Spitfire List Web site and blog of anti-fascist researcher and radio personality Dave Emory.

For The Record  

FTR #458 Interview with Lucy Komisar about Offshore Banking

Recorded May 2, 2004
MP3 Side 1 | Side 2

Sup­ple­ment­ing infor­ma­tion pre­sented in FTRs 356, 357, 387, this broad­cast presents more infor­ma­tion about the Clearstream net­work and the impor­tant (though lit­tle rec­og­nized) issue of off­shore bank­ing. Vis­it­ing once again with the remark­able Lucy Komisar, we are pre­sented with infor­ma­tion about Clearstream, how it works and how it affects the polit­i­cal and eco­nomic health of the world. (The use of Clearsteam by Al Qaeda and the Bank Al Taqwa was dis­cussed in the pro­grams cited above.) Note that excerpts from a very impor­tant arti­cle by Lucy on this sub­ject are pre­sented in the descrip­tion, rather than attempts at para­phras­ing her answers.

Pro­gram High­lights Include: The gen­e­sis of Clearstream; the ori­gin of its noto­ri­ous “unpub­lished accounts”; the inven­tion of “eurodol­lars”; Ernest Backes’ dis­missal from Clearstream because of the Banco Ambrosiano scan­dal; the prob­a­ble mur­der of Ger­ard Sois­son of Clearstream; dis­cus­sion of “trans­fer pric­ing”, “mail­box com­pa­nies”, and the “Bermuda Inversion”—three of the devices used in the off­shore bank­ing busi­ness; the Enron scan­dal; the Stan­ley Works imbroglio; the use of Clearstream by Colom­bian drug traf­fick­ers; a French/Taiwanese arms deal con­ducted through Clearstream; mur­ders ini­ti­ated as a result of that arms scan­dal; the Menatep/Khodorokovsky inves­ti­ga­tion in Rus­sia; Robert Douglass—the Rockefeller-connected head of Clearstream; the effect of off­shore bank­ing on the eco­nomic health of both indus­tri­al­ized and Third World countries.

1. DAVE: Why do you call “Off­shore Bank­ing” a “Threat to Amer­ica?”
LUCY: Because these off­shore bank­ing havens are the vehi­cle for ter­ror­ists and drug-traffickers to finance their oper­a­tions, and they enable cor­po­ra­tions to escape tax­a­tion, thereby dam­ag­ing the economies of many coun­tries. This takes place both in the indus­tri­al­ized and third world countries.

2. DAVE: Much of the arti­cle from Hound-Dogs focuses on Clearstream, an orga­ni­za­tion that is described as a “clear­ing­house.” What is a clear­ing­house, how does it work?
LUCY: “ . . . In these days of global mar­kets, indi­vid­u­als and com­pa­nies may be buy­ing stocks, bonds or deriv­a­tives from a seller who is halfway across the world. Clear­ing­houses like Clearstream keep track of the ‘paper­work’ for the trans­ac­tions. Banks with accounts in the clear­ing­house use a debit and credit sys­tem and, at the end of the day, the accounts (minus han­dling fees, of course) are totaled up. The clear­ing­house doesn’t actu­ally send money any­where, it just deb­its and cred­its its mem­bers’ accounts. The money involved is mas­sive. Clearstream han­dles more than 100 mil­lion trans­ac­tions a year, and claims to have secu­ri­ties on deposit val­ued at $10 tril­lion.”
(“Off­shore Bank­ing: The Secret Threat to Amer­ica” by Lucy Komisar; Hound-Dogs; Vol. 1; p. 5.)

3. DAVE: What are eurodol­lars, and how did eurodol­lars lead to the gen­e­sis of Cedel/Clearstream?
LUCY: “ . . . Cedel and its main com­peti­tor, Brussels-based Euro­clear, were started to man­age trans­fers of ‘eurodol­lars,’ U.S. cur­rency kept in banks out­side the United States. The Chi­nese and the Sovi­ets invented Eurodol­lars in the ‘50’s so they would not have to put their assets in banks where the U.S. gov­ern­ment could seize them. But oth­ers saw value in eurodol­lars, and they began to be traded for other cur­ren­cies. Some banks attracted eurodol­lars with higher inter­est than was being paid in Amer­ica, and U.S. cor­po­ra­tions and indi­vid­u­als began using the accounts to avoid laws on domes­tic banks. The euro money mar­ket was born. (By the ‘90’s, the Fed­eral Reserve esti­mated that about two-thirds of U.S. cur­rency was held abroad as eurodol­lars.)” (Idem.)

4. DAVE: Tell us about Clearstream’s pub­lished and unpub­lished accounts. What is the dif­fer­ence and what are the impli­ca­tions of an “unpub­lished account?”
LUCY: “ . . . A bank would send a trans­fer to the code of the head­quar­ters bank, which would send it on to the non-published account of its sub­sidiary. The bank would reg­u­late this oper­a­tion inter­nally. [Ger­ard] Sois­son autho­rized each non-published account, which would be known only by some insid­ers, includ­ing the audi­tors and mem­bers of the coun­cil of admin­is­tra­tion. As Cedel’s lit­er­a­ture to clients explained: ‘As a gen­eral rule, the prin­ci­pal account of each client is pub­lished: the exis­tence of the account, as well as its name and num­ber, are pub­lished. On demand, and at the dis­cre­tion of Cedel, the client can open a non-published account. The non-published accounts don’t fig­ure in any printed doc­u­ment and their name is not men­tioned in any report.’ Requests for non-published accounts came from some banks that weren’t eli­gi­ble, but Sois­son turned them down. . .” (Idem.)

5. DAVE: Much of your arti­cle focuses on a gen­uinely heroic man named Ernest Backes. Tell us about Ernest Backes and his role in set­ting up Cedel.
LUCY: “ . . . Many of [the charges against Clearstream] were first made in a con­tro­ver­sial book called Rev­e­la­tion$, writ­ten by Denis Robert, a French jour­nal­ist, and Ernest Backes, a for­mer top offi­cial at the clear­ing­house who helped design and install the com­puter sys­tem that facil­i­tated the undis­closed accounts. The book’s impact was explo­sive. Six Euro­pean judges called it ‘the black box’ of illicit inter­na­tional finan­cial flows. Top Clearstream offi­cials were fired. The scan­dal made head­lines in big Euro­pean news­pa­pers; TV net­work spe­cials; the French National Assembly’s finan­cial crimes com­mit­tee held a hear­ing. Lux­em­bourg author­i­ties ordered an inves­ti­ga­tion and in Octo­ber 2003, the exam­in­ing mag­is­trate brought charges against [Clearstream CEO Andre] Lussi for money-laundering, tax fraud, forgery, false balance-sheets and other infringe­ments of the finan­cial law. Yet Rev­e­la­tions remains unpub­lished and rel­a­tively unknown in the United States, and this issue is not yet on the agenda of Amer­ica.” (Idem.)

6. DAVE: In 1975, some big Ger­man and Ital­ian banks ini­ti­ated steps to shield their trans­ac­tions from scrutiny. Tell us how this led to the gen­e­sis of the unpub­lished accounts.
LUCY: “ . . . In 1975, sev­eral big Ital­ian and Ger­man banks wanted to cen­tral­ize their account­ing and didn’t want other mem­bers of Cedel to send trans­fers through their numer­ous indi­vid­ual branches. The Cedel coun­cil of administration—its board of directors—authorized banks with mul­ti­ple sub­sidiaries not to put all their accounts on the lists. Backes and Ger­ard Sois­son, then Cedel’s gen­eral man­ager, set up a sys­tem of non-published accounts.” (Idem.)

7. DAVE: Ernest Backes rose to become the No. 3 man at Cedel and then expe­ri­enced a sharp down­turn in his pro­fes­sional for­tunes, appar­ently as a result of the Banco Ambrosiano scan­dal. Describe the Ambrosiano scan­dal and how that affected the lives of Ernest Backes and Ger­ard Sois­son.
LUCY: “ . . . By 1980, Backes had become Cedel’s No. 3 offi­cial, in charge of rela­tions with clients. But he was fired in May 1983.

Backes says the rea­son given for his sack­ing was an argu­ment with an Eng­lish banker, a friend of the CEO. ‘I think I was fired was because I knew too much about the Ambrosiano scan­dal,’ Backes says. Banco Ambrosiano was once the sec­ond most impor­tant pri­vate bank in Italy, with the Vat­i­can as a prin­ci­pal share­holder and loan recip­i­ent. The bank laun­dered drug-and-arms-trafficking money for the Ital­ian and Amer­i­can mafias and, in the ‘80’s, chan­neled Vat­i­can money to the Con­tras in Nicaragua and Sol­i­dar­ity in Poland. The cor­rupt man­agers also siphoned off funds via fic­ti­tious banks to per­sonal shell com­pany accounts in Switzer­land, the Bahamas, Panama and other off­shore havens. Banco Ambrosiano col­lapsed in 1982 with a deficit of more than $1 bil­lion. (Unknown to many movie­go­ers, Banco Ambrosiano inspired a sub­plot of “The God­fa­ther Part III.) Sev­eral of those behind the swin­dle have met untimely ends. Bank chair­man Roberto Calvi was found hanged under Black­fri­ars Bridge in Lon­don. Michele Sin­dona, con­victed in 1980 on 65 counts of fraud in the United States, was extra­dited to Italy in 1984 and sen­tenced to life in prison; in 1986, he was found dead in his cell, poi­soned by cyanide-laced cof­fee. (Another sus­pect, Arch­bishop Paul Marcinkus, the head of the Vat­i­can Bank, now lives in Sun City, Ari­zona with a Vat­i­can pass­port; U.S. author­i­ties have ignored a Milan arrest for him.”
[For more about the Banco Ambrosiano scan­dal, see RFAs 17–21—avail­able from Spitfire—as well as FTRs 2, 3, 103.] (Ibid.; pp. 5–6.)

8. “Just two months after Backes’ dis­missal in 1983, Sois­son, 48 and healthy, was found dead in Cor­sica, where he’d gone on vaca­tion. Top Cedel offi­cials had the body returned imme­di­ately and buried, with no autopsy, announc­ing that he had died of a heart attack. His fam­ily now sus­pects he was mur­dered. ‘If Sois­son was mur­dered, it was also related to what he knew about Ambrosiano,’ Backes says. ‘When Sois­son died, the Ambrosiano affair wasn’t yet known as a scan­dal. [After it was revealed] I real­ized that Sois­son and I had been at the cross­roads, We moved all those trans­ac­tions known later in the scan­dal to Lima and other branches. Nobody even knew there was a Banco Ambrosiano branch in Lima and other South Amer­i­can coun­tries.’ An Ital­ian judge recently reopened the Calvi case, and Backes was asked to col­lab­o­rate in the inquiry. He said, ‘ I was told that the ques­tions around Soisson’s death would be a part of the new inves­ti­ga­tion.’’’ (Ibid.; p. 6.)

9. DAVE: Tell us how, after Backes and Sois­son were gone from the orga­ni­za­tion, Clearstream accel­er­ated the open­ing of unpub­lished accounts.
LUCY: “ . . . With Sois­son out of the way, there was noth­ing to stop abuse of the sys­tem. Whereas Sois­son had refused numer­ous requests (from such insti­tu­tions as Chase Man­hat­tan in New York, Chem­i­cal Bank of Lon­don and numer­ous sub­sidiaries of Citibank), Cedel opened hun­dreds of non-published accounts in total irregularity—especially after the arrival of CEO Andre Lussi in 1990. No longer were they just sub-accounts of offi­cially listed accounts, Backes charges. Some were for banks that weren’t sub­sidiaries or even offi­cial mem­bers of Cedel. At the start of 1995, Cedel had more than 2,200 pub­lished accounts. But in real­ity, accord­ing to doc­u­ments obtained by Backes, Cedel that year man­aged more than 4,200 accounts.” (Idem.)

10. DAVE: What are some of the orga­ni­za­tions that have unpub­lished accounts with Clearstream?
LUCY: “ . . . Among the major com­pa­nies with secret accounts, Backes dis­cov­ered the Shell Petro­leum Group and the Dutch agri­cul­tural multi­na­tional Unilever, one of whose accounts was asso­ci­ated with Gold­man Sachs. On the French TV broad­cast ‘Les Dis­sim­u­la­teurs’ (‘The Deceivers’) in March 2000, Clearstream Pres­i­dent Lussi sim­ply denied the accounts existed. ‘Only banks and bro­kers are eli­gi­ble for mem­ber­ship,’ he said, ‘as it has always been the case. No pri­vate com­pany accounts, no com­mer­cial or indus­trial com­pa­nies.’ But his own spokesman con­tra­dicts this claim. ‘Cus­tomers of Clearstream can be banks or, excep­tion­ally, cor­po­rate clients who have their own trea­sury depart­ments the size of banks,’ Cope wrote in an e-mail to me, ‘We can­not accept CEO’s of multi­na­tion­als or ter­ror­ists and have strict account-opening pro­ce­dures to pre­vent such prob­lems.’ Clearstream was formed in 1999 out of the merger of Cedel and the com­pen­sa­tion com­pany of Deutsche Borse (the Ger­man stock exchange). By 2000, accord­ing to Backes, Clearstream man­aged about 15,000 accounts (of which half were non-published) for 2,500 clients in 105 coun­tries; most of the invest­ment com­pa­nies, banks and their sub­sidiaries are from West­ern Europe and the United States. Most of the new non-published accounts were in off­shore tax havens. The banks with the most non-published accounts are Banque Inter­na­tionale de Lux­em­bourg (309), Citibank (271) and Bar­clays (200).” (Idem.)

11. DAVE: Tell us about some of the Colom­bian cus­tomers of Clearstream.
LUCY: “Backes found numer­ous dis­crep­an­cies in the lists he obtained of the secret accounts. For exam­ple, code No. 70287 on the pub­lished list belongs to Citibank NA-Colombia AC in Nas­sau, and code No. 70292 is that of the Banco Inter­na­cional de Colom­bia Nas­sau Ltd. But on the non-published list, the num­bers both belong to Banco Inter­na­cional de Colom­bia in Bogota. There’s no men­tion of Citibank. Based on the pub­lished list, mem­bers may think they are deal­ing with two banks in the Bahamas, one of which is a sub­sidiary of Citibank. Based on the pub­lished list, mem­bers may think they are deal­ing with two banks in the Bahamas, one of which is a sub­sidiary of Citibank, but any­thing sent to these estab­lish­ments goes directly to the coun­try of cocaine car­tels. On the April 2000 Clearstream list, there are 37 Colom­bian accounts, of which only three are pub­lished. The spokesman for Cit­i­group in New York, declined repeated requests for com­ment. Cope declined to talk about any indi­vid­ual cus­tomers or accounts, cit­ing Lux­em­bourg bank­ing secrecy laws.)” (Idem.)

12. DAVE: One of Russia’s wealth­i­est indi­vid­u­als and most suc­cess­ful busi­ness­men, Mikhail Khodor­kovsky, was recently arrested, gen­er­at­ing many sto­ries in the U.S. media about Russia’s return­ing to its old ways (i.e., repres­sion). Khodor­kovsky was one of Clearstream’s many cus­tomers. Detail the com­plex oper­a­tions of Khodor­kovsky.
LUCY: “ . . . Clearstream’s deal­ings with Russ­ian banks are another area of con­cern. Menatep Bank, which had been bought in a rigged auc­tion of Soviet assets and has been linked to numer­ous inter­na­tional scams, opened its Cedel account (No. 81738) on May 15, 1997, after Lussi vis­ited the bank’s pres­i­dent in Moscow and invited him to use the sys­tem. It was a non-published account that didn’t cor­re­spond to any pub­lished account, a breach of Clearstream’s rules. Menatep fur­ther vio­lated the rules because many trans­fers were of cash, not for set­tle­ment of secu­ri­ties. ‘For the three months in 1997 for which I hold micro­fiches,’ Backes says, ‘only cash trans­fers were chan­neled through the Menatep account.’” (Ibid.; p. 7.)

13. “ . . . Menatep bank was founded by Russ­ian ‘oli­garch’ Michail Khodor­kovsky has been in a Russ­ian jail since Octo­ber on myr­iad charges of fraud and tax eva­sion. On Nov. 26,2003, Backes and another ex-banker, Swiss cit­i­zen Andre Stebel, filed a crim­i­nal com­plaint with the Swiss attor­ney gen­eral against Khodor­kovsky and his col­leagues Pla­ton Lebe­dev, and Alexei Gol­ubovich, accus­ing them of money laun­der­ing and sup­port­ing a crim­i­nal orga­ni­za­tion. . . The for­mer bankers requested the Swiss offi­cials to open an inves­ti­ga­tion into the charges and to search the records of the Swiss offices of Menatep SA, Menatep Finances SA and Val­met (which set up off­shore com­pa­nies and bank accounts) and of Bank Leu in Geneva related to inves­ti­gate claims of fraud against the Russ­ian com­pany Avisma and money laun­der­ing by Menatep in Switzer­land. . . .” (Idem.)

14. “ . . . The com­plaint alleges that Khodor­kovsky, Lebe­dev, and Gol­ubovich are or were own­ers in Switzer­land of the Swiss com­pa­nies Menatep SA, Freiburg, Menatep Finances SA, Geneva and Val­met SA, Geneva. It claims that since the cre­ation, ‘the Bank Menatep SA has been mixed with the affairs of mem­bers of the Russ­ian oli­garchy and crim­i­nal orga­ni­za­tions, such as Mikhail Khodor­kovsky and Alexan­der Konanykhine. (Konanykhine got asy­lum in the U.S. in 1999, was ordered deported last fall to face charges in Rus­sia, then had the order stayed and will have a new asy­lum hear­ing. Amer­i­can and Russ­ian law enforce­ment offi­cials believe he was in charge of mov­ing bil­lions of dol­lars out of Rus­sia for the KGB; Konanykhin denies it.) It is also related to another mafia fig­ure, Semyon Mogilvich, called the god­fa­ther of orga­nized crime in Rus­sia.’” (Idem.)

15. “The com­plaint cites the Avisma case which it says involved fraud and money laun­der­ing whereby tens of mil­lions of dol­lars were diverted from the Russ­ian com­pany, a man­u­fac­turer of tita­nium, a sub­stance used in air­planes. In the mid-90’s, Menatep was the major­ity owner of Avisma. The doc­u­ment says that the scheme involved sell­ing tita­nium at a low price to TMC, a shell com­pany set up by Val­met, which resold the prod­uct at a higher price on the inter­na­tional mar­ket. This prac­tice, called trans­fer pric­ing, is widely used inter­na­tion­ally to cheat tax author­i­ties and minor­ity share­hold­ers. . . .” (Idem.)

16. DAVE: Tell us about Robert Dou­glass, of Cedel Inter­na­tional.
LUCY: “ . . . Backes explained that a com­pany called Cedel Inter­na­tional had been inscribed in the Swiss reg­is­ter of com­merce but not included in the Books of the mother com­pany, Cedel Inter­na­tional in Lux­em­bourg. He com­mented, ‘This non-consolidated ‘branch,’ whose pres­i­dent is Robert Dou­glass of New York, the for­mer pri­vate sec­re­tary of Gov­er­nor Nel­son Rock­e­feller and now vice chair­man of the Chase Man­hat­tan Cor­po­ra­tion [now J.P. Mor­gan Chase], had appar­ently not raised too many ques­tions for Swiss fed­eral mag­is­trates,’ Dou­glass is an attor­ney at the New York law firm Mil­bank, Tweed, Hadley & McCloy, with offices at 1 Chase Man­hat­tan Plaza. Mil­bank, Tweed is the law firm for Chase, the bank founded by the Rock­e­fellers. Dou­glass declined to com­ment. (The same Mil­bank Tweed, for its client Citibank, worked with the Cay­man Islands agent Maples and Calder to set up the ‘Delta Corp’ to do phony com­mod­ity swaps and dis­guise Citibank loans to Enron as trades. Maples and Calder also set up the Cay­man Islands shell com­pany that helped the own­ers of the Ital­ian con­glom­er­ate Par­malat embez­zle bil­lions of dol­lars and swin­dle investors.)” (Ibid.; p. 8.)

17. DAVE: Another mur­der con­nected to Clearstream’s machi­na­tions involved a French/Taiwanese arms deal. Describe that if you would.
LUCY: “ . . . In the early ‘90’s, [for­mer deputy gen­eral direc­tor of the Tai­wan branch of the bank Soci­ete Gen­eral Joel] Bucher con­tends, Cedel was used to laun­der $350 mil­lion in ille­gal ‘com­mis­sions’ on a con­tract for the sale by Thomson-CSF, a French gov­ern­ment arms com­pany, of six French frigates to Tai­wan. He said that the money, han­dled by an SG sub­sidiary, was paid as a reg­is­tered secu­ri­ties trans­fer to a ‘nominee’—a stand-in for the real beneficiary—and that Thom­son (now known as Thales) didn’t appear in the trans­ac­tion except in the Cedel archives. He said SG used two non-published Cedel accounts. The kick­backs were exposed after the 1993 mur­der of a naval cap­tain named Yin Ching-feng, who had writ­ten a crit­i­cal report on the pur­chase and its inflated $2.8 bil­lion price. Bucher told Taipei author­i­ties that a third of the kick­backs went to Tai­wanese gen­er­als and politi­cians, while the rest was pock­eted by French offi­cials. Tai­wan courts sen­tenced 13 mil­i­tary offi­cers and 15 arms deal­ers to between eight months and life in prison for bribery and leak­ing mil­i­tary secrets.” (Idem.)

18. DAVE: You write of the gen­e­sis of Swiss bank­ing secrecy in the pre WWII period. Tell us about France’s dis­cov­ery of finan­cial treach­ery by mem­bers of the French elite and how that led to Switzerland’s leg­endary bank secrecy. [NOTE: Lucy gave an elo­quent sum­mary of the infor­ma­tion pre­sented in the Hound-Dogs arti­cle. The infor­ma­tion is iden­ti­cal to infor­ma­tion pre­sented by Lucy in FTR#412. Listeners/Readers are referred to that descrip­tion for a detailed pre­sen­ta­tion of the infor­ma­tion dis­cussed in this program.]

19. DAVE: Let’s talk about some of the mech­a­nisms used in the off­shore bank­ing oper­a­tions. Tell us about “trans­fer pric­ing” and the use of mail­box com­pa­nies. [For good dis­cus­sion of “trans­fer pric­ing,” see dis­cus­sion in para­graph #15, about the Menatep scan­dal.]
LUCY: “ . . . Shell companies—front com­pa­nies, ‘mail­box’ com­pa­nies, some­times called Inter­na­tional Busi­ness Cor­po­ra­tions (IBCs) or Per­sonal Invest­ment Com­pa­nies (PICs)—were set up to own bank accounts and effect phony trans­ac­tions to hide or laun­der funds. They didn’t pro­duce goods or ser­vices; they existed for book-keeping, to receive, hold, and trans­fer money so as to hide the real peo­ple involved. Banks and account­ing firms mar­keted shell and even ready-made ‘off-the shelf com­pa­nies,’ the lat­ter already reg­is­tered with local gov­ern­ments, picked up by clients like mer­chan­dise in a store. Off­shore net­works pop­u­larly come in series of three. It’s called lay­er­ing, or lad­der­ing. ‘Throw in Cay­man and Panama; sprin­kle with Aruba or Cura­cao,’ said the Miami offi­cial of an inter­na­tional inves­ti­ga­tion firm that hunts fraud­sters. Money laun­der­ers set up a British Vir­gin Islands cor­po­ra­tion, open a bank account in Cura­cao, air­freight the money to Aruba, have it wire trans­ferred. In days, it’s been through three juris­dic­tions, and there are no records, You can con­vert prof­its to losses, put money in phony loans, buy busi­nesses with­out peo­ple know­ing who you are, and evade all laws reg­u­lat­ing money. If author­i­ties look­ing into a loan to the com­pany want to find out who owns it, lawyers say, ‘That’s pro­tected by secrecy law.’ Some­times, for greater obfus­ca­tion a shell com­pany is owned by another shell from a sec­ond juris­dic­tion. At the end, there is ‘inte­gra­tion’: the indi­vid­ual buys a big hotel or invests in the stock mar­ket. . . .” (Ibid.; p. 10.)

20. DAVE: Well-publicized cases of Amer­i­can firms using some of these scams were the Enron case and the Stan­ley Works case. Tell us about those. [For dis­cus­sion of Enron, see paragraph#16, above.]
LUCY: “ . . . Take the case of Stan­ley Works, which announced a ‘move’ of its headquarters-on paper-from New Britain, Con­necti­cut, to Bermuda and of its imag­i­nary man­age­ment to Bar­ba­dos. Though its build­ing and staff would actu­ally stay put, man­u­fac­tur­ing ham­mers and wrenches, Stan­ley Works would no longer pay taxes on prof­its from inter­na­tional trade. The Secu­ri­ties and Exchange Com­mis­sion accepts the pre­tense as legal. ‘The whole busi­ness is a sham,’ fumed New York Dis­trict Attor­ney Robert Mor­gen­thau, who more than any other U.S. law enforcer has attacked the off-shore sys­tem. ‘The head­quar­ters will be in a coun­try where that com­pany is not per­mit­ted to do busi­ness. They’re say­ing a com­pany is man­aged in Bar­ba­dos when there’s one meet­ing there a year. In the prospec­tus, they say legally con­trolled and man­aged in Bar­ba­dos. If they took out the word legally, it would be a fraud. But Bar­ba­dian law said it’s legal, so it’s legal.’ The con­ceit appar­ently also per­suaded the SEC.” (Idem.)

21. DAVE: Of course the Bush admin­is­tra­tion is deeply involved with the Enron sit­u­a­tion. Bush’s Demo­c­ra­tic oppo­nent John Kerry has been active in attempt­ing to bring the off­shore bank­ing scams to heal. Tell us about Kerry’s efforts in that regard.
LUCY: “Some Amer­i­can polit­i­cal lead­ers have been push­ing to reform the off­shore sys­tem for years. Demo­c­ra­tic Sen­a­tor John Kerry of Mass­a­chu­setts, who ran the Iran-Contra and BCCI hear­ings in the 1980’s and 1990’s, called for changes then: he even wrote a book about it. . . .” (Ibid.; p. 11.)


5 comments for “FTR #458 Interview with Lucy Komisar about Offshore Banking”

  1. http://www.dallasnews.com/news/local-news/20110807-dallas-billionaire-charles-wyly-dies-in-car-accident-in-colorado.ece

    Dal­las Bil­lion­aire, Far-Right Repub­li­can Donor & Off­shore Baron Charles Wyly Dies In Car Accident

    Dal­las bil­lion­aire Charles Wyly, whose $20 mil­lion gift to the AT&T Per­form­ing Arts Cen­ter helped build the Dee and Charles Wyly The­atre, but who was fac­ing insider trad­ing charges, was killed Sun­day in a car wreck in Colorado.

    The Wyly broth­ers’ high-profile phil­an­thropy was nearly matched by their polit­i­cal influ­ence. They gave more than $1 mil­lion to the Repub­li­can National Com­mit­tee between 2000 and 2004, accord­ing to the Cen­ter for Respon­sive Pol­i­tics, and were involved in the early polit­i­cal career of U.S. Rep. Jeb Hen­sar­ling, R-Dallas.

    But the Wylys’ polit­i­cal activ­ity — along with their pub­lic pro­file — fell markedly around 2005, when the SEC began inves­ti­gat­ing their busi­ness activ­i­ties. The sub­se­quent law­suit accused the broth­ers of ille­gal stock sales worth more than half a bil­lion dollars.

    Using off­shore tax shel­ters named after the Louisiana towns where both grew up, the SEC charged, the broth­ers con­cealed $550 mil­lion worth of trans­ac­tions between 1992 and 2004, spend­ing the prof­its on jew­elry, art, real estate and char­ity.
    The broth­ers dis­missed the inves­ti­ga­tion as a waste of tax dol­lars and seemed pub­licly con­fi­dent they would beat the charges.

    “They’re gonna lose,” Sam Wyly told The Dal­las Morn­ing News in 2010, “That means we’re gonna win.”

    Recent rul­ings had gone against them. A fed­eral judge refused to dis­miss the case in March. Two weeks before Wyly’s death, the court ordered the broth­ers to turn over sev­eral doc­u­ments they had sought to with­hold under attorney-client privilege.


    Bil­lion­aire Wyly broth­ers charged with tax eva­sion, insider trad­ing by SEC

    Bil­lion­aire broth­ers, Samuel and Charles Wyly, who founded Mav­er­ick Cap­i­tal Man­age­ment, one of the world’s biggest hedge funds with $11.4 bil­lion in assets, have been accused of civil fraud charges by the Secu­ri­ties and Exchange Com­mis­sion (SEC).

    The SEC, Thurs­day, accused the Dallas-based broth­ers of tax eva­sion by cre­at­ing a com­plex web of off­shore com­pa­nies and trusts over 13 years that allowed them to amass and stash away $550 mil­lion of gains from stock trad­ing of four com­pa­nies where they served as directors.

    The Wyly broth­ers held stakes as high as 16.1 per­cent to 36.7 per­cent in four com­pa­nies — Michaels Stores Inc, Ster­ling Com­merce Inc, Ster­ling Soft­ware Inc and Scot­tish Annu­ity & Life Hold­ings Ltd — and yet with­held infor­ma­tion from investors, the SEC said.

    The SEC also charged the Wyly broth­ers’ attor­ney, Michael French, and their stock­bro­ker, Louis Schaufele III, in con­nec­tion with their roles in the scheme. French was on the board of direc­tors at three of the companies.

    Mav­er­ick, which was founded by the Wyly broth­ers and trader Lee Ainslie, who got his start with hedge fund indus­try leg­end Julian Robert­son, is not under inves­ti­ga­tion by the regulators.

    The fed­eral reg­u­la­tor has sought seek var­i­ous finan­cial fines and sanc­tions against the Wyly broth­ers and their associates.

    “The cloak of secrecy has been lifted from the com­plex web of for­eign struc­tures used by the Wylys to evade the secu­ri­ties laws,” SEC deputy enforce­ment chief Lorin Reis­ner said in a state­ment. “They used these struc­tures to con­ceal hun­dreds of mil­lions of dol­lars of gains in vio­la­tion of the dis­clo­sure require­ments for cor­po­rate insiders.”

    Posted by R. Wilson | August 7, 2011, 7:53 pm
  2. This is rather excit­ing: Some­one leaked 2.6 ter­abytes of data con­sist­ing of 40 years of data from from Mos­sack Fon­seca, the world’s fourth largest off­shore law firm that spe­cial­ized in set­ting up off­shore accounts for thou­sands of com­pa­nies and indi­vid­u­als. And after what is being described as “the largest cross-border media col­lab­o­ra­tion ever under­taken,” involv­ing at least 370 jour­nal­ists work­ing for more than 100 media orga­ni­za­tions in 80 coun­tries for over a year, the report­ing spree on on that mas­sive trove of data has just begun. What fun:


    Inside the Panama Papers: Mas­sive leak shows just how exten­sive cor­rup­tion is world­wide, impli­cat­ing politi­cians, human traf­fick­ers and drug dealers

    One of the biggest leaks in his­tory exposes how global elites and their rel­a­tives hide money in off­shore tax havens

    Ben Nor­ton
    Mon­day, Apr 4, 2016 12:45 PM CST

    “My life is in dan­ger,” read an anony­mous mes­sage. “No meet­ing, ever.”

    “Why are you doing this?” a Ger­man news­pa­per asked.

    “I want to make these crimes pub­lic,” the whistle­blower wrote.

    An enor­mous cache of doc­u­ments was just released, expos­ing how polit­i­cal and eco­nomic elites from around the planet are stash­ing their money in secre­tive tax havens.

    The Panama Papers is one of the biggest leaks in his­tory. Sub­stan­tially larger than Wik­iLeaks’ 2010 release of U.S. diplo­matic cables or Edward Snowden’s 2013 release of NSA files, the leak con­sists of 11.5m doc­u­ments from the world’s fourth-largest off­shore law firm, Mos­sack Fon­seca. At a mas­sive 2.6 ter­abytes in size, the Panama Papers reveal infor­ma­tion about 214,000 companies.

    An anony­mous source leaked the trove to the Ger­man news­pa­per Süd­deutsche Zeitung. The pub­li­ca­tion sub­se­quently shared these files with the Inter­na­tional Con­sor­tium of Inves­tiga­tive Jour­nal­ists, which sub­se­quently col­lab­o­rated with news out­lets worldwide.

    In what is being called “the largest cross-border media col­lab­o­ra­tion ever under­taken,” at least 370 jour­nal­ists work­ing for more than 100 media orga­ni­za­tions in 80 coun­tries sifted for over a year through the doc­u­ments, which show just how wide­spread cor­rup­tion is through­out the world.

    Among those impli­cated in the scan­dal are arms traders, human traf­fick­ers, drug deal­ers, con artists and 143 politi­cians — a ver­i­ta­ble Who’s Who of global lead­ers, includ­ing 12 cur­rent or for­mer heads of state, along with their fam­i­lies and friends.

    Many West­ern media reports on the Panama Papers framed the story around Russ­ian Pres­i­dent Vladimir Putin, whose close friends are involved in the cor­rup­tion, but he is just one small part of the much larger scandal.

    King Salman of Saudi Ara­bia and Petro Poroshenko, pres­i­dent of Ukraine, both of whom are close West­ern allies, are directly impli­cated in the corruption.

    A slew of other lead­ers are involved, includ­ing Nawaz Sharif, the prime min­is­ter of Pak­istan; Ayad Allawi, the ex-interim prime min­is­ter and for­mer vice-president of Iraq; Sig­mundur Davíð Gunnlaugs­son, the prime min­is­ter of Ice­land; Alaa Mubarak, the son of Egypt’s for­mer Western-backed dic­ta­tor; and the chil­dren of Ilham Aliyev, the pres­i­dent of Azerbaijan.

    Join­ing them are a key mem­ber of the ethics com­mit­tee of inter­na­tional soc­cer asso­ci­a­tion FIFA, fam­ily mem­bers of Syr­ian Pres­i­dent Bashar al-Assad and even the son of for­mer U.N. Sec­re­tary Gen­eral Kofi Annan.

    British law­mak­ers and the father of U.K. Prime Min­is­ter David Cameron are also impli­cated, along with donors to polit­i­cal par­ties. So too are the fam­i­lies of mem­bers of China’s rul­ing body, the politburo.

    Mos­sack Fon­seca is based in Panama, but oper­ates glob­ally. It has at least 600 employ­ees work­ing in 42 coun­tries. Its leaked records show deal­ings with 14,000 clients, and it is a reg­is­tered agent for more than 200,000 com­pa­nies con­nected to 200 countries.

    The com­pany is one of the top cre­ators of shell com­pa­nies, insti­tu­tions that allow cor­po­ra­tions to make trans­ac­tions with­out hav­ing to claim own­er­ship of assets.

    The tax havens the Pana­man­ian law firm oper­ates in include the British Vir­gin Islands, where approx­i­mately half of the cor­po­ra­tions are reg­is­tered, along with Switzer­land, Cyprus, Hong Kong, Nevada and oth­ers. More than half of the cor­po­ra­tions involved are reg­is­tered in British-administered tax havens.

    Major banks have pushed hard for the cre­ation of these opaque com­pa­nies, the Panama Papers reveal. Eco­nomic and polit­i­cal elites col­lab­o­rated in order to keep the cor­rup­tion as dif­fi­cult as pos­si­ble to trace.

    Even more shock­ing in the doc­u­ments is the rev­e­la­tion that, in some cases, fix­ers and mid­dle­men tried to pro­tect them­selves and their clients by not only hid­ing ques­tion­able trans­ac­tions, but also by back­dat­ing and even destroy­ing documents.

    Nearly 40 years of records are included in the release, from the late 1970s through the end of 2015.

    Mos­sack Fon­seca firmly denies that it has been involved in any ille­gal activ­ity, and refuses to com­ment on the cases, cit­ing client con­fi­den­tial­ity. Use of off­shore tax havens are in some coun­tries per­fectly legal. In oth­ers, it may be in a murky legal gray area for elites to hide their wealth there.

    “Most of the ser­vices the off­shore indus­try pro­vides can be used for legal pur­pose and are by law-abiding cus­tomers,” the Inter­na­tional Con­sor­tium of Inves­tiga­tive Jour­nal­ists explained. “But the doc­u­ments show that banks, law firms and other off­shore play­ers often fail to fol­low legal require­ments to make sure clients are not involved in crim­i­nal enter­prises, tax dodg­ing or polit­i­cal corruption.”

    This is actu­ally not the first time Mos­sack Fon­seca has been exposed. Inves­tiga­tive jour­nal­ist Ken Sil­ver­stein released a report in Decem­ber 2014 detail­ing how the law firm works with oli­garchs, money laun­der­ers and dic­ta­tors. A year and a half later, how­ever, the release of a gar­gan­tuan cache of the company’s records show just how far this net­work of cor­rup­tion spreads around the globe.

    The release of the Panama Papers comes mere days after the rev­e­la­tion of another scan­dal involv­ing the shad­owy com­pany Unaoil. An explo­sive inves­ti­ga­tion found that the Monaco-based com­pany exploits the wide­spread cor­rup­tion in the Global South, charg­ing multi­na­tional cor­po­ra­tions multi-million dol­lar fees and then brib­ing gov­ern­ment offi­cials in oil-rich coun­tries in order to get good deals for these companies.

    In the process, the little-known firm fuels inequal­ity and helps desta­bi­lize nat­ural resource-rich con­flict areas in these coun­tries, some of which are also impli­cated in the Panama Papers scandal.


    “Nearly 40 years of records are included in the release, from the late 1970s through the end of 2015.“
    Imag­ine all the his­tory hid­ing under that rock. Let’s hope for many, many arti­cles going forward.

    And note that we should prob­a­bly be extra thank­ful that this is story is still being reported on at all because, as the arti­cle points out, this isn’t actu­ally the first time Mos­sack Fon­seca has been exposed:

    This is actu­ally not the first time Mos­sack Fon­seca has been exposed. Inves­tiga­tive jour­nal­ist Ken Sil­ver­stein released a report in Decem­ber 2014 detail­ing how the law firm works with oli­garchs, money laun­der­ers and dic­ta­tors. A year and a half later, how­ever, the release of a gar­gan­tuan cache of the company’s records show just how far this net­work of cor­rup­tion spreads around the globe.

    Keep in mind that Ken Sil­ver­stein was actu­ally work­ing for Pierre Omidyar’s First Look Media at the time the arti­cle was pub­lished, it was a lit­tle odd for a First Look reporter’s story to show up in Vice. But now we have a bet­ter idea of why that hap­pened: When Mark Ames raised this wrin­kle to Sil­ver­stein in a tweet, here’s Silverstein’s reply:

    Ken Sil­ver­stein ?@KenSilverstein1

    .@MarkAmesExiled FYI @pierre wouldn’t pub story but demanded my fee from VICE. Oh well, at least I’m not in Moscow.

    6:46 PM — 3 Apr 2016

    So Omid­yar blocked the block­buster story, the story gets pub­lished by Sil­ver­stein in Vice any­way, and Sil­ver­stein leaves First Look a cou­ple months later, call­ing it the place where ‘jour­nal­ism goes to die’. There’s no doubt quite a bit hid­ing under that rock too.

    Posted by Pterrafractyl | April 4, 2016, 12:51 pm
  3. The decades of off­shore antics by Mos­sack Fon­seca are no doubt going to keep inves­ti­ga­tors and his­to­ri­ans busy for years to come given the size and nature of the leak. There are just so many ques­tions to ask regard­ing this firm, and plenty of poten­tial answers in the data treasure-trove. And it turns out we can add a new cat­e­gory to the list of intrigu­ing ques­tions related to firm: Of what rel­e­vance is the fact that Jur­gen Mossack’s father was a Waf­fen S.S. “deaths head” unit mem­ber who later offered to spy for the CIA and who the BND refuses to release any infor­ma­tion about:

    The Daily Mail

    Panama ‘tax scam’ lawyer is son of Nazi SS offi­cer from dreaded Death’s Head divi­sion who fled to South Amer­ica then SPIED on Cuba for the CIA, brother reveals

    * Horst Mos­sack is Ger­man half-brother of Panama lawyer Jür­gen Mos­sack
    * Told MailOn­line unmask­ing of his sib­ling is ‘shock­ing news, astound­ing’
    * Father was in the S.S. and after is thought to have been a CIA spy in Cuba
    * Horst was treated as shame­ful as a child after being born out of wed­lock
    * Last saw half-brother Jür­gen 60 years ago and says will never meet again

    By Allan Hall In Berlin for MailOn­line and Isabel Hunter and Imo­gen Calder­wood For Mailonline

    Pub­lished: 05:31 EST, 4 April 2016 | Updated: 09:18 EST, 4 April 2016

    The man behind a Panama ‘tax scam’ that guards the clan­des­tine wealth of the global elite is the son of a Nazi SS offi­cer from a unit known as the ‘Death’s Head division’.

    Jür­gen Mos­sack is at the heart of the biggest finan­cial data leak in his­tory, and has allegedly been help­ing world lead­ers, politi­cians and celebri­ties laun­der money, dodge sanc­tions and evade tax from his base in Panama.

    It has now been revealed that his father, Erhard Mos­sack, was a mem­ber of the Nazi fight­ing unit known as the ‘Death’s Head divi­sion’, a dreaded force dur­ing the Sec­ond World War.

    Today, his half-brother Horst, has spo­ken of his ‘shock and bewil­der­ment’ at the news of the unmask­ing of his half-brother.

    He described the twisted fam­ily his­tory that led to the estrange­ment of the sib­lings, both of whom raised by a man who not only fought with the Nazis but later joined the CIA to carry out espi­onage on Cuba.

    The 68-year-old Horst last saw his sib­ling Jür­gen 60 years ago when he left the town of Fürth in Bavaria bear­ing the name of his father Erhard.

    Now liv­ing in the Black For­est region of Ger­many, Horst was born out of wed­lock to a woman called Luisa Herzog.

    ‘This was shame­ful in those days so I was put up for adop­tion,’ he told MailOn­line. ‘My mother later went on to marry Erhard Mos­sack. I took that name later.

    ‘What has come out of Panama is shock­ing news, astound­ing, bewil­der­ing even, but I can’t say I feel shame because I have no con­nec­tion in real­ity with him.

    ‘I left all those years ago and we never had con­tact again. He was just a child, so how can I say what I remem­ber of him? All I know is that I heard that he went to Lon­don and lived there for quite some time.

    ‘He has a brother called Peter and a sis­ter called Mar­ion in Ger­many. Both my mother and their father are now dead.

    ‘I remem­ber that Erhard Mos­sack, their father, was in the S.S. I believe after the war he became a journalist.’

    Ger­man media have reported that Erhard served as a Rot­ten­fuehrer — roughly cor­re­spond­ing to a senior cor­po­ral — in the Waf­fen, or fight­ing arm, of the dreaded S.S.

    The Sued­deutsche Zeitung in Munich, one of the pub­li­ca­tions in the global alliance of news­pa­pers which unmasked the activ­i­ties of Jür­gen Mossack’s firm in Panama, said Erhard served in a ‘Death’s Head’ unit of the S.S.

    These were the units which ran the con­cen­tra­tion camps. But if he was in the Waf­fen S.S. it prob­a­bly meant he served in the Third Waf­fen S.S. Panzer Divi­sion Totenkopf.

    Most of the division’s ini­tial enlisted men were recruited from con­cen­tra­tion camp guards and oth­ers were mem­bers of mili­tias that had com­mit­ted war crimes in Poland.

    Due to its insignia, it was some­times referred to as the ‘Death’s Head Divi­sion’. Mem­bers of the divi­sion com­mit­ted war crimes — one of them against British soldiers.

    The Le Par­adis mas­sacre was car­ried out by mem­bers of the 14th Com­pany of the division.

    It took place on May 27 1940, dur­ing the Bat­tle of France, at a time when the British Expe­di­tionary Force was attempt­ing to retreat through the Pas-de-Calais region dur­ing the Bat­tle of Dunkirk.

    Sol­diers of the 2nd Bat­tal­ion, the Royal Nor­folk Reg­i­ment, had become iso­lated from their reg­i­ment. They occu­pied and defended a farm­house against an attack by Waf­fen S.S. forces in the vil­lage of Le Par­adis. After run­ning out of ammu­ni­tion, the defend­ers sur­ren­dered to the Ger­man troops.

    But the Ger­mans machine-gunned the men after sur­ren­der­ing, with sur­vivors killed with bay­o­nets. Two men sur­vived with injuries, and were hid­den by locals until they were cap­tured by Ger­man forces sev­eral days later.

    Accord­ing to the Sued­deutsche, Erhard was cap­tured by the Amer­i­cans in Munich after the war with a list of Nazi ‘Were­wolf’ mem­bers upon him.

    The Were­wolf units were intended to fight on as a guer­rilla force after the sur­ren­der, but this never happened.

    The news­pa­per said it applied to the Ger­man Fed­eral Intel­li­gence Ser­vice, the BND, for infor­ma­tion about him. The BND con­firmed doc­u­ments existed on him but said they would not be released becauve this could endan­ger ‘the well-being of the Fed­eral Repub­lic of Ger­many or one of its members’.

    In 1948 he left Ger­many with his fam­ily to set­tle in Panama, and later returned to Munich with his wife dur­ing the 70s. He died in the 1990s, his wife fol­lowed five years ago.

    Accord­ing to reports, U.S. Army intel­li­gence archives hold a file on him as he allegedly offered his ser­vices to the U.S. gov­ern­ment as an infor­mant, claim­ing ‘he was about to join a clan­des­tine organ­i­sa­tion, either of for­mer Nazis now turned Com­mu­nist... or of uncon­verted Nazis cloak­ing them­selves as Communists.’

    An Army intel­li­gence offi­cer wrote that the offer to spy for the U.S. might sim­ply be ‘a shrewd attempt to get out of an awk­ward situation’.

    Nev­er­the­less, the old intel­li­gence files indi­cate that Mossack’s father later ended up in Panama, where he offered to spy, this time for the CIA, on Com­mu­nist activ­ity in nearby Cuba.

    The chil­dren Peter and Mar­ion returned to Ger­many in the 1970s; brother Peter is the Hon­orary Con­sul for Panama based in Frankfurt.

    In 1952 a book by Erhard Mos­sack was pub­lished in Ger­many called The Last Days of Nurem­berg, detail­ing the cap­ture of the city to Amer­i­can forces in 1945.

    Horst Mos­sack says he believes the father of Jür­gen was the author.

    He added; ‘I don’t expect I will ever see Jür­gen again. If I did I would ask him exactly what went on.’

    Mean­while, the sec­ond man behind the Panama firm, a lawyer named Ramon Fon­seca Mora, has been revealed to be an award-winning nov­el­ist famous for his sala­cious plots.

    But the 63-year-old Panama native’s sto­ry­lines may cut closer to home than his read­ers realise.

    As a young man Fon­seca report­edly wanted to be a priest, before age and mate­ri­al­ism took over. On join­ing forces with part­ner Mos­sack, he told a jour­nal­ist in 2012, ‘Together, we have cre­ated a monster.’

    In among accounts he fol­lows on Twit­ter are a fair amount of 18+ accounts — at first glance the naked bot­tom of ‘Horny Cherry’ sits along­side the offi­cial account of the Pres­i­dent of Argentina Mauri­cio Macri.


    “The news­pa­per said it applied to the Ger­man Fed­eral Intel­li­gence Ser­vice, the BND, for infor­ma­tion about him. The BND con­firmed doc­u­ments existed on him but said they would not be released becauve this could endan­ger ‘the well-being of the Fed­eral Repub­lic of Ger­many or one of its mem­bers’.“
    Well isn’t that intrigu­ing. It’s also pretty fas­ci­nat­ing that Erhard Mos­sack was cap­tured by US forces with a list of ‘Were­wolves’, because if there’s one sign of being an unre­pen­tant Nazi, it’s being cap­tured with a list of ‘Were­wolves’. And then there’s this:

    In 1948 he left Ger­many with his fam­ily to set­tle in Panama, and later returned to Munich with his wife dur­ing the 70s. He died in the 1990s, his wife fol­lowed five years ago.

    Accord­ing to reports, U.S. Army intel­li­gence archives hold a file on him as he allegedly offered his ser­vices to the U.S. gov­ern­ment as an infor­mant, claim­ing ‘he was about to join a clan­des­tine organ­i­sa­tion, either of for­mer Nazis now turned Com­mu­nist... or of uncon­verted Nazis cloak­ing them­selves as Communists.’

    An Army intel­li­gence offi­cer wrote that the offer to spy for the U.S. might sim­ply be ‘a shrewd attempt to get out of an awk­ward situation’.

    Nev­er­the­less, the old intel­li­gence files indi­cate that Mossack’s father later ended up in Panama, where he offered to spy, this time for the CIA, on Com­mu­nist activ­ity in nearby Cuba.

    So was Erhard part of the Gehlen out­fit? He fits the mold. It’s also worth not­ing that the Inter­a­gency Work­ing Group which was set up in 1999 to find and dis­close infor­ma­tion related to inves­ti­ga­tions of Nazi and Japan­ese WWII war crimes does con­tain a record for Erhard Mos­sack in the sec­tion for FBI files. There isn’t much infor­ma­tion avail­able, but in the “cat­e­gory” sec­tion for Mos­sack it lists “For­eign Coun­ter­in­tel­li­gence (For­merly Inter­nal Secu­rity, For­eign Intel­li­gence)”. That sure sounds like the US took Mos­sack up on his offer.

    So, given the Erhard Mossack’s back­ground as a pos­si­ble unre­pen­tant Nazi and the promi­nent role the Mossack’s have played in Pana­man­ian high-society, one big ques­tion regard­ing Mos­sack Fon­seca is what role it may have played in the post-war Nazi under­ground as a vehi­cle for hid­ing and mov­ing the vast sums of money that would have been accrued in the sub­se­quent decades. But if Erhard was actu­ally work­ing for US or West Ger­many intel­li­gence in the post-war period that just adds to the intrigue. It’s also a reminder that one of the best ways for a Nazi under­ground to stay under­ground is hav­ing a lot of friends in very high places.

    Let’s hope all the inves­ti­ga­tors pour­ing over this data ask ques­tions about Mos­sack Fon­seca that go far beyond tax-evasion.

    Posted by Pterrafractyl | April 5, 2016, 6:10 pm
  4. Daniel Hop­sicker has a recent new arti­cle that came out a cou­ple weeks before the big “Panama Papers” mega-leak started get­ting reported that reminds of us a key aspect of tax-sheltering that’s worth keep­ing in mind as elite tax-evasion remains in the head­lines. Espe­cially with Don­ald Trump dom­i­nat­ing the head­lines too: If you have lots and lots of wealth to shel­ter, and a whole bunch of shell cor­po­ra­tions all set up to do it, hav­ing those shell cor­po­ra­tions buy a bunch of US real estate is a really great way to shield that wealth. Just ask Don­ald Trump’s clients and busi­ness part­ners:


    Don­ald Trump, Dirty Money, & the Filthy Rich in Palm Beach
    Posted on March 17, 2016 by Daniel Hopsicker

    Is he really doing it with­out dirty money?

    When asked to describe what they like most about Don­ald Trump, sup­port­ers usu­ally say “He’s been doing it all with­out dirty money.” They mean his cam­paign is self-funded, and takes no money from lob­by­ists, spe­cial inter­ests, and Repub­li­can Party kingmakers.

    But what if Trump’s own money is dirty? Could a siz­able chunk of Trump’s net worth come from sell­ing real estate to drug lords, mob­sters, and inter­na­tional finan­cial criminals?

    The answer is: There’s no way to tell. Secrecy hides the iden­tity of the crooked, vio­lent and cor­rupt who invest cash in U.S. real estate through shell com­pa­nies reg­is­tered in Delaware, man­aged by a bank in the Grand Cay­mans for a trust in Guernsey. And its all per­fectly legal.

    Even Swiss banks these days have to know who their cus­tomers are. Not Amer­i­can real estate devel­op­ers. There’s no legal require­ment what­so­ever that U.S. real-estate devel­oper Don­ald Trump know who his clients are. Prob­a­bly, he couldn’t care less. Or even worse, he’d rather not know.

    “The Great Cir­cle of Life,” Trump-Style

    A closer look at Trump reveals names which recur with his—and with each other—in odd and unex­pected places. It’s as if Trump belongs to the “Great Cir­cle of Life” from a “Lion King” movie shot in an alter­na­tive Universe.

    From Palm Beach, win­ter home to well-known and well-heeled scam­mers from around the world, here’s a thumb­nail sketch of “The Great Cir­cle of Life,” Trump-Style.

    Don­ald Trump has repeat­edly taken advan­tage of this huge loop­hole in Amer­i­can law, never more bla­tantly than when he made a cool $90 mil­lion dol­lar profit on a Palm Beach man­sion he sold to a man who some­one must have worked really hard to con­vince the Amer­i­can main­stream media to iden­tify as a “Russ­ian busi­ness­man,” or “Russ­ian fer­til­izer oligarch.”

    He wasn’t. Dmitry Rybolovlev is a Russ­ian Mob­ster, who was indicted for rub­bing out his chief busi­ness rival in what Russ­ian news agency TASS called a “con­tract hit.”

    Yet the Don­ald was pock­et­ing $90 mil­lion of dirty cash from the Russ­ian Mob at the same time a minor politi­cian in Cal­i­for­nia was tak­ing tons of heat for accepting—from that same Russ­ian Mobster—a $400 pen.

    For his part, Rybolovlev liked the U.S. media’s char­ac­ter­i­za­tion of him as a Russ­ian “busi­ness­man” so much that four years ago he splurged on the most expen­sive con­do­minium ever sold in Man­hat­tan ($88 million).

    As for Trump, there’s no way of know­ing if he’s used any dirty money from the Russ­ian Mob to fund his cam­paign. In fact, there’s no way of know­ing so much about Don­ald Trump’s busi­ness career that the best way to get a clearer pic­ture of who he is may be to check out who he does busi­ness with.

    How Don­ald Trump became Don­ald Trump

    For any­one lucky enough to have never seen an episode of “Lifestyles of the Rich & Famous,” here’s a quick reminder of how Don­ald Trump became Don­ald Trump.

    Long before becom­ing a Pres­i­den­tial can­di­date, Trump was a famous icon from an espe­cially ques­tion­able time in Amer­ica, the “go-go” ‘80’s,” when rob­ber barons walked the earth unafraid, while on TV a British twit named Robin Leach rhap­sodized about them between commercials.

    It was a time when things—at least law enforcement-wise—were clearly well out of hand. The enor­mous amount of cocaine money slosh­ing around the bank­ing sys­tem in Miami made some banks there seem to bulge out­wards over the side­walk and drive-through window.

    In the Amer­i­can econ­omy in the 1980’s, drug money was as vis­i­ble as an alli­ga­tor in the Ever­glades slid­ing down the throat of a Burmese python.

    Trump and Ivana were the first cou­ple of the Greed Decade. Trump was Gatsby with weird hair. His Daisy was a for­mer Czech Olympian skier. A blond girl from the South with a syrupy smile waited in the wings. Gold fix­tures every­where. Every­thing was “real class.”


    That was then, this is now. See any difference?

    In “Stash Pad” in New York Mag­a­zine, Andrew Rice reported, “The New York real-estate mar­ket is now the pre­mier des­ti­na­tion for wealthy for­eign­ers with rubles, yuan, and dol­lars to hide.”

    Imag­ine what Florida must be like… Today in Miami, ris­ing above miles of strip malls, con­ve­nience stores, pawn shops, and gas sta­tions, is a row of sky­scrap­ers so baroque that they con­jure up only one man: Don­ald Trump.

    Three Trump Tow­ers, and three other Trump-branded prop­er­ties in Sunny Isles, includ­ing the Trump Inter­na­tional Beach Resort, loom over beach­front Collins Avenue, where they are a favorite home away from home for Russ­ian Mobsters.

    Sunny Isles has numer­ous real estate agen­cies owned by Rus­sians that cater heav­ily to East­ern Euro­pean clients, among them Exclu­sively Bara­noff Realty, which oper­ates from an office in the lobby of the Trump Inter­na­tional Beach Resort. Thanks to its heavy Russ­ian pres­ence, Sunny Isles has acquired the nick­name “Lit­tle Moscow.”

    In a pro­file in The Nation mag­a­zine called “Miami: Where Lux­ury Real Estate Meets Dirty Money” Ken Sil­ver­stein writes:

    “One night I had din­ner and felt like I’d been trans­ported into a Russ­ian ver­sion of Good­fel­las. A Russ­ian singer per­formed on a stage with disco lights while cus­tomers ordered skew­ered stur­geon, and clinked forks on glasses to announce toasts before down­ing shots of vodka. A man who looked 70 spoke in Russ­ian to his wife, who appeared at least 40 years younger. At another table, a man about the same age was seated with a young woman in blue jean shorts, a hal­ter top and cow­boy boots.”

    Trump wel­come mat out for inter­na­tional grifters

    Just how easy does Don­ald Trump make it for for­eign rep­re­sen­ta­tives of orga­nized crime to buy real estate from him? Sil­ver­stein writes:

    “She took me to see a unit on the thirty-eighth floor of Trump Palace, which looked out on the turquoise waters of the Atlantic and was on the mar­ket for $2.3 mil­lion. “Liv­ing in a Trump prop­erty is like liv­ing in a hotel,” she told me, as we stood on a bal­cony. The unit was attrac­tively priced, she said cheer­fully, and all the more so as the owner, a Russ­ian look­ing to buy a big­ger condo else­where in the area, had spent at least $350,000 on improvements.

    Later that day, I obtained the prop­erty records for the condo. The legal owner is a com­pany reg­is­tered in Belize, an off­shore haven where, accord­ing to a gov­ern­ment web­site, there “is no require­ment to file annual returns or pub­lic dis­clo­sure of direc­tors, share­hold­ers, charges, loans or agreements.”

    In other words, the true owner of the Trump Palace unit is untraceable.

    Even the New York Post, which could be excused for being sen­si­tive to talk about lax immi­gra­tion let­ting in the world’s rich­est unde­sir­ables, chimed in.” New York’s swanki­est sky­scrap­ers have become the new Swiss banks for the world’s rich­est undesirables.”

    “Today, Switzer­land has cleaned up its act and the “filthy” rich have turned to New York City, turn­ing it into a secrecy haven to stash their cash through the use of shell companies.”

    Don­ald Trump called him “The Legend.”

    Instead of one of the many famous names in Trump’s “Great Cir­cle,” let’s begin with some­one who’s no longer well-known. Louis Lesser was once as big a name in real estate devel­op­ment as Don­ald Trump’s, but by the time he died he had become a for­got­ten man.

    Lesser (third from right in pic) was once the biggest devel­oper in the his­tory of the west­ern U.S., devel­op­ing hous­ing for mil­i­tary per­son­nel dur­ing World War II, then grew wealthy devel­op­ing, own­ing and leas­ing prop­er­ties to the U.S. mil­i­tary dur­ing the Cold War, lock­ing up numer­ous con­tracts under Kennedy and John­son for devel­op­ments for mil­i­tary indus­trial com­plex clients.

    Louis Lesser was a part­ner with Syn­di­cate leg­end Meyer Lan­sky and Kirk Kerko­rian in buy­ing up Las Vegas hotels and casi­nos. He had exten­sive ties with Howard Hughes. He devel­oped, owned, and leased many prop­er­ties to Hughes’ Air­craft, includ­ing a mas­sive project in New­port Beach.

    Lesser helped Hughes buy up hotels and casi­nos in Las Vegas. When Lesser sold his Fron­tier Hotel and Casino to Hughes, it was the begin­ning of Hughes’ take-over there. In an exam­ple of Trump’s syn­er­gis­tic Great Chain of Life, years later, Don­ald Trump erected the Trump Hotel Las Vegas on a por­tion of the property.

    Louis Lesser, when he resigned as chair­man of Louis Lesser Enter­prises in 1967, was replaced by an asso­ciate of Henry Sal­va­tori, who the L.A. Times called a “GOP Kingmaker.”

    In 1964, Sal­va­tori chaired Barry Goldwater’s pres­i­den­tial cam­paign in Cal­i­for­nia. He con­vinced Gold­wa­ter to allow Ronald Rea­gan to give a tele­vised fundrais­ing speech enti­tled “A Time for Choos­ing,” which launched Reagan’s polit­i­cal career. Sal­va­tori became a promi­nent mem­ber of Ronald Reagan’s “kitchen cabinet.”

    Trump’s “Great Cir­cle” buddy Louis Lesser (cont.)

    Louis Lesser sold his Taj Mahal Hotel and Casino in Atlantic City to Don­ald Trump.

    Later, when the casino went bank­rupt, a court fil­ing in the bank­ruptcy pro­ceed­ings revealed Trump’s Taj Mahal Casino listed Fin­cen (The U.S. Finan­cial Crimes Enforce­ment Net­work) as an unse­cured cred­i­tor, mean­ing it hadn’t paid the record $10 mil­lion penalty (the largest the agency ever levied on a casino) for what FINCEN called “money laun­der­ing failures.”

    What fol­lows is an exam­ple of how Trump asso­ciates blend into each other, and man­age to stay just a step or two in front of the law.

    In the late 1980’s Louis Lesser’s son Craig became part­ners in real estate with Imelda Mar­cos, fronting for the real prin­ci­pals, Louis Lesser and Philip­pines dic­ta­tor Fer­di­nand Mar­cos. On an out­ing with Imelda and a mil­i­tary con­tin­gent, Craig Lesser helped uncover part of the fabled cache of gold buried by the Japan­ese in the Philip­pines at the end of Word War II.

    In Gold War­riors (2002), Ster­ling and Peggy Sea­grave detail a “great for­tune dis­cov­ered by U.S. intel­li­gence ser­vices in 1946 … $13-billion in war loot amassed by under­world god­fa­ther Kodama Yoshio who, as a rear admi­ral in the Impe­r­ial Navy work­ing with Golden Lily in China and South­east Asia, was in charge of plun­der­ing the Asian under­world and rack­e­teers. He was also in charge of Japan’s wartime drug trade through­out Asia

    Craig Lesser sent back a solid gold antique vase to his father, which took sev­eral men to lift, and which was dis­played on the man­tle at Louis Lesser’s man­sion, once the largest pri­vate res­i­dence in Bev­erly Hills.

    Until TV pro­ducer Aaron Spelling built “The Manor,” a home that rivals a mid-sized hotel in square footage, Louis Lesser lived in the largest house in Bev­erly Hills. In fact, his house at 1156 Shadow Hill Way was used exten­sively dur­ing pro­duc­tion of Bev­erly Hills 90210.

    Its cur­rent occu­pant, Pearla­sia Gam­boa, is a Filipino-American busi­ness woman who’s been involved in mas­sive fraud, and was the pres­i­dent of a “micro-nation” called the Domin­ion of Melchizedek, an atoll in the South Pacific which lies under­wa­ter at high tide, used as a front for fraud­u­lent crim­i­nal activity.

    Bank of Eng­land offi­cials raided the Lon­don premises of a com­pany which offered get-rich-quick invest­ment schemes backed by a phony bank ”reg­is­tered” in Melchizedek. ”It appears to exist mainly so that money can be whisked through shell banks,”reported the Wash­ing­ton Post.

    Is it oddly telling, or mere hap­pen­stance, or just another illus­tra­tion of Trump’s “Great Cir­cle of Life,” that Trump busi­ness asso­ciate Louis Lesser, who had much to do with pro­vid­ing entree into the world of casino gam­bling, owns a home (he’s dead, his son Craig is still asso­ci­ated with the prop­erty) that’s a nexus for inter­na­tional finan­cial swindlers?

    Time out for a lit­tle comic relief

    When Imelda Mar­cos went on trial in New York in 1990 for laun­der­ing tens of mil­lions of dol­lars belong­ing to the peo­ple of the Philip­pines, her co-defendant was another close Trump asso­ciate, Adnan Khashoggi. (Both Mar­cos and Khashoggi were acquitted.)

    The first time I saw Don­ald Trump’s name linked with Adnan Khashoggi’s was in a wickedly funny arti­cle from the early 90’s in Spy Mag­a­zine called ”Who is America’s cheap­est zillionaire?”

    Spy mag­a­zine— cruel, bril­liant, beautifully-written, and feared by all—incorporated a com­pany called the National Refund Clear­ing­house, gave it its own check­ing account, and zipped out refund checks to 58 “well-known, well-heeled Amer­i­cans” for $1.11 apiece.

    Chortling, the magazine’s edi­tors set­tled back to see who cashed them.

    26 fru­gal people—“The Bargain-Basement 26,” includ­ing Cher, Harry Helm­s­ley, Michael Dou­glas, Shirley MacLaine, Kurt Von­negut, and Don­ald Trump and Adnan Khashoggi, who par­tied together in swank Palm Beach Florida—cashed their $1.11 checks.

    Each then receive a sec­ond “National Refund Clear­ing­house” check, for 64 cents, half the amount of the first check as com­pen­sa­tion said a cover let­ter, for ”a com­puter error.’ Trump, Khashoggi, and 11 other extra­or­di­nar­ily cheap peo­ple each cashed checks for 64 cents apiece.

    “The Chintzy 13” then each received a final check for 13 cents.

    Don­ald Trump & Adnan Khashoggi were the last men stand­ing. Trump, who the mag­a­zine called a “short-fingered-vulgarian,” and Khashoggi, who per­son­ally endorsed his on the back, each cashed checks total­ing one dime and three pennies.

    Whether by acci­dent, coin­ci­dence, or cos­mic design, over the next two decades Trump and Khashoggi’s names will be inex­tri­ca­bly linked.

    “As for Trump, there’s no way of know­ing if he’s used any dirty money from the Russ­ian Mob to fund his cam­paign. In fact, there’s no way of know­ing so much about Don­ald Trump’s busi­ness career that the best way to get a clearer pic­ture of who he is may be to check out who he does busi­ness with.
    Yikes. That’s not a very pretty pic­ture painted by Trump’s past asso­ciates, or the indus­try that cre­ated his for­tune. And the extreme util­ity that US laws give to anony­mous off­shore shell cor­po­ra­tions is part of why it’s going to be so inter­est­ing to see which promi­nent Amer­i­cans get caught up in “Panama Papers” scan­dal. Although, as the arti­cle below notes, it’s very pos­si­ble that there won’t be many Amer­i­can names that come up in that giant Mos­sack Fon­seca data trea­sure trove because, for wealthy Amer­i­cans, there’s no rea­son your anony­mous shell cor­po­ra­tions needs to be off­shore:


    This is much worse than the Panama Papers: How Amer­ica became a world leader in tax avoidance

    No Amer­i­cans have been impli­cated in the stun­ning doc­u­ment trove detail­ing wide­spread global cor­rup­tion — yet

    David Dayen
    Tues­day, Apr 5, 2016 04:58 AM CST

    Often when I’m sit­ting in bumper-to-bumper traf­fic on one of L.A.’s many free­ways, my mind drifts to won­der­ing if there’s some spe­cial auto­bahn above the hori­zon line reserved only for elite celebri­ties, so they don’t have to bother with the day-to-day incon­ve­niences of the masses. That feel­ing returned when I read about the Panama Papers, a block­buster release of 11 mil­lion doc­u­ments from 40 years of work by one of the world’s lead­ing spe­cial­ists in tax avoidance.

    The global law firm Mos­sack Fon­seca cre­ates untrace­able shell com­pa­nies for Mafia mem­bers, drug deal­ers, elites from sports and cul­ture, and a host of cor­rupt politi­cians. You can come up with a cou­ple legit­i­mate rea­sons for cre­at­ing a shell com­pany: pro­tect­ing trade secrets from rivals, for exam­ple. But most of Mos­sack Fonseca’s busi­ness involves peo­ple want­ing to con­ceal their wealth: “Ninety-five per­cent of our work,” one memo reads, “coin­ci­den­tally con­sists in sell­ing vehi­cles to avoid taxes.” 214,000 of those vehi­cles, secured for 14,000 clients, are shown in the leaked documents.

    While mas­sive, the leak exposes only a small cor­ner of the tax avoid­ance indus­try. Mos­sack Fon­seca is just one of many firms in just one of dozens of inter­na­tional tax havens pro­vid­ing their ser­vices to the global elite. Back in 2012, British activists at the Tax Jus­tice Net­work esti­mated between $21-$32 tril­lion sit­ting in off­shore tax havens, of which the Panama Papers reveals only a piece. “This is the sin­gle biggest dri­ver of global inequal­ity in the world today,” said Clark Gas­coigne of the Finan­cial Account­abil­ity and Cor­po­rate Trans­parency (FACT) Coali­tion, an assem­bly of over 100 orga­ni­za­tions ded­i­cated to root­ing out tax avoidance.

    We’ve known about Mos­sack Fonseca’s cre­ation of shell cor­po­ra­tions since Ken Silverstein’s story about it in Vice well over a year ago. We’ve had sim­i­lar leaks from tax havens in Switzer­land and the British Vir­gin Islands dat­ing back sev­eral years. Carl Levin made a cot­tage indus­try of pro­duc­ing damn­ing reports about tax avoid­ance when he was in the Sen­ate. Nobody should be sur­prised that rich peo­ple world­wide try to stash their money away or laun­der it through fake corporations.


    What we have not yet seen is any U.S. indi­vid­ual impli­cated in the leak, which seems unlikely given our sta­ble of inter­na­tional wealth. The edi­tor of Süd­deutsche Zeitung, the Ger­man news­pa­per which first received the doc­u­ments, promises there will be more to come. But one rea­son why Amer­i­cans haven’t yet been impli­cated is that they already have a per­fectly good place for their tax avoid­ance schemes: right here in the United States.

    While sev­eral devel­oped coun­tries are already mov­ing to reduce the anonymity behind shell com­pa­nies, includ­ing a pub­lic reg­istry of “ben­e­fi­cial own­er­ship” infor­ma­tion in the United King­dom and a direc­tive to col­lect sim­i­lar infor­ma­tion through­out the Euro­pean Union, the United States has resisted such trans­parency. Accord­ing to recent research, the United States is the second-easiest coun­try in the world to obtain an anony­mous shell cor­po­ra­tion account. (The first is Kenya.) You can cre­ate one in Delaware for your cat.

    While we force for­eign finan­cial insti­tu­tions to give up infor­ma­tion on accounts held by U.S. tax­pay­ers through the For­eign Account Tax Com­pli­ance Act of 2010, we don’t rec­i­p­ro­cate by com­ply­ing with inter­na­tional dis­clo­sure require­ments stan­dard­ized by the Orga­ni­za­tion for Eco­nomic Co-Operation and Devel­op­ment (OECD) and agreed to by 97 other nations. As a result, the U.S. is becom­ing one of the world’s fore­most tax havens.

    Sev­eral states – Delaware, Nevada, South Dakota, Wyoming – spe­cial­ize in incor­po­rat­ing anony­mous shell cor­po­ra­tions. Delaware earns between one-quarter and one-third of their bud­get from incor­po­ra­tion fees, accord­ing to Clark Gas­coigne of the FACT Coalition. The appeal of this rev­enue has embold­ened small states, and now Wyoming bank accounts are the new Swiss bank accounts. Amer­ica has become a lure, not only for for­eign elites look­ing to seal money away from their own gov­ern­ments, but to laun­der their money through the pur­chase of U.S. real estate.

    In addi­tion, if the United States really wanted to stop Panama or the Cay­man Islands or other off­shore tax havens from allow­ing the wealthy to avoid hun­dreds of bil­lions in pay­ments, they could do so in about 15 min­utes. Our recent free trade deal with Panama allegedly pre­vents Amer­i­cans from cre­at­ing off­shore tax havens there, but in gen­eral, such tax infor­ma­tion exchanges are insuf­fer­ably weak. And the lit­tle Amer­ica does abroad to police tax eva­sion dwarfs the next to noth­ing we do at home.

    The inter­twin­ing of global and polit­i­cal elites makes tax avoid­ance, whether legal or ille­gal, a sec­ondary con­cern for the coun­try, regard­less of how it robs the coun­try of resources and pro­motes the con­cep­tion of a two-tiered eco­nomic and jus­tice sys­tem where the upper class need not fol­low the same rules as the rest of us. Our politi­cians made a con­sis­tent choice that this ram­pant tax avoid­ance doesn’t bother them.

    “Anony­mous shell com­pa­nies have been used to rip off Medicare,” said Gas­coigne. “They’ve been used to evade U.S. sanc­tions. Arms deal­ers like Vik­tor Bout, the so-called Mer­chant of Death, used U.S. shell com­pa­nies to laun­der money.” Indeed, Mos­sack Fon­seca has affil­i­ated offices in Wyoming, Nevada, and Florida. Amer­ica is up to its eye­balls in this style of corruption.

    It’s a fix­able sit­u­a­tion. The U.S. could sign on to the OECD stan­dards tomor­row. In addi­tion, the Incor­po­ra­tion Trans­parency and Law Enforce­ment Assis­tance Act would require data col­lec­tion on the ben­e­fi­cial own­er­ship of shell com­pa­nies and lim­ited lia­bil­ity cor­po­ra­tions. But oppo­si­tion from the states ben­e­fit­ing from for­eign tax havens, as well as the National Asso­ci­a­tion of Sec­re­taries of State, has stalled progress. Sec­re­taries of State typ­i­cally have the author­ity to reg­is­ter cor­po­ra­tions, and they pros­per from reg­is­tra­tion fees. Delaware and its com­pan­ion states that offer cor­po­rate secrecy con­vinced the Sec­re­taries of State orga­ni­za­tion to oppose the bill.

    If every state gave up this infor­ma­tion, Delaware would still be a friendly place for cor­po­ra­tions to reg­is­ter, given their legal regime, low cor­po­rate tax rates, and sev­eral other advan­tages. But with­out a fed­eral law, states can just com­pete with each other over how much cor­po­rate infor­ma­tion to hide from domes­tic and for­eign authorities.

    Extremely pow­er­ful forces hope that the Panama Papers reac­tion mir­rors pre­vi­ous leaks about tax avoid­ance – a lot of grum­bling but no last­ing changes. They try to guar­an­tee that by lob­by­ing their respec­tive gov­ern­ments. And they care more than the masses of peo­ple who don’t lobby every day for the rick to pay their taxes. The core prob­lem doesn’t stop with the bare facts, pointed out in lurid detail by this leak. It’s that nobody really wants to do any­thing about it.

    “What we have not yet seen is any U.S. indi­vid­ual impli­cated in the leak, which seems unlikely given our sta­ble of inter­na­tional wealth. The edi­tor of Süd­deutsche Zeitung, the Ger­man news­pa­per which first received the doc­u­ments, promises there will be more to come. But one rea­son why Amer­i­cans haven’t yet been impli­cated is that they already have a per­fectly good place for their tax avoid­ance schemes: right here in the United States.
    That’s right, while we’ll no doubt be see­ing promi­nent names trick­ling out of the Mos­sack Fon­seca inves­ti­ga­tions for years to come, it’s very pos­si­ble that the names of wealthy Amer­i­cans will be a sur­pris­ingly small part of that future stream of bad news. And unless you’re the kind of per­son oper­at­ing in Don­ald Trump’s orbit of wealth and power, that lack of bad news is very bad news.

    Posted by Pterrafractyl | April 7, 2016, 1:11 pm
  5. The IMF just warned that low growth, low infla­tion, and high debt across the world is threat­en­ing to drag the global econ­omy into a eurozone-style death spi­ral of deficit-cutting and eco­nomic con­trac­tion. So while that was cer­tainly some bad news from the IMF, there is some good news, that being that the IMF was even talk­ing about the risk that cut­ting gov­ern­ment spend­ing cre­ates in the face of weak­en­ing demand, espe­cially if the whole world starts doing that simul­ta­ne­ously. Don’t for­get its infa­mous aus­ter­ity mea culpa of 2013. There’s no rea­sons the IMF has to stick that mea culpa, but it did this time which, pathet­i­cally, is pretty good news.

    So the bad news is that the world faces a pos­si­ble global slow­down and if the world responds with the aus­ter­ity poli­cies of the past it could induce an eco­nomic death spi­ral. The good news is that the IMF is even acknowl­edg­ing this. Baby steps:


    IMF Warns of Pos­si­ble ‘Spi­ral’ of Wan­ing Growth, Esca­lat­ing Debt

    * Global debt ris­ing as emerg­ing mar­kets strug­gle, IMF says
    * Spend­ing cuts could set off cycle, fund’s fis­cal chief says

    Andrew Mayeda
    April 13, 2016 — 9:30 AM CDT

    Global pol­icy mak­ers need to guard against a self-reinforcing “spi­ral” of weak­en­ing growth and ris­ing debt that could require a coor­di­nated response by the world’s major economies, accord­ing to the IMF’s top fis­cal watchdog.

    Most coun­tries are on a higher debt path than they were a year ago, the Inter­na­tional Mon­e­tary Fund said in its semi-annual Fis­cal Mon­i­tor report released Wednes­day. Fis­cal deficits in 2015–2016 in emerg­ing economies are pro­jected to exceed lev­els dur­ing the global finan­cial cri­sis, as coun­tries strug­gle with low oil prices, cool­ing investor sen­ti­ment and inten­si­fy­ing geopo­lit­i­cal tensions.

    The warn­ing on coun­tries’ debt rein­forces the fund’s mes­sage in two other reports this week that the world risks slip­ping to stag­na­tion with­out strong action by pol­icy mak­ers, who are gath­er­ing in Wash­ing­ton for spring meet­ings of the IMF and World Bank. If gross domes­tic prod­uct growth in advanced economies slides fur­ther, that would raise pub­lic and pri­vate debt lev­els as a pro­por­tion of out­put, said Vitor Gas­par, head of the IMF’s fiscal-affairs department.

    “In such cir­cum­stances you can imag­ine that house­holds, firms, and gov­ern­ments will be tempted to cut fur­ther expen­di­tures,” Gas­par said in an inter­view. “That puts fur­ther down­side pres­sure on nom­i­nal GDP growth, and that would be a spi­ral that one must avoid.”

    Debt is grow­ing espe­cially fast among oil pro­duc­ers, whose bud­get plans have been thrown into dis­ar­ray by the col­lapse in crude prices. In the Mid­dle East and North Africa, cumu­la­tive deficits are expected to widen by $2 tril­lion over the next five years, rel­a­tive to 2004–2008, when oil prices peaked, accord­ing to the IMF.

    Triple Threat

    Advanced economies, mean­time, are fac­ing the “triple threat” of low growth, low infla­tion, and high pub­lic debt, the fund said.

    The IMF is urg­ing coun­tries with fis­cal room to use bud­get mea­sures such as increased spend­ing or tax cuts to boost demand.

    If a low-growth, high-debt spi­ral takes hold, the responses of indi­vid­ual coun­tries won’t be enough. Major economies will have to quickly act together to com­bat the “stag­na­tion forces” through mea­sures to spur both demand and supply, said the Washington-based fund, which was cre­ated dur­ing the World War II to over­see the global mon­e­tary system.

    “Our eval­u­a­tion is that risks are at this point in time more con­sid­er­able than they were, say, six months ago or one year ago,” said Gas­par, a for­mer finance min­is­ter in Por­tu­gal.
    “The expres­sion we use for the way we look at global devel­op­ments at this time is a state of alert. We are on alert, we’re def­i­nitely not on alarm.”

    Gas­par said Japan should ensure it’s pro­vid­ing enough fis­cal stim­u­lus to off­set the eco­nomic hit from the government’s plan to raise the nation’s con­sump­tion tax. “They should make sure that from an aggre­gate view­point, there is no con­trac­tion in the fis­cal stance,” he said.


    “If a low-growth, high-debt spi­ral takes hold, the responses of indi­vid­ual coun­tries won’t be enough. Major economies will have to quickly act together to com­bat the “stag­na­tion forces” through mea­sures to spur both demand and sup­ply, said the Washington-based fund, which was cre­ated dur­ing the World War II to over­see the global mon­e­tary sys­tem.“
    Well, that’s cer­tainly bet­ter advice than the “all nations must slash spend­ing now!”-mentality that’s some­how become accept­able in global policy-making cir­cles. But note how lim­ited the the coor­di­nated actions were: cut taxes or increase spending:

    The IMF is urg­ing coun­tries with fis­cal room to use bud­get mea­sures such as increased spend­ing or tax cuts to boost demand.

    Now, cut­ting taxes on the mid­dle class and poor would cer­tainly boost demand. But what about cut­ting taxes on the peo­ple with the money? Isn’t one of the grand lessons of that last few decades of supply-side, tax-cuts-for-the-rich eco­nom­ics that it just ends up mak­ing the rich richer while starv­ing gov­ern­ments of taxes? In other words, while some tax cuts tar­geted towards the low end of the eco­nomic lad­der would cer­tainly increase demand, tax cuts for the rich are basi­cally throw­ing money down the drain at the expense of higher deficits, and that’s a pretty good recipe for send­ing your econ­omy down the drain and into the death spi­ral the IMF is warn­ing us about.

    So, given all the fret­ting about what to do in the wake of the Panama Papers mega-scandal, isn’t there a very obvi­ous coor­di­nated action the wealthy nations of the world could do that would not only increase demand, but also reduce deficits at the same time: close all the loop­holes that allow the super-rich to hide their cash, onshore or off­shore, and then jack up that top tax rate sky high! The US had a top tax rate of 91 per­cent in the 1950’s and that’s the decade looked back on as a kind of Amer­i­can golden age. Really high taxes on the rich didn’t kill the econ­omy. Quite the oppo­site. So, if one of the rea­sons we can’t return to such a tax struc­ture is that it’s a more com­pet­i­tive global econ­omy and the ultra-wealthy will just take their for­tunes else­where (while still doing all their busi­ness in the nation they’re leav­ing), why not have a coor­di­nated global response to finally end that pathetic race to the bot­tom? Just imag­ine how much demand and debt reduc­tion could be achieved by not let­ting hav­ing all those tril­lions rot­ting away in a tax haven.

    As the IMF puts it, the devel­oped world is fac­ing a “triple threat” of low growth, low infla­tion, and high debt. But isn’t a global oli­garchy that’s set up a global sys­tem to stash away $32 tril­lion in off­shore tax havens (and who knows how much more in onshore tax havens) also a mas­sive threat to global pros­per­ity? So how about we seri­ously address the IMF’s “triple threats” by seri­ously address­ing that threat?

    Sure, a global cam­paign to take down global super-rich and force them to behave like decent global cit­i­zens might seem like the end of the world to the super-rich and an insur­mount­able chal­lenge to every­one else. But if you think about the range of threats that go far beyond the IMF’s “triple threat”, like eco-collapse and the wars or ter­ror that could ensue with future weapons, and the immense finan­cial resources that are going to be required to address those issues, tak­ing on the super-rich’s grip on the world isn’t just a mega-challenge. It’s also a baby step.

    Posted by Pterrafractyl | April 13, 2016, 6:25 pm

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