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BELIZE PRIME MINISTER SPEAKS AT NYC CONFERENCE ON THE CARIBBEAN
Belize P.M. Dean Barrow made a strong pitch for investment in his country and the Caribbean in general in his New York speech.
The Prime Minister of Belize, Dean Barrow, spoke late last week at a New York conference on the Caribbean, on behalf of the Caribbean Community (CARICOM). Mr. Barrow centered his speech on the topics of trade and investment, stating that:
"The rapidly changing and increasingly competitive global economy has forced the countries of the Caribbean Community to revisit their strategies for securing their sustainable development. It is a truism that we in the Caribbean can no longer rely on one-way preferential access for our exports to traditional markets. We are also now recipients of declining volumes of official development assistance and face stiff competition as destinations for foreign direct investment."
He continued: "One of the principal vehicles that the region has devised to keep pace with this changed global trade and economic environment is the CARICOM Single Market and Economy (CSME). The single market component of the CSME became operational in January 2006; and the Single Economy has begun to gather momentum, with the completion date set for 2015.
"This transformation of the regional economy into a single economic space is intended to facilitate the free movement of people, capital, goods and services and the right of establishment. The idea is clearly to foster greater intra-regional trade; but also to give us something like the critical mass necessary to make us more attractive to third states.
"That is because we fully recognize that creating a larger internal market is a necessary, but not a sufficient condition for the solution of the problems associated with small size and vulnerability."
Speaking with regard to the future for the region, Mr. Barrow explained:
"In order to produce the great leap forward, CSME must also be fueled by foreign direct investment, by an influx of technical expertise and technology transfer; and by competitive access to external markets.
"This brings me to my point two and my effort to demonstrate why we think investing in the CARICOM region will now mean excellent business.
"The U.S. is, of course, the region's most important trading partner. In 2007, CARICOM's merchandise exports to the United States were recorded at approximately $9 billion, and had seen an average annual growth rate of 17.6% during the period 2003-2007. By comparison, CARICOM exports to the European Union and Canada, our other important trading partners, were in 2007 approximately $3.2 billion and $1.3 billion, respectively.
"CARICOM has also recorded positive trade balances with the U.S. over the last five years, ranging from $1.4 billion in 2003 to approximately $4.0 billion in 2007.
"It must be pointed out though that this positive balance recorded by the region in its trade with the U.S. was essentially on account of exports, and especially petroleum exports, by Trinidad and Tobago.
"In any event, the historical data clearly substantiates the already existing depth and scope of the U.S.–CARICOM trade relations. But, CARICOM has also now taken steps to equip itself with the normative framework required for investment attraction.
"And this is what we hope will lead to an even more successful and diverse track record as an investment destination. Thus, we have conceptualized the Caribbean Community Investment Policy regime, which is currently evolving into a comprehensive framework for the attraction of private sector investment. Accordingly, there are proposals under consideration by Member States that are intended to provide for a harmonized investment policy framework.
"This will be operationalized by a CARICOM Investment Code and a CARICOM Financial Services Agreement. I am pleased to report today that these instruments will actually be ready for signature by Member States at the meeting of CARICOM Heads in the first week of next month.
"The CARICOM Investment Code is intended to facilitate the marketing of the CARICOM region as a single investment location; and it will enhance transparency, fill information gaps, and facilitate the reduction of transaction costs. The CARICOM Financial Services Agreement addresses the need for efficiency in the regional cross border financial market, and is based on a harmonised regulatory philosophy. It is intended to facilitate the strategic positioning of the region's financial services sector in the global environment.
"The overall investment policy environment in CARICOM Member States, we therefore submit, is now to be considered highly facilitatory of business activity. And, we point out, this is on top of the fact that already nine CARICOM Member States rank within the first half of 178 countries evaluated (only 12 CARICOM States were included in the evaluation) by the World Bank for ease of doing business during 2006-2007. One of the smallest Member States -- St. Vincent and the Grenadines -- was actually ranked as the number one performer regarding 'dealing with licenses'.
"It is against the backdrop of all we are doing, and have already done, to spur trade and foreign direct investment, that I make the final point of this presentation. Our efforts to secure an economically stable, prosperous and secure CARICOM is in the interest both of CARICOM and the United States."
The Belizean Prime Minister concluded that: "Economic growth, availability of jobs, a higher standard of living and increased purchasing power would translate into a higher demand for imports from the United States. It also consolidates a sphere of stability along your third border, and it promotes a secure environment for the thousands of American visitors that travel to the Caribbean every year.
"This, then, is the overarching picture that allows me to close by inviting you to cement your role in this grand CARICOM undertaking. Invest in us. Help us promote stability and prosperity. Help us secure our neighbourhood. The pencil of God has no eraser and the laws of geography are immutable. That is why it behooves us all to remember that always and forever, our neighborhood is also your neighborhood."
HEDGE FUND ARRESTS SEND CHILL THROUGH INDUSTRY
Mind what you say in your emails.
With the collapse of the bubble economy it was only a matter of time before yesterday's gunslinger heroes became today's criminal defendants. The true "power behind the throne" villain is, of course, the state. They provided the credit fuel for the bonfire, and the match, but it will be those who were caught near the conflagration who will be charged.
The specific case at hand has several lessons that transcend the who is at fault game: Avoid overstaying a mania, even if it seems like you are missing out on a lot of fun. When you entrust your funds to another, understand what the risks are. Leverage is dangerous no matter how sure a thing the bet appears to be. Email communications never go disappear, so be careful what you say in them. And don't lie, either by commission or omission. It makes life simpler.
BOSTON: Pictures of hedge fund managers in handcuffs being led away to face fraud charges on Thursday [June 19] have sent a chilling message to the $2 trillion industry. The warning was clear: Mind what you say in your e-mails if you are a manager and do a lot of due diligence if you are an investor.
While this is not the first time hedge fund managers have been arrested -- police are searching for a convicted manager who recently faked his suicide to avoid prison -- the two former Bear Stearns managers who were surrounded by a swarm of federal agents on Thursday were in a different league.
Ralph Cioffi and Matthew Tannin were called savvy managers who understood the complicated credit markets and worked for a bulge bracket investment bank that promised investors strong risk controls. Bear Stearns also had deep pockets in case something went wrong, analysts thought.
Much of the case against the two was based on e-mail traffic between Tannin and Cioffi, including one that included the prophetic line: "... the entire subprime market is toast." The two men stand accused of having known their portfolios were in trouble, but lying to investors about it.
"You cannot say one thing to investors and another thing to your colleagues and think that is OK. It is not," said Dick Del Bello, a senior partner at Conifer Securities, who used to run the U.S. prime brokerage business for UBS. The men's arrests are the first criminal charges related to the sub-prime mortgage crisis that has impacted the loosely regulated hedge fund industry through heavy losses and a wave of redemptions.
Unless you write it on a post-it note and put it on top of a book of matches, everything stays around and it can bite you," said a hedge fund manager who asked not to be named.
Still, endowments and pension funds need hedge funds to help boost sagging investment portfolios as the economy slows and stock markets wobble. To protect themselves, they will ask more consultants to help with due diligence. ... And people may stop believing a single manager's explanation for how safe the money is, several investors said.
"We never rely exclusively on what one manager tells us," said Michael Travaglini, executive director of the $53 billion Massachusetts state pension fund, an early and big investor in hedge funds. "We already spend all of our time monitoring our portfolios, so for us this case does not mean very much. But in general, it really underscores the need for investors to understand exactly what they are buying."
At the same time, investors' appetite for very risky hedge funds -- the kind that use a lot of leverage, or borrowed money, to boost returns -- may also taper off, industry experts said, adding that now more than ever people want to play it safe. One of the collapsed Bear Stearns funds was said to have borrowed $20 for every $1 it invested.
"Hedge funds can be used as offensive weapons and as defensive weapons and this will probably prompt more people to use them as defensive tools, marking a return to the basics of unleveraged funds that reduce volatility," Massey said.
The trend is illustrated in quarterly flow data that show hedge funds attracted only $2.6 billion in the first quarter, an 81% drop from what they pulled in during the previous quarter. Long/short equity hedge funds experienced the biggest redemptions, losing $7 billion in net new money during the quarter, data from Lipper TASS, a unit of Thomson Reuters show.
Also the arrest of the Bear Stearns managers might finally drive home a message to everyone using email -- everything they put in writing can stay around forever. Chief compliance officers at larger hedge funds have long warned portfolio managers to be candid but careful. This case should reinforce the message.
"One would hope that after all the previous scandals involving emails that hedge fund managers will realize they have to make sure the things they say internally match what they are telling their clients," said Randy Shain a private investigator who specializes in the hedge fund industry.
It may not have saved the trouble here, but encrypting their emails would have made things a little harder on the prosecutors. And "candid but careful" sounds like a good formula for communications in general in this day and age. Since there is no such thing as real privacy any more, understand that anything said or written may get interpreted in unexpected ways.
PRIVATE BANKER CHARGED BY U.S. IN OFFSHORE TAX EVASION PLOT
Former UBS private banker Bradley Birkenfeld has followed through with his previous agreement to plead guilty to a variety of charges in connection with a U.S. tax evasion investigation. More background on the case may be found here.
Of interest in this round of coverage are the details of how he "helped" the bank's U.S. clients evade reporting requirements and taxes. It is a pretty good case study in what not to do. Also interesting are some tidbits on the business pressures on Swiss banks that might lead their employees to act as they did, and why you do not want to do business with banks like UBS if you value your privacy.
Banker Bradley Birkenfeld has pleaded guilty to conspiring with an American billionaire real estate developer, Swiss bankers and his co-defendant, Mario Staggl, to help the developer evade paying $7.2 million in taxes by assisting in concealing $200 million of assets in Switzerland and Liechtenstein, the U.S. Justice Department announced on Thursday [June 19].
Birkenfeld, an American citizen employed by a Swiss bank [UBS; we are not sure why the article assiduously omits the Swiss bank's name], pleaded guilty before U.S. District Court Judge William J. Zloch in Fort Lauderdale, Florida, on 19th June. During the plea, Birkenfeld admitted that between 2001 and 2006, while he was employed as a director in the private banking division of a large Swiss banking firm, he routinely traveled to and had contacts within the United States to help wealthy Americans conceal their ownership in assets held offshore and evade the payment of taxes on the income generated from those assets.
According to statements and documents filed with the court, Birkenfeld's services to American clients violated a 2001 agreement that the Swiss bank entered into with the U.S. Under the terms of the agreement, the bank would identify and document any customers who received reportable U.S. source income or would withhold and anonymously pay a 28% withholding tax. This agreement was a major departure from historical Swiss bank secrecy laws under which Swiss banks concealed bank information for U.S. clients from the IRS.
It approximates the agreement that the Swiss government painstakingly negotiated with the EU, which for EU clients of Swiss banks has the same report or withhold option. We see in this blog post from Sovereign Society's Bob Bauman what he thinks about UBS as it pertains to this matter:
The merger of Swiss Bank Corp and Union Bank of Switzerland creating UBS AG was approved by the U.S. Federal Reserve Board in 1999 -- but only after UBS supinely agreed to provide the U.S. government with all information "necessary to determine and enforce compliance with ... [U.S.] federal laws." This surrender went far beyond the financial information required to be exchanged under the existing U.S.-Swiss Tax Treaty and it also nullified Swiss bank secrecy laws that usually require a court order to release private banking information.
UBS caved in after the U.S. government threatened to shut down the bank's extensive American financial operations. The UBS sell out was bad news for financial privacy seekers -- and it blew a large hole in the much vaunted concept of Swiss "bank secrecy."
Then and now we advise U.S. and other potential depositors to avoid UBS AG and any Swiss bank that has active U.S. financial operations and offices beyond a mere "representative office." A similar privacy killing deal was made between the Fed and Credit Suisse when that leading Swiss bank merged with First Boston.
So the current case represents the fruition of the UBS/Fed agreement. Note the statement that Swiss banks are usually responsive to court orders. But that would require that the U.S. government spend extra time and have some sort of real evidence before they could obtain the required information. Due process is not convenient, but it is not supposed to be.
It is believed by the U.S. authorities that, when the bank notified its U.S. clients of the requirements of this agreement, many of the bank's wealthy U.S. clients refused to be identified, to have taxes withheld from the income earned on their offshore assets, or to sell their U.S. investments. These accounts were known at the Swiss bank as the "United States undeclared business."
According to evidence provided by Birkenfeld to the court, managers and bankers at the firm, including Birkenfeld, assisted the U.S. clients in concealing their ownership of the assets held offshore by helping these wealthy customers create nominee and sham entities. It is thought that this was done to prevent the risk of losing the approximately $20 billion of assets under management in the United States undeclared business, which earned the bank approximately $200 million per year in revenues. To this end, Birkenfeld, managers and bankers at the Swiss bank, and U.S. clients are accused of preparing false and misleading IRS forms that claimed that the owners of the accounts were sham offshore entities and failed to prepare and file IRS forms that should have identified the true U.S. owner of the accounts.
The $20 billion estimate comes from U.S. federal investigators. With $1.9 trillion under management, a $20 billion loss in assets seems pretty insignificant to UBS. The market value of client assets probably fluctuates that much each day. No doubt the $200 million in revenue (whoever came up with the $20 billion number must have assumed a 1% of assets management fee) was far more significant to the specific bank employees involved than to the bank as a whole, so the incentive was to do whatever it took to keep the clients from walking.
To further assist U.S. clients of the bank in concealing their offshore accounts, Birkenfeld admitted that he, Mario Staggl, additional private bankers and managers at the Swiss bank, and others advised U.S. clients to place cash and valuables in Swiss safety deposit boxes, and purchase jewels, artwork and luxury items using the funds in their Swiss bank account while overseas.
It is unclear how exactly these later actions are actually illegal. Tangible property held offshore does not need to be reported. Given the other actions which clearly were illegal, the issue is somewhat moot. The actions make for good press in any case.
Additionally, they advised the clients to misrepresent the receipt of funds from the Swiss bank account in the U.S. as loans from the bank, destroy all offshore banking records existing in the U.S., utilize Swiss bank credit cards that they claimed could not be discovered by U.S. authorities, and filed false U.S. individual income tax returns that omitted income earned by the clients, and fraudulently misrepresented that the clients did not have an interest in and signature authority over accounts held offshore.
Birkenfeld admitted that from at least 2001 through the date of the indictment, he conspired with Staggl, the American real estate developer, additional private bankers and managers employed by the Swiss bank, and others to defraud the U.S. of approximately $7.2 million in tax revenue by assisting the real estate developer in evading income tax on the income earned on $200 million of assets hidden offshore in Switzerland and Liechtenstein.
To circumvent the requirements of the agreement between the bank and the IRS, Birkenfeld and others conspired to conceal the American real estate developer's ownership and control of the $200 million of assets hidden offshore by creating and utilizing nominee and sham entities, including Bahamian corporations, Liechtenstein trusts and Danish corporations.
Now comes the sanctimonious pronouncements from the lower-level functionaries of the true criminal party here:
"I want to thank the attorneys and agents of the Southern District of Florida, the Department of Justice's Tax Division and the Internal Revenue Service, who have worked diligently on this matter," commented R. Alexander Acosta, U.S. Attorney for the Southern District of Florida. "It is sad that individuals with wealth and access to offshore accounts would abuse their advantages and use schemes to evade tax obligations. We must fully investigate and prosecute these offshore schemes."
"U.S. taxpayers who honestly report their income and pay their taxes can rest assured that those who do not, those who secrete and conceal their assets offshore to avoid paying their fair share, will be investigated and prosecuted by the IRS and Department of Justice," added John A. Marrella, Deputy Assistant Attorney General of the Tax Division.
"I believe this case will send a strong signal to anyone hiding money in offshore bank accounts to avoid paying the taxes they should. The IRS will pursue people using offshore accounts in this manner as well as financial advisers and others who orchestrate these tax fraud schemes," stated IRS Commissioner Douglas Shulman.
Besides the IRS agents involved in this case, the prosecution is being handled by senior trial attorney Kevin M. Downing and trial attorney Michael P. Ben'Ary of the Justice Department's Tax Division, as well as Assistant U.S. Attorneys Jeffrey A. Neiman and Jeffrey Kay of the US Attorneys Office for the Southern District of Florida.
Yes, turn over our cut or we will break your legs. Having said that, it is not very smart to put yourself at risk like the U.S. clients of the Swiss bank have when you already have more money than you can spend in a lifetime. Besides the reliance on a secrecy that wasn't, we just do not understand why they went the route of utilizing sham and nominee entities when they had plenty of money to do it the right way.
FUGITIVE AT THE CENTER OF LIECHTENSTEIN FRAUD CASE HAS CHECKERED PAST
The man who stole client data from a Liechtenstein bank and then sold it to Germany, from where it found its way to numerous other countries' tax authorities, turns out to be quite a lulu. In the words of an OECD department head, Heinrich Kieber instigated "the biggest political backlash against tax havens in more than a decade," and "really put Liechtenstein in a very difficult situation." Unlike a lot of pronouncements out of the likes of the OECD, this is not hyperbole.
How did Kieber get in a position to have as big an effect as he did? Routine carelessness in hiring him, from what we can tell. Demonstrating once more that a chain is only as strong as its weakest link. The trick is figuring out which links need strengthening, and setting your priorities accordingly.
Heinrich Kieber used a bogus check to buy an apartment in Barcelona and tried to blackmail a prince. He finally got rich by selling stolen bank account data from LGT Group, owned by Liechtenstein's royal family, to German agents, according to the bank. The German government said it paid as much as €5 million, or $7.7 million, for the data.
Kieber, a 43-year-old computer technician with a checkered past, is the target of an international arrest warrant. His U.S. lawyer said Kieber has gone into a witness protection program because bankers, LGT clients and even drug dealers who had money in Liechtenstein were trying to find him. The lawyer would not divulge the country Kieber was in.
The computer discs that Kieber handed over, containing about 1,400 names, have set off investigations in 14 countries. France has pledged to pursue a crackdown on tax havens when it assumes the European Union presidency next month. Germans alone have $485 billion in undeclared assets deposited abroad, according to the country's BBW research institute.
"He's managed to generate the biggest political backlash against tax havens in more than a decade," said Pascal Saint-Amans, head of the tax competition division at the OECD in Paris. "Kieber has really put Liechtenstein in a very difficult situation."
LGT tried to stop Kieber from releasing the data five years ago when it agreed to help him fight a fraud conviction if he returned the discs, according to his lawyer at the time. That offer was made after he sought help from Liechtenstein officials, telling them he had escaped from kidnappers, then threatening to give the data to the foreign authorities unless Prince Hans-Adam II of Liechtenstein provided legal assistance, the principality's top prosecutor said.
"It's always very dangerous to make a deal with a criminal, because you are in most cases the loser," said Wolfgang Müller, the lawyer LGT hired to represent Kieber in 2003 as part of his agreement to turn over the discs.
Jack Blum, a lawyer at Baker & Hostetler in Washington, said Kieber had hired him to collect fees that Kieber was eligible for after giving the data to U.S. authorities. U.S. law allows whistleblowers to collect 30% of any taxes recovered as a result of the information they provide. "My two interests are keeping him alive and making sure everybody in this chain knows he is the good guy in this case," said Blum, a former U.S. Senate investigator and an expert in offshore money laundering.
So someone who stole information from his employer and the reneged on a deal to return it is a "good guy"? Blum has been in government for too long.
The Senate's Permanent Committee on Investigations has issued subpoenas in conjunction with an investigation of possible tax evasion by Americans with accounts at Liechtenstein banks. ...
Kieber was born in Mauren, Liechtenstein, on March 30, 1965. He moved to Barcelona, his mother's hometown, when he was 17 and enrolled in the three-year sales and business administration program at the Escuela Suiza, which teaches courses in Spanish and German. He dropped out after one year, said Arturo Santeugini, head of administration and finances at the school. "He was a decent student, though he had a lot of problems with his Spanish," said Santeugini, who taught a law course to Kieber.
While in Barcelona, Kieber told friends he was a member of the billionaire Hilti family but used an alias because he was afraid of being kidnapped, according to two people with direct knowledge of his claims. The Hilti family, which owns the power tool maker Hilti, was worth as much as SFr5 billion, or $4.8 billion, in 2007, according to Bilanz, a Swiss business magazine.
Kieber is not related to the Hiltis, though his father, Alfons, worked for Hilti, a closely held company, as a machine operator and later a photographer, according to a person close to the company, which is based in Liechtenstein. The Kieber family traces its links in Mauren, a town of 3,600 people, back to 1692, according to a family tree sold by the town hall.
Sandwiched between Switzerland and Austria, Liechtenstein has 35,000 residents. Bank secrecy laws helped the state generate 29% of its economy from financial services last year, more than double the proportion in Switzerland.
Müller said he had known the Kieber family before Heinrich became his client. "I told him, 'If your father, whom I knew very well, knew what his son did, he would roll over in his grave.' And then he cried, and with tears in his eyes said, 'You don't like me, either."'
In the 1980s and 1990s, Kieber worked as a computer technician at Swiss Air and the Amadeus online travel booking company in Barcelona, then hooked on with a courier firm, driving cars between Spain and Switzerland, according to the German man who sold him the Barcelona apartment.
In September 1996, while on vacation in Barcelona, Kieber bought the apartment in a white, 1970s-era building in the hilly, El Putxet neighborhood, saying he wanted to spend more time in the city, said the seller, who asked that his name not be used for fear of reprisals from Kieber's associates.
On October 4 of that year the seller filed a criminal complaint alleging that Kieber had written an unfunded check for 29.2 million pesetas, or $280,000 at the current exchange rate, said Olga Vasquez, an attorney at the Barcelona law firm Cuatrecasas who represented the plaintiffs. Kieber resold the apartment for 29.5 million pesetas a month after he bought it.
It sounds like he might have at least broken even on the apartment flip (except for the fraud damages he was later assessed, as discussed further on). The unfunded check he wrote is functionally equivalent to the loans U.S. banks make using funds "borrowed" from the Fed.
The civil guard, acting on that complaint, arrested Kieber in front of the Barcelo Sants Hotel, near the central train station, on October 31, 1996, Vasquez said. He was questioned by the police and the next day appeared before an investigating judge. Two days later, he was released, pending further investigation, and promptly fled from Spain, Vasquez said.
By 1999, Kieber was back in Liechtenstein, working for a consulting firm that was putting LGT's records into a computer system, the bank said. In 2000, LGT hired him to finish the process.
At this point it is fair to ask, did LGT do any background checking at all on the guy? Presumably they will do more going forward, but a lot of damage has been done.
That was the year Robert Wallner became Liechtenstein's chief prosecutor. Kieber hit Wallner's radar screen in August. Wallner had just given his first radio interview at a country fair. As he stepped off the platform, Kieber ran up and grabbed his hand. "You must help me," Wallner, recalled Kieber saying. "A terrible injustice has been done to me."
Kieber then recounted his time in the dank cellar of an Argentine ranch in 1997. He told Wallner that his captors had demanded money as compensation for the apartment fraud, chained his legs to the wall, burned him with cigarettes and slashed him with a knife. Kieber said he had agreed to pay almost SFr700,000 to secure his freedom, then reneged when he returned to Liechtenstein, according to the prosecutor. ...
Wallner had his team investigate Kieber's claims, and a forensic medical specialist examined the marks on his legs, wrists and neck. "I can't say with absolute certainty that it didn't happen, but we found no evidence that it did," Wallner said.
Instead of intervening on Kieber's behalf, Wallner charged him with fraud in the Spanish case. In October 2001, a civil court in Liechtenstein ordered Kieber to pay the German couple the equivalent of SFr615,000 in damages for the Barcelona apartment deal. Kieber was indicted on charges of aggravated fraud in November 2002, Wallner said.
He later sent a letter to Prince Hans-Adam and the prince's son, Alois, warning that he had stolen the names of LGT clients and would disclose them if he was not freed. The prince referred the details to the police and a charge of attempted coercion was added to Kieber's case, Wallner said. After receiving the letter, the prince asked LGT to set up a task force to stop Kieber from releasing the data, Müller said.
The group decided to seek Kieber's cooperation, and LGT agreed to pay for his legal defense, Müller said. Kieber was convicted and given a suspended jail sentence after he told a judge he had returned the computer discs and paid compensation for the apartment.
"The main intention in Liechtenstein was to get rid of him," Müller said. "For him to go to the Australian outback and never come back."
Now the Liechtenstein authorities want Kieber back. The police in the capital, Vaduz, issued an arrest warrant for Kieber on March 11 and demanded his immediate extradition if apprehended abroad. The next day, Germany said it needed time to consider whether it could aid in the search. Wallner said he had not received a reply from the German authorities. The German Justice Ministry did not respond to five telephone calls requesting an update on the country's position.
Uh, yeah. We doubt Germany's position will be clarified any time soon.
Blum, Kieber's U.S. attorney, said he had no way to reach his client because Kieber was in such "deep witness protection." ... "I have no way to talk to him," Blum said. "That's the problem." ...
"It's hard to defend stealing, and hard to defend people not complying with their country's tax laws," said James Hines, director of tax policy research at the University of Michigan. "There are settings where there are no good guys, and this is one of them."
PRESIDENT OF GREEK CYPRUS DELIVERS HIS VISION FOR ISLAND REUNIFICATION
Cyprus gained independence from Britain in 1960 and became a Commonwealth republic in 1961. In 1974, following a period of violence between Greek and Turkish Cypriots and an attempted Greek Cypriot coup aimed at politically merging the island into Greece and sponsored by the Greek military junta of 1967-1974, Turkey invaded and occupied 1/3 of the island. 170,000 Greek Cypriots were evicted from their homes in the north while 50,000 Turks went the reverse route. Northern Cyprus now claims 265,100 inhabitants, about 30% of the island's population. In 1983 Turkish Cypriots unilaterally proclaimed independence, which was only recognized by Turkey. The resulting political situation -- as with many disputes in the Middle East, this one has roots that go back centuries if not millenia -- is a matter of ongoing dispute.
Since the de facto partition of the island, the north and south have followed separate paths. The Greek section is a constitutional democracy that has prospered. It is part of the UN, the EU as of May 2004, and several other organizations by whom it is recognized as the sole legitimate government of the whole island. It adopted the euro on January 1 of this year. The area of the Republic of Cyprus not under its effective control, the north, is over-dependent on help from Turkey, in part due to its political isolation. Its average per capita income is only $5,000, vs. almost $47,000 for the Greek part.
The last major effort to settle the Cyprus dispute, was the Annan Plan. In March 2003 this most recent round of talks collapsed when long-time Turkish Cypriot leader Rauf Denktah said he would not put the Annan Plan to referendum. The UN plan had undergone several revisions in an attempt to win support. The Turkish Cypriots refused to talk further and were blamed for the failure of the peace process. A later Plam revision gained the support of the Turkish Cypriots but lost support of the Greek Cypriots.
The current President of Greek Cyprus, Demetris Christofias, recently gave a talk before the EU on his "vision" for reuniting the two halves. He claims his solution represents a historic compromise on the part of the Greek Cypriot community. It sounds like reunification is going to be a long process, if it happens at all. With the income differences between the two sides, a merger would effectively be a takeover by the Greeks such as when West Germany absorbed the East post-1989. We will await the transmutation of Mr. Christofias's idea into a formal proposal.
The President of the Republic of Cyprus, Mr. Demetris Christofias ... delivered a speech to a gathering of around 160 people on his vision for the reunification of Cyprus. In his introductory remarks, President Christofias, stressed that his vision for the future of Cyprus is a vision for the reunification of the island and for a federal bizonal, bicommunal Republic of Cyprus and that he considers his vision to be "the vision of all Cypriots, Greek Cypriots and Turkish Cypriots, who love their homeland." ... [T]he President briefly outlined the problem and stressed that the solution of bizonal, bicommunal federation constitutes a historic compromise for the Greek Cypriot community.
President Christofias referred to the common struggles of the Greek Cypriots and the Turkish Cypriots, stressing that he and his party always supported the rights of all Cypriots, irrespective of national origin and religion.
The safeguarding of the rights of the Turkish Cypriots should not however violate the rights of the Greek Cypriot community, he said, adding that a balanced solution should be found that would take into consideration the rights and the expectations of both communities. ...
The President pointed out that the partnership created between the two communities in 1960 with the establishment of the Republic of Cyprus did not have a chance to flourish and that both sides share part of the responsibility.
He said that apart from the fact that the history of the problem should be taken into consideration, the two sides should also take into account the principles based on which the Republic of Cyprus would be transformed from a unified state to a bizonal, bicommunal federal state with a single sovereignty, a single citizenship and a single international personality.
The President then stressed that in all the agreements that the two communities have signed or accepted from the Turkish invasion onwards and in all the UN resolutions there is a reference to two communities and this is why he was talking about a bizonal bicommunal federation.
Unfortunately, he added, both [Turkish Cypriot leader Rauf] Denktash and more recently Turkey's National Security Council speak about two peoples and two states. The President further noted that he is ready to sit down and talk in all sincerity with [Turkish Cypriot Prime Minister] Talat and exchange views which are based on the agreed parameters of the solution.
Concluding, the President of the Republic said that he is willing to work in order to find a solution that will be for the Cypriots by the Cypriots, adding that the Cypriots must be let free to deal with the future of their country.
“MARKETING KEY FOR JAMAICA’S FINANCIAL CENTER SUCCESS” SAYS CONSULTANT
Jamaica is seriously looking at establishing its own Offshore Financial Center. As it is coming late to this game it needs to have a plan that distinguishes it from its many competitors to be. Below is an interesting stream of conciousness from a marketing consultant on the matter.
KINGSTON, Jamaica: The critical element in establishing a successful Offshore Financial Center (OFC) in Jamaica will be its marketing, says tax consultant Dr. Trevor Thomas.
Senator Don Wehby, Minister without Portfolio in the Ministry of Finance and the Public Service is shortly to get a report from a committee exploring the development of an OFC in Jamaica. The concept is part of a Government plan to establish a center in downtown Kingston as a fulcrum for development in that part of the city. ...
Offshore finance is simply the provision of financial services by banks and other agents to non-residents, according to one definition. Successful offshore centers combine the advantages of tax havens with a modern financial infrastructure.
Hosting such a center could offer huge advantages to Jamaica since they [OFCs] hold 26% of the world's wealth, he stated in his recently published book, Offshore Jamaica: The Path Ahead, which was launched ... on Thursday (June 12). The launch was jointly sponsored by the Private Sector Organisation of Jamaica and the Jamaica National Building Society (JNBS).
According to Thomas, Jamaica could attract the institutions required to service such funds which would provide a significant source of income and high paying jobs. "Assuming we set up a reasonable structure I believe the key is the marketing," the London-based consultant said. "It needs to be strongly marketed worldwide."
The competition among such centers is global. One competitor is the British Crown dependency of Jersey, off the coast of France, while another is Labuan Island, a territory of Malaysia. In the Caribbean are the island territories of Cayman Islands, British Virgin Islands and the Bahamas, along with Belize in Central America.
The Cayman Islands would probably be considered by some as one of the less demanding jurisdictions as names of the shareholders of their tax exempted companies do not form part of the public record, his book stated. Bermuda, on the other hand, emphasizes safeguards such as the fact that anyone can review corporate documents, including the register of directors and officers of exempt companies in the territory.
There are significant differences between the jurisdictions which can be highlighted, he stated. Jamaica has to ensure that its legislative framework is structured to give its marketing a distinctive edge. Early and effective marketing is crucial to develop its image, he said. A unique and competitive identity must be developed to position the island as a preferred destination for investments.
"The center does not have to be developed before it is sold," he said. "I think the marketing process should start alongside the development of the legislation needed to give it effect."
The focus should be on investors, banking institutions and those involved in tax minimization and asset protection. It would be difficult for Jamaica's new center to change the established choices of mutual fund managers, insurance officers and advisors to the international hedge fund industry.
"Maybe we should target the sports and entertainment sector," he said. Jamaica already has a strong reputation in entertainment and sport which could be a solid foundation for building a center that would cater to this market segment. Professional sport and entertainment are huge global businesses. In the United States alone entertainment is a $480 billion industry.
To tap these sectors, Offshore Jamaica could market itself as an OFC friendly option to sports personalities and entertainers seeking to minimize the tax burden on their worldwide income, he stated. To promote this concept, internationally known Jamaicans based overseas such as Chris Blackwell and Lennox Lewis could be invited to play a role in its development.
In marketing terms, Jamaica's old commercial capital of Port Royal might also make a better OFC than downtown Kingston as has been proposed, Dr. Trevor Thomas said. Port Royal is a physically distinct area with its own buccaneering history and independent identity within Jamaica. It could be marketed as, "the quiet, safe, beautiful enclave at the tip of the Palisadoes."
Port Royal would need to be regulated by its own independent council as investors require a stable environment in which they can execute long term strategies. Investors would be wary of an OFC whose existence was the subject of political debate. "There is no doubt in my mind that this is a doable proposition," he said. "The question is whether we have the will to carry it out."
In launching the book on Thursday, Earl Jarrett, General Manager of the Jamaica National Building Society also said offshore banking is "doable" and supported the view that OFC can create substantial advantages for national development.
The German Chancellor delivers a scathing indictment of the “Anglo-Saxon” model of regulation.
Germany never seems to make the A-list of the world's dynamic economies. It has a reputation for high taxes and crushing regulations, notably ones that make it hard to fire employees. It is also perceived as a stodgy welfare state, as we noted in this posting in January. However, it is known as a producer of the highest quality manufactured goods. It turns out that Germany is presently the world's largest exporter.
Germany also avoided the credit/housing bubble siren call that enveloped a good deal of the rest of the world. The ECB was creating plenty of euros during the time, sufficient to inflate most of the other European economies. But the German cultural penchant for savings and sparing use of credit appears to have led to a mass, Sam Goldwyn-esque, "include me out" when it came to joining the debt-fueled bacchanalia. With everyone else now preoccupied with dealing with post-bubble hangovers (or poisoning), Germany is certainly poised to assume a greater leadership role among the world's large economies.
Chancellor Angela Merkel rightly observes where the Keystone Cops regulation of Alan Greenspan and company have led the U.S., and those similarly infected, and figures out there must be a better way. She is, in fact, indignant over the European lack of imagination in coming up with alternatives to a clearly disfunctional financial regulatory model. Of course, she does not consider the idea of true minimalist regulation, i.e., no central banking. But that is to be expected.
As a young woman growing up in the former East Germany, Angela Merkel had a front-row seat on the follies and foibles of an overly planned economy. Today, in her post-Communist incarnation as chancellor of a reunified Germany, Merkel has witnessed up-close the follies and foibles of economies that seem to lack any effective planning or regulation whatsoever.
In an exclusive interview in [the] Financial Times newspaper, Merkel delivers a scathing indictment of an "Anglo-Saxon" model gone awry. She says regulations have failed and that Europe should step into the breach with its own rules of governance better tailored to Europe's rising economic models.
The German Chancellor has always been seen as a straight-talker; so none of these blunt words should come as a surprise. But you can really feel her indignation at Europe's failure to forge its own alternatives to the dysfunctional models of finance and regulation that triggered the current crisis.
It bears repeating that Germany is Europe's pacesetting economy, as well as the world's -- yes, the world's -- largest exporter. And, as the FT points out, it has been staging a remarkable economic recovery after nearly three years being branded "the sick man of Europe."
It has created over a million and a half new jobs and boasts low-single-digit unemployment that is the envy of many of its neighbors. So Germany obviously has a major vested interest in shielding itself from the ravages of the U.S. economic contagion.
Meanwhile, Europe itself just celebrated the 10th anniversary of the European Central Bank. The single currency it spawned, the euro, almost a decade old itself, is indisputably the bank's crowning achievement.
Merkel has been a staunch defender of the ECB's independence -- a viewpoint that has put her at odds with her French counterpart, Nicolas Sarkozy. To many, Sarkozy's slights about the strong euro -- and his insinuations that the ECB should do something about it -- are a dangerous encroachment on the Bank's precious autonomy.
The institutional memory of the hyperinflation of 1923 means that Germany -- seemingly alone -- understands the dangers of central bank inflation of any kind. Sarkozy's advocacy of a weaker euro is a policy that flat out does not work, although it has short-term payoffs that make it attractive to politicians in power, the long run be damned.
Merkel also feels that the ECB and the euro are under-appreciated by the "Anglo-Saxon" financial system's boosters. She wants to see the scales adjusted to take account of this. As she put it in the Financial Times interview: "Europe has developed a certain independence thanks to the euro. But ... we still have a strongly Anglo-Saxon dominated system. The robust currency system of the euro has not yet secured sufficient influence over the rules governing financial markets."
She also reiterates a German demand for a European ratings agency that could bring new standards of transparency to credit assessments.
Some might argue that it is a little rich for Merkel to bash the U.S. model when Germany itself has often played the risk game so willingly. Germany's public banks, the FT notes, were among the first dominos to fall in the subprime squeeze that subsequently spread across the rest of Europe. They took on big risks and presumably knew (or thought they knew) what they were doing.
Merkel also acknowledges that the image of German business itself has been tainted in recent months with corruption scandals at former paragons of corporate probity such as Siemens and Volkswagen, and amid allegations that an entire class of affluent Germans evaded taxes by hording cash in fiscal havens such as Liechtenstein.
For a pretty good evisceration of the German bank subprime debacle, and a less than flattering portrayal of certain other aspects of Germany, see this post. In the end, however one assesses Germany's economic system from a distance, it looks like it may be the only major one functioning for a while.
FRANCE TO INTRODUCE NEW “IMPATRIATE” TAX REGIME
France is joining those giving tax breaks to certain foreign residents. The "impatriates" being targeted are those who come in and work for a French employer. As with any kind of price discrimination, it makes sense to give a break at the margin to those who you might otherwise lose altogether. And high-salaried, mobile workers who have the option to take up temporary residence elsewhere certainly qualify on this criterion.
The French parliament could soon adopt a new law giving a more favorable tax regime to "impatriates," tax and advisory firm Ernst and Young has announced. According to E&Y, the law, which was passed by the National Assembly on 10th June, is due to be voted on by the Senate, and could soon become law, subject to any amendments written by the upper chamber. These new provisions would be applicable to assignments in France starting on or after 1st January, 2008.
Under the old regime, taxpayers who were sent to France by their employers were eligible for tax breaks for a "limited period." Under the new rules, these tax breaks will be extended to individuals directly employed by a French employer, also for a limited period. However, in order to qualify for favorable tax treatment under the new regime, the taxpayer must not have been resident in France in the five tax years immediately preceding the commencement of their employment or assignment. These favorable provisions apply up to the 31st December following the 5th anniversary of their arrival in France.
The new regime allows those assigned to France by a foreign employer to exclude from their taxable income those elements of remuneration that are directly related to the expatriate assignment. If individuals are locally recruited, they have the option of excluding from their taxable income those elements of remuneration directly related to their expatriate assignment, or a standard 30% deduction.
However, if the amount of income which remains subject to French income tax after applying the relief is less than the level of remuneration paid locally in France or an individual in the same of similar position, the difference is added back onto their taxable income ensuring that qualifying taxpayers declare at least the same amount of taxable income as a local employee in a similar position.
NO ESCAPE ON UK NON-DOMS’ OFFSHORE MORTGAGE PAYOFF ARRANGEMENTS
Thousands of non-doms who thought their offshore mortgages would escape the government’s tax crackdown now fear they will be caught after all.
The tax issue here is a somewhat arcane one, involving the UK government's plan to bow to populist sentiment and tax the "non-domestics" -- a class of person specific to UK law -- more heavily.
Non-doms to date have not had to pay tax on their offshore income that is not remitted to the UK. So if you get a mortgage on a UK residence from an offshore bank and pay the mortgage out of offshore income, was that income remitted to the UK or not? Unused as we are to taking the side of a tax authority, it seems the logic would indicate that it was. But apparently an old de facto or de jure loophole treated such payments as unremitted income. Now the loophole is in jeopardy. But previous users of the loophole may be grandfathered in. Except that many of the "mortgages" were actually loans secured against a guarantee issued against the property. Why? In order to comply with some rules issued by UK financial regulator FSA.
As we said, arcane. Convoluted too. The main lesson? What the government gives, the government can take away. Sometimes with the same hand, sometimes with different. There is nothing so temporary as a government rule that gives the taxpayor a break.
Jennifer Moses, the American former investment banker who now advises Gordon Brown on special projects, arranged an offshore mortgage on her north London home through Barclays Private Clients International, based on the Isle of Man.
Thousands of other wealthy business people who are resident but not domiciled in the UK also use offshore loans. They allow you to pay the mortgage interest out of offshore income rather than bringing the money onshore, where it would be subject to 40% income tax. It had been thought such arrangements would be permitted to continue in spite of the government's crackdown on perks available to non-doms.
Bowing to pressure from critics who said the move would drive talented and wealthy individuals offshore, chancellor Alistair Darling watered down the proposals so that those who took out loans before April could continue their arrangements -- a legislative move known as "grandfathering".
Last week, however, accountants raised concerns that loans taken out after 2005 would still be caught by the rules, because many of those mortgages were not secured against the property. Instead, banks have tended to secure loans against a guarantee which was in turn issued against the property to comply with Financial Services Authority rules.
Carolyn Steppler of accountants KPMG said: "We would like to see a relaxation of the rules as the grandfathering provisions are very tightly drawn. It is clear most offshore mortgages taken out after 2005 will not fall within the grandfathering. ... Clients are particularly concerned about this. We have argued with HM Revenue & Customs on their behalf that they already arranged their financial affairs to take advantage of the legislative rules. Furthermore, they may not be in a position to remortgage, and this is a particularly unfavourable option in the current lending climate." ...
Under the changes announced by the chancellor in April, non-doms must pay a £30,000 annual levy to remain outside the jurisdiction of HMRC, or face close scrutiny of their affairs.
Critics of the measures, laid out in a consultation paper, asserted that the proposals will force businesses run by non-doms to move overseas and discourage leading international businessmen from working in Britain, which forced the government's climb down. Steppler added: "It does appear that HMRC are listening and they might introduce some changes."
UK TREASURY RELAXES HMRC INSPECTION POWERS; BUSINESS BREATHES A SIGH OF RELIEF
The UK tax agency's powers to drop in with little advance warning for a friendly visit have been increased, but far less than originally proposed.
One of the UK's leading business and financial advisors, Grant Thornton, has commented this week that businesses will have breathed a collective sigh of relief at the relaxation of HM Revenue and Customs (HMRC) powers being introduced in the Finance Bill 2008.
Increased powers of inspection were announced in the 2008 Budget and were meant to provide HMRC with the authority to enter and search business premises with potentially as little as 24 hours notice. However, these powers have been debated and amended in the Finance Bill to reflect a more "relaxed" approach to HMRC inspections, which will be subject to limits and conditions and introduce at least seven days notice.
Francesca Lagerberg, Head of the National Tax Office at Grant Thornton is pleased with these amendments. Lagerberg said: "There are some welcome improvements here to safeguard taxpayers' rights that the original draft had neglected. It is essential that any new power for HMRC has a matching safeguard and is only used in limited and appropriate circumstances. No one wants to see any possibility of 'fishing expeditions' into taxpayers' affairs."
Lagerberg also notes: "Extending the notice time to seven days will enable businesses to be better prepared for visits which can be very stressful. In particular, small to medium sized businesses will benefit greatly as many lack the resources to comply promptly to an HMRC inspection. However, the new rules allow for a shorter notice period (or no notice at all) to apply where this is agreed with the occupier or it is approved by an authorized officer of HMRC. This is unchanged from the original draft legislation."
In the original draft, the rules would have allowed tax inspectors to enter and inspect any business premises to enable any person's tax position to be checked, such as third parties. This has now been amended to only the premises used by the person whose liability is being checked (with the exception of premises used in connection with the taxable supply of goods, in order to help HMRC combat certain VAT frauds).
In addition, the inspection powers are limited so that tax inspectors may not enter or inspect any part of the premises that is used solely as a dwelling, so the taxman can not come into someone's home.
U.S. HOUSE PASSES AMT RELIEF BILL
Congress is getting to work on alternative minimum tax relief early this cycle, rather than wait so long that the IRS can barely issue timely forms with the right rules encoded. Sponsor Charles Rangel mentioned offsetting the resulting tax revenue reduction by the usual loophole closing, better compliance, reduced corporate welfare bromides. But he also specifically mentioned not wanting to add to the national debt, which he said would be asking China and Japan to "bail us out." Interesting.
The U.S. House of Representatives voted ... in support of legislation to protect millions of middle-class families from the alternative minimum tax (AMT) this year. The legislation, known as the Alternative Minimum Tax Relief Act of 2008 (H.R. 6275) and authored by House Ways and Means Chairman Charles Rangel (D-New York), aims to ensure that the number of taxpayers subject to the AMT will not increase.
According to Rangel, failure to pass this legislation would result in more than 25 million families facing a tax increase this year. "The AMT is an outdated, unfair tax that should not even be part of our tax code," commented Chairman Rangel.
He went on to argue that:
"However, in the seven years the Bush Administration has been in office, they have not given us a tax reform bill to do what everyone in this House would want to and remove this fiscal burden from more than 25 million taxpayers. So now we have to pass a so-called 'patch' to make sure these families don't see their taxes increase through no fault of their own.
"The main difference between Democrats and Republicans is that Democrats don't believe we should pay for the cost of this bill by adding to the national debt. We shouldn't go to China and Japan and ask them once again to bail us out. Instead, we should take a look at the tax code and see what loopholes we can close to repair the AMT -- at least for this year -- without passing this burden on to our children and grandchildren."
Rangel claims that the legislation provides one-year relief from the AMT without adding to the deficit because it is paid for by closing loopholes in the tax code, encouraging tax compliance, and repealing excessive government subsidies given to oil companies.
THE DEMOCRATS BETRAY THE FOURTH AMENDMENT (AGAIN)
Bush administration proposes abhorent surveillance program. Democrats claim it goes too far. Negotiations (apparently) ensue. Democrats roll over and give Bush everything he wants, and more.
As secret agent Maxwell Smart used to say: "Fell for that trick just last week!"
A bill essentially legalizing Bush's warrantless surveillance program just sailed through the Democratic House and is expected to sail through the Democratic Senate. It would expand wiretapping powers against foreign targets, extend the grace period of warrantless domestic eavesdropping on Americans at home, and grant retroactive immunity to telecom companies that cooperated in illegal domestic spying. The New York Times calls it "the most significant revision of surveillance law in 30 years," but it is also just the latest example in 30 years of Democratic betrayals of the Fourth Amendment.
In 1978, Democratic President Carter signed the Foreign Intelligence Surveillance Act into law. A meager response to Nixon's surveillance of peaceful activists and other such abuses, FISA established a secret court within the Justice Department to issue special warrants for wiretapping foreign suspects. Even when spying on a "United States person," intelligence officials now had 72 hours before they needed a warrant. Carter said in his signing statement, "This is a difficult balance to strike, but the act I am signing today strikes it." The Fourth Amendment lost its teeth.
From 1979 to September 11, 2001, more than 13,000 FISA warrants were issued. Not a single application was rejected. But that was not enough for Bush. He demanded the Patriot Act, which amended FISA to widely expand executive spying powers and weaken judicial review. FISA had obstructed intelligence gathering before 9/11, we were told. (But the real problem was ineptitude -- for example, the FBI in the weeks before 9/11 had legitimate cause to search "20th hijacker" Zacarias Moussaoui's computer, but FBI agents misunderstood the FISA process and blew the opportunity.)
Intimidated by the administration in October 2001, the Democrats -- including all but one senator -- voted for the Patriot Act. They gave the president what he said he needed, on top of the rubberstamping FISA process he already had, to protect America.
But that was still not enough for Bush. In December 2005, we learned that the president had secretly ordered the National Security Agency, a military intelligence organ of the Defense Department, to ignore FISA and wiretap calls within the U.S. Upon this revelation, Congressional Democrats complained they were not consulted about the program. Bush's defenders responded he had this unilateral warrantless spying power as "commander in chief," or due to Congress's post-9/11 authorization of military force, or just because it was an "inherent" executive prerogative going back to George Washington.
In January 2007, the Democrats retook the House and Senate with a mandate to curb Bush's domestic and foreign abuses in the War on Terror.
And now the Democratic leadership and almost half the Democrats in Congress have codified Bush's brazen, extrajudicial surveillance policy into law and given retroactive immunity to those companies that illegally cooperated with the NSA. Missouri Republican Senator Christopher Bond, who led this legislative "compromise," says, "the White House got a better deal than even they had hoped to get."
This Congress has outdone the last one in encouraging Bush's surveillance power grabs. As Salon.com civil liberties expert Glenn Greenwald notes, "in 2006, when the Congress was controlled by [Republicans] Bill Frist and Denny Hastert, the administration tried to get a bill passed legalizing warrantless eavesdropping and telecom amnesty, but was unable. They had to wait until the Congress was controlled by [Democrats] Steny Hoyer, Nancy Pelosi and Harry Reid to accomplish that."
Some Democrats dissent. Wisconsin's Russ Feingold, the lone senator to vote against the Patriot Act, calls the new bill a "capitulation." Senator Barack Obama, in contrast, expresses superficial misgivings but assures us this "compromise" preserves substantial judicial oversight. "Given the legitimate threats we face, providing effective intelligence collection tools with appropriate safeguards is too important to delay," the presidential candidate says, pledging that once in the White House he "will carefully monitor the program ... and work with the Congress to take any additional steps [he deems] necessary to protect the lives -- and the liberty -- of the American people."
But that is not enough for America. The point of judicial oversight is we cannot, and should not have to, trust the executive branch.
FISA created too many loopholes in the Fourth Amendment. The litany of unspeakable surveillance abuses under this and past administrations (both Republican and Democratic) and the executive's tendency to defy even the flimsiest safeguards suggest that Americans serious about civil liberties should hold their representatives to a higher standard and bolder agenda: repeal this last monstrosity, scrap the Patriot Act, and give FISA itself the axe.
America's founding generation had just lost 25,000 men in a gruesome war against the British Empire when they crafted the Bill of Rights. Despite their dangerous world, they saw no need for wartime exceptions to the Fourth Amendment. And neither should we.
MANDRIVA LINUX GIVES YOU THE BEST OF THE GNU/LINUX AND PROPRIETARY WORLDS
“Mandriva Linux 2008 Spring comes pretty close to a perfect Linux distribution.”
Ubuntu gets the most publicity, but there are many Linux distributions out there that are appropriate for those considering moving over from Windows. We actually have direct experience with Mandriva, and find it works pretty well. According to this reviewer, Mandriva's latest release is about as good as it gets in the Linux world right now, for newbies and power users alike. There are free and paid versions. The later contains extra proprietary software and comes with support.
Last month Mandriva announced its latest Spring edition. Despite a few minor glitches, after several weeks of testing the two Mandriva flavors, I have finally come across a distribution that gives you the best of the GNU/Linux and proprietary worlds in terms of ease of use, range of software, and stability on hardware that ranges from old Celerons to newer multi-core machines.
I tested two Mandriva offerings. Mandriva's flasgship edition, Mandriva One, comprises a half dozen live CDs, three each for the KDE (version 3.5.9) and GNOME (2.22) desktops, each of the three distinguished only by different Internationalization support. There is no DVD available for the One version. I also tried the commercial Mandriva Powerpack edition, which is available for a fee ($59 for the download version and $89 for a boxed set) that includes support as well. Powerpack is an install-only DVD version.
Mandriva One's single-CD distro is a throwback to the days before we had so many free software options, 3-D desktop add-ons and games, not to mention multi-core hardware and fat connections to the Internet that allow users to grab 3.3GB ISOs in a couple of hours. Nevertheless, despite their small size, the two Mandriva One flavors have the best collection of software I have ever seen on a single-CD distro. On machines on which I do not need to play shoot-em-ups, the default list of bundled software serves all my purposes, from browsing the Internet to typing documents to editing images and video. Both the Mandriva One and Powerpack editions run a modified Linux 220.127.116.11 kernel. Sound is handled by PulseAudio, video by X.org 7.3, and 3-D effects by Compiz Fusion 0.7.2 and Mandriva's own Metisse.
Common software bundled in both Mandriva One live CDs includes OpenOffice.org 2.4.0, Mozilla Firefox 2.0, GIMP 2.4.5, and Totem 2.22.0. Each live CD has its desktop environment's own software for burning CDs and DVDs, managing photographs, instant messaging, reading email, playing music, and other tasks. The KDE live CD lacks a video editor, while the GNOME live CD bundles Kino. The KDE system in Powerpack bundles the Kdenlive video editor. None of the live CDs bundle any virtualization software, nor is any installed by the default package selection group in Powerpack. The biggest branch of software missing from the One live CDs is games.
On the bright side, you can download dozens of games and both Virtualbox and Xen virtualization software from the Mandriva repository, which also packs the latest KDE 4. Additionally, Mandriva Linux Spring's release notes page lists new software in the repository that includes Elisa media center, the Mac OS X-inspired task manager Avant Window Navigator, Conduit data synchronizer, and Miro for watching Internet TV.
Out of the box, the live CDs play MP3 music files and patent-free formats such as FLAC and Ogg. For all other types of formats, Mandriva pops up a message via Codeina that asks you to get a decoder by either paying Fluendo for it or using a reverse-engineered decoder from Mandriva's repository. To configure your Mandriva repository, run the software installation utility and select the option to update repositories when prompted.
In addition to the software on the live CD, the commercial Powerpack edition packs in games as well. Paying for the distro also gets you Cedega, for playing Windows games, and Fluendo codecs worth €28, in addition to support and online training.
Working with One and Powerpack
I like the fact that the GNOME and KDE live CDs have a consistent look and feel during bootup and after loading the desktop, with same wallpapers and same configuration tools. Before loading the desktop, both live CDs ask the same set of basic questions, giving you the option to set up your keyword, location, date, and time. You are also asked to select a 3-D desktop if Mandriva has determined that your computer has the resources to run one. On offer is Compiz Fusion and Mandriva's own Metisse.
When I tried to play music on a desktop box with a 1.8GHz Intel Core 2 Duo E6300 CPU and Intel DG965RY motherboard, the speakers (powered by an onboard Sigmatel sound card) oozed a continuous buzzing sound, while the audio was hardly audible. Mandriva Control Center, the distro's configuration tool, refused to display sound editing options. Even Powerpack could not do anything about the buzzing, though it did let me edit the sound options. No other machine had this issue.
Both live CDs ran flawlessly on a 2.0GHz E4400 dual-core desktop. Even after almost a day of using the distro to create documents, browse the Internet, and listen to music, the live CD environment did not show any signs of stress. The live CDs exhibited the same sturdiness on a 1.3GHz Celeron laptop with 1GB RAM.
Installing the operating system to the hard drive from the live CDs is a quick walk in the park. Both live CDs use the same installer. The partitioning tool in the live CD installer can create, resize, and delete partitions. The only issue with the One live CD installer is that it does not add GRUB entries for any Windows partition you might already have on the machine. ...
Those transitioning from Windows by dual booting should get that handled before installing Mandriva to their hard drive.
Apart from the sound issue on one of the dual-core machines, Mandriva recognized, configured, and activated all the devices I have attached to my three test machines. It detected the Linksys Wireless USB adapter, which did not seem to run properly with the built-in drivers but did so later when I installed its Windows drivers via NDISwrapper. The Linksys Wireless PCMCIA card on the laptop did not require any special treatment, nor did the wired Ethernet card on the desktop.
All Mandriva flavors correctly configured a 19-inch 1440x990 LCD monitor and 17-inch 1280x1024 LCD monitor on the desktops. The onboard graphics on both the Intel boards were also configured properly and powered the 3-D desktop and 3-D games like Torcs and Tremulous.
I had to install the GSPCA drivers for my Quantum QHM500LM webcam before I could get it working. But a Sony Handycam plugged in via the FireWire port worked right off the bat with both Kino and Kdenlive. A Canon 400D DSLR camera was also mounted automatically when connected via the USB port.
You can check the Mandriva Linux 2008 Spring Errata to see if there is a known issue with your hardware.
This sounds like as problem-free an installation as you are going to find.
Things you can do
I really appreciate the fact that the only difference between the free (as in beer) Mandriva One editions and the paid-for Powerpack edition is the extra proprietary software and support you get with Powerpack. In terms of features and functionality both versions are identical.
Both versions bundle the same Mandriva Control Center (MCC), which features a few new tricks as compared to the last spring release. In addition to backing up the entire system, you can now setup Mandriva to periodically take snapshots of a particular folder, a bunch of folders, or even the entire system.
There are five preset security levels you can choose from in the MCC, depending on how paranoid you are about system break-ins. You can also set or review audit parameters and the level of authentication required for tasks such as network configuration and scheduling backups.
If you are a concerned parent, using the MCC you can set up parental controls to help you block sites (with the help of a white list and a black list) and restrict Internet access during time periods that you can set.
On the package installation front, there is a small utility that keeps track of the various packages on your system, along with stats like when was the last time you ran a particular package. This can help you identify packages that you can safely remove from the system.
Mandriva Linux Spring 2008 also has an improved software installation utility. Adding a repository is fairly quick now because the package manager downloads extra information about a package when you click on it. By default the package manager now lists only programs with a graphical user interface, in order to help new users who are baffled by the choice of software and libraries in the package manager. Experienced users can browse and search all packages by selecting the appropriate option in a prominently displayed pull-down menu within the software manager.
With the Powerpack edition you can use the DVD as a repository and save time by grabbing stuff off of it when you install new software. That would be a great option for users with the GNOME and KDE live CDs. For example, if I install Mandriva One from the GNOME live CD, the only way I can install KDE on this system is by installing it from the online repos, which is OK unless I have a Mandriva One KDE CD lying next to me.
I could not test two Mandriva Linux 2008 Spring additions because I lacked the necessary hardware. You can run this Mandriva release on an Asus Eee PC, and the distro can synchronize many types of mobile devices, including those running Windows Mobile 5 and 6, Blackberries, and most Nokia phones.
Mandriva Linux 2008 Spring comes pretty close to a perfect Linux distribution. It has a good selection of software in its various editions as well as in its repositories. To help new users, there is useful wiki-based online documentation and an active community on forum boards, IRC channel (#mandriva on Freenode), and several mailing lists, including one for beginners.
It is unfair to expect a distro to work with all sorts of hardware across multi-core and single-core platforms without any tweaking, yet apart from the sound issues on one dual-core machine, Mandriva work effortlessly with all my hardware devices. Never once did I felt the need to launch a terminal to manage the system. Mandriva detected and set up my wireless cards, FireWire and USB devices, graphics cards, and monitors. I could schedule backups, update repositories, install new packages, and tweak and enable a firewall, all within a graphical interface.
No matter whether you are a Linux newbie or power user, you can always use a stable desktop distribution, and they do not come any better than Mandriva Linux 2008 Spring.
WORSE THAN THE FED
Legislation to set up emissions trading for carbon-based energy supplies is currently under consideration. As with the creation of the Federal Reserve in 1913, the "Climate Security Act" is a response to a perceived problem. In 1913 it was the disappearance of money and credit during periodic panics that swept through U.S. financial markets. Now it is CO2 buildup in the atmosphere that is allegedly causing global warming.
Byron King says there will be unforeseen consequences should this legislation go through, just as there were when the Fed was created. As he puts it: "The government is creating a means to control the economy down to the last electron. This is a power that not even the Fed holds."
I received an e-mail from a Washington, D.C. advocacy group urging me to urge my U.S. Senators to "support the Climate Security Act." Climate security? This is legislation to set up emissions trading or a "Cap & Trade" system for carbon-based energy supplies.
Basically, the government sets up a national limit for carbon emissions. This is meant to slow the changes that are supposedly occurring to the atmosphere, and by implication threatening the long-term health of the Earth's climate systems.
Under the national Cap & Trade limits, industry has to obtain rights to emit carbon dioxide (CO2) or find another source for energy. This will lead to a new market for carbon-credits and carbon-trading. Industries that hold carbon permits will be able to operate. Industries that lack carbon permits will face shutdown and probable extinction. One way or the other, the economy will immediately transform into a system where one's industrial fate is controlled by the carbon permits.
For example, carbon permits will dramatically alter the future for coal-based electricity. If coal gets burned at all, the Cap & Trade requirement will enforce CO2 sequestration -- an utterly embryonic technology of which there is not a single large-scale working example anywhere on the face of the planet. And the coal-fired electricity under Cap & Trade will be much more expensive.
So non-carbon alternatives like wind, solar & geothermal will be more competitive as well. There is also a gratuitous plan to handicap the nuclear industry, despite the fact that nuclear power is essentially CO2-free. Old environmentalist habits -- like hating nuclear power -- die hard.
But the higher energy costs of production will have to pass through to consumers. At the end of the consumption chain, people can expect to pay higher prices for most everything that contains an element or two of electricity. (Gee, what might that be?)
In essence, the government will be setting up a new Federal Reserve, except instead of governing the nation's money supply and quality, this new "Cap & Trade" Fed will govern the nation's supply of energy. At the end of the day the "Carbon Fed" will control the output of the nation's energy supply. In the long run, this may be more important than controlling the supply of credit or even the gold supply. Really, without electricity gold may yet prove to be a barbarous relic.
But consider how little most people knew about the original Fed when its enabling legislation was passed (in the dead of night) on Friday, December 23, 1913 -- yes, almost Christmas Eve. The Panic of 1907-1908 was fresh in the minds of many observers. In that Panic, the U.S. money supply had simply dried up. The nation was broke, and even the U.S. government had to borrow money from the house of JP Morgan.
So by 1913 there was a basic political consensus that the nation ought to have some sort of "elastic" element to its currency. Most economists and policy-makers agreed that there had to be a way of increasing the nominal money supply quickly, especially when economic conditions led to a "panic" that dried up the circulation of dollars. Yet few understood the nature of the powers that the Federal Reserve Act was creating and placing in the hands of a quasi-independent monetary body. And even fewer were thinking about the political difficulty of pulling back those excess dollars when the panic abated.
Indeed, the U.S. Fed coexisted with a $20-gold standard for the next two decades. It was no curious coincidence that within a few short years, the U.S. was able to "afford" to participate in World War I, courtesy of the credit-creating mechanisms of the Fed.
Later on, when the central government needed more funds during the depths of the Great Depression, the $20 gold standard became untenable to the monetary managers. So in one of his first acts as U.S. President, Franklin Roosevelt signed an executive order that simply seized the nation's gold and consequently unleashed the flood of fiat dollars into the monetary base of the nation. The dollar has never been the same.
This note is not to re-hash the history of the Fed. It is just to remind that the so-called "Climate Security Act" may claim to be all about Cap & Trade. But Cap & Trade is not just about "Climate Security." In the name of reducing the emission of CO2, the government is creating a means to control the economy down to the last electron. This is a power that not even the Fed holds.
GEORGE CARLIN AND DOGMA
The recent death of comedian George Carlin at the comparatively young age of 71 must be regretted by anyone who is tired by the all the untruths that dominate modern day consensus reality, political and cultural. For he untiringly spit in the eyes of the originators of those untruths, and got a good laugh while doing it.
The death of comedian George Carlin came as a shock. Not because I knew him personally, but as a visceral reaction to the end of an era, the era of my childhood. I am a baby boomer, born in the ‘50s and coming of age in the ‘60s and ‘70s. Sex, Drugs, Rock and Roll: that great cultural leap off of the cliff like a horde of burnt out lemmings. This was the age in which dogma was criticized and overthrown: mass protest brought the Vietnam War to an end, women's liberation, and civil rights stepped to the forefront of public consciousness. A vigilant media, tired of the lies of Richard Nixon, effectively brought his Presidency to an end. The state was staggered with body blows and sent reeling against the ropes.
George Carlin owed his livelihood to his unique ability in skewering the dogma of conventional wisdom on prime time in front of millions. We all knew what he was against, and as such he was one of us, a David throwing rocks at Goliath. ... Carlin was able for more than 40 years to identify the big lie and how it masquerades behind the mask of scientistic and legalistic facade. Dogma to Carlin was a dragon to be slain whenever and wherever it reared its noxious head.
The first step to solution of a problem is identification, and George Carlin was a master at identifying many of them. Carlin used humor as his primary tool in ironic perception, and with that lever he pried open many a mask over the facade of conventional wisdom. His cultural role was not to solve problems, but to identify them. No matter how bad things were he could always bring a smile and a laugh as one of the benighted speaking his mind regardless. He kicked political correctness right in the teeth while Bill Maher was still wearing diapers.
My favorite Carlin quote came from a monologue I watched in the ‘70s one night at a friend's house after a multi-hour skull cracking study session in Angell Hall.
"I love people, I hate groups.
People are smart, groups are stupid." ~~ George Carlin
These simple words embodied Carlin's philosophy of opposition to the status quo, the conventional wisdom. He rarely articulated who the enemy was, since his audiences knew it a priori. For baby boomers it was clear who it was -- the man, the establishment. His philosophy embodied all that economic freedom and individual liberty enshrine. For Carlin individuals were sacrosanct and groups to be despised.
Individuals provide mankind faith, science, culture, music and philosophy. Groups take it away with lies, deception, theft and murder. While an avowed atheist, he was, paradoxically, a man of deep faith. Faith in the ability of the individual to create meaning in life, despite one's brief duration of life, despite the opposition of the privileged and the powerful. He stood on their stage and spat right in their eye.
Carlin knew that groups exist to imprison the individual, to place them in castes, to assign them limited possibilities, to dull their senses into acceptance of the inevitable, to use rape as the powerful desire. He recognized that in groups we find the bestiality of primitive man ascendant to run roughshod over the benighted masses. The cowardly hide behind groups as protection against being held accountable for their deviant behavior. During his professional career he saw Richard Nixon pervert the mantle of the leader of free world for cynical personal ends. In the last decade of his career he saw the draft dodging duo of Bush II and Evil Dick Cheney reincarnated as Nixon gone wild with an unlimited budget ($4 trillion in fresh debt for the unborn) and a facade of legitimacy to maim, crush or kill anyone desired.
Carlin railed against war, poverty, racism, sexism, how the privileged dupe the commoner in order to fleece them. He had no answers for these problems only a firm conviction that group dynamics keep these perversions alive across the generations. The answer lies, where it has always lain, in the politics of Eighteenth Century Jeffersonian Democracy, that is to say, in the individual.
The world is a grayer place without George Carlin in it. Still I take comfort in the image of George Carlin standing with St. Peter in front of the pearly gates keeping the assholes out.
George Carlin on War, Environmentalism, Voting, Airport Security and More
Isle of Man Urged to Rebrand by FinCen Director
The Isle of Man has been urged to rebrand itself as an "independent financial center" rather than an offshore center, as tax havens look to clean up their act.
William F. Baity, deputy director of U.S. anti-money laundering agency FinCen, the Financial Crimes Enforcement Network, suggested the territory move away from the label "offshore," which has negative connotations, to "independent financial center."
"Perception is reality and you will struggle as long as people talk about offshore," tax-news.com reported Baity as saying.
The rebranding suggestion echoes moves made by Gibraltar in recent years, which has pulled out of international groups with "offshore" in their title to try and shake off the tax haven tag.
The moves are unlikely to entirely appease critics, however. Baity ... also said that the Isle of Man has been helpful in its work in providing information. "What you are doing is helpful in our fight against financial crime and I think that is important."
Helpful advice from a friend, then, it seems. Maybe W.I.L. should take Baity's advice.
Additional link here.
Guernsey Warned Against Adopting Too Much UK Legislation
A legal expert is warning Guernsey against adopting too much UK legislation. Paul Arditti, consultant at Collas Day legal firm, issued the warnings after tax inspectors from Her Majesty's Revenue and Customs were given new powers to hunt tax dodgers on the island.
Speaking to the Guernsey Press, Mr. Arditti claimed that the UK is attempting to remove competition from offshore jurisdictions by introducing new laws: "Because the UK and its European partners are so desperate for tax, they try to tell us that all these new laws are international standards and that we must comply. The reality is that we have all the right people to come up with our own laws here in Guernsey. We just need the confidence to stop following the UK."
They also need the confidence to stand up to the UK.
EU Considers Proposals to Ireland to Save Treaty
For background on this issue see the postings in last week's Digest.
European Union ministers may offer Ireland additional guarantees of its sovereignty in a bid to save the bloc's new governing treaty after it was rejected by Irish voters last week, the Financial Times reported.
Under an emergency plan, which would not change the text of the treaty, certain protocols would be added stating that the document will not affect Ireland's right to set taxes or maintain its neutral status and control abortion policy, the newspaper said, citing an unidentified senior EU government official.
EU ministers will discuss the future of the treaty during meetings June 19 and 20, the FT said. With the support of Irish Prime Minister Brian Cowen, detailed proposals for additional protocols could be submitted as early as October, the FT said.
The ideas sound abstactly related to the principles behind the Bill of Rights ammendments to the U.S. Constitution. The Constitution which created the U.S. federal government was supposed to be an "everything that is not allowed is forbidden" directive. The Bill of Rights supporters did not trust that nice thought. History shows that their fears were well grounded.
Swiss to Hand Over $74 million in Salinas Funds to Mexico
A wrapup to a long-running case indicates that wheels of Swiss justice may grind slow, but they grind exceedingly fine.
Swiss authorities will hand over $74 million to the Mexican government from bank accounts linked to the brother of Mexico's former president Carlos Salinas de Gortari, the Justice Ministry said [June 18]. The ministry statement said the money is "clearly of criminal origin."
More than $130 million in bank accounts linked to Raul Salinas had been frozen in accounts in Switzerland and London pending this final decision. The accounts were frozen in November 1995, when Swiss investigators first suspected that the money came from drug traffickers.
Mexican authorities are conducting a criminal investigation into the activities of Raul Salinas and others in connection with money laundering and the embezzlement of public funds, the ministry statement said.
Swiss authorities said they have already released $45 million of the total amount frozen in the Salinas case. The money was released to those entitled to it because it had been determined the money was of legal origin.
Federal Examining Magistrate Paul Perraudin said in releasing the funds that he was closing the Swiss proceedings in the case. The Swiss authorities froze funds initially in the case when they started criminal proceedings for alleged money laundering nearly 13 years ago. About $110 million were frozen then as part of the Swiss proceedings and on the basis of an application from Mexico for judicial assistance. Interest has been added. ...
Justice Ministry spokesman Folco Galli said the legal money that is being returned to claimants had been made available to Raul Salines to set up an investment company. Examining Magistrate Perraudin said none of the money was going back to the Salinas family. The statement said the government was retaining SFr3.3 million ($3.2 million) from the frozen sums to cover the costs of the Swiss investigation since 1995.
"The Mexican authorities demonstrated, with the support of bank documents and other papers, how public funds amounting at the time to around $66 million had been misappropriated and moved to domestic banks," it said, adding that Swiss authorities had already reconstructed the trail of the funds outside Mexico. ...
Switzerland, embarrassed in past years that its banking secrecy rules fostered a reputation as a safe haven for the funds of dictators and other corrupt foreigners, has stepped up its fight against money laundering. Reforms over the last two decades have made it harder to hide money in Switzerland, and the country has become a world leader in returning cash.
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