Recorded October 30, 2005
Featuring the brilliant investigative journalist Lucy Komisar, this program highlights the use of “Offshore” entities to evade taxes, maximize corporate profits and finance a variety of criminal enterprises. Much of the first side of the program consists of analysis and discussion of insurance giant AIG and its prolific use of “offshore” scams. In addition to presenting AIG’s pioneering development of “captive” reinsurance companies to launder profits and evade taxes, the program highlights AIG’s use of Coral Reinsurance for a variety of illegal gambits. It should be noted that AIG’s illegal operations have been aided by a number of powerful and influential people. Much of the second side of the program consists of review of the pivotally important Clearstream network, and its use by intelligence agencies, corporations, criminal syndicates and terrorist organizations.
Program Highlights Include: A working definition of “Offshore;” the links of AIG to the intelligence community; assistance given to AIG’s scams by luminaries such as Henry Kissinger and former Secretary of the Treasury Robert Rubin; Clearstream’s use of unregistered accounts; the role of the Clearstream network in the Banco Ambrosiano, October Surprise and BCCI scandals; the role of the Clearstream network in the financing of Al Qaeda and 9/11; the role of the Clearstream network in the machinations of the Russian criminal networks of Mikhail Khordokovsky; discussion of the “Bermuda Inversion” gambit; discussion of “Transfer Pricing;” discussion of an organization formed by Lucy Komisar that is working to eliminate corporate tax evasion through the use of “offshore.”
1. In this return appearance by the formidable Lucy Komisar, we begin the discussion of “Offshore” with a functional definition: “DAVE: ‘Define ‘Offshore’ for us, Lucy.’ LUCY: ‘Offshore financial centers are, mostly, confidential and parallel financial systems segregated from the traditional banking structure of the jurisdiction and restricted to non-residents. There are more than 4000 offshore banks thought to exist in about 70 offshore jurisdictions. They lack the regulation and supervision of banks found in developed onshore jurisdictions. In many OFCs, a bank can be formed, registered and its ownership placed in the hands of nominee directors via the Internet. There are few, if any, disclosure requirements, bank transactions are free of exchange and interest rate restrictions, there are minimal or no capital reserve requirements, and transactions are mostly tax-free. Some OFCs permit the licensing and registration of ‘shell banks’ that exist only on paper and do not have a physical presence. They generally have legal frameworks designed to obscure the identity of the beneficial owner. Some OFCs offer the ability to form and manage secretly a variety of international business companies (IBCs), trusts, investment funds and insurance companies, many with nominee — that is front –directors, nominee officeholders and nominee shareholders.’
2. Much of the program focuses on the scandals surrounding the insurance giant AIG. We begin with an introductory discussion of this enormous corporation and its position in the corporate landscape. “DAVE: ‘Now, let’s turn to the subject of insurance giant AIG, the focal point of two of your Alternet articles. Tell us about the company’s size and importance in the industry and the corporate landscape in general.’ ‘LUCY: ‘AIG is the world’s second largest financial conglomerate and the largest underwriter of commercial and industrial insurance. In 2003, AIG reported net income of $10 billion. It has $648 billion in assets, a market value of $195 billion, $77 billion in sales and $6.5 billion in annual profits. It has operations in 130 countries and nearly 77,000 employees. It ranks third on Forbes’ list of the world’s biggest companies, after Citigroup, and General Electric.”
(Note that the material on AIG was drawn from Lucy Komsar’s two articles written for AlterNet: “The Fall of a Titan” by Lucy Komisar; AlterNet; 3/17/2005; “Take the Money and Run Offshore” by Lucy Komisar; AlterNet.)
3. AIG and its CEO Maurice [“Hank”] Greenberg are very closely related with the intelligence community. “DAVE’ ‘Tell us about AIG chief Maurice [Hank] Greenberg, and his relationship to the intelligence community.’ ‘LUCY: ‘The American International Group at its origins was linked to the OSS (Office of Strategic Services) the forerunner of the CIA. It grew from the Asia Life/C. V. Starr companies founded by Cornelius Starr who started his insurance empire in Shanghai in 1919, the first westerner to market insurance in China. Starr served with the OSS during World War II, and the Starr Corporation, located in the same building as the OSS in New York, provided intelligence on shipping, manufacturing and industrial bombing targets in Asia and Germany. When Casey became CIA director in the Reagan Administration, he wanted Greenberg to be his deputy, but Greenberg decided to stay with AIG. After the Ames scandal, Sen. Spector floated his name as a replacement of Woolsey, but the job went to Tenet.’” (Idem.)
4. AIG features a number of luminaries on its board of directors and international advisory boards: “DAVE: ‘Tell us about some of the prominent people on the board of directors and international advisory boards of AIG.’ LUCY: ‘Henry Kissinger chairs AIG’s International Advisory Board. Its board of directors includes William S. Cohen, Former United States Secretary of Defense and Senator, Caria A. Hills, Former United States Trade Representative, Richard C. Holbrooke, Former United States Ambassador to the United Nations.’’ (Idem.)
5. AIG’s illegal and/or unethical stratagems feature a pioneering use of “captives.” “DAVE: ‘Let’s turn to the subject of what AIG does. What are ‘captives’ and how does AIG use them?’ LUCY: ‘A captive is an insurance company that is owned by the company it insures — and has that company as its only client. Reinsurance is insurance that an insurance company buys so that if it has to pay out a claim, it doesn’t take all the risk. I discovered and reported on a case where AIG used a reinsurance company secretly owned by its client’s CEO to help him evade taxes, and by the way, to increase AIG profits in a way that cheated the client’s stockholders. I wrote about the case on Alternet, but it has not been reported in the corporate press. Victor Posner, who died in 2002, was a crook known as the original ‘corporate raider,’ famed for engineering hostile takeovers of companies and looting them. He had a history of corrupt dealings. He owned a Delaware factory called NVF that made Vulcan rubber. NVF had a workers compensation policy with an AIG company, which reinsured it with Chesapeake, a reinsurance company based in Bermuda, an offshore center. It turned out that Chesapeake was owned by Posner. In the early 90s, a Delaware insurance investigator discovered that NVF was paying twice the market rate to AIG for the insurance. The transaction meant all the parties came out ahead: AIG would keep a portion of the inflated NVF premium before sending the rest to Chesapeake, which meant AIG would have a higher commission. Posner would write off the entire amount as a business expense and enjoy the extra cash in Bermuda, tax free. A former Delaware insurance regulator told me, ‘This was not an isolated case with Vulcan. AIG did that a lot.’ He said, ‘AIG helped companies set up offshore captive reinsurance companies. AIG would then overcharge on insurance and pay reinsurance premiums to the captives, giving the captive owners tax-free offshore income.’ However, the Delaware Insurance Department took no action against the insurer. When I gave AIG the details of this scam, company spokesman Andrew Silver told me, ‘We don’t have any comment on that.’ AIG declares on its website that it ‘pioneered the formation of captives almost 60 years ago,’ and it offers management facilities to run the captives in offshore Barbados, Bermuda, Cayman Islands, Gibraltar, Guernsey, Isle of Man, and Luxembourg — all places where corporate and accounting records are secret and taxes minimal or nonexistent.’’ (Idem.)
6. AIG also used offshore insurance interests to move debt off its books, thereby making the company appear to be more profitable than it actually was. Of course, this did nothing to damage the price of its stock. “DAVE: ‘What else did [does] AIG engage in that was illegal?’ LUCY: ‘In the late 90s, four state insurance departments New York, Delaware, Pennsylvania and California were aware that AIG was moving debt off its books via the use of an offshore insurance company it secretly set up and controlled. But despite clear evidence of wrongdoing, no sanctions were ordered. State laws require insurance companies to keep a certain amount of capital available to pay out claims. If they have reinsurance, that amount can drop. The reinsurer, of course, has to be an independent company; the risk isn’t reduced if it’s just moved to another division of the same company.’” (Idem.)
7. The program turns to the subject of AIG’s Coral Re gambit, and the considerable assistance provided by investment firm Goldman Sachs to the furtherance of this scam: “‘In the mid-80s, two of AIG’s reinsurers failed. AIG now was going to show unacceptably high levels of debt on its books from claims it would now have to pay out itself. So Hank Greenberg decided to set up Coral Re, a reinsurance company, to move his bad debts off AIG books. It set up a shell company in Barbados, where capital requirements and regulation was minimal compared to the U.S., where American regulators couldn’t readily discover AIG’s involvement and where, as an added incentive, it could move money out of reach of U.S. taxes. The scam company was arranged with the help of Goldman Sachs then headed by Robert Rubin, who would become President Clinton’s Treasury Secretary and is now chairman of the executive committee of Citigroup. It got some high-level corporate executives to front for this supposedly independent company. But I have a confidential memorandum by Goldman Sachs which told why the company was formed. ‘AIG’s interest in creating the company is to create a reinsurance facility which will permit its U.S. companies to write more U.S. premiums. For a U.S.-domiciled company, a high level of surplus is required to support insurance premiums in accordance with U.S. statutory requirements. The statutory requirements in Barbados are less restrictive.’ The people who got this memo were corporate executives who, in exchange for their names, were offered a guaranteed return of $25,125 in the first year and $45,225 each subsequent year. They didn’t have to put up any money: they got financing from Sanwa Bank of Chicago secured by the Coral Re shares, a guarantee of enough dividends from Coral Re to cover the interest, and agreement they could hand off the shares and debt whenever they chose. Who got this no-lose so-called investment? They included serving or former chairmen of Reynolds Metals; Kraft; Itel, Mennen Company; Morton Thiokol. The Arkansas Finance and Development Authority, headed by a man who went to work in the Clinton White House, became lead investor, although state law banned it from buying stocks. Clinton was then governor of Arkansas. He would make Rubin his Treasury Secretary. The new company was not a legitimately independent business. For investors, there was no money at risk; the board of directors never made a decision; and Coral Re had no office of its own but was managed by American International Management, a subsidiary of none other than AIG. Eventually, the scheme unraveled. In 1992, Delaware examiners smelled a rat, AIG initially refused to provide Coral Re documents to the examiners, and it took them a couple of years to nail the connection. When AIG finally supplied Coral Re’s financial papers, the regulator was incredulous. He told me, ‘The books were definitely cooked.’ But the cowardly regulators in Delaware, Pennsylvania, New York and California, though they agreed in 1996 that AIG owned Coral Re and that there was no transfer of risk, did not act to punish AIG, just told it to stop using Coral Re. If Coral Re was an AIG affiliate, it would have to pay taxes on its income. If it was ‘independent,’ that money came tax-free. But the IRS didn’t have the guts to go after them, either. AIG spokesman Andrew Silver simply denied the validity of what all the insurance commissions found. He told me that ‘AIG was not involved in the offer and sale of Coral Re’s shares. That was done by Goldman Sachs, which approached potential investors with which it had relationships. AIG did not control or have an equity interest in Coral Re.’ That of course it completely untrue. Goldman Sachs failed to respond to inquiries about its role in setting up Coral Re. In May this year (2005), New York State Attorney General Eliot Spitzer filed suit against AIG and Greenberg, charging a pattern of fraud through the use of ‘sham transactions’ that bolstered the conglomerate’s financial statements.” (Idem.)
8. Next, the broadcast reviews some of the “offshore” stratagems used by corporations to inflate profits and invade taxes, beginning with discussion of “the Bermuda Inversion.” (For more discussion of the Bermuda Inversion, see: FTR 458.) “DAVE: ‘Let’s review some of the various gambits used by corporations to utilize ‘Offshore’ to their advantage, beginning with the ‘Bermuda Inversion.’ LUCY” ‘In a ‘corporate inversion,’ a U.S. company creates a new parent corporation based in a tax haven like Bermuda. The company and any foreign subsidiaries become subsidiaries of the new parent—and the entire corporation then benefits from tax reporting and regulations that are often significantly less demanding and expensive than those in the United States. In the past few years, about two dozen publicly traded companies have reincorporated in Bermuda or announced they would do so. Among them are Tyco International, McDermott International, Ingersoll-Rand, Nabors Industries, a huge, Houston-based operator of oil-drilling rigs. Since they are now foreign corporations, they evade billions of dollars of US taxes. Shareholders — including pension funds — lose too. In Bermuda, corporate laws shift the balance of control from stockholders to a company’s directors and severely limit investors’ right to sue. There is no treaty with Bermuda guaranteeing the reciprocity of judgments—meaning stockholders may have a hard time ensuring American court orders are enforced. In addition, stockholders’ ability to obtain information about Bermudan court decisions is limited: the island does not even maintain an official court reporter. Legislation to block the tax advantages of conversions was decimated by the Republicans, which applied only to future conversions.”
(For specific documentation, see: FTR 458.)
9. Next, the program reviews “Transfer Pricing.” (For more about “Transfer Pricing”, FTR 458.) “DAVE: ‘How about ‘Transfer Pricing’? LUCY” ‘Is a way of evading taxes by allocating profits for tax and other purposes among parts of a multinational corporate group or to secretly owned companies. These front companies are always offshore in tax havens. Offshore ‘trading’ offices or companies handle imports and exports, buying a U.S. export from a company at a sharply reduced paper cost and selling it abroad for the real-world market value, so the exporting company makes no profit. That stays with the tax haven trading company. In the reverse, a company buys goods at a real price and ‘sells’ to the U.S. firm at a grossly inflated one, so the U.S. firm has a huge cost to deduct when it uses the item in manufacture or resells it at a loss. Two US professors used customs data to examine the impact of over-invoiced imports and under-invoiced exports on U.S. federal income tax revenues for 2001. The findings were staggering. Would you buy plastic buckets from the Czech Republic for $973 each, tissues from China at $1,870 a pound, a cotton dishtowel from Pakistan for $154? U.S. companies, at least on paper, were getting very little for their exported products. If you were in business, would you sell bus and truck tires to Britain for $11.74 each, color video monitors to Pakistan for $21.90, and prefabricated buildings to Trinidad for $1.20 a unit? After all the deductions, the U.S. company has minimal profits. The offshore centers levy no taxes on ‘profits’ claimed there. Comparing all the stated export and import prices to real-world prices, the professors figured the 2001 U.S. tax loss at $53.1 billion.” (Idem.)
10. A bipartisan senatorial team introduced legislation to curb the ability of corporations to use Offshore to evade taxes: “DAVE: ‘This past year, there was legislation introduced aimed at curbing these abuses. Tell us about that.’ LUCY: ‘In July, Republican Senator Coleman and Democratic Senator Levin introduced our ‘Tax Shelter and Tax Haven Reform Act of 2005 which would, among other reforms, require economic substance for transactions to be eligible for tax benefits and strengthen the penalties for tax transactions lacking economic substance.’”
11. Much of the rest of the program consists of review of the use of the Clearstream network by corporations, banks, intelligence services, criminal syndicates and terrorist organizations, often acting in conjunction with one another. Lucy summarizes the Clearstream network, its functions and its history.
“DAVE: ‘Lucy, let’s review the Clearstream network and how it was set up. Let’s note in this context that ‘Offshore isn’t simply used by corporations to amass illegal wealth. It’s also used by criminal organizations, intelligence services and terrorist entities to move finances illegally.’ LUCY: ‘Clearstream is a clearinghouse in Luxembourg called Clearstream, which handles billions of dollars a year in stock and bond transfers for banks, investment companies and multinational corporations. It operates a secret parallel bookkeeping system that allows its clients to hide the money that moves through their accounts. 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. It’s all very efficient. But the money involved is massive. Clearstream handles more than 80 million transactions a year, and claims to have securities on deposit valued at $6.5 trillion. It’s also an excellent mechanism for laundering drug money or hiding income from the tax collector. Banks are supposed to be subject to local government oversight. But many of Clearstream’s members have real or ‘virtual’ subsidiaries in offshore tax havens, where records are secret and investigators can’t trace transactions. And Clearstream which keeps the central records of financial trades, doesn’t get even the cursory regulation that applies to offshore banks. On top of that, it deliberately has put in place a system to hide many of its clients’ transactions from any authorities who might come looking. According to former insiders: Clearstream has a double system of accounting, with secret, non-published accounts that banks and big corporations use to make transfers they don’t want listed on the official books. Though it is legally limited to dealing with financial institutions, Clearstream gives secret accounts to multinational corporations so they can move stocks and money free from outside scrutiny.’”
12. Next, the program reviews how the Clearstream network figures in the Banco Ambrosiano scandal.
“DAVE: ‘Tell us about the Clearstream network and the Banco Ambrosiano scandal, currently in the news after the indictment of four alleged conspirators for the murder of its chairman, former P-2 Lodge member Roberto Calvi.’ LUCY: ‘By 1980, Ernest Backes had become No. 3 official of Cedel (the old name for Clearstream), in charge of relations with clients. He was fired in May 1983. He told me 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,’ 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 ‘80s, 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. Bank chairman Roberto Calvi was found hanged under Blackfriars Bridge in London; the death was ruled a suicide. 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 warrant for him.) Now several people are on trial in Italy for Calvi’s murder. Backes said that he and a colleague, who was found dead in suspicious circumstance, 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.’” (For specific documentation, see: http://www.spitfirelist.com/f458.html.)
13. Much of the wrongdoing that surrounds Clearstream concerns the use of its unpublished accounts: “DAVE: ‘Tell us about Clearstream’s unpublished accounts, used and abused by major corporations, as well as criminal syndicates, terrorist organizations and intelligence services.’ LUCY: ‘Cedel/Clearstream violated its own statutes by setting up unpublished accounts for industrial and commercial companies. With accounts in their own names, companies could avoid passing through banks or exchange agents to use the clearinghouse. They thus skirted mandated due diligence and record-keeping. When Siemens was proposed for membership, Backes says, some Cedel employees protested that this violated Luxembourg law. However, management told them that Siemens’ admission had been negotiated at the highest level. 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. At the discretion of Clearstream, clients can open ‘non-published’ accounts that do not figure in any printed document or record of international financial transactions. When law enforcers ask to see records, they don’t exist. Unlike a bank, Clearstream has no effective outside surveillance. It is audited by KPMG, one of the ‘big five’ international accounting firms. KPMG has either been ignorant of or has overlooked the secret account system. Major companies use the secret accounts. Backes discovered non-published accounts of the Dutch agricultural multinational Unilever. The Shell petroleum group had a non-published account in the name Shell Overseas Trading Ltd. The German giant Siemens had four non-published accounts. Siemens has just been accused of involvement in oil for food kickbacks to Saddam Hussein. Among the international banks with the most secret accounts are: Citibank (271); Barclays (200); Credit Lyonnais (23); and Japanese company Nomura (12).’”
14. Continuing analysis of Clearstream’s role in major intelligence scandals, the program reviews the use of the network by the conspirators in the “October Surprise.” “DAVE: ‘In addition to the Banco Ambrosiano and Iraqgate scandals, the Clearstream network featured in many of the other major intelligence-related scandals of the last quarter century or so. Tell us about Clearstream and the ‘October Surprise’—the sabotage of the Carter campaign by the Reagan/Bush forces’ collaboration with the Iranian fundamentalist regime.’ LUCY: ‘In November 1979, the U.S. Embassy in Iran was seized, and 52 Americans were taken hostage. Their capture, and the Carter administration’s failure to win their release, became a major issue in the 1980 presidential campaign. Carter had frozen $12 billion in Iranian assets in U.S. banks, which was being claimed by American firms and individuals who had lost property in the Islamic revolution. American and Iranian officials were negotiating the amount of funds to be released in return for freeing the hostages, and the amount to be kept to settle claims. The Iranians also wanted Carter to release arms that had been ordered and paid for by the deposed Shah. According to numerous credible reports-many of which first appeared in In These Times-Reagan campaign officials allegedly met with Iranian representatives several times during the 1980 campaign, promising arms and money if Iran delayed release of the hostages until after the November election. This scandal would become known as the ‘October Surprise.’ Reagan won the election, but Carter officials continued to negotiate with the Iranians. Finally, around the turn of the year, an accord was reached under which the United States would release $4 billion but no arms. However, the Iranians did not release the hostages immediately. A few days before Reagan’s inauguration, Ernest Backes recalls, Cedel got an urgent joint instruction from the U.S. Federal Reserve Bank and the Bank of England to transfer $7 million in bearer bonds-$5 million from an account of Chase Manhattan Bank and $2 million from an account of Citibank-both in offshore secrecy havens. The money was to go to the National Bank of Algeria, and from there to an Iranian bank in Teheran. Backes was informed that the $7 million was part of sums being sent from around the world and concentrated in the Algerian bank. He was told the transfers were linked to the fate of the hostages. The Fed and the Bank of England were not members of Cedel, and by its rules had no right to order the transfers. Backes’ two superiors were absent. He informed the president of the Cedel administrative council, Edmond Israel, then acted to execute the order. (Israel, now honorary chairman, did not respond to phone and e-mail messages.) On January 20, 1981, about 15 minutes after Reagan took the oath of office, the hostages were finally freed. Reagan and Vice President George Bush have always denied the payoff happened.’”
15. The Clearstream network was also utilized by the BCCI. Note that the milieu of the BCCI figures prominently in the investigation of 9/11, and that FBI chief Robert Mueller was in of the badly attenuated “investigation” of BCCI by Congress. “DAVE: ‘Tell us about Clearstream and BCCI.’ LUCY: ‘When Mayor Giuliani was assistant prosecutor in the investigation of the Bank of Credit and Commerce International (BCCI) in the early 1990’s, he received documents from Backes. BCCI was a Pakistani-run bank registered via shell companies in the Cayman Islands that used secret accounts to effect an $8 billion global money-laundering fraud. Before it was shut down in 1991, BCCI was used by U.S. and Saudi intelligence to fund the mujahideen, then fighting the Soviet-supported government of Afghanistan.” (See more on BCCI-Clearstream connection.)
16. Clearstream appears to have been involved in the financing of Al Qaeda through the Bank Al Taqwa and SICO.
“DAVE: ‘You’ve also written about the Clearstream involvement with the Bank Al Taqwa, the main financial institution of the Muslim Brotherhood and a major source of funds for Al Qaeda, according to many intelligence sources.’ LUCY: ‘Following the September 11 attacks on the World Trade Center and the Pentagon, the U.S. started focusing its investigation on the financial trail of Osama bin Laden and the al-Qaeda network. Like any other large, global operation, international terrorists need to move large sums of money across borders clandestinely. In November, U.S. authorities named some banks that had bin Laden accounts, and it put them on a blacklist. One was Al Taqwa-’Fear of God’-registered in the Bahamas with offices in Lugano, Switzerland. Al Taqwa had access to the Clearstream system through its correspondent account with the Banca del Gottardo in Lugano, which has a published Clearstream account No. 74381. But Bin Laden may have other access to the unpublished system. In what he calls a ‘spectacular discovery,’ A series of 16 unpublished accounts had been opened under the name of the Saudi Investment Company, or SICO, the Geneva holding company of the bin laden family’s Saudi Binladen Group it is run by Bin Laden’s brother, Yeslam Binladen. SICO is associated with Dar AI-Maal-AI-lslami (DMI), an Islamic financial institution also based in Geneva and presided over by Saudi Prince Muhammed Al Faisal Al Saoud, and which directs millions a year to fundamentalist movements. DMI holds a share of the Al Shamal Islamic Bank of Sudan, which was set up in 1991 and partly financed by $50 million from Osama bin Laden.” (For more specific documentation, see: http://www.spitfirelist.com/f356.html; http://www.spitfirelist.com/f357.html.)
17. The Clearstream network has been utilized by the burgeoning Russian organized crime/oligarch networks. “DAVE: ‘Lucy, you’ve also written about the use of Clearstream by the interests of criminal Russian oligarch Mikhail Khodorkovsky. This scandal has been portrayed in the media as a reversion by Russia to the bad old days of the Soviet Union, with the authoritarian central government repressing the budding flower of Russian free enterprise. In fact, the Khordovsky case could be described as a ‘Russian Enron,’ with American investors among the main losers. Enlarge on that, if you would.’ ‘LUCY: ‘The Russian bank Menatep is on the year 2000 list even though it officially failed in 1998. Menatep is implicated in a Russian Audit Chamber report in the diversion of $4.8 million lent to Russia by the International Monetary Fund in 1998. 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.’ ‘There were a lot of transfers between Menatep and the Bank of New York,’ Backes adds. Natasha Gurfinkel Kagalovsky, a former Bank of New York official and the wife of a Menatep vice president, stands accused of helping launder at least $7 billion from Russia. U.S. investigators have attempted to find out if some of the laundered money originated with Menatep, which they believed had looted Russian assets. (The Justice Department declined to comment on the investigation.) Even though Menatep officially failed in 1998, it oddly remained on the non-published list of accounts for 2000. (Clearstream also lists 36 other Russian accounts, more non-published than published.)’”
18. The program concludes with presentation of the website for an organization Lucy has founded (in partnership with others) that is working to eliminate the offshore tax evasion by corporations. “DAVE: ‘We’re almost at the end of the interview, Lucy. Many listeners will be asking themselves what can be done about this situation. You have formed an organization to deal with the use of ‘Offshore’ to evade taxes. Tell us about that group and how people can find out more about it.’ LUCY: ‘I’ve worked with some associates to form The Tax Justice Network.”