Wealth International, Limited (trustprofessionals.com) : Where There’s W.I.L., There’s A Way

W.I.L. Offshore News Digest for Week of February 4, 2008

This Week’s Entries : This week’s W.I.L. Finance Digest is here.


Another triumph of bureaucratic shortsightedness over sense and substance. When U.S. companies choose to self-insure, they have traditionally been allowed to deduct allowances for future losses, i.e., additions to loss reserves, for tax purposes -- just like a regular insurance company. The fact that one corporate subsidiary is insuring another is a legal issue, but not a substantive one. Now the IRS proposes to allow allow deductions for actual cash losses only. Perhaps the IRS plans to allow the full expensing of capital investments as well? We thought not.

The IRS has scheduled a hearing for the 29th February to listen to concerns from the U.S. captive insurance industry that new tax rules will drive captive insurers offshore. A regulation proposed by the IRS last year would end the allowance of deductions for loss reserves by single-parent captive insurance companies that file income tax returns on a consolidated basis with their parent corporation. But, according to the Self-Insurance Institute of America, a national trade association representing companies involved in the self-insurance and alternative risk transfer, this proposal would have a negative impact on tax revenues for the U.S. government, and would simply tempt captive insurance companies to move to established offshore domiciles such as Bermuda and the Cayman Islands.

"Numerous judicial decisions have made it clear that the intent of legislators was to permit captive insurers to deduct losses on an accrual basis, not a cash basis," SIIA President-Elect Dick Goff pointed out in a letter to the IRS last year ... "The use of administrative procedures for consolidated tax returns to eliminate this ability to deduct losses on an accrual basis circumvents the legislative and judicial intent," Goff's letter added, citing six court rulings in favor of the captive insurance industry on this issue.

The letter also indicated that the proposed regulation would have unintended consequences that would have an adverse affect on U.S. industry: "In the long run, the Proposed Regulation ... will not enhance government revenues. Captive insurance companies will be encouraged to move offshore where they will not be required to pay U.S. income taxes. With this movement offshore, U.S. jobs will be lost to offshore domiciles, and the related payroll taxes, personal income taxes and state premium tax revenues will decline," Goff warned. ...

This matter, as usual, is another one that taxing authorities ought to look at but seldom do very deeply. Sensible or not, fair or not, will the measure end up raising revenues ... presumably the intent of the proposal? The SIAA would not be screaming if it would be costless to circumvent the measure, but there are just too many relatively easy ways to do that to think that companies will meekly just pay up. For instance, companies could combine forces to get around the "single-parent" criterion. Even simpler, the parent could just stop filing income tax returns on a consolidated basis. This sounds like a good idea in any case. Insurance is a very different business from the main one in most cases. Why consolidate?

A deeper issue here -- note the "intent of legislators" language in the protest -- is the tendency of the IRS, and other Executive Department agencies, to override the law as written and enforce it as the damn well please. As always, it is the cop with the gun that says what the law is. Your remedies or appeals come later. Certain IRS employees have been extraordinarily persistent in going against the clear instructions of Congress (they must take their cue from the top). A couple of years ago, some Clinton Administration holdovers in the IRS kept proposing to share information on interest and other earnings earned by foreigners with the laters' home governments. The whole idea was inimical to U.S. economic interests, depending as it does on the kindness of foreign investors. But it was a proposal that would not die.

Goff and members of SIIA's government relations team have presented their case to members of Congress, congressional staff and high level officials from the Department of Treasury and IRS, and the group claims to have had two "very positive" meetings: one with Senator Max Baucus, Chairman of the Senate Finance Committee, which has jurisdiction over this issue, and another with top officials of the IRS and Department of Treasury that included the author of the proposed regulation.

If the proposal is so counterproductive that even arch anti-offshore pointman Max Baucus gets that, then it must be pretty ill-advised.

While Bermuda and the Cayman Islands remain the leading captive insurance domiciles, with about 870 and 750 registered companies respectively, the industry has been on the rise in the U.S. Captive insurance holdings have more than doubled over the last 5 years and over half of the Fortune 1,500 companies in the U.S. utilize a captive, according to Active Captive Management (ACM), which specializes in the formation and management of captive insurance companies for small and medium size companies. However, the industry fears that this trend will be reversed if the IRS succeeds in forcing through its proposed regulation on deductions.

We can think of other ways to adapt to the proposal if the IRS pushes it through. A whole separate, legally unconnected insurance company, "UIC", could be created whose sole purpose is to cover the losses of Company "X". UIC and X have a profit sharing agreement where if UIC's profits exceed a given level because, e.g., of favorable loss development trends, it can send those profits back to X. No cross ownership, just a contract the accomplishes the same thing. See our educational piece on contracts for more ideas along this line.


The was a time when the Bahamas was considered a first-class offshore haven. It is now rarely mentioned in that vein, in major part due its knucking under to the dictates of OECD's Financial Action Task Force (FATF) without much resistance.

A return to bipartisan support for the country's financial services sector is needed so that the industry can be confident that government is committed to consistent and transparent regulation and policies, regardless of the political party in office, Prime Minister and Minister of Finance Hubert Ingraham told parliamentarians ...

Ingraham spoke as he wrapped up debate on proposed amendments to the Central Bank of the Bahamas and the Banks and Trust Companies Acts, which focus on the regulation of Money Transmission Business (MTB) services like Money Gram and Western Union. Pointing out that the amendment Bills will frustrate efforts to launder money through MTB services, Ingraham added that they also seek to bring the Bahamas into compliance with the Financial Action Task Force’s (FATF) Special Recommendation VI on alternative remittances.

The FATF Recommendation states that, "Each country should take measures to ensure that persons or legal entities, including agents, that provide a service for the transmission of money or value, including transmission through an informal money or value transfer system or network, should be licensed or registered and subject to all FATF Recommendations that apply to banks and non-bank financial institutions." The Recommendation goes on to state that each country should ensure that persons or legal entities that carry out this service illegally are subject to administrative, civil or criminal sanctions.

The FATF is an OECD organization whose primary directive includes putting an end to money laundering. (Like any government bureaucracy, if it actually succeeded in its mission it would go out of business and everyone would lose their job. So its actual mission is look like it is trying hard to end money laundering but never succeed. Whatever.) "Money laundering" means to cover the tracks of money earned via means deemed unacceptable by governments, and thus enable it to be spent in ways that people like to spend money without drawing unwanted attention. Intended spending could conceivably include funding terrorist operations, so the FATF says.

The FATF trains most of its guns on small, offshore jurisdictions that like to pursue a course independent of the OECD. Its success at changing the practices of the largest money laundering centers -- New York, London, and Tokyo -- has been modest at best. This could be because the FATF does not try very hard. The OECD's principle funders include the U.S., U.K., and Japan. Strictly coincidence. In vigorously pursuing money laundering, the FAFT helps the world financial policemen monitor all financial transactions. Another convenient coincidence.

"There was a time," the Prime Minister noted, "when the financial services sector enjoyed the unanimous support of all sides of the House and we always agreed to legislative changes and initiatives because both political parties determined that the financial services sector was a sector that was in the interest of the Bahamas. ...A divide took place after the year 2000 and we are still following along that path. ... Hopefully the time will come when there will be bipartisan support for legislative and policy initiatives related to the financial services sector because it is very important for the sector to have certainty that irrespective of which political party is in office, there is a commitment to the sector; to regulate it and have policies that are consistent and are known and that are not easily changed."


The concept and practice of "Islamic finance" has been gaining increased recognition in recent years. This is hardly inexplicable. Immense amounts of money are flowing into the coffers of the Islamic oil exporting states. Major non-oil Islamic states in the Far East are booming.

Islamic finance is approaching "critical mass" in Dubai, the birthplace of banking with a Muslim twist, an international seminar [in Dubai] forecasting the industry for this year heard ... Addressing a business delegation that included FTSE Group, the yardstick for British stock markets -- the Group was [in Dubai] to announce its launch of an Islamic index -- Dubai International Financial Authority's CEO, Nasser Al Shaali, said it took the emirate only three years to become the world's "only exportable model for regulating Islamic Finance". ...

Islamic Finance is a Dh3 trillion global industry that grows about 20% yearly, according to various estimates cited by Majid Dawood, CEO of Yasaar Research Inc., the company co-launching FTSE's Islamic index. ... "It is the fastest growing sector in banking, expanding into non-Muslim regions like Europe and South Africa. By 2025, it will make up an estimated 12% of all equity versus debt-based products and transactions", said Dawood.

The boom is tempting Asian economic powerhouses like Japan and Hong Kong ... who have started tweaking commercial norms there to win Muslim favor and money, said Dawood. "That is a good sign. Islamic investments are moving beyond Malaysia and the GCC which have traditionally been driving demand," Dawood added.

Even the Reserve Bank of India is eyeing investments in line with Shariah, or Islamic law, Dawood told the audience at The Gate, Dubai's iconic landmark for all things financial. He also expects London to extend its longtime role as a nerve center for "conventional" business to Islamic finance as well. "That city has beaten Pakistan, an Islamic republic, as an active role player. We (Muslims) ought to contribute too", Dawood said.

Although Dubai received a better report -- "It has got a great track record and infrastructure and the government is supportive," according to Dawood -- there is always room for improvement. Imogen Hatcher, managing director for FTSE Europe Middle East and Africa, who is poised to "take on this part of the world," wants more "credibility and legitimacy."

"The 'feverish innovation' (in Islamic financial products) has led to very 'clever' stuff, if you like", she said. The cautious sentiment was echoed by Al Shaali who also admitted the "need to be lawful and transparent."

"There can be no black-boxes, no surprises in this story", Hatcher said. Another sticky point in the path of Islamic finance -- it forbids investing in businesses dealing in pork, alcohol, cigarettes, and usury, among other taboos in the Muslim faith -- is the lack of a united front that determines what is acceptable to trade, the speakers stressed. ...

The [Shariah Global Equity Index] Series is made up of 96 indices, 12 of which are calculated in real-time. In 1995, FTSE Group gained independence from its creators, the Financial Times and London Stock Exchange.


Malaysia has been building the island of Labuan as an offshore financial center for years now, with some measure of success. Being located in the heart of the emerging financial colossus that is Asia obviously does not hurt.

Labuan Offshore Financial Services Authority (LOFSA) expects a 10% increase this year in the number of offshore companies registered on the island, boosted by its rebranding strategy, said its director-general Datuk Azizan Abdul Rahman.

Currently, there are more than 6,000 international companies registered in Labuan, including 900 that are Malaysian-owned and more than 300 financial institutions. The island is host to 56 banks, 131 insurance and insurance-related companies, 99 leasing and 21 trust companies. LOFSA [has] launched Labuan International Business and Financial Center (IBFC), previously known as Labuan International Offshore Financial Center (IOFC) as part of its rebranding strategy to attract more foreign direct investments. ...

Moving forward, Azizan said a number of programs would be initiated, including measures aimed at securing the "gold standard for holding company jurisdiction," the expansion of captive insurance and private equity as well as the promotion of syariah-compliant trust and foundation to complement the Islamic financial products and services available in Kuala Lumpur. "One of the main things we are doing now is aggressively reviewing the legal framework to enhance Labuan's competitiveness as an international offshore financial hub," Azizan said.

He added that Lofsa had appointed legal consultants to conduct benchmarking studies against other offshore centers. Moreover, Azizan said the option for Labuan offshore companies to be elected under the Malaysian Income Tax Act 1967 or the Labuan Offshore Business Activity Tax Act (LOBATA) 1990 would also enable businesses to structure their transactions more efficiently.

Labuan Offshore Financial Services Authority Publishes Exposure Draft on Shariah Compliant Trusts

LOFSA has issued an Exposure Draft to provide guidance on the requirements to be observed by all offshore trusts created under the Labuan Offshore Trusts Act 1966 (LOTA) and managed under the Shariah principles, it emerged last week. The Exposure Draft aims to ensure that Shariah compliant offshore trusts created in the Labuan IBFC are based on necessary requirements under LOTA and Shariah principles. It also aims to provide some clarification for Shariah compliant trusts, as currently there is no legislation on Islamic financial business. ...

The Guidelines aim to ensure that Shariah compliant offshore trusts created in Labuan IBFC are created and managed based on prudent practices and necessary requirements under the Shariah principles at all times. The term "Shariah" refers to the guidance and code of conduct derived from the Koran, and embodies all aspects of the Islamic faith, including beliefs and practices that formed the sources of Islamic jurisprudence.

A Shariah compliant offshore trust is defined in the guidance as follows:

"... The formation of an offshore trust is generally for someone or a settlor to give specific property to a third party to be held for the benefit of others, including charities. The creation of a Shariah compliant trust is to provide an alternative for a settlor to exercise his rights in creating a trust in accordance with the Shariah principles." ...

"The trust may include several types of offshore trusts recognized under LOTA including but not limited to discretionary trusts, fixed interest trusts, charitable trusts, life insurance trusts, trading trusts and testamentary trusts or any other forms of offshore trusts set out under provisions of LOTA that are in compliance with Shariah principles."


An entry last week alluded to the double tax avoidance treaty between India and Mauritius, although the discussion did not directly concern the treaty. Now, as Paul Harvey used to say, for the rest of the story ...

NEW DELHI: The controversial double tax avoidance treaty between India and Mauritius is likely to survive despite pressure from the income-tax authorities. The pact may be reworked, but not scrapped, thanks to the lobbying by a high-level delegation headed by Mauritius Prime Minister Navinchandra Ramgoolam.

The pact, crucial for foreign institutional investors (FIIs) investing in India, has been facing an uncertain future since the revenue department in the [Indian] finance ministry is opposed to loopholes that allow exploitation of the pact by intended beneficiaries. Several foreign companies, for example, have invested in India through what is known as the Mauritius route.

It is understood that Mr. Ramgoolam discussed the issue with Prime Minister Manmohan Singh and pleaded strongly for status quo. The pact is crucial for Mauritius that is keen to develop itself into a leading financial center of the world by offering attractively-low tax rates. Due to treaties like the one with India, a number of FIIs and foreign companies register special purpose vehicles (SPVs) in Mauritius for investment in other countries. ...

Substantial amount of foreign investment into India is routed through Mauritius, primarily on the strength of the capital gains exemptions available through this window. Data indicates that Mauritius is the second largest source of foreign investment into India, second only to the U.S.

Translation: For all the crying in their milk the Indian tax authorities do about Mauritius-based tax avoidance schemes, India is critically dependent on the investment routed through Mauritius. They would love to get a few more eggs from the golden goose, but dare not risk killing it.

Meanwhile, the government of Mauritius is going all out to woo investments from India. Under the new Business Facilitation Act of the country, foreign entrepreneurs can start business activities in the country within three working days on the basis of self adherence to guidelines set by the authorities, which will exercise ex-post control for compliance.

The government of Mauritius does not discriminate between local and foreign investment. Foreigners are allowed to own 100% equity in local companies. Also, residence permits and work permits for foreign investors and professionals have been combined into an single occupation permit, which is now processed within three working days. "We are seeking investments from India in the area of infrastructure, hospitality, telecom and IT. We are also very keen to attract professionals in the field of IT, construction and telecom. We need specialist doctors and engineers from India," Mr. Kasenally said.

The government of Mauritius is wooing U.S. companies with the carrot of preferential access to the Indian market through the recent Comprehensive Economic Cooperation and Partnership Agreement signed between Mauritius and India.

The Integrated Resorts Scheme, which is meant to attract high net worth non-citizens who want to acquire an immoveable property of not less than $500,000 in Mauritius (within a resort approved by the board of investment) for personal residence, is also proving to be very popular.

"The investor and his/her spouse and dependents are granted resident permits to live in Mauritius and can later acquire citizenship. Under this scheme, we are attracting people from India as well as people of Indian origin from east Africa and the Gulf region. In many cases, overseas Indians find Mauritius a better place to set up businesses or move their operations than many other countries," Mr. Kasenally said.

The Mauritius government seems serious about bringing investment and people who can add value to the tiny (787 sqare miles, 1.23 million people; Wikipedia entry here) Indian Ocean island nation. The situation bears watching.


The islands making up the Netherland Antilles are currently undergoing fundamental changes in legal status, with some becoming autonomous and others retaining formal links to the Netherlands. Tax-news.com relays some recent first hand news of the transition as it concerns financial affairs.

Significant progress has been made in discussions on a new fiscal scheme for the Netherland Antillean islands of Bonaire, St. Eustatius and Saba after they attain a new constitutional status, it has been reported.

According to the St. Maarten Daily Herald, the new tax system, financial markets and constitutional status as "ultra peripheral territories" (UPT) were the subject of lengthy discussions between senior civil servants from the islands ... The BES islands have been negotiating their status as "public entities" of the Netherlands ... It is hoped that a final decision on the tax proposals will be agreed during further consultations, which will include the Dutch government ...

Officials from the Dutch government have also engaged the islands' governments on new financial markets laws, which will regulate everything from investments to banks and insurance, and have proposed that the U.S. dollar be adopted as their currency. A study is also underway to explore the introduction of the euro in Bonaire, which maintains significant trade and tourist links with the Netherlands.

Following a series of referenda between 2000 and 2005, a Round Table Conference held between the governments of the Netherlands, Aruba and the islands of the Netherland Antilles agreed that Curacao and St. Maarten would become autonomous territories, while the BES islands of Bonaire, St. Eustatius and Saba would have a new status, but remain linked to the Netherlands. The agreement will dissolve the Netherland Antilles by 15th December, 2008.

Netherlands Antilles Announces Shift in Policy on Tax Treaties

Tax-news.com reports:

The tax treaty policy for Nethereland Antilles will change this year to become focused more on treaties to avoid double taxation (Double Taxation Agreement: DTA) and less on tax information-exchange treaties (Tax Information Exchange Agreement: TIEA), the government announced on Thursday.

In a statement, the Secretary of State for Finance, Alex Rosaria explained that: "The importance of TIEAs is the positive positioning of the Netherlands Antilles. These agreements confirm the Netherlands Antilles' commitment to high international standards and its stature as a responsible international financial center."

"Since 2000, the Netherlands Antilles has worked with the OECD countries to develop principles to improve transparency and exchange of information in tax matters. ... Although of vital importance, TIEAs are do not particularly bring about new economic activities for the international financial services sector."

No kidding. TIEAs effectively and by design reduce activities in the international financial services sector, aka the offshore financial sector, "economic" or not, by making the countries signing the TIEA less attractive for investment by each other's citizens. All else equal, why would you invest in a country who is reporting everything back to your home country if you had the option to operate with more privacy elsewhere?

"Furthermore there is a growing number of smaller countries that do question the benefits of TIEAs given the fact that there is no level playing field. It is hoped that this theme will shortly be discussed within the OECD. ... DTAs on the other hand do contribute to economic activity because they focus on stimulating investments."

What is stated here is obvious, but no less worth stating for that. The big OECD countries try to force TIEAs down the throats of small offshore haven countries, threatening them with sanctions such as isolation from the international financial system, for the supposed benefit of, e.g., citizens of the Netherlands Antilles not being able to hide income from investments in the USA. Except, the U.S. and OECD hold higher financial sector transparency and reporting standards for everyone else than themselves -- thus the "no level playing field" assertion (e.g., see here, here, and here). DTAs, on the other hand, reduce taxes (by reducing double taxation) and thus stimulate economic activity.

Currently, the Netherlands Antilles has three signed TIEAs (with the USA, Australia and New Zealand). Negotiations with nine more countries, namely: Sweden, Iceland, Denmark, Greenland, Finland, the Faroe Islands, Spain, Canada and Mexico, are expected to be concluded and possibly signed this year.

Rosaria went on to stress again that the Netherlands Antilles must concentrate more on the negotiating and entering into DTAs, concluding that: "The sector also agrees with me that the 'beef' is to be had in DTAs. I expect that we can this year negotiate DTAs with Mexico, Spain, Surinam, the United Arabic Emirates and Colombia."


Despite the threat of an economic slowdown, Canadian Finance Minister Jim Flaherty has signaled that he does not intend to prop up the economy with a fresh round of tax cuts in the upcoming budget, and will instead concentrate on reducing the government's debt. Flaherty told reporters ... that while there remains room for fiscal measures in the budget, the government was sticking to its pledge to reduce the public debt by C$10 billion, starting with a C$3 billion cut in the coming fiscal year.

"No one should expect large tax reductions in this budget," he stated, reiterating that the government has already introduced billions of dollars in tax cuts for comanies and individuals, equal to about 1.4% of Canada's GDP. "That is a huge stimulus to the Canadian economy -- much more, for example, than our American colleagues are thinking of doing in the United States," he observed, pointing to the $150-billion U.S. fiscal stimulus package designed to keep that country out of recession this year.

Tax cuts as a rule are to be welcomed, if accompanied by spending cuts. Otherwise, they manifest as more government debt than would otherwise be the case. This means increased future taxes or inflation. Any present-day stimulous thus comes at the expense of the future (a tradeoff most politicians are good with, to be sure). And some scholarly studies have shown that even this small effect (of neutral tax cuts unaccompanied by spending cuts) is largely nonexistant. Market actors infer what is going on and are not tricked into altering their behavior.

Flaherty also argued that after cutting taxes by about C$10 billion, the government should concentrate on fiscal stability. "I think most Canadians would say this is a time for steady economic management, steady hand on the tiller, make sure that we navigate our way through this time of economic slowness until we are back in a time of more significant economic growth," he reportedly explained.


Grant Thornton offers some tax arbitrage advice for British couples. By performing a paper transfer between spouses which incurs no tax consequences, the cost basis of an asset can be stepped up using an inflation indexing formula, thus reducing future capital gains taxes when the asset is finally sold "for real". This has to be accomplished before April 6, when indexation is scheduled to be terminated with extreme prejudice.

Business and financial advisory firm, Grant Thornton, is urging taxpayers to take advantage of indexation before the UK capital gains tax flat rate drops on 6th April this year -- provided they have a helpful spouse.

Introduced in 1985 to overcome high levels of inflation which were forcing individuals to pay CGT on illusory gains, indexation allows anyone offloading an asset to uplift the base cost of the asset for capital gains purposes for the impact of inflation between the time the asset was purchased (or April 1982 if earlier) and April 1998.

Mike Warburton, senior tax partner at Grant Thornton, says those wishing to minimize their exposure to the flat rate when it begins on 6 April this year should investigate indexation, as it could save some individuals substantial amounts of money. "The current Chancellor plans to abolish Indexation along with Taper Relief on 6th April when he replaces the existing system with a flat 18% rate of CGT, but draft legislation issued in January confirms that it should be possible to retain the benefit of Indexation Relief by giving assets to your spouse," stated Warburton. "Many people selling shares, buy to let properties, or other assets over the last 10 years, have benefited from the indexation that they had earned. That benefit still exists but only for another two months."

For example, someone who bought an investment property or block of shares in Summer 1982 for £10,000 will have a base cost with Indexation of about £20,000. Transferring those assets to their spouse will give that person a base cost of that £20,000 which will remain there after April this year when Indexation Relief is abolished. ...

Warburton continued: ... "Particular beneficiaries of this will be farmers and land owners, but millions of others could do the same and so need to investigate this situation immediately or else face the difficulty of realizing later in the year that they could have taken advantage of this relief. ... Gifts to your spouse or civil partner do not attract Stamp Duty or tax at the time, so it really is a win-win opportunity for those prepared to act quickly."


The California-based cash transfer company Sigue agreed ... in federal court in St. Louis to pay $15 million for failing to provide effective money-laundering safeguards. Officials said the company violated the Bank Secrecy Act in helping clients send $24.7 million out of the country under suspicious circumstances.

In an undercover sting which began in St. Louis, investigators posed as drug dealers at 83 Sigue locations in 22 states, seeking to send a total of $500,000 to suppliers in Mexico City. 24 of the Sigue agents refused, but 59 agreed, officials said. At 47 sites, agents or their employees helped split the money into smaller batches to try to evade reporting requirements.

The company reported some transactions, "but failed to detect and report the broader money laundering scheme" and prevent it from reoccurring, according to an agreement with prosecutors covering a period in 2003-05.

Unanswered is what "posing as drug dealers" consisted of here, and how important a role that "pose" played in the accusation of failing to detect the "broader money laudering scheme." Many federal crimes have very subjective criteria today, with federal law enforcers acting as umpires -- "That act is illegal because I say it is" -- rather than objective legal scholars. At what point does a "broad scheme" become sufficiently subtle that failure to detect it is not a crime? No one knows for sure, as there is no way to precisely define that point.

The employees who helped split the money into smaller batches to try to evade reporting requirements were guilty of a crime broadly known as structuring. Splitting the cash pile up would save reporting paperwork for the company, and avoid an entry in Big Brother's database for the client. From the government's perspective, the paperwork cost is not their problem, and obviously the money sender avoiding their monitoring net is bad, bad, bad. Thus the laws against structuring.

Again, one might ask, just what is structuring? It is subjectively determined. Say someone, upon being informed about reporting requirements, splits their cash into smaller non-reportable batches and then transfers them sequentially to the same destination. That certainly sounds like structuring (and, by the way, if detected can result in the forfeiture of all the cash involved). What if, instead, the person sends off one sub-reporting requirements batch and then sends off another two weeks later? Is that structuring? If the same cash transfer company handles both transactions is it a violation if they fail to detect the proscribed behavior? It is a judgement call.

Sigue Corp. and Sigue LLC will forfeit $15 million, $12 million of it to the Financial Crimes Enforcement Network [FinCEN] as a civil penalty. It also will spend $9.7 million to improve its procedures. The criminal charge ... will be dismissed in a year if the company "fully implements" the agreement, prosecutors said.

We have hit the trifecta in this little case -- money laundering, subjective crimes, and now forfeiture. FinCEN gets to keep $12 million for setting up a sting operationg and getting some not altogether smart or streetwise suckers to fall for it. No trial or anything that requires real effort is needed. It is not as if Sigue will get the $15 million back if they are deemed not to have "fully implemented" the agreement in a year. We bet the whole operation only cost a couple million at most to set up and implement, so that was a nice profit margin. Far more profitable than sifting through data trying to discover actual crimes. Sure sounds like incentive to try something of a like nature again.

[Sigue] says it has 7,500 independent agents around the country serving millions of customers each month, primarily sending money to Mexico and Central and South America. Its general counsel, Robert Pargac, said ... that no company officers, directors or direct employees were involved, nor were most of its locations. Pargac said the company was already tightening standards before learning of the investigation, and spent about $20 million on it. He also said the accused agents have been terminated.

If the accused agents had been working for the government they would have demanded a bigger budget, on the clear grounds that they did not have adequate funding sufficient to do the job before.


Another sting operation, this time using a former client to nab an attorney.

A Newport Beach [California] attorney has agreed to plead guilty to a federal money laundering charge ... according to federal prosecutors. Thomas Burton, 60, faces up to 20 years in federal prison for his role in a money-laundering scheme, according to prosecutors.

"This is a case that we have been discussing with the U.S. Attorneys for many months, trying to convince them these charges should not be brought," said Burton's attorney Jim Riddet. "It is very, in my opinion, outrageous conduct to do this to a legitimate lawyer." Riddet acknowledged Burton violated the law.

Burton agreed to launder $500,000 for Daryl Ray Rice, who told Burton he had funds he needed to move from an overseas mail fraud scheme, prosecutors said. Unknown to Burton, Rice was working for the FBI and the conversations were recorded, according to prosecutors. The FBI directed Rice to do a test transaction that wired $50,000 through Burton's help into a UniCache account in Bermuda, prosecutors said.

Before cooperating with the FBI, Rice pleaded guilty to mail fraud and structuring cash transactions to avoid reporting requirements, according to prosecutors. Burton's plan was to make Rice's proceeds "look like an investment," according to the plea agreement.

The mail fraud angle in the story crime corresponded to an actual crime committed by Rice. Must have been so he could lie more convincingly. Notice that mail fraud, a real crime with real damages to real victims, was given equal weight in the prosecutors' thumbnail on Rice with structuring, a victimless crime that exists only within the vast quagmire of federal statutes.

Short articles like this one perforce leave out critical details. Here one cannot help but wonder: Did the "overseas" part of the mail fraud scheme in the story Rice fed to Burton also have some correspondence to reality? And was the mail fraud really a minor crime as far as the FBI and the U.S. were concerned, with the structuring rap the true source of leverage they had over Rice?

According to Riddet, Rice had been a client of Burton's previously and came to Burton with a problem. Upon hearing about how Rice obtained the money and what he wanted to do, Burton agreed to help, according to Riddet. "Tom is facing up to it," Riddet said. "He did not realize it was as serious as it turned out to be."

Riddet believes when the case is heard in front of the judge Burton's charitable work, years of service and the legitimacy of the charges will work in favor of Burton and the sentence will reflect that.

It is impossible to tell from what is reported alone just what Mr. Burton did to attract the attentions of the FBI. It may have been the mere fact that he was engaged in offshore financial services, i.e., helping people get their capital out of Dodge. Getting 20 years for a wholely contrived crime is obviously unjust. Nevertheless, given the undisguised illegality of the funds within the story being woven, it was a very unintelligent move to agree to launder the (fake) proceeds, not to mention supernaturally unwary.


The confidentiality of communications between a legal representative and his/her client has been a longstanding legal tradition in English common law, which was inherited by the United States. Naturally this tradition has been a nuisance to criminal prosecutors, just as not being able to look at your opponent's cards is a nuisance if you want to win. The tradition has been whittled down for years in the U.S., notably in cases involving terrorism. "The public interest" in avoiding potentially horrendous damages is the justification. (When lighting a firecracker on public property counts as "terrorism" then practice diverges widely from theory.)

Britain, by dint of its membership in the EU, finds itself compromising on attorney-client privilege in accommodating its European partners who have no such legal traditions. In particular, Britain is incorporating European anti-moneylaundering rules that apply to various professions such as casinos and accountants, and lawyers. Now a Canadian lawyer wonders -- quite rightly -- "How long will Canada stand on guard to defend the privilege on its own?"

Tax havens, money laundering and terrorist financing are all major economic concerns of developed countries. In Canada, we have the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCTFA), which requires various professions, such as accountants, to report suspicious "dirty-money" transactions and cross-border movements of currency and monetary instruments.

This is a white-collar version (for Canadians) of the law the cash transfer company in the post above was found to have violated. As there, what exactly is "suspicious" is a nebulous concept.

Looking for dirty money is like looking for a needle in a haystack because tax havens and banking secrecy hide the source of such money. Thus far, lawyers in Canada have escaped the full force of the PCTFA. Britain, however, is moving against the privileges of the legal profession. How long will lawyers be exempt in Canada?

Tax havens are a refuge for the rich from the tax collector. ... What makes an ideal tax haven? Clearly, the place should have stable government --preferably democratic -- the rule of law, a strong and independent judiciary and sophisticated banking. ... Britain has secure offshore financial institutions in the Channel Islands, amenable tax laws for non-domiciled residents and a cultured lifestyle. The British Treasury estimates there are approximately 115,000 wealthy mobile individuals who are non-domiciled residents in the U.K.

Resident British non-doms can shelter their offshore wealth and investment income from tax. They are not taxable on overseas earnings and capital gains on offshore assets, unless they remit the income and gains to Britain.

The tax advantages, sophisticated offshore banking in the Channel Islands and Britain's pre-eminent legal systems also attract tainted foreign capital. Hence, apart from being a key financial center, London is a honey-pot for substantial capital that comes into the country from opaque sources -- Russia, former Soviet satellites, and corrupt African, Asian and Latin American countries. One Nigerian dictator alone is reputed to have processed at least £1.3-billion ($2.6 billion) through British financial institutions in the late 1990s.

London is also a moneylaundering center, which is attracting the attention of British anti-corruption investigators. Money laundering is the process by which one takes "dirty money" and cleans it to make legitimate money, which flows seamlessly into the national economy through respectable financial institutions.

It interesting to see London called out as a major money laundering center. To hear the OECD and other mouthpieces of the global ruling class tell it, it is those little warm weather tax havens who are the real bad guys.

Typically, drugs, prostitution, gambling, political and economic corruption are the major sources of dirty money. Think also of money from ideological countries and so-called charities fleeing into secret bank accounts to fund terrorism. Since it is difficult to declare income from such sources for tax purposes, tax havens, money laundering and terrorism make happy bedfellows.

Tracking dirty money is not easy, even with government reporting requirements. The underlying philosophy of the money-launderer is simple: If you want to hide illegal money, put it in the biggest haystack you can find. London wins again.

Britain's Labour government is threatening to remove the traditional tax advantages for non-doms and tighten anti-money laundering rules. ... If Prime Minister Gordon Brown's government enacts the proposed laws, London will lose some of its luster for foreign bankers, but the laws will improve tax equity. This worries the British Treasury, which estimates that it could lose up to £4 billion annually -- a steep price for tax equity and fairness. However, a corollary advantage of the tax rules is that even minimal reporting requirements would make London less attractive for terrorists, foreign despots, white-collar criminals and fleeing oligarchs.

Thank goodness for "corollary advantages". If rules allegedly making the City less attractive to criminals are such a great idea, why do they have to come as a package deal with a set of wrong-headed and counterproductive ideas? The crack about £4 billion being a steep price for equity and fairness is well taken. How much is indulging envy and class warfare worth, anyway?

Britain is also introducing new European anti-moneylaundering rules that apply to lawyers, accountants, casinos, trust-company services, consumer-credit businesses and real estate agents. As it is, some of the largest multi-million-dollar property transactions in the country are for cash. The rules will require extra checks on politically exposed persons who pose a higher risk of money laundering -- such as foreign heads of state and customers who do not meet face-to-face with their bankers.

The extension of the anti-money-laundering rules to lawyers touches an exposed nerve of the legal profession. The legal profession in Canada has resisted the state intruding into the identity and source of funds that lawyers receive on account of their clients. Indeed, the legal profession has successfully challenged -- at least thus far -- the constitutionality of the rules requiring lawyers to report client information to federal bureaucracies tracking terrorist financing and money laundering.

As the scale of terrorist financing and money laundering increases, however, so do the economic and security risks to society. Ultimately, law is a balancing of conflicting values. Will our courts tilt from the strict doctrine of solicitor-client privilege in order to better combat the evils associated with terrorist financing and money laundering?

As is often the case, the "evil" of money laundering -- much of which is directed towards covering the tracks of transactions between consenting adults (drugs, prostitution, gambling), or avoiding the enforced burdens of racketeering governments -- is mentioned in the same breath as terrorism. In actuality, a good deal of "money laundering" does not even serve the purpose of covering up a primary crime of any sort, victimless or otherwise, but just involves paperwork violations. Let us play a little thought game and see where it leads: Attorney-client privilege in money laundering cases is shrunken, and someone is accused of tax evasion and money laundering. Can he expect confidentiality in his communications with his tax advisors? Thought not.

Clearly, Britain -- with its long history of legal privilege -- is moving against the legal profession. Its European partners, who never shared the common law tradition of solicitor-client relationships, have little time for such privileges. How long will Canada stand on guard to defend the privilege on its own?


Former Haitian dictator Jean-Claude "Baby Doc" Duvalier fled that unfortunate country over 20 years ago. In good, traditional, Third World dictator fashion he had transfered a tidy sum of cash stolen by his government from Haiti's populace into his own name, and sequested it in a Swiss bank account before departing. In the old days Duvalier could have lived out his life comfortably in exile in, e.g., ex-Haiti colonizer France, but the rules started changing. The Swiss have been sequentially freezing larger portions of Duvalier's assets held in Swiss financial accounts, pending the outcomes of assorted suits by Haitian parties. Now, they have frozen further assets:

The Swiss government has reportedly decided to freeze further assets held by former Haitian dictator Jean-Claude Duvalier in banks accounts with Swiss bank UBS. According to the Swiss ATS news agency, Mark Henzelin, a lawyer acting for two Haitian plaintiffs seeking damages from Duvalier, revealed this week that the sequestration of the funds in Basel was obtained in January.

The latest action by the Swiss authorities follows up on the one-year extension of a temporary freeze on €6.7 million of Duvalier's Swiss assets last August. The Swiss government revealed at the time that they had extended the freeze following assurances by Haiti that proceedings against Duvalier would be launched "in the near future", which is a necessary step for Switzerland to confiscate the funds.

Duvalier and his followers have been accused by Haiti's new government of siphoning off state funds during his reign, but the money in question has been caught up in legal wrangling ever since the Duvalier regime was ousted in 1986. Duvalier now resides in exile in France.


Anyone with a lick of awareness will recognize that the U.S.'s current system of government has almost nothing in common with the Constitution that Congressmen, Senators, Presidents, etc. all swear to uphold. Is this a blatant and treasonous disregard of their oaths? If not, then how did the de facto or de jure Constitution get defaced beyond all recognition? Or is it largely a corrupt, power-happy, and out-of-control Executive branch selectively enforcing real and made-up laws as it sees fit, and relying on the inefficiency and conspiratorial winks of the courts to deny effective remedies to the oppressed?

Jokes about the U.S. Supreme Court "passing too much legislation" have been around for decades. Supreme Court justice nominees are grilled on their ideology rather than their legal qualifications and integrity. This alone is a clue that justices do a lot more than "interpret" the Constitution. How long has this been going on, as the old standard song asks?

Kevin R.C. Gutzman's The Politically Incorrect Guide to the Constitution (PIGC) lays out in fine-toothed detail how all three branches of the U.S. government have systematically sought to arrogate powers never intended for them. Gutzman's particular focus is on the ofttimes flagrant role the Supreme Court has played in undermining the checks and balances intended by the writers of the Constitution, and the Orwellian -- not to mention Salvidor Daliesque -- outcomes deriving from their usurped and unchecked powers.

This book is simultaneously interesting, appalling, and simple. It is simple in that the author is really trying only to drive home one basic idea: that the Constitution was written largely to impose severe limits on federal power, but starting very early on in our history, all three branches of our government -- the judiciary perhaps most of all -- engaged in the most egregious and unconstitutional abuses of power. [The author] says:
This book's goal is to explain how the Constitution was understood in the first place and then to chronicle the federal courts' history of dealing with it. It will show how we went from the Constitution's republican federal government, with its very limited powers, to an unrepublican judgeocracy with limitless powers.
It is appalling in that the author amply demonstrates his case, even showing, in some cases, that those intimately concerned with the Constitution's framing could not be counted on to uphold it as it was understood by its ratifiers. It is interesting in the amount of historical context it provides.

In the case Gutzman makes (more details below), it goes well beyond a matter of certain framers reversing course post-ratification -- politicians not keeping their campaign promises as it were. Important reversals were of sufficiently fundamental character as to constitute an attempt to change the form of government, in effect a coup. The number one judicial scoundrel in the narrative is Chief Justice John Marshall, who in his rulings systematically undermined the whole notion of a federation of independent states in favor of a supreme national government. In doing so Marshall concommitantly elevated the power of the Supreme Court to a level it has effectively maintained to this day. By the time he died the terms of the debate had shifted from what did the Consitution say and mean to what does the Supreme Court say it means.

The author, Kevin R.C. Gutzman, appears unusually well-positioned to examine, evaluate, and explain our Constitution and its history. He is a lawyer -- or possessed of a J.D., at any rate -- and he has a Ph.D in history. His historian's background is important, for he states that for quite some time, lawyers' training vis-a-vis the Constitution has not emphasized the historical background of that document -- English Common Law, The Federalist Papers, The Anti-Federalist Papers ... and so on -- but the records of how courts, especially the Supreme Court, have ruled on cases. ...
For a century now, instruction in American law schools has focused on the "case method." Prospective lawyers do not study the continental, English, and colonial antecedents of the federal Constitution. Neither do they read the records of the Philadelphia Convention of 1787, where the Constitution was written, or the ratification debates that led to its implementation. Instead, they imbibe the latest opinions on constitutional matters from the courts, and particularly from the Supreme Court. Those opinions, and not the Constitution's text as understood by the people when they ratified it, are what law schools teach as "constitutional law."

This "law" is the product, to a large degree, of the political preferences (refracted through the constitutional "theories") of judges and lawyers. It has almost nothing to do with history or with the original understanding of particular provisions. Thus, asked by a student why his constitutional law class would not be reading any of The Federalist, a famous constitutional law professor at an elite law school responded that The Federalist had nothing to do with constitutional law. The sad thing is that the professor was right, because today's "constitutional law" is not constitutional at all.

This not only engraves errors, intentional or not, in stone, but undermines the ability to critically think. If reality is what the court says it is, why bother to question it? Not just power but thinking itself ultimately derives from the barrel of a gun. Lenin and Mao were hardly pioneering practicioners of that philosophy.

The first chapter offers some very interesting material concerning the rights of Englishmen as they were understood by colonial Americans, especially as outlined by Thomas Jefferson in his A Summary View of the Rights of British America. But right after that, the author moves into a section which I found absolutely fascinating, titled "A state is a state is a ... country". Here, he confirms what I have often thought, that the only way the Declaration of Independence and the Constitution made logical sense was if each individual state was not actually a part of a country, but an actual country itself. That always seemed to me how people used the term "state", except when they were talking about one of the United States. Then they always talked about the states as though they were mere provinces of an overall larger country. ...
In the Declaration's culminating fourth section, Congress declared the colonies to be "free and independent states" and claimed for them the right to do everything that free countries could do. They were the sovereign equivalents of Russia, Sweden, and Spain.
Elsewhere, he recounts how at the close of the Revolution, King George recognized not one country, but thirteen sovereign states.

This understanding of the word "state" has huge implications for how one understands the Constitution and "state's rights." If each state is, properly speaking, a country, a country that has delegated certain powers to a federal government for convenience and mutual defense, there is no question but that the states are superior to the federal government, rather than the reverse. ...

The author makes very clear that the Constitution would likely not have been ratified if the states had not been assured that their sovereignty would not be compromised. They were repeatedly assured of this during the Convention itself, and the Bill of Rights was adopted specifically to make clear some of the rights that the Federalist party -- those who wanted a stronger federal, even national, government -- insisted were not at risk.

The states did not trust the feds. Imagine that. At least three of them ratified the Constitution partly on the grounds that they had been assured that the could withdraw from the Union later if the federal government did not suit their needs.

Seen in the light of the ratification debates, then, where the right to secede from the Union was openly debated and ceded, one can certainly make the case that the Civil War really was, as the Southern States often term it, "The War of Northern Aggression."

There is an enormous amount of material concerning the role of the federal courts and especially the Supreme Court, for example
The Constitution also provided a list of the kinds of cases Congress might authorize federal courts to decide -- which meant, as lawyers understood things in those days, that Congress could not authorize federal courts to decide any other kinds of cases. Instead of a national judiciary, in other words -- one with power to hear any case that came to hand -- Article III created a federal judiciary and left most judicial power in the state governments.

Not coincidentally, the various contentious issues roiling the American political waters today -- flag burning, abortion, state government recognition of religion (say through public prayer), and homosexual marriage -- are not among those the federal courts were given power to decide by the federal Constitution written in Philadelphia. ... Nor did the Federalists, when they advocated ratifying the Constitution, pretend otherwise.
There is ample material on the role specific individuals played, both in the framing of the Constitution and in its progressive undermining.

Individual judges, such as John Marshall, come in for detailed treatment, too often noting specifically how their decisions actually and specifically ran counter not only to the words of the Constitution, but to the meaning of the words as detailed during the ratification debates. Most disappointing are the instances wherein people who had a hand in the framing of the document actively undermined it from the beginning. For example, the author says of Madison:
In the wake of the Convention, Madison would be greatly dismayed by the discrepancy between what he had wanted and what the Convention had yielded. He repeatedly acted in positions of high public trust over the next four decades to bring the federal regime into consonance with his proposals -- even to the extent of arguing that the Constitution meant what the Convention had squarely decided that it should not mean.
With example after example, the author makes it clear that the plain meaning of the Constitution -- it is not that hard a document to understand, if one just reads it, after all -- has been under assault almost from the time the ink of the last ratifier's pen was dry. Judicial activism, whilst perhaps particularly bad over the last 40 years or so, has been a problem from the very beginning.

Of the individuals studied ... Lincoln does not come across very well in this book, as the author makes it clear that he ran completely roughshod over both the text and the meaning of the Constitution he had sworn to uphold, over and over again ...
Of course, the most astounding constitutional innovation Lincoln made was his Emancipation Proclamation of 1863. By that act, which he justified on the basis of his war powers as president, Lincoln abolished slavery -- but only in those portions of the Confederacy not occupied by the Union.

Patrick Henry had predicted in the Richmond Ratification Convention of 1788 that a president would someday invade Virginia, burn down delegates' houses, declare it a military necessity, and free the slaves. Even now, more than 140 years since it actually came to pass as Henry predicted, this prognostication is treated as demagogic scare-mongering in most accounts of the Richmond Convention and most biographies of Henry and James Madison.

Indeed, it was an outlandish claim. Who would have thought than an American president would do such a thing? After all, Lincoln had no constitutional warrant for it whatsoever -- only what he called his "inherent powers," a term broad enough to cover almost any wartime behavior. The Court never ruled on the constitutionality of the Emancipation Proclamation, and the issue became moot after the ratification of the Thirteenth Amendment, which the southern states (except Mississippi) were coerced into "ratifying" at the end of the war.

The sum of Lincoln's constitutionalism seems to have been "whatever I favor is constititutional."
Alert readers will note that the rank stench of Lincoln's blatantly unconstitutional reasoning still floats about the halls of Washington and the White House whenever the subject drifts to "executive orders" or the President's "war powers." ...

[T]o sum up, the author clearly makes his case that our government has borne only the slightest resemblance to a truly constitutional government for many decades, that true power was supposed to reside in the sovereign states ("countries" to use a word more recognizable to modern ears), and that the constitution's main purpose was to clearly define and limit federal power. In the process, he provides a number of brief and highly readable accounts of the framing of the Constitution, the ratification process, major Supreme Court cases, and individuals' actions. ... It is, for its length, a superb book ... Highly recommended.

"The Supreme Court did it" is too simplistic an answer to the "Who killed the Constitution?" mystery. It could not have happened without the complicity of the other government branches and, most importantly, a lack of resistance by the people of the United States. A great enigma is, nevertheless, how did a government organ with no army get the people and the often adversarial other branches of the U.S. government to go along with its rulings and usurpations? That would be a sociological study for another book.

The Supreme Court plainly did play an essential role in the Constitution's effective overthrow, and it continues to do so to this day. At times it played the part of a corrupt cop looking the other way when wrongful activity was occurring during its beat. Other times it acted like a national newspaper editorial page, lending the force of its prestige and authority to the justification of what would ordinarily be viewed with hostility or suspicion. And then there were times that the character of the Court was of the nature of "Boss" Tweed, except with a Harvard degree and aristocratic diction, making the law and defying anyone say it was otherwise.

We recall a tale wherein some hikers chance upon a man staked next to an ant hill, stripped bare in the blazing sun with honey smeared all over his body. "How did you ever get yourself into this situation?", the hikers asked. "I don't know," he replied. "Just lucky, I guess."

But the degree of "luck" that yielded the situation we have today in the U.S. is the small residue of a very large design. Gutzman's account methodically identifies a long series of directed actions organized around the principle and goal of accruing power to the federal government. Indeed, if one does not see a "long train of abuses and usurpations, pursuing invariably the same Object [evincing] a design to reduce [the people] under absolute Despotism," as written in the Declaration of Independence, it is because one is willfully choosing not to look.

One matter The Politically Incorrect Guide to the Constitution resolves is when the conspiracy against the Constitution began. During the reign of the Warren Court? When the FDR Supreme Court appointees allowed the New Deal to roll forward unimpeded? With, in short order, the creation of the Federal Reserve, the passing of the 16th and 17th Amendments to the Constitution, and the entry into World War I? During the Progressive Era? With the War Between the States? No to all of those. It began in 1789, the moment it was ratified, if not before.

Ignoring and neutralizing the nominal constraints of the Consitution has been part of the federal mindset for well over two centuries now. That thinking is as much part of the D.C. milieu as humid air in August. Getting "the right people" in place will not change this. One comes away from reading PICG more than sympathetic to 19th century anarchist Lysander Spooner's conclusion to his classic No Treason:

[T]he writer thinks it proper to say that, in his opinion, the Constitution is no such instrument as it has generally been assumed to be; but that by false interpretations, and naked usurpations, the government has been made in practice a very widely, and almost wholly, different thing from what the Constitution itself purports to authorize. He has heretofore written much, and could write much more, to prove that such is the truth. But whether the Constitution really be one thing, or another, this much is certain -- that it has either authorized such a government as we have had, or has been powerless to prevent it. In either case, it is unfit to exist.

What follows are some random quotes from The PIG to the Constitution, and some points of possible contention with the author. The first quote pithily summarizes the vital role the "intellectuals" (people who have been educated beyond their intelligence) play in supporting the depredations of those bent on accumulating power:

The centralized model of government that the New Deal embodied appeals to the socialist leanings of most intellectuals. Something in the typical intellectual finds the idea of the philosopher king -- or the philosopher court -- appealing. Who needs those dirty elections, all that demeaning electioneering, anyway, when you can get the right result by following the Rule of Five: he who has five votes, rules? [p. 174]

In a section titled “The Supreme Court vs. Christianity” (it could well have been titled “Supreme Court et al v. Christianity”), Gutzman discusses the so-called "Lemon test" for judging state laws regarding religion (from the Lemon v. Kurtzman (1971) case). He quotes Chief Justice Warren Burger at length from the Lemon case discourse, then unleashes this inspired piece of invective:

To paraphrase: "Common citizens, as represented in state legislatures, are not bright enough to walk and chew gum simultaneously. Fortunately, I, Warren Burger, lead a committee of well-connected lawyers established for the purpose of determining which issues should be plucked form the state legislatures and decided in the way the intellectual elite prefers. Whenever someone points out that the Constitution does not actually address such matters, except insofar as the Tenth Amendment says that powers not delegated to the federal government are reserved to the states, we tell them that the Constitution is actually extremely complicated, and that only three years in law school and appointment to a judicial post can prepare one to interpret it." [p. 180]

From a sidebar on p. 203:

At the constitutional level where we work, 90 percent of any decision is emotional. The rational part of us supplies the reasons for supporting our prediliction.’ ~~ Justice William O. Douglas

In the section (p. 208 ff) titled “The Supreme Court and 'privacy'”, Gutzman excoriates the Court once more for taking jurisdiction and making law outside of any references within the Constitution's wording and ratification debates. However, when he claims that no "right to privacy" exists within the Consitution, one must wonder if in his anxiety to cut down certain trees he has cleared too much of the forest. The Nineth Amendment reads:

The enumeration in the Constitution, of certain rights, shall not be construed to deny or disparage others retained by the people.

To our knowledge, the Nineth Amendment has never been cited in a major Supreme Court case (it is scarcely acknowledged in PIGC), as if it were an embarrassment, like Mr. Rochester's crazy wife in the cellar in Jane Eyre. This is surprising, given its wide scope. Gutzman's point vis-a-vis the specific "privacy right" case at issue -- the landmark Griswold v. Connecticut (1965), where the court ruled the state could not deny married couples access to contraceptives -- is valid. As with so many cases cited, the matter under consideration was the state's (Connecticut's) business alone. But to claim that no right to privacy exists in the U.S. Constitution at all strikes us as glaringly and oddly deficient in contextual awareness.

The whole point of the Constitution was to delegate a few powers to the feds and otherwise keep them the hell out of everyone's lives. The Nineth Amendment directly bears upon this. Moreover, modern Court rulings often justify government laws -- including offenses against privacy -- by saying they cannot find anything in the Constitution prohibiting the law. (The idea that the federal government has only certain enumerated, i.e., itemized, delegated powers has so long been ignored -- it was overtly repudiated by John Marshall in McCulloch v. Maryland (1819) -- that it may as well never have existed.) The Nineth Amendment tells us that no such finding is required. It is long past time for that Amendment to be used as substantive argument against government overstepping its purported bounds. Failure to bring it up in the context of a right to privacy, more basically a right to be left alone as long as you are minding your own business, was an oversight and missed chance in the book.

Context-dropping of a different order occurs in the section “The Supremes and criminal law” [pp. 190-91]. In the notorious and influential Miranda v. Arizona (1966) case, a bare 5-justice majority ruled that a suspect may not be questioned without first being informed of his rights. ("You have the right to remain silent, etc.") Another instance of the feds interfering in a state matter ... OK. Another instance of the federal judiciary cloaking its own preferences "in the garb of 'constitutional requirements.'" Again, fair enough. However: "Why it should be a bad thing for a suspect to offer up a voluntary confession was unclear then, and it remains unclear now ..." Time to draw the line. While fully agreeing that the process by which violation of people's rights are remedied is all-important, in the context of today's rampaging Executive branch this is a point too far. Today's interrogation techniques can feature methods worthy of the KGB. Confessing after several hours of pyschological abuse counts as "voluntary". Is spending 30 seconds to read someone their Fifth Amendment rights such a burden?

Shortly thereafter, Gutzman cites Mapp v. Ohio (1961), which held that state courts, like federal courts, cannot use evidence obtained illegally. Again, a procedural objection to the federal courts telling the states what to do where they have no technical business doing so. He then throws in: "Thus, the public was to pay the price for police errors and/or misbehavior, and criminals were to benefit." As H.L. Mencken said in another context, "The way to dispose of their chicaneries is not to fight them when they are right." Does he really think the Supreme Court was wrong in principle here? Is Gutzman's principle objection that the federal government violates the rules of its own game book, while having no objection to omnipotent state governments doing whatever they want as long as they are following their own constitutions? With statements such as the above, one wonders. Whatever his views, if a Constitution is silent on the rights of the public to not be subject to police "misbehavior", what good is it?

Another review of PICG, by David Gordon writing in the The Mises Review, can be found here.


For those out job hunting, at home or abroad, here are a couple of simple tips that smack of good common sense, whatever position you are applying for in whatever company.

Think you would like to work for one of the 100 Best Companies to Work For? Good luck. A few require applicants to jump through peculiar hoops, like the notorious test at Microsoft that poses questions like, "How many golf balls can fit in a school bus?" and "How would you move Mount Fuji?"

At most of the 100 Best, however, the main hurdle is one of sheer numbers: The average company on the list has 15,853 employees and gets 96,062 applications each year. Not only that, but the overwhelming majority prefer to promote from within ... so you are also competing against insiders. But ... [i]f you have got the right stuff, and follow these 10 rules, you just might have a shot.
  1. It helps to know someone. Almost all of the 100 Best rely heavily on employee referrals. Principal Financial Group and many others get about 40% of their new hires this way. At Wegmans it is a family thing: About one in five employees is related to at least one other staffer.
  2. Play up volunteer work on your resume. These companies are enthusiastic about community outreach, and they prefer to hire people who are too.
  3. Get ready to interview and interview ... and interview. The process varies wildly from one company to another, but you could be facing a series of 12 to 15 one-on-one chats or one long interview with a panel of up to 50 current employees.
  4. Unleash your inner storyteller. By far the most popular interview style is what is known as behavioral, meaning that you will be asked to describe troublesome situations in past jobs and tell exactly how you handled them.
  5. Do creative research. A proven way to stand out from the hordes of other candidates is to know more about the place and the industry than your rivals. A Google search will not do it. Says Jay Jones, recruiting manager at Alcon Laboratories: "Detailed research, including talking to our customers, is so rare it will almost guarantee you get hired."
  6. No lone rangers need apply. By and large, the 100 Best want team players. "I actually count the number of times a candidate says 'I' in an interview," says Adobe's recruiting director Jeff Vijungco. "We'd much rather hear 'we.'"
  7. If you have moved around a lot, be ready to explain why. A checkered past will not disqualify you, but most of these companies are looking for people who want to build a career over the long haul. Be persuasive about why you are ready to settle down here.
  8. Be open to learning new things. Showing passion is a must, and most of the 100 Best pride themselves on creating "learning environments," so talk about the skills you would like to acquire or polish. A turnoff: declaring that you are already the best at what you do.
  9. If at first you don't succeed, don't give up. Almost every Best Company keeps track of what FedEx calls "silver medalists" -- people who barely missed getting hired -- and alerts them to new openings. If possible, register on the company's website. Four Seasons, for one, has hired people seven or eight years after an initial meeting.
  10. Don't coast on their reputation. One final tip: Do not apply for a job just because the company is on our list. In the words of Mike Gallagher, HR director at SAS Institute, "We know we have a reputation as a great place to work. But if the reason you want to work here is that you want subsidized day care or a great gym, you won't last." Or, for that matter, make it through the first round of interviews.

Related to hint #9, the author once heard someone report that he did not even open the first resume anyone sent him. He waited to see if the applicant tried another time, and another. However, he had to modify that screen when nobody tried a second time!


IMF Urges Bermuda To Tighten Anti-Money Laundering Regime

The IMF has urged the Bermudian authorities to speed up the process of updating anti-money laundering and counter-terrorist financing laws (AML/CFT), after a recent assessment suggested that legislation has not kept pace with the Financial Action Task Force Recommendations.

In a report based on its mission to Bermuda in 2006, which was released last month by the Caribbean Financial Action Taskforce, the IMF concluded that there has been little legislative change since the AML laws and Guidance Notes were brought into force in 1998, and the last IMF assessment in 2003. ...

While observing that the criminalization of money laundering and terror financing is "generally comprehensive", with offenses applying to both natural and legal persons, the IMF found difficulty in assessing the effectiveness of the legal framework because there have been limited money laundering investigations, and only one prosecution for this offence in the last five years. Meanwhile, there have been no investigations into suspected terror financing.

Step it up boys. When we say jump, start those knees bending. And stop making us look bad by being so careful that nothing slips through even worth investigating. Make something up, if necessary.

$3.3 Million in Emergency Assistance Approved for Dominica

It was announced on Tuesday that the Executive Board of the IMF has approved SDR2.05 million (about $3.3 million) in emergency assistance for Dominica. This amount is available immediately to help the government deal with the effects of Hurricane Dean, which struck Dominica in August 2007. The damage caused by Hurricane Dean has been estimated at almost 20% of GDP. The agriculture sector, one of the major sources of foreign exchange earnings, took the brunt of the damage.

Economic growth is estimated to have slowed to around 1% in 2007 from a pre-hurricane forecast of 3% growth, while the loss in export earnings in 2007 and 2008 is estimated at 4% of GDP. The donor community has responded by providing disaster relief grants to help address the immediate needs of those affected by the hurricane, and to undertake repair and reconstruction of essential infrastructure. However, given the severity of structural damage, the reconstruction process will require a considerable amount of time and resources, and is likely to be limited by implementation capacity.

The IMF provides emergency assistance to member countries affected by natural disasters to help them meet immediate balance of payments financing needs, and maintain or restore macroeconomic stability. The emergency loan has a subsidized interest rate of 0.5% per year, and will be repaid in eight equal quarterly installments over 3.25 to 5 years from the disbursement date.

At the conclusion of the Executive Board's discussion on Dominica, Murilo Portugal, Deputy Managing Director and Acting Chair, announced that: "The IMF extends its deepest sympathy to the people of Dominica at this difficult time. The extensive damage caused by Hurricane Dean has resulted in great hardship for many Dominicans, and constitutes a serious setback to recent economic progress. ... The authorities are committed to pursuing a comprehensive medium-term economic strategy to support the reconstruction effort and foster economic growth. ... This approach, based on the country's Growth and Social Protection Strategy, aims at maintaining macroeconomic stability and promoting structural reforms, and includes measures to strengthen further the financial sector."

When the IMF is involved you just know there has to be a catch in there somewhere. Might the measures to "strengthen further the financial sector" include more "transparency" and laws that serve to undermine Dominica's position as an offshore haven? We would not be surprised to see Dominica's second passport program done away with in time.