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FTR #458 Interview with Lucy Komisar about Offshore Banking

Record­ed May 2, 2004
Lis­ten:
MP3 Side 1 [1] | Side 2 [2]
REALAUDIO [3]

Sup­ple­ment­ing infor­ma­tion pre­sent­ed in FTRs 356 [4], 357 [5], 387 [6], 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.) [7]

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 [8]—avail­able from Spitfire—as well as FTRs 2 [9], 3 [9], 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 [10]. 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.)