Spitfire List Web site and blog of anti-fascist researcher and radio personality Dave Emory.

For The Record  

FTR #458 Interview with Lucy Komisar about Offshore Banking

Record­ed May 2, 2004
MP3 Side 1 | Side 2

Sup­ple­ment­ing infor­ma­tion pre­sent­ed in FTRs 356, 357, 387, this broad­cast presents more infor­ma­tion about the Clearstream net­work and the impor­tant (though lit­tle rec­og­nized) issue of off­shore bank­ing. Vis­it­ing once again with the remark­able Lucy Komis­ar, we are pre­sent­ed with infor­ma­tion about Clearstream, how it works and how it affects the polit­i­cal and eco­nom­ic health of the world. (The use of Clearsteam by Al Qae­da and the Bank Al Taqwa was dis­cussed in the pro­grams cit­ed above.) Note that excerpts from a very impor­tant arti­cle by Lucy on this sub­ject are pre­sent­ed in the descrip­tion, rather than attempts at para­phras­ing her answers.

Pro­gram High­lights Include: The gen­e­sis of Clearstream; the ori­gin of its noto­ri­ous “unpub­lished accounts”; the inven­tion of “eurodol­lars”; Ernest Back­es’ dis­missal from Clearstream because of the Ban­co Ambrosiano scan­dal; the prob­a­ble mur­der of Ger­ard Sois­son of Clearstream; dis­cus­sion of “trans­fer pric­ing”, “mail­box com­pa­nies”, and the “Bermu­da Inversion”—three of the devices used in the off­shore bank­ing busi­ness; the Enron scan­dal; the Stan­ley Works imbroglio; the use of Clearstream by Colom­bian drug traf­fick­ers; a French/Taiwanese arms deal con­duct­ed through Clearstream; mur­ders ini­ti­at­ed as a result of that arms scan­dal; the Menatep/Khodorokovsky inves­ti­ga­tion in Rus­sia; Robert Douglass—the Rock­e­feller-con­nect­ed head of Clearstream; the effect of off­shore bank­ing on the eco­nom­ic health of both indus­tri­al­ized and Third World coun­tries.

1. DAVE: Why do you call “Off­shore Bank­ing” a “Threat to Amer­i­ca?”
LUCY: Because these off­shore bank­ing havens are the vehi­cle for ter­ror­ists and drug-traf­fick­ers to finance their oper­a­tions, and they enable cor­po­ra­tions to escape tax­a­tion, there­by dam­ag­ing the economies of many coun­tries. This takes place both in the indus­tri­al­ized and third world coun­tries.

2. DAVE: Much of the arti­cle from Hound-Dogs focus­es on Clearstream, an orga­ni­za­tion that is described as a “clear­ing­house.” What is a clear­ing­house, how does it work?
LUCY: “ . . . In these days of glob­al mar­kets, indi­vid­u­als and com­pa­nies may be buy­ing stocks, bonds or deriv­a­tives from a sell­er who is halfway across the world. Clear­ing­hous­es like Clearstream keep track of the ‘paper­work’ for the trans­ac­tions. Banks with accounts in the clear­ing­house use a deb­it and cred­it sys­tem and, at the end of the day, the accounts (minus han­dling fees, of course) are totaled up. The clear­ing­house doesn’t actu­al­ly send mon­ey any­where, it just deb­its and cred­its its mem­bers’ accounts. The mon­ey involved is mas­sive. Clearstream han­dles more than 100 mil­lion trans­ac­tions a year, and claims to have secu­ri­ties on deposit val­ued at $10 tril­lion.”
(“Off­shore Bank­ing: The Secret Threat to Amer­i­ca” by Lucy Komis­ar; Hound-Dogs; Vol. 1; p. 5.)

3. DAVE: What are eurodol­lars, and how did eurodol­lars lead to the gen­e­sis of Cedel/Clearstream?
LUCY: “ . . . Cedel and its main com­peti­tor, Brus­sels-based Euro­clear, were start­ed to man­age trans­fers of ‘eurodol­lars,’ U.S. cur­ren­cy kept in banks out­side the Unit­ed States. The Chi­nese and the Sovi­ets invent­ed Eurodol­lars in the ‘50’s so they would not have to put their assets in banks where the U.S. gov­ern­ment could seize them. But oth­ers saw val­ue in eurodol­lars, and they began to be trad­ed for oth­er cur­ren­cies. Some banks attract­ed eurodol­lars with high­er inter­est than was being paid in Amer­i­ca, and U.S. cor­po­ra­tions and indi­vid­u­als began using the accounts to avoid laws on domes­tic banks. The euro mon­ey mar­ket was born. (By the ‘90’s, the Fed­er­al Reserve esti­mat­ed that about two-thirds of U.S. cur­ren­cy was held abroad as eurodol­lars.)” (Idem.)

4. DAVE: Tell us about Clearstream’s pub­lished and unpub­lished accounts. What is the dif­fer­ence and what are the impli­ca­tions of an “unpub­lished account?”
LUCY: “ . . . A bank would send a trans­fer to the code of the head­quar­ters bank, which would send it on to the non-pub­lished account of its sub­sidiary. The bank would reg­u­late this oper­a­tion inter­nal­ly. [Ger­ard] Sois­son autho­rized each non-pub­lished account, which would be known only by some insid­ers, includ­ing the audi­tors and mem­bers of the coun­cil of admin­is­tra­tion. As Cedel’s lit­er­a­ture to clients explained: ‘As a gen­er­al rule, the prin­ci­pal account of each client is pub­lished: the exis­tence of the account, as well as its name and num­ber, are pub­lished. On demand, and at the dis­cre­tion of Cedel, the client can open a non-pub­lished account. The non-pub­lished accounts don’t fig­ure in any print­ed doc­u­ment and their name is not men­tioned in any report.’ Requests for non-pub­lished accounts came from some banks that weren’t eli­gi­ble, but Sois­son turned them down. . .” (Idem.)

5. DAVE: Much of your arti­cle focus­es on a gen­uine­ly hero­ic man named Ernest Back­es. Tell us about Ernest Back­es and his role in set­ting up Cedel.
LUCY: “ . . . Many of [the charges against Clearstream] were first made in a con­tro­ver­sial book called Rev­e­la­tion$, writ­ten by Denis Robert, a French jour­nal­ist, and Ernest Back­es, a for­mer top offi­cial at the clear­ing­house who helped design and install the com­put­er sys­tem that facil­i­tat­ed the undis­closed accounts. The book’s impact was explo­sive. Six Euro­pean judges called it ‘the black box’ of illic­it inter­na­tion­al finan­cial flows. Top Clearstream offi­cials were fired. The scan­dal made head­lines in big Euro­pean news­pa­pers; TV net­work spe­cials; the French Nation­al Assembly’s finan­cial crimes com­mit­tee held a hear­ing. Lux­em­bourg author­i­ties ordered an inves­ti­ga­tion and in Octo­ber 2003, the exam­in­ing mag­is­trate brought charges against [Clearstream CEO Andre] Lus­si for mon­ey-laun­der­ing, tax fraud, forgery, false bal­ance-sheets and oth­er infringe­ments of the finan­cial law. Yet Rev­e­la­tions remains unpub­lished and rel­a­tive­ly unknown in the Unit­ed States, and this issue is not yet on the agen­da of Amer­i­ca.” (Idem.)

6. DAVE: In 1975, some big Ger­man and Ital­ian banks ini­ti­at­ed steps to shield their trans­ac­tions from scruti­ny. Tell us how this led to the gen­e­sis of the unpub­lished accounts.
LUCY: “ . . . In 1975, sev­er­al big Ital­ian and Ger­man banks want­ed to cen­tral­ize their account­ing and didn’t want oth­er mem­bers of Cedel to send trans­fers through their numer­ous indi­vid­ual branch­es. The Cedel coun­cil of administration—its board of directors—authorized banks with mul­ti­ple sub­sidiaries not to put all their accounts on the lists. Back­es and Ger­ard Sois­son, then Cedel’s gen­er­al man­ag­er, set up a sys­tem of non-pub­lished accounts.” (Idem.)

7. DAVE: Ernest Back­es rose to become the No. 3 man at Cedel and then expe­ri­enced a sharp down­turn in his pro­fes­sion­al for­tunes, appar­ent­ly as a result of the Ban­co Ambrosiano scan­dal. Describe the Ambrosiano scan­dal and how that affect­ed the lives of Ernest Back­es and Ger­ard Sois­son.
LUCY: “ . . . By 1980, Back­es had become Cedel’s No. 3 offi­cial, in charge of rela­tions with clients. But he was fired in May 1983.

Back­es says the rea­son giv­en for his sack­ing was an argu­ment with an Eng­lish banker, a friend of the CEO. ‘I think I was fired was because I knew too much about the Ambrosiano scan­dal,’ Back­es says. Ban­co Ambrosiano was once the sec­ond most impor­tant pri­vate bank in Italy, with the Vat­i­can as a prin­ci­pal share­hold­er and loan recip­i­ent. The bank laun­dered drug-and-arms-traf­fick­ing mon­ey for the Ital­ian and Amer­i­can mafias and, in the ‘80’s, chan­neled Vat­i­can mon­ey to the Con­tras in Nicaragua and Sol­i­dar­i­ty in Poland. The cor­rupt man­agers also siphoned off funds via fic­ti­tious banks to per­son­al shell com­pa­ny accounts in Switzer­land, the Bahamas, Pana­ma and oth­er off­shore havens. Ban­co Ambrosiano col­lapsed in 1982 with a deficit of more than $1 bil­lion. (Unknown to many movie­go­ers, Ban­co Ambrosiano inspired a sub­plot of “The God­fa­ther Part III.) Sev­er­al of those behind the swin­dle have met untime­ly ends. Bank chair­man Rober­to Calvi was found hanged under Black­fri­ars Bridge in Lon­don. Michele Sin­dona, con­vict­ed in 1980 on 65 counts of fraud in the Unit­ed States, was extra­dit­ed to Italy in 1984 and sen­tenced to life in prison; in 1986, he was found dead in his cell, poi­soned by cyanide-laced cof­fee. (Anoth­er sus­pect, Arch­bish­op Paul Marcinkus, the head of the Vat­i­can Bank, now lives in Sun City, Ari­zona with a Vat­i­can pass­port; U.S. author­i­ties have ignored a Milan arrest for him.”
[For more about the Ban­co Ambrosiano scan­dal, see RFAs 17–21—avail­able from Spitfire—as well as FTRs 2, 3, 103.] (Ibid.; pp. 5–6.)

8. “Just two months after Back­es’ dis­missal in 1983, Sois­son, 48 and healthy, was found dead in Cor­si­ca, where he’d gone on vaca­tion. Top Cedel offi­cials had the body returned imme­di­ate­ly and buried, with no autop­sy, announc­ing that he had died of a heart attack. His fam­i­ly now sus­pects he was mur­dered. ‘If Sois­son was mur­dered, it was also relat­ed to what he knew about Ambrosiano,’ Back­es says. ‘When Sois­son died, the Ambrosiano affair wasn’t yet known as a scan­dal. [After it was revealed] I real­ized that Sois­son and I had been at the cross­roads, We moved all those trans­ac­tions known lat­er in the scan­dal to Lima and oth­er branch­es. Nobody even knew there was a Ban­co Ambrosiano branch in Lima and oth­er South Amer­i­can coun­tries.’ An Ital­ian judge recent­ly reopened the Calvi case, and Back­es was asked to col­lab­o­rate in the inquiry. He said, ‘ I was told that the ques­tions around Soisson’s death would be a part of the new inves­ti­ga­tion.’’’ (Ibid.; p. 6.)

9. DAVE: Tell us how, after Back­es and Sois­son were gone from the orga­ni­za­tion, Clearstream accel­er­at­ed the open­ing of unpub­lished accounts.
LUCY: “ . . . With Sois­son out of the way, there was noth­ing to stop abuse of the sys­tem. Where­as Sois­son had refused numer­ous requests (from such insti­tu­tions as Chase Man­hat­tan in New York, Chem­i­cal Bank of Lon­don and numer­ous sub­sidiaries of Citibank), Cedel opened hun­dreds of non-pub­lished accounts in total irregularity—especially after the arrival of CEO Andre Lus­si in 1990. No longer were they just sub-accounts of offi­cial­ly list­ed accounts, Back­es charges. Some were for banks that weren’t sub­sidiaries or even offi­cial mem­bers of Cedel. At the start of 1995, Cedel had more than 2,200 pub­lished accounts. But in real­i­ty, accord­ing to doc­u­ments obtained by Back­es, Cedel that year man­aged more than 4,200 accounts.” (Idem.)

10. DAVE: What are some of the orga­ni­za­tions that have unpub­lished accounts with Clearstream?
LUCY: “ . . . Among the major com­pa­nies with secret accounts, Back­es dis­cov­ered the Shell Petro­le­um Group and the Dutch agri­cul­tur­al multi­na­tion­al Unilever, one of whose accounts was asso­ci­at­ed with Gold­man Sachs. On the French TV broad­cast ‘Les Dis­sim­u­la­teurs’ (‘The Deceivers’) in March 2000, Clearstream Pres­i­dent Lus­si sim­ply denied the accounts exist­ed. ‘Only banks and bro­kers are eli­gi­ble for mem­ber­ship,’ he said, ‘as it has always been the case. No pri­vate com­pa­ny accounts, no com­mer­cial or indus­tri­al com­pa­nies.’ But his own spokesman con­tra­dicts this claim. ‘Cus­tomers of Clearstream can be banks or, excep­tion­al­ly, cor­po­rate clients who have their own trea­sury depart­ments the size of banks,’ Cope wrote in an e‑mail to me, ‘We can­not accept CEO’s of multi­na­tion­als or ter­ror­ists and have strict account-open­ing pro­ce­dures to pre­vent such prob­lems.’ Clearstream was formed in 1999 out of the merg­er of Cedel and the com­pen­sa­tion com­pa­ny of Deutsche Borse (the Ger­man stock exchange). By 2000, accord­ing to Back­es, Clearstream man­aged about 15,000 accounts (of which half were non-pub­lished) for 2,500 clients in 105 coun­tries; most of the invest­ment com­pa­nies, banks and their sub­sidiaries are from West­ern Europe and the Unit­ed States. Most of the new non-pub­lished accounts were in off­shore tax havens. The banks with the most non-pub­lished accounts are Banque Inter­na­tionale de Lux­em­bourg (309), Citibank (271) and Bar­clays (200).” (Idem.)

11. DAVE: Tell us about some of the Colom­bian cus­tomers of Clearstream.
LUCY: “Back­es found numer­ous dis­crep­an­cies in the lists he obtained of the secret accounts. For exam­ple, code No. 70287 on the pub­lished list belongs to Citibank NA-Colom­bia AC in Nas­sau, and code No. 70292 is that of the Ban­co Inter­na­cional de Colom­bia Nas­sau Ltd. But on the non-pub­lished list, the num­bers both belong to Ban­co Inter­na­cional de Colom­bia in Bogo­ta. There’s no men­tion of Citibank. Based on the pub­lished list, mem­bers may think they are deal­ing with two banks in the Bahamas, one of which is a sub­sidiary of Citibank. Based on the pub­lished list, mem­bers may think they are deal­ing with two banks in the Bahamas, one of which is a sub­sidiary of Citibank, but any­thing sent to these estab­lish­ments goes direct­ly to the coun­try of cocaine car­tels. On the April 2000 Clearstream list, there are 37 Colom­bian accounts, of which only three are pub­lished. The spokesman for Cit­i­group in New York, declined repeat­ed requests for com­ment. Cope declined to talk about any indi­vid­ual cus­tomers or accounts, cit­ing Lux­em­bourg bank­ing secre­cy laws.)” (Idem.)

12. DAVE: One of Russia’s wealth­i­est indi­vid­u­als and most suc­cess­ful busi­ness­men, Mikhail Khodor­kovsky, was recent­ly arrest­ed, gen­er­at­ing many sto­ries in the U.S. media about Russia’s return­ing to its old ways (i.e., repres­sion). Khodor­kovsky was one of Clearstream’s many cus­tomers. Detail the com­plex oper­a­tions of Khodor­kovsky.
LUCY: “ . . . Clearstream’s deal­ings with Russ­ian banks are anoth­er area of con­cern. Menatep Bank, which had been bought in a rigged auc­tion of Sovi­et assets and has been linked to numer­ous inter­na­tion­al scams, opened its Cedel account (No. 81738) on May 15, 1997, after Lus­si vis­it­ed the bank’s pres­i­dent in Moscow and invit­ed him to use the sys­tem. It was a non-pub­lished account that didn’t cor­re­spond to any pub­lished account, a breach of Clearstream’s rules. Menatep fur­ther vio­lat­ed the rules because many trans­fers were of cash, not for set­tle­ment of secu­ri­ties. ‘For the three months in 1997 for which I hold micro­fich­es,’ Back­es says, ‘only cash trans­fers were chan­neled through the Menatep account.’” (Ibid.; p. 7.)

13. “ . . . Menatep bank was found­ed by Russ­ian ‘oli­garch’ Michail Khodor­kovsky has been in a Russ­ian jail since Octo­ber on myr­i­ad charges of fraud and tax eva­sion. On Nov. 26,2003, Back­es and anoth­er ex-banker, Swiss cit­i­zen Andre Stebel, filed a crim­i­nal com­plaint with the Swiss attor­ney gen­er­al against Khodor­kovsky and his col­leagues Pla­ton Lebe­dev, and Alex­ei Gol­ubovich, accus­ing them of mon­ey laun­der­ing and sup­port­ing a crim­i­nal orga­ni­za­tion. . . The for­mer bankers request­ed the Swiss offi­cials to open an inves­ti­ga­tion into the charges and to search the records of the Swiss offices of Menatep SA, Menatep Finances SA and Val­met (which set up off­shore com­pa­nies and bank accounts) and of Bank Leu in Gene­va relat­ed to inves­ti­gate claims of fraud against the Russ­ian com­pa­ny Avis­ma and mon­ey laun­der­ing by Menatep in Switzer­land. . . .” (Idem.)

14. “ . . . The com­plaint alleges that Khodor­kovsky, Lebe­dev, and Gol­ubovich are or were own­ers in Switzer­land of the Swiss com­pa­nies Menatep SA, Freiburg, Menatep Finances SA, Gene­va and Val­met SA, Gene­va. It claims that since the cre­ation, ‘the Bank Menatep SA has been mixed with the affairs of mem­bers of the Russ­ian oli­garchy and crim­i­nal orga­ni­za­tions, such as Mikhail Khodor­kovsky and Alexan­der Konanykhine. (Konanykhine got asy­lum in the U.S. in 1999, was ordered deport­ed last fall to face charges in Rus­sia, then had the order stayed and will have a new asy­lum hear­ing. Amer­i­can and Russ­ian law enforce­ment offi­cials believe he was in charge of mov­ing bil­lions of dol­lars out of Rus­sia for the KGB; Konanykhin denies it.) It is also relat­ed to anoth­er mafia fig­ure, Semy­on Mogilvich, called the god­fa­ther of orga­nized crime in Rus­sia.’” (Idem.)

15. “The com­plaint cites the Avis­ma case which it says involved fraud and mon­ey laun­der­ing where­by tens of mil­lions of dol­lars were divert­ed from the Russ­ian com­pa­ny, a man­u­fac­tur­er of tita­ni­um, a sub­stance used in air­planes. In the mid-90’s, Menatep was the major­i­ty own­er of Avis­ma. The doc­u­ment says that the scheme involved sell­ing tita­ni­um at a low price to TMC, a shell com­pa­ny set up by Val­met, which resold the prod­uct at a high­er price on the inter­na­tion­al mar­ket. This prac­tice, called trans­fer pric­ing, is wide­ly used inter­na­tion­al­ly to cheat tax author­i­ties and minor­i­ty share­hold­ers. . . .” (Idem.)

16. DAVE: Tell us about Robert Dou­glass, of Cedel Inter­na­tion­al.
LUCY: “ . . . Back­es explained that a com­pa­ny called Cedel Inter­na­tion­al had been inscribed in the Swiss reg­is­ter of com­merce but not includ­ed in the Books of the moth­er com­pa­ny, Cedel Inter­na­tion­al in Lux­em­bourg. He com­ment­ed, ‘This non-con­sol­i­dat­ed ‘branch,’ whose pres­i­dent is Robert Dou­glass of New York, the for­mer pri­vate sec­re­tary of Gov­er­nor Nel­son Rock­e­feller and now vice chair­man of the Chase Man­hat­tan Cor­po­ra­tion [now J.P. Mor­gan Chase], had appar­ent­ly not raised too many ques­tions for Swiss fed­er­al mag­is­trates,’ Dou­glass is an attor­ney at the New York law firm Mil­bank, Tweed, Hadley & McCloy, with offices at 1 Chase Man­hat­tan Plaza. Mil­bank, Tweed is the law firm for Chase, the bank found­ed by the Rock­e­fellers. Dou­glass declined to com­ment. (The same Mil­bank Tweed, for its client Citibank, worked with the Cay­man Islands agent Maples and Calder to set up the ‘Delta Corp’ to do pho­ny com­mod­i­ty swaps and dis­guise Citibank loans to Enron as trades. Maples and Calder also set up the Cay­man Islands shell com­pa­ny that helped the own­ers of the Ital­ian con­glom­er­ate Par­malat embez­zle bil­lions of dol­lars and swin­dle investors.)” (Ibid.; p. 8.)

17. DAVE: Anoth­er mur­der con­nect­ed to Clearstream’s machi­na­tions involved a French/Taiwanese arms deal. Describe that if you would.
LUCY: “ . . . In the ear­ly ‘90’s, [for­mer deputy gen­er­al direc­tor of the Tai­wan branch of the bank Soci­ete Gen­er­al Joel] Buch­er con­tends, Cedel was used to laun­der $350 mil­lion in ille­gal ‘com­mis­sions’ on a con­tract for the sale by Thom­son-CSF, a French gov­ern­ment arms com­pa­ny, of six French frigates to Tai­wan. He said that the mon­ey, han­dled by an SG sub­sidiary, was paid as a reg­is­tered secu­ri­ties trans­fer to a ‘nominee’—a stand-in for the real beneficiary—and that Thom­son (now known as Thales) didn’t appear in the trans­ac­tion except in the Cedel archives. He said SG used two non-pub­lished Cedel accounts. The kick­backs were exposed after the 1993 mur­der of a naval cap­tain named Yin Ching-feng, who had writ­ten a crit­i­cal report on the pur­chase and its inflat­ed $2.8 bil­lion price. Buch­er told Taipei author­i­ties that a third of the kick­backs went to Tai­wanese gen­er­als and politi­cians, while the rest was pock­et­ed by French offi­cials. Tai­wan courts sen­tenced 13 mil­i­tary offi­cers and 15 arms deal­ers to between eight months and life in prison for bribery and leak­ing mil­i­tary secrets.” (Idem.)

18. DAVE: You write of the gen­e­sis of Swiss bank­ing secre­cy in the pre WWII peri­od. Tell us about France’s dis­cov­ery of finan­cial treach­ery by mem­bers of the French elite and how that led to Switzerland’s leg­endary bank secre­cy. [NOTE: Lucy gave an elo­quent sum­ma­ry of the infor­ma­tion pre­sent­ed in the Hound-Dogs arti­cle. The infor­ma­tion is iden­ti­cal to infor­ma­tion pre­sent­ed by Lucy in FTR#412. Listeners/Readers are referred to that descrip­tion for a detailed pre­sen­ta­tion of the infor­ma­tion dis­cussed in this pro­gram.]

19. DAVE: Let’s talk about some of the mech­a­nisms used in the off­shore bank­ing oper­a­tions. Tell us about “trans­fer pric­ing” and the use of mail­box com­pa­nies. [For good dis­cus­sion of “trans­fer pric­ing,” see dis­cus­sion in para­graph #15, about the Menatep scan­dal.]
LUCY: “ . . . Shell companies—front com­pa­nies, ‘mail­box’ com­pa­nies, some­times called Inter­na­tion­al Busi­ness Cor­po­ra­tions (IBCs) or Per­son­al Invest­ment Com­pa­nies (PICs)—were set up to own bank accounts and effect pho­ny trans­ac­tions to hide or laun­der funds. They didn’t pro­duce goods or ser­vices; they exist­ed for book-keep­ing, to receive, hold, and trans­fer mon­ey so as to hide the real peo­ple involved. Banks and account­ing firms mar­ket­ed shell and even ready-made ‘off-the shelf com­pa­nies,’ the lat­ter already reg­is­tered with local gov­ern­ments, picked up by clients like mer­chan­dise in a store. Off­shore net­works pop­u­lar­ly come in series of three. It’s called lay­er­ing, or lad­der­ing. ‘Throw in Cay­man and Pana­ma; sprin­kle with Aru­ba or Cura­cao,’ said the Mia­mi offi­cial of an inter­na­tion­al inves­ti­ga­tion firm that hunts fraud­sters. Mon­ey laun­der­ers set up a British Vir­gin Islands cor­po­ra­tion, open a bank account in Cura­cao, air­freight the mon­ey to Aru­ba, have it wire trans­ferred. In days, it’s been through three juris­dic­tions, and there are no records, You can con­vert prof­its to loss­es, put mon­ey in pho­ny loans, buy busi­ness­es with­out peo­ple know­ing who you are, and evade all laws reg­u­lat­ing mon­ey. If author­i­ties look­ing into a loan to the com­pa­ny want to find out who owns it, lawyers say, ‘That’s pro­tect­ed by secre­cy law.’ Some­times, for greater obfus­ca­tion a shell com­pa­ny is owned by anoth­er shell from a sec­ond juris­dic­tion. At the end, there is ‘inte­gra­tion’: the indi­vid­ual buys a big hotel or invests in the stock mar­ket. . . .” (Ibid.; p. 10.)

20. DAVE: Well-pub­li­cized cas­es of Amer­i­can firms using some of these scams were the Enron case and the Stan­ley Works case. Tell us about those. [For dis­cus­sion of Enron, see paragraph#16, above.]
LUCY: “ . . . Take the case of Stan­ley Works, which announced a ‘move’ of its head­quar­ters-on paper-from New Britain, Con­necti­cut, to Bermu­da and of its imag­i­nary man­age­ment to Bar­ba­dos. Though its build­ing and staff would actu­al­ly stay put, man­u­fac­tur­ing ham­mers and wrench­es, Stan­ley Works would no longer pay tax­es on prof­its from inter­na­tion­al trade. The Secu­ri­ties and Exchange Com­mis­sion accepts the pre­tense as legal. ‘The whole busi­ness is a sham,’ fumed New York Dis­trict Attor­ney Robert Mor­gen­thau, who more than any oth­er U.S. law enforcer has attacked the off-shore sys­tem. ‘The head­quar­ters will be in a coun­try where that com­pa­ny is not per­mit­ted to do busi­ness. They’re say­ing a com­pa­ny is man­aged in Bar­ba­dos when there’s one meet­ing there a year. In the prospec­tus, they say legal­ly con­trolled and man­aged in Bar­ba­dos. If they took out the word legal­ly, it would be a fraud. But Bar­ba­di­an law said it’s legal, so it’s legal.’ The con­ceit appar­ent­ly also per­suad­ed the SEC.” (Idem.)

21. DAVE: Of course the Bush admin­is­tra­tion is deeply involved with the Enron sit­u­a­tion. Bush’s Demo­c­ra­t­ic oppo­nent John Ker­ry has been active in attempt­ing to bring the off­shore bank­ing scams to heal. Tell us about Kerry’s efforts in that regard.
LUCY: “Some Amer­i­can polit­i­cal lead­ers have been push­ing to reform the off­shore sys­tem for years. Demo­c­ra­t­ic Sen­a­tor John Ker­ry of Mass­a­chu­setts, who ran the Iran-Con­tra and BCCI hear­ings in the 1980’s and 1990’s, called for changes then: he even wrote a book about it. . . .” (Ibid.; p. 11.)


5 comments for “FTR #458 Interview with Lucy Komisar about Offshore Banking”

  1. http://www.dallasnews.com/news/local-news/20110807-dallas-billionaire-charles-wyly-dies-in-car-accident-in-colorado.ece

    Dal­las Bil­lion­aire, Far-Right Repub­li­can Donor & Off­shore Baron Charles Wyly Dies In Car Acci­dent

    Dal­las bil­lion­aire Charles Wyly, whose $20 mil­lion gift to the AT&T Per­form­ing Arts Cen­ter helped build the Dee and Charles Wyly The­atre, but who was fac­ing insid­er trad­ing charges, was killed Sun­day in a car wreck in Col­orado.

    The Wyly broth­ers’ high-pro­file phil­an­thropy was near­ly matched by their polit­i­cal influ­ence. They gave more than $1 mil­lion to the Repub­li­can Nation­al Com­mit­tee between 2000 and 2004, accord­ing to the Cen­ter for Respon­sive Pol­i­tics, and were involved in the ear­ly polit­i­cal career of U.S. Rep. Jeb Hen­sar­ling, R‑Dallas.

    But the Wylys’ polit­i­cal activ­i­ty — along with their pub­lic pro­file — fell marked­ly around 2005, when the SEC began inves­ti­gat­ing their busi­ness activ­i­ties. The sub­se­quent law­suit accused the broth­ers of ille­gal stock sales worth more than half a bil­lion dol­lars.

    Using off­shore tax shel­ters named after the Louisiana towns where both grew up, the SEC charged, the broth­ers con­cealed $550 mil­lion worth of trans­ac­tions between 1992 and 2004, spend­ing the prof­its on jew­el­ry, art, real estate and char­i­ty.
    The broth­ers dis­missed the inves­ti­ga­tion as a waste of tax dol­lars and seemed pub­licly con­fi­dent they would beat the charges.

    “They’re gonna lose,” Sam Wyly told The Dal­las Morn­ing News in 2010, “That means we’re gonna win.”

    Recent rul­ings had gone against them. A fed­er­al judge refused to dis­miss the case in March. Two weeks before Wyly’s death, the court ordered the broth­ers to turn over sev­er­al doc­u­ments they had sought to with­hold under attor­ney-client priv­i­lege.


    Bil­lion­aire Wyly broth­ers charged with tax eva­sion, insid­er trad­ing by SEC

    Bil­lion­aire broth­ers, Samuel and Charles Wyly, who found­ed Mav­er­ick Cap­i­tal Man­age­ment, one of the world’s biggest hedge funds with $11.4 bil­lion in assets, have been accused of civ­il fraud charges by the Secu­ri­ties and Exchange Com­mis­sion (SEC).

    The SEC, Thurs­day, accused the Dal­las-based broth­ers of tax eva­sion by cre­at­ing a com­plex web of off­shore com­pa­nies and trusts over 13 years that allowed them to amass and stash away $550 mil­lion of gains from stock trad­ing of four com­pa­nies where they served as direc­tors.

    The Wyly broth­ers held stakes as high as 16.1 per­cent to 36.7 per­cent in four com­pa­nies — Michaels Stores Inc, Ster­ling Com­merce Inc, Ster­ling Soft­ware Inc and Scot­tish Annu­ity & Life Hold­ings Ltd — and yet with­held infor­ma­tion from investors, the SEC said.

    The SEC also charged the Wyly broth­ers’ attor­ney, Michael French, and their stock­bro­ker, Louis Schaufele III, in con­nec­tion with their roles in the scheme. French was on the board of direc­tors at three of the com­pa­nies.

    Mav­er­ick, which was found­ed by the Wyly broth­ers and trad­er Lee Ainslie, who got his start with hedge fund indus­try leg­end Julian Robert­son, is not under inves­ti­ga­tion by the reg­u­la­tors.

    The fed­er­al reg­u­la­tor has sought seek var­i­ous finan­cial fines and sanc­tions against the Wyly broth­ers and their asso­ciates.

    “The cloak of secre­cy has been lift­ed from the com­plex web of for­eign struc­tures used by the Wylys to evade the secu­ri­ties laws,” SEC deputy enforce­ment chief Lorin Reis­ner said in a state­ment. “They used these struc­tures to con­ceal hun­dreds of mil­lions of dol­lars of gains in vio­la­tion of the dis­clo­sure require­ments for cor­po­rate insid­ers.”

    Posted by R. Wilson | August 7, 2011, 7:53 pm
  2. This is rather excit­ing: Some­one leaked 2.6 ter­abytes of data con­sist­ing of 40 years of data from from Mos­sack Fon­se­ca, the world’s fourth largest off­shore law firm that spe­cial­ized in set­ting up off­shore accounts for thou­sands of com­pa­nies and indi­vid­u­als. And after what is being described as “the largest cross-bor­der media col­lab­o­ra­tion ever under­tak­en,” involv­ing at least 370 jour­nal­ists work­ing for more than 100 media orga­ni­za­tions in 80 coun­tries for over a year, the report­ing spree on on that mas­sive trove of data has just begun. What fun:


    Inside the Pana­ma Papers: Mas­sive leak shows just how exten­sive cor­rup­tion is world­wide, impli­cat­ing politi­cians, human traf­fick­ers and drug deal­ers

    One of the biggest leaks in his­to­ry expos­es how glob­al elites and their rel­a­tives hide mon­ey in off­shore tax havens

    Ben Nor­ton
    Mon­day, Apr 4, 2016 12:45 PM CST

    “My life is in dan­ger,” read an anony­mous mes­sage. “No meet­ing, ever.”

    “Why are you doing this?” a Ger­man news­pa­per asked.

    “I want to make these crimes pub­lic,” the whistle­blow­er wrote.

    An enor­mous cache of doc­u­ments was just released, expos­ing how polit­i­cal and eco­nom­ic elites from around the plan­et are stash­ing their mon­ey in secre­tive tax havens.

    The Pana­ma Papers is one of the biggest leaks in his­to­ry. Sub­stan­tial­ly larg­er than Wik­iLeaks’ 2010 release of U.S. diplo­mat­ic cables or Edward Snowden’s 2013 release of NSA files, the leak con­sists of 11.5m doc­u­ments from the world’s fourth-largest off­shore law firm, Mos­sack Fon­se­ca. At a mas­sive 2.6 ter­abytes in size, the Pana­ma Papers reveal infor­ma­tion about 214,000 com­pa­nies.

    An anony­mous source leaked the trove to the Ger­man news­pa­per Süd­deutsche Zeitung. The pub­li­ca­tion sub­se­quent­ly shared these files with the Inter­na­tion­al Con­sor­tium of Inves­tiga­tive Jour­nal­ists, which sub­se­quent­ly col­lab­o­rat­ed with news out­lets world­wide.

    In what is being called “the largest cross-bor­der media col­lab­o­ra­tion ever under­tak­en,” at least 370 jour­nal­ists work­ing for more than 100 media orga­ni­za­tions in 80 coun­tries sift­ed for over a year through the doc­u­ments, which show just how wide­spread cor­rup­tion is through­out the world.

    Among those impli­cat­ed in the scan­dal are arms traders, human traf­fick­ers, drug deal­ers, con artists and 143 politi­cians — a ver­i­ta­ble Who’s Who of glob­al lead­ers, includ­ing 12 cur­rent or for­mer heads of state, along with their fam­i­lies and friends.

    Many West­ern media reports on the Pana­ma Papers framed the sto­ry around Russ­ian Pres­i­dent Vladimir Putin, whose close friends are involved in the cor­rup­tion, but he is just one small part of the much larg­er scan­dal.

    King Salman of Sau­di Ara­bia and Petro Poroshenko, pres­i­dent of Ukraine, both of whom are close West­ern allies, are direct­ly impli­cat­ed in the cor­rup­tion.

    A slew of oth­er lead­ers are involved, includ­ing Nawaz Sharif, the prime min­is­ter of Pak­istan; Ayad Allawi, the ex-inter­im prime min­is­ter and for­mer vice-pres­i­dent of Iraq; Sig­mundur Davíð Gunnlaugs­son, the prime min­is­ter of Ice­land; Alaa Mubarak, the son of Egypt’s for­mer West­ern-backed dic­ta­tor; and the chil­dren of Ilham Aliyev, the pres­i­dent of Azer­bai­jan.

    Join­ing them are a key mem­ber of the ethics com­mit­tee of inter­na­tion­al soc­cer asso­ci­a­tion FIFA, fam­i­ly mem­bers of Syr­i­an Pres­i­dent Bashar al-Assad and even the son of for­mer U.N. Sec­re­tary Gen­er­al Kofi Annan.

    British law­mak­ers and the father of U.K. Prime Min­is­ter David Cameron are also impli­cat­ed, along with donors to polit­i­cal par­ties. So too are the fam­i­lies of mem­bers of China’s rul­ing body, the polit­buro.

    Mos­sack Fon­se­ca is based in Pana­ma, but oper­ates glob­al­ly. It has at least 600 employ­ees work­ing in 42 coun­tries. Its leaked records show deal­ings with 14,000 clients, and it is a reg­is­tered agent for more than 200,000 com­pa­nies con­nect­ed to 200 coun­tries.

    The com­pa­ny is one of the top cre­ators of shell com­pa­nies, insti­tu­tions that allow cor­po­ra­tions to make trans­ac­tions with­out hav­ing to claim own­er­ship of assets.

    The tax havens the Pana­man­ian law firm oper­ates in include the British Vir­gin Islands, where approx­i­mate­ly half of the cor­po­ra­tions are reg­is­tered, along with Switzer­land, Cyprus, Hong Kong, Neva­da and oth­ers. More than half of the cor­po­ra­tions involved are reg­is­tered in British-admin­is­tered tax havens.

    Major banks have pushed hard for the cre­ation of these opaque com­pa­nies, the Pana­ma Papers reveal. Eco­nom­ic and polit­i­cal elites col­lab­o­rat­ed in order to keep the cor­rup­tion as dif­fi­cult as pos­si­ble to trace.

    Even more shock­ing in the doc­u­ments is the rev­e­la­tion that, in some cas­es, fix­ers and mid­dle­men tried to pro­tect them­selves and their clients by not only hid­ing ques­tion­able trans­ac­tions, but also by back­dat­ing and even destroy­ing doc­u­ments.

    Near­ly 40 years of records are includ­ed in the release, from the late 1970s through the end of 2015.

    Mos­sack Fon­se­ca firm­ly denies that it has been involved in any ille­gal activ­i­ty, and refus­es to com­ment on the cas­es, cit­ing client con­fi­den­tial­i­ty. Use of off­shore tax havens are in some coun­tries per­fect­ly legal. In oth­ers, it may be in a murky legal gray area for elites to hide their wealth there.

    “Most of the ser­vices the off­shore indus­try pro­vides can be used for legal pur­pose and are by law-abid­ing cus­tomers,” the Inter­na­tion­al Con­sor­tium of Inves­tiga­tive Jour­nal­ists explained. “But the doc­u­ments show that banks, law firms and oth­er off­shore play­ers often fail to fol­low legal require­ments to make sure clients are not involved in crim­i­nal enter­pris­es, tax dodg­ing or polit­i­cal cor­rup­tion.”

    This is actu­al­ly not the first time Mos­sack Fon­se­ca has been exposed. Inves­tiga­tive jour­nal­ist Ken Sil­ver­stein released a report in Decem­ber 2014 detail­ing how the law firm works with oli­garchs, mon­ey laun­der­ers and dic­ta­tors. A year and a half lat­er, how­ev­er, the release of a gar­gan­tu­an cache of the company’s records show just how far this net­work of cor­rup­tion spreads around the globe.

    The release of the Pana­ma Papers comes mere days after the rev­e­la­tion of anoth­er scan­dal involv­ing the shad­owy com­pa­ny Unaoil. An explo­sive inves­ti­ga­tion found that the Mona­co-based com­pa­ny exploits the wide­spread cor­rup­tion in the Glob­al South, charg­ing multi­na­tion­al cor­po­ra­tions mul­ti-mil­lion dol­lar fees and then brib­ing gov­ern­ment offi­cials in oil-rich coun­tries in order to get good deals for these com­pa­nies.

    In the process, the lit­tle-known firm fuels inequal­i­ty and helps desta­bi­lize nat­ur­al resource-rich con­flict areas in these coun­tries, some of which are also impli­cat­ed in the Pana­ma Papers scan­dal.


    “Near­ly 40 years of records are includ­ed in the release, from the late 1970s through the end of 2015.”
    Imag­ine all the his­to­ry hid­ing under that rock. Let’s hope for many, many arti­cles going for­ward.

    And note that we should prob­a­bly be extra thank­ful that this is sto­ry is still being report­ed on at all because, as the arti­cle points out, this isn’t actu­al­ly the first time Mos­sack Fon­se­ca has been exposed:

    This is actu­al­ly not the first time Mos­sack Fon­se­ca has been exposed. Inves­tiga­tive jour­nal­ist Ken Sil­ver­stein released a report in Decem­ber 2014 detail­ing how the law firm works with oli­garchs, mon­ey laun­der­ers and dic­ta­tors. A year and a half lat­er, how­ev­er, the release of a gar­gan­tu­an cache of the company’s records show just how far this net­work of cor­rup­tion spreads around the globe.

    Keep in mind that Ken Sil­ver­stein was actu­al­ly work­ing for Pierre Omid­yar’s First Look Media at the time the arti­cle was pub­lished, it was a lit­tle odd for a First Look reporter’s sto­ry to show up in Vice. But now we have a bet­ter idea of why that hap­pened: When Mark Ames raised this wrin­kle to Sil­ver­stein in a tweet, here’s Sil­ver­stein’s reply:

    Ken Sil­ver­stein ?@KenSilverstein1

    .@MarkAmesExiled FYI @pierre would­n’t pub sto­ry but demand­ed my fee from VICE. Oh well, at least I’m not in Moscow.

    6:46 PM — 3 Apr 2016

    So Omid­yar blocked the block­buster sto­ry, the sto­ry gets pub­lished by Sil­ver­stein in Vice any­way, and Sil­ver­stein leaves First Look a cou­ple months lat­er, call­ing it the place where ‘jour­nal­ism goes to die’. There’s no doubt quite a bit hid­ing under that rock too.

    Posted by Pterrafractyl | April 4, 2016, 12:51 pm
  3. The decades of off­shore antics by Mos­sack Fon­se­ca are no doubt going to keep inves­ti­ga­tors and his­to­ri­ans busy for years to come giv­en the size and nature of the leak. There are just so many ques­tions to ask regard­ing this firm, and plen­ty of poten­tial answers in the data trea­sure-trove. And it turns out we can add a new cat­e­go­ry to the list of intrigu­ing ques­tions relat­ed to firm: Of what rel­e­vance is the fact that Jur­gen Mos­sack­’s father was a Waf­fen S.S. “deaths head” unit mem­ber who lat­er offered to spy for the CIA and who the BND refus­es to release any infor­ma­tion about:

    The Dai­ly Mail

    Pana­ma ‘tax scam’ lawyer is son of Nazi SS offi­cer from dread­ed Death’s Head divi­sion who fled to South Amer­i­ca then SPIED on Cuba for the CIA, broth­er reveals

    * Horst Mos­sack is Ger­man half-broth­er of Pana­ma lawyer Jür­gen Mos­sack
    * Told MailOn­line unmask­ing of his sib­ling is ‘shock­ing news, astound­ing’
    * Father was in the S.S. and after is thought to have been a CIA spy in Cuba
    * Horst was treat­ed as shame­ful as a child after being born out of wed­lock
    * Last saw half-broth­er Jür­gen 60 years ago and says will nev­er meet again

    By Allan Hall In Berlin for MailOn­line and Isabel Hunter and Imo­gen Calder­wood For Mailon­line

    Pub­lished: 05:31 EST, 4 April 2016 | Updat­ed: 09:18 EST, 4 April 2016

    The man behind a Pana­ma ‘tax scam’ that guards the clan­des­tine wealth of the glob­al elite is the son of a Nazi SS offi­cer from a unit known as the ‘Death’s Head divi­sion’.

    Jür­gen Mos­sack is at the heart of the biggest finan­cial data leak in his­to­ry, and has alleged­ly been help­ing world lead­ers, politi­cians and celebri­ties laun­der mon­ey, dodge sanc­tions and evade tax from his base in Pana­ma.

    It has now been revealed that his father, Erhard Mos­sack, was a mem­ber of the Nazi fight­ing unit known as the ‘Death’s Head divi­sion’, a dread­ed force dur­ing the Sec­ond World War.

    Today, his half-broth­er Horst, has spo­ken of his ‘shock and bewil­der­ment’ at the news of the unmask­ing of his half-broth­er.

    He described the twist­ed fam­i­ly his­to­ry that led to the estrange­ment of the sib­lings, both of whom raised by a man who not only fought with the Nazis but lat­er joined the CIA to car­ry out espi­onage on Cuba.

    The 68-year-old Horst last saw his sib­ling Jür­gen 60 years ago when he left the town of Fürth in Bavaria bear­ing the name of his father Erhard.

    Now liv­ing in the Black For­est region of Ger­many, Horst was born out of wed­lock to a woman called Luisa Her­zog.

    ‘This was shame­ful in those days so I was put up for adop­tion,’ he told MailOn­line. ‘My moth­er lat­er went on to mar­ry Erhard Mos­sack. I took that name lat­er.

    ‘What has come out of Pana­ma is shock­ing news, astound­ing, bewil­der­ing even, but I can’t say I feel shame because I have no con­nec­tion in real­i­ty with him.

    ‘I left all those years ago and we nev­er had con­tact again. He was just a child, so how can I say what I remem­ber of him? All I know is that I heard that he went to Lon­don and lived there for quite some time.

    ‘He has a broth­er called Peter and a sis­ter called Mar­i­on in Ger­many. Both my moth­er and their father are now dead.

    ‘I remem­ber that Erhard Mos­sack, their father, was in the S.S. I believe after the war he became a jour­nal­ist.’

    Ger­man media have report­ed that Erhard served as a Rot­ten­fuehrer — rough­ly cor­re­spond­ing to a senior cor­po­ral — in the Waf­fen, or fight­ing arm, of the dread­ed S.S.

    The Sued­deutsche Zeitung in Munich, one of the pub­li­ca­tions in the glob­al alliance of news­pa­pers which unmasked the activ­i­ties of Jür­gen Mos­sack­’s firm in Pana­ma, said Erhard served in a ‘Death’s Head’ unit of the S.S.

    These were the units which ran the con­cen­tra­tion camps. But if he was in the Waf­fen S.S. it prob­a­bly meant he served in the Third Waf­fen S.S. Panz­er Divi­sion Totenkopf.

    Most of the divi­sion’s ini­tial enlist­ed men were recruit­ed from con­cen­tra­tion camp guards and oth­ers were mem­bers of mili­tias that had com­mit­ted war crimes in Poland.

    Due to its insignia, it was some­times referred to as the ‘Death’s Head Divi­sion’. Mem­bers of the divi­sion com­mit­ted war crimes — one of them against British sol­diers.

    The Le Par­adis mas­sacre was car­ried out by mem­bers of the 14th Com­pa­ny of the divi­sion.

    It took place on May 27 1940, dur­ing the Bat­tle of France, at a time when the British Expe­di­tionary Force was attempt­ing to retreat through the Pas-de-Calais region dur­ing the Bat­tle of Dunkirk.

    Sol­diers of the 2nd Bat­tal­ion, the Roy­al Nor­folk Reg­i­ment, had become iso­lat­ed from their reg­i­ment. They occu­pied and defend­ed a farm­house against an attack by Waf­fen S.S. forces in the vil­lage of Le Par­adis. After run­ning out of ammu­ni­tion, the defend­ers sur­ren­dered to the Ger­man troops.

    But the Ger­mans machine-gunned the men after sur­ren­der­ing, with sur­vivors killed with bay­o­nets. Two men sur­vived with injuries, and were hid­den by locals until they were cap­tured by Ger­man forces sev­er­al days lat­er.

    Accord­ing to the Sued­deutsche, Erhard was cap­tured by the Amer­i­cans in Munich after the war with a list of Nazi ‘Were­wolf’ mem­bers upon him.

    The Were­wolf units were intend­ed to fight on as a guer­ril­la force after the sur­ren­der, but this nev­er hap­pened.

    The news­pa­per said it applied to the Ger­man Fed­er­al Intel­li­gence Ser­vice, the BND, for infor­ma­tion about him. The BND con­firmed doc­u­ments exist­ed on him but said they would not be released becauve this could endan­ger ‘the well-being of the Fed­er­al Repub­lic of Ger­many or one of its mem­bers’.

    In 1948 he left Ger­many with his fam­i­ly to set­tle in Pana­ma, and lat­er returned to Munich with his wife dur­ing the 70s. He died in the 1990s, his wife fol­lowed five years ago.

    Accord­ing to reports, U.S. Army intel­li­gence archives hold a file on him as he alleged­ly offered his ser­vices to the U.S. gov­ern­ment as an infor­mant, claim­ing ‘he was about to join a clan­des­tine organ­i­sa­tion, either of for­mer Nazis now turned Com­mu­nist... or of uncon­vert­ed Nazis cloak­ing them­selves as Com­mu­nists.’

    An Army intel­li­gence offi­cer wrote that the offer to spy for the U.S. might sim­ply be ‘a shrewd attempt to get out of an awk­ward sit­u­a­tion’.

    Nev­er­the­less, the old intel­li­gence files indi­cate that Mos­sack­’s father lat­er end­ed up in Pana­ma, where he offered to spy, this time for the CIA, on Com­mu­nist activ­i­ty in near­by Cuba.

    The chil­dren Peter and Mar­i­on returned to Ger­many in the 1970s; broth­er Peter is the Hon­orary Con­sul for Pana­ma based in Frank­furt.

    In 1952 a book by Erhard Mos­sack was pub­lished in Ger­many called The Last Days of Nurem­berg, detail­ing the cap­ture of the city to Amer­i­can forces in 1945.

    Horst Mos­sack says he believes the father of Jür­gen was the author.

    He added; ‘I don’t expect I will ever see Jür­gen again. If I did I would ask him exact­ly what went on.’

    Mean­while, the sec­ond man behind the Pana­ma firm, a lawyer named Ramon Fon­se­ca Mora, has been revealed to be an award-win­ning nov­el­ist famous for his sala­cious plots.

    But the 63-year-old Pana­ma native’s sto­ry­lines may cut clos­er to home than his read­ers realise.

    As a young man Fon­se­ca report­ed­ly want­ed to be a priest, before age and mate­ri­al­ism took over. On join­ing forces with part­ner Mos­sack, he told a jour­nal­ist in 2012, ‘Togeth­er, we have cre­at­ed a mon­ster.’

    In among accounts he fol­lows on Twit­ter are a fair amount of 18+ accounts — at first glance the naked bot­tom of ‘Horny Cher­ry’ sits along­side the offi­cial account of the Pres­i­dent of Argenti­na Mauri­cio Macri.


    “The news­pa­per said it applied to the Ger­man Fed­er­al Intel­li­gence Ser­vice, the BND, for infor­ma­tion about him. The BND con­firmed doc­u­ments exist­ed on him but said they would not be released becauve this could endan­ger ‘the well-being of the Fed­er­al Repub­lic of Ger­many or one of its mem­bers’.”
    Well isn’t that intrigu­ing. It’s also pret­ty fas­ci­nat­ing that Erhard Mos­sack was cap­tured by US forces with a list of ‘Were­wolves’, because if there’s one sign of being an unre­pen­tant Nazi, it’s being cap­tured with a list of ‘Were­wolves’. And then there’s this:

    In 1948 he left Ger­many with his fam­i­ly to set­tle in Pana­ma, and lat­er returned to Munich with his wife dur­ing the 70s. He died in the 1990s, his wife fol­lowed five years ago.

    Accord­ing to reports, U.S. Army intel­li­gence archives hold a file on him as he alleged­ly offered his ser­vices to the U.S. gov­ern­ment as an infor­mant, claim­ing ‘he was about to join a clan­des­tine organ­i­sa­tion, either of for­mer Nazis now turned Com­mu­nist... or of uncon­vert­ed Nazis cloak­ing them­selves as Com­mu­nists.’

    An Army intel­li­gence offi­cer wrote that the offer to spy for the U.S. might sim­ply be ‘a shrewd attempt to get out of an awk­ward sit­u­a­tion’.

    Nev­er­the­less, the old intel­li­gence files indi­cate that Mos­sack­’s father lat­er end­ed up in Pana­ma, where he offered to spy, this time for the CIA, on Com­mu­nist activ­i­ty in near­by Cuba.

    So was Erhard part of the Gehlen out­fit? He fits the mold. It’s also worth not­ing that the Inter­a­gency Work­ing Group which was set up in 1999 to find and dis­close infor­ma­tion relat­ed to inves­ti­ga­tions of Nazi and Japan­ese WWII war crimes does con­tain a record for Erhard Mos­sack in the sec­tion for FBI files. There isn’t much infor­ma­tion avail­able, but in the “cat­e­go­ry” sec­tion for Mos­sack it lists “For­eign Coun­ter­in­tel­li­gence (For­mer­ly Inter­nal Secu­ri­ty, For­eign Intel­li­gence)”. That sure sounds like the US took Mos­sack up on his offer.

    So, giv­en the Erhard Mos­sack­’s back­ground as a pos­si­ble unre­pen­tant Nazi and the promi­nent role the Mos­sack­’s have played in Pana­man­ian high-soci­ety, one big ques­tion regard­ing Mos­sack Fon­se­ca is what role it may have played in the post-war Nazi under­ground as a vehi­cle for hid­ing and mov­ing the vast sums of mon­ey that would have been accrued in the sub­se­quent decades. But if Erhard was actu­al­ly work­ing for US or West Ger­many intel­li­gence in the post-war peri­od that just adds to the intrigue. It’s also a reminder that one of the best ways for a Nazi under­ground to stay under­ground is hav­ing a lot of friends in very high places.

    Let’s hope all the inves­ti­ga­tors pour­ing over this data ask ques­tions about Mos­sack Fon­se­ca that go far beyond tax-eva­sion.

    Posted by Pterrafractyl | April 5, 2016, 6:10 pm
  4. Daniel Hop­sick­er has a recent new arti­cle that came out a cou­ple weeks before the big “Pana­ma Papers” mega-leak start­ed get­ting report­ed that reminds of us a key aspect of tax-shel­ter­ing that’s worth keep­ing in mind as elite tax-eva­sion remains in the head­lines. Espe­cial­ly with Don­ald Trump dom­i­nat­ing the head­lines too: If you have lots and lots of wealth to shel­ter, and a whole bunch of shell cor­po­ra­tions all set up to do it, hav­ing those shell cor­po­ra­tions buy a bunch of US real estate is a real­ly great way to shield that wealth. Just ask Don­ald Trump’s clients and busi­ness part­ners:


    Don­ald Trump, Dirty Mon­ey, & the Filthy Rich in Palm Beach
    Post­ed on March 17, 2016 by Daniel Hop­sick­er

    Is he real­ly doing it with­out dirty mon­ey?

    When asked to describe what they like most about Don­ald Trump, sup­port­ers usu­al­ly say “He’s been doing it all with­out dirty mon­ey.” They mean his cam­paign is self-fund­ed, and takes no mon­ey from lob­by­ists, spe­cial inter­ests, and Repub­li­can Par­ty king­mak­ers.

    But what if Trump’s own mon­ey is dirty? Could a siz­able chunk of Trump’s net worth come from sell­ing real estate to drug lords, mob­sters, and inter­na­tion­al finan­cial crim­i­nals?

    The answer is: There’s no way to tell. Secre­cy hides the iden­ti­ty of the crooked, vio­lent and cor­rupt who invest cash in U.S. real estate through shell com­pa­nies reg­is­tered in Delaware, man­aged by a bank in the Grand Cay­mans for a trust in Guernsey. And its all per­fect­ly legal.

    Even Swiss banks these days have to know who their cus­tomers are. Not Amer­i­can real estate devel­op­ers. There’s no legal require­ment what­so­ev­er that U.S. real-estate devel­op­er Don­ald Trump know who his clients are. Prob­a­bly, he couldn’t care less. Or even worse, he’d rather not know.

    “The Great Cir­cle of Life,” Trump-Style

    A clos­er look at Trump reveals names which recur with his—and with each other—in odd and unex­pect­ed places. It’s as if Trump belongs to the “Great Cir­cle of Life” from a “Lion King” movie shot in an alter­na­tive Uni­verse.

    From Palm Beach, win­ter home to well-known and well-heeled scam­mers from around the world, here’s a thumb­nail sketch of “The Great Cir­cle of Life,” Trump-Style.

    Don­ald Trump has repeat­ed­ly tak­en advan­tage of this huge loop­hole in Amer­i­can law, nev­er more bla­tant­ly than when he made a cool $90 mil­lion dol­lar prof­it on a Palm Beach man­sion he sold to a man who some­one must have worked real­ly hard to con­vince the Amer­i­can main­stream media to iden­ti­fy as a “Russ­ian busi­ness­man,” or “Russ­ian fer­til­iz­er oli­garch.”

    He wasn’t. Dmit­ry Rybolovlev is a Russ­ian Mob­ster, who was indict­ed for rub­bing out his chief busi­ness rival in what Russ­ian news agency TASS called a “con­tract hit.”

    Yet the Don­ald was pock­et­ing $90 mil­lion of dirty cash from the Russ­ian Mob at the same time a minor politi­cian in Cal­i­for­nia was tak­ing tons of heat for accepting—from that same Russ­ian Mobster—a $400 pen.

    For his part, Rybolovlev liked the U.S. media’s char­ac­ter­i­za­tion of him as a Russ­ian “busi­ness­man” so much that four years ago he splurged on the most expen­sive con­do­mini­um ever sold in Man­hat­tan ($88 mil­lion).

    As for Trump, there’s no way of know­ing if he’s used any dirty mon­ey from the Russ­ian Mob to fund his cam­paign. In fact, there’s no way of know­ing so much about Don­ald Trump’s busi­ness career that the best way to get a clear­er pic­ture of who he is may be to check out who he does busi­ness with.

    How Don­ald Trump became Don­ald Trump

    For any­one lucky enough to have nev­er seen an episode of “Lifestyles of the Rich & Famous,” here’s a quick reminder of how Don­ald Trump became Don­ald Trump.

    Long before becom­ing a Pres­i­den­tial can­di­date, Trump was a famous icon from an espe­cial­ly ques­tion­able time in Amer­i­ca, the “go-go” ‘80’s,” when rob­ber barons walked the earth unafraid, while on TV a British twit named Robin Leach rhap­sodized about them between com­mer­cials.

    It was a time when things—at least law enforcement-wise—were clear­ly well out of hand. The enor­mous amount of cocaine mon­ey slosh­ing around the bank­ing sys­tem in Mia­mi made some banks there seem to bulge out­wards over the side­walk and dri­ve-through win­dow.

    In the Amer­i­can econ­o­my in the 1980’s, drug mon­ey was as vis­i­ble as an alli­ga­tor in the Ever­glades slid­ing down the throat of a Burmese python.

    Trump and Ivana were the first cou­ple of the Greed Decade. Trump was Gats­by with weird hair. His Daisy was a for­mer Czech Olympian ski­er. A blond girl from the South with a syrupy smile wait­ed in the wings. Gold fix­tures every­where. Every­thing was “real class.”


    That was then, this is now. See any dif­fer­ence?

    In “Stash Pad” in New York Mag­a­zine, Andrew Rice report­ed, “The New York real-estate mar­ket is now the pre­mier des­ti­na­tion for wealthy for­eign­ers with rubles, yuan, and dol­lars to hide.”

    Imag­ine what Flori­da must be like… Today in Mia­mi, ris­ing above miles of strip malls, con­ve­nience stores, pawn shops, and gas sta­tions, is a row of sky­scrap­ers so baroque that they con­jure up only one man: Don­ald Trump.

    Three Trump Tow­ers, and three oth­er Trump-brand­ed prop­er­ties in Sun­ny Isles, includ­ing the Trump Inter­na­tion­al Beach Resort, loom over beach­front Collins Avenue, where they are a favorite home away from home for Russ­ian Mob­sters.

    Sun­ny Isles has numer­ous real estate agen­cies owned by Rus­sians that cater heav­i­ly to East­ern Euro­pean clients, among them Exclu­sive­ly Bara­noff Real­ty, which oper­ates from an office in the lob­by of the Trump Inter­na­tion­al Beach Resort. Thanks to its heavy Russ­ian pres­ence, Sun­ny Isles has acquired the nick­name “Lit­tle Moscow.”

    In a pro­file in The Nation mag­a­zine called “Mia­mi: Where Lux­u­ry Real Estate Meets Dirty Mon­ey” Ken Sil­ver­stein writes:

    “One night I had din­ner and felt like I’d been trans­port­ed into a Russ­ian ver­sion of Good­fel­las. A Russ­ian singer per­formed on a stage with dis­co lights while cus­tomers ordered skew­ered stur­geon, and clinked forks on glass­es to announce toasts before down­ing shots of vod­ka. A man who looked 70 spoke in Russ­ian to his wife, who appeared at least 40 years younger. At anoth­er table, a man about the same age was seat­ed with a young woman in blue jean shorts, a hal­ter top and cow­boy boots.”

    Trump wel­come mat out for inter­na­tion­al grifters

    Just how easy does Don­ald Trump make it for for­eign rep­re­sen­ta­tives of orga­nized crime to buy real estate from him? Sil­ver­stein writes:

    “She took me to see a unit on the thir­ty-eighth floor of Trump Palace, which looked out on the turquoise waters of the Atlantic and was on the mar­ket for $2.3 mil­lion. “Liv­ing in a Trump prop­er­ty is like liv­ing in a hotel,” she told me, as we stood on a bal­cony. The unit was attrac­tive­ly priced, she said cheer­ful­ly, and all the more so as the own­er, a Russ­ian look­ing to buy a big­ger con­do else­where in the area, had spent at least $350,000 on improve­ments.

    Lat­er that day, I obtained the prop­er­ty records for the con­do. The legal own­er is a com­pa­ny reg­is­tered in Belize, an off­shore haven where, accord­ing to a gov­ern­ment web­site, there “is no require­ment to file annu­al returns or pub­lic dis­clo­sure of direc­tors, share­hold­ers, charges, loans or agree­ments.”

    In oth­er words, the true own­er of the Trump Palace unit is untrace­able.

    Even the New York Post, which could be excused for being sen­si­tive to talk about lax immi­gra­tion let­ting in the world’s rich­est unde­sir­ables, chimed in.” New York’s swanki­est sky­scrap­ers have become the new Swiss banks for the world’s rich­est unde­sir­ables.”

    “Today, Switzer­land has cleaned up its act and the “filthy” rich have turned to New York City, turn­ing it into a secre­cy haven to stash their cash through the use of shell com­pa­nies.”

    Don­ald Trump called him “The Leg­end.”

    Instead of one of the many famous names in Trump’s “Great Cir­cle,” let’s begin with some­one who’s no longer well-known. Louis Less­er was once as big a name in real estate devel­op­ment as Don­ald Trump’s, but by the time he died he had become a for­got­ten man.

    Less­er (third from right in pic) was once the biggest devel­op­er in the his­to­ry of the west­ern U.S., devel­op­ing hous­ing for mil­i­tary per­son­nel dur­ing World War II, then grew wealthy devel­op­ing, own­ing and leas­ing prop­er­ties to the U.S. mil­i­tary dur­ing the Cold War, lock­ing up numer­ous con­tracts under Kennedy and John­son for devel­op­ments for mil­i­tary indus­tri­al com­plex clients.

    Louis Less­er was a part­ner with Syn­di­cate leg­end Mey­er Lan­sky and Kirk Kerko­ri­an in buy­ing up Las Vegas hotels and casi­nos. He had exten­sive ties with Howard Hugh­es. He devel­oped, owned, and leased many prop­er­ties to Hugh­es’ Air­craft, includ­ing a mas­sive project in New­port Beach.

    Less­er helped Hugh­es buy up hotels and casi­nos in Las Vegas. When Less­er sold his Fron­tier Hotel and Casi­no to Hugh­es, it was the begin­ning of Hugh­es’ take-over there. In an exam­ple of Trump’s syn­er­gis­tic Great Chain of Life, years lat­er, Don­ald Trump erect­ed the Trump Hotel Las Vegas on a por­tion of the prop­er­ty.

    Louis Less­er, when he resigned as chair­man of Louis Less­er Enter­pris­es in 1967, was replaced by an asso­ciate of Hen­ry Sal­va­tori, who the L.A. Times called a “GOP King­mak­er.”

    In 1964, Sal­va­tori chaired Bar­ry Goldwater’s pres­i­den­tial cam­paign in Cal­i­for­nia. He con­vinced Gold­wa­ter to allow Ronald Rea­gan to give a tele­vised fundrais­ing speech enti­tled “A Time for Choos­ing,” which launched Reagan’s polit­i­cal career. Sal­va­tori became a promi­nent mem­ber of Ronald Reagan’s “kitchen cab­i­net.”

    Trump’s “Great Cir­cle” bud­dy Louis Less­er (cont.)

    Louis Less­er sold his Taj Mahal Hotel and Casi­no in Atlantic City to Don­ald Trump.

    Lat­er, when the casi­no went bank­rupt, a court fil­ing in the bank­rupt­cy pro­ceed­ings revealed Trump’s Taj Mahal Casi­no list­ed Fin­cen (The U.S. Finan­cial Crimes Enforce­ment Net­work) as an unse­cured cred­i­tor, mean­ing it hadn’t paid the record $10 mil­lion penal­ty (the largest the agency ever levied on a casi­no) for what FINCEN called “mon­ey laun­der­ing fail­ures.”

    What fol­lows is an exam­ple of how Trump asso­ciates blend into each oth­er, and man­age to stay just a step or two in front of the law.

    In the late 1980’s Louis Lesser’s son Craig became part­ners in real estate with Imel­da Mar­cos, fronting for the real prin­ci­pals, Louis Less­er and Philip­pines dic­ta­tor Fer­di­nand Mar­cos. On an out­ing with Imel­da and a mil­i­tary con­tin­gent, Craig Less­er helped uncov­er part of the fabled cache of gold buried by the Japan­ese in the Philip­pines at the end of Word War II.

    In Gold War­riors (2002), Ster­ling and Peg­gy Sea­grave detail a “great for­tune dis­cov­ered by U.S. intel­li­gence ser­vices in 1946 … $13-bil­lion in war loot amassed by under­world god­fa­ther Kodama Yoshio who, as a rear admi­ral in the Impe­r­i­al Navy work­ing with Gold­en Lily in Chi­na and South­east Asia, was in charge of plun­der­ing the Asian under­world and rack­e­teers. He was also in charge of Japan’s wartime drug trade through­out Asia

    Craig Less­er sent back a sol­id gold antique vase to his father, which took sev­er­al men to lift, and which was dis­played on the man­tle at Louis Lesser’s man­sion, once the largest pri­vate res­i­dence in Bev­er­ly Hills.

    Until TV pro­duc­er Aaron Spelling built “The Manor,” a home that rivals a mid-sized hotel in square footage, Louis Less­er lived in the largest house in Bev­er­ly Hills. In fact, his house at 1156 Shad­ow Hill Way was used exten­sive­ly dur­ing pro­duc­tion of Bev­er­ly Hills 90210.

    Its cur­rent occu­pant, Pearla­sia Gam­boa, is a Fil­ipino-Amer­i­can busi­ness woman who’s been involved in mas­sive fraud, and was the pres­i­dent of a “micro-nation” called the Domin­ion of Melchizedek, an atoll in the South Pacif­ic which lies under­wa­ter at high tide, used as a front for fraud­u­lent crim­i­nal activ­i­ty.

    Bank of Eng­land offi­cials raid­ed the Lon­don premis­es of a com­pa­ny which offered get-rich-quick invest­ment schemes backed by a pho­ny bank ”reg­is­tered” in Melchizedek. ”It appears to exist main­ly so that mon­ey can be whisked through shell banks,”reported the Wash­ing­ton Post.

    Is it odd­ly telling, or mere hap­pen­stance, or just anoth­er illus­tra­tion of Trump’s “Great Cir­cle of Life,” that Trump busi­ness asso­ciate Louis Less­er, who had much to do with pro­vid­ing entree into the world of casi­no gam­bling, owns a home (he’s dead, his son Craig is still asso­ci­at­ed with the prop­er­ty) that’s a nexus for inter­na­tion­al finan­cial swindlers?

    Time out for a lit­tle com­ic relief

    When Imel­da Mar­cos went on tri­al in New York in 1990 for laun­der­ing tens of mil­lions of dol­lars belong­ing to the peo­ple of the Philip­pines, her co-defen­dant was anoth­er close Trump asso­ciate, Adnan Khashog­gi. (Both Mar­cos and Khashog­gi were acquit­ted.)

    The first time I saw Don­ald Trump’s name linked with Adnan Khashoggi’s was in a wicked­ly fun­ny arti­cle from the ear­ly 90’s in Spy Mag­a­zine called ”Who is America’s cheap­est zil­lion­aire?”

    Spy mag­a­zine— cru­el, bril­liant, beau­ti­ful­ly-writ­ten, and feared by all—incorporated a com­pa­ny called the Nation­al Refund Clear­ing­house, gave it its own check­ing account, and zipped out refund checks to 58 “well-known, well-heeled Amer­i­cans” for $1.11 apiece.

    Chortling, the magazine’s edi­tors set­tled back to see who cashed them.

    26 fru­gal people—“The Bar­gain-Base­ment 26,” includ­ing Cher, Har­ry Helm­s­ley, Michael Dou­glas, Shirley MacLaine, Kurt Von­negut, and Don­ald Trump and Adnan Khashog­gi, who par­tied togeth­er in swank Palm Beach Florida—cashed their $1.11 checks.

    Each then receive a sec­ond “Nation­al Refund Clear­ing­house” check, for 64 cents, half the amount of the first check as com­pen­sa­tion said a cov­er let­ter, for ”a com­put­er error.’ Trump, Khashog­gi, and 11 oth­er extra­or­di­nar­i­ly cheap peo­ple each cashed checks for 64 cents apiece.

    “The Chintzy 13” then each received a final check for 13 cents.

    Don­ald Trump & Adnan Khashog­gi were the last men stand­ing. Trump, who the mag­a­zine called a “short-fin­gered-vul­gar­i­an,” and Khashog­gi, who per­son­al­ly endorsed his on the back, each cashed checks total­ing one dime and three pen­nies.

    Whether by acci­dent, coin­ci­dence, or cos­mic design, over the next two decades Trump and Khashoggi’s names will be inex­tri­ca­bly linked.

    “As for Trump, there’s no way of know­ing if he’s used any dirty mon­ey from the Russ­ian Mob to fund his cam­paign. In fact, there’s no way of know­ing so much about Don­ald Trump’s busi­ness career that the best way to get a clear­er pic­ture of who he is may be to check out who he does busi­ness with.
    Yikes. That’s not a very pret­ty pic­ture paint­ed by Trump’s past asso­ciates, or the indus­try that cre­at­ed his for­tune. And the extreme util­i­ty that US laws give to anony­mous off­shore shell cor­po­ra­tions is part of why it’s going to be so inter­est­ing to see which promi­nent Amer­i­cans get caught up in “Pana­ma Papers” scan­dal. Although, as the arti­cle below notes, it’s very pos­si­ble that there won’t be many Amer­i­can names that come up in that giant Mos­sack Fon­se­ca data trea­sure trove because, for wealthy Amer­i­cans, there’s no rea­son your anony­mous shell cor­po­ra­tions needs to be off­shore:


    This is much worse than the Pana­ma Papers: How Amer­i­ca became a world leader in tax avoid­ance

    No Amer­i­cans have been impli­cat­ed in the stun­ning doc­u­ment trove detail­ing wide­spread glob­al cor­rup­tion — yet

    David Dayen
    Tues­day, Apr 5, 2016 04:58 AM CST

    Often when I’m sit­ting in bumper-to-bumper traf­fic on one of L.A.’s many free­ways, my mind drifts to won­der­ing if there’s some spe­cial auto­bahn above the hori­zon line reserved only for elite celebri­ties, so they don’t have to both­er with the day-to-day incon­ve­niences of the mass­es. That feel­ing returned when I read about the Pana­ma Papers, a block­buster release of 11 mil­lion doc­u­ments from 40 years of work by one of the world’s lead­ing spe­cial­ists in tax avoid­ance.

    The glob­al law firm Mos­sack Fon­se­ca cre­ates untrace­able shell com­pa­nies for Mafia mem­bers, drug deal­ers, elites from sports and cul­ture, and a host of cor­rupt politi­cians. You can come up with a cou­ple legit­i­mate rea­sons for cre­at­ing a shell com­pa­ny: pro­tect­ing trade secrets from rivals, for exam­ple. But most of Mos­sack Fonseca’s busi­ness involves peo­ple want­i­ng to con­ceal their wealth: “Nine­ty-five per­cent of our work,” one memo reads, “coin­ci­den­tal­ly con­sists in sell­ing vehi­cles to avoid tax­es.” 214,000 of those vehi­cles, secured for 14,000 clients, are shown in the leaked doc­u­ments.

    While mas­sive, the leak expos­es only a small cor­ner of the tax avoid­ance indus­try. Mos­sack Fon­se­ca is just one of many firms in just one of dozens of inter­na­tion­al tax havens pro­vid­ing their ser­vices to the glob­al elite. Back in 2012, British activists at the Tax Jus­tice Net­work esti­mat­ed between $21-$32 tril­lion sit­ting in off­shore tax havens, of which the Pana­ma Papers reveals only a piece. “This is the sin­gle biggest dri­ver of glob­al inequal­i­ty in the world today,” said Clark Gas­coigne of the Finan­cial Account­abil­i­ty and Cor­po­rate Trans­paren­cy (FACT) Coali­tion, an assem­bly of over 100 orga­ni­za­tions ded­i­cat­ed to root­ing out tax avoid­ance.

    We’ve known about Mos­sack Fonseca’s cre­ation of shell cor­po­ra­tions since Ken Silverstein’s sto­ry about it in Vice well over a year ago. We’ve had sim­i­lar leaks from tax havens in Switzer­land and the British Vir­gin Islands dat­ing back sev­er­al years. Carl Levin made a cot­tage indus­try of pro­duc­ing damn­ing reports about tax avoid­ance when he was in the Sen­ate. Nobody should be sur­prised that rich peo­ple world­wide try to stash their mon­ey away or laun­der it through fake cor­po­ra­tions.


    What we have not yet seen is any U.S. indi­vid­ual impli­cat­ed in the leak, which seems unlike­ly giv­en our sta­ble of inter­na­tion­al wealth. The edi­tor of Süd­deutsche Zeitung, the Ger­man news­pa­per which first received the doc­u­ments, promis­es there will be more to come. But one rea­son why Amer­i­cans haven’t yet been impli­cat­ed is that they already have a per­fect­ly good place for their tax avoid­ance schemes: right here in the Unit­ed States.

    While sev­er­al devel­oped coun­tries are already mov­ing to reduce the anonymi­ty behind shell com­pa­nies, includ­ing a pub­lic reg­istry of “ben­e­fi­cial own­er­ship” infor­ma­tion in the Unit­ed King­dom and a direc­tive to col­lect sim­i­lar infor­ma­tion through­out the Euro­pean Union, the Unit­ed States has resist­ed such trans­paren­cy. Accord­ing to recent research, the Unit­ed States is the sec­ond-eas­i­est coun­try in the world to obtain an anony­mous shell cor­po­ra­tion account. (The first is Kenya.) You can cre­ate one in Delaware for your cat.

    While we force for­eign finan­cial insti­tu­tions to give up infor­ma­tion on accounts held by U.S. tax­pay­ers through the For­eign Account Tax Com­pli­ance Act of 2010, we don’t rec­i­p­ro­cate by com­ply­ing with inter­na­tion­al dis­clo­sure require­ments stan­dard­ized by the Orga­ni­za­tion for Eco­nom­ic Co-Oper­a­tion and Devel­op­ment (OECD) and agreed to by 97 oth­er nations. As a result, the U.S. is becom­ing one of the world’s fore­most tax havens.

    Sev­er­al states – Delaware, Neva­da, South Dako­ta, Wyoming – spe­cial­ize in incor­po­rat­ing anony­mous shell cor­po­ra­tions. Delaware earns between one-quar­ter and one-third of their bud­get from incor­po­ra­tion fees, accord­ing to Clark Gas­coigne of the FACT Coali­tion. The appeal of this rev­enue has embold­ened small states, and now Wyoming bank accounts are the new Swiss bank accounts. Amer­i­ca has become a lure, not only for for­eign elites look­ing to seal mon­ey away from their own gov­ern­ments, but to laun­der their mon­ey through the pur­chase of U.S. real estate.

    In addi­tion, if the Unit­ed States real­ly want­ed to stop Pana­ma or the Cay­man Islands or oth­er off­shore tax havens from allow­ing the wealthy to avoid hun­dreds of bil­lions in pay­ments, they could do so in about 15 min­utes. Our recent free trade deal with Pana­ma alleged­ly pre­vents Amer­i­cans from cre­at­ing off­shore tax havens there, but in gen­er­al, such tax infor­ma­tion exchanges are insuf­fer­ably weak. And the lit­tle Amer­i­ca does abroad to police tax eva­sion dwarfs the next to noth­ing we do at home.

    The inter­twin­ing of glob­al and polit­i­cal elites makes tax avoid­ance, whether legal or ille­gal, a sec­ondary con­cern for the coun­try, regard­less of how it robs the coun­try of resources and pro­motes the con­cep­tion of a two-tiered eco­nom­ic and jus­tice sys­tem where the upper class need not fol­low the same rules as the rest of us. Our politi­cians made a con­sis­tent choice that this ram­pant tax avoid­ance doesn’t both­er them.

    “Anony­mous shell com­pa­nies have been used to rip off Medicare,” said Gas­coigne. “They’ve been used to evade U.S. sanc­tions. Arms deal­ers like Vik­tor Bout, the so-called Mer­chant of Death, used U.S. shell com­pa­nies to laun­der mon­ey.” Indeed, Mos­sack Fon­se­ca has affil­i­at­ed offices in Wyoming, Neva­da, and Flori­da. Amer­i­ca is up to its eye­balls in this style of cor­rup­tion.

    It’s a fix­able sit­u­a­tion. The U.S. could sign on to the OECD stan­dards tomor­row. In addi­tion, the Incor­po­ra­tion Trans­paren­cy and Law Enforce­ment Assis­tance Act would require data col­lec­tion on the ben­e­fi­cial own­er­ship of shell com­pa­nies and lim­it­ed lia­bil­i­ty cor­po­ra­tions. But oppo­si­tion from the states ben­e­fit­ing from for­eign tax havens, as well as the Nation­al Asso­ci­a­tion of Sec­re­taries of State, has stalled progress. Sec­re­taries of State typ­i­cal­ly have the author­i­ty to reg­is­ter cor­po­ra­tions, and they pros­per from reg­is­tra­tion fees. Delaware and its com­pan­ion states that offer cor­po­rate secre­cy con­vinced the Sec­re­taries of State orga­ni­za­tion to oppose the bill.

    If every state gave up this infor­ma­tion, Delaware would still be a friend­ly place for cor­po­ra­tions to reg­is­ter, giv­en their legal regime, low cor­po­rate tax rates, and sev­er­al oth­er advan­tages. But with­out a fed­er­al law, states can just com­pete with each oth­er over how much cor­po­rate infor­ma­tion to hide from domes­tic and for­eign author­i­ties.

    Extreme­ly pow­er­ful forces hope that the Pana­ma Papers reac­tion mir­rors pre­vi­ous leaks about tax avoid­ance – a lot of grum­bling but no last­ing changes. They try to guar­an­tee that by lob­by­ing their respec­tive gov­ern­ments. And they care more than the mass­es of peo­ple who don’t lob­by every day for the rick to pay their tax­es. The core prob­lem doesn’t stop with the bare facts, point­ed out in lurid detail by this leak. It’s that nobody real­ly wants to do any­thing about it.

    “What we have not yet seen is any U.S. indi­vid­ual impli­cat­ed in the leak, which seems unlike­ly giv­en our sta­ble of inter­na­tion­al wealth. The edi­tor of Süd­deutsche Zeitung, the Ger­man news­pa­per which first received the doc­u­ments, promis­es there will be more to come. But one rea­son why Amer­i­cans haven’t yet been impli­cat­ed is that they already have a per­fect­ly good place for their tax avoid­ance schemes: right here in the Unit­ed States.
    That’s right, while we’ll no doubt be see­ing promi­nent names trick­ling out of the Mos­sack Fon­se­ca inves­ti­ga­tions for years to come, it’s very pos­si­ble that the names of wealthy Amer­i­cans will be a sur­pris­ing­ly small part of that future stream of bad news. And unless you’re the kind of per­son oper­at­ing in Don­ald Trump’s orbit of wealth and pow­er, that lack of bad news is very bad news.

    Posted by Pterrafractyl | April 7, 2016, 1:11 pm
  5. The IMF just warned that low growth, low infla­tion, and high debt across the world is threat­en­ing to drag the glob­al econ­o­my into a euro­zone-style death spi­ral of deficit-cut­ting and eco­nom­ic con­trac­tion. So while that was cer­tain­ly some bad news from the IMF, there is some good news, that being that the IMF was even talk­ing about the risk that cut­ting gov­ern­ment spend­ing cre­ates in the face of weak­en­ing demand, espe­cial­ly if the whole world starts doing that simul­ta­ne­ous­ly. Don’t for­get its infa­mous aus­ter­i­ty mea cul­pa of 2013. There’s no rea­sons the IMF has to stick that mea cul­pa, but it did this time which, pathet­i­cal­ly, is pret­ty good news.

    So the bad news is that the world faces a pos­si­ble glob­al slow­down and if the world responds with the aus­ter­i­ty poli­cies of the past it could induce an eco­nom­ic death spi­ral. The good news is that the IMF is even acknowl­edg­ing this. Baby steps:


    IMF Warns of Pos­si­ble ‘Spi­ral’ of Wan­ing Growth, Esca­lat­ing Debt

    * Glob­al debt ris­ing as emerg­ing mar­kets strug­gle, IMF says
    * Spend­ing cuts could set off cycle, fund’s fis­cal chief says

    Andrew Maye­da
    April 13, 2016 — 9:30 AM CDT

    Glob­al pol­i­cy mak­ers need to guard against a self-rein­forc­ing “spi­ral” of weak­en­ing growth and ris­ing debt that could require a coor­di­nat­ed response by the world’s major economies, accord­ing to the IMF’s top fis­cal watch­dog.

    Most coun­tries are on a high­er debt path than they were a year ago, the Inter­na­tion­al Mon­e­tary Fund said in its semi-annu­al Fis­cal Mon­i­tor report released Wednes­day. Fis­cal deficits in 2015–2016 in emerg­ing economies are pro­ject­ed to exceed lev­els dur­ing the glob­al finan­cial cri­sis, as coun­tries strug­gle with low oil prices, cool­ing investor sen­ti­ment and inten­si­fy­ing geopo­lit­i­cal ten­sions.

    The warn­ing on coun­tries’ debt rein­forces the fund’s mes­sage in two oth­er reports this week that the world risks slip­ping to stag­na­tion with­out strong action by pol­i­cy mak­ers, who are gath­er­ing in Wash­ing­ton for spring meet­ings of the IMF and World Bank. If gross domes­tic prod­uct growth in advanced economies slides fur­ther, that would raise pub­lic and pri­vate debt lev­els as a pro­por­tion of out­put, said Vitor Gas­par, head of the IMF’s fis­cal-affairs depart­ment.

    “In such cir­cum­stances you can imag­ine that house­holds, firms, and gov­ern­ments will be tempt­ed to cut fur­ther expen­di­tures,” Gas­par said in an inter­view. “That puts fur­ther down­side pres­sure on nom­i­nal GDP growth, and that would be a spi­ral that one must avoid.”

    Debt is grow­ing espe­cial­ly fast among oil pro­duc­ers, whose bud­get plans have been thrown into dis­ar­ray by the col­lapse in crude prices. In the Mid­dle East and North Africa, cumu­la­tive deficits are expect­ed to widen by $2 tril­lion over the next five years, rel­a­tive to 2004–2008, when oil prices peaked, accord­ing to the IMF.

    Triple Threat

    Advanced economies, mean­time, are fac­ing the “triple threat” of low growth, low infla­tion, and high pub­lic debt, the fund said.

    The IMF is urg­ing coun­tries with fis­cal room to use bud­get mea­sures such as increased spend­ing or tax cuts to boost demand.

    If a low-growth, high-debt spi­ral takes hold, the respons­es of indi­vid­ual coun­tries won’t be enough. Major economies will have to quick­ly act togeth­er to com­bat the “stag­na­tion forces” through mea­sures to spur both demand and sup­ply, said the Wash­ing­ton-based fund, which was cre­at­ed dur­ing the World War II to over­see the glob­al mon­e­tary sys­tem.

    “Our eval­u­a­tion is that risks are at this point in time more con­sid­er­able than they were, say, six months ago or one year ago,” said Gas­par, a for­mer finance min­is­ter in Por­tu­gal.
    “The expres­sion we use for the way we look at glob­al devel­op­ments at this time is a state of alert. We are on alert, we’re def­i­nite­ly not on alarm.”

    Gas­par said Japan should ensure it’s pro­vid­ing enough fis­cal stim­u­lus to off­set the eco­nom­ic hit from the government’s plan to raise the nation’s con­sump­tion tax. “They should make sure that from an aggre­gate view­point, there is no con­trac­tion in the fis­cal stance,” he said.


    “If a low-growth, high-debt spi­ral takes hold, the respons­es of indi­vid­ual coun­tries won’t be enough. Major economies will have to quick­ly act togeth­er to com­bat the “stag­na­tion forces” through mea­sures to spur both demand and sup­ply, said the Wash­ing­ton-based fund, which was cre­at­ed dur­ing the World War II to over­see the glob­al mon­e­tary sys­tem.”
    Well, that’s cer­tain­ly bet­ter advice than the “all nations must slash spend­ing now!”-mentality that’s some­how become accept­able in glob­al pol­i­cy-mak­ing cir­cles. But note how lim­it­ed the the coor­di­nat­ed actions were: cut tax­es or increase spend­ing:

    The IMF is urg­ing coun­tries with fis­cal room to use bud­get mea­sures such as increased spend­ing or tax cuts to boost demand.

    Now, cut­ting tax­es on the mid­dle class and poor would cer­tain­ly boost demand. But what about cut­ting tax­es on the peo­ple with the mon­ey? Isn’t one of the grand lessons of that last few decades of sup­ply-side, tax-cuts-for-the-rich eco­nom­ics that it just ends up mak­ing the rich rich­er while starv­ing gov­ern­ments of tax­es? In oth­er words, while some tax cuts tar­get­ed towards the low end of the eco­nom­ic lad­der would cer­tain­ly increase demand, tax cuts for the rich are basi­cal­ly throw­ing mon­ey down the drain at the expense of high­er deficits, and that’s a pret­ty good recipe for send­ing your econ­o­my down the drain and into the death spi­ral the IMF is warn­ing us about.

    So, giv­en all the fret­ting about what to do in the wake of the Pana­ma Papers mega-scan­dal, isn’t there a very obvi­ous coor­di­nat­ed action the wealthy nations of the world could do that would not only increase demand, but also reduce deficits at the same time: close all the loop­holes that allow the super-rich to hide their cash, onshore or off­shore, and then jack up that top tax rate sky high! The US had a top tax rate of 91 per­cent in the 1950’s and that’s the decade looked back on as a kind of Amer­i­can gold­en age. Real­ly high tax­es on the rich did­n’t kill the econ­o­my. Quite the oppo­site. So, if one of the rea­sons we can’t return to such a tax struc­ture is that it’s a more com­pet­i­tive glob­al econ­o­my and the ultra-wealthy will just take their for­tunes else­where (while still doing all their busi­ness in the nation they’re leav­ing), why not have a coor­di­nat­ed glob­al response to final­ly end that pathet­ic race to the bot­tom? Just imag­ine how much demand and debt reduc­tion could be achieved by not let­ting hav­ing all those tril­lions rot­ting away in a tax haven.

    As the IMF puts it, the devel­oped world is fac­ing a “triple threat” of low growth, low infla­tion, and high debt. But isn’t a glob­al oli­garchy that’s set up a glob­al sys­tem to stash away $32 tril­lion in off­shore tax havens (and who knows how much more in onshore tax havens) also a mas­sive threat to glob­al pros­per­i­ty? So how about we seri­ous­ly address the IMF’s “triple threats” by seri­ous­ly address­ing that threat?

    Sure, a glob­al cam­paign to take down glob­al super-rich and force them to behave like decent glob­al cit­i­zens might seem like the end of the world to the super-rich and an insur­mount­able chal­lenge to every­one else. But if you think about the range of threats that go far beyond the IMF’s “triple threat”, like eco-col­lapse and the wars or ter­ror that could ensue with future weapons, and the immense finan­cial resources that are going to be required to address those issues, tak­ing on the super-rich’s grip on the world isn’t just a mega-chal­lenge. It’s also a baby step.

    Posted by Pterrafractyl | April 13, 2016, 6:25 pm

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