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For The Record  

Repost: FTR #531 Interview with Lucy Komisar about Offshore

Record­ed Octo­ber 30, 2005
REALAUDIO

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.”

Discussion

4 comments for “Repost: FTR #531 Interview with Lucy Komisar about Offshore”

  1. This is a great one — valu­able insight into some of the real fores shap­ing the cur­rent eco­nom­ic cri­sis, laid out in plain view. If only more peo­ple could bear to lis­ten.

    Posted by Don | October 26, 2008, 5:47 pm
  2. Of all the pos­si­ble uses of the 5th Amend­ment, this is the last one I expect­ed Hank to use:

    UPDATE 3‑U.S. sued for $25 bil­lion over AIG takeover

    Mon Nov 21, 2011 2:51pm EST

    * Law­suit seeks $25 bln for AIG share­hold­ers

    * Starr Int’l says AIG takeover vio­lat­ed Con­sti­tu­tion

    * Fed­er­al Reserve Bank of New York also sued

    * Trea­sury Depart­ment calls AIG bailout nec­es­sary, legal

    By Jonathan Stem­pel

    Nov 21 (Reuters) — A com­pa­ny run by for­mer Amer­i­can Inter­na­tion­al Group Inc Chief Exec­u­tive Mau­rice “Hank” Green­berg sued the Unit­ed States gov­ern­ment for $25 bil­lion, call­ing the 2008 U.S. takeover of the insur­er uncon­sti­tu­tion­al.

    The law­suit marks an unusu­al effort to force the gov­ern­ment to pay share­hold­ers, who have seen AIG’s stock price tum­ble 98 per­cent since the mid­dle of 2007, when the insur­er’s risky bets on mort­gage debt through cred­it default swaps began to fal­ter.

    ...

    Starr Inter­na­tion­al Co, which once had a 12 per­cent stake in AIG and was its largest share­hold­er, said the gov­ern­ment ille­gal­ly took a near­ly 80 per­cent AIG stake with­out seek­ing a share­hold­er vote, hop­ing to pro­vide a “back­door bailout” for AIG trad­ing part­ners such as Gold­man Sachs Group Inc.

    It said the bailouts that began on Sept. 16, 2008 vio­lat­ed share­hold­ers’ rights to due process and equal pro­tec­tion, and a Fifth Amend­ment ban against tak­ing pri­vate prop­er­ty for pub­lic use with­out just com­pen­sa­tion, known as the “tak­ings clause.”

    ...

    DISCRIMINATORY, PUNITIVE BAILOUT ALLEGED

    The bailouts began one day after Lehman Broth­ers Hold­ings Inc went bank­rupt and Bank of Amer­i­ca Corp agreed to buy Mer­rill Lynch & Co.

    But accord­ing to Starr, the AIG bailout was done as “a vehi­cle to covert­ly fun­nel bil­lions of dol­lars to oth­er pre­ferred finan­cial insti­tu­tions” such as Gold­man.

    Gold­man spokesman Michael DuVal­ly declined to com­ment.

    Starr also called the 14.5 per­cent inter­est rate on the $85 bil­lion cred­it line “puni­tive,” and out of line with aid pro­vid­ed to com­pa­ra­ble com­pa­nies at the time.
    ....

    Ok, and he’s also pissed that AIG was charged too much inter­est for all the free mon­ey. Not fair enough I guess. Heh.

    Well, at least he’s in good com­pa­ny when it comes to “are you $#@%!&* kid­ding me?”-bailout-related law­suits. Show ’em how it’s done J.P.!:

    ANALYSIS — Big banks may not be free from U.S. after TARP repay

    By Karey Wutkows­ki

    WASHINGTON | Fri Jun 5, 2009 10:52am IST

    (Reuters) — Tense nego­ti­a­tions over the val­ue of war­rants held by the Trea­sury Depart­ment could pre­vent some of the biggest U.S. banks from ful­ly shak­ing off gov­ern­ment own­er­ship after they repay bil­lions of dol­lars in bailout funds in com­ing days.

    Some big banks, includ­ing JPMor­gan Chase & Co, are wran­gling with offi­cials over the war­rants they want to buy back from Trea­sury, which the gov­ern­ment owns in addi­tion to the banks’ pre­ferred stock. The banks argue they should get a dis­count on the war­rants because they did not want the mon­ey in the first place..

    The issue puts Trea­sury in the tough posi­tion of want­i­ng to give the banks a fair deal while not short­chang­ing tax­pay­ers, who financed the indus­try res­cue plan at a time when the sec­tor was extreme­ly shaky.

    ...

    That’s right J.P., stick it to the man. You go girl!

    Posted by Pterrafractyl | November 25, 2011, 11:25 pm
  3. Giv­en the news that AIG’s board is con­sid­er­ing join­ing Hank Green­berg’s law­suit against the Fed­er­al gov­ern­ment over charges that the bailout was too puni­tive, this arti­cle brings up some­thing the rest of us might want to con­sid­er:

    Jan. 8, 2013, 12:46 p.m. EST
    How about charg­ing AIG with trea­son?
    Com­men­tary: Insur­er eras­es the good­will earned with its turn­around

    — David Wei­d­ner
    By Mar­ket­Watch

    SAN FRANCISCO (Mar­ket­Watch) — Amer­i­can Inter­na­tion­al Group Inc. wants to sue the U.S. gov­ern­ment under the Constitution’s pro­tec­tions of pri­vate prop­er­ty rights?

    OK. Maybe it’s time to charge AIG.

    There are plen­ty of pos­si­bil­i­ties: theft and neg­li­gence come to mind. And, as long as we’re talk­ing ridicu­lous cas­es, why not trea­son? Like the pro­tec­tion of pri­vate prop­er­ty rights in the Fifth Amend­ment, the def­i­n­i­tion of trea­son is spelled out in the Con­sti­tu­tion.

    Trea­son, the doc­u­ment states “consist(s) only in levy­ing War against them, or in adher­ing to their ene­mies, giv­ing them aid and com­fort.”

    One could argue that by mak­ing so many enor­mous and risky bets in deriv­a­tives and cred­it default swaps that AIG put the nation’s finan­cial sys­tem at risk — not an out­ra­geous claim at all — and gave com­fort and aid to our ene­mies includ­ing ter­ror­ists and for­eign foes.

    Sounds sil­ly? Is it any sil­li­er than AIG’s con­sid­er­a­tion of a claim against the U.S. gov­ern­ment?

    AIG is con­sid­er­ing join­ing a $25 bil­lion law­suit against the U.S. gov­ern­ment because it suf­fered oner­ous terms and loss of val­ue as part of its $182 bil­lion bailout in 2008. Read full sto­ry on AIG’s poten­tial claim against tax­pay­ers.

    ...

    Posted by Pterrafractyl | January 8, 2013, 1:48 pm
  4. http://www.guardian.co.uk/uk/2013/apr/03/offshore-secrets-offshore-tax-haven

    Leaks reveal secrets of the rich who hide cash off­shore

    Exclu­sive: Off­shore finan­cial indus­try leak expos­es iden­ti­ties of 1,000s of hold­ers of anony­mous wealth from around the world
    http://www.guardian.co.uk/uk/2013/apr/03/offshore-secrets-offshore-tax-haven

    David Leigh
    The Guardian, Wednes­day 3 April 2013 18.59 EDT
    Jump to com­ments (1807)

    British Vir­gin Islands
    The British Vir­gin Islands, the world’s lead­ing off­shore haven used by an array of gov­ern­ment offi­cials and rich fam­i­lies to hide their wealth. Pho­to­graph: Dun­can Mcnicol/Getty Images

    Mil­lions of inter­nal records have leaked from Britain’s off­shore finan­cial indus­try, expos­ing for the first time the iden­ti­ties of thou­sands of hold­ers of anony­mous wealth from around the world, from pres­i­dents to plu­to­crats, the daugh­ter of a noto­ri­ous dic­ta­tor and a British mil­lion­aire accused of con­ceal­ing assets from his ex-wife.

    The leak of 2m emails and oth­er doc­u­ments, main­ly from the off­shore haven of the British Vir­gin Islands (BVI), has the poten­tial to cause a seis­mic shock world­wide to the boom­ing off­shore trade, with a for­mer chief econ­o­mist at McK­in­sey esti­mat­ing that wealthy indi­vid­u­als may have as much as $32tn (£21tn) stashed in over­seas havens.

    In France, Jean-Jacques Augi­er, Pres­i­dent François Hol­lan­de’s cam­paign co-trea­sur­er and close friend, has been forced to pub­licly iden­ti­fy his Chi­nese busi­ness part­ner. It emerges as Hol­lande is mired in finan­cial scan­dal because his for­mer bud­get min­is­ter con­cealed a Swiss bank account for 20 years and repeat­ed­ly lied about it.

    In Mon­go­lia, the coun­try’s for­mer finance min­is­ter and deputy speak­er of its par­lia­ment says he may have to resign from pol­i­tics as a result of this inves­ti­ga­tion.

    But the two can now be named for the first time because of their use of com­pa­nies in off­shore havens, par­tic­u­lar­ly in the British Vir­gin Islands, where own­ers’ iden­ti­ties nor­mal­ly remain secret.

    The names have been unearthed in a nov­el project by the Wash­ing­ton-based Inter­na­tion­al Con­sor­tium of Inves­tiga­tive Jour­nal­ists [ICIJ], in col­lab­o­ra­tion with the Guardian and oth­er inter­na­tion­al media, who are joint­ly pub­lish­ing their research results this week.

    The nam­ing project may be extreme­ly dam­ag­ing for con­fi­dence among the world’s wealth­i­est peo­ple, no longer cer­tain that the size of their for­tunes remains hid­den from gov­ern­ments and from their neigh­bours.

    BVI’s clients include Scot Young, a mil­lion­aire asso­ciate of deceased oli­garch Boris Bere­zovsky. Dundee-born Young is in jail for con­tempt of court for con­ceal­ing assets from his ex-wife.

    Young’s lawyer, to whom he signed over pow­er of attor­ney, appears to con­trol inter­ests in a BVI com­pa­ny that owns a poten­tial­ly lucra­tive Moscow devel­op­ment with a val­ue esti­mat­ed at $100m.

    Anoth­er is jailed fraud­ster Achil­leas Kallakis. He used fake BVI com­pa­nies to obtain a record-break­ing £750m in prop­er­ty loans from reck­less British and Irish banks.

    As well as Britons hid­ing wealth off­shore, an extra­or­di­nary array of gov­ern­ment offi­cials and rich fam­i­lies across the world are iden­ti­fied, from Cana­da, the US, India, Pak­istan, Indone­sia, Iran, Chi­na, Thai­land and for­mer com­mu­nist states.

    The data seen by the Guardian shows that their secret com­pa­nies are based main­ly in the British Vir­gin Islands.

    Sam­ple off­shore own­ers named in the leaked files include:

    • Jean-Jacques Augi­er, François Hol­lan­de’s 2012 elec­tion cam­paign co-trea­sur­er, launched a Cay­mans-based dis­trib­u­tor in Chi­na with a 25% part­ner in a BVI com­pa­ny. Augi­er says his part­ner was Xi Shu, a Chi­nese busi­ness­man.

    • Mon­go­li­a’s for­mer finance min­is­ter. Bayart­sogt San­ga­jav set up “Leg­end Plus Cap­i­tal Ltd” with a Swiss bank account, while he served as finance min­is­ter of the impov­er­ished state from 2008 to 2012. He says it was “a mis­take” not to declare it, and says “I prob­a­bly should con­sid­er resign­ing from my posi­tion”.

    • The pres­i­dent of Azer­bai­jan and his fam­i­ly. A local con­struc­tion mag­nate, Has­san Gozal, con­trols enti­ties set up in the names of Pres­i­dent Ilham Aliyev’s two daugh­ters.

    • The wife of Rus­si­a’s deputy prime min­is­ter. Olga Shu­val­o­va’s hus­band, busi­ness­man and politi­cian Igor Shu­val­ov, has denied alle­ga­tions of wrong­do­ing about her off­shore inter­ests.

    •A sen­a­tor’s hus­band in Cana­da. Lawyer Tony Mer­chant deposit­ed more than US$800,000 into an off­shore trust.

    He paid fees in cash and ordered writ­ten com­mu­ni­ca­tion to be “kept to a min­i­mum”.

    • A dic­ta­tor’s child in the Philip­pines: Maria Imel­da Mar­cos Man­otoc, a provin­cial gov­er­nor, is the eldest daugh­ter of for­mer Pres­i­dent Fer­di­nand Mar­cos, noto­ri­ous for cor­rup­tion.

    • Spain’s wealth­i­est art col­lec­tor, Baroness Car­men Thyssen-Borne­misza, a for­mer beau­ty queen and wid­ow of a Thyssen steel bil­lion­aire, who uses off­shore enti­ties to buy pic­tures.

    • US: Off­shore clients include Denise Rich, ex-wife of noto­ri­ous oil trad­er Marc Rich, who was con­tro­ver­sial­ly par­doned by Pres­i­dent Clin­ton on tax eva­sion charges. She put $144m into the Dry Trust, set up in the Cook Islands.

    It is esti­mat­ed that more than $20tn acquired by wealthy indi­vid­u­als could lie in off­shore accounts. The UK-con­trolled BVI has been the most suc­cess­ful among the mush­room­ing secre­cy havens that cater for them.

    The Caribbean micro-state has incor­po­rat­ed more than a mil­lion such off­shore enti­ties since it began mar­ket­ing itself world­wide in the 1980s. Own­ers’ true iden­ti­ties are nev­er revealed.

    Even the island’s offi­cial finan­cial reg­u­la­tors nor­mal­ly have no idea who is behind them.

    The British For­eign Office depends on the BVI’s com­pa­ny licens­ing rev­enue to sub­sidise this resid­ual out­post of empire, while lawyers and accoun­tants in the City of Lon­don ben­e­fit from a lucra­tive trade as inter­me­di­aries.

    They claim the tax-free off­shore com­pa­nies pro­vide legit­i­mate pri­va­cy. Neil Smith, the finan­cial sec­re­tary of the autonomous local admin­is­tra­tion in the BVI’s cap­i­tal Tor­to­la, told the Guardian it was very inac­cu­rate to claim the island “har­bours the eth­i­cal­ly chal­lenged”.

    He said: “Our leg­is­la­tion pro­vides a more hos­tile envi­ron­ment for ille­gal­i­ty than most juris­dic­tions”.

    Smith added that in “rare instances …where the BVI was impli­cat­ed in ille­gal activ­i­ty by asso­ci­a­tion or oth­er­wise, we respond­ed swift­ly and deci­sive­ly”.

    The Guardian and ICI­J’s Off­shore Secrets series last year exposed how UK prop­er­ty empires have been built up by, among oth­ers, Russ­ian oli­garchs, fraud­sters and tax avoiders, using BVI com­pa­nies behind a screen of sham direc­tors.

    Such so-called “nom­i­nees”, Britons giv­ing far-flung address­es on Nevis in the Caribbean, Dubai or the Sey­chelles, are sim­ply rent­ing out their names for the real own­ers to hide behind.

    The whistle­blow­ing group Wik­iLeaks caused a storm of con­tro­ver­sy in 2010 when it was able to down­load almost two giga­bytes of leaked US mil­i­tary and diplo­mat­ic files.

    The new BVI data, by con­trast, con­tains more than 200 giga­bytes, cov­er­ing more than a decade of finan­cial infor­ma­tion about the glob­al trans­ac­tions of BVI pri­vate incor­po­ra­tion agen­cies. It also includes data on their off­shoots in Sin­ga­pore, Hong Kong and the Cook Islands in the Pacif­ic.

    Posted by Vanfield | April 6, 2013, 10:38 pm

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