Wealth International, Limited

Offshore News Digest for Week of December 18, 2006

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

Global Living & Business Taxes Asset Protection / Legal Structures Privacy Law Opinion & Analysis



Let’s face it. In the opinions of a great many people, there is simply no convincing reason to stay in the United States right now. Based upon a variety of motives, political objections, social dysfunction, or simple curiosity, a great many Americans these days are looking to make the Big Move. A significant portion of these are folks who would love to leave, and who would be well-suited to the expat lifestyle, but who do not have the money, education, experience, or connections to do it in the usual ways. Things like second citizenships and holidays in Majorca seem beyond their abilities. Even getting the money together for a plane ticket can be daunting.

This article is for those folks. This is meant to serve as a general-purpose guide to getting out of the U.S. for less than ten thousand dollars. I have done it on $5,000, but it was sometimes uncomfortable to do so. A total investment of $10,000 would be able to provide quite a nice living during the crucial first 90 days in-country. This article is about how to get things done as cheaply as possible, as easily as possible, and as freely as possible. It is a general overview which may be further developed in the future. It is not a one-size-fits-all method of expatriating, and for some people this may be a good working description of Hell. However, for those who do not mind doing things in a slightly unconventional way, and who are willing to put up with the trouble, this is a workable method. I should probably warn you that this approach is not for the faint of heart. But it works, and it is also a LOT of fun.

In a moment, you are either going to love me or hate me. You are going to Prague. Right now, about half of you are saying to yourself “He’s got to be kidding. I can hit Prague for five grand?!” The other half are saying “Oh no, not Prague ... lousy tourists, drunken football hooligans, legions of prostitutes and corrupt officials ...” Well, I am afraid you are both right. However, the information with which I am about to provide you will allow you to experience the good parts of living in Prague, which are considerable and varied, while largely negating the less positive points.

The first thing that makes Prague so attractive to the on-the-cheap ex-pat is cost. The cost of living in Prague is much lower than in much of Western Europe, but it still has sufficient modern conveniences and services. Prague is also much cheaper to get to than most of the other super-cheap ex-pat destinations. It is important to note, however, that “cheap” does not mean “dirt cheap”. Certain things are going to be more expensive, as a percentage of income, than you are used to. But the savings in other areas, notably transportation and food, will more than make up for it. Secondly, work in Prague is easy to get. Especially the kind of work you will be getting. You are going to be an English teacher. Yes, I know it is a cliché ... but it works, it pays the bills, and employment is virtually guaranteed.

For the on-the-cheap ex-pat, Prague fits the bill. It is easy to get to, cheap to live in, easy to find a job in, and most importantly, it is very easy to live here anonymous and free, if you play your cards right.

Link here.


During the past month I have had the pleasure of getting to know a gentleman from Switzerland who is moving here and has just gotten his residency approved here. The information I am writing here largely comes from his experience and feedback, before, during and after his visit here (he having decided to enjoy summer in Europe before moving here in time for Spring here when Autumn falls there).

Cellphones. If you are particularly emotionally attached to your cellphone (you must really have a problem), but you can bring it along to Uruguay and use it here, if it is a GSM phone that works on one of the frequencies used here. Caution! Each of the three cellphone companies uses different frequencies. However, if you insist, you must register it at the airport with customs, either when you arrive or within 48 hours. The fee is 130 pesos, or less than $6.00. With that registration you can buy a local prepaid GSM card with nothing more than your passport and cash.

Health insurance. What a winner! This is probably the only civilized country in the world where I am insurable! Somehow a brain tumor, back injuries, and recurring staph infections scare insurance companies away in other places – not here. It might be worth it to move here just for the medical care. Taken together, it costs less to live in Uruguay than to eat in Switzerland.

Caveat emptor! Let the buyer beware! This maxim applies to the privately owned side of internet industry here in spades. The people that run at least two of these companies make the carpetbaggers look like philanthropists. This makes my poor free market heart sad. But I have to tell you that, as of right now, the safest and best ISP is to one owned by the government. Adam Smith, Forgive me!

July 7, 2006. I am not an expert on Winter. In fact, compared to people from New England, or Moscow, or Tierra del Fuego, I am a rank amateur. When I was young and foolish (perhaps more foolish), I remember driving into North Florida because I heard it had snowed and I wanted to see it, but it had melted before I could get there. That being said, I do have a good deal of experience with winter-time months in which winter never deigns to appear. Living in Florida for so many years, I had become accustomed to having Summer and not-Winter. It is now officially Winter in Montevideo. What that means has yet to be entirely revealed to me. Thus far it seems to mean 3-5 days of clouds and drizzle and then a like number of days with bright sunshine. Today it is bright and will be in the 70s Fahrenheit. Thus far at least, no frosty mornings to sing about, no snowmen to build, no windows to de-ice, no salted roads ... On second thought, I really do not care if I ever get to know Winter. Not-Winter, thank you kindly, will do just fine.

Link here.

The Southron’s Guide to Living in Uruguay eBook published. Chapter 1 available as a free download.

The Southron’s Guide to Living in Uruguay is “the most comprehensive and authoritative book available on moving to and living in one of the least known Expat retirement and Investment location in the world: URUGUAY!

“It is also the most lavishly illustrated, and certainly the funniest – written from a very pronounced point of view by a ‘wheelchair bound curmudgeon’ with a decade of experience living in the West Indies, former Yugoslavia and Central America.”

Cost is $29.95. Free download of the cover through the first chapter available here (PDF file).

Link here.


The Government of Belize has offered to exchange the country’s outstanding commercial indebtedness in return for new U.S. dollar bonds to be issued by Belize (“New Bonds”). The exchange offer was preceded by four months of intensive consultations with the affected creditors by the Belizean authorities.

“On its existing terms,” said Belizean Prime Minister Said Musa, “Belize’s stock of external commercial debt is visibly unsustainable. Through this transaction, Belize will have consolidated the debt into a single new series of bonds, improved liquidity for the creditors, stretched out maturities and significantly lowered the average rate of interest on the debt. Over the next five years, this transaction will save an estimated $301 million in debt service costs for Belize in comparison with existing terms.” The launch of the transaction was approved by the National Assembly of Belize last week.

Links here and here.


The U.S. and Panama announced this week that they have completed negotiations on an FTA, with the understanding that it is subject to further discussions regarding labor. The agreement will eliminate tariffs and other barriers to trade of goods and services, expand trade between the U.S. and Panama, and promote economic growth and opportunity. The conclusion of the negotiations with Panama was announced on Tuesday by U.S. Trade Representative Susan C. Schwab and Alejandro Ferrer, Panama’s Minister of Trade and Industry. “Panama is an important ally in the region. We are pleased to be able to advance our long-standing friendship and deepen our trading relations with Panama,” said Ms. Schwab. “This comprehensive agreement significantly cuts trade barriers and expands opportunities for American workers, consumers, farmers and ranchers, manufacturers, and service providers.”

New provisions on customs administration contained in the agreement aim to enhance the transparency and efficiency of trade between the two countries. For example, the agreement establishes a monitoring program for Panama’s free trade zones that will help guard against circumvention of customs rules. Important provisions on trade security will facilitate secure and reliable trade in goods from all over the world that pass through Panama. The agreement will eliminate nearly 90% of Panama’s tariffs on industrial goods immediately, with remaining tariffs phased out over 10 years.

Link here.


Cariaccess Communications, which offers Internet services in Barbados, St. Lucia and St. Vincent and the Grenadines, has filed a lawsuit against Cable & Wireless and the St. Vincent National Telecommunications Regulatory Commission, asking for interconnection and seeking damages of $43 million.

Cariaccess says that almost 5 years after receiving its first Organization of Eastern Caribbean States telecom license, Cariaccess remains unable to interconnect to the public-switched telephone, Internet and other networks, anywhere in the OECS. Cariacess claims that Cable and Wireless offers to sell it broadband products for prices that are way in excess of its own retail prices. The company says that the regulator has failed to enforce rules that prohibite Cable and Wireless from such practices. Cable and Wireless has recently reported rapidly increasing broadband customer numbers and revenues in the Caribbean.

Link here.


Citigroup Inc., the biggest U.S. bank, agreed to buy the financial-services assets of Corporacion UBC Internacional SA’s Grupo Cuscatlan for $1.51 billion in cash and stock to extend its reach to Central American consumers. Grupo Cuscatlan operates banking, pension and insurance businesses in El Salvador, Honduras, Nicaragua, Costa Rica and Panama. The group has $5.4 billion in assets and $3.4 billion in deposits.

The acquisition gives New York-based Citigroup a foothold with mid-sized companies and consumers in Central America, and complements its planned purchase of Grupo Financiero Uno, a regional credit-card issuer. “Cuscatlan is basically a commercial bank with a strong middle-market business and a growing consumer platform,” Manuel Medina-Mora, the head of Citigroup’s Latin American unit, said in an interview. “This region is growing very fast, and has improved significantly in credit.” Citigroup has had a corporate- and investment-banking presence in Central America for a century. Still, its sole consumer business in the region is a credit-card unit in Panama, Medina-Mora said.

Link here.


The Labuan Offshore Financial Services Authority (Lofsa) is set to unveil a new strategy in the first half of 2007 to attract more international investors and elevate its status as a global offshore and low tax jurisdiction to rival the likes of the British Virgin Islands, the Cayman Islands and Mauritius.

Speaking at the Labuan-IOFC Investment Route to Asia conference in Kuala Lumpar last week, Lofsa director-general Datuk Azizan Abdul Rahman said that the authority is looking at ways in which Labuan’s tax structure can be improved, with a particular focus on the jurisdiction’s double taxation avoidance treaty network. He also indicated that Lofsa is trying to identify niche markets, such as Islamic finance, which Labuan could specialize in. Lofsa has employed a team of international consultants to help its rebranding exercise, and the study is expected to be completed within the first half of next year.

Malaysia has high hopes for the future of Labuan, and more than RM3 billion ($845 million) has been invested by the Malaysian government in the infrastructure of Labuan to facilitate offshore business over the last decade. Some RM120 million has also been earmarked for future investment in the offshore center.

Lofsa was established in 1996, six years after the creation of Labuan’s IOFC, to help streamline the administration and supervision of the offshore centre. In 1997, the number of offshore companies incorporated in Labuan doubled to about 1,000. To date, there are more than 5,500 companies registered in the Labuan IOFC. Labuan now provides a full range of financial services that include offshore banking, investment banking, insurance and insurance related services, investment holding, trust, fund management, leasing and Islamic finance.

The setting up of the Labuan International Financial Exchange (LFX) has further boosted the offshore business activities, Rahman noted. Since its first listing in 2001, the number of listings on LFX has grown to 31 instruments, comprising of investment funds, Islamic notes and debt securities that in aggregate have a total market capitalization of $13.5 billion.

Links here and here.


Six small island nations are developing plans for joint ownership of a new airline that would service the central Pacific. Nauru floated the idea at a meeting of the six potential partners in the Marshall Islands. Delegates from the Solomon Islands, Kiribati, Tuvalu and the Federated States of Micronesia also attended the meeting. Nauru recently relaunched its own air service under the name Our Airline, and Transport Minister Kieren Keke says Nauru is ready to give shares away in exchange for landing rights. Our Airline now links the Solomon Islands, Nauru, Kiribati and the Marshall Islands with Australia twice a week.

Link here.


A dramatic increase in the number of apartments, accompanied by skyrocketing prices, has confirmed claims by economist Edward Scicluna that black money is being washed in the Maltese property market. The number of housing units constructed increased by 35% in 2005, from 6,700 to 9,000, and despite the increase, prices skyrocketed by 40% since 2003 for apartments, and by 35% for 2-bedroom maisonettes. Figures also revealed that the number of apartments had jumped from 5,265 in 2004 to 7,539 in 2005 – an increase of 43%. Overall, the increase of over 2,300 units in just one year is comparable to the gradual increase between 2000 and 2004 of 2,500 units.

Edward Scicluna told MaltaToday the property inflationary explosion was like “a fire. One might disagree with what actually started it, but definitely it will only persist if it is generously fuelled. In the economy that fuel is always excess money. In the present context what is fuelling the present property inflationary spiral is the excess liquidity of Maltese currency in circulation seeking back-door conversion into Euro.” Scicluna had already warned in October that as the date for the euro changeover approaches, more people will channel their undeclared monies into legitimate activities like property development. “These monies are now fuelling the current inflationary pressures, blowing up further the property bubble and encouraging property speculation, with its needless environmental damage and destruction of our towns and village cores, and leading to downward pressures on the Maltese Lira.”

Data compiled by Scicluna shows that Malta has the highest amount of money in circulation per capita among the 12 new EU member states – an astounding €2,912 (Lm1,250) per person. Since 1999, the amount of money in circulation has increased at an average rate of Lm17 million per annum, despite a period of economic sluggishness during the same period. But since last year Malta registered a first ever decrease of about Lm10 million. Scicluna estimates that this break in trend indicates that about Lm30 million have already been withdrawn. Those who are hiding their money “under the mattress” will surely not be taking cash to financial institutions to exchange it for euros. By law, credit institutions are obliged to enquire on “the provenance of any amount of any sum in excess of Lm5,000”. Banks are also obliged to enquire on the origins of series of structured transactions below Lm5,000.

Most of the development occurring in 2005 has taken place in already developed residential areas. While alleviating some of the pressures on the countryside, the intensification of construction in already built-up areas is creating havoc in village cores for residents living in once tranquil residential areas. According to the FAA – a Malta environmental lobby – much of the new development is not necessary and damaging Malta’s image, heritage and public health.

Link here.


Doubling your living standard every six years would seem a breakneck pace of growth even in East Asia. In Europe, it is unheard of. But two Baltic countries, Estonia and Latvia, are growing at 11.6% and 10.9%, respectively. The pair’s high growth is an exceptional product of good luck and good policies. Both countries are stable, business-friendly and cheap, and lie close to large, rich markets. They have flat taxes, cleanish government, balanced budgets and stable currencies pegged to the euro. Foreigners like all this. Estonia is Europe’s biggest recipient per head of foreign investment.

Consumption is soaring in both countries, as is credit. Estonia will see money-supply growth of 33% this year. In Latvia mortgage lending rose by 90% in the year to October, and credit-card lending doubled. That reflects the rise of a western-style financial industry that lends in a way yet to develop in most of eastern Europe.

Can the good times last? Signs of a property bubble abound. The authorities want to tighten banks’ lending. If a crash came, due to outside ownership of banks (99% in Estonia, and 80% in Latvia) foreign shareholders would suffer if loans went bad. Both countries have huge current-account deficits (17.9% of GDP in Latvia and 12.5% in Estonia). But for poor economies trying to catch up on 50 years of development missed under communism, a thirst for imported technology is commendable. Balance sheets are strong – indeed, Estonia has no net foreign debt.

The bigger worries are twofold. Even as the Baltic hot rods scorch across the tarmac toward European living standards, they lack any brakes. Monetary policy cannot contain inflation (their currency boards give the two countries no independent control over interest rates). Fiscal policy works in theory but not in practice – Estonia already runs a big budget surplus and Latvia is not far behind. Wages are spiraling thanks to a boom in labor-thirsty industries such as construction, retail and tourism. Both countries are struggling to integrate Soviet-era immigrants, so importing more labor from the east is hugely unpopular.

But tempting back the many locals – especially 100,000+ Latvians – who have moved to work abroad is tricky. Latvia’s president, Vaira Vike-Freiberga, herself a returned emigre, says it is not just the money. Latvians find that foreign bosses and colleagues treat them more kindly and respectfully than their compatriots do, and public services are better abroad. So far, soaring productivity growth has masked the labour market’s tightness. But that will not last. The big task for both countries is to move to an economy based on brain not brawn. That requires a liberal immigration regime – at least for skilled foreigners – and a transformation of the calcified, self-satisfied education system. Neither is yet in sight.

Link here.


A remarkable progress to long-term stability and steady growth shortly before joining the EU, states a World Bank report on market development in Bulgaria compared with the countries of the OECD. In the last few years Bulgaria has considerably improved the regulatory environment for doing business, the report stated. Some of its indicators are better than the OECD and EU average, while others are close to the levels of the OECD countries. For example, in terms of barriers to entrepreneurship, Bulgaria has the same coefficient as Switzerland and the Czech Republic as well as South Korea, Spain, the Netherlands, Iceland, Germany, Greece, France and Belgium. Poland and Turkey rank below Bulgaria.

In terms of licensing and authorization systems, Bulgaria is on the same level as 12 OECD countries: Australia, Finland, France, Japan, South Korea, Luxembourg, Norway, Poland, Sweden, Britain, the US and Brazil. Business entities in Bulgaria have registered this progress as licensing and authorization were less of a problem to doing business in 2005 than in 2002, the report found.

Link here.


Italy’s astonishing about-face on Internet gambling has caught the attention of major industry companies, with reports of household names in the business all vying for a slice of the Italian action by applying for some of the estimated 17,000 licenses the Italian government is to issue. Turning its face away from an aggressive prohibitionist approach as recently as October this year to a policy of regulation and taxation, Italy provided a new direction for companies looking to fill the vacuum created by the banning of U.S. online gaming financial transactions. The Italian government has announced that it will auction off the licences for betting shops, kiosks, casinos and online casinos and sportbooks.

The potential for the new market is still a matter for research and estimation. Nilay Patel, corporate finance manager for William Hill group told Jackpot UK that the Italian decision was essentially about creating a new market or converting an illegal market into a legal market. “We don’t have the facts, figures and information on which to make sensible estimates of the potential size of the opportunity,” he said. “Until we actually have a couple years of operating experience in these markets, we really don’t know how they”re going to develop.”

Many other countries, such as Greece, Ireland and the Czech Republic have open minds and will undoubtedly watch the effects of the law changes, basing their own decisions on its implications. Spain is also set to follow Italy, with the various Spanish regions authorized to set up their own regulatory structures as they see necessary. Overlooking all of this is the European Commission, who face the tough job of ensuring the changes in gambling laws, however flexible or stringent, do not interfere with healthy competition. According to a ruling by the EU’s highest courts, member states may place controls on private gambling operations, but they must be “non-discriminatory, proportionate and consistent.”

Link here.

You bet you can bet on Italy!

Italy’s 180º change from October, when Italy was still pursuing strict suppressive measures, will almost certainly have a cascading effect throughout the entire EU. They are even reports that Canada is going to defy the US and go forward with the extension of online gaming. No one seems to care what the Bush administration or the U.S. Congress will think about this.

If the Bush administration chooses to “push the issue”, the repercussions will almost certainly be financial and political. One possible effect is a narrowing of the definition of money laundering everywhere outside the U.S. as a counterbalance to an ever widening U.S. definition which will include money from all forms of gambling that the U.S. does not directly tax and regulate. Even a hairline crack in such a fundamental international banking policy could have vast and unforeseen results if that crack becomes a fissure under pressure. Every single battle that the U.S. loses on the gambling front will fuel opposition to its policies on other fronts especially with regard to drugs and coca production. In an effort to impose its morals on the world, the U.S. will face the real possibility of having its opinions become irrelevant.

Link here.


She is a former marine, a native Californian and, now, an ex-American who prefers to remain discreet about abandoning her citizenship. After 10 years of warily considering options, she turned in her U.S. passport last month without ceremony, becoming an alien in the view of her homeland. “It’s a really hard thing to do,” said the woman, a 16-year resident of Geneva who had tired of the cost and time of filing yearly U.S. tax returns on top of her Swiss taxes. “I just kept putting this off. But it’s my kids and the estate tax. I don’t care if I die with only one Swiss franc to my name, but the U.S. shouldn’t get money I earned here when I die.”

Historically, small numbers of Americans have turned in their passports every year for political and economic reasons, with the numbers reaching a high of about 2,000 during the Vietnam War in the early 1970s. But after Congress sharply raised taxes this year for many Americans living abroad, some international tax lawyers say they detect rising demand from citizens to renounce ties with the U.S., the only developed country that taxes it citizens while they live overseas. Americans abroad are also taxed in the countries where they live. So far this year, the IRS has tallied 509 Americans who have given up their citizenship, said Anthony Burke, an IRS spokesman in Washington.

Andy Sundberg, a director of the Geneva-based American Citizens Abroad, has been tracking renunciations dating back to the 1960s through annual Treasury Department figures. He considers recent numbers low compared with some stretches in the past, like the early 1970s. But he has also noticed a recent increase in interest among Americans in renouncing their citizenship. “I think the cup is boiling over for a number of people living abroad,” Mr. Sundberg said. “With the Internet and the speed and the ubiquity of information, people are more aware of what’s happening.” With the changes in the tax laws, he said, some Americans living abroad fear “they’re heading toward a real storm.” He cited a survey by the American Chamber of Commerce in Singapore, which polled its members in October and November and found that many were considering returning to the U.S. because of the higher taxes.

Concern about taxes among Americans living abroad has surged since President Bush signed into law a bill that sharply raises tax rates for those with incomes of more than $82,400 a year. The legislation also increases taxes on employer-provided benefits like housing allowances. The changes, enacted in May, apply retroactively to January 1, 2006. Matthew Ledvina, an international tax lawyer in Geneva, said demand for legal counsel on the citizenship issue was coming largely from American citizens who held second passports and who had minimal ties to the U.S. “There are incentives to do it before the end of the year so that you can minimize your future reporting,” he said.

Mr. Ledvina said the waiting period for appointments at the American Embassy in London had increased from a few days to more than three and a half months. He said he had recently approached embassies in Vienna, Bern, London, Paris and Brussels before finally getting an appointment in Amsterdam for a client’s renunciation application. The legal ritual of renunciation is largely unique to the U.S. because other countries base taxation on residency, not citizenship, according to Ingmar Dörr, a tax lawyer with Lovells in Munich. “We don’t have that issue,” he said. “We only have the problem that rich people who don’t want to pay taxes in Germany just move to a lower-tax country in Switzerland.”

For some Americans abroad, motivations for renunciation are mixed and complex, involving social concerns, political displeasure with their government and other reasons. But it is clear that taxation plays a large role for many, even though few are willing to admit that because of penalties enacted a decade ago. In 1996, Congress tried to address a wave of tax-driven expatriation by the wealthy by requiring former citizens to file tax returns for a decade and forbidding Americans who renounced their passports for tax reasons from visiting the U.S. But in practice, the government is mainly interested in wealthier ex-citizens with a net worth of more than $2 million – few of whom pay further U.S. taxes because they generally avoid making American financial investments after giving up citizenship, Mr. Ledvina said. As for the rule barring entry to tax refugees, he said, it has not been enforced by the authorities.

Still, that possibility prompts ex-citizens to tread carefully and remain discreet about their choices. “I didn’t give up my citizenship with a sense of hostility,” said an importer in Geneva who renounced her citizenship as President Bush was taking office in 2001. “I gave it up with a sense of fairness.”

Link here.

Even the mainstream press is catching on to expats.

It is the week before Christmas. And it is always interesting to see what is in the news, when most companies, including news organizations, are slowing down to prepare for the holiday break. For example, yesterday The New York Times ran a story about one of our favorite topics – expatriation. It was a little strange to see such a taboo topic in a mainstream newspaper.

You have to wonder what made the editor choose to run this story this week. Is it just a slow news week? Or is expatriation really gaining popularity, as the article claimed? Apparently the NYT interviewed an IRS agent who said over 500 Americans had expatriated this year. Hmmm ...

The story began with an anecdote about an ex-marine from California, who decided to give up her U.S. citizenship to avoid estate taxes. Last month, she very unceremoniously turned in her U.S. passport. This wise Californian maintained her privacy by not revealing her name to the Times. However, they did quote her as saying “It’s (for) my kids and the estate tax. I don’t care if I die with only one Swiss franc to my name, but the U.S. shouldn’t get money I earned here when I die.” Or in other words, this ex-marine said what we have been saying for the last five years – that expatriation really can be the “ultimate estate plan” for the right person.

If you are a freedom seeker, who loves to live abroad, then you can legally avoid thousands in income and estate taxes by giving up your citizenship. You can move to a safer country that stays out of the world’s frays as much as possible, like Switzerland. You can move to a country like Panama, which does not tax any income earned outside the country. Not to mention, you get to avoid filing taxes in two nations each year. Trust me. I lived in Ireland for three years as a U.S. citizen. And filing your taxes twice in two different nations makes the April 15th deadline in the U.S. seem like a field day.

There are many steps on the road to trading in your U.S. passport in return for a gigantic cut in your taxes. But in the end it all boils down to four steps really ...

  1. Securing a second citizenship where you would like to live eventually.
  2. Moving to the country where you have a second citizenship (I suggest a no-tax jurisdiction).
  3. Get your finances in order, whether that means seeking professional advice to move your assets to your new home.
  4. And finally turning in your U.S. passport.
Again, this is an extremely bold move. It is not for everyone. But the fact is this is the ONLY way a U.S. citizen can stop paying U.S. taxes. That means it is one of the few ways you can significantly reduce your tax bills – especially if you already favor living in another nation rather than the United States. If you are interested, I urge you to meet with a qualified financial professional who can tell you if this makes sense for your particular situation.

And keep an eye on the mainstream press this week. You never know when they may start spouting some real insight, when they assume their readers are distracted by the holiday season.

Link here.



New publication by Vernon Jacobs and Richard Duke presents a plain English summary of 107 legal ways for U.S. taxpayers to lower their income and estate taxes.

A lot of high net worth and high income U.S. taxpayers are looking for some kind of “magical” way to save taxes by moving their money offshore. However, the U.S.A. is the only major country in the world that imposes taxes on its citizens no matter where they live or work in the world. Because we are taxed on our worldwide income (and assets) our tax planning must deal with domestic as well as offshore methods.

If you reduce your taxes but you do not want to get into an argument with the IRS, then you need to stick with tax reduction methods that are clearly permitted in the tax law itself. And you want to avoid taking the advice of people who claim that that you do not have to pay taxes at all or the advice of people who offer you some kind of secret plan to hide income from the IRS. If you want to stay within the law and also want to be sure you have used every legal way to save taxes, then this novel tax guide will show you the legal ways to save taxes in the U.S. or offshore.

This 110 page book represents a plain English summary of 107 legal ways to pay less income and/or estate taxes either onshore or offshore. It is a tightly written synthesis of more than five years of research into how to legally save taxes offshore by using methods that work the same regardless of where you live or where your money or business is located. We have searched through the tax code for ways to save taxes. Then we have checked to be sure those methods are not restricted if the taxpayer lives offshore or has assets offshore. Finally, we analyzed the complex alternative minimum tax rules for each method to be sure whether the tax saving method would work for those subject to this nasty tax trap.

The book is organized in the sequence of the personal Form 1040 income tax return and describes the tax reduction alternatives available to taxpayers with different kinds of income. It therefore helps to identify which tax reduction methods may be suitable for different taxpayers based on the kind of income they have.

Link here.


The IRS announced that individuals and businesses making contributions to charity should keep in mind several important tax law changes made last summer by the Pension Protection Act. The new law offers older owners of individual retirement accounts a new way to give to charity. It also includes rules designed to provide both taxpayers and the government greater certainty in determining what may be deducted as a charitable contribution.

Giving details of a new tax break for older IRA holders, the IRS revealed that individuals aged over 70½ can directly transfer tax-free, up to $100,000 per year to an eligible charitable organization. This option is available in tax years 2006 and 2007. Distributions from employer-sponsored retirement plans, including SIMPLE IRAs and simplified employee pension (SEP) plans are not eligible. To qualify, the funds must be contributed directly by the IRA trustee to the eligible charity. Amounts so transferred are not taxable and no deduction is available for the amount given to the charity. However, not all charities, e.g., donor-advised funds and supporting organizations, are eligible under this provision. Transferred amounts are counted in determining whether the owner has met the IRA’s required minimum distribution rules.

Unveiling new general guidlines for monetary donations, the IRS revealed that in order to deduct any charitable donation of money, a taxpayer must have a bank record or a written communication from the charity showing the name of the charity and the date and amount of the contribution. Donations of money include those made in cash or by check, electronic funds transfer, credit card, and payroll deduction. Prior law allowed taxpayers to back up their donations of money with personal bank registers, diaries or notes made around the time of the donation. Those types of records are no longer sufficient. This provision applies to contributions made in taxable years beginning after August 17, 2006.

The new law does not change the prior-law requirement that a taxpayer get an acknowledgement from a charity for each deductible donation (either money or property) of $250 or more. However, one statement containing all of the required information may meet the requirements of both provisions.

Link here.


Canada’s Department of Finance has provided further guidance on “normal growth” in respect of new tax measures regarding income trusts and other flow-through entities. The guidance followed Minister of Finance Jim Flaherty’s announcement on October 31 that a Distribution Tax will be levied on certain amounts distributed by a “specified investment flow-through” (SIFT) trust or SIFT partnership. This new tax applies as of 2007 to new entities, but is deferred until 2011 for SIFTs that were publicly traded as of October 31, 2006.

The deferred application of these measures is, however, conditional on existing SIFTs respecting the policy objectives of the proposals. Materials released with the Minister’s announcement indicated that, for example, the undue expansion of an existing SIFT might cause the deferral to be rescinded. On the other hand, the continuation of the normal growth of a SIFT would not raise concerns. The guidance provides existing SIFTs with more detail as to what is meant by “normal growth” in this context. The Department of Finance said it will monitor developments in the market and will take action accordingly to ensure that this guidance is respected.

Link here.


The European Commission has announced a series of initiatives to promote better coordination of national direct tax systems in the EU. The aim of the proposals is to ensure that national tax systems interact coherently with each other by seeking to remove discrimination and double taxation for the benefit of individuals and business, while preventing tax abuse and erosion of the tax base. “Discrimination and double taxation prevent individuals or business from reaping the full benefits of the Internal Market and undermine the EU’s competitiveness. There is an urgent need to improve coordination of national tax rules to allow them to interact more coherently” stated Laszlo Kovacs, the Commissioner responsible for Taxation and Customs Union. “Moreover, I am convinced that coordination would help Member States to prevent unintended non-taxation or abuse and hence avoid undue erosion of their tax bases.”

Under EU law Member States are largely free to design their direct tax systems. However, national tax rules designed solely or primarily with the domestic situation in mind may give rise to incoherent tax treatment in a cross-border context. The sharp increase in litigation by taxpayers in national courts and the European Court of Justice over the last few years highlights the need for improved cooperation and better coordination between member states.

Link here.

EC wants more coordination on company loss relief.

The EC has urged EU governments to explore ways of allowing companies to set off losses incurred in other member states as part of its initiative aimed at coordinating EU-wide direct taxation systems, announced earlier this week. In most member states, domestic losses may be set-off against other profits in the same country. However, there is only limited availability for such relief for losses incurred in other member states. The EC says that the lack of cross-border relief for losses in the member states’ legislations creates a barrier to entering other markets and therefore undermines the international competitiveness of European companies. This also compares unfavorably with the USA, where the federal tax base is larger than that of any individual member state and loss relief is provided for any investment made anywhere in the USA.

Link here.

EC urges Ireland to increase taxes on cigarettes, not fix their prices – link.
EC says French EIG asset financing tax scheme is illegal state aid – link.
EU urges member states to examine exit taxes – link.


French taxpayers may get a one year tax “holiday” in 2008 if the government goes ahead with a proposal to introduce a pay-as-you-earn tax system in 2009. Finance Minister Thierry Breton said the government is “technically ready” to change over to a PAYE system.

Unlike most of its EU counterparts, France requires its citizens to declare their annual income on a tax return in the Spring following the year in question, allowing the French ample scope to minimize their tax bills. The government has long thought about switching to a PAYE system, but has stopped short because the transition year to the switch over would mean taxpayers paying double the amount of tax in one year. However, according to Breton, the government has decided to get around this problem by simply waiving income tax in 2008. Breton claimed that this would achieve a win-win scenario for both taxpayer and government, as more tax will be collected in 2009 under the PAYE system.

The proposal comes amid a growing debate about tax, particularly wealth taxes, in the run-up to the national elections. It has been greeted with much scepticism from some quarters, with Francois Hollande, leader of the opposition socialists, asserting that the idea of a one-year tax holiday is a “pure electoral extravagance”. The Socialists plan to roll back all tax cuts for top earners, and will remove the 60% tax cap for the wealthiest taxpayers. Nonetheless, economists have said that the proposal will have little impact on the public finances.

Link here.


A new survey by Deloitte of employee remuneration in enterprises with 10 or more employees shows a wide divergence in average remuneration levels and social security costs in 24 of the 25 EU member states. Lithuania was found to have the lowest remuneration costs at just over €5,100. Estonia and Slovenia are not far behind with remuneration levels of €9,216 and €9,264. These figures represent a considerable increase over the figures for 2005 which were €7,466 and €8,321 respectively.

Ireland is ranked 15th out of the 24 countries surveyed, with an average remuneration cost of €36,852. In 2005 the figure was €34,997, representing a 5.3% increase. However, the relative positions of the countries change when one compares the employee tax and insurance costs as a proportion of the total remuneration paid. Ireland continues to have the lowest level at 6.34% post-Budget, with Cyprus in second place at 8.77%. This confirms Ireland as a low tax jurisdiction for employees. Also, when one compares the employer social insurance costs as a percentage of remuneration, Ireland is in fifth position. Denmark has the lowest percentage at 1.36%. Ireland, at 9.71%, is just behind Cyprus, Malta and the UK which have percentages of approximately 9.1%.

Comparing the combined costs of tax and employee and employer social insurance costs with the total cost of employment, Ireland post-Budget is found to have the lowest percentage cost. This was only a marginal advantage in 2005, but the gap between Ireland and Cyprus has increased to 1.44%. Malta and Luxembourg continue to occupy third and fourth places respectively.

Link here.


The Labour party has sold its former headquarters at 16 Old Queen Street through a corporate vehicle, inviting accusations of hypocrisy over its avoidance of tax through the set-up. The arrangements caused the Treasury to miss out on about £200,000, reports said. Labour sold the holding company containing the property, 16OQS Ltd., which meant a 0.5% stamp duty tariff instead of a 4% levy. Lord Oakeshott of Seagrove Bay, a Treasury spokesperson for the Liberal Democrats said, “For the governing party to use a device like this is the unacceptable face of tax avoidance.”

Link here.



Answer: The 10% on top is glistening and gleaming and looks wonderful, and 90% of it that is hidden is filled with unknown dangers. The history of tax shelters in the U.S. has at best, been dubious, and at worst disastrous. The biggest problem with a tax shelter is that it is intrinsically self-destructive. For a tax shelter to work it has to be a reportable item on one’s tax return – in the form of a credit, a reduction, an offset, etc. As such, it is easily quantifiable by the IRS. As soon as any tax shelter really become popular, and starts to cut into the revenue collected by the IRS, they act to destroy it. In virtually every case, except for the sacrosanct home mortgage interest deduction, Congress agrees with the IRS that the tax shelter in question is an abuse and must be wiped out.

This would not be so bad, except that tax laws are often changed retroactive to the beginning of the current session of Congress, which could be as long as two years ago. A taxpayer will have made a whole series of decisions based upon a law that was changed well after he/she made those decisions. As such those who participate in tax shelters become very easy targets for the tax collectors. I still remember when people invested in minks as a tax shelter.

To be very specific, and perhaps very contrarian, let me name names. The Roth IRA is the biggest con job since the invention of paper money! If anyone really believes that a future Congress strapped for cash is going to honor the “no-tax on withdrawal” promises made by a Congress from years before, then there is some riverfront property in the Amazon forest that I would like to talk to you about.

There are two ways to protect oneself. (1) Never use a tax shelter. (2) Move one’s investments beyond the reach of the domestic taxman.

Link here.


“Offshore legal entities.” These three words sound like something from a dreaded college law class. But before you nod off, give me just a second to tell you why these offshore structures are actually more exciting than their names suggest. For starters, offshore legal entities can act as extremely effective asset protection tools. House your assets in a trust or foundation and you are free from lawyers, creditors, and other greedy individuals who might want to steal your savings.

Unfortunately, offshore trusts or foundations do NOT help you save on taxes. There are claims floating out there in cyberspace, that you can “disconnect” yourself from the U.S. tax system with an offshore trust. Let me tell you right now - you cannot. And truthfully, that is not the point of an offshore trust or foundation. The benefits of each go far beyond mere tax-savings.

The idea of the trust started in ancient times when soldiers would leave their family’s inheritance with a trusted friend when they would leave for war. This was their “just in case” fund for their family. At the time, this was the only way a soldier could protect his family if he did not return. And this ancient vehicle still works today. You can still protect your children and your spouse with a trust after you are gone. This is why many individuals use their trusts for estate planning. When you set up a trust you hand over your assets to a trustee, who then holds them in trust for your beneficiaries. By giving your assets away, you are giving them the ultimate protection. Once you set up the trust, your assets legally are not yours anymore. For an extra layer of protection, you may want to choose an offshore asset protection trust. This involves setting up your trust in your offshore asset haven of choice, so your assets are further away from creditors and lawyers.

A foundation is the secretive, offshore legal entity that most Americans never hear about. It is an independent fund that you set up specifically for your family. Unlike other legal entities, a foundation has no shareholders, owners, or members, just beneficiaries. Only a handful of countries offer this unique asset protection tool, including Liechtenstein, Panama, St. Kitts & Nevis, and The Bahamas. Unlike a trust, you actually may manage your own legal entity’s assets if you set up a foundation. You do not have to consult a trustee, because you still have creative control. That means if you have the income to invest in a foundation, it can be more effective than a trust. However, you can ONLY set a foundation for family members. So if you want to leave your fortune to your best friend from childhood, a trust may be more appropriate.

Link here.


The recent death of former Chilean President and strongman General Pinochet, and the subsequent scramble to find the money he stashed around the world is yet one more illustration of the hypocrisy of major world banks, and the completely amoral behavior in which they regularly engage.

While dictators are in power banks are thrilled to take their deposits. After all, from a technical legal standpoint, what can be cleaner than funds deposited by someone who enjoys sovereign immunity? Of course, one has to overlook the uncomfortable facts that the person in question may have seized power, committed murder, overthrow the Constitution, and in the case of someone like Idi Amin even literally cannibalize his own people. But that does not matter to a bank. They get to check off the box that says they did their due diligence knowing full well that the day will come when the right to these funds will be challenged.

As soon as any challenge is made, the bank or banks in question can freeze the funds, stop paying interest on the deposit, while continuing to make money on the frozen funds during the interminable years it will take for the proper ownership of the funds to be determined. The banks know this. The banks plan for this.

Now banks also have the Patriot Act excuse at their disposal every time they want to hold on to your funds for a bit longer, or leave a huge incoming wire in its suspense account for another weekend. But it does not stop major criminals. In the case of criminals who are dictators, they have the appearance of rights because they are the de facto, and in some cases even the de jure chiefs of state of sovereign nations.

In a different way, the same thing occurs with major crime cartels and terrorist organizations. Every one of them has impeccable documentation, including references in business and professions, and probably from the local cardinal archbishop as well. Their funds do not get held in suspense accounts or otherwise delayed, they are considered important private clients. The truth about the Patriot Act is that it has given major banks one more excuse to mistreat their clients, to gouge their clients, and to make extra money on their clients, while blaming it all on the U.S. government.

Link here.

Any kind words for Pinochet?

Rporters from Chile advise that two-thirds of the people celebrate the death of Gen. Augusto Pinochet. But thousands turned out at his funeral to mourn him. Any man who loomed large in history will find fans right to the end of the line. There is a special awkwardness in the matter of General Pinochet, who came to public life in the great and bloody days of September 1973, when he participated in the coup against Salvador Allende in Santiago. Pinochet emerged as president of Chile and ruled for 17 years as just one more strongman.

But complications were deep-set. When in 1998 a nonchalant Spanish judge set in motion legal machinery intended to bring Pinochet to trial for murder, the protests were thunderous. To begin with, similar legal loose cannons might hypothetically endanger the future of any former leader who ran afoul of human rights concerns. One dissenter complained that if the Pinochet precedent prevailed, no Israeli cabinet minister could ever travel safely abroad. But what mattered even more to some was that history should rule correctly on the Chilean legend. Dissenters from the general orthodoxy on Pinochet defended his authoritarian rule on the grounds that he had displaced a leftist who was prepared to overthrow the Chilean constitution.

The unfolding of the Pinochet story took many years. He was never tried, and in the last years he was too ill to act responsibly in his own behalf. At the end his defenses collapsed at every level. It had been popular among his supporters to say that he was untouched by greed. But a federal investigation into “money laundering and foreign corruption” disclosed that he had manipulated the banking system in order to cultivate a private fortune in the Riggs Bank in Washington. The myth of an elder statesman who lived austerely on the income of a retired general came crashing to earth, and with it the Pinochet’s entire defense structure.

In Portugal, Antonio Salazar exercised power without ever using it for personal debauchery. But the general rule is implacable: Power begets the abuse of it.

Link here.


A reclusive German millionaire is claiming damages against Citibank in what lawyers say is the biggest alleged fraud in Swiss private banking history. Lawyers for Peter Mikutta, who moved to Switzerland after selling his data communications group, last week filed papers claiming SFr44 million ($36 million) in damages against the U.S. banking giant for dereliction of its fiduciary duties. Michael Werder, a top Zurich lawyer, said the bank had for years allowed Mr. Mikutta to be defrauded by failing to check movements on his account.

In a separate, but linked, criminal case, Zurich public prosecutors are accusing a former Citibank employee who went to work for Mr. Mikutta of fraud and falsifying documents amounting to SFr114 million. The twin cases, to come before the courts next year, are expected to generate immense interest given Switzerland’s famously discrete and dedicated private banks. The country is believed to hold about one-third of the world’s total offshore assets.

The civil and criminal cases allege the former Citibank employee falsified Mr. Mikutta’s signature on documents to divert funds from his account for her own uses. The employee’s lawyer, Tanja Knodel, said her client was innocent until proven guilty. Mr. Mikutta’s lawyers allege the bank accepted faxed instructions – sometimes involving multi-million sums – without requesting an original signature or verbally checking the instructions with the account holder. It is alleged the transfers were approved because the former employee knew the bank’s internal procedures and used her influence and former position as an account manger to bully and cajole staff into doing as she wished. She also regularly threatened to move the account – allegedly Citibank’s largest at the time – to another bank if her requests were not met.

Mr. Mikutta, who lives in Zurich, apparently failed to detect that his account was being depleted because he was given periodic performance data purporting to show his money was in safe hands. His lawyers admit Mr. Mikutta contributed to his losses by failing to notice what was happening, but still argue the bank was largely to blame for allowing the transfers to occur. The civil case follows attempts by Mr. Mikutta’s lawyers to negotiate an out of court settlement, which they say Citibank rejected.

Link here.


The money trail uncovered by the Serious Fraud Office during its two-year corruption inquiry into BAE turned out to be much more sizeable – and to lead in much more dangerous directions – than anyone had first imagined. Initially investigators merely looked into allegations of a £60 million “slush fund”, used by BAE over the years to pay for Saudi generals and princes to go on extravagant holidays, shopping sprees and trips on luxury yachts. But before the SFO was suddenly taken off the case, it discovered far more. It found that in recent years an enormous sum – more than £1 billion – had been secretly shuffled through BAE’s accounts.

It was passed through two anonymous offshore companies, registered by BAE in the financial “black hole” of the British Virgin Islands, set up in 1997 and 1999. Neither’s existence was disclosed in BAE’s published accounts, and BAE refuses to give any explanation of their purpose. The flow of secret money was coordinated through Switzerland where BAE set up another anonymously-owned company called Novelmight. BAE kept its secret commission agreements with agents around the world in the custody of Geneva lawyers. One of the issues the SFO was trying to examine was whether any of this enormous quantity of secret cash found its way back to BAE executives themselves. The financial arrangements surrounding two adjoining Mayfair flats occupied by BAE’s long-serving chairman, Sir Richard Evans, were examined.

One flat had been originally bought by a company linked to arms broker. The second was similarly linked to a Lebanese politician. The two men were not the targets of the SFO investigation into BAE, but the inquiry team hoped to get access to accounts allegedly controlled by them to investigate others.

Link here.


A Bahamian bank and trust company is named in a C$110 million lawsuit to recover funds allegedly misappropriated by the Canadian executive who appears to own Heath Bank and Trust, formerly Barrington Bank International Ltd. The bank is listed among the assets of Ronald Weinberg, co-founder and former chief executive of the children’s animation firm Cinar. The current owners of Cinar plan to go after $20.7 million in assets held by Mr. Weinberg after two Quebec courts refused to keep the details of those assets confidential. Cinar is suing Weinberg and others for $110 million, an amount that includes $59 million that was allegedly misappropriated and diverted to the Bahamas. “We will contact the banks and investment funds to advise them to freeze the assets,” said Cinar lawyer Marc-Andre Boutin.

The long list of assets includes funds being held in banks and funds located in The Bahamas, Florida, New York, Boston and Montreal. The cash in the offshore bank account is part of nearly $18 million in worldwide assets declared by Mr. Weinberg and the estate of his late wife and business partner, Micheline Charest, according to an affidavit made public this week. Mr. Weinberg’s assets include C$2.75 million at Heath, plus almost US$2.2 million invested mostly in New York and Florida.

Link here.


The U.S. S.E.C. announced that it has obtained an emergency asset freeze to halt an Estonia-based “account intrusion” scheme that targeted online brokerage accounts in the U.S., in order to manipulate the markets. In an emergency federal court action filed in a New York U.S. District Court, the Commission charged Grand Logistic, S.A., a Belize corporation located in Tallinn, Estonia, and its owner, Evgeny Gashichev, a citizen of Russia, with conducting a fraudulent scheme involving the manipulation of the prices of numerous stocks by the unauthorized use of other people’s online brokerage accounts (account intrusions).

The complaint alleged that, to effect his “pump and dump” manipulations, Gashichev purchased shares of small, thinly-traded companies, with low share prices, through an online trading account he opened in the name of Grand Logistic at an Estonian financial services firm that has an omnibus account at a U.S. broker-dealer through which the defendants traded. Often within minutes of the purchase, Gashichev used electronically stolen usernames and passwords to gain unauthorized Internet access to one or more online brokerage accounts (the intruded accounts) for the sole purpose of pumping up the price of the stock he had just purchased at lower prices. He used electronic means to hide his identity and mask the means by which he intruded into accounts. Gashichev then placed orders through these intruded accounts to purchase large blocks of the same stock at artificially inflated prices, which created buying pressure and the false appearance of legitimate trading activity, and caused the price of the stock to greatly increase. Gashichev then sold, at a profit, the shares he had earlier purchased in the Grand Logistic account. The share prices of the manipulated stocks invariably fell sharply, and the victims suffered losses in their accounts.

Between August 28 and October 13, 2006, Grand Logistic and Gashichev alleged made $353,609 in unlawful profits by conducting at least 25 separate manipulations, involving the securities of at least 21 companies. Acting on the Commission’s request, the Court issued a temporary restraining order which, among other things, freezes the defendants’ assets and orders the repatriation of funds taken out of the U.S.

Link here.



The founder of e-gold has grown tired of the government characterizing his business as a haven for money launderers, terrorists, child pornographers and credit card thieves. So a year after the Department of Justice raided his offices, Douglas Jackson, president of Gold and Silver Reserve (GSR), which operates e-gold, has been wading deep into his customer transaction logs to identify and fight back against people who misuse his system. In the last month, he has blocked about 2,000 accounts from his system, and voluntarily turned over detailed account and transaction histories to federal law enforcement.

In the process, Jackson says he has exposed an illicit and previously invisible economic underground. “It’s like discovering an undisturbed tomb in Egypt where you’ve got this archaeological thing,” Jackson says about the wealth of data he has uncovered. “There will never be another crack like this one where all of these people have left their footprints with memos that sometimes give us clues as to what they’re doing.”

E-gold is a privately issued digital currency backed by real gold and silver stored in banks in Europe and Dubai. Jackson says about 1,000 new e-gold accounts are opened daily, and the system processes between 50,000 and 100,000 transactions a day. With a value independent of any national legal tender, the electronic cash has cultivated a libertarian image over the years, while drawing the ire of law enforcement agencies who frequently condemn it publicly as an anonymous, untraceable criminal haven, inaccessible to police scrutiny.

Jackson says the image is false. Although a user can open an account using a fraudulent name and a proxy server that shields his or her IP address, a permanent record of every transaction remains in the e-gold system, which can help law enforcement agencies track criminals. Jackson says he first became aware that credit card thieves were laundering money through e-gold from 2004 news stories about a Secret Service bust of Shadowcrew, a website where carders congregated. He contacted the Secret Service and pleaded with them to work with him to catch the carders, but the agency inexplicably rebuffed him.

Last December, the Department of Justice raided the Melbourne, Florida, office of GSR, and seized more than 100 boxes of paper records in a move dubbed Operation Goldwire. “They basically raped our computers and also took us offline for 36 hours, took all the paper out of our office,” Jackson says. The government also froze GSR’s U.S. bank account. The company survived, Jackson says, only because its euro, British pound and yen accounts are maintained outside the U.S. The criminal affidavit, filed under seal, accused Gold and Silver of aiding terrorists and child pornographers. But prosecutors later dropped the criminal claim, replacing it with a civil complaint charging GSR with operating as an unlicensed money-transmitting business. Jackson’s lawyers say the charge is bogus because Gold and Silver is not a money transmitter, since GSR does not accept cash from customers, only wire transfers. That case is on hold until April.

Rather than attack him, the DoJ and Secret Service should have been working with him, says Jackson. Because all the while they were trying to build a case against e-gold, he was gathering evidence that could help them battle the real criminals. Jackson’s staff developed a method for doing global searches in e-gold transactions, so he decided to see if he could find carders in his system by searching the “memo” field, where – like the memo line on a check – the sender can note the reason for the transaction. Jackson says some carders, apparently so convinced of their invisibility, do not try to hide the nature of their activity. Jackson says some culprits that authorities deemed “unfindable” were easy to track through e-gold. He identified a core group of accounts that appeared to involve carding, and made lists of accounts that exchanged e-gold with them. Patterns emerged. By matching other data, like time stamps, IP addresses and hashes of passwords, Jackson could sometimes identify when one person controlled or used different accounts.

Jackson decided that law enforcement needed to know about what he had found. He had received and complied with hundreds of subpoenas in the past – from FBI, Secret Service, Drug Enforcement Agency and international law enforcement agencies. But this time he had trouble finding someone to work with him. Since the Secret Service had already dismissed him, he approached the FBI and U.S. Postal Inspection Service, but got the runaround. He ultimately began assisting postal inspectors and other agents voluntarily.

Jackson acknowledges some discomfort over the decision to give information to the feds without legal process – a move that could save e-gold from further law enforcement aggression, while tarnishing its libertarian sheen. His lawyers say agents repeatedly promised to provide Jackson with court orders since last February but have not come through. They also say that once the company discovered evidence of possible wrongdoing, it had no choice but to hand over information to the government. Jackson could even have been charged with aiding and abetting money launderers under federal statutes if he did not report the suspicious activity. Kevin Bankston, staff attorney for the Electronic Frontier Foundation, says e-gold is violating its privacy policy, which states that the company will not hand over data except under court order.

In November, Jackson began running an automated script to blacklist accounts he identified as suspicious. The digital funds are not frozen, and the account holder can conceivably get the money out by transferring it to another account he controls, or to a different e-gold customer. But then those accounts get blocked, too. “They can log into the account and send payment to someone who’s willing to accept payment from them, but at that other person’s risk,” says Jackson. But the aggressive policing is chafing some users, who say they did nothing wrong and were improperly banned. One such user says the block has not hurt his business but he will never use e-gold again and is considering legal action to get his funds. “I no longer trust the e-gold integrity,” he says.

Link here.


Cash is private. When you spend cash, there is no paper trail. Cash transactions are difficult, if not impossible to trace. Because of this difficulty, the U.S. government over the last 35 years has quietly enacted civil forfeiture laws that make it possible for police to confiscate cash or other property with near-zero evidence of any wrong-doing. The states have followed suit with their own civil forfeiture laws, mostly modeled on U.S. statutes. And even if a state lacks its own confiscation law, state agencies can use federal civil forfeiture laws to confiscate cash or other property and receive a kickback of up to 80% from the federal government.

When the government seizes your property under a civil forfeiture law, it does not need to prove you did anything wrong. All it needs to do is to demonstrate, by a preponderance of the evidence, is that your property is subject to forfeiture. Cash is particularly vulnerable to this argument, because U.S. courts have repeatedly ruled that possession of a large sum of cash is “strong evidence” of a connection to trafficking in illegal drugs. In other words, merely possessing a large sum of cash provides the government with sufficient evidence to seize it, unless you can provide clear and credible evidence that it is NOT connected to illegal drugs.

While not all federal courts have ruled the same way in similar circumstances, the handwriting is most definitely on the wall. If you possess a large quantity of cash, especially exceeding $10,000, then you are inviting police to confiscate it as the probable proceeds of a narcotics transaction. No arrest you or evidence of narcotics involvement is needed in order to prevail in court. What this means is that you should never carry or store large quantities of cash in the U.S. Police can “legally” seize it and you have very little recourse. The U.S. government and police agencies throughout the U.S. have declared war on cash. And any cash you carry or store, legally or otherwise, is in their sights.

Link here (scroll down).



In a ruling made public November 28, U.S. District Judge Audrey Collins struck down a major part of Bush’s September 24, 2001 order tagging 27 groups and individuals as “specially designated global terrorists”. The order gives the president the authority to label groups “terrorists”, and to seize their property, without any legal process, and give them no way to challenge the designations. Judge Collins ruled that the order was too vague and infringed on the right of free association, guaranteed by the First Amendment to the U.S. Constitution. Indeed, any person or group could be named a “terrorist” under the President’s authority for any reason. Or, as Judge Collins observed, “for no reason.”

Judge Collins also concluded that the Executive Order giving the Treasury Secretary the right to designate other persons or groups as “Specially Designated Global Terrorists” (SDGTs) was unconstitutional. Under the Executive Order, the Treasury Secretary could dub anyone a “terrorist” based only on their association with any of the 27 groups or individuals on the original list. The Executive Order was illegal because it “contains no definable criteria” for designating individuals and groups as SDGTs, and because it “imposes penalties for mere association.”

However, Judge Collins’s decision is hardly the end of the systematic dismantling of constitutional protections made in the name of the War on Terror (and in earlier “wars” such as the War on Drugs and the War on Money Laundering). The government will surely appeal this decision, and while the appeal is pending, it is likely to petition to permit seizures of “terrorist property” to continue. Moreover, the Treasury Department says there is nothing the government cannot confiscate once the President declares a national emergency, as President Bush has on numerous occasions. Not to mention the shameful laws enacted by the U.S. Congress, such as the Military Commissions Act (see article immediately below).

Still, Judge Collins (who also was the first magistrate to invalidate any portion of the USA PATRIOT Act) represents an encouraging, albeit small, countertrend in the U.S. judiciary. Judge Collins represents someone willing to stand up to the President, even in the face of overwhelming public support for the War on Terror. I hope more courageous jurists like Judge Collins step forward. They represent one of the last hopes of rescuing our republic from the scourge of totalitarianism.

Link here.


The first court decision (PDF file) to interpret and apply the legislative atrocity known as the “Military Commissions Act of 2006” was issued yesterday in the case of Hamdan v. Rumsfeld. The decision was a major victory for the Bush administration’s attempt to vest the President with the power to imprison individuals – even for life – without according them any meaningful opportunity to contest the validity of their imprisonment.

The district court ruled that (1) the MCA successfully stripped federal courts of jurisdiction to hear habeas corpus petitions filed by “war on terrorism” detainees, and (2) under controlling Supreme Court precedent, “enemy aliens” who have no substantial connection to the U.S. (i.e., never resided inside the U.S.) have no constitutional right to seek habeas corpus review. As a result, the court dismissed the case of the Guantanamo detainee seeking habeas review here and, in essence, upheld the Bush administration’s power to detain such “enemy combatants” forever while denying the detainees all access to our courts.

Hamdan, who acted as a driver on occasion for Osama bin Laden, vehemently denies the administration’s accusation that he was involved in a “conspiracy” to commit terrorist acts (the only charge against him). He has been in U.S. custody since late 2001, and in Guantanamo since early 2002. He has been seeking the right to prove his innocence by petitioning our federal courts for habeas corpus relief. Once the MCA was enacted, the Bush administration moved to dismiss all habeas corpus petitions – including Hamdan’s – on the ground that Congress has now stripped federal courts of jurisdiction to hear such claims. The ruling granted that motion and dismissed Hamdan’s petition.

The judge who issued this ruling is District Judge James Robertson, a Clinton appointee who ruled originally that Hamdan could not be tried before a Guantanamo military commission that had not been authorized by Congress. Robertson also is the federal judge who resigned from the FISA court in protest of the Bush administration’s warrantless eavesdropping program. Clearly, Robertson’s ruling is not the by-product of pro-administration sentiment. Rather, he obviously felt constrained to enforce the MCA by his (not necessarily correct) understanding of controlling Supreme Court authority on the question of whether accused enemy aliens – who have been detained on foreign soil and who have no connection to the U.S. – have a constitutional right to access U.S. federal courts for habeas corpus petitions. Robertson’s ruling that they have no such constitutional right (and that Congress therefore has the power to deny habeas access to such aliens under the MCA) is what led him to dismiss Hamdan’s petition.

The judge did not rule that the MCA constitutes a general “suspension” of the right of habeas corpus under the Suspension Clause of Art. I, Sec. 9 of the Constitution. Quite the contrary, the court found that Congress did not intend to suspend habeas corpus, and, independently, that Congress could not constitutionally suspend the right of habeas corpus (because there is no “rebellion or invasion” as required by the Constitution). Rather than having “suspended” habeas corpus rights, the court ruled that Congress intended with the MCA only to block federal courts from entertaining habeas petitions from alien detainees. Thus, the question which the court was required to answer was this: Do aliens – who have no connection to the U.S. and who are detained outside of the U.S. – have a constitutional right to habeas corpus (which no Congressional statute could deny)? Judge Robertson concluded that aliens with no U.S. connections have no constitutional right to bring habeas corpus petitions, and Congress is therefore permitted to strip federal courts of jurisdiction to entertain such petitions.

Judge Robertson’s ruling heavily depends upon the fact that Hamdan has no established connections to the U.S., i.e., he never voluntarily entered the U.S., never resided here, etc. The decision makes clear (albeit in a non-binding way) that any alien who does have strong ties to the U.S. (such as legal residents here in the U.S.) would have a constitutional right to petition a court for habeas corpus relief and Congress could not deny that right. Since the MCA does purport to strip even legal residents of that right, Judge Robertson’s ruling, in essence, concluded that that part of the MCA is unconstitutional. The MCA does not purport to strip habeas rights for U.S. citizens. It is quite possible that the Court will reverse this ruling by holding that all alien detainees have a constitutional right to habeas corpus review.

The principal fault here lies with the 109th Congress (and, of course, the administration it so faithfully served), not with Judge Robertson (unfortunately, whether there is a constitutional habeas right for aliens with no connection to the U.S. is, under controlling Supreme Court precedent, less than crystal clear). What is so radical and indescribably regressive is the Congress’s enactment of a law which expressly denies habeas rights to everyone in the world other than U.S. citizens. Not only did the Founders repeatedly emphasize that the right of habeas corpus is the most critical safeguard against tyranny from the Executive branch (and never drew any distinction between citizens and non-citizens), but the statute granting habeas jurisdiction to federal courts (sec. 2241) was the very first statute ever enacted by the U.S. (in 1789) which bestowed jurisdiction to the federal courts. That is how paramount a right the Founders believed habeas petitions to be.

The history of our country has been to progressively extend and expand habeas rights, not to restrict them. The MCA – passed in a pre-election frenzy with virtually no thought or deliberation – drastically reverses that 210-year trend and deliberately seeks to limit habeas rights as narrowly as possible. Put another way, it seeks to vest the maximum possible power in the President to order people imprisoned – even for life – with no opportunity to contest the validity of the accusations against them or the treatment to which they are subjected. That, as has been repeatedly noted, is a power which not even the British King possessed.

It is one thing to warn of these abuses in the abstract. But we will start to see more and more actual cases of human beings who – as a result of the MCA – face life imprisonment under the most inhumane conditions imaginable based on nothing more than George Bush’s unreviewed accusation that they are Guilty of Terrorism. The attack on our national character, and the abandonment of our most defining values, continues unabated.

Link here.


Chinese authorities have found seven big underground banks involved in money laundering cases worth more than 14 billion yuan ($1.75 billion). Police arrested 44 people suspected of involvement in the undergound banks, found in Shanghai, Guangdong, Inner Mongolia, Liaoning and Heilongjiang.

The biggest case so far, reported earlier this month, involved a money laundering operation operated by a Singaporean in Shanghai, suspected of handling 5 billion yuan ($630 million). That underground bank was offering transfers, foreign exchange and other banking services between Singapore and 25 major Chinese cities. In the course of investigations, authorities have seized or frozen accounts worth 58 million yuan ($7.4 million). According to state media reports, that case was discovered amid a probe into falsified business registrations by the central bank and other government agencies.

China’s national legislature recently enacted the country’s first anti-money laundering law, giving the central bank greater investigative power. The law will take effect January 1, enabling the country to join the international watchdog FATF.

Link here.



Good evening, ladies and gentlemen. I am not an expert or a scholar or an activist. I am more of an eye-witness. I watched the Soviet Union collapse, and I have tried to put my observations into a concise message. I will leave it up to you to decide just how urgent a message it is. My talk tonight is about the lack of collapse-preparedness here in the United States. I will compare it with the situation in the Soviet Union, prior to its collapse. The rhetorical device I am going to use is the “Collapse Gap” – to go along with the Nuclear Gap, and the Space Gap, and various other superpower gaps that were fashionable during the Cold War.

(Slide [2]) The subject of economic collapse is generally a sad one. But I am an optimistic, cheerful sort of person, and I believe that, with a bit of preparation, such events can be taken in stride. As you can probably surmise, I am actually rather keen on observing economic collapses. Perhaps when I am really old, all collapses will start looking the same to me, but I am not at that point yet.

And this next one certainly has me intrigued. From what I have seen and read, it seems that there is a fair chance that the U.S. economy will collapse sometime within the foreseeable future. It also would seem that we will not be particularly well-prepared for it. As things stand, the U.S. economy is poised to perform something like a disappearing act. And so I am eager to put my observations of the Soviet collapse to good use.

I anticipate that some people will react rather badly to having their country compared to the USSR. I would like to assure you that the Soviet people would have reacted similarly, had the United States collapsed first. Feelings aside, here are two 20th century superpowers, who wanted more or less the same things – things like technological progress, economic growth, full employment, and world domination – but they disagreed about the methods. And they obtained similar results – each had a good run, intimidated the whole planet, and kept the other scared. Each eventually went bankrupt.

(Slide [4]) The USA and the USSR were evenly matched in many categories, but let me just mention four. The Soviet manned space program is alive and well under Russian management, and now offers first-ever space charters. The Americans have been hitching rides on the Soyuz while their remaining spaceships sit in the shop. The arms race has not produced a clear winner, and that is excellent news, because Mutual Assured Destruction remains in effect. Russia still has more nuclear warheads than the U.S., and has supersonic cruise missile technology that can penetrate any missile shield, especially a nonexistent one. The Jails Race once showed the Soviets with a decisive lead, thanks to their innovative GULAG program. But they gradually fell behind, and in the end the Jails Race has been won by the Americans, with the highest percentage of people in jail ever. The Hated Evil Empire Race is also finally being won by the Americans. It is easy now that they do not have anyone to compete against.

(Slide [5]) Continuing with our list of superpower similarities, many of the problems that sunk the Soviet Union are now endangering the U.S. as well. Such as a huge, well-equipped, very expensive military, with no clear mission, bogged down in fighting Muslim insurgents. Such as energy shortfalls linked to peaking oil production. Such as a persistently unfavorable trade balance, resulting in runaway foreign debt. Add to that a delusional self-image, an inflexible ideology, and an unresponsive political system.

(Slide [6]) An economic collapse is amazing to observe, and very interesting if described accurately and in detail. A general description tends to fall short of the mark, but let me try. An economic arrangement can continue for quite some time after it becomes untenable, through sheer inertia. But at some point a tide of broken promises and invalidated assumptions sweeps it all out to sea. One such untenable arrangement rests on the notion that it is possible to perpetually borrow more and more money from abroad, to pay for more and more energy imports, while the price of these imports continues to double every few years. Free money with which to buy energy equals free energy, and free energy does not occur in nature. This must therefore be a transient condition. When the flow of energy snaps back toward equilibrium, much of the U.S. economy will be forced to shut down.

(Slide [7]) I have described what happened to Russia in some detail in one of my articles. I do not see why what happens to the U.S. should be entirely dissimilar, at least in general terms. We should certainly expect shortages of fuel, food, medicine, and countless consumer items, outages of electricity, gas, and water, breakdowns in transportation systems and other infrastructure, hyperinflation, widespread shutdowns and mass layoffs, along with a lot of despair, confusion, violence, and lawlessness. We definitely should not expect any grand rescue plans, innovative technology programs, or miracles of social cohesion.

(Slide [8]) When faced with such developments, some people are quick to realize what it is they have to do to survive, and start doing these things, generally without anyone’s permission. A sort of economy emerges, completely informal, and often semi-criminal. It revolves around liquidating, and recycling, the remains of the old economy. It is based on direct access to resources, and the threat of force, rather than ownership or legal authority. People who have a problem with this way of doing things, quickly find themselves out of the game.

These are the generalities. Now let’s look at some specifics.

Link here.


It is all but official. The war in Iraq is lost. Report after leaked report says so. Everybody in Washington knows it except the draft-dodger in the White House. Politicians scurry to avoid the blame. One day soon people will ask aloud: How did we let 3000 GIs die for the weak ego of a pampered liar and his desperate need to prove he is half the man his father was?

The troops from now on will die for a war that they already know is over. They are dying for politicians. They are dying for nothing. By now they must know it. It happened to us, too, long ago. The talk among pols now is about finding an “exit strategy”. This means a way of pulling out without risking too many seats in Congress. Screw the troops. We must look to the elections. Do we really want an exit strategy? A friend of mine, with two tours in heavy combat in another war, has devised a splendid exit strategy. It consists of five words – “OK. On the plane. Now.” Bring your toothbrush. Everything else stays. We’re outa here.

It is a workable exit strategy, one with teeth, and comprehensible to all. But we will not use it. We will continue killing our men, calculatedly, cynically, for the benefit of politicians. The important thing, you see, is the place in history of Bush. Screw the troops. Face it. The soldiers are being used. They are being suckered. This is not new. Long after we knew that the war in Vietnam was lost, Lyndon Johnson kept it going to fertilize his vanity, and then Nixon spoke of the need to “save face” ... at 200 dead GIs a week. But of course Johnson and Nixon were not among the dead, or among the GIs.

I saw an interview on television long ago in which the reporter asked an infantryman near Danang, I think, what he thought of Nixon’s plan to save face. “His face, our ass,” was the reply. Just so, then, and just so now. Soldiers are succinct and do not mince words. This makes them dangerous. We must keep them off-camera to the extent possible. A GI telling the truth could set recruiting back by years.

The truth is that the government does not care about its soldiers, and never has. If you think I am being unduly harsh, read the Washington Post. You will find story after story saying that the Democrats do not want to do anything drastic about the war. They fear seeming “soft on national security.” In other words, they care more about their electoral prospects in 2008 than they do about the lives of GIs. It is no secret. For them it is a matter of calculating the vector sum of the ardent-patriot vote which may be cooling, deciding which way the liberal wind blows, and staying poised to seem to have supported whoever wins.

Soldiers do not realize, until too late, the contempt in which they are held by their betters. If you are, say, a Lance Corporal in some miserable region of Iraq, I have a question for you: Would your commanding general let you date his daughter? Oh yes, we honor our fighting men. We hold them in endless respect. Yes we do. For that matter, Lance Corporal, ask how many members of Congress have even served, much less been in combat. Ask how many have children in the armed services. Look around you. Do you see many (any) guys from Harvard? Yale? MIT? Cornell? Exactly.

You are being suckered, gang, just as we were. It is a science. The government hires slick PR firms and ad agencies in New York. These study what things make a young stud want to be A Soldier. Then comes the calculated psychological conditioning. And so you come out in splendid physical shape and feeling no end manly and they tell you how noble it is to Fight for Your Country. This might be true if anyone were invading the country. But since Washington always invades somebody else, you are actually fighting for Big Oil, or Israel, or the defense industry, or the sexual ambiguities who staff National Review, or the vanity of that moral dwarf on Pennsylvania Avenue. You will figure this out years later.

Once you are in the war, you cannot get out. While your commander in chief eats steak in the White House and talks tough, you kill people you have no reason to kill, about whom you know next to nothing – which one day may weigh on your conscience. It does with a lot of guys, but that comes later.

You are being suckered, and so are the social classes that supply the military. Note that the Pentagon cracks down hard on troops who say the wrong things online, that the White House will not allow coffins to be photographed, that the networks never give soldiers a chance to talk unedited about what is happening. Oh no. It is crucial to keep morale up among the rubes. You are the rubes. So, once, were we.

Link here.


The Year was 1914 and the Great War was under way. Christmas season was upon the participants of war, and the scene was set for one of the greatest Christmas stories of all time. For two days, the fighting stopped, the guns fell silent, and men who had been enemies days before, came together in the spirit of brotherhood, peace, and goodwill. The soldiers came together to bury their dead, sing hymns, hold worship services, exchange gifts and play soccer. It was the spirit of Christ, the Prince of Peace that moved these soldiers to act in complete opposite of how soldiers should act. They looked beyond the propaganda, and saw in each other humanity and likeness.

This story is not new, but it has never been told in a more beautiful and stirring way than by Walter Cronkite at Temple Square with the Mormon Tabernacle Choir and Orchestra. The narrative concludes with the most beautiful rendition of Silent Night I have ever heard. It begins with two soldiers from opposing sides singing the sacred hymn, alternating stanzas. The choir then comes in at the end of the first verse to finish the remaining two verses. I have never been more inspired.

This magnificent story needs to be told over and over again. Not only to ourselves, but also to our children and grandchildren. I cannot think of a better way to spend Christmas Eve, sitting around the lit Christmas tree, telling the story of those brave men, who for a brief moment, followed the example of Christ, and proclaimed peace. This is available in hardcover book and companion CD or DVD.

Link here.
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