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
Lis­ten:
MP3 Side 1 | Side 2
REALAUDIO

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.)

Discussion

One comment 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.

    http://www.ibtimes.com/articles/39939/20100731/billionaire-wyly-brothers-charged-with-tax-evasion-insider-trading-by-sec.htm

    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

Post a comment