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Program Highlights Include: The genesis of Clearstream; the origin of its notorious “unpublished accounts”; the invention of “eurodollars”; Ernest Backes’ dismissal from Clearstream because of the Banco Ambrosiano scandal; the probable murder of Gerard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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