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COPAN RUINAS, HONDURAS: RESIDING IN A TOURIST TOWN
Copan Ruinas is a village that is approximately 12 kilometers from the Guatemalan border in Honduras’s Western Highlands. There are 10,000 people living in the region and outlying aldeas (small villages) with 5,000 of these inhabitants living in the village itself. There are fewer than 40 foreigners who live here full time. The region is most famous for the the Maya Ruins for which it is named, which attract around 200,000 visitors a year (the definition of the word “Copan” is a bridge between two places, it is also believed to have been named after a Mayan indian chief named Copan Galeal, but there is no recorded history of this). But Copan Ruinas is now becoming known more and more for the coffee that grows in the outlying plantations and the coffee tourism it is starting to attract, as well as the Ruins.
Living in this mountain village and tourist area for 16 years as a “local” has been wonderful, and was a happy surpise as when I arrived here to take Spanish Lessons at the then brand new Spanish School. I fell in love with the mist-covered highlands and then fell in love with a wonderful Honduran restaurant owner/tour guide, got married, and stayed. These events all happened within a 6-week period and 16 years later it is all still magic.
My two story home whose veranda looks out toward the sunset every day cost me $5000 and has been my “nest” for 15 years. I often wonder how much it would take to reproduce this cottage in the United States with its flagstone paths, antique wood floors, and hand thrown tile roof. I think the view alone would probably be cost prohibitive for me and even with the inconveniences of sometimes losing electrical power, at times not having water (build a larger holding tank) the property is paid for and I, my husband, and 3 labrador retrievers, live on about $250 a month for food, utilities and telephone. This leaves a lot of left over for luxuries, if I so desire.
Living here however, has been a lesson in patience. It is an experience that continues to fascinate me, even after all these years. It has made me more assertive, bilingual, artistic and more imaginative than I ever would have been living anywhere else. Dealing with and respecting cultural differences has been one of the more challenging aspects of living abroad, especially in a developing nation. If you can remember that you are the guest, basically, and Hondurans, especially those from the mountains, have their own pace, then this mountain village has unlimited possibilities for full time residents. Anyone whose desire to live in an area that is not jaded by overdevelopment and will willingly put up with a few inconveniences then this valley and Copan Ruinas is definitely a viable option. Tradeoffs for these few inconveniences are being able to sip locally-grown, hand-toasted, coffee on a veranda in one of the most breathtakingly beautiful, mystically enshrouded, mountainous regions of the world. Copan Ruinas as a lifestyle should really be investigated.
Getting here is easy. Staying here if you are retired and have an monthly income is also easy. Building up and maintaining a life may be a little more challenging if you need to live on the income you produce here, but it can be done especially if you are very creative. This of course is the reason some of us listen to the sound of a different drummer, no?
There are apartments and houses tucked away all over the village. While there are no real real estate offices most locals will point you in the right direction. Within the city limits a house will rent for anywhere from $80 to $300 (3 bedrooms, 3 baths, maid service, laundry hookups, garage area). Room and Board (3 homecooked meals a day) in a modern furnished room will go for about $200 or less per month. These are the higher-end places. There are many many houses and rooms available for less, it is a matter of looking around. Two small outlying towns, one 8 km. away (Santa Rita) and the other 4 km. (Osteman) have property and rentals as well as undeveloped lots for sale or rent for much less. There are also houses available in the coffee areas outside of town toward Seisasmill with higher altitudes and cooler temperatures. My suggestion to people who come here and immediately fall in love with the place is to rent for around six months to a year and get a feel for what they want and go from there.
Copan Ruinas’s real estate and its surrounding area is one of the fastest growing and hottest commodities in the Country, but it comes expensively, as most people are speculating on real estate right now. This region has a low to nonexistant crime rate (so far). Hot properties at a good price are in high demand, and Honduran families who have lived here for generations sometimes demand U.S. prices because their houses have been passed down through the generations. The properties are extremely negotiable. It can be done and believe me, there are bargains to be had in this village. Prices as a whole may be higher here than in the rest of the country, but the value continues to climb even after purchase. There is also built in infrastructure on most of the properties with tanks, generators, maids quarters, etc., which can take out some of the “surprises” of living in a developing nation. A tip for anyone who is buying property anywhere in Honduras is to get the name of the law firm that the local banks use. As these law firms are stricter in dealing with loans on properties, they make very sure everything is in order before the last paper is signed.
The average year round temperature is usually in the 80’s (ºF) with the hottest month being in March and April. May through October brings the heavy rains, which usually last maybe an hour or more in the afternoon and sometimes again at night. Not all day like some people think. Then the misty rains which start in October through December that make the soil in the coffee plantations so rich. These rains are responsible for the rich tropical foliage that cover the mountains that surround the village. There are hundreds of species of plants in the mountains that surround the village. It is also a birdwatchers paradise, with over 300 species in the Copan Ruinas valley alone. The wild parrots which fly overhead in the evening on their way to roost are and incredible site with their jade wings fluttering in the sunset!
I have been a bartender, restaurant owner, established the first laundromat, waitress, bookshop owner, coffeeshop owner and wife as well as a consultant and cheerleader for all the benefits of living in this mountain village. The lifestyle is healthy, the air is clean, and the people are very friendly. The local bilingual grade school (Mayatan) is always looking for qualified teachers and hires from all over the world. Since the language they teach in is English, you do not have to be bilingual or even have to know Spanish. If you arrive and see a niche in the market that you would like to fill, starting a business here is very easy.
Copan Ruinas usually enforces immigration laws with travelers who arrive on tourist visas and choose to stay (as I did) and start to work here. As with any visa you get anywhere in the world it usually states that you cannot be employed. If you are planning on long term living here or buying real estate and working here, you need to establish residency. This is not that difficult. I ended up paying a total cost of $1000 over a one year period of time. No matter what they say, it will usually take one year.
Copan Ruinas is in the mountains, but not so isolated that you can not be into a large city within about 3 hours. The Panamerican highway passes behind the village and the roads are paved and maintained and very good. Honduras has the best road system in Central America. With the new open border policy all of the Central American Countries are accesible, stopping and checking cars at borders is a thing of the past and you can exit the country at will. If you prefer to stay in country you can be in San Pedro Sula within three hours. San Pedro Sula, Tegucigalpa, and La Ceiba, as well as Puerto Cortes have top of the line medical facilities, and very inexpensive. A 4-day stay in a clinic for an emergency hysterectomy cost me $1,200.
As you can see, a full time residency in Copan Ruinas, Honduras is a no brainer, I hope that many of you will read this and come a little further south and Mexico and Guatemala. Although both of these countries are excellent choices for the Escape lifestyle, why not come and check us out before you decide! Copan Ruinas, Honduras, is an alternative lifestyle that is rich in culture, history and a wonderful place to call home. Stay here a lifetime, you will be so glad you did!!Link here.
PANAMA, JERSEY, ISTANBUL AND SLOVAKIA THE NEXT BIG THING IN PROPERTY INVESTMENT
Panama, Jersey, Istanbul and Slovakia are expected to be amongst the best property investment areas over the next 12 months, according to a UK-based international property expert. According to Adrian McDermott, managing director for escapes2.com, Panama is already at the top of American investors’ list, and is now attracting interest from European investors.
“Property prices in Panama City are less than half that of American cities such as Miami, and coupled with the fact that the U.S. Dollar has been Panama’s currency since 1904 and given its current weak state, Panama looks a good bet for 2007,” said McDermott. He also pointed out that Panama’s low cost of living and its numerous incentives for retirees has helped the country to become the most popular choice for Americans looking to purchase property outside of their own country.
In Turkey, rapid migration to the city of Istanbul from within the country has pushed up demand for housing there, McDermott observed. He also noted that the purchasing power of Turks is about to expand because of legislation that is being passed to make land titles more secure, opening up the opportunity of loan to value mortgages. Furthermore, the high cost of borrowing from banks and a culture of raising capital by alternative means has caused developers to reduce their profit margins substantially in order to raise the required capital to get their projects off the ground. “For this reason Istanbul now represents great potential for Western Europeans as off plan development prices are considerably less than the completed projects’ local market value,” said McDermott.
Jersey in the Channel Islands currently has a strong rental market owing to a high proportion (27%) of residents living in rented accommodation and enjoys high rental yields compared to mainland UK, McDermott said. He also noted that contrary to popular opinion, there are no restrictions on nonresidents buying property to let on Jersey, and with the government aiming to boost its tax revenues by allowing more licenced workers into the island, property for purchase or rent will be in even shorter supply pushing up rental yields as well as increasing capital growth.
McDermott’s final choice is Slovakia, and in particular the ski resort areas in the Tatras mountains which have seen heavy government investment in recent times. The area is also served by an international airport and the country as a whole is enjoying a period of stability and economic growth, with GDP estimated to have expanded by 8% last year – the fastest in Central Europe.
Founded in 1999 in Manchester, UK, escapes2.com Ltd. initially sold property in the Costa del Sol area of Spain. Over the last few years the company has expanded to cover other areas of Europe and further afield, establishing relationships with property developers and partner agents from around the world.Link here.
WTO AGREES TO HEAR ECUADOR’S BANANA GRIPE
The World Trade Organization has agreed to establish a compliance panel in response to Ecuador’s complaint that the EU has failed to implement previous rulings over banana tariffs. Ecuador had filed the request on 8th March, but the EU blocked it in a meeting of the WTO’s Disputes Settlement Body, delaying its consideration by the WTO for two weeks.
The EU had installed a revised banana import regime with an overall tariff of €176 per tonne in 2006 in response to a previous WTO ruling which obliged it to cut tariffs to banana producers outside its favored ACP countries, which benefit under the Lome Agreement. “At the moment, the tariff is discriminatory and doesn’t allow our bananas to enter EU markets. Our participation in EU markets is going down,” said Ecuadorian trade negotiator Juan Holguin.
“The regime we have in place is completely in line with our international commitments” said Michael Mann, the EU’s spokesman, saying that the EU would have preferred to continue to negotiate outside the Dispute Settlement process. Costa Rica, which also sells bananas to the EU, had said earlier that although it does not agree with the present import regime, it will not support Ecuador’s request for a WTO arbitration panel, and will rather continue negotiations to reach a reduction of the tariff.
Bananas are just one aspect of the EU’s trade relations with developing countries. Peter Mandelson, EU trade commissioner, has been attempting to parlay the conflicting interests of the ACP countries, the EU member states, the WTO’s “Aid for Trade” program and the quarrelsome European Parliament into a coherent developing country strategy. In an effort to square the circle, the EU last year proposed economic partnership agreements (EPAs) with the 70+ ACP developing countries, which would combine increased development aid with extended liberalization periods.
Predictably, no-one liked what they saw. EU member states did not exactly rush forward to find the €$2 billion that the Commission wants to offer. And the ACP countries have been saying for years that EU aid is much promised but often delivered slowly or not at all. Specific programs are often hobbled by protectionist member states and/or cash-strapped producer countries. Sugar and bananas are two examples. The Commission was not allowed to cut the EU’s sugar price by as much as the WTO demanded because of resistance from Caribbean producers, while at the same time hopelessly uneconomic EU sugar-beet producers were bribed to accept a new regime with five times as much money as was being offered in aid to the Caribbean.
British Trade Minister Ian McCartney and Development Minister Gareth Thomas wrote in a letter to the Commission, “The EU must allow ACP countries as much time as they reasonably need to open their own markets, while providing effective safeguards to prevent unfair competition from subsidized European products undermining African products on their own doorstep.” Easy to say, but hard to achieve, especially against the looming 2008 WTO deadline for an end to protectionist regimes.Link here.
HOUSE DEMOCRATS UNVEIL “NEW TRADE POLICY FOR AMERICA”
House Ways and Means Committee Chairman Charles Rangel (D-New York), and Trade Subcommittee Chairman Sander Levin (D-Michigan), have unveiled “A New Trade Policy for America”, which they claim will improve pending free trade agreements and allow for bipartisan support in the House. “The policies we’ve outlined today should send a clear message that this Congress wants trade, but we want trade that works for all Americans,” said Rangel.
“We must use trade as a tool to shape globalization and spread its benefits more broadly,” urged Levin. “Congress, and this Democratic Majority, is reasserting its constitutional authority to stand up for US businesses, workers, and farmers in the global marketplace.” Specifically, the policy calls for the United States Trade Representative (USTR) to:
The proposal also puts these pending FTA issues into the broader context and addresses a number of other key issues, including the pending negotiations with South Korea, the Congressmen said.Link here.
LATVIA SCARE SPOTLIGHTS BALTICS
It is a curious and disturbing fact of current financial life that a message tapped into a mobile phone one morning in Riga, the capital of Latvia, can within hours trigger a run on the country’s currency amid rumours it is to be devalued. Latvia’s security police say the SMS came from fewer than 10 sources and appeared to be based on a newspaper article arguing, but not stating, the currency could be devalued via an adjustment of its peg to the euro. The message spread virally, urging people to sell the Lats, the currency, and to buy euros or dollars instead. Queues formed at Riga’s foreign exchange bureaux, which ran out of euros, intensifying a sense of crisis.
The peg to the euro held fast, but the uncertainty caused 3-month interbank rates to spike at 9% from a previous range of 3.5-4%. The central bank has intervened to support the Lats and raised interest rates. The security police say they have hauled in “bankers and workers from the money exchanges” for interrogation amid claims they perpetrated an attempt to destabilize the currency for personal profit. The results of the investigation will emerge after Easter.
This quirky, high-tech, rumour-driven saga highlights the increasing nervousness surrounding Latvia’s incredible 12% economic growth in 2006, and by extension the similarly high-octane performances of its Baltic neighbors, Estonia and Lithuania, up 11% and 8% respectively. The anxiety is readily explained by a heady combination of high growth, rising inflation, tightening labour markets, spiraling credit growth and large current account deficits in all three countries. Latvia’s current account deficit was 21.8% in 2006, Estonia’s 14.3%, and Lithuania’s 12%. Credit growth last year in Latvia was 57.6%, Estonia 35%, and Lithuania 56.6%.
Unsurprisingly given these numbers, the world’s leading credit rating agencies – Moody’s, Standard & Poor’s and Fitch – have stepped up their analysis of the Baltics and reached the same broad conclusion – they are showing signs of serious overheating and, as a result, the possibility of hard landings has escalated. More aggressive interpretations of the facts drew comparisons between the Baltics and the Asian economies before their crisis in 1997, reasoning that a hard landing in Latvia could trigger a contagion across the Baltics into countries such as Romania and Bulgaria.
While nobody dares rule this out, current thinking on this vibrant corner of northern Europe is more benevolent. The preferred comparison is with pre-euro Portugal, which experienced high growth, a pro-cyclical fiscal policy, rising inflation, a large current account deficit and rapid credit growth. When the cycle turned Portugal did not crash, but went into prolonged stagnation as overextended private sector balance sheets slowly adjusted.
The ratings agencies argue that the reason this is a more likely scenario for the Baltics is that all three economies have shown fiscal discipline with low levels of public debt and strong government finances. The amount of local currency debt held by foreigners is low and the banking system is almost entirely controlled by foreign banks, mainly Swedish. Moody’s emphasises that all three economies are members of the EU and pending euro members. “The comparison with Asia 1997 is misleading. It ignores the nature of EU integration, which lends support to a realistic real income convergence scenario and reduces considerably the risk of a sudden halt to external financing.”
While there are reasons to be cautious, the strangely good news for the booming economies of Latvia, Estonia and Lithuania is that if their politicians fail to implement proper policies to cool growth, they will probably face a Portuguese-style period of slow and painful economic adjustment – hardly an enticing scenario, but better than a full blown crash.Link here.
THERE IS PROFIT POTENTIAL IN THESE OVERLOOKED ASIAN MARKETS
Just 10 years ago that Asia was reeling from its worst economic crisis ever. Since then, markets in this dynamic region have managed to do a complete 180 degree turn. In fact, you could argue that as Asia labored to dramatically improve its balance sheet since 1998 other regions have deteriorated, including many European countries and the U.S.
From Shanghai to Singapore, the majority of countries have resurrected their economies from the near abyss a decade ago. Many countries continue to amass record foreign exchange reserves, bulging trade surpluses with the West and soaring stock markets. The bourses are also extremely cheap in countries like Japan, Thailand and Taiwan. Not to mention many of these countries continue to harbor undervalued currencies supported by generally healthy trade and budget balances. This bullish cocktail of positive economic data should compel value investors to park their long-term wealth in Japanese yen, Thai baht and Taiwan dollars, in concomitant local stock markets.
Other regional markets, though not as extraordinarily cheap as Japan, Thailand and Taiwan, also offer great values in real estate. Singaporean REITs continues to attract substantial foreign direct investment dollars because the local real estate market is still cheap compared to other major cities worldwide. Hong Kong REITs appear to have bottomed and offer excellent value now, after suffering last year amid the spectacular rise in domestic Chinese shares as conservative investors fled income-producing securities. Japan offers not only exceptional values in smaller companies following a 30% beating in 2006, but also in REITs. For the first time in 16 years, the Japanese real estate market posted an increase in land values in 2006. Combined with an undervalued yen and modest income distributions, Japanese commercial REITs are worth a look.
Japanese smaller stocks remain in the buy-zone, while Thai and Taiwanese stocks are equally distressed. And they are distressed for entirely different reasons. In Thailand, the military government botched their foreign-exchange controls last December. The Thai government tried to depreciate the Thai baht, and sent their stocks plummeting 15% instead. But with the recent appointment of a market-friendly finance minister and a gradual reversal of exchange controls, Thai equities are poised to lift off. Bangkok stocks are now Asia’s cheapest at just 10 times trailing earnings and paying a 4.6% dividend. I expect the Thai baht to decline later this year versus the U.S. dollar and other foreign currencies following a dramatic rally since last year. With the Bank of Thailand now cutting interest rates to boost the economy, the time to buy depressed Thai stock has arrived.
The Taiwan market remains 35% off its all-time high almost 17 years ago. Stocks in Taipei were hammered by the dot.com bust from 2000 to 2002. Now they trade for a song. Taiwan is a very large semiconductor manufacturing center, which is mainly supported by huge Chinese companies pouring billions into the economy. The U.S. is also a significant investor in Taiwan. At some point, I expect Taiwanese stocks to post a major recovery, and like the rest of Asia, catch up with other hot global markets almost overnight. Many blue-chip stocks in Taiwan trade at book-value or less, pay dividends in a strong currency and are rich with cash.
I am extremely bullish long-term for Asia. This region has paid its economic dues over the last 10 years and now serves as a model for economic prosperity with over $1.8 trillion dollars in combined foreign exchange reserves. Cheap currencies, attractive stock market valuations and booming economic growth mean a portion of your investment dollars belong in Asia.Link here.
U.S. TELECOM TYCOON STARTS 9-YEAR JAIL TERM FOR TAX EVASION
Convoluted offshore structuring scheme unraveled. Sentence is longest ever handed out for tax evasion.
Walter C. Anderson, the telecommunications tycoon accused of evading $200 million in U.S. taxes, has been jailed for nine years by a federal judge in Washington D.C. – the longest sentence ever handed out for a case of tax evasion in the country’s history.
Anderson, who formed Mid-Atlantic Telecom when the industry was being deregulated in the 1980s, was accused of two counts of tax evasion and one count of failing to report $365 million in personal income in 1998 and 1999. He pleaded guilty to the charges in September 2006. Anderson was arrested in February 2005 at Washington Dulles airport while stepping off of a plane from London after an investigation unraveled a complex set of offshore entities, banks accounts and transactions designed to conceal income earned from his interest in companies he owned.
According to the Department of Justice, in October 1992, Anderson formed an offshore corporation named Gold & Appel Transfer in the British Virgin Islands (BVI) and hired a trust company to serve as Gold & Appel’s registered agent and sole director. Gold & Appel was said to be owned by another BVI company, Icomnet, previously formed by Anderson. Prosecutors believe that Anderson granted himself an exclusive option to purchase Gold & Appel shares for a nominal sum, insuring that no one else could own these remaining shares. By forming the corporations in that manner, neither the option nor Anderson’s name was recorded in the BVI’s public records. Prosecutors said that as a result, Anderson hid his ownership of the corporations that held these assets, but was still able to maintain complete control.
After other merger activity with telecommunications companies he owned, Anderson was said to have further obscured his ownership of Gold & Appel, by using an alias and forming another offshore corporation – Iceberg Transport, S.A. – in Panama. To disguise his ownership of this company, the DoJ said that Iceberg was created as a “bearer share” company, meaning that, unlike U.S. corporations, there was no central registry information on the company. Therefore, whoever had physical control over the actual share certificates was considered the owner.
Anderson allegedly received the shares, using his alias, in a mailbox drop in Amsterdam. Once he set up Iceberg, Anderson was then said to have directed the transfer of shares of Gold & Appel to Iceberg, and represented that Iceberg owned Gold & Appel. Anderson then hired a trust company and its employees to serve as registered agent for the company and as officers and directors of Iceberg, ensuring that he had complete control over it.
According to prosecutors, between October 1992 and July 1996 Anderson transferred his ownership interests in three telecommunications companies to Gold & Appel and Iceberg. In this way, when appreciated stock was sold, or other taxable events occurred, Gold & Appel and Iceberg not Anderson would appear to be the taxpayer. After these transfers were made, each of these telecommunication corporations became dramatically more valuable. Between 1995 and 1999, Anderson used the assets of Gold & Appel and Iceberg, which included the profits realized from these three telecommunication corporations, to invest in other business ventures. This generated more than $450 million in earnings for Gold & Appel and Iceberg during this period.
Anderson was also charged with evading taxes in the District of Columbia and had claimed residency in the state of Florida, which does not levy income tax. Initially facing an 80-year prison term, Anderson will serve nine years under the terms of his plea agreement. Somewhat controversially however, U.S. District Judge Paul L. Friedman ruled that Anderson will not have to make restitution to the IRS of up to $140 million in unpaid tax because of a “poorly drafted” plea agreement. But Anderson was ordered by Friedman to pay $22 million in unpaid tax back the D.C. governmen, although this was only about half of the amount he actually owed.
Before the trial, Anderson had argued that the millions in assets that the government claimed belonged to him were actually in the ownership of the Smaller World Foundation, a charity he set up to promote causes such as world peace, family planning and space exploration. He has since declared personal bankruptcy and the government has been unable to seize any assets to repay the taxes Anderson evaded.Link here.
FOUR CHARGED WITH U.S. VIRGIN ISLANDS TAX EVASION, CONSPIRACY
A federal grand jury has charged a St. Louis car dealer, two Texas men and a USVI resident with using a USVI economic development program to evade $74 million in taxes. The East St. Louis, Illinois grand jury indicted James A. Auffenberg Jr. of Swansea, Illinois, charging him with illegally sheltering $300 million through Kapok Management, L.P., a St. Croix-based partnership that qualified for tax benefits from the US territory. James W. Ferguson III of Amarillo, Texas, Peter G. Fagan of De Leon, Texas, and J. David Jackson of St. Croix were also charged with promoting the scheme.
The indictments cap a 4-year investigation that began with a federal raid of Kapok Management and touched off new federal scrutiny of the U.S. Virgin Islands’ tax incentives. Approved by the U.S. Congress, the program permits qualified taxpayers to cut their federal bill by 90%. A 2004 federal law placed new restrictions on the tax program and chased off a burgeoning hedge fund industry attracted by the incentives, the Virgin Islands government says.
To qualify for the USVI tax incentives, firms must invest at least $100,000 in the territory, buy products such as office supplies and computers in the USVI, contribute to area charities and hire at least 10 people, 80% of whom must be natives of the islands. Company owners must live in the territory for at least half of the year, under federal requirements.
Auffenberg, Fagan, Ferguson and Jackson are charged with income-tax evasion, conspiracy, wire fraud and filing, aiding and assisting in the filing of false individual and corporate income tax returns. The indictment seeks forfeiture of about $16.2 million in cash. The indictment claims Auffenberg, a St. Louis-area car dealer, and other partners in Kapok never actually became bona fide residents of the USVI and used the St. Croix-based Kapok to launder funds they earned in the U.S. They improperly filed tax returns with the Virgin Islands’ Bureau of Internal Revenue instead of with the IRS, according to the indictment.
Jeffrey Demerath, a lawyer for Auffenberg, a St. Louis-area car dealer, said his client only followed the advice of tax lawyers and accountants in deciding to invest in the Kapok partnership and file his tax returns with the territory. “He did everything with the full intent of following the law, and that will be his defense,” Demerath said. He said Auffenberg received an opinion letter from accounting firm KPMG LLP verifying he could participate in the program.
Demerath disputed charges in the indictment that Auffenberg never became a true resident of the USVI, saying Auffenberg was in the territory at least once a month, owned real estate there and registered to vote. Gordon Rhea, a lawyer for Jackson, similarly denied the charges. Jackson was an employee of Kapok, not a partner, Rhea said.
The indictments were issued three years after another Kapok partner, a Massachusetts life insurance executive named Gary Payne pleaded guilty to tax evasion in February 2004. He has not been sentenced. If convicted, the men named face up to five years imprisonment on the conspiracy charge, up to five years imprisonment on each income tax evasion charge, up to five years on each wire fraud charge, and up to three years on each false tax return charge. The men face up to $32.5 million in fines.
The case has major ramifications for the territory’s economic development program, which has struggled to regain legitimacy since the raids on Kapok four years ago and the subsequent law change, Virgin Islands Governor John deJongh said. The territory’s government says the program is needed to boost the local economy. The three principal USVI – St. Croix, St. John and St. Thomas – have a population of 108,605. Per capita income in the territory is $18,652, less than half the average in the continental U.S. and $7,000 less than in Mississippi, the poorest state.
In addition to pledging more oversight of companies that currently are collecting tax benefits, the territory also has been trying to lure technology companies to the islands by touting an abundance of Internet bandwidth off the coast of St. Croix.Link here.
BARBADOS IS KEEPING ITS EYES ON A BILL NOW BEFORE THE U.S. SENATE
Fearing a negative impact, Barbados is keeping its eyes on a bill now before the U.S. Senate designed to curb the presence of American firms in offshore financial centers in the Caribbean and elsewhere. The proposed legislation, introduced by several Senators, including Barack Obama of Illinois, Carl Levin (D-Michigan) and Norm Coleman (R-Minnesota), would, if enacted into law, give U.S. tax and securities enforcement agencies the authority to impose tougher requirements on American firms and individuals using certain offshore jurisdictions.
Michael King, Barbados’s Ambassador in Washington, said that the island was concerned about the potential impact of the bill. “The Government of Barbados is well seized on this matter and efforts are being made in Bridgetown to ensure that the voices of Barbados will be heard in defending our position on the Barbados financial services regime,” he told the Midweek Nation. “Barbados and the U.S. have had a double-taxation agreement since the 1980s. Indeed, a protocol was signed revising that treaty on December 20, 2004, and we do hope that there would be no legislation being proposed by members of the U.S. Senate or Congress overriding the language of an existing treaty between two existing states.”
The proposed legislation has already drawn the fire of several influential national organizations and lawmakers on Capitol Hill who brand it as a violation of “America’s obligations to the World Trade Organization” and warned that it would “undermine American competitiveness.” The measure would, among other things:
Barbados has resisted efforts to label it as a tax haven. Instead, it uses the term “low-tax” jurisdiction to describe itself. King said the island was very concerned about the measure because of its possible negative impact on the offshore sector not only in Barbados, but throughout the Caribbean. The backers of the bill are claiming that could force corporations and individuals to pay more than $100 billion in additional taxes, which would otherwise be left offshore.Link here.
U.S. FREE-MARKET COALITION ATTACKS DEMOCRAT TAX PLANS
44 of the USA’s largest and most influential free-market groups have sent a letter urging Treasury Secretary Henry Paulson to “protect America’s self-interest” and oppose proposals by Senator Byron Dorgan (D-North Dakota) and Senator Carl Levin (D-Michigan) that “seek to thwart tax competition and penalize good tax policy in other jurisdictions.”
The letter from the Coalition for Tax Competition states, “Senator Byron Dorgan of North Dakota has proposed S. 396, a bill which targets American companies operating in selected low-tax jurisdictions and strips away their ability to postpone the imposition of a second layer of tax on their foreign-source income. Senator Carl Levin of Michigan has proposed S. 681, a bill which imposes a wide range of taxes, regulations, and penalties on American taxpayers operating in selected low-tax jurisdictions. ... Both of these pieces of legislation are deeply flawed. They share a common premise that the U.S. government should adopt an adversarial position against jurisdictions with pro-growth tax policy.” The letter details three flaws with the two proposals:
“Senators Dorgan and Levin should be ashamed for their discriminatory attacks on less economically developed countries. American lawmakers should encourage more nations in the developing world to adopt pro-growth tax regimes, not penalize them,” stated Andrew F. Quinlan of the Center for Freedom and Prosperity Foundation. “Senators Dorgan and Levin have managed to combine the worst of all worlds,” said Dan Mitchell of the Cato Institute.Link here.
U.S. HOUSE BILL TO BLOCK FOREIGN COMPANY DIVIDENDS FROM TAX BREAK
House Ways and Means Select Revenue Subcommittee Chairman Richard Neal has filed legislation to amend the Internal Revenue Code to ensure that dividends from certain foreign corporations are not eligible for the lower rate of tax on dividends.
“The changes in the bill I am filing today will carry out the original intent of Congress and the President in attempting to limit double taxation,” Neal said on introducing the bill. “It has come to my attention that in certain circumstances, double taxation does not exist because there is no tax on the foreign company. It only makes sense, then, that these dividends should not enjoy the lower preferential rate.”
Neal’s bill amends Title 1 of the IRC to disallow the preferential dividend rate for payments from foreign entities not subject to tax in the foreign country, for payments that are deductible in the foreign country, or for payments with respect to an instrument not treated as stock in the foreign country. In addition, the Neal bill fixes the current limitation on the preferential dividend rate for payments from passive foreign investment companies. The bill also provides that dividends from companies based in tax havens will not enjoy the preferential lower dividend rate.
“Some banks have advertised this hybrid instrument loophole to clients, bragging that it is tax deductible in the foreign country and tax-preferenced in the U.S., thereby creating a competitive advantage in raising capital over U.S. companies,” Neal added. “We should not allow such games to be played at the expense of our treasury and American businesses.”Link here.
IRS GIVES U.S. EMBASSY STAFF MORE TIME TO RESOLVE TAX ISSUES
The IRS is providing a further extension, until June 30, 2007, of the deadline for current and former U.S.-based employees of foreign embassies, consular offices, missions and international organizations to participate in a one-time settlement initiative to resolve outstanding tax matters related to their employment. The offer is open to employees of the aforementioned organizations who are U.S. citizens, green-card holders, and foreign employees who have tax obligations. Accredited diplomatic personnel are generally exempt from income taxes on their wages under the Internal Revenue Code and international treaties or agreements.
The IRS estimates that as many as half of these employees subject to U.S. tax fail to report their wages, claim deductions they are not entitled to, incorrectly establish SEP/IRA retirement plans, fail to pay self-employment tax, or fail to file tax returns. To participate, employees must submit amended or original tax returns for tax years 2004 and 2005 that properly reflect their income and expenses. In addition, participants with erroneously established SEP/IRA plans will not be required to distribute amounts contributed to these plans for tax years prior to the 2004 tax year. The IRS has said it will remove the 2003 tax year issues from the settlement elections previously received from taxpayers.Link here.
U.S. HOUSE COMMITTEE TO PROBE PRIVATE TAX DEBT COLLECTION
House Ways and Means Committee Chairman Charles Rangel has urged the IRS not to award any new private tax collection contracts this year, after hearing numerous complaints from taxpayers concerning violation of privacy. Rangel made his request in a letter to IRS Commissioner Mark Everson, in which he also announced a Ways and Means Committee investigation into the overall use of private companies to collect federal income tax debts.
“We have heard too many complaints and concerns about the tactics used by private debt collectors to allow the IRS to issue new contracts,” explained Rangel. “We need to investigate these violations to ensure that we are protecting the privacy and dignity of taxpayers, not enabling harassment by these private companies.” In his letter, Rangel said he was most concerned about reports that private collection firms have violated taxpayer privacy laws. Rangel is also concerned about provisions of the code which state that the federal government “shall not be liable for any act or omission of any person performing services under a qualified tax collection contract”.
“Given the Committee’s current investigation of the program and my intent to have legislation enacted this year to repeal or significantly modify the authority granted under Code section 6306, I strongly urge that you not proceed with the process of awarding new private collection contracts this year,” Rangel wrote. The IRS plans to award three to five additional contracts in October 2007, with the procurement process due to start next month. According to Rangel, IRS Commissioner Everson has previously testified before Congress that the use of private collection companies is more costly than using trained IRS professionals.Link here.
U.S. Taxpayer Protection Act proceeds through House committee.
The House Ways and Means Committee has approved new legislation that aims to strengthen taxpayer protection against fraud and identity theft. The committee passed HR 1677, the Taxpayer Protection Act of 2007, by voice vote. The legislation, introduced by Chairman Charles B. Rangel (D-New York) and Oversight Subcommittee Chairman John Lewis (D-Georgia) drew unanimous bipartisan support for its provisions, designed to improve communication between the IRS and taxpayers to protect them from fraudulent or predatory behavior.
“This bill improves and increases IRS outreach to provide taxpayers with stronger protections against tax fraud and identity theft” observed Lewis, who presided over the markup. “It is a shame and a crime to use schemes to steal personal information from American taxpayers, so this legislation cracks down on misleading websites and subjects them to a higher penalty for any violations.”Link here.
CZECH FLAT TAX NOW A CERTAINTY, SAYS PRIME MINISTER
Czech Prime Minister Mirek Topolanek has reportedly stated that his government’s plan to introduce a a 15% flat tax rate is “certain”. According to the report, the only thing left to be resolved in the final legislation is the approval of a number of deductions. The reform package will be published by the government in April.
The center-right coalition of three parties has dusted off plans for a flat tax after they were abandoned by last year’s minority government in the face of opposition from the Social Democrats. Initially, the coalition had planned to introduce a flat tax at a rate of 17% to 19%. Corporate tax in the Czech Republic was reduced to 24% last year, and personal income tax rates are levied at progressive rates to a maximum of 32%. The standard rate of VAT is 19% for most goods and services, with a 5% discounted rate for certain specified goods.
While the Czech Republic’s tax rates are currently not the lowest in the region, the country has nevertheless managed to attract high volumes of foreign investment in recent years, with investors attracted by a skilled workforce, advantageous geographic location and favorable operating costs. In 2006, CzechInvest mediated for the Czech Republic a total of 176 investment projects, worth $4.6 billion (€3.6 billion) – the largest inflow of foreign investment into the country in the government business and development agency’s 15-year existence. Most of the investment projects and the largest volume of investment were directed to the Moravia-Silesia region, in the country’s industrial north-east. The second most attractive location was the Usti region, which borders Germany in the north. The Moravia-Silesia and Usti regions are among the areas worst affected by structural problems.Link here.
GERMANY ASKED TO AMEND TAX TREATMENT OF EXPATS
The EC formally requested Germany to modify the withholding tax system applied to the income of certain categories of non-resident taxpayers, particularly artists and sportsmen. Under German law, a flat-rate withholding tax is applied to the total income without any possibility of deducting business expenses. A subsequent refund procedure allows non-resident taxpayers to ask for reimbursement of the overpaid tax.
However, the Commission considers the tax deduction at source and refund procedure to be incompatible with the principle of freedom to provide services in the Internal Market. It also argues that the prohibition of the deduction of business expenses from gross receipts and prohibition of the deduction of indirect expenditure could in many cases result in an objectively unjustified higher taxation of such non-residents as compared with residents. If there is no satisfactory reaction to the reasoned opinion within two months, the EC may decide to refer the matter to the European Court of Justice.Links here and here.
WASHINGTON STATE GOVERNOR SIGNS INTERNET TAX BILL
Saying it will level the playing field between in-state and out-of-state businesses, Gov. Chris Gregoire has signed a measure that encourages Internet and catalog companies to collect and send the state sales taxes on purchases made by Washington residents. Washington will join 21 other states that have passed legislation to become members of the Streamlined Sales Tax Project. More than 1,000 companies that sell products in multiple states have voluntarily agreed to begin collecting and distributing sales taxes to any state that agrees to become a member of the project.
The state Department of Revenue predicts that by joining the program, Washington will initially see an additional $35 million to $40 million in sales taxes from out-of-state companies that sell products to Washington residents. A 1992 U.S. Supreme Court ruling prohibits states from forcing businesses to collect the states’ sales taxes unless the company has a physical presence in the affected state. The court noted the dizzying array of tax jurisdictions and widely varying definitions of taxable goods. The law will streamline those definitions.
The main sticking point revolved around a change the law makes on where sales tax goes when it is collected. Under current law, the jurisdiction where a product originates receives the sales tax. That does not help the state, if the product originates with an out-of-state Internet company. Under the measure, the jurisdiction where the product is delivered would get the tax. The change benefits some cities and towns, but hurts others. To solve this problem, the measure calls for mitigation, in which jurisdictions that lose money would receive payments from the state.Link here.
WHY PANAMA IS TOP-RANKED AS AN OFFSHORE HAVEN
Panama is The Sovereign Society’s top tax haven. You have probably read about the soon-to-be new and improved Panama Canal (on the schedule to be completed by 2014). You have also probably heard all the hype surrounding the booming real estate market in Panama. Just last month both the Wall Street Journal and the Washington Post commented on the real estate market bursting at the seams down in Panama. You may have even read that celebrities like Donald Trump have snatched up real estate down there.
But still love Panama for an entirely different reason than its hot real estate. It is because Panama is still what we call a “foreign source income tax haven”. That means if you move to Panama, the local government only taxes you on income you earn inside Panama. So if your business is based in say St. Louis, and you live in Panama, you can live virtually tax-free at the local level. And even if your foreign business is technically located in Panama, you can avoid most corporate taxes. (Although Americans still must pay U.S. taxes no matter where they live.)
Panama has a long tradition as a tax haven for many other reasons. For starters, Panama has statutory guarantees of financial privacy and confidentiality. Violators can suffer civil and criminal penalties for unauthorized disclosure. Panama also has no double taxation agreements and no tax information exchange agreements with other countries. Washington tried to get Panamanian authorities to sign a TIEA with the U.S., but Panama has politely ignored their demands. So basically, Panamanian authorities have what it takes to stand up to anyone (even the U.S.) who would threaten their tax haven status.
Panama has it all when it comes to offshore structures. Its corporation law dates to 1929, and Panama has long offered refuge for entrepreneurs seeking to escape hyperinflation and foreign exchange controls in Central and South American countries. More recently, Panama enacted a law authorizing private foundations and patterned it after the best model available – Liechtenstein. There is no requirement to reveal a beneficial trust or corporate ownership to Panamanian authorities and no required audit reports or financial statements. That is financial privacy in spades.
On top of all that, Panama has good offshore professional services, with dozens of banks, trust companies and attorneys to choose from to help you set up your offshore trust, foundation or offshore corporation. However, you will need an introduction from a local source to open an account.Link here.
UK 15% GAMING TAX FAR TOO HIGH TO ATTRACT OFFSHORE-BASED FIRMS, EXPERTS WARN
Operators with UK presence will have to look carefully at where they site their online gaming equipment.
The UK government has finally decided to fix the rate of income tax paid by online gaming companies at 15%, but industry experts say that this rate is far too high to help achieve the government’s objective of tempting offshore-based firms back onshore. “The Remote Gaming Duty rate of 15% is considerably higher than the industry hoped for and it is difficult to see any operators moving onshore and volunteering for it,” commented Mark Summerfield, Head of Gaming at KPMG. “As such, the government’s objective under the Gambling Act of increasing tax revenues by moving these companies onshore is likely to fail. Operators that are partially in the UK will have to look carefully at where they site their online gaming equipment if they are to avoid this duty.”
More positively for offshore operators, Summerfield observed that VAT will not be charged on remote participation fees on bingo, poker and betting exchanges. “This means they will retain their advantage over UK based bricks and mortar bookmakers and casino operators,” he said. However, experts have noted that the UK bingo industry is likely to be disappointed by the Chancellor’s last budget.Link here.
GUERNSEY PROTECTED CELL COMPANY FUND CONVERTED TO ICC
A Guernsey protected cell company has become the first to be converted into an incorporated cell company, in the process becoming the world’s largest mutual fund to adopt the new ICC structure, according to law firm Bedell Cristin. “This illustrates once again how the island is not just a major player but at the cutting edge of developments in the international finance industry,” says chief executive Peter Niven of GuernseyFinance, the promotional agency for the island’s financial services industry. “It is fitting that 10 years after Guernsey introduced the PCC concept to the world, the island has once again delivered a world first, this time with the younger sibling that is the innovative ICC structure.” Under legislation introduced in Guernsey in Spring 2006 it is possible to convert a conventional company or PCC into an ICC.
Bedell Cristin’s Guernsey team, led by partner Mark Helyar, undertook the conversion on behalf of Guernsey-based clients, whose PCC originally had nine cells that were converted into incorporated cells. A further 13 incorporated cells have been added to create the first Class B ICC investment fund in Guernsey. The company uses the mutual ICC as a multi-manager platform with different promoters in each cell. They believe the additional insolvency protection and flexibility offered by the ICC structure is particularly advantageous for management and future business development.Link here.
QATAR ISSUES NEW TRUST REGULATIONS
The Qatar Financial Center Authority (QFCA) announced last week that the QFC Trust Regulations, issued for public consultation for 30 days on January 27 this year, are now in force. The regulations set out, among other things, the rules applying to the creation of trusts, the duties and powers of a trustee, and the rights and interests of beneficiaries of trusts. They also include definitions of the governing law and the role of the QFC Tribunal in the administration of QFC trusts.
QFCA CEO and Director-General Stuart Pearce earlier said, “Establishing the legal framework for trusts to be established in the QFC is an excellent example of the role that the QFC was created to perform. It broadens the scope of financial services opportunities available in Qatar as a whole for the benefit of both QFC and state institutions.” The QFCA is the commercial, administrative and legislative body responsible for driving the commercial strategy of the QFC and for developing relationships with the global corporate community and other key institutions both within and outside Qatar.Link here.
CONRAD BLACK IS JUST THE LATEST STOCK SCAMMER FROM CANADA
Canada is America’s #1 foreign supplier of oil, natural gas and electricity. BlackBerry wireless email comes from Canada, and so do auto parts. Now for a hot new export – scandal. Chicago jurors are just getting to know media mogul Conrad Black, who is on trial for fraud, tax evasion and money laundering. Black is Canadian (although he has renounced his citizenship), but he is accused of diverting $84 million disguised as fees from a holding company based in the Windy City and traded on the NYSE, and he faces 101 years if convicted.
Lord Black has company. Just as his case got going, the SEC filed civil stock fraud charges against Frank A. Dunn and three other former executives of Nortel Networks, the Canadian darling of the Internet stock bubble. The SEC says they used bogus tactics to improve earnings and pad their bonuses. Dunn’s lawyer says it is unfair for Uncle Sam to go after Dunn, since he is already dealing with a Canadian regulatory action. But SEC enforcement chief Linda Thomsen says it is important to send a “strong message that officers of U.S.-filing foreign corporations will be held to the same standards of accountability” as U.S. execs.
Sound principle, but is her staff big enough? Hordes of penny-stock hustlers have headed south to the American Stock Exchange, the O-T-C bulletin board and the Pink Sheets since the Vancouver Stock Exchange disappeared in 1999. “Where do all these guys go?” asks Vancouver journalist David Baines. “They are all here floating the same crummy deals” in the U.S. Dilbagh Gujral has been banned from trading and promoting stocks by the B.C. Securities Commission for improper loans that a publicly traded outfit he ran made to companies he controlled. And yet you can find him all over a recent prospectus filed with the SEC for Hydrogen Power, a Seattle company with a volatile stock on the O-T-C bulletin board. Gujral indirectly controls the company – and is underwriting its shares.
Enforcer Thomsen has been busy. In March the SEC halted trading in 35 companies hyped in spammed emails. Roughly half were from Canada. So far 700 outfits on the o-t-c bulletin board and Pink Sheets have been linked to the Vancouver area.Link here.
GOOGLE’S NEW BLOGGER SOFTWARE REPRESENTS A HUGE LEAP FORWARD. REALLY
Easy to use with good access-control features.
The goal was to find a way to share photos and adventure tales of the twins online with friends and relatives. Thus began a search for the best blog software, a program that would be easy to use, require no HTML tutorials and produce a Web journal that looks attractive, works flawlessly at all times and sits behind password protection to keep out unwanted visitors.
Sadly, that program does not exist. But of the popular blog-creation services – TypePad, WordPress and Google’s Blogger – Blogger comes the closest. It lets you choose from dozens of design templates and manage all the links and bits in a very cool drag-and-drop layout system. Blogger also makes it easy for you to control who can view or comment on your blog. Better yet, Blogger is free, provided by Google out of the kindness of its “Don’t be evil” heart.
Each day about 90,000 new blogs spring up, adding to the 71 million already in existence. Only a small number of professional bloggers attract millions of readers and make a living selling advertising. Those folks might not mind spending hours or days learning the intricacies of some program. But I wanted to get up and running fast, spending as little time as possible learning how to use the software. Pretty much every blogging program out there has no decent tech support. The programs do come with online manuals, whose assistance ranges from nearly useless to pretty good. Blogger is is at the upper end of the category.
It is easy to get started. Blogger uses numbered steps and big buttons that make it impossible to screw up. First you need to sign up for a Google account, if you do not already have one from one of Google’s other services, like Gmail or Google Calendar. Next you choose a “display name” (the name that you will use to sign your blog posts) and the title that will appear on the banner atop your page. You can change these things later.
You do have to be more fussy about choosing your blog’s Web address. All blogs on Blogger use the same format, http://yourblogname.blogspot.com. Pick something you can live with because it is a bit of a pain to change the address later. All that is left is to choose a design template. By default Blogger chooses a page design called Minima, which is clean and easy to read. That is it. You are done.
For a basic blog this software makes life really easy, but the most important new feature may be its access-control features. You control who sees the blog by entering a list of approved email addresses. When those people visit the blog, they are allowed in, as long as they can also provide a password. Enhanced security was the reason I originally started blogging with another popular service, TypePad. But TypePad’s protection scheme is draconian – your blog is either public or private, with little ability to customize that access. And TypePad starts at $50 a year for the basic version.
For us nontechie folks, TypePad’s createor rolled out an easier to use blogging program called Vox. Vox offers fine-grained levels of privacy (for example, limiting access to specific photos), and the instructions are simple. And it is free. The bad news is that Vox is ad-supported. Text and animated ad links appear next to your blog posts while you create them and while people read them. (Blogger is free, and has no ads.)
I have also operated a blog on a third system called WordPress. WordPress is an open-source program, is free, and is fairly easy to get started. Techie types love WordPress because supposedly you can make it do whatever you want, if you know what you are doing. Which I do not. Even posting photos, which in every other program is a brainless procedure, can be a pain. There is a help button, but it takes you to an almost impossible to navigate list of frequently asked questions. In frustration I ordered a manual, but when the book arrived I just sat there looking at it and then abandoned my WordPress blog.
In 2005 I wrote a Forbes cover story describing how blogs were being used by online lynch mobs who were “spewing lies, libel and invective.” This did not go over well in the blogosphere, where I was branded “the blog-hater guy from Forbes.” Not true. I am a big fan of blogs and Blogger. Google has put together some really powerful features and made those features easy for regular people to use. That is an accomplishment.Link here.
U.S. WANTS ALL 10 FINGERPRINTS FROM FOREIGNERS ON ENTRY
The U.S. will increase the amount of information it holds on foreign visitors when it takes all 10 fingerprints from air travelers rather than the usual two. Currently foreign travellers must have their index fingers scanned into a database when they enter the U.S. by agents of the Department of Homeland Security. Those prints can then be checked against a database of fingerprints held by police forces or the FBI. That number will increase to all 10 fingerprints on a trial at 10 U.S. airports. It is planned that the program will be in place in all airports in around a year.
U.S. authorities claim the current scan of two fingers takes around 15 seconds and that the new process will not take significantly longer than that. Tourism bodies in the U.S. have expressed concern that such measures are harming the tourist trade, however. There are already concerns in Europe about the amount and importance of data held by U.S. authorities on European air passengers. The U.S. has a less stringent privacy regime than Europe.
Airlines are currently forced to hand over 34 pieces of information about every passenger that travels to the U.S. Called Passenger Name Records, the information is transferred in line with a deal signed by the EC and U.S. authorities. The European Parliament has opposed the deal, though, and a new agreement is due to be signed later this year. The Department of Homeland Security is said to have arrested 1,800 suspects since biometric identification was introduced, but in order to do that they collected the fingerprints of 80 million passengers.
Visitor numbers from the UK to the U.S. have dropped since 2001’s terrorist attacks in the U.S. and the security measures put in place in their aftermath. Around 4.7 million UK citizens visited the U.S. in 2001, a figure that fell to 4.3 million in 2005.Link here.
SON OF T.I.A. WILL MINE ASIAN DATA IN SINGAPORE
Nearly four years after Congress pulled the plug on what critics assailed as an Orwellian scheme to spy on private citizens, Singapore is set to launch an even more ambitious incarnation of the Pentagon’s controversial Total Information Awareness, or TIA, program – an effort to collect and mine data across all government agencies in the hopes of pinpointing threats to national security.
The Singapore prototype of the system – dubbed Risk Assessment and Horizon Scanning, or RAHS – was rolled out early this week at a conference in the Southeast Asia city-state. Retired U.S. Adm. John Poindexter, the architect of the original Pentagon program, traveled to Singapore to deliver a speech at the unveiling, while backers have already begun quietly touting the system to U.S. intelligence officials.
In 2003, plans for TIA sparked outrage among privacy advocates. Fueling public indignation was news that Poindexter, President Reagan’s national security adviser and a key figure in the ‘80s Iran-Contra scandal, was in charge of the office. Facing an avalanche of bad publicity, Poindexter resigned in August 2003. Congress pulled funding for the program, and TIA and related programs were either terminated or moved to other agencies. The Information Awareness Office was closed. But Poindexter’s vision never lost currency among advocates of data mining, particularly in Singapore, a country that mixes elements of democratic governance with authoritarian rule.
While different in design from TIA, the RAHS system shares some intellectual roots with the doomed TIA effort. The two principal consultants for RAHS are John Peterson, of the Virginia-based Arlington Institute, and Dave Snowden, who was previously supported by Poindexter’s office. Peterson, a futurist, describes RAHS as a system that monitors multiple feeds of data – both open and classified – to detect possible threats. “Essentially it’s a strategic tool that ties together every one of the agencies in a government into a large network that is constantly scanning the horizon looking for weak signals that point toward the possibility of a significant event that would have important implications for Singapore,” he said.
Snowden’s work concentrates on automated software to detect such “weak signals” that would normally be passed over by human analysts. “Instead of having analysts trawl through huge amounts of data to decide what it means, the data is tagged very quickly, then they decide what the patterns in the metadata mean,” said Snowden.
While terrorism is a driving factor for RAHS, it was the SARS epidemic – which crippled Singapore’s economy – that prompted interest in the technology. Whether terrorism or epidemics, Singapore’s rapid acceptance of data mining is a breath of fresh air to the system’s designers. “Singapore is small and has this intrinsic sense of paranoia,” Peterson said. Said Snowden, “Singapore just walked around and saw what they liked, and said, ‘The hell with it, let’s just make it operational,’ which is much more pragmatic and forward-thinking.”
While the controversial Pentagon efforts were never more than research, RAHS is set to launch with five different agencies in September. Eventually, RAHS would extend across Singapore’s entire government, a plan that makes it the most ambitious data-snooping effort in the world.
For Snowden, the balance between privacy and security is clear-cut. “If somebody can use a little bit of software that connects up the conversation between somebody trying to get into Britain, and four or five stories told by parents of pupils in a school in an area with a high Islamic population, and some police intelligence reports, and see there’s a pattern, I think that’s a good thing,” he said. Of course Snowden concedes that how the public views the privacy issue depends on “how people explain it and how it’s sold.”
Recalling the events that led to the closing of Poindexter’s office, Snowden, who describes himself as “on the left politically,” was candid about the man he still calls a friend. “He’s a genius,” Snowden said, “but he’s a naive genius. He did not realize how it was going to be picked up.”Link here.
CHERTOFF PRAISES “ENHANCED” WASHINGTON DRIVERS LICENSES FOR BORDER CROSSINGS
High-security driver’s licenses aimed at letting U.S. citizens return from Canada without a passport could be adopted elsewhere if Washington state’s experiment works, Homeland Security Secretary Michael Chertoff said. The pilot project, signed into law by Gov. Chris Gregoire and now formally approved by Chertoff, calls for Washington to begin issuing new “enhanced” driver’s licenses in January 2008.
They will look much like conventional driver’s licenses, but will be loaded with proof of citizenship and other information that can be easily scanned at the border. Radio frequency ID chips and other advanced security features also would make the enhanced licenses less vulnerable to forgery. At about $40, they also would be less expensive than a $97 passport.
Chertoff’s endorsement of the pilot project comes as border states prepare for new federal security requirements mandating a passport for all travelers, including U.S. citizens, who enter the country by sea or land from elsewhere in the Western Hemisphere. That requirement is expected to take effect between early 2008 and mid-2009, a similar rule for air travelers already is in force. Washington state officials are particularly sensitive to the new rule because of the extensive tourist traffic between the state and neighboring British Columbia, home of the 2010 Winter Olympics in Vancouver.
Gregoire, a Democrat, said the enhanced ID’s security features also could help combat identity theft. The enhanced licenses will not be mandatory for Washington drivers. Those who want to get the enhanced version will go through an in-person interview, and will have to show proof of citizenship, Gregoire adviser Antonio Ginatta said. State and federal officials are still working out details about whether particular crimes would prevent a person from getting the enhanced license, Ginatta said. Along with being less expensive, the enhanced licenses will be available faster than the six-to-eight-week wait for a passport.
Canada does not have similar passport requirements for U.S. travelers heading north. But Stockwell Day, Canada’s public safety minister, said Canadian officials share the security concerns that prompted the new rules. “Nine-eleven was an event of horrendous proportions that has certainly galvanized us,” Day said Friday. “Canadians also died in those towers.”Link here.
KAFKAESQUE NATIONAL SECURITY LETTER GAG ORDERS
The Justice Department’s inspector general revealed on March 9 that the FBI has been systematically abusing one of the most controversial provisions of the USA Patriot Act, the expanded power to issue “national security letters” (NSLs). It no doubt surprised most Americans to learn that between 2003 and 2005 the FBI issued more than 140,000 specific demands under this provision – demands issued without a showing of probable cause or prior judicial approval – to obtain potentially sensitive information about U.S. citizens and residents. It did not, however, come as any surprise to me.
Three years ago, I received an NSL in my capacity as the president of a small Internet access and consulting business. The letter ordered me to provide sensitive information about one of my clients. There was no indication that a judge had reviewed or approved the letter, and it turned out that none had. The letter came with a gag provision that prohibited me from telling anyone, including my client, that the FBI was seeking this information. Based on the context of the demand – a context that the FBI still will not let me discuss publicly – I suspected that the FBI was abusing its power and that the letter sought information to which the FBI was not entitled.
Rather than turn over the information, I contacted lawyers at the American Civil Liberties Union, and in April 2004 I filed a lawsuit challenging the constitutionality of the NSL power. I never released the information the FBI sought, and last November the FBI decided that it no longer needs the information anyway. But the FBI still has not abandoned the gag order that prevents me from disclosing my experience and concerns with the law or the national security letter that was served on my company. In fact, the government will return to court in the next few weeks to defend the gag orders that are imposed on recipients of these letters.
Living under the gag order has been stressful and surreal. Under the threat of criminal prosecution, I must hide all aspects of my involvement in the case – including the mere fact that I received an NSL – from my colleagues, my family and my friends. When I meet with my attorneys I cannot tell my girlfriend where I am going or where I have been. I hide any papers related to the case in a place where she will not look. When clients and friends ask me whether I am the one challenging the constitutionality of the NSL statute, I have no choice but to look them in the eye and lie. I resent being conscripted as a secret informer for the government and being made to mislead those who are close to me, especially because I have doubts about the legitimacy of the underlying investigation.
The inspector general’s report makes clear that NSL gag orders have had even more pernicious effects. Without the gag orders issued on recipients of the letters, it is doubtful that the FBI would have been able to abuse the NSL power the way that it did. Some recipients would have spoken out about perceived abuses, and the FBI’s actions would have been subject to some degree of public scrutiny.
While Congress was debating the reauthorization of the Patriot Act in 2005 and early 2006, if I had not been under a gag order I would have contacted members of Congress to discuss my experiences and to advocate changes in the law. The inspector general’s report confirms that Congress lacked a complete picture of the problem during a critical time. Even though the NSL statute requires the director of the FBI to fully inform members of the House and Senate about all requests issued under the statute, the FBI significantly underrepresented the number of NSL requests in 2003, 2004 and 2005, according to the report.
I recognize that there may sometimes be a need for secrecy in certain national security investigations. But I have now been under a broad gag order for three years, and other NSL recipients have been silenced for even longer. In the wake of the recent revelations, I believe more strongly than ever that the secrecy surrounding the government’s use of the NSLs power is unwarranted and dangerous. I hope that Congress will at last recognize the same thing.Link here.
THE PENTAGON’S POWER TO JAIL AMERICANS INDEFINITELY
The presiding judge in the José Padilla case has held that the Sixth Amendment’s guarantee of a speedy trial does not protect American citizens from being indefinitely incarcerated by the Pentagon. Padilla had filed a motion to dismiss the case on the ground that the federal government had denied him his right to a speedy trial. Padilla has been in custody since May 2002 and his trial, which is scheduled to begin in April, is not being held until some five years later.
From May 2002 until January 2006, Padilla was held in U.S. military custody as an “enemy combatant” in the “war on terror”. In January 2006, the Pentagon chose to transfer custody of Padilla to the U.S. Justice Department, which had indicted Padilla on terrorism charges in U.S. District Court. (Ever since 9-11, U.S. officials have had the option of treating people suspected of terrorism either as “enemy combatants” or as federal-court defendants.) Now the presiding judge in the case, Marcia Cooke, denied Padilla’s motion to dismiss. The judge held that when a person, including an American citizen, is held in custody by the Pentagon as an “enemy combatant,” the time does not start running with respect to his right to a speedy trial. It begins running, she held, only when he becomes part of the federal criminal-justice system.
Gee, I wonder if the judge’s reasoning applies to the rest of the Bill of Rights as well. Maybe the First Amendment does not apply if it’s the Pentagon that is suppressing speech and assembly as part of its perpetual “war on terror”. Or maybe the Second Amendment prohibits only the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF), not the Pentagon, from seizing guns from the American people, as it is doing as part of the “war on terror” in Iraq.
Our 18th-century American ancestors would have found Judge Cooke’s ruling to be ludicrous. If a military department of government is exempt from the restrictions of the Bill of Rights, then the entire executive branch is exempt. Whenever the government wants to exempt itself from the Bill of Rights, all it has to do is employ the military to do the dirty deed. The purpose of the Bill of Rights was to protect the American people from the federal government, not a particular department of the federal government.
This week, Judge Cooke is scheduled to rule on Padilla’s motion to dismiss on the basis of the government’s torture and abuse of Padilla while he was in pretrial military confinement. It will be interesting to see if Judge Cook rules that that the military is also exempt from that part of the Bill of Rights that prohibits the federal government from inflicting cruel and unusual punishments on Americans and others suspected of terrorism.
José Padilla is an American citizen. Thus, this case continues to hold ominous implications for the American people, especially when Cooke’s ruling is considered in conjunction with the ruling of the Fourth Circuit Court of Appeals that upheld the government’s “enemy-combatant” designation for Americans as part of its “war on terrorism”. So whatever the government has done – and continues doing – to Padilla and, for that matter, every other “enemy combatant” in its “war on terror”, it has the authority to do to all Americans.Link here.
DEATH SQUAD IN DELAWARE: THE CASE OF THE MURDERED MARINE
Delaware was the first state to ratify the U.S. Constitution. It may be the first state to be afflicted with a fully operational death squad – unless a civil lawsuit against the murders of Derek J. Hale results in criminal charges and a complete purging (in the Eastern European sense of the term) of Delaware’s law enforcement establishment.
Hale, a retired Marine Sergeant who served two tours in Iraq and was decorated before his combat-related medical discharge in January 2006, was murdered by a heavily armed 8–12-member undercover police team in Wilmington, Delaware last November 6. He had come to Wilmington from his home in Manassas, Virginia to participate in a Toys for Tots event. Unknown to Derek, he had been under police surveillance as part of a ginned-up investigation into the Pagan Motorcycle Club, which he had joined several months before; the Pagans sponsored the “Toys for Tots Run” that had brought Derek to Delaware. As with any biker club, the Pagans probably included some disreputable people in their ranks. Derek was emphatically not one of them.
In addition to his honorable military service (albeit in a consummately dishonorable war), Derek’s personal background was antiseptically clean. He had a concealed carry permit in Virginia, which would not have been issued to him if he had been convicted of a felony, a narcotics or domestic violence charge, or had any record of substance abuse or mental illness. On the day he was killed, Derek had been under both physical and electronic (and, according to the civil complaint, illegal) surveillance. Police personnel who observed him knew that his behavior was completely innocuous. And despite the fact that he had done nothing to warrant such treatment, he was considered an “un-indicted co-conspirator” in a purported narcotics ring run by the Pagans.
As is always the case when agents of the State murder an innocent person, the WPD immediately went into cover-up mode. Last week, the Rutherford Institute – one of the precious few nominally conservative activist groups that gives half a damn about individual liberty – and a private law firm in Virginia filed a civil rights lawsuit against several Delaware law enforcement and political officials on behalf of Derek’s widow and parents.
Those who persist in fetishizing local police – who are, at this point, merely local franchises of a unitary, militarized, Homeland Security apparatus – should ponder this atrocity long and hard. They should contemplate not only the inexplicable eagerness of a policeman to kill a helpless, paralyzed pseudo-suspect, but also the practiced ease with which the police establishments of two states collaborated in confecting a fiction to cover up that crime. Derek J. Hale survived two tours of duty in Iraq, a country teeming with Pentagon-trained death squads, only to be murdered by their home-grown equivalent.Link here.
EU LEGAL AFFAIRS COMMITTEE ENDORSES CRIMINAL SANCTIONS FOR IP INFRINGEMENTS
The first EU directive aiming at harmonizing national criminal laws was backed by the European Parliament’s Legal Affairs committee last week, when it adopted a first-reading report on legislation imposing criminal sanctions for the infringement of intellectual property rights. If approved by the full Parliament and the Council, the proposed directive would oblige all Member States to consider as a criminal offence all intentional infringements of an intellectual property right carried out on a commercial scale. The text proposes, as a deterrent, measures ranging from fines to imprisonment.
They excluded patent rights from the scope of the Directive, and decided that criminal sanctions should only apply to those infringements deliberately carried out to obtain a commercial advantage. Piracy committed by private users for personal, non-profit purposes was therefore also excluded. Under the proposed Directive, in cases of serious crimes committed by a criminal organization, the maximum penalty must be at least €300,000 and/or four years’ imprisonment. The same applies where the offences carry a health or safety risk. For less serious infringements, the maximum penalties should include criminal and civil fines of at least €100,000. In some cases, remedies can include the seizure and destruction of counterfeited goods.Link here.
EUROPEAN COMMISSION OFFICES RAIDED AS PART OF A LARGE-SCALE CORRUPTION INQUIRY
Over 30 dawn raids have been carried out in EC offices in four countries as part of a large-scale corruption inquiry. EC headquarters, banks, offices and homes were searched in dawn raids in Belgium, France, Luxembourg and Italy. The raids were part of a 3-year investigation into European commission security and building contracts worth millions of euros.
Police are looking into possible links to organized crime, fraud, forgery, bribery of civil servants and breaches of public procurement laws – two Italian MEPs are reported to be at the center of the investigation. At least three people were arrested after the raid, according to press reports. The EU’s anti-fraud office Olaf is involved in the investigation, as are the Italian Carabinieri, the French financial police and Belgian fraud officers. The affair brings with it memories of the infamous 1999 corruption scandal which eventually forced the entire EC to step down.Link here.
VERIZON GRANTED INJUNCTION AGAINST VOIP PROVIDER VONAGE OVER PATENT INFRINGEMENT
Ruling last week, a judge in the U.S. District Court for the Eastern District of Virginia granted a permanent injunction against the use by internet telephony provider Vonage of patented technology owned by mobile telecommunications rival, Verizon. Earlier this month, jurors at the Virginia District Court found that Vonage had infringed several U.S. patents held by Verizon, covering areas such as wireless and call waiting technology, and conversion mechanisms from VoIP to standard telephony. Vonage was ordered to pay $58 million, and royalties of 5.5% of future sales.
In a statement following the granting of the injunction, Vonage announced that, “The US District Court ... today issued an order enjoining Vonage from using certain VoIP technology named in its patent litigation with Verizon. The order is not immediately effective, however, and Vonage is confident its customers will see no change in their phone service.” Vonage’s CEO, added, “Our fight is far from over. We remain confident that Vonage has not infringed on any of Verizon’s patents – a position we will continue vigorously contending in federal appeals court – and that Vonage will ultimately prevail in this case.”Link here.
Go tell the Cretins, you who read;
We took their orders, and are dead.
~~ Based on inscription at Thermopylae, with apologies
The Bush administration is hoping that the new film, 300, will give the troop surge a lift with the public. The film glorifies the sacrifice of 300 Spartan warriors who held back an invading army of over 100,000 Persians in 480 B.C. Choosing their terrain well, the Spartans managed to neutralize much of the Persians advantage. While the Persians had many, many more troops, they could only get a few of them to the line of battle at a time. But the Greeks could see they were on the losing side of this fight. The Thespians, fighting alongside the Spartans, withdrew while the Spartans decided to stay and fight to the last man. They might have done so as a purely military necessity, holding off the enemy so as to give their allies time to retreat and regroup. Or they might have fought on simply for the glory of it. We do not know.
We do know that they managed to hold their ground for a couple more days, until a fellow Greek betrayed them by showing Xerxes how to outflank his opponents. Then, the Persians got behind the Spartans and rained down arrows upon them until they were all dead. But the rest of the surviving Greeks were then able to take up the fight and, in a number of calamities and misadventures, the Easterners were finally driven back across the straits to Asia Minor. Western civilization was saved.
According to today’s neo-conservative apparatchiks, we are once again involved in an epic struggle – a clash of civilizations between the free West and the tyrannical East. Paul Wolfowitz, Douglas Feith, Richard Perle, Philip Zelikow – this handful of men (probably no more than 300 of them), pushed a bright, shining war on a dim yahoo of a president. Together, they see themselves like the Spartans at the Pass of Thermopylae, guarding our western way of life, without even getting their suits dirty. The sacrifice of others is worthwhile, they believe. But now, after four years with neither victory nor defeat in hand, it is too late for earnest criticism. Instead, the time has come for gratuitous ridicule.
The targets are many. For instance, against whom the war in Iraq is being waged (or why) has yet to be fully clarified. Every question on the subject brings a response that only deepens the mystery. But the costs are becoming clearer every day. $505 billion of U.S. “taxpayers’ money” has been spent or approved. The biggest of all liar’s loans? Of course, we are already in the Land of Lies. The American taxpayer has no spare money. His and her taxes were already earmarked for other boondoggles. Looking ahead, to the cost of caring for wounded and incapacitated soldiers, the whole thing is expected to cost more than $1 trillion. And we cannot fail to mention the cost in lives. 3,205 U.S. soldiers have died, and 134 British soldiers. More than 24,000 Americans have been seriously wounded. Iraqi casualties, if anyone is keeping score, may top half a million.
Meanwhile, George W. Bush asked Congress for another $100 billion, without strings and without delay. Or else the war might have to be called off, he seemed to warn. The politicians bent over and checked under the cushions, but the spare change they recovered came nowhere close to $100 billion. They are already facing budget deficits of a half a trillion over the next two years. Where would the extra money come from? What would the extra strain do to the finances of the nation? How was the investment expected to pay off? No one knew. No one even asked.
But as for the strings, everyone knew exactly what the chief executive was talking about – even the chief executive himself. Lawmakers have come to see the war, not as a real war, but merely as just another spending opportunity, with live ammunition. To the latest demand for cash, the polls have attached a number of pork-barrel provisions, including $25 million for spinach growers, $100 million for citrus growers, $74 million for peanut storage, $4 billion for “emergency payments” to farmers, and $283 million for milk subsidies. The U.S. congress has managed to improve upon the old Roman formula. They have combined bread, circuses and war in a single spending bill.
Every war has its profiteers. Neither in love, nor in war do you stop to count the costs. But a phony war is a bigger opportunity than most, because there is no patriotic necessity to win. Unlike the Spartans, the Cretins know Iraq poses no real danger to the homeland. So everyone gets into the spirit of the war as it really is. Halliburton, Lockheed, and Bechtel inflate prices, take money for nothing, and gouge taxpayers for useless weapons and unnecessary supplies. In one report, truckers reported that they were asked to drive empty trucks back and forth across the desert, carrying sailboat fuel so that contractors could bill the government for delivery. A total of $9 billion has been officially lost or unaccounted for.
War critics will complain about the waste of money involved. Polls show the war to be so ineffective that the average Iraqi now regards democracy with suspicion, and finds it acceptable to kill U.S. and British troops. The more the U.S. government tries to improve the lives of the Iraqis, the more Iraqis seem to want to get even. Given the deadly drift of things, wasted spending may turn out to be the best spending the Bush team did. “There will be good days and there will be bad days,” said the American president, stoically. Ture. But they will not be shared out equally. The spinach growers, milk producers, and weapons contractors will get the good days. The poor grunts, the Iraqis and the taxpayers will get the bad ones.
But what about the Cretins? In the film, as in the battle, the Spartans were wiped out. “Spartans. Tonight we dine in hell,” Spartan king Leonidas was said to remark. Later, a shower of arrows so thick they blotted out the sun, according to Herodotus, came down on them. The Spartans fell, but Greece was saved.
We do not know how far the parallels go. The U.S. military presence in Iraq hardly seems like 300 Spartans defending the homeland. Instead, it seems more like the Persian Empire invading someone else’s homeland. And the 300 Cretins? Are they really protecting western civilization? Was it worth the billions spent and the thousands of corpses? We do not know that either, but we have a feeling that there is already a table reserved for them in Hell.Link here (scroll down to piece by Bill Bonner).
HILLARY GETS YOUTUBED
Go to Google. Type in “Hillary”. There are over 32,000,000 hits. Next, look at the top of the Google screen. Look for VIDEO. See it? Click it. Look what is at the top of the list. And not just at the top of the page – all the way down. Watch it. Just click the image. It is called “Vote Different”. It will not take you very long. It is worth every second.
This video is a remake of the 1984 Apple Macintosh ad. It turns Hillary Clinton into Big Sister. The bulk of this “Vote Different” video was originally produced by Ridley Scott, of “Blade Runner” (1982) fame. The remake was done anonymously. The creator did not get permission from Scott, but Scott has yet to threaten a lawsuit, nor has Apple. This in itself is revealing. The creator posted the video on YouTube. It immediately took off. Within hours, it was being forwarded by the tens of thousands of delighted viewers. Today, it is almost four million downloads, if you count all of the postings of the video.
This practical joke will cost Ms. Clinton a lot of votes. Every time her campaign posts another talking head video, with the lady mouthing platitudes – which is what talking head ads do – what she is saying will not register with viewers who have seen “Vote Different”. They will recall the images of the “Vote Different” ad. They will start giggling. A politician whose would-be supporters giggle at her campaign ads is in big trouble.
There is probably nothing effective that she or her handlers can do about this giggle effect. She has remained discreetly silent about this video. Her handlers have obviously warned her that to fight back against a joke video will only make her look petty. Because she already has a reputation for being industrial-strength petty, this is good advice. But the downloads keep increasing. The phenomenon keeps growing. At the end, the video promotes Obama. This did not cost Obama a dime.
The producer had been working for Blue State Digital, a company that sells technology to presidential campaigns, including Obama’s. The producer resigned when his authorship was about to be exposed. He claims that he produced the video on his own time, and that he did it with off-the-shelf software. Obama said he had nothing to do with it. He said his staff did not have the technical savvy to produce such a video. That is probably true. At least, Obama does not know such a person on his staff. But that person may exist, and surely he or she exists among his followers. Dozens of them do. Maybe hundreds.
A significant fact is this: The limiting factor is no longer the price of software, which is cheap, but the multiple skills – creativity, humor, and editing – to put the software to this kind of use. The number of teenagers with this degree of computer savvy is high and growing higher. Before I discuss how you can apply this to your business, let me show you why this video is bad news for incumbent politicians all over the world ...Link here.
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