Wealth International, Limited

Offshore News Digest for Week of February 5, 2007

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

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



More Americans choose to live in Nicaragua, as locals question the loss of their homeland.

SAN JUAN DEL SUR, Nicaragua – The rutted road to this sleepy port cuts through some of the hemisphere’s poorest terrain, past barefoot farmers, ox-drawn plows and rickety shacks in sugar cane fields. But once here, heaven is for sale. “You gotta go see Paradise Bay! It will take your breath away!” reads one of the English-language billboards hawking property.

In the latest twist – some would say mixed blessing – in Nicaragua’s complicated relationship with the U.S., the country’s Pacific coast is turning into a hot new destination for U.S. vacationers and retirees, who are snapping up property faster than you can say “gringo”. For years, Yankees have lived part-time or year-round in Mexico, Costa Rica and Panama. But their embrace of Nicaragua is remarkable for many reasons.

Latin America’s poorest country after Haiti, Nicaragua is an unlikely spot for comfort-loving U.S. citizens. And while Americans are popular here, not all Nicaraguans love the U.S. government, which backed the corrupt Somoza dynasty for decades before funding rightist Contra rebels in a 1980s civil war that killed 30,000 people. Moreover, leftist Daniel Ortega, the ex-revolutionary whom the Contras tried unsuccessfully to oust, was just re-elected president after 16 years out of office – although he now welcomes foreign investment and promises his government will not confiscate private property as it did during his previous term. All that makes Nicaragua even more attractive to some adventurous newcomers.

Despite its poverty, Nicaragua has the lowest crime rate in Central America, note boosters such as Scott Kelly, 37, who studied dozens of countries before moving here last year to open a computer software company, Nica Geeks. Though real estate prices have risen 5-fold since 2000, they are half those of Costa Rica or Panama, and a fraction of those in the U.S. Only about 7,000 U.S. citizens live in the New York State-sized country of 5.6 million. But that is triple the number three years ago and residential sales to Americans are increasing 25% a year, said Raul Calvet, a Nicaraguan consultant to foreign developers.

The U.S. presence underscores an increasing porousness regionwide. “You have got people moving in both directions as investors, as individuals, as families,” said Richard Feinberg, a Latin America expert at the University of California, San Diego. “Americans are bringing dollars and know-how, and contributing to the local economy.” While many locals benefit, he cautioned, “others will suffer dislocations.” That apparently is the case in San Juan del Sur, a small, unassuming town on a pretty crescent beach that locals call “Los Estados Unidos Pequeños” (The Little United States ...

Link here.

Cocaine is king on Nicaragua’s Caribbean coast.

From the drug runners’ point of view, the working environment along Nicaragua’s Caribbean coast is as good as it gets. Deep poverty, high unemployment and widespread resentment over decades of government neglect has made it easy for cocaine traffickers to set up support networks in the towns along the Miskito coast and the islands off it. The area is so remote and so different from the rest of Nicaragua, it could be another country. Named after a 17th century Dutch pirate, Bluefields is the largest town in the area. The coast is populated largely by Miskito Indians and descendants of African slaves. English and Miskito are the dominant languages, corrugated iron and wood the dominant building materials.

To hear authorities tell it, many of the locals work for cocaine trafficking organizations as lookouts, intelligence agents, and suppliers of gasoline for speedboats refueling on the run from Colombia’s northern coast to Mexico – the penultimate stop on the long cocaine trail to the U.S. “On the islands, entire communities provide logistics support for the narcos,” said Captain Manuel Mora, chief of Nicaragua’s Atlantic Naval Command. “Everybody is involved, one way or the other. Everybody.”

That gives an edge to the traffickers, according to authorities, and so does the fact that the smugglers are better equipped than those trying to intercept them. “They have night vision equipment,” said Mora. “We don’t. They have satellite communications. We don’t. They have vast resources. We don’t.” In the past four years, Mora said, his force had seized 11 tons of cocaine and 40 northbound speedboats. As a rule of thumb, narcotics experts say that for every vessel intercepted, at least four get through.

The smugglers’ craft of choice is a fiberglass vessel powered by three 250 horsepower motors for a top speed of 70 miles per hour. What the U.S. sees as a threat, many of the impoverished inhabitants of the area see as an opportunity. Apart from steady incomes for those providing logistics support, many harbor hopes of winning the cocaine equivalent of the lottery – finding 55-pound waterproof parcels of cocaine floating in the sea after being dumped by smugglers pursued by the navy or spilled in accidents. One parcel would be worth around $75,000 here. Half of Nicaragua’s 5.5 million people live on less than a dollar a day. Rags-to-riches tales involving seaborne cocaine have become part of the local lore on the coast, and the islet of Sandy Bay is spoken of frequently. “Somebody who fishes out a cocaine parcel would see it as a blessing from God, not a reason to alert the authorities,” said Capt. Jose Echeverria, head of the port authority in Bluefields. “Take poverty and joblessness, add easy money and you get a bad mix.”

The mix gets even worse, Bluefielders say, when cocaine replaces cash as payment for services rendered, a trend that has accelerated over the past few years. As a result, drug addiction has become a growing problem in Nicaragua, particularly on the Atlantic Coast. “It’s a sad thing to say,” remarked Luis, a retired fishing boat captain who did not want his last name used. “But it is hard to find a Bluefields family which has not been affected by drugs.” That includes his own family. “I have 11 children and one of my sons has gone to work for the narcos. I told him that was a bad idea. He didn’t listen.”

Link here.


This year’s Heritage Foundation economic freedom ranking puts Panama at 65.9%. Most marks were high except two, freedom from corruption and property rights. Both of these categories ranked around 30% which brought the average down considerably. Both of these have to do with the legal system. Property rights for titled land is one of the best in Latin America but if you get into a legal battle, corrupt judges can be bought off to rule in favor of the highest bidder. This is one of the reasons people use corporations to hold their properties. This gives them a level of anonymity and protection. If Panama can clean up the judiciary system its ranking would be in the mid-80’s, putting it on par with First World countries with the advantages of low taxation and little litigation.

The 65.9% freedom makes it the world’s 47th freest economy. Its overall score is 1.3 percentage points lower than last year, partially reflecting new methodological detail. Panama is ranked 10th out of 29 countries in the Americas, and its overall score is slightly higher than the regional average. Panama receives high scores for business freedom, fiscal freedom, freedom from government, financial freedom, investment freedom, and monetary freedom. Commercial operations are generally subject to clear rules, although bureaucratic inefficiency worsens the regulatory environment. Personal and corporate income tax rates are moderate, and overall tax revenue is low as a percentage of GDP. Government expenditures are also fairly low, and the country experiences only a marginal amount of inflation. The law welcomes foreign capital and imposes only minor restrictions on investments. Panama is a regional financial hub and uses the U.S. dollar as its currency.

Panama is weak vis a vis property rights and freedom from corruption. The judicial system is backlogged with cases, not committed to contract enforcement, and subject to political interference. The economic climate is further hurt by a significant amount of corruption in the judiciary and civil service. Trade regulations are enforced inconsistently.

Link here.


Bride-to-be Megan Ziemba was weighing two Caribbean destinations for her winter wedding when the U.S. government stepped in and tipped the balance. Ziemba, a New Yorker, chose a colonial mansion in Puerto Rico, where her 100 guests will not have to worry about a new passport requirement that has given the U.S. territory an edge in the crowded Caribbean tourism market.

Since the law took effect January 23, American air travelers, who long have been able to visit most Caribbean islands, plus Mexico and Canada, with only a driver’s license, have had to show a passport upon their return to the states – posing a problem for the more than 70% of U.S. citizens who do not have one, and posing a threat to tourism-dependent nations. Puerto Rico and the neighboring U.S. Virgin Islands, on the other hand, expect a windfall from impulse vacationers and wedding planners like Ziemba.

On other Caribbean islands, the rule designed to increase U.S. border security has conjured fears of economic ruin. While governments lobbied Washington for a deadline extension, tourism boards have launched campaigns encouraging Americans to sign up for passports. Puerto Rico, however, is aggressively branding itself as a no-passport destination with a $36 million advertising campaign on the U.S. mainland. The U.S. Virgin Islands has labeled itself “America’s Caribbean”.

The pitch has aggravated rivalries in the region’s $23-billion tourism industry. The U.S.-administered islands, which joined a regional campaign to delay the measure, now face accusations of betrayal from sister islands. “The technical term is breaking ranks,” said Basil Smith, director of Jamaica’s tourism board. “I do recognize their tremendous competitive advantage, and frankly I wish Jamaica had such a competitive advantage.”

While the new rules require a passport for air travel, Americans do not need one for sea or land travel, at least not until 2008, when another round of regulations is expected to take effect. Tourism officials say the staggered implementation gives the cruise industry a competitive advantage. Cruise ship passengers, who typically stay in port for only a few hours, also spend much less than overnight visitors.

Analysts say Puerto Rico will likely experience a jump in bookings, at least initially, with losses expected elsewhere. A 2005 study commissioned by the Caribbean Hotel Association found the measure jeopardized as much as $2.6 billion in tourism revenue and 188,000 jobs in the region. Americans account for more than half the tourists in the region overall, but 87% in the Bahamas and 73% in Jamaica – destinations expected to experience the most severe effects of the new passport rule. With first-time applicants typically waiting six weeks for a passport, the islands say their greatest loss will be last-minute getaways. For budget travelers, cost could also be a factor – passports cost $97, or $82 for children. Details on how to obtain a passport and the new travel rules may be found here.

Link here.


So now Asia’s central bankers and governments are trying curbs on bank lending, construction fees, even environmental regulations in an effort to combat asset bubbles that have made Seoul the world’s 2nd-priciest city and Mumbai apartments cost as much as Manhattan’s. The measures aim to control lending and stem a gusher of money from overseas lured by the more than 25 Asian interest rate increases last year. The risk is that the new measures, easily circumvented and effective only for limited duration, may work no better at deflating bubbles before they burst and prices tumble, potentially shaking global markets.

“It does not take a lot of capital inflows to create very bubbly positions, inflationary positions, financially destabilizing positions,” says Bill Belchere, Asian economist at Macquarie Securities Ltd. in Hong Kong. Policy makers, he says, are “a bit confused about how to handle this.” Developing countries in Asia attracted $98 billion in overseas investment last year, according to UN statistics, about four times the average from 1998 to 2004. Investment in emerging markets in other regions declined last year, the UN figures show.

Not only did last year’s higher interest rates fail to curb overinvestment, they may even have helped draw in all that cash. While South Korea’s central bank increased rates three times in 2006, Seoul’s real-estate boom has continued unabated, jeopardizing President Roh Moo Hyun’s pledge to make housing more affordable. That is forcing the implementation of measures such as home-price caps, stricter borrower screening and curbs on the number of loans a person can take out. Central bank Governor Lee Seong Tae warns that household debt threatens the nation’s longest economic expansion in a decade. Reserve Bank of India Governor Yaga Venugopal Reddy announced curbs on lending, telling banks to double provisions for real estate, personal loans, credit cards and loans against shares. China’s rate increases last year failed to cool an investment boom that stoked the fastest growth since 1995. The central bank also increased the amounts banks have to set aside as reserves four times since June to discourage excessive lending. Even so, urban real estate prices in China rose faster.

“Short of establishing currency controls like we have seen in Thailand, I don’t think measures to reduce property prices across the region will have much of an impact,” says Eugene Kim, chief investment officer of Tribridge Investment Partners Ltd. in Hong Kong, a hedge fund managing about $100 million. “The wealth out there needs to go somewhere.” Thailand’s measures to ward off “hot money” included seeking cooperation from banks to curb baht loans to foreign investors and the sale of bonds in repurchase agreements. The baht kept rising, reaching a 9-year high on December 18. Then the central bank slapped penalties on early withdrawals by investors in Thai assets.

Thailand, Indonesia and South Korea have reason to be suspicious of conventional methods. At the behest of the IMF, their central banks raised interest rates during the 1997-1998 Asian financial crisis to halt an attack on their currencies and stop a flight of funds. The higher rates hurt businesses and put a crimp in spending, plunging the economies into recession. Economists say central banks’ tinkering will not work unless governments in the region reinforce those actions by opening up their economies. Allowing Asian currencies to continue appreciating will limit inflows and deter speculators, they say.

Asian governments might also do more to encourage companies and individuals in their countries to invest more overseas, economists say. Thailand and South Korea have already moved to relax controls on money moving abroad. South Korea suspended taxes on gains from overseas fund investments and let businesses and individuals buy more offshore property, while Thailand raised the ceiling for overseas investments for companies and individuals.

“Asian governments must liberalize their economies to allow consumers and investors to do their thing,” says Macquarie’s Belchere. “Because governments are not doing that, it pushes central banks into a corner. They have to do something to absorb all that liquidity, all those inflows, or they risk a massive inflationary breakout.”

Link here.



U2 is no stranger to using offshore structures to minimize taxes.

During the final concert of U2’s world tour on December 9, Bono, the Irish rock band’s lead singer, launched into One, a song about a love affair gone sour. “Did I disappoint you or leave a bad taste in your mouth?” he sang to 47,000 fans in Honolulu. As if on command, some of the fans held aloft their cell phones and sent text messages of support to ONE, the U.S. group that is lobbying the U.S. Government to donate an additional 1% of its budget to ending poverty. Bono made the same tie-in for the lobbying group during most of the 131 concerts on the Vertigo tour, which began in March 2005 and was seen by 4.6 million fans in worldwide. They sent about 500,000 text messages of support to ONE, according to the group.

While Bono was making his appeal, U2 was racking up $389 million in gross ticket receipts, making Vertigo the second-most lucrative tour of all time, according to Billboard magazine (after the Rolling Stones’ current tour). Revenue from the tour is funneled through companies that are mostly registered in Ireland and structured to minimize taxes. “U2 are arch-capitalists ... but it looks as if they are not,” says Jim Aiken, a music promoter who helped stage U2 concerts in Ireland during the 1980s and ‘90s. “Bono’s campaigns reflect a great amount of concerns that U2’s audience also has, such as AIDS and malaria in Africa, and that cannot help but have a beneficial effect on record sales,” says Simon Garfield, author of Expensive Habits: The Dark Side of the Music Industry, a book about the business of rock. U2 has sold about 9 million copies of the album linked to the Vertigo tour, How to Dismantle an Atomic Bomb. In addition, U2 sells merchandise at the concerts, such as a $30 T-shirt with a photo of the band on the front.

With his trademark wraparound sunglasses and cowboy hat, Bono is as famous for exhorting world leaders – from U.S. President Bush to Japanese Prime Minister Abe to Irish Prime Minister Bertie Ahern – to give money to Africa as he is for his music. He was awarded a knighthood in December by the Queen and his name has been mentioned as a contender for the Nobel Peace Prize. The 46-year-old Dublin native, born Paul Hewson, is also focusing on his investments. The most recent example is Product(RED), a marketing agreement with half a dozen companies that are selling a special RED line of clothing, mobile phones and other merchandise and donating 40% of the profit they make from the products to a charity that pays for AIDS drugs for Africans with HIV.

Bono’s own dealings have not always followed the altruistic ideals he espouses, says Richard Murphy, a British adviser to the Tax Justice Network, an international lobbying group. Murphy points to the band’s decision to move its music publishing company to the Netherlands from Ireland in June 2006 in order to minimize taxes. The move came six months before Ireland ended an exemption on musicians’ royalty income, which is generally untaxed in the Netherlands. “This is somebody who is exceptionally rich taking the opportunity to shift his tax burden to somebody else but then asking governments around the world to spend that tax take in the way that he would like,” Murphy says.

During the 1990s, U2 used non-executive directors who were resident in an offshore tax haven to limit the amount paid by the four band members. “We pay a great deal of tax around the world and in Ireland we do not pay any more taxes than we have to,” says Paul McGuinness, U2’s manager. “U2 were never dumb in business,” Bono says in Bono on Bono. “We don’t sit around thinking about world peace all day.”

What a business it is. Bono’s empire encompasses real estate, private-equity investments, a hotel, a clothing line and a chain of restaurants. He also owns a stake in 15 companies and trusts, including concert-booking agencies, record production firms and trusts that are mostly registered in Ireland. U2 was one of the first successful bands in the world to have obtained all rights to its own music. In addition, Bono shares three homes with his wife and four children. While Bono promotes charitable causes, he does not disclose whether he personally gives any money to them and, if so, how much. “{We] don’t focus on charity too much – that’s private; justice is public,” he told the Dublin’s Sunday Independent newspaper in June 2005.

Link here. (Also see this article summary below.)


Four more UK banks with an offshore presence outside mainland Great Britain have found themselves caught in the expanding net of EU tax inspections. EU citizens who have money in the banks, which have previously been out of reach of taxation from the country where they are resident, will now find their banking details being handed over for inspection by Britain’s HM Revenue and Customs. It is estimated that 100,000 customers will be affected and unpaid taxes of £275 million ($540 million) recovered. Commentators have noted that this is much lower than the $3 billion estimated when a similar ruling was made against Barclays in 2006, indicating that speculation may have been very wide of the mark.

The four banks now obligated to hand details to the revenue officials, following a court case in the UK, are HSBC, Royal Bank of Scotland, HBOS and Lloyds TSB. Last year another British bank, Barclays, was also ordered to reveal details of accounts held in the Channel Islands of customers resident with EU countries. The action has been made possible by the EU Savings Tax Directive, which came into force in July 2005 to give uniform information exchange between EU countries. Effectively, countries report interest on savings paid to citizens of other EU countries to home authorities of the resident in question.

Offshore banking centres such as the Channel Islands, Isle of Man and a number of affiliated countries and jurisdictions, including Caribbean island dependencies of the UK and Holland are also part of the continent’s tax directive. However, Bermuda was missed out, apparently due to an administrative error during the drafting of the EU directive and currently remains outside the regulations. At the moment there is no indication that it will affect Bermuda bank accounts held by residents of EU states.

A report in the Financial Times stated that HMRC would be looking for evidence of UK-domiciled individuals who have not declared the interest and other income they may be receiving from bank accounts held in the Channel Islands. It is illegal to conceal such income from tax collectors, although having an offshore account is not a crime.

Link here.


SLI has sent a plea to the Chancellor of the Exchequer to include measures in the forthcoming Budget to simplify parts of the offshore tax system by removing unnecessary administration burdens. It has particularly suggested the government should remove the reporting requirement in Inheritance Tax (IHT) regulations for transfers which are less than 3.5% of the zero-rate band. SLI said a “good” tax should have minimal compliance costs, but it warns the reporting requirement imposes an additional administrative burden without yielding any tax to HM Treasury.

David Kneeshaw, chief executive of SLI, has used the letter to recommend four “modest changes” which it believes should be dealt with in the upcoming Budget, which is expected in March, describing them as “positive steps to simplifying the tax system.” Kneeshaw also suggests the government should abandon proposals to shorten filing dates, as he says the “ever-increasing complexity of tax legislation” means more rather than less time is needed to “calculate the liabilities flowing from sophisticated transactions.”

Meanwhile the insurer suggests the government should introduce a statutory definition of residence, based on the number of days of physical presence in the UK, which it says should stop any future legal disputes. The recommendation follows concerns raised by the recent ruling by the HM Revenue & Customs (HMRC) Special Commissioners which seemed to contradict guidance which allows offshore business people to visit the UK for 90 days a year without paying tax. SLI says a statutory definition of residence would “allow individuals to know where they stand and save a considerable amount of resource for both HMRC and potentially affected individuals.”

In addition Kneeshaw is also suggesting the government should change the way income is calculated for age allowance purposes, as he points out if an individual surrenders a life assurance policy the whole gain is included as income for age allowance purposes in that year, even though the investment gains have built up over a period of years. And SLI points out as a result this method of calculation often leads to the loss of age allowance and can result in marginal tax rates of more than 30% for pensioners with an income of less than £25,000.

Link here.


The IRS’s Whistleblower Office opened for business this month. The congressionally mandated program is designed to receive information that helps uncover tax cheating and provide appropriate rewards to whistleblowers. The Tax Relief and Health Care Act of 2006 established the Whistleblower Office, which will process tips received from individuals who spot tax problems in their workplace, while conducting day-to-day personal business, or anywhere else. A reward worth between 15% and 30% of the total proceeds that IRS collects could be awarded if the IRS moves ahead based on the information provided.

Link here.


In the long and glorious history of taxation, some of the state’s plunder outshines its routine thieving, if only for the audacity factor. My wallet was suddenly lightened by an unexpected $300 the other day when I visited those nice young ladies at the local revenooers office. You see, I was visiting my son and his family near Austin, Texas when I saw a dealer ad for $11,000 off Dodge Rams. I bought a bright red 2007 Dodge Ram 1500 Quad Cab pickup. But then came registration of the vehicle in Arkansas where I have lived for the last four years, and “settling up” on taxes. It makes no difference in this tale of tax woe where I had purchased the truck – Texas, Arkansas or Timbuktu – as long as I must register it in Arkansas.

The posted MSRP was $33,040 and that was fluffed up by a dealer add-on of some $1,000+ in claimed paint and fabric protection and other nonsense. But with a solid $10,000 off that I agreed to pay $23,235 for the truck, plus the familiar TTL the government clips us all for. Heck, I paid $19,200 for a far more modest Ford F150 back in 1998. That amounts to no auto price inflation whatsoever in my 9 years between new vehicles.

So how much was the sales tax? The dealer calculated what to send to Arkansas at 6% of the net sales price, or $1,394.10 billed to me. That was the right tax liability if I had still lived in Texas, where the auto sales tax is 6% too and the tax base is the net sales price the customer actually pays. Naturally, I expected the same from Arkansas but, alas, no such luck. In Arkansas the 6% tax applies to the higher “sales price” of $28,235 before the manufacturer’s rebate is applied. That boosted my tax liability a tidy $300.10 for the darlings over at the Arkansas state government. Ka-ching! I suppose I should feel grateful that the state did not tax me on the posted sticker price of $34,000+!

It turns out that this practice of collecting sales taxes on higher prices than consumers actually pay is widespread. For example, consumers often pay full retail price and the associated sales tax on groceries and related items, send in a coupon and get a rebate to bring down their “net price” but never recover the higher sales tax they already paid. These small rebates only total about $3 billion nationally each year, but auto rebates run closer to $30 billion. If only half those are taxed at 6% rate, state governments rake off a tidy $900 million annually on phantom retail spending.

“There is no art which one government sooner learns of another,” Adam Smith observed in 1776, “than that of draining money from the pockets of the people.” More to the point is what they say in Albania: fire, water and governments know no mercy.

Link here.



Last spring, Keith Richards, the craggy-faced and hard-partying lead guitarist for the Rolling Stones, fell from a tree at a beach resort in Fiji, slamming his head against the trunk on his way down. Mr. Richards was flown to New Zealand, where a surgeon provided emergency care to treat swelling in his brain. While the accident forced the Rolling Stones to cancel part of their summer tour, Mr. Richards, 62, handily survived his plunge. “I guess what I learned is, don’t sit in trees anymore,” Mr. Richards later told Rolling Stone magazine.

What two of the other three Rolling Stones apparently learned, including Mick Jagger and Charlie Watts, was that Mr. Richards’s near-death experience meant that it was time to think about their heirs. For that, the aging rockers turned to a reclusive Dutch accountant, Johannes Favie, whose company, Promogroup, has helped them minimize their tax bills for more than 30 years.

And so, last August, according to details disclosed in documents maintained by the Handelsregister, the trade registry of the Netherlands, Promogroup helped the three performers set up a pair of private Dutch foundations that will allow them to transfer assets tax-free to heirs when they die. Other Dutch shelters that Promogroup has arranged for the three have already paid off handsomely. Over the last 20 years, the three musicians have paid just $7.2 million in taxes on earnings of $450 million that they have channeled through Amsterdam – a tax rate of about 1.5%.

Rock powerhouse U2 has transferred lucrative assets to Amsterdam (see article summary above), as have other pop singers and well-known athletes, all of whom have used or continue to take advantage of the Netherlands’ tax shelters, according to a Dutch tax lawyer who requested anonymity because of client confidentiality agreements. Entertainment companies and others that benefit handsomely from the Dutch shelters include EMI, the giant record label, and CKX, the entertainment company that owns stakes in “American Idol,” the Elvis Presley estate and the soccer pin-up idol David Beckham.

When it comes to attracting celebrity wealth seeking shelter from taxes, the Cayman Islands and other classic Caribbean tax havens are receding in favor, according to tax experts in The Netherlands and overseas. While old-school, offshore tax havens still attract money, they are largely patronized, tax lawyers and entertainment bankers say, by hedge funds and private equity firms looking to protect trading profits from taxes. But for earnings derived from intellectual property such as royalties, the Netherlands has become a tax shelter of choice. With celebrities lending their names and images to clothing lines, licensing their hit songs to corporate sponsors, seeking roles in Hollywood and engaging in other ventures that generate significant taxable income, the Dutch system, which does not tax royalties, offers a nifty shelter.

As they flock to Amsterdam, celebrities are taking a leaf out of the playbook of major corporations that also use Dutch tax shelters to help reduce or eliminate the royalty taxes on patents, another form of intellectual property. “The Caribbeans are thinking about trading profits, not royalties, so the smaller European countries like Holland have had to be creative, tax-wise,” said David Pullman, an investment banker in New York who caters to entertainers and athletes. “They are going for the high-end stuff and don’t want to be seen as shady like some Caribbean haven.”

Many of the world’s multinational corporations, like Coca-Cola, Nike, Ikea and Gucci, have set up holding companies here in recent years to take advantage of tax shelters nearly identical to the ones that the Rolling Stones and U2 use. An additional draw is the Dutch Finance Ministry’s recent willingness to issue advance rulings that effectively bless the tax shelters, a fast-track process that has lured in companies and individuals seeking to use the Netherlands as a tax shelter. American software and hardware giant Sun Microsystems operates Dutch holding companies and is candid about why it does so. Until recently, on the Web site of the Netherlands Foreign Investment Agency, Sun offered a blurb that made no bones about its attraction to the country’s accommodating tax laws.

The Netherlands is home to almost 20,000 “mailbox companies”, Dutch shorthand for corporate shells set up by foreign companies and wealthy foreigners who use them to relieve taxes on royalties, dividends and interest payments, according to a report last November by SOMO, the Center for Research on Multinational Corporations, a nonprofit group in Amsterdam that monitors the business practices of large companies. Globally, some 1,165 companies use Dutch tax shelters to reduce or eliminate taxes on royalties and patents, according to SOMO.

The report, which is critical of the emergence of the Netherlands as a tax haven, says that the number of mailbox companies “has been increasing rapidly in recent years” and that the shelters undermine efforts by governments worldwide to “ensure that a level playing field is created where each country receives the fair taxation due to it as a result of the commercial activities undertaken within its borders.”

Historically, of course, the Netherlands has always looked outward, building global trading links and establishing the world’s first stock exchange in the 17th century. That outlook has spawned legendary leniency, generosity and openness. Prostitution and some drugs are regulated but legal. State-funded benefits are substantial. The government even offers tax breaks to students studying witchcraft. Some experts see a darker side to the emergence of the Netherlands as a sought-after tax shelter. In 2000, the OECD black-marked the country as one of the world’s top five industrialized tax havens for promoting “treaty shopping” for low-tax jurisdictions. The Netherlands tightened certain rules, requiring more substance for Dutch companies set up solely to reduce or eliminate taxes. But some analysts say that troubles persist.

While no one has suggested that any of the entertainers, athletes or celebrities making use of Dutch shelters are laundering illicit funds or engaging in illegal acts, the fact that some of them are gaming the tax system has invited criticism. News of the Rolling Stones’ Dutch tax shelter did not particularly roil fans or the British tax authorities. The Rolling Stones are widely regarded as one of the world’s most commercial bands. But critics say that U2’s tax move to Holland is threatening to tarnish the halo surrounding the well-regarded, affable and articulate Bono, by lending him a whiff of hypocrisy.

Some tax advisers in Holland relish extolling the benefits of their service when compared with classic Caribbean tax regimes. A tax lawyer at Greenberg Traurig in Amsterdam, observed that “it’s better to be here than sit on an island, where they don’t even take euros.” Amid such jousting, the fact that U2 is financially decamping to Holland has raised some eyebrows. Jeff Swystun, a global director at a New York-based brand consulting firm said that “the Stones will always be credible because of a very simple proposition: we want to have a great party.” But U2, he said, “almost project themselves as a nonprofit, so the tax move does not really fit with the brand values that they are trying to communicate.” Not so, says U2. “U2 is a global business and it pays taxes globally,” said Paul McGuinness, the band’s business manager. “Innovative tax policies have been the bedrock of Ireland’s current prosperity. Like any other business, U2 operates in a tax-efficient manner.”

Dutch tax benefits are typically available only to artists who are not citizens of the U.S. While the Netherlands does not tax royalties going in or out of a Dutch company, the U.S. typically levies its standard corporate income tax rate of 35% on royalties coming into America from a Dutch entity. Dutch holding companies set up to protect royalties often work in tandem with offshore Caribbean companies, shuffling money around to escape taxes, analysts say. For example, part of the Rolling Stones’ Dutch-run assets are funneled through the Netherlands Antilles, a Dutch protectorate and a classic Caribbean tax haven, according to company registration documents.

U2 and the Stones “are taking advantage of this in the same way that all the drug companies are putting all their patents in favorable tax jurisdictions,” said Prof. Michael J. Graetz of Yale, an authority on tax shelters and a self-described die-hard Rolling Stones fan. “I would not go so far as to say it’s fair, but it is not shocking either.”

Link here.


Canadian companies’ use of offshore financial centers (OFCs), like Barbados and Ireland, often prompts debate over perceived tax revenue losses. Appearing before a Commons committee recently, Finance Minister Jim Flaherty, in discussing OFCs, raised the issue of “tax fairness” and went on to claim “there is significant tax avoidance there.” But is that all there is to it? Or does Canada’s economy benefit in other ways from capital investment that flows through OFCs, which ought to be considered in evaluating international tax policy?

The benefits of foreign direct investment in Canada and Canadian investment abroad are well understood. Domestic investment drives employment, technology transfer, trade, and productivity growth, to the benefit of Canadian workers. At the same time, investment abroad allows Canadian firms to exploit firm specific advantages, globalize supply chains, and gain access to foreign technology and management techniques, all of which are transferred back to Canadian firms.

In 1970, Canada received $4 in direct investment for every dollar of Canadian direct investment abroad. Today, Canada sends abroad approximately $1.25 in investment for every dollar arriving there. A closer look at the data shows that much of the growth in investment abroad has involved OFCs. One of the defining characteristics of an OFC is a low level of tax. Canadian multinationals use these OFCs as conduits to the global economy. That is, the funds do not stay in the OFC, but rather are invested in markets throughout the world. The multinationals use these OFCs by creating indirect financing structures to allow them to invest abroad with lower capital costs than otherwise.

Of the 42 jurisdictions identified as OFCs by the IMF in 2003, Canadian firms had investments in 25 of them. Interestingly, four of these are among the top 10 destinations for Canadian investment abroad. The OFC’s share of all Canadian direct investment abroad has at least doubled since 1990, to about $97-billion as of 2004. Barbados is the largest conduit, receiving about a quarter of all Canadian investment capital destined for OFCs.

There is an important distinction between low-tax jurisdictions and tax havens. According to the OECD, low-tax jurisdictions in and of themselves do not amount to “harmful tax practices”, whereas tax havens may. The distinction between the two relates to transparency and information sharing that comes with a low-tax jurisdiction and is absent in a tax haven. Barbados is an example of a low-tax jurisdiction that is not listed as a tax haven.

The Canadian government’s immediate concern has been the initial loss in tax revenue that accompanies the use of OFCs. Public discussion on this issue tends to stop there. Whether using these conduits is “good” or “bad” for Canada, on the other hand, depends on their overall impact on the Canadian economy.

Although the investment arrives in an OFC, the investments are destined to third markets, such as Latin America, East Asia, or Europe and sometimes the U.S. Theory suggests that using conduit jurisdictions reduces the cost of capital for the multinational, improving its competitive position. Canadian firms are better able to compete in global markets, especially in markets where risk is high, when they are able to channel investment through OFCs. The cost of capital for a corporation that uses Barbados as an offshore financial centre to access the global economy is lower because, under an agreement between Canada and Barbados, income earned by a subsidiary of a Canadian company incorporated in Barbados is subject only to taxes in Barbados.

When it comes to tax policy, the important question is whether using OFCs to access the global economy is good for Canada. Simply put, overseas investment through offshore financial centres like Barbados enhances Canada’s trade, which eventually translates into higher business investment and employment in Canada. The presumed income tax losses associated with companies using OFCs has an offset in our increased trade with the global economy, and therefore includes benefits at home.

Link here. Complete paper here (PDF).


A flurry of advance-fee loan scams is victimizing consumers across the U.S. and Canada, the Council of Better Business Bureaus warns. Consumers who respond to phone calls or ads that purportedly guarantee loans to those with poor credit instead lose hundreds of dollars or more in fees demanded by the suspected scammers.

The frauds follow a typical pattern. Consumers call a toll-free number and are told to submit credit information over the phone or fill out paperwork to be mailed later. In exchange for a $5,000 to $100,000 loan, they are told to wire or mail a money order for $500 or more to pay processing fees or other charges. The applicants never get the loan, and they lose what they paid in fees. They also risk having their identity stolen if they provided a Social Security number or other personal data to the scammers.

Although the CBBB had no data on the number of victims, spokesman Stephen Cox said workers in the council’s 129 local bureaus have fielded a rise in complaints about the alleged scam. Nata Clegg, a 30-year-old legal-office worker from Fort Worth, said she almost lost $607 this month when scammers told her she qualified for a $5,000 loan. Luckily, Clegg checked the address listed by the purported firm, Elmhurst Financial Loan Corp., and discovered the location was actually a restaurant in Wisconsin.

Others have not been as lucky. According to the council, scammers using the name B&T Financial Group hijacked the Web site of an Ohio insurance firm near Cleveland late last year. Consumers who responded to loan offers saw the insurance firm’s identifying information online. But new phone and fax numbers had been set up by the suspected scammers. Several victims lost as much as $1,000 each in fees wired to Canada, the council said.

Link here.


Britons filed for bankruptcy in record numbers last year, as rising interest rates forced consumers to default on swelling debts. Individual insolvencies in England and Wales rose 59% from 2005 to 107,288, the Department for Trade and Industry said. The reading was the highest since records began in 1960.

Britain’s mounting consumer debt creates a dilemma for the Bank of England. In raising interest rates to a 5-year high to bring down inflation, the central bank risks squeezing those households that can least afford it. Mortgage repossessions increased by more than 50% last year. “People are blindly taking on debt without thinking about how they will repay it,” said Louise Brittain, head of personal insolvency at Baker Tilly, the U.K.’s #7 accountancy firm. “As a nation, we have totally binged. I think the numbers of insolvencies will continue to rise.” British consumer debt equaled 104% of GDP as of June 30, compared with 92% in the U.S., according to PricewaterhouseCoopers. Bankruptcies may continue to rise after BoE’s recent rate increase, to a total of 130,000 in 2007, accountants KPMG LLP predicted.

The surge in bankruptcies last year also reflects an increase in so-called individual voluntary arrangements, which allow individuals to write off most of their debt and make gradual repayments on the remaining amount. The increase in IVAs helped fuel a 50% jump in first-half bad debts at Barclays Plc and stall retail profit at Lloyds TSB Group Plc, where bad debts rose 20% in the period. British banks are now rejecting more debt plans as they try to curtail rising consumer defaults. Lenders have criticized the marketing of some IVAs, saying they have been sold to people they are not suitable for.

More than one million people have missed regular debt payments and another two million are “constantly struggling”, to meet their financial obligations, the Financial Services Authority said. Total debt now amounts to 152% of household disposable income, up from 91% in the late 1980s, the FSA said. Debt difficulties have also spawned a new generation of U.K. reality-television shows in the past year, including BBC2’s Pay Off Your Mortgage in Two Years. The program followed eight households trying to curb their spending habits and increase their incomes enough to erase their home loans.

Link here.


I am as guilty as the next person. I have sat around with my pals wondering how a neighbor, a colleague, or, yes, a good friend, can possibly afford to put that huge addition on their house. Or take those many overseas vacations. Or pay for the private schools and the fancy summer camps and the second home. Some people we just write off as trust fund babies or hedge fund zillionaires or lucky dogs who got into the stock market at the right time and cashed out. But others are more perplexing. They look like us. They seem to come from roughly the same backgrounds as us. But they sure do not act like us.

I do not exactly envy them. Oh, occasionally I wish we had that house on Martha’s Vineyard, or did not have to choose between remodeling the bathroom or taking a summer trip, but generally I know how fortunate we are. But I do sometimes burn with curiosity about how they do it. And wish that talking about money was not so fraught in this society so I could just ask them to explain it. For years, economists, academics and psychologists have written about how money is the last taboo. It has become a virtual cliché to say that people would rather talk about their sex lives or child abuse than their finances.

Elissa Schappell was a co-editor, with Jenny Offill, of an anthology called Money Changes Everything (2007), a compilation by 22 writers, many fairly well known, discussing how money, whether it disappeared over generations or arrived in a sudden windfall, affected their lives. But the contributors had to write under their own names and some could not do it. “We lost a good one,” Ms. Schappell said. “He had written about his drug addiction, about a nervous breakdown, but he would not write about money.”

That instinct, however, might be beginning to change. The inability to address issues of money – and the envy it causes – is creating more financial and psychological distress than we can imagine, psychologists and social scientists say. We overspend to keep up with neighbors and friends, take jobs we are not happy at to keep up a lifestyle we think we should have, and compulsively watch television shows that flaunt multimillion-dollar homes and exotic vacations.

Although grappling with issues of money is certainly not solely an American experience, the paradoxical way we treat it is peculiarly our own and stems from our contradictory history, said Dalton Conley, chairman of the sociology department at New York University. “One string is consumption, social status and competition,” Professor Conley said. “That is a strong part of the social fabric in America. Another is the Puritan string in American capitalism: to save, to lead an inconspicuous life.” The saving and the discreet lifestyle, however, Professor Conley noted, have been somewhat lost in recent times. Instead, no home seems to be big enough and increasingly fancy cars idle in front of us on the school run.

Sometimes it seems as if we must be doing something wrong because we cannot possibly afford what they can – even if we do not want it. But we do not know the truth, said Shira Boss, author of Green With Envy: Why Keeping Up With the Joneses Is Keeping Us in Debt, (2006). “The accessibility and availability of debt has created a fiction that was not there 20 years ago,” Ms. Boss said. “We do not have a grip on who can afford what. Your external lifestyle is a lot lower when you are living within your means – you can see extravagance, but not financial security.” Ms. Schappell said that editing her book made her realize that “all the ready credit gives of the illusion of living the American dream.”

In the introduction to their book, Ms. Schappell and Ms. Offill note that “economists report that middle-class families are now carrying record levels of credit card debt, going without health insurance and filing for bankruptcy at several times the rate of the early 1980s.” Ms. Schappell said she now believed, however, that the old-fashioned ideal of working hard, saving and gradually making it is a bankrupt one. Instead, the way people envision growing rich, she said, is through a windfall: “a malpractice lawsuit, the lottery or going on a reality show – it’s the new American dream.”

But envying people is part of human nature, right? It is one of the seven deadly sins, one of the Ten Commandments. There are studies and surveys that show people never feel they have enough. For example, in 2005, PNC Advisors asked 792 of its rich private-banking clients what they would need to feel financially secure. Virtually all said they needed to double their wealth. 29% of those with more than $10 million to invest also said having more money generated more problems than it solved. Others say the problem is more one of society and less one of individuals. That the drumbeat to consume more all the time is so deafening that few can resist.

“I strongly disagree that it is human nature,” said Allen D. Kanner, a psychologist and co-editor of Psychology and Consumer Culture (2004). “Our nature is being molded pretty powerfully by the media. If we started a trend to extract marketing from our lives, it would go a long way to reducing money anxieties.” Mr. Kanner is also a co-founder of the nonprofit Campaign for a Commercial-Free Childhood.

Tim Kasser, an associate professor of psychology at Knox College in Galesburg, Illinois, said the answer was to want less. There is a small movement, he said, heir to many such groups in the past, called voluntary simplifiers who have chosen to make do with less. This does not mean they live puritanical lives without modern conveniences, but rather they have consciously chosen to make less money and work fewer hours to spend more time with families and friends. A study in 2005 of 200 “voluntary simplifiers” in 48 states compared with 200 similar people in the same geographical areas who lived regular lives found that the simplifiers were happier according to a variety of criteria, said Professor Kasser, author of The High Price of Materialism (MIT Press 2002). (Details about the movement can be found at here.)

Even though we do tend to compare ourselves with those who have more, not less, it does help to remember that there is truth in clichés - like money does not buy happiness. “You have to look at what money is standing in for in your life. Is it safety? Does it make you socially acceptable? Does it make you important?”, Ms. Schappell noted. Attitudes about money may also change as the baby boom generation moves toward retirement, Professor Conley said. “As this group leave their earning years, will they set a leisure and consumption culture for the rest of us or will they move into a more frugal mode of life and the whole dynamic will change?”

Link here.



How much would you sell your private data to a company for? Would you take $1,000 to let someone see every site you have visited over the past year? Today, many major companies spend millions collecting a variety data on individuals such as what charities you donate to, your political beliefs, your shopping habits, your educational data and your contact information. And you never get to decide how much your privacy is worth to you, because these companies are not asking your permission.

Here we highlight 10 of the worst corporate offenders when it comes to invading privacy. We hope that by helping to bring to light some of the personal privacy infringements that these companies are engaged in, more people will begin to select the companies they do business with on the basis of their privacy policy. If that starts to happen, real consumer-driven change is possible. So without further adieu, here are the top ten big corporate privacy offenders:

  1. ChoicePoint, a marketing conglomerate, wins our coveted George Orwell award as the company most likely to be watching you right now; i.e., Big Brother. ChoicePoint maintains more than 17 billion records on 220 million people with topics ranging from social security numbers to DNA samples. The majority of the company’s information is sold to the highest bidder which more often than not happens to be a representative of the U.S. government, a leading American company, or a Nigerian fraud group. Another factor that makes ChoicePoint the biggest privacy threat is the company’s failure to provide a high level of data security. A 2005 breach in security resulted in more than 750 cases of full blown identify theft.
  2. Google. It seems the only thing growing faster than Google’s control of online searches is their database which they hope will eventually hold information on every internet user in the world. Google boasts databases big enough to permanently save the countless number of searches internet users make each and every day. The information Google stores on its users is great enough to create a virtual identity equipped with information ranging from favorite flavors of ice cream to sexual fantasies. And who can forget Google’s infamous eye in the sky, also known as Google maps. How scary of a thought is this: a group of people monitoring servers in California know everything you did yesterday, your major plans for the rest of the week, and where you live. To top it off, Google offers services such as GMail and Web Accelator that can store even more information about your personal life. Unfortunately, however, that is not the worst of Googles privacy offenses.

    Google’s most prominent form of data assimilation lies in their cookies. Where most websites set cookies to expire in a few days (or in rare cases a few months) Google configures their cookies to expire in 30 years. Google claims this gestation period is to gather information to provide users with more accurate search results and protect Google from denial of service attacks and other cyber-crimes, but the simple truth is Google is gathering your information and has the storage space to create a very detailed picture of your online activity.
  3. Acxiom. Dubbed as the premiere source of addresses and telephone numbers for telemarketers and mass mailers, Acxiom has a reputation of collecting data better than anyone else. Acxiom boasts records on millions of Americans including drug test and criminal histories, education data, and the popular “Suspected Terrorist Watchlist” available at a premium price. The company claims this data is to help employers weed out untruthful applicants and illegal employees, but often the information is used to create very targeted ads by advertisers.
  4. Accenture takes the #4 spot for their growing reputation in expanding digital dossiers and accepting a $10 billion dollar contract with the DHS to build a surveillance system that tracks visitors, to, from, and within the U.S. The system calls for extensive fingerprints and photographs of all visa wavier travelers and non-naturalized U.S. residents. The system is also experimenting in futuristic technologies such as facial recognition. Not only will Accenture know your credit history and previous court dates (even if only jury duty), they also know what you look like.
  5. Microsoft. It will come as little surprise to many that Microsoft products are among the world’s elite when it comes to privacy invasion. Microsoft is constantly developing new ways to aggregate customer data for the ostensible purpose of creating a “smoother ride” for the user. Practically speaking, however, many Microsoft products and features are designed simply to provide a convenient way for the program to report back to Microsoft databases what type of activities you regularly engage in on your computer. In effect, Windows works like a two-way mirror: the customer has little idea that Microsoft is literally watching every move he makes.

    Perhaps the most insidious method of privacy invasion Microsoft employs is the “Windows Live ID” (formerly .NET Passport). Live ID collects data from the majority of Microsoft networks including MSN, Hotmail, and Xbox Live, and stores them in a central database. This data includes email addresses, generic personal information (name, age, etc.), your favorites (books, video games, gadgets, etc.), address books and contact lists (so your friends can be exploited too!), and much more. Microsoft then takes this data and generates ads targeted specifically to you.
  6. Yahoo!, the world’s most popular website, is also one of the world’s biggest data aggregators. The plethora of services Yahoo! offers provides the ideal data collection scheme. Yahoo! does not have to go through any extraordinary means to obtain your personal information. Instead, users voluntarily divulge their information every time they use a company product, perform a search, enter a promotion or sweepstakes, or purchase products through Yahoo!. Eventually, Yahoo! has acquired enough of your personal data to create for each user an individualized profile which they use to target advertisements that are most likely to appeal to you.
  7. Amazon.com. It should come as no surprise that the world’s biggest online store has a lot of private information pass through its servers on a daily basis. Amazon happens to have receipts on more than 59 million active customers, which are used by the company to track the purchases that individual customers make. And Amazon.com now has the capability to cross reference their database with public records to create enough marketing information to make any unscrupulous retailer squeal with delight.

    Amazon is currently among the world leaders in distributing information about its users to advertisers. If they continue this practice their recent advancements in data mining threaten to make shopping online with any form of anonymity a thing of the past. Here is an excerpt from their privacy policy: “As we continue to develop our business, we might sell or buy stores, subsidiaries, or business units. In such transactions, customer information generally is one of the transferred business assets.”

    Yes, you read that correctly, Amazon is in the business of selling private consumer data. And for that move, they earn the #7 spot in our ranking.
  8. America Online’s privacy intrusion efforts are so aggressive and offensive, that the only explanation seems to be that AOL thought its naïve clientele would never catch on. Last August, AOL released web search data from more than 650,000 users without prior consent. A handful of users involved have since then filed a lawsuit citing that the released data contained information some users considered too private to ever make it beyond the comforts of their own home.

    To attract new customers, AOL is currently using an anti-spyware software campaign. What they fail to tell you is that packaged within portions of their software (including AIM and various online games) lies WildTangent, an application that reports personal information directly to various databases. AOL went so far as to fail to tell users WildTangent was being installed on their machines in the End User License Agreement - ! – until mounting complaints finally forced their hand.
  9. LexisNexis is as notorious for its inability to secure the private information it has as it is for its privacy invasions per se. The LexisNexis database includes millions of records which include mailing addresses of almost every person in the U.S. In July 2005, the LexisNexis security system was compromised resulting in more than 300,000 records being stolen by computer hackers. This security breach ranks among the top personal data heists of all time. Luckily, the hackers were identified as a few teenage kids looking to have some fun, but it demonstrated how inept their security measures are at protecting one of the largest caches of private data in the world.
  10. Response Unlimited. In what is perhaps the boldest information scam of all time, Response Unlimited, a large marketing firm, received authorization to sell a list of Terri Schiavo’s financial contributors to other companies as sales leads. The story broke only after it was revealed that most of the donors were constantly getting loads of spam and telemarketing calls. This shameless consumer data mining scheme earns them the #10 spot on this countdown.

This Top 10 list is intended to highlight some of the worst actors among big business. If this article leaves you with anything, I encourage you to become more educated about the privacy policies of the companies you do business with, and consider making consumer decisions on the basis of what you learn.

Link here.

In serious Windows Vista doubt? Try Ubuntu instead!

Those of us who will not be rushing out to grab a copy of Windows Vista still have a few options. Not the least is sticking with Windows XP for the time being, as several tech experts have recommended. What about those of us who have had it up to here with Windows XP but also are not ready to spend tons of cash on a Vista-capable PC? Here is a thought. Take a second look at Linux and, specifically, Ubuntu.

Once just the stable and solid workhorse of quietly humming server rooms, Linux has made some incredible strides in recent years as a desktop operating system for the masses. Ubuntu, the pet project and entrepreneurial venture of tech millionaire Mark Shuttleworth is constantly pushing the envelope, making Linux an easier choice for end users the world over.

I have put together a short list of tips and resources for the non-conformists out there who would rather swim upstream than be carried down-river by the latest from Redmond. The point? If you are ready for Linux, Linux is ready for you.

Link here.


“Why are you traveling so often to Canada?” the tough U.S. border guard barked. I was on Amtrak, going from New York to Montreal, as I had done dozen of times before over several decades. This was my first experience (summer 2006) of the increasingly standard and intrusive “U.S. Exit Interviews” on trains crossing the border. I have been hassled on every train crossing since then, most recently January 2007.

The U.S. now has a combined FBI-compiled file of all arrests and charges at all government levels for millions of Americans, and this is instantly viewable by police in many jurisdictions, including border officials of the U.S. and most other countries. In some cities, local police can access this file via one’s license plate. The files do NOT show the favorable disposition of arrests that did not lead to charges or of dismissals and findings of innocence. “And what is this entry stamp from Canada, with no country of departure? Was that from Cuba? You know U.S. citizens may not travel to Cuba – you could be imprisoned and fined.”

This line of questioning has been part of every exit interview since. The first time, the guard took my passport and kept it for about 30 minutes. Others – Canadians and foreigners as well as U.S. citizens – were getting similar queries, but mine took much longer. Two weeks after I returned from Canada, the Canadian immigration agent called me. “We have fully investigated your dossier – you have been approved and are welcome to return when you wish.” Since that time, I continue to be hassled by the U.S. “exit” police, but I am always dealt with quickly and politely by the Canadians. It is clear from my experience, as well as that of U.S. Green Party and peace activists barred from entering Canada during anti-globalization demonstrations two years ago, that a million or more former peaceniks and other radicals will now see more and more attempts to keep them at home.

Most Americans are unaware of the new police state procedures of U.S. officials who seek to keep millions of Americans from traveling, including trips across the border to our North, once thought the least difficult international frontier in the world to cross. There are now regular stops at “internal” checkpoints for cars traveling toward, away from or near the border in states from Maine to Washington. This includes permanent checkpoints on interstates 100 or more miles from the border in New York and Vermont, as well as moving patrols who stop motorists in all parts of the border states. Civil libertarians and others in the border states, including conservative farmers, have protested this dramatic departure from the assumed tradition of allowing Americans freedom of travel – certainly freedom to leave their own country. Homeland Security admits that few terrorists (some say none) have been apprehended by this dubious process, but various “sex offenders and other criminals” have been caught, and drugs and other contraband seized. This is in addition to the “exit interviews” of Americans leaving by train or bus, which are now routine.

One group, aside from dark-skinned people and Muslims, targeted by the internal checkpoints, are students and other young people. Persons under 18 cannot cross a U.S. border alone, unless they are with a guardian and have notarized letters from a parent, as well as a passport issued in their own name. Persons between 18 and 21 may be questioned about their intention to engage in behavior (sex or drinking or marijuana use) strongly penalized in the U.S., but either decriminalized or lightly punished in Canada. Up until three years ago, unaccompanied persons over 16 were seldom checked. Student groups, including bus tour groups, now report very close scrutiny from the U.S. Exit police. Some bus companies now refuse to take groups of students under 21 across U.S. borders because of hassles they face.

The big media story about all this has been the new requirement that all U.S. air travelers returning home must now have passports, including those coming from Canada, Mexico and the Caribbean, and that citizens of those countries must also have passports when coming by air. Similar requirements for passports at land and sea crossings will go into effect sometime after next January 1. (These measures have been strongly protested by Canada and Mexico, to little avail.) Aside from the expense of passports, having to have passports even to go and come from Canada or Mexico will limit a very large number of Americans from international travel, period.

One group that gets very special attention are registered sex offenders, of whom there are now just over 600,000 in the U.S. The public generally approves of all measures to limit or control this group of pariahs – including those convicted of minimal offences like prostitution and public sex, or in some cases even urinating in public. Beyond sex offenders, though, virtually all the 5 million plus persons who are on parole or probation for state and federal felonies will be unable to keep or get passports. Another large group are the 4 million or so who are “child support delinquents”. At least 2 million (mostly male, but some female) or so “deadbeats” meet the minimum requirement of being $5,000 or more behind in their payments, which triggers (since 1994) automatic passport cancellation or denial. Among these are at least a half million teenage fathers, mostly very low income school drop-outs, often unemployed and sometimes homeless. By some estimates, between 13 and 20% of all black men are forbidden to hold or keep passports.

Most media attention about new U.S. travel restrictions has focused on harm to tourism and other business. A Canadian government website dedicated to international trade, Strategis.Ca, estimates that there has already been an 8% reduction of U.S. visitors to Canada and a 7% reduction of Canadian visitors to the U.S., but that this will rise to 14% or more by the end of 2007 for visitors in both directions. Gay tourism to meccas like Montreal and Vancouver is decidedly down – some say as much as 30%. This would reflect the greater likelihood that gay men and women, like non-whites and the poor, would fall afoul of U.S. laws more frequently due to discrimination.

At the beginning of the Cold War, Winston Churchill made his famous comment about an iron curtain descending across Europe. Like many others, I experienced this iron curtain. I faced incessant exit and entry police interrogations in places like East Berlin and at the Soviet borders. In those days, such long waits to get OUT of a country, as well as to get in, were limited to the “Communist” block primarily. Now that virtually all travel barriers have fallen throughout Europe – including Eastern Europe, and with travel in and out of China or Vietnam far easier than before, it is around the U.S. that the iron curtain seems to be descending. As in the Soviet or Chinese blocks before (or more recently in Cuba), the elites could travel, but the various dissidents, deviants and ordinary folk could not. This sad fact is becoming increasingly the case for many U, S, citizens today.

So far, very few liberals or libertarians have taken note of this chilling trend to limit travel for huge numbers of Americans. Unless protests against these measures grow quickly, it will be too late to stop or even slow them down. America, like Russia and China before it, will become a prison for many of its people.

Link here.



Two weeks after a senior Pentagon official suggested that corporations should pressure their law firms to stop assisting prisoners at Guantanamo Bay, major companies have turned the tables on the Pentagon and issued statements supporting the law firms’ work on behalf of terrorism suspects. The corporate support for the lawyers comes as law associations and members of Congress have expressed outrage at the remarks of Deputy Assistant Secretary of Defense for Detainee Affairs Charles D. “Cully” Stimson on January 11.

In a radio interview, Stimson stated the names of a dozen law firms that volunteer their services to represent detainees, and he suggested that the chief executives of the firms’ corporate clients would make the lawyers “choose between representing terrorists or representing reputable firms.” He said he expected the newly public list of law firms that do work at Guantanamo Bay to spark a cycle of negative publicity for them. Instead, Stimson himself became the center of nationwide criticism and later apologized for the remarks.

The episode has become an embarrassing chapter in the Pentagon’s long-running battle with the detainees’ lawyers and appears to have spurred public support for the legal rights of the detainees, nearly 400 of whom just marked the start of their 6th year of incarceration at the base.

A spokesman for Boston Scientific said the company supports the decision of its law firm, WilmerHale, to represent six men who were arrested in Bosnia in 2001 “because our legal system depends on vigorous advocacy for even the most unpopular causes.” The general counsel of General Electric said the company strongly disagrees with the suggestion that it discriminate against law firms that do such work. “Justice is served when there is quality representation even for the unpopular,” he said in a statement. Verizon issued a similar statement.

Michael Ratner , president of the Center for Constitutional Rights, said that in his early days of defending Guantanamo detainees he got hundreds of hate letters from the public every time he spoke about the issue on television. But now, he said, he receives only positive feedback, especially since Stimson’s remarks. “They miscalculated, that is for sure,” said Ratner, who helps coordinate 500 lawyers and 120 law firms across the country to defend the detainees. Support for the defense of Guantanamo detainees has become so widely accepted that two Newton attorneys are defraying the cost of their trips to Guantanamo Bay by collecting donations from the public.

Some lawyers said publicizing the names of the law firms had achieved one of Stimson’s objectives – distracting attention from the roughly 395 men who remain imprisoned. “[T]hey did not get the kind of support that they were hoping [for],” said Neil McGaraghan, a Boston-based attorney at Bingham McCutchen, which represents a group of ethnic Uighurs from China at Guantanamo Bay. “But to the extent that it has drawn attention away from Guantanamo and focused it on the lawyers, it has worked.”

Link here.
Thumbscrews for freedom – link.


Germany has ordered the arrest of 13 suspected CIA agents over the alleged kidnapping of one of its citizens. Munich prosecutors confirmed that the warrants were linked to the case of Khaled al-Masri, a German national of Lebanese descent. Mr. Masri says he was seized in Macedonia, flown to a secret prison in Afghanistan and mistreated there. He says he was released in Albania five months later when the Americans realized they had the wrong man.

Mr. Masri says his case is an example of the U.S. policy of “extraordinary rendition” – a practice whereby the U.S. government flies foreign terror suspects to third countries without judicial process for interrogation or detention. Prosecutors in Munich said in a statement that the city’s court had issued the warrants on suspicion of abduction and grievous bodily harm.

The information on which the warrants were based came from Mr. Masri’s lawyers and a journalist and officials in Spain, where the flight carrying Mr. Masri is thought to have originated. The names and nationalities concerned were not released but prosecutors said the names identified were thought to be the code names of CIA agents. “The investigation will now focus on learning the actual names of the suspects,” they said. German arrest warrants are not valid in the U.S. but if the suspects were to travel to the EU they could be arrested.

Link here.


On September 23, 2006, a SWAT team stormed the rural Virginia home of A.J. Nuckols, his wife, and their two children. As if the shock of having his house invaded by a SWAT team were not enough, Nuckols had a second surprise. One of the SWAT officers who assisted in the raid was none other than NBA all-star Shaquille O’Neal.

The raid was no rehearsal. Nuckols was the innocent target of a very real “wrong door” paramilitary police raid. The police believed, inaccurately, that Nuckols was a child pornographer. In a letter to the editor of the Chatham Star Review, he described the raid: “Men ran at me, dropped into shooting position, double-handed semi-automatic pistols pointed at me, and made me put my hands against my truck. I was held at gunpoint, searched, taunted, and led into the house. I had no idea what this was about. I was scared beyond description.”

An “honorary deputy” with the Bedford County Sheriff’s Department but untrained as a SWAT officer, Shaq apparently has gone on several such raids across the country. The presence of an untrained celebrity on this type of activity is especially strange, given that the most popular police excuse for forced-entry, military-style raids is the volatile, high-risk nature of serving a search warrant. But SWAT teams with star power are more common than you might think. Matt Damon recently accompanied SWAT officers on several raids while preparing for the movie The Departed. And after police mistakenly shot and killed immigrant and father Ismael Mena on a raid in Denver in 1999, they revealed that then-Colorado Rockies first baseman Larry Walker went along for the ride. Denver police added that it was fairly common to take sports stars on drug raids.

O’Neal, who aspires to be a police officer when he retires from basketball, told Time that Nuckols’s description of the raid was exaggerated. “We did everything right, went to the judge, got a warrant. You know, they make it seem like we beat him up, and that never happened. We went in, talked to him, took some stuff, returned it – bada bam, bada bing.”

Link here.


Officials from the EC and U.S. government met to review progress in the fight against counterfeiting and piracy. EC Vice-President Günter Verheugen, who has responsibility for enterprise and industry policy, observed that “Effective enforcement of intellectual property rights is crucial for our industry and to protect Europe’s citizens. Too often poor imitations of all kinds of products, including medicines, are a threat to the health and safety of the buyer. Today’s meeting has clearly shown that we are making real progress.”

U.S. Secretary of Commerce Carlos Gutierrez highlighted the importance of doing more. “We cannot let American innovators – the creative forces behind our knowledge-based economies – be left to fend for themselves,” he said. “Protecting IP is not only critical to protecting consumer safety, but also to ensure a stable and growing economy. ... Our next steps will be critical and I look forward to our ongoing partnership.”

Link here.



Does climate change caused by mankind even exist? My answer is “No.” The idea is highly improbable. And I view its support by a panel of scientists as a fraud, notwithstanding the participation of those sincere scientists who have examined research and contributed to its interpretation. But the latter fraud pales by comparison with four far greater deceits: (1) The world needs to wage a War on Climate Change. (2) The states of the world should spearhead this war. (3) The states of the world have the authority to prosecute such a war. And (4) said states can wage such a war successfully.

The quixotic idea of a War on Climate Change is preposterous. Statesmen who cannot control their tempers, their verbal blunders, and their bedrooms, propose to control the world’s climate. Statesmen who cannot get through the night without having to relieve themselves, who cannot settle a dispute over a barren island, and who routinely lie, cheat, and steal, propose to unite in an effort to control the earth’s climate. Men who routinely unleash forces within society that are beyond their control, and who then try to control them with bombs, terrorism, napalm, mines, missiles, and issues of paper money, now propose to control the world’s climate over the next 100 years. What insanity is afflicting us? What impossible propaganda will we the people not sop up and place our faith in? We are utter fools if we believe this claptrap. We are utter fools if we do not suspect that any cooperation they might cobble together is anything but designed to further their power over us.

Like America’s wars, the War on Climate Change, when and if it occurs, will also not be marked by a clear declaration. It is in fact already occurring and has been occurring for some years under a host of idiotic but no less lethal titles and appeals such as environmentalism and sustainable development. A War on Climate Change has the potential to create the worst dictatorship the world has ever seen, one that invades the private lives of every person. In such a war, there will be no clear demarcation of an enemy or enemies. They will be kept vague. They will be an ever-moving and ever-changing target. They will change with the climate, and the climate is notoriously changeable. As the climate alters naturally, the political states of our world will have a perpetual and ideal excuse for further intrusive actions to control the micro-behavior of all of us. If we are to battle the climate to stem its being warmer, say, then in the future why not battle it for other purposes? The War on Climate Change will serve mankind’s rulers and their minions, who will batten on their control and dominance. The people of the world have everything to lose and nothing to gain from a War on Climate Change.

The latest big noise, causing a severely high reading on the pollution of ideas index, is the fourth report of The Intergovernmental Panel on Climate Change. This Panel is a United Nations agent. We greatly deceive ourselves if we believe that we will be led into the light by government reports, especially reports of inter-government organizations such as the U.N. We greatly deceive ourselves if we believe that panels of scientists working under the auspices of government agencies will lead us into the light of true knowledge. Hundreds, even thousands, of scientists may have their names attributed to the final report. This will lend weight to the document and make its pronouncements seem irresistible. But such reports are still government reports, and many of the scientists will be government employees. It will not necessarily be a bias produced intentionally by those participating, although I do not discount such blatant bias. It will be what is technically called selection bias. We cannot assume that we are hearing the evaluations of objective scientists. We should rationally assume the opposite. Furthermore, a few persons will write the final report after gathering the input of many. These few will have a disproportionate effect on the final conclusions. The press reports that such was the case with the latest report.

Has there been climate change? Over long enough time periods, climate changes remarkably. Are many regions of the earth now experiencing such change? There is little assurance that the answer is yes, because climate varies a lot over time. Is whatever variation that is now occurring attributable to mankind? There is little assurance that the answer is yes because the variables influencing climate vary greatly over time and are not well-understood. The bald fact is that there is no need to launch a War on Climate Change even based on the facts of climate. Faced with this lack of necessity alone, are we supposed to melt with fear because there happen to have been more hurricanes in the Atlantic or because ice is melting in the Arctic? Are we supposed to place our lives in the hands of government and allow bureaucrats and scientists to change our lives dramatically in the vain hope of changing the concentration of carbon dioxide in the atmosphere? We could not do anything more foolish. Those telling us this myth have a conflict of interest. They benefit by propagating this story.

Even if the people of the world are causing climate change, what are its costs? No set of states will ever be able to assess them. They too depend on too many imponderable variables. We cannot expect the state to measure costs and benefits for us in an unbiased way, and we cannot expect them to be able to measure them in the first place. They simply cannot. The press reports that a number of large companies already are lining up to support the U.N. report and the War on Climate Change. This is no different than Brown and Root and Haliburton seeking and getting Iraq war contracts.

The state has no constitutional authority for the measures it might contemplate and enact. That has not stopped it in the past. In this case, as in all the other of the state’s crusades, the proper expectation we should hold is that the state will succeed at its purposes of its own aggrandizement, control, and enrichment, while it fails miserably at the purported purpose of controlling the climate. We should expect that each failure to control climate will be used as an occasion to call for more money and controls. How many times do we have to observe this pattern before we learn? The “war to end all wars” (World War I) initiated more wars. The war on poverty created more poverty and dependency. The war on alcohol stimulated greater alcohol use and crime. The war on drugs has imprisoned hundreds of thousands without stemming drug use. The war against terror has stimulated more terror than ever.

There will be many who will disagree with my assessment that there has been no significant climate change, and there will be those who will say that mankind is causing climate change. Let me say that it would be more accurate if we were to speak in terms of probabilities. The latest U.N. report asserts that the chance of manmade climate change is near 1. I assert that it is near 0. As evidence comes in, all the many individuals who care about this issue change their prior assessments. Usually these assessments are implicit. Most of us do not bring them to the surface consciously. If we as individuals have different implicit probabilities of climate change, so also do we have different valuations of how it might affect us. And we have different strategies for coping with it because we assess different costs and benefits of such change. Each of us is better off establishing our own priorities and tradeoffs than allowing Congress to choose them for us.

Each of us finds ourselves confronted with a raft of costs that interact with all sorts of problems and choices we face, climate change being merely one of them. I find it hard to believe that people individually will spend very much money to attack an intangible and elusive problem like climate change when they have far more pressing problems. In such a situation, the free market is the answer, not the collectivized answer that a Congress might impose on all of us. It may be called democracy, but in subverting the market and free choice, Congressional mandates are soft communism.

Let me worry about climate change, Congress. Let me make my own decisions and adaptations. Let everyone else do the same. Let us adapt. Let us be free to adapt. Let us be free to choose. Let freedom ring, Americans. Stop listening to the siren song of scientific shills. Stop listening to atavistic greens who value swamps and snails more than humans. Stop handing over your lives to politicians and bureaucrats who do not know or care about you.

Link here.
Global warming, the precautionary principle, and the road to totalitarianism – link.
The Al Gore threat – link.


Super Bowl Sunday is a good time to examine the U.S. federal government’s hypocritical relationship with gambling. Betting at Native American casinos on federal land is fine. Wagering in Nevada and New Jersey is OK, too. State lotteries are great. So is the stock market. As long as the government is on the action (taxes), placing a C-note on the Bears or the Colts is as moral as sipping a vanilla milkshake. But do not dare use your BlackBerry or laptop to visit an offshore gaming Web site. The sins? Locking the IRS out of the take and offending the “legitimate gaming” lobby.

It is time to sack the online gaming ban, which makes criminals out of people who may not always have the best judgment but are not doing anything that hurts others. There are, of course, gambling addicts, but the vast majority of players are not. Banning gaming for that reason is about as wise as banning pinot noir because some people sip too much of it. Like other pronouncements against “sin”, the government crackdown is creating crime where it should not need to exist. The prime beneficiaries of the assault on computer wagering appear to be local bookies and illegitimate Web sites run by organized crime, according to the Wall Street Journal.

Apparently some of those who want to place bets on the big game are too scared to do so from their computers, which are easy to trace, but they do not mind risking a call to a guy who looks like one of The Sopranos and collects in person (scary). Some Americans are still taking chances. Some gaming sites in Costa Rica and other countries are still accepting action from the U.S. Americans last year bet $94.5 million on the Super Bowl in legitimate Nevada casinos. That is just a fraction, considering what went to offshore and into office pools.

Gambling is a form of speculating, and if someone thinks they can get a greater return on the Super Bowl than he can on Ford stock, why not let him? (We would put even money on those two choices, by the way.) The best bet would be for the government to lift the online gaming ban, restore liberty and let people waste their money as they see fit.

Link here.


We are in the process of creating what deserves to be called the idiot culture. Not an idiot sub-culture, which every society has bubbling beneath the surface and which can provide harmless fun; but the culture itself. For the first time, the weird and the stupid and the coarse are becoming our cultural norm, even our cultural ideal.’ – Carl Bernstein

I do not know who coined the phrase “The end of the world will be televised,” but more and more, the hip pseudo-prophecy is being fulfilled. Turn on your idiot box, and you will not see cities aflame from nuclear bombs, or land masses submerged by killer tsunamis. I dare say this is lamentable. At least the mega-death prophesied in the Bible might have been quick and relatively painless. But the apocalypse unfolding now is a slow mass death from preventable sickness.

We are all sick and dying from brain to bones. And the sickness spreads, because the afflicted believe they are perfectly healthy. The sickness we are dying from is the loss of all meaning. In the United States, we do not care about anything good or meaningful or lasting or life-affirming. We care about the pointless and ugly and wretched and life-destroying. This sickness, programmed into our brains as easily as a computer virus, is our shared obsession with the inane, moronic, grotesque and murderous.

If you watched the Super Bowl, it is not a problem. But it is a major problem if you have never once questioned why the Super Bowl is important to you. No one is BORN enamored with the sight of steroid-riddled maniacs tackling each other and running with a ball. In fact, no one can articulate a rational basis for an emotional investment in any sporting event. We only care about such inanities because we are following a collective illusion created and fueled by the media-driven culture.

This is not a small matter. Every problem afflicting human beings is the result of erroneous cultural programming. If you were born in a particular region of the world at a particular time and EVERY person around you – including your mother, your father, your spiritual counselors, your government officials, and media personalities – taught you to HATE a certain type of person (Jews, Muslims, Christians, the Irish, the British, whoever), you could not have shrugged off the conditioning and chosen a different path. You, like I, could have easily been made a suicide bomber, a terrorist, a holy warrior, a murderer. I am not saying that people who watch the Super Bowl are the moral equivalent of murderers and terrorists. I am saying that OVERWHELMINGLY, we have no idea why we think the way we think or do the things we do.

Buddha taught that the source of all human suffering is ignorance, but we are not ignorant. We are stupid – too stupid, in fact, to even choose what is constructive and meaningful over what is obviously destructive and meaningless. But this is not entirely our fault. “Beauty is truth and truth is beauty,” and the truth is hard to see when you are being pummeled by ugliness. We are drowning in meaninglessness, but the source of life’s meaning is not a well-kept secret. It is well-established through human testimony, and even supported by medical science, that happiness and contentment can be found in family, friendship, community, and the intangible beauties of art, literature, music, poetry, architecture, and nature. Likewise, the ingredients of a physically healthy life - essential for any life to have meaning – are not at all mysterious. But both meaning and health remain elusive for many of us, because we are immersed in a culture that is totally meaningless and totally destructive.

The favored pastime of Americans is not reading or exercise or any activity that could be defined as healthy or good. Most Americans spend their free time watching TV, and this habit is handed down from parents to their children. The problem is not just that excessive TV viewing leads to a sedentary lifestyle, obesity, heart disease, a loss of social skills and friendships, and a breakdown of familial communications. A perhaps even greater problem is the totally grotesque and fallacious “paradigm” promoted on the vast majority of television programs. Given the prevalence of TV watching in America, it is no wonder that so many of us are lonely and depressed.

It is clear that meaning cannot be found in mainstream American culture. In fact, meaning can only be found through the conscious RESISTANCE of virtually every value and lifestyle trend that the culture promotes. To do this, one must first acknowledge that most if not all of his opinions and values might be completely invalid. Like it or not, ALL of us are the products of cultural conditioning. This recognition can be terrifying, but it is the first and most critical step toward freedom and empowerment.

Link here.
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