Swiss bank’s crafty strategy shows how difficult it is to clamp down on tax havens

Evening Standard (London), Jan 6, 2009

Gordon Brown and Barack Obama are both promising to crack down on the use of offshore tax havens. But putting those tough words into practice is another matter.

One of the world’s biggest private wealth management groups circulates funds via offices in the Cayman Islands, claiming they take major investment decisions — when the main work is apparently carried out in London.

With offices in London and across the globe, Swiss-based Julius Baer banking group invests over $300 billion (£208 billion) in assets on behalf of institutions and wealthy individuals. Profits in 2007 were more than $1.1 billion.

In London, one of its units was known as Julius Baer Investors or Julius Baer Investment Management (JBIM) until a management buyout in 2007. It was renamed Augustus Asset Managers, is based in Bevis Marks in the City, and is still 10% owned by Julius Baer.

From London, Augustus controls assets of $12 billion but claims its profits are generated elsewhere, offshore at a Cayman Islands Baer subsidiary called Baer Select Management.

Why? Simple, really. “If you would generate all the income in London, you would pay much more taxes,” acknowledged Max Obrist, a Cayman Islands executive of Julius Baer.

Crisis Pits Vatican Against Offshore Bankers

Inter Press Service (IPS), Dec 22, 2008

The financial crisis has the U.S. swirling with charges about the immoral greed of some corporate executives who recklessly bet their companies’ futures to line their own pockets. The popular fix for this international calamity stops at the nation’s borders: decouple top-line salaries and bonuses from stock prices and institute more transparency and regulation.Vatican shield

However, last month, the Vatican, in a groundbreaking statement, linked the financial crisis to a much deeper problem largely ignored in discussions of the crisis here. It underlined the need to consider carefully “the hidden but crucial role of the offshore financial system in light of the emergence of the global financial crisis”.

The Vatican now gets it, but U.S. corporations don’t. The U.S.-based multinationals that signed on to yet another ethics pledge included General Electric, The Hartford, Pepsi, Wal-Mart, Accenture, Dell, and United Airlines. Their ethics, according to their pledge, does not include rejecting the use of the offshore system to evade regulation as well as taxes.

Palin’s campaign operations chief was VP of IDT, telecom investigated for bribery

Sept 2, 2008 –

Michael Glassner, in charge of Republican Vice-Presidential candidate Sarah Palin’s campaign operations, was till April 18th a vice-president of IDT, the New Jersey-based telecom fined $1.3 million by the FCC in July for failing to file its Haiti contract.

The contract, effective in 2004, revealed payments to an offshore shell company in the Turks & Caicos which sent only part of the fees to Haiti’s phone company. The case is under investigation by the Justice Department and the Securities and Exchange Commission. A former IDT insider, Michael Jewett, who managed the company’s Caribbean region, says the missing money represented kickbacks to former Haiti President Jean-Bertrand Aristide.

Corruption: Laundromat Royale

Inter Press Service (IPS), July 18, 2008

It sounded like the plot of an action thriller. A U.S. Senate subcommittee held hearings Thursday on how UBS/Switzerland, the world’s largest private bank, and LGT (Liechtenstein Global Trust), owned by the royal family of that micro-tax-haven state, organised complex tax evasion schemes for U.S. clients, and used spy-type tactics to avoid being detected.

LGT bankers allegedly used code names and public phones instead of making calls that could be traced. UBS agents carried encrypted laptops and business cards that didn’t mention they were in the “wealth management” division. According to testimony and records, both banks took care to disguise their activities because moving and hiding the money of tax evaders and other criminals is very lucrative, bringing hundreds of millions of dollars in profits.

Evasive Tactics: UBS trolls for tax cheats

Condé Nast Portfolio, July 16, 2008 – UBS Code names, secretive European royalty, encrypted computers. A spy novel? Nope. Nope. It’s how two European banks helped rich Americans duck the taxman, a Senate probe found.

The Newport regatta has always drawn America’s moneyed class, and the Art Basel show in Miami is hot on the nouveau riche circuit—making both glitzy venues ideal for financial giants to prospect for new clients.

But UBS, one of the world’s largest banks, had another goal in mind when it shelled out money for the UBS Regatta Cup in Newport or the Art Basel Art Fair in Miami, or performances in major U.S. cities by the UBS Vervier Orchestra.

Larry Summers on Robert Rubin and money-laundering

March 26, 2008 –

Lawrence Summers spoke at the Council on Foreign Relations last week and was a bit uncomfortable about my question regarding Clinton administration anti-money-laundering policy.Lawrence Summers

I pointed out that Treasury Secretary Robert Rubin (who happens to be one of the Council’s co-chairs) had not acted against money-laundering because he didn’t want to stop the free flow of cash into the US – in effect, into Wall Street. But when Summers succeeded Rubin in the job, he had taken action.

The facts are important because Rubin is poised to move into a Democratic administration — especially if Clinton wins — as a high-level Wall Street influential.

Investigators of subprime crisis should look offshore

Dec 1, 2007

When there’s a financial crisis tied to lack of transparency, follow the culprits offshore. Evidence comes out now that this is true about the subprime debacle.

Reuters reports that a German bank is implementing “accounting changes including consolidation of an offshore conduit whose soured investments triggered a government-led rescue.” The offshore operation was set up to invest in subprime mortgages.

Pam Martens in Counterpunch points out that, “Citigroup, is discovered to have stashed away over $80 billion of Byzantine securities off its balance sheet in secretive Cayman Islands vehicles with an impenetrable curtain around them.”

Among those securities count subprimes. Citigroup has $55 billion of subprime exposure and in November said it would write down up to $11 billion in subprime losses. Goldman Sachs said that won’t be all, that the bank may have to write off $15 billion.

Corruption: Another Lead in Siemens Bribery Probe?

Inter Press Service (IPS), Aug 30, 2007

U.S. officials from the Securities and Exchange Commission, the Justice Department and the Federal Bureau of Investigation met with Munich prosecutors this week regarding the 1.3-billion-dollar bribe fund run by Siemens, the German multinational technology company.

After talking to the Germans about tracking the financial flows of the largest illicit slush-fund ever discovered, the U.S. investigators would do well to visit Luxembourg on Germany’s western border.
Clearstream list of Siemens accounts 2001
There they could seek information from Clearstream, the international financial clearing house, that might tell them how Siemens moved so much money and where it went. That is because Siemens has the unusual status of being one of only four non-financial companies among 2,500 Clearstream members. It gained membership on the insistence of a former CEO who was fired after a scandal.

Siemens has a $1.3-billion bribe fund; did it move payoffs through Clearstream?

Aug 15, 2007

Siemens, the German-based multinational technology company that made massive payoffs to get international contracts, has, according to the German press, a bribery slush fund of more than $1.3 billion. Siemens It moved money through a network of front companies, mostly in offshore Liechtenstein and the United Arab Emirates. Siemens is being investigated by the U.S. Justice Department and the Securities and Exchange Commission as well as by public prosecutors in Germany and Italy.

How did Siemens officials move so much money about? Investigators ought to take a look at Siemens’ transactions through Clearstream, the international financial clearing house in Luxembourg, whose clients do not undergo the same due diligence scrutiny that regular banks apply.

Siemens is one of only four non-financial companies (out of 2500) with Clearstream accounts. Here — published for the first time — are listings of Siemens’ Clearstream accounts for 1995, 2000 and 2001.

Tax dodging helps Murdoch buy the Journal

Aug 1, 2007

Where did Rupert Murdoch get $5 billion to buy up the Wall St. Journal? Beyond normal profits, his coffers were stuffed by dodging taxes in the U.S. and elsewhere. Some of that is your money!

The Economist, in 1999, investigated Murdoch’s corporate tax affairs and discovered that a collection of 800 offshore companies help him cut corporate taxes to 6%!

Closing Down the Tax Haven Racket

Speech to conference on “Taming the Giant Corporation,” organized by Ralph Nader and The Center for Study of Responsive Law, Washington DC, June 8, 2007

The tax haven racket is the biggest scam in the world. It’s run by the international banks with the cooperation of the world’s financial powers for the benefit of corporations and the mega-rich. This talk is about strategy, but first you have to know the target, and most Americans, including progressive activist Americans, don’t know what I’m going to tell you. And that’s part of the problem.

Between 1996 and 2000, of U.S. and multi-national corporations operating in the United States, with assets of at least $250 million or sales of at least $50 million, nearly two-thirds paid no U.S. income tax. Over 90 percent reported owing taxes of under 5 percent. One year, six in ten paid less than a million.

This is the dirty little secret of globalization: the end of controls on capital flows and the expansion of the tax haven system from 25 years ago to where it has more than doubled to about 70 tax havens.

The system is a major reason for the growing inequality in the U.S. and between the West and the developing worlds.

The system has given the big banks and corporations and the super-rich mountains of hidden cash they use to control our political systems.

Citigroup’s Charles Prince: “Let’s go back to the bad old days.”

April 10, 2007 –

The NY Times reports today that Charles Prince, CEO of Citigroup, is planning to cut the corporation’s compliance staff. Citigroup logoReporter Eric Dash says it’s “to keep the bank from getting bogged down” because “the compliance overhang has made it difficult to be competitive” and “unnecessarily slowed the company down.”

Translation: other banks are laundering profits or running scams to help clients cheat tax authorities and investors, and they make good money at it. Why shouldn’t we?

Dash noted that Citigroup had beefed up its compliance staff after scandals, including its “dealings” with Enron. He skimps on details: that Citigroup set up offshore shell companies to help Enron cook the books.

Exclusive: Confessions of a Citibanker

Is Citibank Spain a tax cheat?
New Internationalist, Aug 2006
Citigroup

With help from a whistleblower, I followed the money trail through the offshore operations of Citigroup, the world’s biggest bank, and discovered that Spanish bankers handling their client’s offshore accounts were getting commissions via an internal accounting system instead of on the regular books.

It is the same internal system that Citigroup used in the 1970s to compensate currency traders in Paris, London, Frankfurt and elsewhere who “booked” trades in the tax haven Nassau, the Bahamas. They were exposed by an insider, were investigated by the SEC and Congress, and had to pay millions in back taxes. Is this happening again?

Citigroup: a culture and history of tax evasion

This report describes and details a history of tax evasion by the world’s largest
financial conglomerate, Citigroup. Going back decades, it is a story of
repeated, aggressive tax evasion for itself and clients, depriving governments
and therefore citizens of huge amounts of funds and carried out with relative
impunity.

France & UK Ignore Corporate Bribery: One Hand Launders the Other

Inter Press Service (IPS), Dec 29, 2006

Investigators find evidence that Siemens (German electronics & engineering firm), Total (French oil company), and BAE (British arms conglomerate) paid multi-millions of dollars in bribes through bank accounts in Switzerland and other offshore centers.
Siemens, Total, BAE logos

France and the UK argue “national security” to block inquiries. Concern is more likely the “security” of top officials who got kickbacks.

Spain’s discovery that funding for Basque terrorist group ETA goes through tax havens is dramatic proof that “national security” lies not in protecting but in dismantling the global offshore secrecy network.

US/Haiti: Top Republicans Leave Telecom Accused of Bribery

Inter Press Service (IPS) – Nov 6, 2006

The company is under investigation by the SEC, the United States Attorney in Newark, New Jersey, and a U.S. federal grand jury for allegedly paying bribes to Jean-Bertrand Aristide, former president of Haiti. Five nationally prominent US Republicans, the independent board members of a corporation that has been charged with paying hundreds of thousands of dollars in bribes to get a sweetheart telecom deal in Haiti, are leaving its board. The company is IDT, the world’s third-ranked international phone company.

IDT is run by James Courter (shown here), a former New Jersey Republican congressman. The other Republicans are Rudy Boschwitz, former senator from Minnesota; James S. Gilmore III, former Virginia governor; Thomas Slade Gorton III, former senator from Washington State; Jack Kemp, former congressman from New York and 1996 vice presidential nominee; and Jeane Kirkpatrick, the former U.S. ambassador to the UN under President Ronald Reagan.

US/Haiti: Govt Corruption Suit Stalls for Lack of Funds

Inter Press Service (IPS), Oct 26, 2006

The U.S. Justice Department is withholding agreement to share assets seized from Haitian drug traffickers to finance a lawsuit by the Haitian government charging former President Jean-Bertrand Aristide with taking bribes.

The suit is based on allegations by a former executive of the telecom company IDT that before Aristide left the country in 2004, he took hundreds of thousands of dollars in kickbacks from IDT, which is connected to prominent U.S. Republicans.

Justice Dept. Criminal Division chief wrote “lawyer’s letter” clearing GOP ex-congressman’s firm

Sept 18, 2006
Is top Justice official protecting a former client accused of bribery?

The Justice Department’s Criminal Division, headed by a Bush political appointee who gave legal advice to a company accused of bribing Haiti’s former president, is blocking an agreement to share seized Haitian drug money that would help Haiti pursue the bribery case in U.S. courts. The accused company is run by a former Republican congressman.

Alice Fisher

The Criminal Division chief, Alice Fisher, formerly a registered lobbyist for HCA, the healthcare company founded by the father of Republican Senate Majority Leader Bill Frist, is a recess appointee. Her approval was blocked by Senators concerned about her qualifications and about her participation in a government meeting on abusive interrogations at the U.S. military prison camp at Guantanamo.

Haiti Telecom Kickbacks Tarnish Aristide

CorpWatch, Dec 29, 2005

Two U.S. lawsuits charge that former Haitian President Jean-Bertrand Aristide and his associates accepted hundreds of thousands of dollars in kickbacks from politically connected U.S. telecom companies.

Lawsuits filed this Fall challenge the former priest’s image of political purity and raise claims that both he and U.S. corporate executives scammed illegal profits off the hemisphere’s poorest population.

In one suit, a fired executive charged his former employer, the U.S. telecom IDT (Newark, NJ), with corruption, defamation, and intimidation under the New Jersey anti-racketeering law. In the second, the government of Haiti contends that IDT, Fusion (New York, NY) and several other North American telecoms violated the federal RICO anti-racketeering statute. Both suits allege that Aristide, now in exile in South Africa, and his associates, took kickbacks.

Follow Aristide’s Money Offshore: How Haiti was looted with the help of tax haven shell companies & secret bank accounts and U.S. citizens & corporations

Haiti Democracy Project, Nov 10, 2005

Add former Haitian president Jean-Bertrand Aristide to the long list of corrupt and repressive officials who have used Western banks and companies and offshore tax havens to plunder their countries and launder the stolen money.

Aristide and his associates looted government coffers, wrote checks to front companies for nonexistent purchases, padded invoices to get kickbacks from vendors, secretly owned companies that cheated Haiti of taxes, and laundered the money they stole through shell companies and secret bank accounts set up in the United States and the offshore tax havens of Turks and Caicos and the British Virgin Islands.

Check from account of Aristide

Nearly $20 million has been documented as stolen between 2001, when Aristide took office as president for the second time, and 2004, when he fled or was forced out of the country according to varying accounts.

Tax Activists: Big Business Must Pay Its Fair Share

Pacific News Service – April 12, 2005

A new global movement is tracking the increasing number of offshore tax shelters and pressuring governments to make multinationals pay up.

As Americans fret over their personal income taxes, there is a movement afoot to reduce the tax burden on ordinary people by getting corporations and wealthy individuals to pay their fair share.

Last month, the Tax Justice Network (www.taxjustice.net/) issued a report based on publicly available statistics from the Bank of International Settlements and Merrill Lynch, the investment company. The data showed the following:

–Approximately $11.5 trillion of assets are held offshore by high net-worth individuals, or about a third of the total global GDP, the value of goods and services, which in 2003 was $36.2 trillion.

–The annual income that these assets might be expected to earn amounts to $860 billion annually.

–The tax not paid as a result of these funds being held offshore would exceed $255 billion a year.

The Fall of a Titan

AlterNet, March 17, 2005.

Maurice “Hank” Greenberg, one of the world’s richest men, and head of AIG, one of the world’s largest financial companies, was forced to resign this week as prosecutors closed in on him and the company.

Given his economic and political power, the fall of Maurice “Hank” Greenberg, the 59th richest man in America and CEO of the American International Group (AIG), the world’s second-largest financial conglomerate (after Citigroup), is stunning.

Take The Money And Run Offshore

AlterNet, Dec 22, 2004

How insurance companies are aiding tax evasion by over-charging in America and shipping the money to offshore firms.

Terry Mills was working in Wilmington, DE, for J. Montgomery, one of the largest insurance agencies in the region, when in 1993 he was called in to get to the bottom of a messy insurance problem. Little did he know that he would uncover a story – as yet unreported – about tax evasion through offshore firms, but with a twist. The scheme Mills came across seemed to be taking place with the aid of AIG, a major U.S. insurance giant.

Offshore Banking: The Secret Threat To America

Hound-Dogs, March 2004
(Same title but not same article as in Dissent 2003)

This is a story about a massive money-laundering operation run by the world’s biggest banks. It hides behind the “eyes-glazing over” technicalities of the international financial system. But it could be one of the biggest illicit money-moving operations anyone has ever seen. And it’s allowed to exist by the financial regulators who answer to Western governments.

In these days of global markets, individuals and companies may be buying stocks, bonds or derivatives from a seller who is Clearstreamhalfway across the world. Clearstream, based in Luxembourg, is one of two international clearinghouses that keep track of the “paperwork” for the transactions.

Menatep paper trail

The Russia Journal, Nov 5, 2003

The charges against key shareholders in Yukos are enormous and very varied in scope. The Yukos tale is a long, complex and controversial one, requiring lengthy and painstaking substantiation. Public interest in the Yukos controversy is very high.

However charges and counter charges, mostly of a political nature, are being flung so wildly about in the media that The Russia Journal believes it essential at this stage to focus on the evidence in the accusations against Mikhail Khodorkovsky and his partners. His innocence of the charges that have been filed against him must be presumed until a competent trial is held.

Those who support his innocence of the charges are invited to review and comment on this, the first in a Russia Journal series on the case against him and others in Menatep Group.