierce contests to control Congress.
Advocates for raising the wage such as the Economic Policy Institute, a liberal think tank, say inflation has eaten away the last increase by Congress in 1997. Opponents say the pay raise would hurt businesses such as restaurants that depend on lower-wage workers, and be a setback for entry-level employees. “There will be fewer jobs for teenagers and low-income workers who come in to get a skill,” says Jan Rigg, spokeswoman for Respect Colorado’s Constitution, a business coalition opposing the increase.
All six states with minimum wage on the ballot are election battleground states this fall. Montana, Ohio and Missouri have Senate contests rated as tossups by The Cook Political Report. Arizona, Ohio, Colorado and Nevada have competitive governors’ contests. Arizona, Colorado and Ohio have some of the most closely watched House elections in the country. Brookings Institution scholar Matt Fellowes says that the minimum wage measures reflect frustration with Washington and state legislatures that have failed to approve raises. Republicans control Congress and one or both legislative branches in four of the six states with ballot measures this fall. In July, the House approved a GOP-led effort to tie a $2.10 increase in the minimum wage to a permanent reduction in the estate tax and other tax breaks. Senate Democrats blocked the measure.Link here.
HEDGE FUND CASH FLOODS U.S. POLITICS
Top hedge fund managers are pouring money into U.S. political campaigns ahead of November’s congressional elections as the government considers what to do about the lightly-policed hedge fund industry. Campaign finance records show 20 of the most successful U.S. hedge fund managers have pumped more than $3.1 million into campaigns so far in 2005-2006, up from about $1.1 million by the same group in the last mid-term election cycle. By far the biggest donor among them is George Soros, of Soros Fund Management, who has donated more than $2.3 million in this cycle to Democratic candidates or groups, up from $112,500, according to PoliticalMoneyLine, a campaign finance research group.
Like Soros, hedge fund managers tend to favor Democrats over Republicans. They also give mostly to candidates and causes that interest them personally, rather than targeting key lawmakers with influence over regulating the industry. There are signs that is beginning to change, however, as the relatively new, $1.2-trillion industry matures. “It seems now the giving is becoming more business motivated,” said John Gaine, president of the Managed Funds Association (MFA), an industry lobbying group in Washington.
MFA targets lawmakers of both parties with key committee roles, such as House of Representatives Capital Markets Subcommittee Chairman Richard Baker. The Louisiana Republican has gotten $10,000 from MFA’s PAC in this mid-term cycle. Hedge fund giving is still not as strategically targeted as donations made by bankers, insurers and other, older financial interests, which are generally more pro-Republican. Financial services firms, as a whole, have donated $38 million in this election cycle, almost two-thirds to Republicans, according to PoliticalMoneyLine. No other business segment pumps more cash into the Washington access-and-influence bazaar than financial firms.
Hedge fund managers are just starting to emerge as players on this scene due to their rapid growth – assets under management have doubled in the past five years – and thanks to a recent, rude awakening about Washington’s impact. Amid concerns about the growth and risk of hedge funds, the SEC in 2004 adopted a rule forcing many hedge fund advisers to register with the investor protection agency and submit to occasional inspections. Famously secretive and free-wheeling, much of the industry resisted registration, although some funds advisers did not. One hedge fund manager sued over the matter and won. A federal appeals court in June invalidated the SEC rule. Now the SEC is working on a scaled-back plan for hedge fund oversight, while its examiners dig deeply into hedge fund matters. There is bipartisan movement in the House Financial Services Committee to draw up oversight legislation, which could gather momentum if Democrats make the House gains some predict. James Chanos, president of hedge fund Kynikos Associates, was alarmed by the registration struggle. His firm registered early, but the controversy spurred him to set up a group called the Coalition of Private Investment Companies to urge hedge fund managers to be more politically active.Link here.
DUBAI AEROSPACE ARM MAKES €1 BILLION BID FOR SWISS FIRM
Dubai Aerospace Enterprise (DAE), a consortium of three UAE investors with a strategic investment interest in the aerospace industry is to acquire Zurich-based SR Technics, a leading independent provider of technical services in the aircraft industry in a €1 billion deal. The consortium will hold a majority stake of more than 90% of SR Technics. The Share Purchase Agreement was signed in Zurich last week.
SR Technics, formerly a subsidiary of the former Swiss national airline Swissair until its demise in 2001, had been owned by private-equity investors 3i and Star Capital, SR Technics’ management and other institutional investors since 2002. The deal represents the most significant acquisition involving DAE since it was launched by the government of Dubai in February with the intention of investing $15 billion in aerospace manufacturing and aviation services, in a bid to transform the Gulf state into a leading player in the sector within 10 years.
According to the Dubai International Financial Center, airline passenger traffic in the Middle East and Asia (especially China) is expected to grow as much as 9% a year for the next 10 years, reaching 1.7 billion passengers by 2015. Annual air freight growth is also expected to exceed 6% a year. India and China alone plan more than 145 airport projects in the decade – including greenfield builds, expansions and upgrades. Dubai expects that, within a decade, the industry will have emerged as one of its richest sources of revenue. Some 30,000 new jobs will be created through DAE activities and 8,000 students a year will pass through a new university.Link here.
NETHERLAND ANTILLES KEEN TO BOOST TRADE WITH CARIBBEAN NEIGHBORS
The Netherland Antilles has decided to continue opening up to its Caribbean neighbors with the announcement that it intends to begin negotiations with Barbados towards a tax and customs treaty. According to a report by CBC, Vanessa Tore, Business Information Officer with the Curacao Chamber of Commerce and Industry, has said that Barbados is among nine priority countries being targetted in the Caribbean as part of the jurisdiction’s strategy of increasing regional trade links. Rosario commented during a trip to Barbados that, “After years of behaving somewhat as indifferent onlookers, the Netherlands Antilles is pursuing a policy of being a committed neighbor.”
The Netherlands Antilles have tended to move away from double tax treaty arrangements during recent years. At one time the country had treaties with a number of prominent countries, including the U.S. and the UK. Most of these treaties have lapsed, and the only remaining double tax treaty as such is with Norway and the the “BRK” tax agreement with the Netherlands. A “mini-Treaty”, the product of failed tax treaty negotiations with Washington in 1987, continues to give exemption from U.S. withholding taxes to Eurobonds issued before 1984.
The Netherland Antilles is also keen on increasing its links to the Caribbean Community (Caricom), which is in the process of establishing a single Caribbean market, after formally requesting to become an associate member of the group earlier this year.Link here.
CAYMAN ISLANDS REMAINS KEY HEDGE FUND JURISDICTION
The Cayman Islands Monetary Authority has announced that the number of hedge funds registered in the jurisdiction has passed the 8,000 mark. The figure represents an increase of more than 2,000 hedge funds registered in the Cayman Islands since the start of 2005. More than 1,000 new hedge funds were authorized in the first half of 2006 alone – a record for any 6-month reporting period in the jurisdiction.
Hedge funds are attracted to the Cayman Islands by its low taxes, a sophisticated financial infrastructure that includes major banks and accounting firms, and the ability to achieve measurable savings which, in turn, are passed along to investors. About 80% of the world’s hedge funds are thought to be registered in the Caymans. According to Walkers, the international offshore law firm, the global surge in hedge funds is the result of a range of factors, including non-traditional applications of hedge funds and increased interest in emerging markets. “Despite an increased focus on regulations by governing bodies such as the Securities and Exchange Commission (SEC) in the US and the Financial Services Authority (FSA) in the UK, the hedge fund market continues to thrive,” Mark Lewis, a Senior Investment Funds Partner for Walkers.
According to Hedge Fund Research, Inc., the hedge fund industry attracted $42.1 billion in new money in the Q2 2006 alone, bringing total industry assets under management to $1.225 trillion. This influx is the biggest quarterly jump in new funds since HFR started tracking in 2003. In addition to the increase in global strategies being employed, Walkers says that the demographic of the investors who are attracted to the hedge funds is also becoming more global, with investment managers and financial institutions less dependent on investors from the U.S. and EU countries.Link here.
HONG KONG TO PROVIDE GLOBAL SPRINGBOARD FOR CHINESE FIRMS
The Hong Kong government is strongly committed to helping more mainland Chinese companies expand internationally, its investment chief has stated. Addressing 200 mainland executives and officials during the 10th China International Fair for Investment and Trade in the southern Chinese city of Xiamen, Mike Rowse, Director-General of InvestHK, announced that supporting Chinese firms with international ambitions would be a “top priority’ for the government’s investment promotion agency.
“Private companies in the mainland are maturing quickly, and many are capable of going global,” he noted. “They can test and fine-tune their products in our full-blown market economy, and use it as a springboard to move further afield.” InvestHK helped 21 mainland companies establish or expand operations in the SAR in the first six months, and expects 2006 to top the record of 38 achieved in 2005. The agency offers a wide range of free services. These include advice on Hong Kong’s regulatory and business environments, sector-specific consultations and detailed guidance on incorporation. It also facilitates contacts with other government departments in the SAR, and provides introductions to prospective business partners.
Hong Kong is Asia’s largest recipient of foreign direct investment after the mainland. FDI inflows reached $35.9 billion last year, up from $34.0 billion in 2004 and $13.6 billion in 2003. For the January-March 2006 period, inflows amounted to $13.16 billion. Some 350 mainland firms have listed on the Hong Kong Stock Exchange since 1993, raising $160 billion in equity. The intensification of Hong Kong’s campaign to attract mainland firms includes the recent expansion of InvestHK promotion offices in Beijing and Guangdong, and the opening later this year of new facilities in Shanghai and Chengdu.Link here.
RUSSIAN CENTRAL BANKER ASSASSINATED IN MOSCOW
Russian central banker Andrei Kozlov was assassinated in Moscow, victim of a shooting that the prosecutor general linked to his job regulating the nation’s banks. Kozlov, a 41-year-old deputy chairman of the central bank, was shot in the head and neck by two gunmen outside a sports stadium last night, said a spokeswoman at the Moscow prosecutor’s office. He died in hospital this morning. The killing may have been connected to Kozlov’s work, the prosecutor general’s office said in a statement posted on its Web site.
Kozlov, who led the central bank’s fight against corruption in Russia’s banking industry, was instrumental in pushing measures to regulate a financial system that almost collapsed after the government defaulted on $40 billion of debt in 1998. The changes included introducing a deposit insurance law, tightening supervision and increasing anti-money laundering legislation. “There are people in Russia who do not want the transparent, law-abiding and rational system he was creating,” said Richard Hainsworth, chief executive officer of RusRating, an independent bank rating company in Moscow. “His reforms have pushed up the price of black money, of giving bribes.”Link here.
IRS ISSUES NEW PROPOSED RULES FOR RECOGNIZING CURRENCY LOSSES FOR TAX PURPOSES
The U.S. Treasury Department and IRS issued new proposed regulations under section 987 that withdraw and replace proposed regulations that were issued in 1991 but were not finalized. The new proposed regulations generally provide rules for determining items of income or loss of a taxpayer with respect to a “qualified business unit” as well as rules regarding the timing, amount, character, and source of currency gain or loss taken into account upon a remittance from such a unit.
IRS experience with the 1991 proposed regulations has shown that some taxpayers sought to exploit conceptual flaws in those regulations to claim substantial noneconomic losses, largely at the taxpayer’s discretion. The new proposed regulations employ a revised paradigm that is designed to minimize or eliminate such noneconomic results by taking into account currency gain and loss only with respect to items whose value actually changes with fluctuations in exchange rates.Link here.
Oil companies may avoid U.S. federal royalty payments.
Oil companies are under pressure to resolve flawed drilling leases that allow them to avoid federal royalty payments, including on oil from a major discovery in the Gulf of Mexico. The issue stems from a mistake eight years ago that omitted a provision in more than a thousand drilling leases that would have required royalty payments but only if the price of oil went above $36 a barrel. At the time oil was much cheaper and Congress had allowed the royalty break to spur deep-water exploration. With oil now costing almost double the trigger level, most of those leases would be subject to royalty payments had the provision not been omitted in leases issued in 1998-99.Link here.
GLAXOSMITHKLINE SETTLES MULTI-BILLION DOLLAR TRANSFER PRICING TAX DISPUTE WITH IRS
Pharmaceutical giant GlaxoSmithKline announced that it has settled its transfer pricing tax dispute with the IRS in order to to spare shareholders from a potentially lengthy and costly legal process. Under the agreement, the final net cash cost to GSK, Europe’s largest drug manufacturer, will be approximately $3.1 billion which covers federal, state and local taxes, interest and also the benefit of tax relief on the payments made. According to the company, this settlement resolves all the issues which were in dispute in this case.
The settlement covers the dispute for the period 1989-2000, which was due to go to trial in February 2007, and also covers the subsequent years 2001-2005. GSK held a $4.3 billion accounting reserve to cover against potential tax liabilities. Although the firm said that it was confident of its position in the case, it concluded that it was in the best interests of its shareholders to reach the settlement in view of the size of the potential financial exposure, as well as the continued level of resources being applied to the case, and the uncertainty caused by potential future litigation.Link here.
FORMER TYCO TAX CHIEF ACCUSED OF TAX EVASION
A former vice president of Tyco International has surrendered to authorities and will face charges that he falsified the company’s 1999 tax return. Raymond Scott Stevenson, former vice president in charge of taxation for the company, is charged with intentionally failing to report more than $170 million in income on Tyco’s 1999 corporate tax return. According to the U.S. Department of Justice, as the head of tax at Tyco, Stevenson directed a series of transactions designed to reduce Tyco’s state tax liability. In doing so, an approximate $170 million federal capital gain was incurred by Tyco.
Stevenson entered a plea of not guilty before U.S. Magistrate Judge Linnea R. Johnson in Fort Pierce, Florida. The violation carries a maximum sentence of three years in prison and a $250,000 fine. Last year, Tyco’s CEO L. Dennis Kozlowski and former CFO, Mark Swartz, were sentenced to maximum prison terms of 25 years for their theft of unauthorized loans and bonuses from the company. The two were found guilty in 2005 on 22 of 23 counts, including grand larceny, conspiracy, securities fraud and falsifying business records, and were said to have received more than $150 million in unauthorized loans and bonuses from Bermuda-based Tyco.Link here.
“TRIFECTA” BILL DELAY COULD LEAD TO TAX COMPLIANCE CHAOS IN THE U.S.
Senate Finance Committee Chairman Chuck Grassley is calling for swift passage of a series of expired tax cuts, warning that taxpayers face confusion and compliance problems if the legislation is not passed soon. The provisions in question expired at the end of 2005 and include the state and local sales tax deduction, and deductions for college fees and teachers. According to Grassley, they effect 8.6 million taxpayers.
The tax cut extensions, which were left out of a tax cut bill passed by Congress in May, have been included in the so-called “trifecta” bill along with estate tax cuts and a minimum wage increase. While the measures on their own have broad bipartisan support, Democrats have dug their heels in over the inclusion of estate tax cuts in the bill, and three Republican dissenters meant that the bill failed to gain the 60 Senate votes necessary for its approval. Senate Majority Leader Bill Frist, a supporter of the bill, is to reschedule a vote, but a date has yet to be finalized.Link here.
TELUS TO CREATE CANADA’S LARGEST INCOME TRUST IN TAX SAVING MOVE
Telus Corporation, Canada’s second-largest telecommunications company, is seeking to prolong long-standing corporate tax breaks with a proposal to reorganize the company in its entirety into an income trust, a move that will save investors substantial amounts in tax. The company announced that the conversion will be accomplished by way of a plan of arrangement under the Business Corporations Act (British Columbia). This will be subject to the approval of at least two-thirds of the votes cast by the shareholders of Telus at a special meeting expected to be held in January 2007. The move must also be approved by regulators.
Darren Entwistle, Telus President and CEO, explained that surplus cash generated from the firm’s assets would in future be returned to shareholders “in the most tax efficient way possible.” Common in the real estate sector, income trusts pay little or nothing in the way of corporate tax provided they pass most of their income onto shareholders, who then pay tax at their own rate. The conversion to an income trust would also ensure that Telus would continue to operate free from corporate tax after a 6-year period in which the firm has benefited from tax breaks linked to its acquisition of wireless carrier Clearnet Communications.
Analysts have said that the conversion represents a good move for investors as more cash will be returned to them in the form of dividends. On the other hand, some caution that the large sums of money that the company plans on spending on upgrading its networks may reduce surplus cash available to investors. However, according to Entwistle, the payout level set by the company will enable it to reinvest in its core operations while maintaining a flow of returns to investors. With a market capitalization of US$16 billion, the conversion will create Canada’s largest income trust company when complete.Link here.
LEADING INSURER LEAVES LONDON FOR LOW-TAX BERMUDA
Robert Hiscox, chairman of London-listed reinsurer Hiscox Plc, has announced that the company is transplanting the majority of its operations to Bermuda in order to take advantage of the jurisdiction’s low taxation and light regulatory touch. According to Mr. Hiscox, the UK government’s over-zealous attitude towards taxation and regulation, in addition to increasing interference in the market by the EU, is forcing increasing numbers of London insurers to consider jumping ship and setting up offshore. “They’re throwing regulation at us the whole time and then you’ve got Brussels putting its oar in on top of that,” Hiscox commented.
Although London is the traditional hub of the global insurance market, its 30% corporate tax rate looks increasingly unattractive when compared to Bermuda’s 0% rate. Moreover, Hiscox pointed out in an interview that the ease of doing business in Bermuda meant that substantially more money was raised there than in London following last year’s active Atlantic hurricane season. “Investors like [Bermuda’s] combination of swift bureaucracy and low tax,” he observed. The UK is coming under increasing pressure to reexamine its tax and regulatory structure for the insurance industry after the chairman of Lloyds of London called upon the government to make London more competitive, in a speech in the city last week. Bermuda is now the third largest center for insurance after London and New York.Link here.
AZORES TAX CASE COULD HAVE IMPLICATIONS FOR GIBRALTAR
In a ruling which could have repercussions for Gibraltar, the European Court of Justice said that the tax regime in the Azores Island is illegal. In 1999 and 2000 the island, which is Portugese, set up lower corporate tax rates than the rest of Portugal. In 2002 the European Commission branded them illegal state aid and ordered their phasing out, a decision that Portugal appealed.
It will be recalled that Gibraltar’s new corporate tax structure, was rejected by the European Commission on the grounds of both material and regional selectivity. The former means the actual contents of the measure itself and the latter posed the question as to whether Gibraltar could have a different business tax regime from the Member State UK in the first place. The UK was supporting Portugal in this case, no doubt fearing that the wrong decision could open a constitutional pandora’s box in Gibraltar’s case. In a relevant section the ruling says that the Azores Islands do not have enough political and economic autonomy from Portugal to set tax rates that are different from those applied in the rest of the country.
It is well known that Gibraltar is not part of the UK, nor is it a region of the UK but is an independent jurisdiction with our own powers to set, raise and spend taxes. While the outcome of the case against the Commission over Gibraltar’s planned new tax structure is awaited, it is known that the Government continues to have new rounds of consultations with the Finance Center industry on the issue of low-tax versus no-tax.Link here.
Gibraltar welcomes ECJ ruling in Azores tax case.
The government of Gibraltar has welcomed a judgment by the ECJ which backed the EC’s decision against tax cuts in the Azores, a Portuguese dependency. According to Gibraltar, the ECJ’s decision “fully vindicates” its own arguments before the Court as to why it is entitled to have a separate and different tax regime to that of the UK. “The judgment confirms that the principles to be applied in deciding this issue, are the very principles upon which the Gibraltar Government’s case is based and pleaded,” a government statement argued. Gibraltar has been attempting to overhaul its company taxation system by introducing a new regime which will replace the mainstream 35% corporate tax and tax-exempt company forms with a payroll tax and a business property occupation tax, both of which will be capped at 15% of profit. However, this plan has been blocked by the EU’s decision that the jurisdiction effectively constitutes part of the UK, and therefore such a tax regime would breach EU state aid rules.Link here.
EC WANTS TO BOOST BOOZE TAXES
The European Commission announced that it has adopted a proposal to increase the minimum rates of excise duty on alcohol and alcoholic beverages agreed in 1992, starting 1 January 2008. Assessing that the need to avoid the EU system of minimum rates had become meaningless, the EC proposed to increase the minimum rates taking into account the inflation since 1992. The majority of Member States will be unaffected by this proposal as their national rates already exceed the proposed new minimum rates. However, for those Member States that will encounter difficulties in increasing their national rates immediately, transition periods, up to 2010, were proposed.Link here.
EU CONFIRMS CADBURY-SCHWEPPES CONTROLLED FOREIGN COMPANIES TAX RULING
In the closely-watched Cadbury-Schweppes case, the European Court of Justice backed its Advocate-General’s May ruling that UK legislation on CFCs can apply only to wholly artificial tax minimization schemes. “In order to determine whether a CFC is carrying on a genuine activity, the national authorities should take account of objective factors which are ascertainable by third parties, and not only subjective considerations,” said the ECJ.
After the Advocate-General gave his ruling in May, Chris Morgan, Head of the EU Law Group at KPMG noted that the opinion could represent “a rare win-win situation for both revenue authorities and taxpayers. … [Leger’s] Opinion is hugely significant for the way business operates in the EU. Assuming that the ECJ follows this Opinion, companies will be able to enjoy far more freedom in establishing commercial operations in low tax jurisdictions. Whilst the Advocate General made clear that setting the tax rate is a decision to be taken by the individual Member States, there is likely to be increased downward pressure on rates as a result of this pronouncement.”
A survey conducted on behalf of KPMG earlier in 2006 had found that CFC rules were “hugely unpopular” with firms operating in the UK, with two-thirds of respondents saying that UK tax rules had hindered cross-border investment for their groups. The CFC regime was the most commonly cited problem, because it was deemed unfair and complex, and made normal business transactions difficult. Under UK tax legislation, the profits of a foreign company in which a UK resident company owns a holding of more than 50% (a CFC) are attributed to the resident company and subjected to tax in the UK, where the corporation tax in the foreign country is less than 75% of the rate applicable in the UK. The resident company receives a tax credit for the tax paid by the CFC. That system is designed to make the resident company pay the difference between the tax paid in the foreign country and the tax which would have been paid if the company had been resident in the UK.
There are a number of exceptions to the application of the legislation, including where the CFC distributes 90% of its profits to the resident company or where the “motive test” is satisfied. In order to obtain the latter exception, a company must show that neither the main purpose of the transactions which gave rise to the profits of the CFC nor the main reason for the CFC’s existence was to achieve a reduction in UK tax by means of the diversion of profits.Link here.
EU ruling may cost high-tax jurisdictions millions.
An EU court ruling on corporate tax may cost hundreds of millions in revenue for high-tax member nations but could be a boon for low-tax ones. The ruling by the European Court of Justice in Luxembourg said EU finance ministers cannot go after profits earned by subsidiaries in other EU countries, if the businesses were not artificially set up to avoid paying taxes. The company must show it had real operations in the low-tax country, like physical offices, employees and equipment.
The ruling could adversely affect EU members like Germany, France, Britain, and Italy, but also was seen as being attractive for promoting cross-border business expansion. An expert on global taxation said the ruling may encourage more companies to place parts of their businesses offshore, but employee resistance to moving would prevent a mass exodus. Others said countries like Britain could be faced with a significant outflow of tax revenue because of low requirements for a company to show the existence of a legal tax shelter, the report said.Link here.
CHINA BEGINS TO LEVEL TAX PLAYING FIELD FOR LOCAL FIRMS
The Chinese government has taken a serious step towards unifying its local and foreign corporate tax system by doubling the tax threshold for domestic firms. As a result of the change, domestic companies can deduct from their taxable income 1,600 yuan ($200) per employee per month, up from 800 yuan. The move follows new data showing that the average monthly income of urban residents in China had almost doubled since 1999 to about 1,530 yuan.
While it is expected that the move will lead to a $1.5 billion cut in tax revenues for the Chinese government, the official stated that this loss would be “bearable”. In a bid to attract foreign investment, foreign-funded firms are able to whittle their corporate tax rate down to about 15% by using preferential provisions contained in the Corporate Income Tax Law. By contrast, domestic firms are required to pay corporate tax at a rate of 33% under the Provisional Ordinance on Corporate Income for Local firms.
Beijing has intended for some time now that a level playing field should be introduced so that all firms pay the same rate of corporate tax (likely to be about 25%), but legislation has stalled in the National People’s Congress, as pressure from foreign corporations to retain the current system has grown. Recent figures have also shown a 1.16% fall in foreign direct investment into China in the first six months of the year, compared to the previous year, to $32.7 billion.Link here.
INDIA TO GET SIMPLER INCOME TAX ACT BY 2008
Indian Finance Minister Palaniappan Chidambaram announced last week that a simplified Income Tax Act replacing the current statute could be in place by 2008. The announcement follows the submission of a report by a government-appointed panel of tax officials. Suggested changes include the removal of redundant tax provisions and the simplification of the language used in the statute so that it can be more clearly understood by taxpayers. The report also recommends the consolidation of all existing direct taxes such as income tax, wealth tax and fringe benefit tax into one code, to be known as the “Direct Taxes Code Bill 2006”.Link here.
NEW ZEALAND TAX SYSTEM ENCOURAGES AVOIDANCE
The New Zealand tax system has become complicated and unfair, with tax evasion and avoidance widespread. In a paper to be released on September 14, 2006, “How to Fix a Leaky Tax System” (PDF file), Phil Rennie examines how the integrity of New Zealand’s tax system has been corroded by the introduction of a 39% tax rate for income over $60,000. Large numbers of people are using loopholes to avoid the top rate of personal tax by using trusts, splitting or under-reporting their income, and using the lower corporate rate. This is an inevitable outcome of having too many different income brackets in a tax system.
Rennie argues against the Business Tax Review’s proposal for targeted tax concessions, saying this would only make things worse. Taxes are a necessity for a modern, civilized society. But the cost of raising tax in New Zealand is far higher than it has to be. Up until the 1990s, New Zealand had one of the least distortionary tax systems in the world. But since 2000 changes to the tax system have encouraged the flourishing of tax avoidance and evasion.Link here.
Accountants welcome rethink of New Zealand unrealized offshore capital gains tax.
The New Zealand Institute of Chartered Accountants has welcomed news that Finance Minister Michael Cullen may be backing away from a proposal in a current tax bill on overseas taxation rules. Under the proposed changes to New Zealand’s international tax regime, 85% of unrealized capital gains on investments outside New Zealand and Australia would be taxed. However, a parliamentary committee has urged the government to explore an alternative plan which would tax either the dividends received or – as a proxy for dividends – 3% of the average market value, being the average of the value at the start and end of the year.
NZICA Tax Director Craig Macalister said, “In our view the proposal in the bill had the potential to over-tax foreign-sourced income, and was very complex.” However, he added that the Institute still has reservations on the risk-free rate of return method now under consideration. “Conceptually the change is straightforward, but the changes may not address the concerns of complexity. The risk-free rate of return rules can become complex very quickly. Potentially they could end up looking like a cross between a space shuttle wiring diagram and something out of a Dr Seuss book. On balance, we would prefer the status quo to remain.”/
Mr. Macalister said that a risk-free rate of return approach will still impose a tax liability in years when investments are making losses. This was largely the reason why these proposals were not well favored when originally floated, he suggested.Link here.
TYCOON PLEADS GUILTY TO OFFSHORE TAX EVASION CHARGES
A U.S. telecoms industry entrepreneur has pleaded guilty in U.S. District Court for the District of Columbia in what is believed to be America’s largest ever case of personal tax evasion. Walter Anderson, who formed Mid-Atlantic Telecom when the industry was being deregulated in the 1980s, is accused of two counts of tax evasion and one count of failing to report $365 million in personal income in 1998 and 1999.
Anderson was arrested in February 2005 at Washington Dulles airport while stepping off of a plane from London after an investigation unraveled a complex set of offshore entities, bank accounts, and transactions designed to conceal income earned from his interest in companies he owned. According to the Department of Justice, in October 1992, Anderson allegedly formed an offshore corporation named Gold & Appel Transfer in the British Virgin Islands (BVI) and hired a trust company to serve as Gold & Appel’s registered agent and sole director. Gold & Appel was said to be owned by another BVI company, Icomnet, previously formed by Anderson.
Prosecutors believe that Anderson granted himself an exclusive option to purchase Gold & Appel shares for a nominal sum, insuring that no one else could own these remaining shares. By forming the corporations in that manner, neither the option nor Anderson’s name was recorded in the BVI’s public records. As a result, the indictment alleged that Anderson hid his ownership of the corporations that held these assets, but was still able to maintain complete control. After other merger activity with telecommunications companies he owned, Anderson further obscured his ownership of Gold & Appel, by using an alias and forming another offshore corporation – Iceberg Transport, S.A. – in Panama. To disguise his ownership of this company, the DoJ said that Iceberg was created as a “bearer share” company, meaning that, unlike U.S. corporations, there was no central registry information on the company. Therefore, whoever had physical control over the actual share certificates was considered the owner.
Anderson allegedly received the shares, using his alias, in a mailbox drop in Amsterdam. Once he set up Iceberg, Anderson was then said to have directed the transfer of shares of Gold & Appel to Iceberg, and represented that Iceberg owned Gold & Appel. Anderson then hired a trust company and its employees to serve as registered agent for the company and as officers and directors of Iceberg, ensuring that he had complete control over it.
Prosecutors allege that between October 1992 and July 1996, Anderson transferred his ownership interests in three telecommunications companies to Gold & Appel and Iceberg. In this way, when appreciated stock was sold – or other taxable events occurred – Gold & Appel and Iceberg would appear to be the taxpayer, as opposed to Anderson. Between 1995 and 1999, Anderson used the assets of Gold & Appel and Iceberg, which included the profits realized from these three telecommunication corporations, to invest in other business ventures. This generated more than $450 million in earnings for Gold & Appel and Iceberg during this period.
Anderson is also charged with evading taxes in D.C. and has claimed residency in the state of Florida, which does not levy income tax. Anderson initially faced an 80-year prison term, but will serve up to 10 years under the terms of his plea agreement. He must also pay restitution to both the federal government and D.C. Among the taxes allegedly owed to Washington are use taxes – equivalent to sales taxes – on art, jewelry and wine. The indictment alleges Anderson bought a paintings by Salvador Dali and Rene Magritte, an 18-karat gold bracelet, and more than $47,000 in fine wines, then had them shipped to a Virginia address to avoid Washington taxes.
Court documents say Anderson could be linked to at least seven aliases. Officials seized from his apartment forged identification and manuals detailing ways to create fake identification and hide from authorities, ammong them Poof! How to Disappear and Create a New Identity and The ID Forger: Homemade Birth Certificates and Other Documents Explained.Links here and here.
PURSUING THE ELUSIVE EURO
I am going to tell you how I entered the underworld, and became a money launderer, and international drug wallah, and remorseless criminal, just like Carlo Gambino or Bin Laden or Condoleezza Rice. Yes. I am now of one blood with Pablo Escobar. It is a service of the Anglo-Irish Bank. I imagine that my picture can be seen on wanted posters in European post offices.
How did I come to this frightful pass? I decided a while back to get such money as I have out of dollars. Where to put my minute shriveled pittance, all that is left to me of a misspent life? Europe appealed, redolent as it is of stability, solemnity, and stuffy reliability. A couple of years before a shill from the Anglo-Irish Bank of Dublin had come through my Mexican town, which is full of expatriate money. Ireland, I thought. Just the thing.
I duly, and foolishly, sent the bank a deposit, along with copies of my passport, Mexican residency papers, driver’s license, dog’s paw prints, grandmother’s DNA, and all the other dry foliage of my life that the bank required. This was enough, I thought, to identify several people. But no. The bank was darkly suspicious. It suspected me of Laundering Money. (I wish it suspected me of having money.) The multitudinous requirements sprang, I presumed, from international law intended to discourage honest people from putting money in banks. Crooks have ways around these requirements, and also have more money.
Now, any bank’s protestations that it wants to avoid the laundering of money constitute pious fraud. Criminal enterprise reaps immense sums, being unhampered by governmental regulation. Do you think any bank whatever does not get weak-kneed at the thought of billions in poppy lucre? The drug trade is a valued part of the world’s economy. But all right. I sent this stuff off to Dublin, FedEx and $45. I emphasized, please communicate with me by email, as the Mexican mails are casual about things like arrival. Please, email. Many weeks later, my check to AIB having cleared, I assumed that I had a properly constituted account. Then Violeta discovered a sodden envelope in a muddy spot in the road near our house. This missive turned out to be from AIB. Perhaps the bank had an eccentric conception of email. In it I discovered that the bank, in the person of a Mr. David Milne, was not happy with the documentation from my bank here, Lloyd.
Since this column is read by expatriates around the world, suggesting that they have too much time on their hands, I explained to the Mr. Milne that I was a journalist, and asked what would have happened had I not found his email in the mud hole in front of my house. Would my money have been confiscated by some august governmental body given to thievery? What was AIB’s objection to Mexican banks? Did his majesty know something I did not? He declined to answer. The rub was that he wanted some document from my Mexican bank imprinted with the bank’s stamp. But Lloyd’s does not have a stamp. It is not how things are done here. Anyway, my patient account manager at Lloyd’s, composed a letter testifying that I existed and so on, had it translated into English, and sent it to the his Excellency. $45 more for FedEx, which began setting up a branch office to handle my correspondence.
This did not work either. Nothing does. I have sent document after document. I wondered why the good baron did not simply email Lloyd’s, which would remove all doubt about whatever it was that he doubted. With this much trouble getting money into the bank, I assumed that there could be no earthly hope of getting it out. In fact AIB seemed to regard depositors with resentment, as annoyances having nothing to do with its line of work. On and on it went, and goes. I do not know whether I will live long enough to see my funds, orphaned and sorrowing in some cold account. They probably will not even recognize me.Link here.
JERSEY’S PROTECTED CELL COMPANY LEGAL STRUCTURE ATTRACTS HEDGE FUNDS
In recent years, Jersey has taken a number of significant steps specifically to attract hedge funds business, and the result has been highly encouraging. As a result of the joined-up policies developed and implemented by the regulator and the political authorities in the island following close consultation with industry, Jersey now has a flexible regime that is attractive to all aspects of the hedge funds industry. Over the past 18 months, the States of Jersey has on a number of occasions described hedge fund management as being the type of “high value, low footprint” business that the island most values. Jersey has a stable political environment and low rates of personal taxation. In addition, its great natural beauty and close links to London make it an attractive place to live. Civil servants have been appointed expressly to assist hedge fund managers wishing to relocate to the island and already, a small but significant number of hedge fund managers – from individuals to entire businesses – have become resident in Jersey. A virtuous circle has been created, and a real hedge fund community has come into existence in the island.
Legislative developments have also provided new opportunities, such as an enhanced version of the Protected Cell Company and the innovation of Incorporated Cell Companies. This provides for the robust ring-fencing of assets in a particular cell while allowing the fund manager a degree of control over the cell that would be hard to achieve were the cell to be replaced by a stand-alone company. As with the Expert Funds regime, positive sentiment at launch is now being followed by increasing demand for the product. There are currently discussions taking place in relation to the creation of a new “Super Expert Fund” regime, and a number of legislative changes directly encouraging the funds industry are expected in the next six to 12 months.Link here.
LEAVE YOUR IRA TO CHARITY
U.S. Congress designed Individual Retirement Accounts for, well, retirement. But a new rule opens up their use for charity donations, too. A provision in the recently passed Pension Protection Act allows certain IRA investors to donate retirement money to favorite non-profit groups without triggering any tax consequences. Specifically, donors who transfer the money directly to a charity will avoid the income-tax bite that normally would apply on withdrawals from traditional IRAs. But, on the flipside, they cannot take this tax break and reap a charity-donation deduction, too.
Charities could see this as a potential new source of fund-raising, but in truth the law imposes several restrictions that will limit the donor pool. Key eligibility limitations for the tax break are as follows:
Some observers think the IRA-rollover rule eventually will be made permanent. The various restrictions, coupled with the fact that most Americans do not have surplus retirement funds anyway, will limit the impact of the new legislation. IRA-owning households held a median total of just $25,000 in their accounts, according to a 2005 study by the Investment Company Institute. The inability to take a charity-donation deduction also hurts, though some investors still could come out ahead because tax-free withdrawals often are worth more than donation deductions. Also, the majority of taxpayers who do not itemize also will be able to take advantage of the rule.Link here.
THE HP PHONE RECORDS THEFT SCANDAL IS A WAKE-UP CALL ON A TOLERATED CRIME
Four years ago this month, my own phone records were stolen, and in exactly the same way that the phone records of various HP board members were stolen earlier this year. Private investigators used the Internet and fake e-mail addresses to jive AT&T into handing them over. These days, the practice is known as “pretexting” – a nice, sanitizing word that masks the criminal scheming behind it. Whatever word one uses to describe it, the skullduggery still amounts to stealing. And with the war on terror increasingly benumbing Americans to the relentless erosion of their civil liberties, the organized theft of telephone records has become one of the fastest growing and least prosecuted crimes in cyberspace.
Now, the spreading furor over HP’s apparent involvement in pretexting offers a wake-up call for everyone as to just how widespread – and tolerated – the practice has become. Documents obtained by investigators for a congressional committee probing the pretexting industry this summer show that many of America’s largest corporations routinely use private investigators to obtain the phone records of individuals they are trying to gather information on.
The documents show that the private eyes typically rely on companies known as data brokers to perform the dirty work of stealing the phone records for their corporate clients. Often, the corporations simply cut the private eye middlemen out of the action entirely and deal directly with the data brokers themselves. Committee documents show that in 2005, Wachovia Bank spent more than $456,000 for purloined phone records from Global Information Group, a Florida data broker that was recently shut down by state officials. Global’s clients included Wells Fargo, Chase, Citicorp, HSBC, Ford Motor, and Enterprise Rent-a-Car. Global’s corporate customers collectively spent more than $2 million last year for pretexting services from Global alone, paying $45 to obtain a month’s worth of anybody’s land-line phone records and $55 if the calls were made using a cell phone.
To obtain the phone records, the data brokers typically bring in yet another level of even seedier subcontractors. This group’s mission is to engage in whatever ruse or impersonation will convince the phone company to hand over a customer’s phone records. Documents subpoenaed in the congressional probe include scripts of suggested lies the subcontractors can try, as well as e-mail between the data brokers and their contractors regarding how to proceed when a particular come-on fails to work. Typical advice? Try again.
Amazingly, none of this outrageous behavior is sanctioned under federal criminal law, leaving it to prosecutors to decide for themselves whether to file cases charging offenses under more general statutes such as criminal conspiracy and wire fraud, for which the standards of proof are challenging. To date, no federal cases have been brought anywhere on pretexting, and only a smattering have been pursued in state courts. One reason may be the embarrassment that could result. The U.S. Drug Enforcement Agency, the U.S. Marshals Service and the Department of Homeland Security routinely turn to data brokers to speed up the process of getting phone records illegally when obtaining court authorization first would take too much time.
My own case is one of the many that have thus suffered, ignored by all concerned even though documents on file at both the Department of Justice and the S.E.C. show plainly that the theft occurred and that the man behind it was a stock market swindler and con man. The case file showed how my records had been stolen by someone who phoned AT&T’s customer service center over 50 times, each time claiming to be me and asking for a copy of my phone records for the late summer and early autumn of 2002. Finally, the impersonator hit pay dirt, winding up on the phone with a service rep of an AT&T subcontractor named Aegis Communications Corp. who swallowed the imposter’s bait and read out the details of more than 60 phone calls, line by line, in a conversation that took more than a hour. Later, AT&T claimed it had been unable to trace the call.Link here.
HP’s Dunn takes the fall.
Hewlett-Packard said that Patricia Dunn will step down as chairwoman of the computer and printer maker in January amid a widening scandal involving a possibly illegal probe into media leaks. She will be succeeded by CEO Mark Hurd. “I am taking action to ensure that inappropriate investigative techniques will not be employed again. They have no place in HP,” Hurd said in a statement.
Having already concluded HP’s probe broke some California laws, state Attorney General Bill Lockyer indicated for the first time that HP insiders are likely to face some criminal charges. “We currently have sufficient evidence to indict people both within Hewlett-Packard as well as contractors on the outside,” Lockyer said.
Dunn apologized for the techniques used in the company’s probe, which included “pretexting”, in which private investigators impersonated board members and journalists to acquire their phone records. “Unfortunately, the investigation, which was conducted with third parties, included certain inappropriate techniques. These went beyond what we understood them to be, and I apologize that they were employed,” Dunn said in a statement. The pressure on Dunn to step down began rising sharply Monday when Congress and federal investigators entered the fray surrounding HP’s possibly illegal probe of media leaks.
Dunn, a former freelance journalist, was angry about the media leaks and commissioned an unnamed outside firm to identify their source. They used Social Security numbers and other personal information to get phone companies to turn over detailed logs of home phone calls of reporters and board members. Although frequently used by private investigators, the tactic tests the bounds of state and federal law. The leak investigation at HP began with a January article on CNET’s News.com that included a quotation from an anonymous HP source who described a gathering of HP directors at a posh spa in Southern California. At a board meeting in May, Dunn identified director George Keyworth II as CNET’s source, as well as the source of other leaks dating to early 2005. The board asked Keyworth, 66, to resign, but he refused. HP then barred him from seeking re-election.
His ouster riled another board member, longtime Silicon Valley venture capitalist Tom Perkins, 74, who resigned and stormed out of the May 18 meeting. Perkins’s attorney later discovered that private investigators had obtained the last four digits of his client’s social security number. They used that information to open an online account with AT&T, then called the telephone company and impersonated Perkins, asking for a record of phone calls to and from his house. HP’s investigators also obtained the phone records of several journalists, including those who work at The Wall Street Journal, BusinessWeek, The New York Times and News.com.
Dunn defended the need for the investigation. “These leaks had the potential to affect not only the stock price of HP but also that of other publicly traded companies,” she said. California’s attorney general has already said HP’s probe broke two California laws governing identity theft illegal access to computer records. It is still unclear, however, whether the company or anyone acting on its behalf will face civil or criminal charges. FBI Deputy Director John Pistole said that the bureau had opened its probe and was investigating two possible crimes – illegal computer intrusion and wiretapping. The U.S. Attorney’s Office issued a statement saying it was “investigating the processes employed in an investigation into possible sources of leaks.”Link here.
The U.S. Constitution is that great deceit by which Congress and the Executive are enabled to extend their powers without any evident end. Acts of Congress habitually violate natural rights and individual rights. In this sense, Congressional Acts are illegitimate. For those readers who believe that the Constitution’s language constrains such across-the-board power, let us put it this way: The U.S. Constitution is that deception by which Congress and the Executive are enabled to act unconstitutionally with impunity. In this sense, Congressional Acts are unlawful.
The U.S. Constitution is far more of a carte blanche than libertarians who want to “go back to the Constitution” may realize. The American majority approves a law, the majority being an ever-changing subset of voters and elected and appointed officials. It grants to itself an almost unlimited scope of imposing its illegitimate and unlawful will upon the minority of those other Americans obliged to submit. By what means? By using the open-ended language of the Constitution and the open-ended interpretations thereof to tyrannize an ever-changing minority. The result is before us – a pastiche of illegitimate and unlawful laws, passed and executed under an abstraction that we are supposed to bow down to called the rule of law. This motley mess, this crazy quilt has no grounding except the continual effort and success of majorities to impose themselves upon and gain from minorities. If it were not for the fact that the American pie has been kept growing by the efforts and successes of many of its people, this confused game of I take thou belongings as mine would have long ago ended.
Ridiculous Acts of Congress constantly intrude, and hardly ever are they justified by any sensible theory of right and wrong, much less the Constitution. Congress tells doctors how much they will be paid under Medicare, and it tells Americans they must overpay for cotton by subsidizing domestic cotton production and shutting out foreign producers. Any decent theory of law that does not contradict itself has to conclude that we are being ruled by a tyranny. There is no way around this conclusion. The idiocy of Congressional Acts only rubs salt into the wounds. Congress habitually tampers with things that it knows nothing about and continually throws monkey wrenches into matters that are none of its business. This naturally accompanies the real goals of Congress which are to line the pockets of select groups.
The American people have every right to declare a new declaration of independence from the illegitimate, unlawful, unconstitutional, and burdensome acts of their rulers under this Constitution. A critical mass with the intent to do so is not yet in sight. No matter how we analyze the situation, there is only one conclusion. The American system of state and government, even under a Constitution, is a tyranny. The legal claptrap of Constitution, rule of law, and divided government is a formality, a cover-story, a diversion, and a sop for an unpleasant truth that is becoming ever more true: Congress owns us.Link here.
POLICE RUSH TO SHOOT, BUT ASK US TO WITHHOLD JUDGMENT
Late last month, Huntington Beach, California police officers unloaded 18 bullets into 19-year-old Ashley MacDonald in a city park after, they say, she moved toward them with a pocket knife. The shooting has understandably sparked protests and countywide debate over when police officers should be allowed to use deadly force. Besides the senseless nature of the killing, the arrogance of the police agencies, which refuse to talk frankly about the appropriate use of deadly force, grates. The police department and sheriff’s department, which investigates these shootings for HBPD, say we should not second-guess the officers or rush to judgment before the investigation is complete.
But it could take months before all the details are gathered. I contacted HBPD and asked for reports from two previous police shootings, from 2004 and 2001. The department’s answer? Even though the investigations are complete, they will release no information other than the skeletal facts, such as the date and time of the incident. So we should shut up about the incident until the investigation is complete, but once it is complete we have no right to see it. This is not good enough any more. The public should talk about what happened. Was there not any other possible way to defuse that situation than to shoot the girl to death? The park was nearly empty, the teen was clearly distraught, yet we are supposed to believe that the cops could not have backed away, exhibited some patience and tried a non-lethal alternative? Had it been one of the officer’s daughters, I am guessing they would have tried a few more things before firing their weapons.
Is it not time that these increasingly common deadly police shootings get reviewed, not just by the police agencies – which give themselves and their officers the benefit of the doubt - but by the public at large? These official internal investigations only look at whether the police followed proper “procedure” and the district attorney only looks at whether the officers who fired the deadly shots did so with criminal intent. A firearms “expert”, who trains police officers, said that officers “did what they are trained to do.” That is the problem … this is how officers are trained to behave. No one really thinks there was criminal intent in the Huntington Beach shooting. It seems more likely to have been a matter of poor judgment, bad policies, poor training and insufficient oversight. By their nature then, the official investigation will never even touch on the significant issue of proper police policy.
The problem is not just in Huntington Beach. To make matters worse, the California Supreme Court ruled last week, 6-1, that “the public may not have access to police discipline records filed during administrative appeals, including the names of officers who have been terminated, unless the officers waive their rights to privacy.” In California, police decide when to use deadly force, and police agencies get to investigate themselves. They release only the information they want to release when the investigation is complete. The agencies can shield information about “bad apple” cops from the public. And those of us who simply want a little more debate and accountability are told that it is unconscionable to second-guess the authorities. I do not mean to be alarmist here, but the Webster’s definition of a police state, i.e., a political system characterized “by an arbitrary exercise of power by police,” is starting to cut a little too close to the bone.Link here.
CHAIRMAN OF ONLINE CASINO ARRESTED IN NEW YORK
In an escalation of the American attack on Internet casinos, law enforcement officers in New York arrested Peter Dicks, chairman of the board of SportingBet, an online sports book that is publicly traded on the London Stock market. Legal experts with knowledge of the case said Mr. Dicks had been detained at Kennedy Airport based on a warrant issued by the state of Louisiana. Louisiana state police were unavailable for comment. George Hudson, a spokesman for SportingBet, declined to comment. The arrest led the company to halt trading on its stock.
The arrest of Mr. Dicks comes seven weeks after federal law enforcement officials arrested the chief executive of a competing Internet sports book, BetOnSports, when he was on a flight layover at the Dallas airport. The executive, David Carruthers, and his company, which also trades on the London Stock Exchange, were charged with taking bets illegally over the Internet.
The federal government, and some states, assert it is illegal to operate an Internet casino. But their position puts them at odds with the policies for licensing license and regulating online betting parlors in many countries, including Costa Rica and Antigua, where many casinos base their operations. It also puts the states and federal government in conflict with millions of Americans who place bets online, using their home computers to wager on sporting events and games like blackjack and poker. After the arrest of Mr. Carruthers, legal experts and industry analysts and executives, said they presumed that the American law enforcement effort was aimed at one company, BetOnSports. But that presumption has changed.
Sue Schneider, the publisher of Interactive Gaming News, an online magazine that focuses on the Internet casino industry, echoing the sentiments of other industry analysts, had said the one obvious lesson after the arrest of Mr. Carruthers was that executives of online casinos should not visit the U.S. and risk arrest. She and other analysts and legal experts said it was mind-boggling that Mr. Dicks had visited anyway. “It’s absolutely amazing,” said I. Nelson Rose, a professor and Internet gambling expert at Whittier Law School in Costa Mesa, California. Mr. Rose speculated of Mr. Dicks – “Apparently he convinced himself this all involved Carruthers and BetOnSports.”
Mr. Carruthers, who was let go as chief executive of BetOnSports, is under indictment by the attorney general for the Eastern District of Missouri, Catherine L. Hanaway. Reuters reported that it had confirmed with the Louisiana State Police that Mr. Dicks was arrested as part of an indictment issued in May that was part of an ongoing investigation of SportingBet. Lawrence Walters, a Florida attorney who specializes in Internet gambling law, said Louisiana has been interested in recent years in exploring whether online gambling operations violated state law that prohibits residents under the age of 21 from placing wagers. But, more generally, Mr. Walters said he doubted that state laws could be read as regulating Internet gambling because the activity crosses state lines and thus would fall under federal jurisdiction.
Shares of other offshore casinos plunged following the arrest. But some analysts said the offshore casinos cannot be undone by the lengthening arm of American law enforcement. “Online gaming will not end unless they prosecute every one of the 50 million Americans who bet online every year,” said Andrew P. Lee, a London-based online gaming analyst at Dresdner Kleinwort. “But from an investor’s perspective this becomes a very difficult sector to invest in.” The high demand from consumers means that a U.S. ban will likely do little to stop the growth of online gambling, Mr. Lee said. “The U.S. accomplishes nothing by prohibiting online gaming. In the end, they will be about as successful as prohibition was in banning alcohol.”Link here.
U.S. SENATE BANKING PANEL EXAMINES TREASURY ANTI-TERROR EFFORTS
Lawmakers also received testimony from Treasury’s Financial Crimes Enforcement Network, (FinCEN) which guards against money laundering, terrorist finance and implements the Bank Secrecy Act. In accordance with the intelligence reform act passed in late 2004, Robert W. Werner, FinCEN’s director, said his group was continuing a feasibility study on a program that would require companies to report details of almost all of the 500 million international wire transfers sent each year.
Werner said the cross-border wire collection program would help detect and prevent illicit finance and terrorist networks. But a host of private sector groups – including the American Bankers Association – and federal banking agencies, have raised concerns about the data collection program. “Chief among these concerns is how to protect the privacy of individuals about whom we collect information,” Werner said. Costs of the program could also prove burdensome, Werner added, saying his department was continuing work on the feasibility study.
Werner also said his group was starting “a replanning effort for BSA Direct,” a program he killed earlier in July, following cost overruns and doubts about the tracking tool’s effectiveness. Elsewhere, FinCEN is considering whether it needs to take further action to address problems banks may have applying anti-money laundering rules to money services businesses, which are retail operations that offer check-cashing, money transfers, short-term lending and related services.
Another Treasury official, deputy assistant secretary for terrorist financing and financial crimes Daniel Glaser, said the U.S. has learned well since 2001 that targeted financial sanctions work better when other countries are willing to freeze terrorist assets in their jurisdiction. The multilateral Financial Action Task Force (FATF), the Group of Seven leading industrial nations and the U.N. have been venues for dialogue and coordination on sanctions policy, and many countries have joined in sanctioning people and groups targeted by the U.S, Glaser said.Link here.
SHIPPING MAGNATE TO HAVE IRISH ASSETS SEIZED
A Greek shipping magnate who bought the Christina O yacht on behalf of Irish investors is to have his Irish assets seized. John Paul Papanicolaou was successfully pursued through the Greek courts by the former owner of the boat. The action was moved into the Irish courts last week. Peter Tauck – an international tour operator – sold the 324-foot yacht to Papanicolaou and his team of Irish investors, including truck dealer Robert “Pino” Harris. The investors have since spent €50 million refurbishing the boat. Tauck took the case against Papanicolaou after he failed to settle a multimillion euro debt. Tauck – through his company Tauck Inc. – secured an “arrest and seize” order against Papanicolaou’s assets. An “arrest and seize” order is particular to admiralty law.
Tauck is now attempting to seize significant cash reserves held by Papanicolaou in Ireland. The ex-parte application was made during a vacation sitting of the High Court last week. Papanicolaou has a stake in the Christina O through an offshore company in the Cook Islands. It is not clear how the new court action affects ownership of the yacht, although legal sources said the matter was likely to be addressed by the High Court.
Harris is one of a number of Irish residents who participated in the Christina Limited Partnership. The investors bought the yacht for about €3 million and spent €50 million on its refurbishment. The purchase attracted some controversy when it emerged that Harris could claim capital allowances on the yacht for tax purposes. Last year, the Revenue Commissioners had to pay back Harris €9.1 million after attempts to disallow tax breaks on his investment in the yacht were ruled out on appeal. Harris recently put the boat on the market with a price tag of about €60 million.Link here.
HEADED FOR THE TRASHCAN
Nature abhors a vacuum (although apparently not in Washington, where the empty heads proliferate without check). Thus, when the centralized economic gulag called the Soviet Union collapsed under pressure from the mixed economies of the West, the U.S. stepped up to the plate as the world’s only great empire – with legions garrisoned in every hot spot and proconsuls spouting off at every diplomatic watering hole. No sparrow could flap a tail-feather in any Third World hellhole without setting off sensors at the Pentagon, we have noted.
But nature does not tolerate a monopoly for very long, either. The U.S., with a monopoly on conventional military power, has stood up against nature, and against history. It cannot be long that she does so, unless history and nature are both to come to a complete stop. Instead, since there are no conventional powers outside to challenge her, her destruction is being wrought unconventionally, from within. You see, empire running is a serious trade. It cannot be done on borrowed money, especially money borrowed from incipient rivals. Only, look at Britain at the beginning of the 20th century. As soon as it exhausted itself in World War I, the helping hand from across the Atlantic grew stronger and bolder. Eventually, Uncle Sam had snatched the imperial mantle from the shoulders of the Queen.
No, an empire that cannot turn an imperial profit had better get into another business. It can provide all the security, peace, and rule of law it wants, but if it means to stay in business, it had better not provide it at a loss. Mind you, imperial profits are not hard to show. Your common or garden variety empire could do it. Just impose a tax on vassals, or if in a hurry, simply steal what is needed. Thus did Augustus feed the mobs in Rome … after the defeat of Anthony and Cleopatra … after taxing grain from the Egyptians. But Americans have never really gotten the hang of empire. From the very beginning, their heads have been fogged up with earnest hallucinations of the Wilsonian species. They think they are making the world safe for democracy and capitalism … for adultery and market-rate lending.
And the Pax Americana that U.S. troops have imposed on the world has been an expensive undertaking. It might have been worthwhile until the 1970s, but since then, neither U.S. business nor U.S. labor has been truly competitive. So, the more the military has opened the door to globalization, the more the economy has lost market share, as foreigners have rushed in. American working stiffs may continue to believe in the American dream and in the federal hacks and financial hoodlums who rule them. But the only way they can improve their standard of living now is by working longer hours, taking on greater debt, and buying products made by their rivals overseas.
As is the wont of empires, the U.S. empire was bound to wend its way to the trashcan anyway. But George W. Bush, Alan Greenspan – and the whole host of movers and shakers, hustlers and dissemblers, the massed ranks of seraphim and cherubim on the banks of the Potomac and the Hudson – have all hastened along the moment of its undoing. And so, today, while other publications may carp and complain about the incompetence and stupidity of the president and his neo-con advisors, we do not join in, for we believe that the U.S. Empire needs to be taken down a notch and that our rulers have merely found a novel way to do it, turning a rag-tag bunch of terrorists into a world-beating brand. And the rest of the world into anti-Americans. Thus has the world’s most expensive military force been squandered on a war that cannot be won, and the world’s richest treasury been emptied on bread it does not bake. At least Washington still provides homemade circuses.Link here.
TRAITORS TO THE AMERICAN REVOLUTION
The American Revolution was waged against a highly centralized, nationalistic governmental tyranny run by a king, namely, the British Empire. The king enriched himself and his regime through the economic institution of mercantilism, defined by Murray Rothbard as “a system of statism which employed economic fallacy to build up a structure of imperial state power, as well as special subsidy and monopolistic privilege to individuals or groups favored by the state.” This system impoverished the average Englishman but was a perpetual source of power and riches for the king and his political allies. That is why the system lasted so long (at least 200 years) despite the fact that it was so harmful to the average citizen.
After the Seven Years War with France the king of England needed to pay off his war debts, so he stepped up the application of the corrupt mercantilist system to the American colonists. He did so with numerous taxes and interferences with international trade that benefited British businesses and the British state while treating the colonists like tax serfs. The “train of abuses” delineated in the Declaration of Independence were mostly abuses of the colonists for the purpose of plundering them with the British mercantilist system.
There was always a group of men in American politics who were not opposed to the evil mercantilist system in principle. They recognized it as a wonderful system for accumulating power and wealth as long as they could be in charge of it. Being victimized by it was another matter. These men, led by Alexander Hamilton and his fellow Federalists, strived to implement an American version of British mercantilism as soon as the Revolution was over. In doing so they were traitors to the American Revolution and the worst kind of corrupt, power-seeking political scoundrels.
The Constitution was essentially a failed attempt to overthrow the decentralized, federalist system that was created by America’s first Constitution, the Articles of Confederation. The delegates to the constitutional convention were only instructed to revise the Articles, not replace them. The first thing they did was to ignore the instructions they were given and write an entirely new constitution. But they failed. They only managed to get the citizens of the states to delegate a few enumerated powers to the central government, not to create a national government. They succeeded in replacing the Articles, but not with their ideal, monopolistic system.
The crusade for a central, monopolistic government began as soon as the Revolution ended. It would require a brutal, uncompromising dictator to overthrow the federal system and adopt a British-style consolidated, mercantilist empire. Some 75 years later, just such a dictator cemented just such an empire into place. Lincoln’s army included literally hundreds of thousands of conscripts and European mercenaries who finally snuffed out the Jeffersonian, federalist system of states’ rights with the bloodiest war in human history up to that point. The New England Yankees and their Midwestern brethren have rewriten history in the ensuing decades. The whitewash of American history has been very thorough indeed.Link here.
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