“No Narco-state, No Keiko!” was the chant repeated endlessly by protesters during the massive May 31 demonstrations in Lima and many other cities in Peru against the possible triumph of presidential candidate Keiko Fujimori. Credit: Courtesy of La República

By Ángel Páez
LIMA, Jun 3 2016 (IPS)

Thousands of Peruvians took to the streets of Lima and other cities to protest the likely triumph in the Sunday Jun. 5 runoff election of Keiko Fujimori, the daughter of former president Alberto Fujimori, who is serving a 25-year sentence for corruption and crimes against humanity.

If Keiko Fujimori wins, as indicated by the polls, it will be the fourth time a Fujimori is elected president.

Alberto Fujimori (1990-2000) spent two full terms in office and his third term was cut short (he served less than one year) due to a corruption scandal revolving around his security chief Vladimiro Montesinos. His administration was marked by human rights violations and a self-coup in which he dissolved Congress, suspended civil liberties and established government by decree. “A triumph by Keiko Fujimori represents for Peruvian democracy, on a symbolic level, the exercise of shameful masochism on the part of those who already suffered the crimes and horror of her father’s government…Her election would amount to support for a way of governing that violated all the principles of democracy.” – Julio Arbizu

On May 31 and two previous occasions, enormous crowds of demonstrators took to the streets in Lima and other major cities to protest the candidacy of Keiko Fujimori, in protests similar to those she faced as first lady – a position she held informally after her parents divorced – during the campaign in which her father was reelected to a third term, in 2000.

Keiko Fujimori, 41, is facing off with banker Pedro Pablo Kuczynski, 77, who served as prime minister and economy minister in the government of Alejandro Toledo (2001-2006). They are both running for president for a second time: in 2011 she came in second and he came in third in the elections won by Ollanta Humala.

In the last two opinion polls, Fujimori was slightly ahead of Kuczynski, which could change due to the growing denunciations of corruption and other irregularities against the candidate for the right-wing Fuerza Popular, which groups the supporters of 77-year-old Alberto Fujimori, who has been in a cell in a national police station on the east side of Lima since 2007.

Since last year, Keiko Fujimori has been seeking to project an image of herself as having nothing to do with the authoritarian practices of her father, in a strategy that has included populist promises aimed at neutralising the anti-Fujimorista vote that led to her defeat in 2011.

But during the campaign that got underway in January, the candidate has faced a growing number of accusations of shady financing, manipulation of the media, false claims about her political opponents, and other practices that put people in mind of the way her father did things.

“Those of us who fought the authoritarianism and corruption of the government of Alberto Fujimori believe that a victory by his daughter Keiko Fujimori would represent a setback to democracy,” said Salomón Lerner, President Humala’s former prime minister.

“Keiko Fujimori, who at the start of her election campaign criticised the excesses of her father, was repeating his practices by the last stage of the campaign. And one demonstration of what I’m saying is the appearance of shady figures, with dubious reputations, who worked with Alberto Fujimori,” Lerner told IPS.

According to Peru’s national elections office, Fujimori has reported more than three million dollars in income, compared to the centre-right Kuczynski’s 2.2 million.

The May 31 protest in Lima against presidential candidate Keiko Fujimori, the daughter and heir to Alberto Fujimori, who is serving a 25-year sentence for crimes against humanity and corruption. Credit: Courtesy of La República

Keiko Fujimori’s main campaign funders include former officials from her father’s regime or people otherwise close to him, some of whom are implicated in the current investigation of money laundering in her 2011 campaign.

Drug trafficking, more than just a shadow

In 2013, the U.S. government accused businessman Luis Calle, who helped finance Keiko Fujimori’s campaign in 2011, of being an international drug kingpin and laundering money.

And in 2014, Peru’s special prosecutor for money laundering cases, Julia Príncipe, sought to lift the parliamentary immunity of Fujimorista lawmaker Joaquín Ramírez, alleging a major discrepancy between his reported income and his 7.1 million dollars in assets.

But the following year, Keiko Fujimori made him secretary general of Fuerza Popular and later threw all her support behind him even after the public prosecutor’s office launched an investigation of him for alleged money laundering.

And she ratified Ramírez in his post after the U.S. Spanish-language television network Univisión and the investigative journalism programme Cuarto Poder, in Lima, revealed in a joint televised news report that the U.S. Drug Enforcement Administration (DEA) was investigating him.

An undercover informant for the DEA, Jesús Vásquez, said he had recorded Ramírez saying Keiko Fujimori gave him 15 million dollars in alleged drug money to launder for the 2011 election campaign.

Although Fujimori dismissed the reports as false, Ramírez was forced to temporarily step down as the leader of Fuerza Popular, after Peruvian authorities announced a trip to the United States to interview Vásquez.

When it looked like the scandal was winding down, the TV programme “Las cosas como son” aired a recording in which Vásquez apparently said he had lied about what Ramírez said. Shortly afterwards the producer of the programme, Mayra Albán, said the recording had been doctored, and that it had come from the head of Fujimori’s campaign, José Chlimper.

It was an operation by the Fujimori camp to discredit the DEA informant, whose accusations reminded analysts and opposition politicians of Keiko Fujimori and her father: during the latter’s government, drug trafficking was one of the biggest sources of corruption, as the justice system proved.

Former anti-corruption prosecutor Julio Arbizu said “a triumph by Keiko Fujimori represents for Peruvian democracy, on a symbolic level, the exercise of shameful masochism on the part of those who already suffered the crimes and horror of her father’s government.”

“Her election would amount to support for a way of governing that violated all the principles of democracy,” added Arbizu, who headed the fight against corruption in the country from 2011 to 2014.

“But as a more in-depth consequence, a victory by Fujimorismo would mean the country would be governed by a criminal organisation (I believe Fujimorismo has always been one), which this time around has a strong coating of formality, but which has given us enough reasons to believe that it has serious ties to the drug trade and money laundering,” he added.

Keiko Fujimori, with Joaquín Ramírez, who has temporarily been suspended as secretary general of her party, Fuerza Popular, because of accusations of drug trade-related activities, although the candidate has confirmed her confidence in him. Credit: Courtesy of La República

Arbizu played a decisive role in the extradition of former president Fujimori, when he took refuge in Chile, in 2007, after he tried to step down as president, while in Asia, in late 2000 and was impeached by Congress for “moral incapacity.”

Congresswoman Rosa Mavila presided over an investigative commission on the links between drug trafficking and politics, which issued a report that mentioned ties with Fujimorismo.

“At the end of Fujimori’s government, when Keiko Fujimori was first lady, she asked her father to pardon the Martínez sisters, who were in prison at the time on charges of drug trafficking,” Mavila, who belongs to a centre-left alliance, told IPS.

Fujimori freed them, and when his daughter was running for Congress in 2006, “the Martínez sisters contributed to her campaign. And this isn’t the only case,” said Mavila.

“During the Fujimori administration, the drug trade had a powerful influence,” she stated.

As an example, she cited the case of drug trafficker Fernando Zevallos, who was acquitted four times during that period, but was sentenced to 20 years in prison once Toledo became president.

“Rather than trying to ward off any doubt, Keiko Fujimori has defended people accused of money laundering, as in the case of Congressman Joaquín Ramírez,” said Mavila, who pointed out that the Fujimorista leader had taken refuge in his parliamentary immunity to escape investigation.

“Immunity is not impunity. The Fujimoristas should understand that,” the legislator said.

In the May 31 march against Keiko Fujimori, the most frequently intoned chant was against the creation of a “narco state”, if the daughter of imprisoned former president Alberto Fujimori is elected Sunday.

Edited by Estrella Gutiérrez/Translated by Stephanie Wildes

Transparency International (PNG) organises an annual Walk Against Corruption in Papua New Guinea's capital, Port Moresby. Credit: Kanya D’Almeida/IPS

By Catherine Wilson
SYDNEY, Feb 24 2015 (IPS)

Corruption, the single largest obstacle to socioeconomic development worldwide, has had a grave impact on the southwest Pacific Island nation of Papua New Guinea. While mineral resource wealth drove high gross domestic product (GDP) growth of eight percent in 2012, the country is today ranked 157^th out of 187 countries in terms of human development.

Key anti-corruption fighters in the country say that money laundering must be tackled to increase deterrence and ensure that stolen public funds earmarked for vital hospitals and schools do not pay for luxury assets abroad.

A patronage system of governance and a culture of secrecy have led to the misappropriation of an estimated half of Papua New Guinea's development budget of 7.6 billion kina (about 2.8 billion dollars) between 2009 and 2011 -- Investigation Task-Force Sweep (ITFS)
“Our police officers, school teachers and health workers live and work in very squalid circumstances,” Lawrence Stephens, chairman of Transparency International (PNG), in the capital, Port Moresby, told IPS.

“So when we see the government awarding a contract for pharmaceutical and medical supplies to a company not qualified to tender, a company quoting a price 40 percent higher than the closest qualified tender and costing the equivalent of 160 new homes for nurses each year of the three-year contract, we blame corrupt individuals for destroying development.”

Papua New Guinea has been given a corruption score of 25/100, where 100 indicates clean governance, in comparison to the world average of 43/100, by Transparency International.

The country’s dedicated anti-corruption team, Investigation Task-Force Sweep (ITFS), launched by the government in 2011, has described the country as a ‘mobocracy’, where a patronage system of governance and a culture of secrecy have led to the misappropriation of an estimated half of the development budget of 7.6 billion kina (about 2.8 billion dollars) from 2009 to 2011.

Large-scale theft of public funds, including foreign aid, is alleged to have occurred across government departments responsible for national planning, health, petroleum and energy, finance and justice.

A 2006 Public Accounts Committee Inquiry into the Lands Department alone concluded that it had conducted itself illegally over many years and given priority to the interests of private enterprise and speculators over the interests and lawful rights of the State. The department’s shortfall in revenue was 5.9 million kina (2.2 million dollars) in 2001 and 4.9 million kina (1.8 million dollars) in 2003.

State capture, where powerful private sector interests exert undue influence over state leaders, officials and procurement processes, has had devastating repercussions for national development. Approval of ‘white elephant projects’ has channelled windfalls to criminal syndicates, Sam Koim, the ITFS Chairman, reported in the Griffith Law Journal.

Koim told IPS that, of 302 cases of corruption entailing revenue of up to 5.3 billion kina (1.9 billion dollars) under investigation, 91 had been prosecuted. Twenty-eight senior public servants have been suspended or removed from office, while two Members of Parliament and two senior public servants have been convicted and jailed.

To date, 8.3 million kina (3.1 million dollars) in proceeds of crime have been recovered, but including all outstanding cases this figure could potentially rise to 500 million kina (187 million dollars). Investigation into corporate tax evasion has led to the restitution of 22.6 million kina (8.4 million dollars).

Globally it is estimated that corruption drains the developing world of up to one trillion dollars every year and what is lost is in the magnitude of 10 times the official development assistance budget, claims the United Nations Development Programme (UNDP).

This has impacted increasing inequality in countries such as PNG, where 40 percent of the population of seven million live below the poverty line, maternal mortality is 711 per 100,000 live births, literacy is just 63 percent and only 19 percent of people have access to sanitation.

It is a vicious cycle, as Koim also believes that the state becomes an alternative source of personal prosperity when there are few legitimate avenues available for people to economically improve their lives.

Banks crucial to fighting corruption

The majority of stolen funds have been transferred through banks to offshore investments. Australia receives about 200 million Australia dollars (155 million dollars) of illicit gains from the Melanesian island state every year, claims the Australian Federal Police.

Several PNG politicians have purchased luxury homes with a total estimated value of 11.5 million Australian dollars (8.9 million dollars) in the northern Australian city of Cairns.

“Without banks and financial institutions, it is impossible to commit economic crimes, such as fraud and money laundering,” states the Investigation Task-Force Sweep (ITFS).

In a report last year on the government’s payment of fraudulent legal fees, ITFS identified numerous control gaps, such as lack of written contracts, oversight of procurement and payment clearance processes and the failure of banks to prevent evidently suspicious transactions.

“The duty imposed on banks to avoid engaging in money laundering should not be limited to ticking the boxes or submitting periodic transaction reports, but also taking proactive steps including rejecting transactions and closing bank accounts,” the report recommended. Sixty-five percent of PNG’s financial sector assets are held by commercial banks, including foreign bank subsidiaries.

There are also gaps between national legislation and banking sector regulations. For instance, money laundering is a criminal offence under the Proceeds of Crime Act (2005), but there is no obligation on banks to check inexplicably large or unorthodox patterns of transactions.

Action is also required by recipient nations, experts say. Professor Jason Sharman of the Centre for Governance and Public Policy at Queensland’s Griffith University told IPS that there was a need for improved government “supervisory responsibility to make sure that Australian banks are not accepting suspect funds from PNG Politically Exposed Persons (PEPs).”

“One of the main weaknesses is in the Australian real estate sector with very little scrutiny of foreign money coming in, especially when, as is often the case, this money is routed via lawyers’ or real estate agents’ trust accounts,” he added.

But progress by the anti-corruption team has accelerated broader action. “A number of PNG-based banks have closed accounts of high risk customers and refused suspicious transactions”, while some international corresponding banks “have refused transactions they view to have originated from illicit sources,” ITFS reports.

Reducing and preventing corruption is a long-term battle, which includes addressing the cultural divide between an introduced western government system and centuries of traditional governance based on a leader’s ability to acquire and distribute resources to his own kin. But if corruption is driven largely by the lure of a quick route to untold personal wealth, then a critical measure now is eliminating safe havens for the plunder.

Edited by Kanya D’Almeida

New analysis suggests that developing countries are losing a trillion dollars or more each year to tax evasion and corruption facilitated by lax laws in Western countries, raising pressure on global leaders to agree to broad new reforms at an international summit later this year.

These massive losses could be leading to as many as 3.6 million deaths a year, according to the ONE Campaign, an advocacy group that focuses on poverty alleviation in Africa. Recovering just part of this money in Sub-Saharan Africa, the organisation says, could allow for the education of 10 million more children“Whenever corruption is allowed to thrive, it inhibits private investment, reduces economic growth, increases the cost of doing business, and can lead to political instability. But in developing countries, corruption is a killer” – ONE Campaign
 a year, or provide some 165 million additional vaccines.

“Whenever corruption is allowed to thrive, it inhibits private investment, reduces economic growth, increases the cost of doing business, and can lead to political instability. But in developing countries, corruption is a killer,” a report on the findings, released Wednesday, states.

“When governments are deprived of their own resources to invest in health care, food security or essential infrastructure, it costs lives, and the biggest toll is on children.”

The new analysis focuses on a spectrum of money laundering, bribery and tax evasion by criminals as well as government officials. The lost money is not development aid but rather undeclared or siphoned-off business earnings – immense tax avoidance resulting in a decreased base from which governments can fund essential services.

International trade offers a key point of manipulation, the report says, with the extractive industries particularly vulnerable. In Africa alone, exports of natural resources grew by a factor of five in the decade leading up to 2012, offering clear prospects for growth alongside lucrative opportunities for corruption on a mass scale.

“Between 2002 and 2011 we saw an exponential increase in illicit financial flows across the globe,” Joseph Kraus, a transparency expert at the ONE Campaign, told IPS.

“Yet while we’re all familiar with corruption in developing countries, it takes two to tango – that money often ends up in the financial centres of the Global North. Those banks, lawyers and accountants are all essentially facilitators of that corruption, so in order to get at the root of this issue we need to go after the problems there.”

Real opportunity

Advocates including the ONE Campaign are currently stepping up pressure on industrialised countries to institute a series of across-the-board transparency measures. Some are aimed at corruption in developing countries, such as strengthening disclosure laws impacting on the extractives industry and bolstering “open data” standards to allow citizens increased oversight over their governments’ dealings.

Several other reforms would need to be carried out by developed countries, particularly those housing major financial centres such as the United States and United Kingdom. These would include new standards requiring governments to automatically exchange tax information, to mandate the publication of full information on corporate ownership, and to force multinational corporations to report on their earnings on a country-by-country basis.

In certain circles, such demands have been percolating for years. But current circumstances could offer unusual opportunity for such changes.

“In the last two years we’ve seen an acceleration of this agenda,” Kraus says. “Eighteen months ago, no one was talking about phantom firms or anonymous shell companies. But these issues have gained a lot of momentum in a short period of time, and there is real opportunity coming up.”

This new energy has been motivated particularly by concerns in advanced economies over shrinking government budgets in the aftermath of the global economic downturn. Yet developing countries arguably stand to benefit the most from substantive reforms, provided they’re structured accordingly.

Advocates of such changes are now looking ahead to a summit, on Nov 15 and 16 in Australia, of the members of the Group of 20 (G20) world’s largest advanced and emerging economies as well as two major meetings of finance ministers in the run-up to that event.

The G20 represent about two-thirds of the world’s population, 85 percent of global gross domestic product and over 75 percent of global trade.

The members of the G20 are Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Republic of Korea, Mexico, Russia, Saudi Arabia, South Africa, Turkey, the United Kingdom, the United States and the European Union.

The G20 has taken on a primary role in issues of global financial stability and, more recently, in pushing the automatic exchange of tax information between governments. A new global standard on such exchange could be approved by the G20 ministers in November, among other actions.

“For too long, G20 countries have turned a blind eye to massive financial outflows from developing countries which are channelled through offshore bank accounts and secret companies,” according to John Githongo, an anti-corruption campaigner in Kenya.

“Introducing smart policies could help end this trillion dollar scandal and reap massive benefits for our people at virtually no cost. The G20 should make those changes now.”

Coordinated response

In fact, many G20 countries have instituted some of these reforms on their own. The U.K. government, for instance, has taken unilateral action on publicising information on corporate ownership, while the United States was the first to pass strong transparency requirements for multinational extractives companies.

While such piecemeal national legislation can spur other countries to action, many feel only a comprehensive approach would have a chance at having a substantial impact. Further, many governments have pledged to act on these issues, but have yet to actually follow through.

“Illicit financial flows are a perfect example of a transnational problem, in that you have two legal regimes in which loopholes are being exploited,” Josh Simmons, a policy counsel at Global Financial Integrity, a Washington watchdog group that supplied data for the new ONE Campaign report, told IPS.

“So when an international cooperative body is able to identify these loopholes, they can get member countries to move in sync to address the situation. But if only one country tries to do so, businesses would probably just move elsewhere.”

Others are looking even more broadly than the G20. A paper released last month by researchers with the Center for Global Development, a think tank here, calls for the inclusion of anti-tax-evasion aims in the new global development goals currently being negotiated under the United Nations.

Indeed, even while there could be real movement at the G20 on several of these issues this year, the work on the other end of this equation – in developing countries – remains onerous.

“We need to get developing countries’ tax systems up to speed, strengthen their financial intelligence units and get their anti-laundering laws up to code. And that is proceeding, but much more under the radar given its complexity,” Simmons says.

“Still, that’s where people are actually bearing the brunt of this problem. Tax avoidance in the United States contributes to the national debt, but in developing countries it’s literally causing people to go hungry.”

Edited by Ronald Joshua

An Iranian entrepreneur who is the subject of U.S. and EU sanctions for laundering oil money on behalf of Tehran is operating a successful family of businesses in Tajikistan.

Babak Zanjani’s Tajik empire includes a bank, an airline, a taxi service and a bus terminal that President Imomali Rahmon himself helped inaugurate in March. That cushy relationship, in a country where foreign businessmen say it is impossible to survive without top-level political connections, has coincided this year with increased international scrutiny of Tajikistan’s lax attitude toward money laundering.

Beyond Tajikistan, Zanjani’s business interests are sprawling. On its website, the Dubai-based Sorinet Group, which describes Zanjani as its chairman, lists at least two dozen companies engaging in construction, cosmetics, hospitality, transport, and oil and gas extraction.

The site also lists the Asia Express Terminal in Dushanbe as one of its subsidiaries. A photo on the site shows Zanjani with Rahmon and Dushanbe mayor Mahmadsaid Ubaydulloyev admiring a model of the terminal.

It appears that Rahmon has embraced the head of a group of companies and financial institutions the U.S. Treasury Department says “have been used by the Iranian government to finance its sales of oil around the world”. In April, the Treasury Department targeted Zanjani and a Malaysian bank under his control, along with “an international network of front companies” including Sorinet Commercial Trust.

U.S. officials believe the Zanjani-connected entities are “moving billions of dollars on behalf of the Iranian regime, including tens of millions of dollars to an Islamic Revolutionary Guards Corps (IRGC) company.” The Treasury Department is also targeting his Kont Investment Bank, based at 43 Bukhara Street in Dushanbe.

Last December the European Union sanctioned Zanjani for being “a key facilitator for Iranian oil deals and transferring oil-related money. Zanjani owns and operates the UAE-based Sorinet Group, and some of its companies are used by Zanjani to channel oil-related payments.”

The Treasury Department did not specifically name Sorinet Group, which oversees the Dushanbe businesses. But Sorinet Group’s website lists Zanjani as its “chairman”. And under Treasury Department regulations, any company controlled by a sanctioned individual is also the subject of sanctions. In addition, Sorinet Group shares a Dubai address with Sorinet Commercial Trust, which Treasury did name.

EurasiaNet.org tried to reach Zanjani to give him a chance to explain his activities. His office in Dubai refused to connect us. But he told the Reuters news agency shortly after the European sanctions were announced that he does not do business with the Iranian government. He suggested that EU regulators were mistaken in their assumption that he was engaging in illicit activity.

BBC Persian reported in March that Zanjani has strong ties with senior Iranian officials and appeared in an unofficial video on a private plane with a senior Iranian security officer involved in the violent crackdown on demonstrators following contested elections in 2009.

Few in Tajikistan seem to know much about Zanjani. Last month, the head of Tajikistan’s National Bank, Abdujabbor Shirinov, said he had never heard of Zanjani or the U.S. embargo on Kont Investment Bank, the Ozodagon news agency quoted Shirinov as saying on Jul. 23.

Nevertheless, senior Western officials are concerned about Zanjani’s relationship with Tajikistan’s leadership and worry that Dushanbe is serving as a money-laundering hub.

“Zanjani’s been embraced by the president. The president even opened the bus station, which is unheard of. It’s too cozy a relationship. We believe he’s using Tajikistan to launder Iranian oil money,” said one senior Western official.

Tajikistan enjoys strong cultural and linguistic ties with Iran – the Tajik language is a close cousin of Persian – leading to relatively high levels of Iranian investment for the region. Moreover, because vast quantities of Afghan heroin are said to transit through Tajikistan each year, analysts believe illicit money is sloshing around Dushanbe.

In June, the Basil Institute on Governance ranked Tajikistan the country fourth most-vulnerable to money laundering and terrorist financing of 149 countries in its second-annual Basel Anti-Money Laundering (AML) Index.

A few days after the Basil Institute index was released, and only five days ahead of an international meeting on money laundering in Oslo that Tajik officials were due to attend, Rahmon called an extraordinary session of parliament and pushed through new legislation that sets criminal penalties for money laundering.

The Asia-Plus news agency noted that lawmakers did not discuss the legislation. As in many of the post-Soviet republics, Tajikistan often passes legislation that is vaguely worded and poorly enforced.

While foreign diplomats welcomed the move in principle, the senior Western official told EurasiaNet.org the legislation was only “window dressing” to give Tajik officials something to boast about at the Oslo inter-governmental Financial Action Task Force (FATF) meeting. Earlier in 2013, FATF criticised Tajikistan for having some of the weakest anti-money laundering legislation in the world.

In a small economy like Tajikistan’s, a business empire like Zanjani’s can be hard to avoid, even if U.S. sanctions prohibit “transactions between the designees and any U.S. person”.

A number of Westerners in Dushanbe said their embassies, including the U.S. Embassy, recommend Zanjani’s taxi service, Asia Express, because it is prompt, reliable, and, unlike the few other local companies (most taxis are private cars), offers receipts.

The U.S. Embassy – which rights advocates and some diplomats have accused of avoiding criticism of the Rahmon administration for fear of losing his support as NATO withdraws from neighbouring Afghanistan – did not respond to a request for comment.

This story originally appeared on EurasiaNet.org.

In the 1980’s, Caribbean countries wanted to shore up their prospects of social and economic development in the coming decades, so they looked to the financial services sector to spur employment and development. They managed to develop a robust industry, particularly in the Bahamas and the Cayman Islands.

Today, however, the region has been struggling to keep up with evolving international regulations. These challenges come at a high cost, even as proponents of the regulations argue that they are critical in dealing with the global financial and economic crisis.

For at least two years, the international community has pressured the Caribbean, where several countries are well known as tax havens, to shut down its financial centres and implement a number of measures in order to qualify for bilateral aid. Since then, little has changed, delegates at the second meeting of the Caribbean Forum (CARIFORUM) Conference on the International Financial Services Sector in the Caribbean Region, held Oct. 30-31 in Antigua, learned.

Baldwin Spencer, the Antiguan prime minister, said the international community continues to issue “repeated demands that the region should be treated on a level playing field with financial centres in the industrialised economies using the principles of natural justice”.

He said that while the Caribbean has been committed to developing financial services in a “responsible manner and investing in their good supervision and regulation”, developed countries are the ones that have dropped the “regulatory ball”, to devastating effect on the rest of the world.

The Paris-based Organisation for Economic Cooperation and Development (OECD) has pushed for restricting, and in some cases, outlawing financial services in the Caribbean, threatening on occasions to blacklist countries that have failed to comply with some of its policies.

Regulations with a purpose

Those who support such regulations say that they are necessary given the current financial climate. The newly appointed head of the delegation of the European Union to Barbados and the Eastern Caribbean, Mikael Barfod, has defended the OECD position, insisting that it is aimed at tackling tax fraud and harmful tax practises.

“In today’s environment with the international financial crisis, the international taxation cooperation between governments and between tax administrations has gained in importance,” he said, noting that since 2009, there has been “major progress” in these areas.

He acknowledged that while Caribbean countries have made an effort to sign a “sufficient amount” of Tax Information Exchange Agreements in order to be fully accepted by the OECD, “there is more to be done in many states and the governance standards defined internationally by G20 and OECD are changing”.

Avinash Persaud, an international expert on the financial services sector and chairman of the London Business School, told IPS that the financial sector “is really quite significant” in Caribbean economies, accounting for as much as 50 percent of gross domestic product (GDP) for islands like Barbados and Antigua and Barbuda.

“They represent a major part of tax revenues. Over the past 10 years they have come under tremendous pressure by the larger economies” such as those of London, Zurich, and New York, which are under fiscal pressure themselves with little or no tax revenues and which now want to compete with Caribbean financial centres.

“They are trying to establish a set of global rules which they decide themselves and then impose on us,” said Persaud. “Then they judge whether we are fitting with those rules or not. Judge and jury. It is really ad hoc and it is really designed to close down the international financial centres coming from the Caribbean. It is certainly not a level playing field.”

New standards to follow

Ivan Ogando Lora, the director general of CARIFORUM, which is comprised of the 15-member Caribbean Community (CARICOM) bloc and the Dominican Republic, said recent recommendations by the Financial Action Task Force (FATF) regarding international standards for combating money laundering and financing of terrorism, will also now pose new problems for the region.

“Compliance to international standards now seems to be the order of the day and Caribbean jurisdictions have been making strides in this regard,” he said, noting however, despite the efforts, that Caribbean countries “continue to attract negative attention”.

CARICOM countries have already developed a final draft of a Financial Services Agreement that if approved by mid-2013 would create a single financial space with common legislation, regulations, administrative procedures and practices and will also provide for cross border supervision and harmonisation of standards.

The United States, which has complained in the past of its wealthy citizens using the Caribbean to escape paying taxes, has itself introduced a range of changes to its financial regulatory environment that regional stakeholders fear could also undermine the financial services sector within CARIFORUM.

The Foreign Account Tax Compliance Act (FATCA), for example, would require U.S. tax authorities to levy a 30 percent withholding tax on both foreign and non-financial foreign institutions where new reporting requirements have not been met.

The requirements would affect traditional financial institutions such as retail and commercial banks as well as investment banks, securities and brokerage firms, private banks and wealth management firms that do business in the United States. Any institution doing business with U.S. individuals and entities would have to immediately adopt procedures, processes and systems necessary for FATCA compliance.

Persaud said that this latest strategy underscores the struggle facing the Caribbean in recent years.

“They have essentially moved land and water to try and comply with the new rules and when they do so, the rules then change again and the costs are extremely burdensome. The cost for the Caribbean financial centre complying with international rules is ten times as the per cent of GDP as the cost of the larger rich countries complying with the rules they have set.

“The problem is we can’t abandon the sector because it is an important sector,” he said, urging the Caribbean “to fight a better fight”.

By Hilaire Avril
LONDON, Aug 17 2011 (IPS)

As several African governments examine the possibility of setting up their own “offshore” financial centres, the trade name for tax havens, campaigners are calling for transparency and fair tax regimes.

Alvin Mosioma, coordinator of the Tax Justice Network Africa, which advocates fair tax regimes to promote economic and social development. Credit: Tax Justice Network Africa

“The African Union has established a special panel on illicit financial flows, and the African Tax Administrators Forum meeting held in 2008 was also a promising start, but Africans have been too silent too long on the issue of financial transparency.”

“With the current preoccupations with terrorism and political instability on the continent, adding financial instability and sheltering corruption in local tax havens would be catastrophic,” Mosioma concludes.

“There is an emerging trend in Africa towards establishing our own offshore centres. One argument we hear is that it would modernise the African financial sector, and streamline the red tape in many countries,” says Mosioma.

The nefarious impact of tax havens on developing countries’ economies is increasingly well documented. Recent research establishes that secrecy jurisdictions in the British Isles or the Caribbean are a major conduit for billions of dollars siphoned out of low-income countries each year.

Africa is far from immune. The Isle of Jersey, one of the world’s most famous jurisdiction for “offshore finance”, announced in early August it would open negotiations with the government of Kenya over its share of the 10 million dollars in bribes recovered from bank accounts allegedly held by a former Kenyan cabinet minister and the former head of the national power company on the island.

Some African states have a long-standing tradition of ensuring banking and legal secrecy on their territory. Liberia is internationally famous for its lax shipping register, ensuring cheap and confidential registration of sea vessels regardless of their seaworthiness and ownership.

Mauritius has long been a tax haven, sheltering fortunes from the prying eyes of African tax authorities and facilitating “round tripping”, the discrete harbouring of funds from India later artificially re-invested under the very favourable guise of foreign direct investments. Djibouti and the Seychelles have also been qualified as tax havens in the past.

Botswana, in southern Africa, set up its International Finances Services Centre in 2003, facilitating the easy transfer and repatriation of funds to avoid withholding and capital gains tax, thus earning the moniker of “Switzerland of Africa” in an article of the Harvard International Review in 2010.

Much more recently, Ghana, a west-African country, which recently struck oil, contemplated the benefits of setting up its own offshore financial centre.

Kenya announced in March that it was considering establishing the Nairobi International Financial Centre. The project seems to be an attempt at competing with Johannesburg, in South Africa, the financial powerhouse of the continent, and Mauritius, already a secrecy jurisdiction.

“This is not yet official government policy, as far as we know,” Mosioma says. “But there are related concerns being raised regarding Kenya’s Special Economic Zones granting telecoms and banking operations special tax regimes,” he explains.

Financial advisor and international institutions have, until recently, been marketing Western economies’ deregulation as the successful path to economic growth throughout the world. The global financial meltdown of 2008 and current debt crises in Europe and the U.S.A. seem to have had little effect on this discourse so far.

“The global financial sector is still advocating the liberalisation of financial flows into and out of countries as a “best practice”, and increasingly so in developing countries,” says Mosioma.

But recent developments may have thwarted some African temptations to create regional fiscal paradises. Ghana’s proposed offshore centre was recently disavowed by the government, which withdrew the offshore banking license it had granted to Barclay’s bank.

The move was blamed by the financial group on Ghana’s inadequate legislative framework. But the Central Bank seems to have reacted to concerns regarding the possibility of regional money laundering. “It’s very heartening to see that Ghana seems to have come through in this regard,” says Nicholas Shaxson, author of the recently published “Treasure Islands: Tax Havens and the Men who Stole the World”, a history of the global offshore financial system.

“The specific risks of tax havens for African countries is that tax haven exacerbate the “resource curse”, the economic hardships hitting countries that rely mainly on commodities exports,” Shaxson explains.

“A country like Nigeria has billions in oil money flooding in, but the ordinary people tend not to be better off, as it sets off inflation and impedes exports of job-creating sectors, such as agriculture or manufacturing,” he says. “If a country’s financial sector were suddenly to cause a massive influx of money, it would undoubtedly have the same effect on its population.”

Despite the risks, the issue of offshore financial centres is not yet on most international organisations’ radars. The OECD’s Global Forum on Transparency and Exchange of Information for Tax Purposes is one of the only institutions monitoring offshore finance. It narrowly spared Ghana a slot on its black list, in light of the recent development.

According to Shaxson: “Civil society is in its early phase of waking up to the importance of the issue: Brazil’s government is hosting an upcoming seminar on international tax justice, and India has its own drivers, with rising public anger at what they call ‘black money’.”

Excerpt:

By Emad Mekay
CAIRO, Jan 21 2011 (IPS)

Middle East countries have seen the largest increase of illicit outflows of funds to richer nations, depriving the developing nations of much needed development money, a new international report shows.

Developing countries in the Middle East and North Africa (MENA) region lost 1.2 trillion dollars in the nine years of the study, an average of 130 billion dollars a year, most of which goes to banks in the U.S., the UK, Switzerland and other G8 countries, economist Karly Curcio told IPS in an interview.

MENA alone accounted for 24.3 percent of the hike in all global illicit money outflows between 2000 and 2008, according to a new report by Global Financial Integrity (GFI), a Washington-based organization that advocates transparency in the international financial system.

Four oil-producing Arab countries appeared on the top 10 list of illicit money transfer exporters.

Saudi Arabia was the lead Arab country with outflows of 302 billion dollars over the nine years studied the report, ‘Illicit Financial Flows from Developing Countries 2000 – 2009’.

The United Arab Emirates came next at 276 billion dollars, followed by Kuwait at 242 billion dollars and Qatar at 138 billion dollars.

Curcio said that capital flight in the region was mostly in the form of bribes, kickbacks, tax evasion, deals in contraband goods, criminal activities and other forms of corruption.

“The dramatic increase in the world price of oil this decade likely contributed to the rapid increased volume of illicit financial flows out of the resource-rich region,” added Curcio, who is co-author of the report.

Another method for illicit money transfers is when a country’s residents acquire foreign assets illicitly by over-invoicing imports and under-invoicing exports – a practice known as trade mis-pricing that is more common outside the MENA region especially in Asia and Mexico.

Globally, developing nations were losing an average of 725 billion dollars a year to illicit money transfers. China was the world’s largest exporter of illegal funds by far at a whopping 2.18 trillion dollars followed by oil exporters Russia at 427 billion dollars and Mexico at 416 billon dollars, the GFI said in its report.

Egypt was the first exporter of illicit funds after the four top Arab oil- exporting countries in the region with estimated total outflows of 57 billion dollars between 2000 and 2008, an average of 6.3 billion dollars a year.

Israel followed at 15.2 billion dollars, an annual average at 1.6 billion dollars a year, and Lebanon at 11 billion dollars for nine years, an average outflow of 1.2 billion dollars per year.

“We regard our figures as conservative, since they do not include smuggling, some forms of trade mispricing, and asset swaps,” says Raymond W. Baker, director of Global Financial Integrity. “Skyrocketing prices for oil, other minerals, and foodstuffs, generated funds which easily escaped abroad.”

The 64-page report comes at a critical time in the Middle East when people of the region are witnessing an unprecedented popular revolution against the Western-backed corrupt rule of President Zine el Abidine Ben and his family. Tunisians say they revolted in part because they saw the slow obliteration of their wealth to corruption by the Ben Ali regime.

Tunisian media online are reporting that the Ben Ali family accumulated hundreds of millions of dollars of wealth in stolen money that is now in Western banks.

The new interim government in Tunisia has requested that foreign countries, especially Switzerland, freeze all assets of the Ben Ali clan.

While the Middle East outpaced other regions in terms of the speed of growth of illicit outflows, it took second place in terms of the size of flows after Asia.

Asia accounted for 44.4 percent of total illicit flows from the developing world while MENA represented 17.9 percent, developing Europe17.8 percent, the Western hemisphere 15.4 percent, and Africa 4.5 percent.

The report says that oil-producing countries around the world, many of them in the Middle East, are fast pushing China as the world’s largest exporter of illicit funds.

China’s share of all developing world outflows fell from 46 percent in 2000 to 27 percent in 2008 while Russia, the United Arab Emirates, Kuwait, and Nigeria – all oil exporters – are now becoming more important as sources of illicit capital.

Authors of the report say they studied World Bank and IMF data of unrecorded capital leakages through the balance of payments which helps capture illicit transfers of the proceeds of bribery, theft, kickbacks, and tax evasion.

The Washington-based GFI said it was recommending greater transparency in the global financial system to curtail further bleeding of wealth from already poor nations.

“Illicit capital flight needs somewhere to go, therefore, one of the best ways of dealing with the problem of these illicit outflows is to increase transparency in the global financial system and make it much harder to hide ill-gotten wealth,” Monique Danziger, communications director told IPS.

“This includes doing away with the kind of bank secrecy for which Switzerland is famous for but also requiring financial institutions in places like the United States to be more open and accountable.”

Excerpt:

By Helda Martínez
BOGOTÁ, Jun 22 2010 (IPS)

Football, the most popular sport in Colombia, has been subject to heavy pressures from drug trafficking since the mid-1970s. A new study shows that the illicit trade continues to tarnish the upper echelons of this sport.

A big screen in a Bogotá plaza shows the 2010 football World Cup. Credit: Helda Martínez/IPS

Investigations in recent months led to the arrests of five people, in Buenos Aires, Bogotá, Miami and in the central Colombian town of Puerto Gaitán.

Notable among them are two former officials of the government’s Technical Investigation Corp (CTI), the entity that supports the national Attorney General’s Office.

Luis Caicedo and Claudio Silva were detained in April as part of “Operation Pacific Basin.” Caicedo lived in relatively humble circumstances in Buenos Aires, marking a sharp difference with the top Colombian drug cartel bosses.

From Argentina, he allegedly coordinated a network of illicit activities throughout the Americas, linked to the brothers Javier and Luis Calle, successors to drug boss Wilber Varela, who was killed in Venezuela and 2008.

Silva is believed to have served as a figurehead. The authorities have seized 118 properties whose titles were under his name.

Arrested in the United States for alleged obstruction of justice is Ricardo Villarraga, former official with the Colombian Administrative Department of Security (DAS), charged in 1994 for abetting the escape of Puerto Rican Fernando Montañez, arrested for drug trafficking.

The Attorney General’s Office links Villarraga, who has a son playing for Independiente Santa Fe, to the money laundering case, though his defence attorney denied that his arrest in the U.S. is related to drug trafficking.

Another arrestee also belonged to the DAS: Franklin Gaitán, who was in charge of the organisation’s security. The fifth to be arrested is Carlos Flórez, police captain, who is thought to have leaked information to the drug cartel.

The next target of justice authorities is Julio Alberto Lozano Piraquive, who is thought to be living in Mexico and was already sentenced in the United States to 20 years for “drug trafficking and money laundering,” which won him inclusion in the Red Notice of Interpol (International Criminal Police Organisation).

Lozano allegedly provided money to Independiente Santa Fe under the guise of investments. The investigation cites figures that surpass 25 million dollars between 2006 and 2008.

Involved in the plot are also former club presidents dating back to 1985, such as the assassinated César Villegas, sentenced for drug-related money laundering in the “Proceso 8,000”, which investigated the ties between the Cali drug cartel and the electoral campaign of former Colombian president Ernesto Samper (1994-1998).

Luis Eduardo Méndez, who headed the club from 2003 to 2007, was sentenced to 70 months in prison for helping Montañez escape. When Montañez was recaptured, he confirmed that Méndez had received money from drug traffickers.

In the middle of the scandal, the football club’s current president, César Pastrana, issued a statement assuring that none of the people mentioned has ties to Independiente Santa Fe, and reiterated willingness to provide all information necessary.

“The relationship between the ‘narcos’ and football has left innumerable inconclusive legal investigations” in Colombia, designer and football fan Camilo Alejandro González, told IPS.

Investigative journalist Fabio Castillo published a report in 1987 entitled “The Horsemen of Cocaine,” which laid out the ties that existed at the time.

“Atlético Nacional (football club) had as its principal shareholder Hernán Botero, seen in a large photo in which he held up a fistful of dollars during a football match that his team lost,” wrote Castillo.

“Remember that in the 1980s and 90s, most people wavered between desire and ethics. They wanted the team managers to create winning teams by hiring famous footballers, at the same time they ignored or hid the disappointment they may have felt about the participation of narco- trafficking money,” sociologist Fernando Morales told IPS.

“It was an era when many idolised Pablo Escobar (notorious Colombian drug lord, killed by police in 1993) because he built houses for the poor and supported neighbourhood football teams,” Morales said.

The 1980s and 90s were also an era of great football triumphs. In 1989, the Atlético Nacional club won the Liberators Cup (the prestigious South American club tournament) and in 1993 the Colombian national team beat powerhouse Argentina 5-0 in qualifying for the 1994 FIFA World Cup — a victory that fans continue to boast about.

The Colombian squad played in the FIFA (International Federation of Association Football) World Cups of 1990, 1994 and 1998.

In 1991, while serving time in La Catedral prison in Medellín, Pablo Escobar received a visit from the national team’s goalie at the time, René Higuita, famous for ability and his agility in the goal.

In 1994, footballer Andrés Escobar (no relation to Pablo) was assassinated in his home city of Medellín after scoring a goal against his own team, which meant Colombia’s elimination from the World Cup in the United States. “That loss sparked fury among those betting on the match, and surely some were linked to narco-trafficking,” said football fan González.

Other teams have experienced similar situations. Los Millionarios club belonged to drug trafficker Gonzalo Rodríguez Gacha, who was killed in a military operation in 1989. The clan of the Rodríguez Orejuela brothers, extradited to the U.S. in 2004, owned shares in the América de Cali football club.

González, who supports Los Millionarios, is confident that the club’s new president, José Roberto Arango “will renovate it, selling some shares and the trademark, as well as bringing in new investors — this time legal ones.”

“A similar process can be seen at the América de Cali club,” he said.

Excerpt:

By Gonzalo Ortiz
QUITO, May 20 2010 (IPS)

“It sounds incredible, but it’s just a matter of a letter that wasn’t turned in on time,” Ecuador’s attorney general said in regards to the Financial Action Task Force decision to qualify the country as “posing a risk to the international financial system.”

Ecuador’s inclusion on the list of “high risk” nations means the FATF determined the South American nation has failed to fulfil the recommendations for preventing and punishing both money laundering and terrorist financing.

Difficulties are already arising for some banks and businesses. “Lines of credit haven’t been cut, but the correspondent banks have requested much more information from the Ecuadoreans,” César Robalino, executive chair of Ecuador’s private bank association, said at a press conference on Tuesday.

Foreign banks have even sent missions to monitor the security practices for transactions in Ecuadorean banks, which already have their own compliance officers and specialised committees on their boards of directors, said Robalino.

The FATF is an inter-governmental body created in 1989 by the Group of Seven most industrialised countries (Britain, Canada, France, Germany, Italy, Japan and United States), and now has 35 members (33 nations and two regional organisations).

Its aim is to oversee and promote policies to fight money laundering and the financing of terrorism by states and financial institutions; yet, among its members are notorious tax havens, such as Switzerland, Luxembourg and the Dutch island of Aruba. Today, FATF is guided by the Group of 20, a bloc of industrial powers and emerging nations that have led efforts to weather the global financial storm that erupted in 2008 in the United States.

Angola, Ethiopia and North Korea are the three other nations joining Ecuador on the list that the FATF issued Feb. 18 in its public statement. Those countries, says FATF, have not complied with its recommendations. In a special declaration, the task force accused Iran of financing terrorist activities.

According to Attorney General Diego García, the other four countries do not even engage in dialogue with FATF, while Ecuador collaborates with the task force and is a member of the regional organisation, the South American Financial Action Task Force (GAFISUD), founded in 2000.

The GAFISUD website states that it was “created on the model of the FATF and has adopted the Forty Recommendations issued by FATF as the most widely recognised international standard for countering money laundering and the Special Recommendations against terrorism financing.”

The reason Ecuador was included on the list, in García’s reckoning, is that the FATF members believed that the government “had not confirmed an absolute commitment at the highest political level” to put all the recommendations into practice.

“They don’t say that we haven’t fulfilled our obligations. On the contrary, they recognise Ecuador’s efforts, but they believe we are lacking a declaration from the highest level in terms of the will to resolve the existing deficiencies and to implement the action plan,” he added.

The official is planning a meeting next week of the National Council Against Money Laundering, which would then send a project to Congress on reforming financial standards.

Ecuador has had anti-money laundering laws on the books since October 2005, but needs to make up for the shortcomings that emerged when they began to be implemented, said the attorney general.

The reforms would clarify the laws and include harsher penalties for money laundering and related illicit activities, and would make Ecuador more efficient in freezing accounts and seizing assets when necessary, García said.

With these steps and a clear letter about Ecuador’s political commitment, García hopes that this country will be removed from the list at the next plenary meeting of the FATF, to be held Jun. 21-25 in Amsterdam.

“FATF is obligated to remove us from that list if we submit an action plan and commitment from the highest level,” he said.

President Rafael Correa and Foreign Minister Ricardo Patiño have both spoken publicly about the possibility of cancelling cooperation with FATF and its recommendations, and creating a new body to monitor financial practices.

But García said that as Ecuador’s representative to the FATF he had not yet received any such instructions, so he is continuing his efforts “to get Ecuador off the list.”

In the opinion of financial expert María Laura Patiño, the FATF action could be a reaction to an agreement signed by Quito and Tehran that allows the Export Development Bank of Iran (EDBI) to act through Ecuador’s Central Bank.

The EDBI and Iran’s Central Bank “have been on special lists for some time,” said Patiño, and even though “no operations have been carried out, this can have consequences.”

García rules out that theory, pointing out that the FATF official documents do not mention the agreement with Iran.

The agreement with Iran has created other problems, however. The president of Ecuador’s Central Bank, Diego Borja, travelled in mid-May to the United States to explain the extent of the pact to officials at the U.S. Federal Reserve.

As he explained upon his return, “there was a danger that they wouldn’t send dollar currency to Ecuador,” which would be a disaster because this country replaced its national currency with the dollar a decade ago. Borja said U.S. officials proved understanding of Ecuador’s position in regards to the agreement with Iran.

Excerpt:

By Ranjit Devraj
NEW DELHI, Apr 25 2010 (IPS)

Allegations that India’s junior foreign minister Shashi Tharoor had swung outsize ‘sweat equity’ for a female friend in a newly floated professional cricket league franchise may have cost him his job, but it may also expose the multi- million dollar India Premium League (IPL) as a massive money-laundering enterprise.

Tharoor, a former United Nations under-secretary general, denied in a speech delivered in Parliament on Tuesday that he had done anything “improper or unethical,” adding he was resigning so as not to “embarrass” the government of Prime Minister Manmohan Singh.

But the heat generated over the issue resulted in parliamentarians from both the treasury and opposition benches demanding that the government thoroughly investigate the IPL and its ability to attract hundreds of millions of dollars from shell companies at auctions of franchises and in advertising and telecast rights.

During the debates in Parliament around Tharoor’s resignation, Laloo Prasad Yadav, leader of the regional Rashtriya Janata Dal party, alleged that the IPL thrived on “the laundering of black money stashed away in Swiss banks.”

Gurudas Dasgupta, a long-standing member of the Communist Party of India, said the IPL exploited a passion for cricket among Indians but had turned the game into organised gambling. He referred to reports of large amounts of money flowing into the IPL from tax havens such as Mauritius and Dubai.

Top members of the ruling Congress party seemed to agree. “The IPL is nothing but glorified gambling with black money,’’ said Vayalar Ravi, a member of Singh’s cabinet and Minister for Overseas Indians.

Such was the clamour for investigations into the workings of the IPL that Indian Finance Minister Pranab Mukherjee was compelled to make a solemn promise in Parliament that a thorough probe would be launched by the income tax department and that “no one would be spared.”

On Wednesday, income tax officials carried out simultaneous raids on IPL’s offices in several cities across India and those of its franchisees such as the Kolkata Knight Riders owned by the film star Shah Rukh Khan.

Tax officials have been questioning IPL commissioner Lalit Modi, described as the ‘wunderkind’ who brought together high-profile politicians, film stars, world cricketing legends and big money to create what may be the world’s most lucrative professional cricket league.

With such a powerful lineup, will the government carry its investigations into the workings of the IPL to its logical conclusion? “No chance of that happening,” said Vineet Narain, a veteran crusader against the phenomenon of ‘black money’ (cash transactions hidden from the government) that greases the workings of political parties in India.

“As we have seen with other scams of this magnitude, politicians and businessmen can be expected to close ranks and ensure that the income tax investigations reach nowhere,” Narain told IPS. “The IPL, in fact, is the latest and slickest way to launder black money stashed away by politicians and big wigs in tax havens abroad.”

Black money has long been considered the lifeblood of politics in India, where the system requires political parties to keep large numbers of workers on their payrolls but cannot be legally funded to pay their salaries.

Jayprakash Narain – founder of the Hyderabad-based non-government organisation devoted to eradicating corruption in public life – said nothing short of “systemic reform” can break the close links between black money and India’s political parties.

“Perhaps more than anywhere else in the world, politicians in India work by mobilising large numbers of people for mammoth rallies that are expensive and that can be paid for only by raising money through dubious means on being elected to power – and this process is perpetuated in a vicious cycle,” Narain told IPS over telephone from Hyderabad.

On Wednesday the main opposition Bharatiya Janata Party (BJP) mounted a massive rally in the national capital to protest against rising prices, which BJP leader Lal Krishna Advani blamed on “rising corruption within the central government leadership.”

According to Narain what is particularly unfortunate about the IPL scam is that it has shown up top politicians chasing after a brand of cricket associated with glamorous Indian film stars, the world’s top cricket heroes and all-night parties while the country grapples with mass poverty.

One name that keeps popping up in the context of both rising food prices and big-time cricket is that of Sharad Pawar, union agricultural minister and the man slated to replace Britain’s David Morgan as the president of International Cricket Council in June this year.

The IPL was created as a unit of the Board of Cricket Control in India while Pawar was chairman from 2005 to 2008.

As leader of the National Congress Party, a key constituent of the ruling United Progressive Alliance, Pawar wields enormous clout in the Manmohan Singh government.

“The arithmetic in the Lok Sabha (lower house of parliament) is such that government cannot afford to antagonise Sharad Pawar and also hope to see through a slew of important legislation in the current budget session of parliament,” Vineet Narain said.

Excerpt:

By Julio Godoy
BERLIN, Feb 23 2010 (IPS)

New cases of tax evasion in several European countries are showing the limits of the informal agreements reached between the Organisation for Economic Cooperation and Development (OECD) and tax havens such as Switzerland, Luxembourg and Liechtenstein.

The cases surfaced in January when anonymous former clerks at Swiss private banks offered the German ministry of finance copies of CDs containing data on German citizens who maintain secret bank accounts in Switzerland, and who use them to evade taxes.

Early February the German government announced that it would buy the CDs, for some two million euros (2.7 million US dollars). The data contained in the CDs would allow the German fiscal authorities to legally pursue the evaders and collect more than 400 million euros (543 million dollars) in additional taxes.

The government’s decision to buy the CDs and use the data to launch inquiries into the tax evaders’ financial dealings have triggered a wave of corrected tax declarations in recent weeks.

Allegedly, more than 3,000 German citizens have, since the beginning of February, presented new tax declarations, hoping to avoid judicial inquiries and possible prison sentences.

Similar cases have been reported in France and even in Switzerland.

According to surveys by the Swiss press, at least 300 tax evaders have filed new corrected declarations in February. In France, fiscal authorities have bought several CDs containing data on secret bank accounts held by French citizens in Swiss banks, and launched prosecutions.

In the German case, the government’s decision to buy the CDs also led to diplomatic quarrels with Swiss authorities. Swiss high-ranking government officials accused the German government of complicity with thieves who have stolen the data from private banks.

At a press conference on Feb. 21, the Swiss minister of justice Eveline Widmer Schlumpf even accused Germany of “fencing.” Widmer Schlumpf added that her government will not cooperate with Germany in its fight against tax evasion as long as “it uses data stolen [in Switzerland] to substantiate its claims.”

These affairs confirm that tax evasion continues to take place on a large scale in Europe, despite the agreements reached in 2009 by the OECD and European tax havens.

According to estimates by the U.S. senate, tax evasion represents global revenue losses of up to 100 billion dollars a year for states. “In many European countries the sums run into billions of euros,” says a recent OECD paper on the issue, released Feb. 18.

One year ago, in the wake of the global financial crisis that illustrated the troublesome consequences of financial deregulation, the OECD agreed with fiscal authorities in countries such as Switzerland, Liechtenstein and Luxembourg to improve tax transparency and push forward a more effective exchange of information in matters related to international capital movements and tax evasion.

According to the OECD, “Since the April 2009 … almost 300 tax agreements have been signed to meet [the group’s] standards on tax transparency and effective exchange of information. All OECD and G20 countries are committed to these standards.”

Switzerland is member of the OECD.

At the time of the agreement, the OECD secretary general Angel Gurría said, “What we are witnessing [in the fight against tax evasion] is nothing short of a revolution. By addressing the challenges posed by the dark side of the tax world, the campaign for global tax transparency is in full flow.”

With the OECD agreement with European tax havens, “we have equipped ourselves with the institutional means to continue the campaign,” Gurría added. “With the crisis, global public opinion’s expectations are high, their tolerance of non-compliance is zero and we must deliver”.

The OECD also elaborated two lists of tax havens. One includes all OECD countries and territories under European or U.S. jurisdiction, which had signed the agreement with the organisation.

The other register, officially labelled black list, records all other non- European countries which offer very low or no tax at all to foreign capitals, and which did not put in practice the norms and standards set up by the OECD.

Despite the evidence that such agreements and grey lists have at best only symbolic value, on Feb. 22 the French government released yet another black list of tax havens, with 18 countries or territories in the developing world. The list includes six islands in the Caribbean and Oceania, as well as four Central American countries, Brunei, the Philippines, and Kenya.

All capital transfers between France and these 18 territories is being imposed with a 50 percent tax.

But, as the French tax expert Dominique Richard noted in a comment for the newspaper ‘Sud Ouest,’ “none of the big European tax havens, used by international capital, from Luxembourg to Monaco, appears in the French black list. All these big accomplices of tax evasion and money laundering have cheaply regained their virginity [before the OECD] by signing symbolic agreements.”

French unions point out that the tax justice and transparency the French government demands internationally does not operate within the country. “The tax rate for small French enterprises reaches 28 percent upon their net operating surpluses. But the 40 largest French enterprises pay only eight percent,” the Sud fiscal union (the union’s office at the ministry of finances) said in a communiqué.

In Germany, the wave of new corrected tax declarations is moving parliamentarians to considering abolishing the impunity offered to tax evaders who voluntarily correct their own tax declarations.

The German penal code sanctions tax evasion with prison sentences of up to 10 years. But if tax evaders by their own will correct their revenue declarations, the law foresees no sanction other than the payment of the evaded taxes and the corresponding interests.

On Feb 22, Leo Dautzenberg, in charge of fiscal policy at the ruling Christian Democratic Union party, said at a press conference: “The present wave of corrected tax declarations proves that tax evaders act out of fear. The parliament should correct the impunity for such crimes.”

Dieter Ondracek, chairperson of the fiscal union, also complained that German penal law grants impunity to tax evaders, unparalleled in other law enforcement areas. “The tax evaders’ sudden honesty is simply the consequence of the fear, and of the promise of impunity,” Ondracek told IPS.

Excerpt:

By Julio Godoy
BERLIN, Nov 24 2009 (IPS)

Numerous failures by industrialised countries’ governments and central banks in managing the financial crisis are feeding the next bubble, which most likely will again provoke economic woes such as recession, unemployment, and poverty, according to economists and analysts.

The failures go from central banks’ overshooting the easing of monetary and interest policy, which has led to a substantial increase in the world’s money supply, to the incapacity of governments to agree on coordinated global regulation for the operation of investment banks and hedge funds.

Since early 2007, the joint monetary base of the U.S. and the European Union has increased by 70 percent, from 1,400 billion to 2,500 billion Euros. The monetary base comprises coins, paper money and the commercial banks’ reserves at the central bank.

Yet another mistake by governments and central banks is the lack of proper controls over the use of the billions of dollars in state funds allocated during the last 18 months to rescue – from insolvency – the private banks involved in highly risky investment in and trade of toxic financial derivates.

Thanks to these rescue packages and the low interest policy practiced in practically all industrialised countries, private banks can cheaply borrow money from central banks. But, instead of using this money to grant credit to industries and fuel real economic growth, banks are investing it in the stock markets; are speculating in natural resources, such as oil, copper, and food; and in risky hedge businesses.

In Germany, Dieter Hundt, head of the local confederation of employers’ associations, said in a press conference that despite such government policies private companies find it ever more difficult to obtain credits.

“We do not have to discuss whether there is a credit crunch or not,” Hundt told the press. “The fact is, it is ever more difficult and expensive to obtain credit.”

The latitude in the commercial banking business – which under the fragile current conditions should be unthinkable – has led again to a swift growth in stock exchange markets all over the world. On Nov. 23, the U.S. Dow Jones index reached its highest value this year – 10,451 points, up from 6,626 last March.

The same day, the main German industrial index, the DAX, reached 5,800 points, up 3,800 since last February. Similar growth has been registered in all stock exchange markets across the world. At the same time, recession is still felt in the European Union, Japan, and the U.S.A.

Oil and copper prices have more than doubled since last January. The price of sugar has increased by 80 percent in the same period, indicating a high degree of speculation in the markets.

“Prices for practically all kinds of assets have skyrocketed in the last three or four months,” Thomas Meyer, head economist for Europe of the largest German private bank, the Deutsche Bank, told IPS. “The only explanation for this inflation is the very low interest policies of central banks,” he explained.

At the same time, private investment banks and hedge funds have restarted their financial engineering, creating new financial derivates to sell the old toxic assets they still posses – assets they created during the early 2000 real estate bubble. These derivates go under the name of re-remic – short for “re-securitisation of real estate mortgage investment conduit.”

Wall Street bankers and analysts have been quoted as saying that the vast majority of these re-remics are aimed to help “create buyers for orphan securities that otherwise would have languished.”

“I am really shocked to realise how little has changed since the outburst of the crisis,” Ed Yardeni, former head of investment strategy at the Deutsche Bank, told IPS.

Some investment banks are also applying practices that are downright illegal – such as front running. Using highly performing software, banks buy or sell a company’s shares a fraction of a second in advance of other investors, who are the bank’s own customers. By so doing, the bank profits from prior knowledge they have obtained from pending orders from the investors, its own customers.

Such businesses practices – re-remics and front running – explain the high profits investment banks such Goldman Sachs, Stanley Morgan, and the Deutsche Bank, have reached this year.

“Actually, the rescue packages for banks and the easy money policy were put in practice not only to stop the bankruptcy of private financial institutions, but also to avoid a credit crunch, and to stimulate the production and consumption of goods and services,” Gerhard Leithaeuser, professor of financial economics at the university of Bremen, some 300 kilometres of from Berlin, told IPS.

These policies were aimed at offsetting the global recession provoked by the collapse of the real estate and financial bubble in the U.S. and Britain in 2007.

“Instead, these policies have helped to recreate the situation that provoked the financial crisis in the first place,” Leithaeuser added. “Banks and hedge funds are misusing the enormous amounts of cheap money provided by governments and central banks to invest and trade in new financial derivates and in the stock exchange market, leading to the inflation of equity and real estate.”

The substantial growth in the stock markets alongside the recession in the real economy in most industrialised countries reveals this again – the financial economy has decoupled from the production and consumption of goods and services, Leithaeuser said.

At the same time, the policies have raised state deficit and indebtedness to historical levels, putting public finances across the industrialised world in a critical state of disarray. To finance their deficits, states are likely to increase indirect taxes, such as the valued added tax, and to reduce social services.

The lack of coordination of interest rate policies is also allowing speculators to make profits with simple arbitrages – by borrowing money in a lower interest rate country, such as the U.S. and lending in another, where the rate is higher.

This arbitrage has reinforced the devaluation trend of the U.S. dollar, which is at the same time affecting emerging countries – such as Brazil and South Korea – which practice a flexible exchange rate policy. In both countries, the local currency has suffered a revaluation of some 40 percent since last March.

Bank executives do not appear to have learnt from the crisis. Only last week, Josef Ackermann, CEO of the Deutsche Bank, repeated his promise that the Deutsche Bank aims at a pre tax return of equity of 25 percent. Such a rate of return is generally considered impossible without engaging in highly risk investments.

In spite of Ackermann’s promise, during a conference on banking and business on Nov. 18 in the German capital Berlin, he called for a state bail out of banks in case of new crisis.

“Many critics have the unrealistic assumption that a systemic banking crisis can be solved without deploying state resources,” Ackermann said during the conference. At the same time, Ackerman rejected new regulations for the financial sector.

German Chancellor Angela Merkel, who also participated at the conference, warned banks of such thinking. “Banks are risking getting beaten again,” Merkel complained, referring to their risky investments. Merkel also rejected Ackermann’s calls for a permanent state bail out fund, but failed to announce new regulations to avoid such big risks. Instead, Merkel only urged banks “to be judicious – without renouncing to making profits.”

Excerpt:

By Hilaire Avril
PARIS, Sep 16 2009 (IPS)

Illegal capital flight in the form of corrupt, criminal and illicit commercial proceeds out of developing economies could be as high as one trillion dollars a year.

Raymond Baker: The poor are the hardest hit by illegal capital flight. Credit:

This is according to Raymond Baker, the director of Global Financial Integrity, a Washington D.C.-based think tank that campaigns against corruption and money laundering. He is the author of a new book called "Capitalism’s Achilles Heel: Dirty Money and How to Renew the Free-Market System".

He has also acted as an advisor to several African countries.

Hilaire Avril spoke to him about the recent Group of 20 (G20) decision to curb capital secrecy jurisdictions — in response to the global economic crisis — and concerns about political elites’ possible backsliding on corruption in certain African countries.

IPS: You wrote that "criminal, corrupt and commercial dirty money transferred out of developing and transitional economies is the biggest loophole in the global free-market system and the most damaging economic condition hurting the poor". What makes dirty money the biggest obstacle to poverty reduction? RAYMOND BAKER: I know of no other economic condition that is so damaging to the poor. The only other obstacle of this magnitude to poverty reduction is hyperinflation. But hyperinflation is always a short-term phenomenon. It may go on for several years, but it’s nothing like illegal flight capital, which goes on for generations.

Illicit outflows from developing countries have moved cumulatively trillions of dollars abroad. In the long scope of my 48 years in developing countries, I know of nothing that is so harmful to them.

Another reason is that this phenomenon is a one-way flow. This money never comes back from abroad. It has been a massive one-way transfer of wealth — out of developing countries and into Western economies.

IPS: Your figures are staggering: 500 billion dollars of dirty money leave developing countries every year, whereas international aid amounts to a 10th of that. And yet, development professionals and institutions rarely mention this problem? RB: The figures I used in my book are actually lower than the ones we posted on the Global Financial Integrity (GFI) website.

We have recently done a study using standard economic models and came up with an even bigger figure (for illicit financial flows from developing countries between 2002 and 2006): 850 billion to a trillion dollars a year of illicit money draining out of developing countries. We still think that is a conservative estimate.

IPS: Why hasn’t the development community addressed this issue? RB: I think it’s because, firstly, we are dealing with data that is difficult. There is no place where you can look up "flight capital" and find statistics. You have to go through fairly interesting analytical exercises in order to arrive at these numbers. For my book, I used a survey method, that is, I interviewed people.

At GFI, we employ an economist from the International Monetary Fund (IMF), who’d been with the IMF 32 years, and we use economic models that have been used by many economists.

But it just happens that we were the first people to apply these models to the whole of the developing world, to the data available from the World Bank and the International Monetary Fund that is relevant. Economists have been hesitant to deal with this because the data is a little bit dodgy. You have to massage it a little to get intelligible results.

But I think there is a second reason why the development community hasn’t examined this issue, and that’s because it’s been far too focused on the foreign aid component of development. That is, the money that goes into developing countries. We don’t pay attention to the money that comes out.

That’s part of the reason GFI was established: to draw attention to the fact that this business of development is two-way street. It must also consist of what we in our Western economies need to do to foster development in poor countries.

IPS: Are you optimistic that recent initiatives to recover assets diverted from developing countries, such as the World Bank’s Stolen Assets Recovery (StAR) programme, will succeed? RB: I think the StAR initiative is primarily focused on helping developing countries themselves figure out how to recover their stolen assets. The problem with that strategy is that there are a lot of developing countries that do not want to do that, or are afraid to do that.

There are a lot of countries where the group in power doesn’t want to dig up the transgressions of the group that is out of power, because the situation could easily be reversed at another point in time. The question of motivation is not addressed in initiatives such as StAR.

However, given that it is an effort to help developing countries pursue those stolen assets, it is a very good initiative.

IPS: You have advised a number of governments in developing countries, including in Africa. What were your most frequent recommendations? RB: We lead the Task Force on Financial Integrity and Economic Development, which believes that much more could be accomplished through transparency than through regulation.

While regulation simply tries to provide a tighter set of rules governing financial transactions, transparency requires that the shadow financial system itself be largely dismantled.

So we advocate curtailing the mispricing of trade imports and exports; accounting faithfully for sales, profits and taxes paid by multinational corporations in all countries; disclosing ownership of all bank accounts; setting up automatic cross-border exchanges of tax information on personal and business accounts; and harmonising anti-money laundering laws internationally.

A lot of people think that it is difficult to do. But it is not. It’s only a matter of political will. The outflow of illicit money can be substantially curtailed, to the benefit of developing countries. But it does take a regime that wants to accomplish that goal.

You cannot approach this kind of problem thinking that you only want to prevent multinational corporations from extracting hidden wealth out of developing countries. Whatever you apply to those entities, you probably ought to apply to your own domestic citizens as well. And that is where the political will breaks down.

IPS: The G20 (summit held in London in April 2009) proclaimed a number of measures to limit tax and judicial havens. Is this cause for optimism, or just more promises? RB: We are happy with the forward movement, but there’s a great deal of distance left to go.

I think in fact the recent Liechtenstein case (in which hundreds of German nationals have been accused of owning secret accounts for tax-evasion purposes) and the UBS case (similarly affecting U.S. account holders in Switzerland) have been even more important than G20 pronouncements as to the curtailment of tax havens.

Having said that, there is a movement trying to minimise the harm they do around the globe, which is encouraging. But there still is a lot of distance to go.

IPS: Do you feel there is increasing momentum from governments to tackle these issues? RB: Yes, I think there is growing momentum from governments. You can see this in G8 or G20 announcements, and in the new tax information exchange agreements that are being signed between countries.

But another factor to consider is the effect of the market itself. Investors are pulling their money out of Switzerland and tax havens. Lots of capital has passed back to the United States over the past several months, and additional sums are now going to Dubai and Singapore.

Two things are happening. Those who are frightened of being caught are bringing their money back and trying to handle it responsibly. And those who are continuing to seek secrecy are taking it to other jurisdictions. So these changes are not only brought about by pressure from governments, but also by fear in the marketplace.

IPS: Several initiatives against capital flight have been launched in Africa in recent years, but they seem mostly due to civil society rather than governments. Why is that? RB: I think that is a fair comment, and the hope is that NGOs (non-governmental organisations) will keep up the pressure. But there has been a lot of backsliding on the part of governments on this issue, in Nigeria and in Kenya. There is also concern that there may be some backsliding in South Africa and other places.

The anti-corruption agenda cannot be said to be moving forward in all countries, by any means.

Excerpt:

By Ángel Páez
LIMA, Aug 24 2009 (IPS)

“One way of ensuring the future of journalism is to improve content quality, and this means investigating what is deliberately hidden, like corruption,” said Gerardo Reyes, a reporter for the Miami newspaper El Nuevo Herald, on a visit to the Peruvian capital.

Reyes was one of the judges for the Prize for the Best Journalistic Investigation of a Case of Corruption in Latin America, awarded by the Instituto Prensa y Sociedad (Press and Society Institute of Peru, IPYS) and the Berlin-based Transparency International (TI).

“After selecting the winners and reading over a hundred entries, we can say without any hesitation that investigative journalism in the region is alive and well,” Reyes told IPS.

An example of its vitality is the work done by reporters Ernesto Rivera and Giannina Segnini, of the Costa Rican newspaper La Nación, and Daniela Arbex, Táscia Souza and Ricardo Miranda of the daily Tribuna de Minas, in the city of Juiz de Fora in the Brazilian state of Minas Gerais, who shared the first prize.

Rivera and Segnini unearthed illegal financial dealings with potentially dirty money, carried out by officials of the Catholic Church in Costa Rica.

“It never crossed our minds that Church authorities could be involved in illegal financial operations with dirty money, until we saw the cheques and accounts involving millions of dollars,” Segnini told IPS.

“We have investigated corruption in government circles and also in the private sphere, but no one wakes up one morning thinking: let’s investigate the Church today. What was most surprising was the involvement of the top authorities of the Costa Rican Bishops’ Conference,” she said.

Segnini said that “at first, the president of the Bishops’ Conference, Monsignor Francisco Ulloa, said he was not aware of the illegal financial dealings, but after La Nación published the stories, the General Superintendence of Financial Entities (SUGEF, a regulatory authority) brought a complaint and the prosecutor’s office raided its premises looking for evidence of wrong-doing.

“We realised the impact of what we had discovered when, without warning, all the members of the Bishops’ Conference, led by its president, turned up at the La Nación editorial offices to offer explanations,” Segnini said.

The Costa Rican journalists’ investigation was triggered by a complaint by Swiss-Italian businesswoman Ana Moscarelli, who ultimately was shown to have participated in the illegal dealings and to have a record in Switzerland for managing the accounts of corrupt politicians and of persons linked to the Mafia.

Brazilian journalists Arbex, Souza and Miranda, for their part, investigated the president of the city council in Juiz de Fora, Vicente de Paula Olivera, popularly known as Vicentão, who awarded 11 contracts to a front company that really belonged to him.

When this was reported in Tribuna de Minas, and he lost the elections in which he was standing for a sixth consecutive term as the candidate of the centre-right Brazilian Labour Party (PTB), Vicentão resigned. A judicial investigation for alleged corruption was subsequently opened against him.

Arbex said Vicentão had appointed an executive in the Koji construction company that he covertly owned, to be his right-hand person in the public tenders and contracts office.

“We were up against a carefully constructed corruption scam,” said Arbex at the presentation of her team’s work. “When we interviewed Vicentão, we were taken aback when he claimed: ‘Honestly, I am not the owner of Koji.’ But now he is facing justice for his lies,” she said.

The winners of this year’s competition presented their work at the Aug. 15-18 Latin American Conference on Investigative Journalism organised by IPYS and TI in Lima.

The conference included the award ceremony, as well as classes by experts like Reyes, who recently published “Nuestro hombre en la DEA” (“Our Man at the DEA” – U.S. Drug Enforcement Administration), the untold story of photographer Baruch Vega, who helped United States authorities capture Colombian drug traffickers.

Ricardo Uceda, executive director of IPYS, told IPS that 189 investigative pieces from 19 countries were submitted, indicating that investigative journalism in this region has been growing in strength, in spite of all the talk about the print media facing a crisis.

“The judges selected for recognition stories revealing corruption in spheres unrelated to the state,” Uceda said.

“The final selection and special mentions included journalistic pieces that revealed corruption in non-governmental organisations, the media and trade unions, as well as organised crime activities, to mention a few cases,” he said.

Second prize went to Santiago Fascetto, of the Panamanian newspaper La Prensa, for his work reporting irregular payments received by former president Martín Torrijos in connection with a secret contract with a high government official in the Dominican Republic.

Salvadoran reporter Jorge Antonio Ávalos, with El Diario de Hoy, won third prize for articles exposing false accusations of environmental damage made against a battery recycling factory.

The Tribuna de Minas stands out for being a provincial newspaper, proving that it is not necessary to work in a large city or have lots of resources in order to undertake investigative journalism.

“It was an exceptional case of homegrown investigative journalism, sustained by sheer persistence, uncovering fact after fact without the aid of information leaked from the police, the prosecutor’s office or third parties. In a climate of hostility and obstructionism, the reporters examined each fact without fear or favour, hit the nail on the head, and brought down a powerful local politician,” said Uceda.

“It’s a model. It was awarded the prize, not because of its impact – it had little or none at the national level – nor because of the star careers of the journalists, but due to its methods and results,” he said.

At the Lima conference, Reyes shared his experiences on how to track dirty money. He said laws on money laundering are quite lenient and the banks are let off too lightly.

“The U.S. government does not seem to be very keen on fighting money laundering,” he told IPS. An indication of this is that “it only invests 120 million dollars in combating this crime.”

The author of “Our Man at the DEA” said one of the greatest challenges faced by investigative journalists is the close relationship between the banking system and money laundering, because whenever a case is detected, the banks tend to get off scot-free.

“The banks have come to the conclusion that money laundering is good business, and that the risk is worth running,” he said.

“They conclude this because in the end it is middle-ranking officials, or the poor employees who open the accounts, who are punished. And the penalties are not severe and do not have serious consequences. After paying the fines, the bank carries on as if nothing has happened. Its reputation remains intact,” he said.

When an investigative journalist exposes banks implicated in money laundering, it will certainly be front page news.

Excerpt:

By Danielle Kurtzleben and Ali Gharib
WASHINGTON, Jul 20 2009 (IPS)

Governmental corruption and the refusal to cooperate with U.S. counter-drug efforts are worsening a ballooning drug trafficking problem in Venezuela, according to a new report by the investigative office of the U.S. Congress.

The report, released Monday by the Government Accountability Office (GAO), may further fray long-tense relations between the two countries which had appeared to improve modestly since the inauguration six months ago of President Barack Obama.

The report says that gains from the U.S.’s six-billion-dollar Plan Colombia counternarcotics programme are being undermined by Caracas’s “permissive environment” for Colombian insurgent groups, notably the Revolutionary Armed Forces of Colombia (FARC), a left-wing guerrilla group that supports itself in part through drug production and trafficking.

“According to U.S. officials, a high level of corruption within the Venezuelan government, military, and other law enforcement and security forces contributes to the permissive environment,” said the report.

Venezuela’s 2,000-km-long border with Colombia has long been a preferred route for Colombian drug runners. But shipments of cocaine from Colombia to Venezuela skyrocketed from 60 metric tonnes in 2004 to 260 metric tonnes in 2007, said the GAO.

Venezuelan President Hugo Chavez denied the GAO’s findings as they were leaked to various press outlets over the past several days, calling the study a smear and accusing the U.S. of hypocrisy because drug trafficking is fuelled by U.S. demand.

“This is a tough issue for the U.S. to lecture Latin America about because the U.S. hasn’t done its part,” said Michael Shifter, vice president for policy at the Inter-American Dialogue (IAD), a think tank here. “It’s both demand, and it’s a failure of law enforcement here, too. The U.S. also deserves to be criticised.”

In the past, the U.S. and Venezuela have cooperated in anti-drug efforts, but as the relationship deteriorated, cooperation fell off, culminating in Chavez’s 2005 expulsion of U.S. Drug Enforcement Agency (DEA) officials from Venezuela, accusing them of espionage.

Chavez said that Venezuelan anti-narcotics efforts have continued without the U.S. But the GAO report claimed that Venezuelan security forces are known to take bribes in exchange for facilitating drug shipments or, upon seizing drugs, either returning them to the traffickers or keeping them.

“[The U.S. State Department] reports that members of the special counternarcotics units of the National Guard and the Federal Investigative Police often facilitate or are themselves involved in drug trafficking,” said the report. “In addition, although the Venezuelan government reports that it seizes cocaine and incinerates it, some may be taken by Venezuelan officials or returned to drug traffickers.”

According to the U.N. Office on Drugs and Crime’s (UNODC) 2009 World Drug Report, seizures of cocaine in Venezuela dropped from 58 metric tonnes in 2005 to fewer than 32 metric tonnes in 2007.

Perhaps the strongest charge made by the report is that Venezuela provides a “lifeline” to the FARC and other groups.

“By allowing illegal armed groups to elude capture and by providing material support, Venezuela has extended a lifeline to Colombian illegal armed groups, and their continued existence endangers Colombian security gains achieved with U.S. assistance, according to U.S. and Colombian government officials,” the report asserts.

“For any government to support a group like the FARC is very serious,” Shifter told IPS. “Being involved in the drug trade is something that is of concern, but it’s not limited to Venezuela. Support for the FARC has more serious political and strategic considerations.”

“The findings of this report have heightened my concern that Venezuela’s failure to cooperate with the United States on drug interdiction is related to corruption in that country’s government,” said Sen. Richard Lugar, the ranking Republican on the Senate Foreign Relations committee who commissioned the GAO report.

Tensions between Washington and Caracas came to a head in September 2008, when Venezuela expelled the U.S. ambassador, accusing him of spying. The U.S. followed suit by expelling the Venezuelan ambassador.

U.S.-Venezuela relations have since softened; Chavez applauded Barack Obama’s election in 2008, and the two leaders greeted each other warmly at the April Summit of the Americas.

Ambassadors in both countries were reinstated in June.

Lugar, a moderate Republican who, among other things, has called for moving toward normalising relations with Cuba, had asked the GAO to determine whether Venezuela was “in the process of becoming a narco-state, heavily dependent (on) and beholden to the international trade in illegal drugs”.

“The report’s findings require, at a minimum, a comprehensive review of U.S. policy toward Venezuela,” Lugar said late last week when the GAO’s findings first became known.

“President Chavez has recently approved the re-establishment of our respective ambassadors. I hope he sees this as an opportunity to further dialogue in areas of common interest, but also in matters of sharp differences,” Lugar added.

The recent agreement to return ambassadors marked the latest step in a gradual détente between Caracas and Washington since Obama became president. But tensions seem to be on the rise again, particularly in the wake of the ongoing political crisis over the coup d’etat against Honduran President Manuel Zelaya.

While both Obama and Chavez have called for Zelaya’s re-instatement, Chavez’s call for more aggressive actions as well as his charges that U.S. government agencies were behind the coup itself and his strong scepticism of the mediation undertaken by Costa Rican President Oscar Arias have clearly irritated Washington.

It is in that context that the latest report is expected to be seized on by anti-Chavez forces here, led by hard-liners in the Cuban-American community, such as Rep. Ileana Ros-Lehtinen and former Assistant Secretary for Western Hemisphere Affairs, Otto Reich, who gave strong backing to the coup attempt against Chavez and who has also spoken out against Zelaya, depicting him as a puppet of the Venezuelan leader.

That characterization of Zelaya during the Honduran crisis has been used as well by prominent neo-conservative commentators in the Wall Street Journal, the Washington Post, the National Review, and the Weekly Standard who see “Chavismo” as the greatest threat Washington faces in the Americas and who have also played up Chavez’s alleged friendship with Iranian President Mahmoud Ahmadinejad.

The latest edition of the Standard, for example, features a cover photo of an embrace between Zelaya and Chavez entitled “Comrades in Arms” and sub-titled “On Hugo Chavez’s Honduran Adventure”.

Adam Isaacson, a Latin America specialist at the Centre for International Policy, said that the report should be of concern to Venezuela itself.

“Venezuela has this rapidly growing problem, and won’t even deal with the DEA,” he told IPS. “Venezuela should be worried as well. If you have that amount of cocaine going through the country, you’re risking ending up like Mexico, with powerful organised crime and violence. No leader wants violence.”

Rather than siding outright with narco-traffickers, it’s likely that Venezuela doesn’t have the internal security capacity to deal with the problem, Isaacson said, noting that despite large oil revenues, Chavez has not properly addressed public safety.

“You’ve seen it happen in Colombia, Mexico and Central America. A country not set up to combat the money of crime and narco-trafficking just gets steamrolled by it. That could be what you’re seeing in Venezuela.”

*Jim Lobe contributed to this story.

Excerpt:

By Lucy Komisar
MIAMI, Florida, Jul 14 2009 (IPS)

At a recent conference in Miami organised by Offshore Alert, a specialised media organisation focused on financial crime, IPS correspondent Lucy Komisar sat down with veteran investigator Bob Roach to discuss the hurdles facing regulators trying to crack down on tax havens, which cost the U.S. alone an estimated 100 billion dollars annually.

Bob Roach Credit: Lucy Komisar/IPS

Worldwide, financial centres with bank secrecy laws are blamed by the Organisation for Economic Cooperation and Development (OECD), which represents 30 developed economies, for hiding some 5 to 7 trillion dollars offshore so the profits they produce evade taxes.

The Miami conference dealt with these offshore financial centres, and the significance and global impact of the myriad of business transactions that is conducted in and through them.”

Excerpts of the interview follow. He is speaking not on behalf of the committee, but rather expressing his own views.

IPS: You said at the conference that information received by the Permanent Subcommittee of Investigations of the Senate about the activities of some institutions pointed to structures that were created for one reason: to avoid tax liability. What institutions were you talking about? BOB ROACH: I was specifically referencing the hearings that took place in July last year and lasted until this year, which focused on activities of UBS in Switzerland and the LGT Group, an asset management company in Lichtenstein.

IPS: One of the issues raised by the G20 in April was the need to have country-country agreements to deal with tax-information sharing about clients of banks and companies set up in offshore jurisdictions. How effective are they? BR: The fact that you have agreements in place doesn’t really mean or help a lot if jurisdictions won’t comply with them. And this is a problem in a country when we try to seek information. Often the government (that requests the information) has to prove the case before it gets the information it needs to prove the case.

So while countries can say they have exchange agreements, it’s about the details. Agreements are written in such nebulous language, there are such strict requirements (to comply with in order to get information), that it’s impossible. These really are not effective agreements that increase transparency.

IPS: Most people don’t know that the U.S. has its own tax havens: Delaware, Nevada and Wyoming. How serious is this problem and what are the U.S. agencies doing about them? BR: It is a very serious problem. Certain investigations as early as 2000-01 (showed that) the incorporation procedures in those states are very weak. Most states will incorporate entities without really having any kind of understanding of who the true controlling persons or beneficial owners are. This is a weakness that has become exploited by many interests, particularly overseas, to facilitate the kind of activity that we worry about. And it is something that really has to be ended.

On a couple of occasions now, Senator (Carl) Levin has introduced legislation to stop this type of activity by requiring states to collect more information on the ownership, on who is behind entities that are being incorporated in these states.

Recently, Senator Levin, Senator (Charles) Grassley, and Senator (Claire) McCaskill introduced the incorporation transparency and law enforcement act that requires states to collect the kind of information that will allow the identification of true parties behind the entities that are established in these states.

IPS: How are these states different from offshore tax havens? BR: One way to look at it is that in many offshore tax havens the jurisdictions will collect a lot of information on the entities and who is behind them and who the beneficiaries are. In the U.S. these jurisdictions don’t necessarily prevent the release of the information; they just don’t collect any information, so there is nothing to release.

IPS: When we are talking about these states, the problem of incorporation makes them havens of some sort. But we are not talking about banking secrecy, which the U.S. does not have. Is that correct? BR: The U.S. prohibits the release of personal information on individuals. But it doesn’t have the kind of laws that criminalise the release of information of accounts simply to protect the secrecy of the accounts.

IPS: Do you that think the offshore banking secrecy has contributed to the worldwide financial crisis? BR: I’m not sure if it’s the secrecy as much as it is the regulatory mechanisms that go along with these jurisdictions. And that has to do with the understanding and approval of types of financial products that allow engaging in various transactions. And what we see is that some of these structures and financial products are more and more complex, to the point of where some of the people who design and some of the institutions that implement them don’t fully understand their impact, risks, and liabilities downstream.

We begin to face really troubled situations because if we begin to have a collapse of these corporations, that quickly spreads through the system because so many parties can be affected by these relationships. And suddenly the system becomes relevant because no one understands who else might be tied in and who else may be affected.

Many experts need to say that a big factor in the financial crisis goes back to the lack of strong regulatory regimes and a strong oversight in reviewing and monitoring this kind of transactions before they are allowed into the market place.

IPS: At the conference, people referred frequently to the “Stop Tax Haven Abuse Act”, which Senator Levin introduced (and has been co-sponsored by President Barack Obama when he was a senator). Can you tell us what that would do if it was passed? BR: Some of the provisions in the Act are tools aimed at the enforcement of our laws against those who want to exploit the existing tax laws by enacting a set of presumptions against people who would try to set up and hide their assets and tax obligations. It would strengthen various penalties against enablers. It would increase the amount of time that the IRS has to conduct offshore investigations.

It would try to stop abusive practices that take place under the current law with respect to residing structures to payments of taxes in certain transactions by utilising different financial instruments. So there are a number of provisions in there that would both enhance enforcement making it more difficult for parties to hide assets offshore and also increase penalties for those trying to help others abuse the system. It would give more power to the IRS to pursue its investigations.

IPS: Are the hearings set yet for this bill? BR: That would be referred to the finance committee, and that has not been scheduled. It is not something the Permanent Subcommittee of Investigations or (chairman of the Permanent Subcommittee on Investigations) Senator Levin would have control over. However, as everyone has recognised, there has been a lot of talk from the administration and leadership in congress about the hope that there will be legislation to address a variety of these offshore issues.

*After this interview was conducted, the Swiss reached an agreement over a double taxation treaty with the United States in what was seen as a key step towards removal from the Paris-based OECD “grey list” of uncooperative tax havens.

And on Monday, Jul. 13, the legal action against Swiss banking giant UBS by U.S. authorities seeking access to records of some 52,000 of UBS’s U.S. clients was delayed, and the sides were given until Aug. 3 to find a settlement.

Excerpt:

By Tito Drago
MADRID, Jul 9 2009 (IPS)

Trade between Spain and Equatorial Guinea is flourishing, amidst calls by activists for the government of Spanish Prime Minister José Luis Rodríguez Zapatero to push for democracy in this tiny country on the Atlantic coast of Africa, still under the yoke of dictatorship.

Exports from Spain to its former colony grew by 11.09 percent in the first four months of the year compared to the same period in 2008, reaching a total of 52 billion euros (73 billion dollars), and involving mainly vehicles, machinery, beverages and electrical materials.

Spanish imports of oil from this African country which has been ruled by dictators almost from the moment it became independent in 1968 have remained steady, although payments are down because of the fall in international crude prices.

Spanish Foreign Minister Miguel Ángel Moratinos is visiting Equatorial Guinea from Thursday to Saturday, accompanied by a multi-party group of lawmakers, journalists and representatives of different business sectors, especially oil, infrastructure and agrifood industries and commercial distributors.

Mauricio Valiente, a lawyer and chief lobbyist with the non-governmental Spanish Refugee Council (CEAR), told IPS that the Zapatero administration should demonstrate real support for democratisation in Equatorial Guinea by requiring certification of respect for human rights and democracy, instead of putting economic and commercial interests first.

“We are asking the government to take a firm position on this,” he emphasised.

He did praise the fact that some 40 asylum-seekers from Equatorial Guinea who arrived in Spain over the last year “have enjoyed a high degree of protection by the Spanish authorities.”

Spanish government sources who requested anonymity told IPS that progress is occurring in Equatorial Guinea, although there is still a great deal to be done. The most important thing, they added, is that talks with the African country’s authorities about human rights, described as educational, two-way and critical, are under way.

They also said that presidential elections may be held in December, although the Equatorial Guinean regime has not yet made an official announcement. Furthermore, it is not clear whether these would be open to all candidates, or only to authorised political parties.

At the invitation of the regime, representatives of the United Nations Working Group on Arbitrary Detention visited Equatorial Guinea in November 2008, as did a delegation of the International Committee of the Red Cross (ICRC) which came to monitor the treatment and living conditions of prisoners, including the large proportion of political prisoners, and found that several had been pardoned.

The U.N. Special Rapporteur on torture, Manfred Nowak, stated in a preliminary report on his mission that he “found that torture is used systematically by the police against persons who refuse to ‘cooperate,’ such as persons suspected of political as well as ordinary crimes.”

Those travelling with Moratinos this week will certainly be able to see for themselves the wretched living standards of the people of Equatorial Guinea.

A report by the New York-based Human Rights Watch (HRW), presented in Madrid on Thursday, says that infant mortality rose from 103 per 1,000 live births in 1990 to 124 per 1,000 in 2007, while the under-five mortality rate increased from 170 per 1,000 to 206 per 1,000 over the same period.

“The government’s failure to provide basic social services violates its obligations under the International Covenant on Economic, Social and Cultural Rights,” the report says.

Arvind Ganesan, director of HRW’s Business and Human Rights programme, said Equatorial Guinea has a per capita GDP close to that of Spain or Italy, but its people “live in poverty worse than in Afghanistan or Chad,” two of the least developed countries on the planet which have been afflicted by destructive wars.

HRW also says that a United States Senate investigation in 2004 uncovered details of how Equatorial Guinean dictator President Teodoro Obiang Nguema used revenues from oil exports to finance personal transactions, including the purchase of two mansions in the Washington DC suburbs for 3.8 million dollars.

His son, Teodorín, has also spent huge sums: 35 million dollars on properties in California and 8.45 million dollars on mansions and luxury cars in South Africa.

Exiled Equatorial Guineans continue to battle for democracy in their country, led by Severo Moto, who spent time in prison there, and later in Spain on arms trafficking charges, until a Supreme Court ruling freed him for lack of evidence.

Moto has been president of the Equatorial Guinean government-in-exile in Spain since it was established by his Progress Party in 2003. One of its members predicted there will soon be changes in their homeland, and that Moto will be elected to power “if there are really democratic elections.”

A week ago, Obiang Nguema called on everyone over 18 to register to vote.

Excerpt:

Colombian journalist Hollman Morris phoned an international news agency and said in an agitated voice: “I am being followed by the police.”

As he left his apartment on the north side of Bogotá, he saw a police car on the other side of the street; when he reached his parents’ apartment a few minutes later, to drop off his kids, another car was parked near the building.

And when he reached the spot where he was planning to meet with this reporter, a third car with plainclothes police officers made it clear to him that orders had been given to follow him.

Ten days earlier, President Álvaro Uribe had publicly accused Morris of being an accomplice of the Revolutionary Armed Forces of Colombia (FARC) because of his newspaper coverage of the release of a group of kidnapped victims by the insurgent group.

A few weeks later, Morris commented in a meeting of journalists on the “chilling” discovery of a dossier in his name that had been kept for some time by the Departamento Administrativo de Seguridad (DAS) – Colombia’s domestic secret police service, which answers directly to the office of the president – when its offices were searched on orders from the attorney general’s office in the midst of a scandal over widespread illegal wiretapping.

The file contained photos and information on his parents, siblings, wife and children, and on his day-to-day movements, with a level of detail that reminded those looking at it of the thorough investigations carried out by hired killers while planning their hit jobs.

Morris is one of the reporters who was targeted by the DAS, which illegally eavesdropped on a wide range of opponents of the right-wing Uribe administration. Searching through DAS computers, investigators from the attorney general’s office found that the secret police had intercepted the phone calls and e-mails of Supreme Court justices, opposition lawmakers, reporters and even the likely presidential candidate of the opposition Liberal Party, Rafael Pardo.

The ongoing scandal over illegal wiretapping operations by the DAS has led to the resignation of the director of the intelligence agency, María del Pilar Hurtado, and investigations of the last four directors as well as 30 DAS agents.

The similarities of the case with the Watergate scandal, which forced U.S. president Richard Nixon (1969-1974) to step down, have been cited by opposition figures calling on Uribe to resign – not a likely outcome, however, due to the president’s high level of popularity and Colombian society’s jaded attitude towards such scandals, which are all too common in this country.

Before DAS

The government of General Gustavo Rojas Pinilla (1953-1957) replaced the security police by creating the Servicio de Inteligencia Colombiano (SIC) in 1953, which was answerable to the president’s office and used methods like those of the Federal Bureau of Investigation (FBI) in the U.S.

The SIC worked in close coordination with the state Office of Information and Propaganda, in activities like monitoring the press, with advice from Karl von Merk, a former secretary to Nazi Germany’s propaganda chief, Joseph Goebbels, according to a report by journalist Alberto Donadío.

The SIC, DAS’s predecessor, played a significant role in the investigation of Rojas Pinilla’s political opponents.

In April 1955, the SIC searched the headquarters of the Liberal Party and, based on letters from guerrilla leaders in the regions of Tolima and Llano, accused the party’s leader, Alberto Lleras, of being involved in subversive activities.

The SIC also alleged that it found evidence to accuse the dean of the National University law school, Abel Naranjo, of communist infiltration after the bloody events of Jun. 9, 1954, when the army opened fire on student demonstrators.

The SIC set out on a mission of sniffing out communists in Colombia, which included spying on and arresting reporters. Hernando Santos Castillo, who later became director of the newspaper El Tiempo, was arrested painting anti-government graffiti in downtown Bogotá. Around the same time the then presidential candidate of the Conservative Party, Guillermo León Valencia, was arrested as well.

Another activity carried out by the SIC was denounced by a military commander in the western province of Valle del Cauca, who said SIC agents were operating in complicity with “los pájaros” in that province – the term used to refer to paramilitary squads at the service of conservative elites.

Similar activities were carried out at a Feb. 5, 1957 bullfight, when numerous SIC agents infiltrated among the public beat dozens of spectators who booed Rojas Pinilla’s daughter María Eugenia when she arrived. According to U.S. Embassy reports, 20 people were killed.

The DAS era

The DAS, created by decree in 1960, continued the SIC’s work, under the shelter of the state of siege and the security statute (the latter was adopted in late 1982) – instruments that almost became part of the legal system after the 1991 constitution was passed.

According to a later draft law on the state of emergency, searches and wire tapping could be carried out without a legal warrant. The draft law was denounced at the Eighth Human Rights Forum, held in 1996, which stated that under the government of president Julio César Turbay (1982-1986) “an addiction to such practices, justified in the name of defence of the fatherland, had been instilled in the young officers.”

Not as crude as torture and dungeons, the tradition of hounding and eavesdropping on political opponents has been maintained and refined with the latest technological advances.

Vans with equipment that can simultaneously tap 16 calls in an area of 70 metres followed judges, politicians and journalists in recent months

In the days of General Rojas Pinilla, the focus was on hunting down communists and dissidents. Today, involvement in activities opposed to the government is more dangerous than being a communist.

For example, the Supreme Court judges began to be followed when they started investigating and arresting legislators who had worked together with far-right paramilitary groups to manipulate elections and electoral results.

Besides wiretapping their phones, the DAS investigations looked at bank accounts, tax returns, parties the judges had attended, trips they had taken, gifts they received – anything that might possibly be used to discredit them.

While the opposition and journalists saw these activities as an attempt to undermine the legitimacy of the judges who were investigating more than 60 Uribe allies in Congress for their ties to the paramilitary militias, the government insinuated that the magistrates were involved in money laundering, had ties with drug traffickers, or were accomplices of the guerrillas.

The documents, instructions, archives and photos gathered by the investigators of the attorney general’s office show that at least 50 people were spied on without a legal order, “in line with the democratic security policies” of the Uribe administration, as a memorandum from a detective to the DAS counterintelligence director states.

The targets of surveillance “are being politically persuaded to mobilise a bloc that could counteract the election of the president,” says another of the agents describing his work in Pasto, in the south of the country, referring to the possible approval of a constitutional amendment to allow presidents to run for a third term.

Because the DAS, like the now-defunct SIC, is directly answerable to the president, there is little doubt about the origin of the orders for illegal wiretapping and surveillance.

But the investigations by the attorney general’s office and the office of the public prosecutor have only led to offices near Uribe, and no further. And although the DAS wiretapping operations are eerily similar to Watergate, the difference lies in that the scandal has not yet reached the president’s desk.

By Adam Morrow
CAIRO, Jun 3 2009 (IPS)

Several leading members of the Muslim Brotherhood opposition movement stand accused of plans to form an "international network of organisational cells." Its leaders say the charges are blatant fabrications.

"We're used to trumped-up charges," says Saad Al-Husseini, a prominent Brotherhood MP accused by police of spearheading the group's alleged global expansion plans. "I was also briefly accused of training jihadists in Chechnya five years ago – despite never having left Egypt," he told IPS.

Thirteen leaders of the Muslim Brotherhood, including a member of the group's Guidance Office, were arrested last month for "establishing organisational cells worldwide." The claims were accompanied by customary charges of "belonging to and financing a banned organisation," and of money laundering.

Although the Brotherhood remains formally outlawed, its members can contest as nominal independents in municipal and parliamentary elections. In 2005, the group captured 88 seats in parliament – roughly one-fifth of the national assembly – making it Egypt's largest opposition bloc.

The independent daily Al-Dustour reported last month that the 13 had been formally accused of setting up an illegal "committee for communications abroad." According to official charges cited in the press, the committee constituted an attempt to "form an international network of Muslim Brotherhood strongholds."

The men were further accused of "exploiting foreign religious students in Egypt to promote the Muslim Brotherhood's message in their respective countries," and of "communicating with Brotherhood cells overseas." The police charge sheet spoke of plans to establish cells in Saudi Arabia, the United Arab Emirates, Kuwait and Iraq, as well as in the U.S., Germany and Italy.

Police additionally went on to accuse four high-ranking Brotherhood figures of complicity in the plot. Along with Al-Husseini, these included Ibrahim Al- Katitani, head of the group's parliamentary bloc; Hussein Ibrahim, Al- Katitani's number two in parliament; and Abdel Menaam Abou Al-Fotouh, who is also secretary-general of the Arab Doctors Union. All the men except Ibrahim are also members of the group's 21-member Guidance Office.

Al-Husseini, who leads the parliamentary bloc's committee for foreign relations and was therefore accused of heading the alleged "communications committee", calls the charges against him "illusory".

"It's true that I'm responsible for foreign relations for the Brotherhood bloc in the assembly. Whenever international figures visit Egypt's parliament, I meet with them openly," he said. "But this doesn't mean that I run a 'committee for international communications', the existence of which is a police fabrication.

"Throughout the world, Muslim Brotherhood members respect the laws of the nations in which they reside," Al-Husseini said. "This is part of the group's philosophy. Despite the frequent moves against us – such as arrest campaigns, asset seizures or false accusations – we remain devoted to political change by peaceful means only."

Some of the group's spokesmen have suggested that the recent arrest campaign was aimed specifically at Muslim Brotherhood Supreme Guide Mehdi Akef, noting that a number of Akef's personal assistants had been detained in the recent sweep.

"The latest campaign targets Mehdi Akef," leading Brotherhood member Essam Al-Arian was quoted as saying. "It's an attempt to punish him for his recent public statements in support of (Lebanese resistance group) Hizbullah."

In early May, Akef declared that Hizbullah leader Hasan Nasrallah "should be thanked for his support to the Palestinian resistance (against Israel) and his perseverance against the enemy." Akef added that Egypt "should offer Nasrallah its gratitude, respect and appreciation, rather than try to tarnish his image."

In April, authorities announced the arrest of members of a Hizbullah cell that they claimed had been planning terrorist operations in Egypt. Although Nasrallah hastily stated that the group had only been tasked with assisting the Palestinian resistance in Gaza, the government has since used the incident to launch a blistering media campaign against the Lebanese Shia resistance group and its leader.

Ibrahim Mansour, political analyst and executive editor of Al-Dustour, agrees that the crackdown on the Brotherhood leadership may have been in reaction to Akef's public support of Hizbullah.

"A number of western governments officially consider Hizbullah a terrorist group," Mansour told IPS. "Therefore, Akef's statements in support of Nasrallah allow Egypt to portray the Brotherhood to the west as a dangerous supporter of terrorism.

"The case will probably remain in limbo, at least for a while," added Mansour. "It will give the government an additional means of pressuring the Brotherhood in advance of parliamentary elections next year."

Mohamed Habib, first deputy to the group's supreme guide, has stated that the recent arrests were aimed primarily at pre-empting rapprochement between the Brotherhood and the administration of U.S. President Barack Obama, who is scheduled to deliver a high-profile speech in Cairo Jun. 4.

"It's been suggested that Obama was going to invite a number of Brotherhood parliamentarians to attend the event," Habib was quoted as saying. "But the prospect of the U.S. President opening communications with us angered the regime, which decided to launch a pre-emptive strike."

Al-Husseini, however, attributed the crackdown primarily to the state's longstanding fear of the group as Egypt's largest and best organised opposition force.

"The main reason for the latest round of arrests and accusations is that the Muslim Brotherhood represents the strongest popular force in the country," he said. "The Egyptian regime remains deep in the embrace of America and Israel, while the Brotherhood opposes the Zionist-U.S. colonial project in the region – several of those arrested also happened to have led demonstrations against Israel's recent assault on Gaza."

Al-Husseini added: "For these reasons the government is continuing its longstanding strategy of attrition aimed at perpetually harassing, threatening and wearing us down, without any regard for the law."

Excerpt:

By Ranjit Devraj
NEW DELHI, Apr 25 2009 (IPS)

General elections currently being contested in India have brought an unusual issue to the fore – the repatriation of more than a trillion dollars believed to have been stashed away in Swiss and other tax havens.

Leading the charge is the ultra-nationalist, opposition Bharatiya Janata Party (BJP), which carried out mock election exercises to sensitise voters to its plank that the money, if returned, could be channelled into development activity.

Lal Krishna Advani, the BJP’s prime ministerial candidate, began demanding that the Indian government pursue the issue of ‘black money,’ well before the G20 summit in London earlier this month where pledges were made to devise a post-crisis economic plan to shore up the global financial system.

Following up on high-profile scandals involving Liechtenstein and Switzerland, the G20 nations demanded that tax havens dismantle the secretive structures that have allowed fake corporations, anonymous trusts, foundations and money laundering operations to flourish.

"We assure the nation that India will join the global effort to put an end to banking secrecy and intensify it by every means – diplomatic, political and economic – to get back the real sovereign wealth of our country," Advani has vowed.

The BJP leads the National Democratic Alliance (NDA) which is pitted against the ruling Congress party-led United Progressive Alliance (UPA). Also running in the general elections of the world’s largest democracy – being held in stages from Apr. 16 to May 13 – is the ‘Third Front,’ a loose conglomeration made up of communists and regional parties.

During its five-year stint in power, starting 1999, the BJP-led coalition privatised major public sector corporations and opened up the banking and insurance sectors to foreign investment. But such measures failed to provide jobs or improve living conditions for the vast majority of India’s billion plus people and the coalition sustained severe losses during the 2004 elections.

How serious is the BJP about bringing back the loot secreted away in tax havens overseas? Arun Kumar, economics professor at the prestigious Jawaharlal Nehru University (JNU) in New Delhi and among the country’s foremost experts on the phenomenon of ‘black money’ – money hidden from the taxation authorities – is sceptical.

In an interview with IPS, Kumar said the real difficulty was that "too many senior politicians maintain secret accounts in tax havens overseas and are likely to stick together in the same way that they have consistently done in the past."

Referring to the BJP’s solemn promises to bring the money back, Kumar said: "Let us not forget that election manifestos are hardly ever implemented."

While there are several estimates as to the size of the deposits parked by Indians in numbered accounts overseas, Kumar believes that the figure "going by various calculations, is not less than 1.45 trillion dollars in Swiss accounts alone… It is also good to remember that there are more than 50 tax havens in the world and that Indians have been stashing away their money for more than 60 years now."

In Kumar’s view, what can help get at least some of the money back to Indian shores – more than the BJP’s election promises – is the fact that the "Western economies, battered as they are by the recession, are no longer willing to look the other way and allow tax havens to flourish at their expense."

Kumar’s estimates are based on the latest comprehensive numbers available – the 2006 study by the Washington-based Global Financial Integrity (GFI) – which suggest that the average amount stashed away by Indians annually during 2002-06 period was 27.3 billion dollars – representing a third of the global aggregate for the five years.

However, Kumar said that most of the "flight of capital" from India took place in the years following India’s independence from British colonial rule in 1947. "The total loot over the last 60-70 years, taking into account the higher value of the rupee in the earlier decades and the interest earned during that period, will be well in excess of the 1.45 trillion dollars that the BJP claims is lying in Swiss vaults."

The real credit for linking ‘black money’ to development goes to Sudhakar Reddy, deputy general secretary of the Communist Party of India, who, in a stark presentation to Parliament last month, pointed out that the 1.45 trillion dollars in question was about double the country’s gross domestic product (GDP).

Quoting the Swiss Banking Association report of 2006-07, which placed India at the top of five countries – including Russia, Britain, Ukraine and China – Reddy said, "if equally distributed, each Indian will get 100,000 rupees [2,000 dollars]."

Reddy charged that while the United States and Germany have moved to obtain the banking details of its citizens who are clients of Switzerland’s UBS Bank, the Indian government has actually favoured UBS operations in India.

UBS has admitted to the tax fraud and agreed to pay up 780 million dollars to the U.S. authorities, but has refused to disclose the identities of 47,000 U.S. clients who are believed to own deposits with the bank totalling 14.8 billion dollars.

"UBS Bank are under a serious cloud and are admitted criminals, but its subsidiary UBS Security India has been asking for more facilities in India," says Ram Jethmalani, a former law minister. "The Reserve Bank of India had earlier stopped its expansion in India but I am told that the government has since reversed those decisions."

Jethmalani, joined by K.P.S. Gill, a retired senior police official, and Subhash Kashyap, a prominent constitutional expert, filed public interest litigation in the Supreme Court seeking its intervention in getting the government to take steps to get the money returned.

The petitioners have alleged that the failure to take action so far attests to the fact that "influential politicians in most of the political parties are involved in the offences in question." The case is set for a preliminary hearing Wednesday.

For Indian depositors the most popular tax haven is Switzerland. Some 80,000 people travel to that country from India each year. "Typically, money is moved through the ‘hawala’ system [informal banking channels] by deft accounting involving the under invoicing or over invoicing of exports and imports and stashing away the balance," said a ‘hawala’ operator who runs a legitimate currency exchange business in the capital, and spoke to IPS on condition of anonymity.

"Liechtenstein, the Bahamas and the Cayman Islands are also popular," he said. "A favourite method is to use dummy software companies which ship out CDs full of fake software that are shown to be earning millions of dollars," said the ‘hawala’ operator. "Similarly, large amounts of cash are shipped into the country through students or other travellers who work as couriers on a commission basis."

"What facilitates fraudulent transfers of money into and out of the country is the fact that India’s political parties regularly use the ‘hawala’ system to finance elections, since it is impossible to legally fund political parties," says Prof. K. N. Kabra, another noted expert on the ‘black economy’.

About ten years ago Advani and several other top politicians from all political parties were caught receiving money brought in from overseas through ‘hawala’ channels in what became known as the ‘Jain hawala case’.

The case, built around a diary of payments made by two Jain brothers, was seized by police on the trail of Islamist militants. But, although several of the beneficiaries owned up to being recipients, the case was hushed up.

Kumar said Indian depositors figuring in a German case involving hundreds of Liechtenstein clients and 7.9 million dollars are now attempting a similar hush up.

"The fact that the Indian government refused to take up an offer by the German government to share details of the Indian depositors shows how disinterested authorities here are in curbing activity that has been bleeding this country for decades," Kumar said.

While several tax havens are now committed under G20 proposals to sign tax information exchange agreements, it remains to be seen if they will work. "Tax havens may simply not have the information sought by India or other requesting countries," Kumar said.

*Not for publication in Italy

Excerpt:

By IPS Correspondents
MACAU, Apr 17 2009 (IPS)

Beijing’s decade-old flirt with lucrative gambling in the booming casino town of Macau has gone decidedly sour.

The former Portuguese enclave may have surpassed Beijing mandarins’ wildest dreams by becoming one of the fastest growing economies globally, clocking annual growth of 30 percent in 2007 and overtaking the world’s gambling capital Las Vegas in earnings, but the boom has come at a cost.

A string of corruption and money laundering scandals involving Chinese communist party officials and managers of state firms have filtered through the press, creating a wave of resentment on the mainland where the leadership is attempting to reinstate Confucian virtues of plain living and honest public service as the mantras of the day.

Meanwhile, the enclave’s freewheeling dash for growth has alienated chunks of Macau population that have been left out of the development loop and are unable to share in the gambling bounty.

Editorials in China’s state press have described an “epidemic of gambling,” afflicting large groups of mainland population and leading to countless losses of family savings as well as huge amounts of public money gambled away at Macau’s casino tables. While the amount of lost public money has not been reported, the Beijing Youth Daily went as far as saying earlier this year that reckless gambling by officials was a “threat to the national treasury”.

What is more, commentators have warned that the survival of China’s entrepreneurial culture is in danger after a series of gambling-caused bankruptcies hit the province of Zhejiang – China’s export powerhouse for everything from socks and buttons to toys and artificial flowers. Famous for private initiative and hard-working businessmen, Zhejiang has been at the forefront of China’s transformation as an economic tiger.

An investigation by the China Business Journal found that in 2008, Zhejiang private entrepreneurs gambled away at least 1.3 billion RMB (191 million dollars) in Macau, leading to the closures of scores of factories in the province. “To save Zhejiang from gambling means to save China’s private business culture,” proclaimed an editorial in the newspaper.

“For many mainland Chinese arriving in Macau the feeling is sensational,” says Zeng Zhonglu, a gaming industry expert at Macau Polytechnic Institute. “This is their first visit to a legal gambling spot and they are dazzled by the opportunities and by the freedom. They want to gamble big and they want to win big.”

Feng Ruxue, a loud and brash 38-year-old punter from Fijian province, describes her first feeling at entering the cavernous casino of the Venetian, Macau’s plushest gambling spot, as being “awestruck.” She couldn’t remember what struck her more – the opulence of the place with its palatial pillars and engraved dragons on the ceiling, or the fact that there were so many Chinese people openly engaged in a pastime that has been banned in mainland China for decades.

“It was incredible! In broad daylight there were hundreds of people betting and gambling lots and lots of money,” she says.

Along with opium and prostitution, gambling was among the vices that Chinese communists banned and vowed to extirpate upon seizing power in 1949.

But Macau – an old trading post where Portuguese enjoyed a colonial status similar to that of the British in Hong Kong – remained a haven for gamblers, gold smugglers, opium and gun dealers and all kinds of shady businesses. After gambling was legalised in 1964, the sleepy fishing village was drawn out of its colonial slumber as it gradually became a magnet for gamblers all over the region.

The notion of Macau’s seediness was so enduring that a 1952 Hollywood film noir “Macao” by Josef von Sternberg opened with a local customs officer greeting the arrival of three Americans with the famous: “In Macau, everything is a gamble.”

While gambling has been a seamy part of Macau’s existence for 150 years, it was not until it returned to Chinese sovereignty in 1999 and its new leaders, hand-picked by Beijing, embarked on overhauling the tiny enclave’s fortunes that the gambling industry got a serious shot at making big profits.

The first foreign-owned casino opened in 2004. At the end of 2008, Macau had 31 licensed casinos, along with scores of new hotels and huge shopping centres, transforming this once tranquil place of just half-a-million people into a bold and brash twin of nearby Hong Kong. Last year the enclave received 23 million visitors, more than half of them from mainland China.

“I miss the old days when we all knew our neighbours and everybody had the same worries about earning their daily bread,” sighs Sit Chi Shin, 63, as he sips tea at one of the small cafés on the street leading to the iconic St. Paul’s cathedral here.

“We have too many foreigners now and I sometimes feel lost. And young people don’t want to study any more. They think they can take a shortcut to getting rich by working for the casinos.”

The Macau government’s labour policy mandates that only locals can be employed as casino croupiers. But the huge demand from rapidly rising numbers of gambling tables has also meant that young people with relatively little training were able to start earning big money all too quickly. Last year the university enrolment rate dropped to about 34 percent, down from 39 percent before 2004.

“Croupiers in Macau could earn as high as 15,000 patacas (1,900 dollars) a month,” says Zeng Zhonglu, adding that the average salary is around 8,000 patacas. “Of course, there are people who are disgruntled and unhappy – they can’t share in the gambling boom but suffer the consequences of high inflation and high property prices”.

Authorities recognise the brewing crisis and have doled out cash to ease people’s grievances. Last year, long-term residents of Macau received 5,000 patacas each. This year the cash handed out has risen to 6,000 patacas per person.

Meanwhile, Beijing is dealing with the social domino effect of the “gambling epidemic” by cracking down on the gambling habits of party leaders and public figures. Last year, it announced a drastic reduction in travel visas to Macau, limiting trips from the mainland to once every three months, and for no more than seven days.

Party investigators have issued a stern warning about corruption among party and government officials, singling out the danger of gambling. In a widely publicised speech titled “The Socialist Concept of Honour and Disgrace” recently, president and party chief Hu Jintao reminded the public of Confucius’ “eight disgraces,” including the pursuit of profit.

When Vice-President Xi Jinping – in charge of Hong Kong and Macau affairs in the communist leadership – visited Macau in January, he gave no indications that the travel ban would be eased any time soon. Instead he called on Macau politicians and society to diversify the local economy and rely less on gambling.

But observers believe diversification would be difficult as the tiny enclave lacks the land and human resources to replicate Las Vegas success by developing convention centres and an entertainment industry.

“Macau is impossible without gambling,” says Harald Bruning, director of The Macau Post daily and a long-term resident. ‘It is like thinking of Rome without the Pope.”

Ironically, Beijing’s disaffection with the rewards of gambling and attempts to cool growth are occurring just as regional competition in the industry is heating up, with Singapore, Vietnam and the Philippines all in the midst of big gaming projects.

Excerpt:

This could be the moment when a fatal blow is delivered to the world’s tax havens. Or it could be another largely cosmetic change that allows offshore financial centres such as Switzerland, the Cayman Islands and Liechtenstein to deflect attacks on the system by sacrificing the few tax miscreants that governments catch in their nets.

Decisions at the G20 government leaders meeting in London Apr. 2 will set the direction.

Financial centres with bank secrecy laws are blamed by the Organisation for Economic Cooperation and Development, which represents 30 developed economies, for hiding some 5 to 7 trillion dollars offshore so the profits they produce evade taxes. This costs the U.S. 100 billion dollars in taxes annually, says Michigan Senator Carl Levin, who has introduced legislation to combat offshore tax evasion. The numbers are guesses, as bank secrecy masks the figures.

Officials in Germany and France, the two western countries that have pressed hardest for reform, believe the offshore system not only deprives them of taxes, but helped cause the financial crisis. Germany’s Finance Minister Peer Steinbrueck said, “These tax havens are also places where unregulated financial market deals are made.” A leaked French government paper agrees that “Uncooperative jurisdictions may threaten the global financial stability by creating regulatory loopholes and opacity.”

Offshore centres, worried what may happen in London, are falling all over themselves promising to cooperate with the major powers on the trail of tax cheats. But the holes in the tax havens’ promises are as big as those in Switzerland’s famous cheese.

The issue is dramatised by the case of UBS. The bank, to settle a charge that it promoted tax fraud, agreed to turn over the names of some 300 clients to the U.S. Treasury. But it has balked at turning over another 47,000 names of U.S. account holders suspected of tax evasion.

And that’s the point. Tax havens, including the aforementioned as well as Singapore, Hong Kong, Andorra, the Cayman Islands, Monaco and others, are agreeing to sign bilateral tax information exchange agreements. OECD spokesman Nicholas Bray told IPS on Thursday, “The situation is changing daily, with new announcements from jurisdictions around the world that they are ready to commit to the international standards.”

But the OECD’s tax standards call only for cooperation with foreign tax authorities if there is a particular and justifiable case. Bray said that means “Inquiries by tax authorities based on reasonable and justified suspicion of tax evasion, individuals and companies – no fishing expeditions, no automatic exchange of information.”

The section on companies opens many possibilities. Not only could governments go after individuals using shell companies to carry out fake transactions to cheat on taxes, but they could pursue real companies who move their profits offshore via transfer pricing to evade home country levies.

Transfer pricing occurs when a company sells to an offshore intermediary at a fake low price (paying low taxes on low profits) and then sells from the intermediary into the market at the real higher price, assigning the true profits to the tax haven – which levies no tax. Or if a company assigns excessive profits to an offshore sales or service subsidiary.

Grace Perez-Navarro, head of OECD’s International Cooperation and Tax Competition Division, said that if France, for example, had a tax haven subsidiary that the government suspected was used for transfer pricing, it could request information about the subsidiary’s offshore accounts.

That could have impact in developing countries Trade between companies, often done for transfer pricing to evade taxes, is at least half of global trade. Grand Cayman is Brazil’s second largest trading partner – obviously a transfer-pricing way station. Brazil this year amended its transfer-pricing regulations and expanded the legal definition of tax havens. Christian Aid in London says that tax evasion costs developing countries estimated 160 billion dollars in tax a year, a lot more than they get from global aid.

However, under the agreements signed, governments have to go after suspects about which they already have evidence – and that evidence may be in the accounts. The Swiss Bankers’ Association said in a statement that “the privacy of foreign clients not under suspicion will continue to be protected by Swiss bank-client confidentiality.” And, “An automatic exchange of information is excluded.”

It’s impossible even for rich governments to investigate and provide evidence to tax havens about more than a very small number of their tax cheating citizens and companies. Requests for administrative assistance take money, staff, legal expertise and time. Many believe that automatic exchange of information is the only really effective way to end pandemic tax evasion.

And where do such bilateral agreements leave developing countries with limited resources or bargaining strength? The Isle of Man has signed 14 agreements, of which only two are with non-OECD countries. Will such arrangements be acceptable to G20 members Brazil and India?

Bray said, “This is an ongoing issue, which will have to be resolved by more diplomacy. The UK is trying to encourage the idea of multilateral agreements, I believe.”

The other part of the equation the G20 must deal with is how tough the sanctions are that it endorses.

The leaked French working paper makes the strongest proposals. They include that G20 members punish countries deemed to be “uncooperative” by breaking off bilateral tax conventions. This would discourage corporations from using those financial centres.

Equally important, the French would put some onus on a G20 country’s own financial institutions. They would require those banks to spell out in their annual reports if they worked with non-cooperative financial centres and would make supervisory authorities take this extra risk into account in the capital requirements for the banks.

The paper says, “Clear reporting mechanisms should be put in place in order to increase the accountability of the management in business decisions leading to operations located in non cooperative jurisdictions.” It says banks should be required to report accounts of their customers located in tax havens and the related capital flows.

The French suggest refusing to allow payments to a blacklisted haven to be deducted from taxable income. They propose requiring international financial institutions to end their activities in blacklisted havens. Finally, they suggest restriction or ban of money flows to and from that offshore centre – which would essentially end G20 banks and company operations offshore.

The British are an unknown factor. About a third of the world’s tax havens are British dependences. It is currently reviewing the policies of what it acknowledges are “British offshore financial centres.” So when Prime Minister Gordon Brown told the U.S. Congress recently, “How much safer would everybody’s savings be if the whole world finally came together to outlaw shadow banking systems and outlaw offshore tax havens?” the question was why hasn’t he dealt with British tax havens.

The answer sits in London, where financial institutions exist in a seamless web with the offshore centres.

Other key G20 members also have tax haven concerns: China has attempted to crack down on tax evasion, India loses a great deal of tax money through Mauritius, and Russian officials are intimately aware of how the oligarchs moved assets and cheated on taxes through Cyprus, Switzerland, Jersey and the Isle of Man.

As for the Americans, U.S. banks already inform tax authorities about how much interest they are paying on clients’ accounts. Barack Obama co-sponsored the Stop Tax Haven Abuse Act as a senator and has endorsed it as president. It would allow the U.S. to bar its own banks from doing business with foreign banks that refused to cooperate with U.S. tax authorities.

Treasury Secretary Timothy Geithner told Congress Thursday that the U.S. would “launch a new, initiative to address prudential supervision, tax havens, and money laundering issues in weakly regulated jurisdictions.” He said, “President Obama will underscore in London on Apr. 2 at the Leaders’ Summit the imperative of raising standards across the globe and encouraging a race to the top rather than a race to the bottom.”

However, the U.S. has provided no specifics about where it stands on the key issues.

*Lucy Komisar is an investigative journalist who writes about the offshore bank and corporate secrecy system. Her articles are posted at http://thekomisarscoop.com/.

By Ángel Páez
LIMA, Mar 12 2009 (IPS)

Business Track, a private security firm, was engaged in spying on non-governmental organisations, environmental activists, social movements and opposition groups in Peru, sources in the police, prosecutor’s office and courts investigating the case told IPS.

When the authorities arrested Business Track (BTR) managers and employees in January on charges of illegally tapping telephone conversations on behalf of third parties, they found intelligence reports about politicians, leftwing organisations and groups critical of the government in the possession of those implicated in spying.

The detainees had files of taped telephone conversations, intercepted e-mails and video footage of people they had had followed, said the sources, who have access to the confiscated documents.

According to investigations by prosecutors and police, the owner of BTR, Manuel Ponce, a retired naval captain, delivered the information collected by his firm's employees, who were active or retired naval intelligence agents, to high government officials.

BTR's "front" activities were counterespionage and information security, such as debugging telephone lines and information technology systems, removing wireless microphones and neutralising spam or malicious e-mail intrusions.

The BTR web site, which has now been decommissioned by the authorities, used to display a portfolio of clients made up of oil, mining and gas companies and private security firms like Forza and Orus. Orus and Forza provide contracted security services to mining companies that are in conflict with local communities. Both firms denied knowledge of BTR's illegal activities and said they had only requested "information security" services.

Forza has worked for the Newmont Mining Corp., a U.S. company mining for gold at Yanacocha in the northern region of Cajamarca, the epicentre of a large number of violent incidents involving local authorities, non-governmental organisations and social movements.

The Majaz mining company, formerly owned by the British company Monterrico Metals and then by the Chinese Xiamen Zijin Tongguan Investment Development Company, also availed itself of Forza's services at the copper and molybdenum mines in Río Blanco, in the mountainous northern province of Huancabamba.

In January the Ecumenical Foundation for Development and Peace (FEDEPAZ) published photographs, obtained from an anonymous source, showing police and Forza personnel meting out brutal treatment to campesinos (small farmers) participating in a peaceful protest against Majaz in 2005.

The photographs show campesinos blindfolded or with their heads inside black bags and their hands tied behind their backs. During the demonstrations, police and Forza agents arrested and tortured people, according to the FEDEPAZ report. The Majaz company has not denied the accusation.

Opposition lawmakers said they will investigate Forza's role in the alleged violence against and torture of campesinos.

Orus, in turn, has metal and mining firms Miski Mayo, Doe Run Peru, Oro Candente, Buenaventura and BHP Billiton Tintaya on its client roster.

Local communities in the areas of the mining operations have protested against the mining companies for not consulting them in advance, as required by law, or because the firms’ activities have caused environmental damages.

The documents confiscated from BTR were handed over by prosecutor Walter Milla to Judge Ana María Martínez, who is handling the case.

Martínez must determine which of Ponce’s clients were paying for illegally obtained information, sources at her office told IPS.

Vice President Luis Giampietri acknowledged that BTR provided him with certain information through one of its officials, a woman who is currently in jail.

"I received intelligence information, early in my term of office (in July 2006), about the ALBA (Bolivarian Alternative for the Americas) Houses and the Bolivarian groups," Giampietri told the newspaper Expreso on Jan. 13.

The ALBA Houses are social centres providing basic needs in the poorest areas, and receive part of their funding from the Venezuelan government, which runs similar programmes in its own country.

The press revealed that between July 2006 and July 2007, while officiating as the president of Congress, lawmaker Mercedes Cabanillas of the governing Peruvian APRA party hired BTR, ostensibly to carry out an electronic sweep of her office. Cabanillas admitted to being a friend of Ponce's, who she said "passed on to and discussed with me information about the activities of anti-establishment groups."

In military spy jargon, "anti-establishment groups" are organisations that hold protests against violations of basic human rights, or against the activities of mining companies, police and military sources told IPS.

The same material – film footage, intercepted e-mails, surveillance and monitoring of persons belonging to "anti-establishment groups" – came into the hands of Giampietri, the armed forces high command and Defence Minister Ántero Flores Aráoz.

On the basis of the intelligence, Ponce tried to convince the authorities of the existence of a plan to create chaos and overthrow the constitutional order.

The putative plan was alleged to be financed by the government of Venezuelan President Hugo Chávez, with the Peruvian chapter of the Continental Bolivarian Committee (CCB-CP), a platform of leftwing groups sympathising with Chávez, as its intermediary.

The supposed plan was also alleged to involve the rebirth of the now-defunct Túpac Amaru Revolutionary Movement (MRTA), the smaller of two guerrilla groups fought by counterinsurgency forces during Peru's 1980-2000 civil war. (The larger group was the Maoist Sendero Luminoso or Shining Path).

BTR spied on some former members of the MRTA and leaked the information it had gleaned to the media, warning of supposed acts of violence to disrupt international meetings held in Peru in 2008, such as the European Union-Latin America and the Caribbean (EULAC) Summit and the Asia Pacific Economic Cooperation (APEC) forum.

None of the dire prophecies was fulfilled.

"Giampietri and I are friends; in fact I am friends with everyone, including (Peruvian) President (Alan) García. I have provided all of them with the information they needed. If I learned something that would interest them, I passed it on. I gave them information, for free. Everyone has consulted me, even President García," said Ponce in an interview from his prison cell for the Lima newspaper La República, published Feb. 8.

In addition to the current charges he faces, Ponce has been prosecuted for human rights violations allegedly committed when he worked at the Directorate of Naval Intelligence during the administration of former Peruvian president Alberto Fujimori (1990-2000).

Excerpt:

By IPS Correspondents
WASHINGTON, Mar 11 2009 (IPS)

Some of the world’s leading banks facilitate corruption in the poorest countries, charges a new report by Global Witness, an independent watchdog group.

The report, “Undue Diligence: How banks do business with corrupt regimes,” shows how by doing business with dubious customers in corrupt, natural resource-rich states, banks are facilitating corruption and state looting, which deny these countries the chance to lift themselves out of poverty and leave them dependent on aid.

“The same lax regulation that created the credit crunch has let some of the world’s biggest banks facilitate the looting of natural resource wealth from poor countries,” said Gavin Hayman, Global Witness campaigns director.

“If resources like oil, gas and minerals are to truly help lift Africa and other poor regions out of poverty, then governments must take responsibility to stop banks doing business with corrupt dictators and their families,” he said.

The report presents a series of case studies about bank customers in Equatorial Guinea, Republic of Congo, Gabon, Liberia, Angola and Turkmenistan. In these countries, the national resource wealth has or had been captured by an unaccountable few, whether for personal enrichment, to maintain an autocratic personality cult that violated human rights, or to fund devastating wars.

The banks doing business with these customers include Barclays, Citibank, Deutsche Bank, and HSBC. Nearly all of the banks that are featured in the report are major international banks and all of them make broad claims about their commitments to social responsibility. Yet, according to the report, there is a grotesque mismatch between rhetoric and reality.

Natural resource revenues offer a potential way out of poverty for many developing countries. But too often, resource revenues that could be spent on development are misappropriated or looted by senior government officials, or are used to prop up regimes that oppress their own people.

“Banks are providing the mechanism for natural resource corruption to take place,” said Anthea Lawson, campaigner for Global Witness.

Some of the evidence presented in the report includes the case of Barclays Bank, which kept open an account for Teodorin Obiang, the son of the dictator of oil-rich Equatorial Guinea, long after clear evidence emerged that his family was heavily involved in substantial looting of state oil revenues.

In 2004, Riggs bank collapsed as a result of a U.S. Senate committee investigation and federal criminal investigators’ findings that it had been holding accounts for President Teodoro Nguema Obiang, his family members, and his corrupt government.

Despite this, Teodorin, who as minister for agriculture and forests in his father’s government earns a salary of 4,000 dollars a month, still had an open Barclays account as of November 2007. The report notes that while his country remains one of the poorest in the world, he owns a 35-million-dollar Malibu, California mansion and has spent 6.3 million dollars on car purchases in the last decade.

Also mentioned is Citibank, which facilitated the funding of two vicious civil wars in Sierra Leone and Liberia by enabling the warlord Charles Taylor, now on trial for war crimes in The Hague, to loot timber revenues.

As evidenced by the current financial crisis, the report argues that when it comes to sticking to the rules, bankers are doing the minimum they can get away with. They aggressively exploit the loopholes and ambiguities in regulations and arbitrage their responsibilities to the lowest level.

This is happening despite a raft of anti-money laundering laws that require banks to do due diligence to identify their customer and turn down illicitly-acquired funds. But the current laws are ambiguous about how far banks must go to identify the real person behind a series of front companies and trusts.

By accepting these dubious customers, banks are, directly or indirectly, assisting those who are using the assets of the state to enrich themselves or brutalise their own people, says the report.

This report comes right before G-20 officials are set to meet on Mar. 14 in London to discuss the financial crisis.

“The G20 leaders must act on their promises to help the world’s poor. A key element of making poverty history is to stop the money being stolen or kept off-budget in the first place. Ducking this issue now leaves the global financial system open not only to further corrupt money flows, but to the destabilising influences that have caused such damage to the developed world’s economies,” said Hayman.

The report prescribes essential reforms to the financial regulatory system, which need to be adopted globally, with effective information sharing across borders. These include the adoption of explicit anti-money laundering laws that call on banks to identify the natural person behind the funds, investigate the source of funds, and refuse the customer if they present a corruption risk.

According to the report, while it is important that banks develop their own effective know-your-customer policies, leaving them to do it on their own without regulatory oversight will not work, because the avoidance of corrupt funds inevitably involves turning down potential business, and not all banks are willing to do this. The subprime crisis and ensuing credit crunch have shown, among other things, that allowing banks to self-regulate does not work.

Another recommendation is for greater cooperation between governments to ensure that national bank regulations become globally compatible, accountable and transparent, and are not hindered by bank secrecy laws. This must begin with reforms to the inter-governmental body that oversees the anti-money laundering regime, the Financial Action Task Force (FATF), which sets the global standard for the anti-money laundering rules that are supposed to prevent flows of corrupt funds.

Global Witness calls on FATF to use its powers to name and shame more effectively, open itself up to external scrutiny, and cooperate with other organisations and government agencies working on corruption.

Though Lawson said all the banks mentioned in the report were contacted by Global Witness and shown evidence in great detail, none have responded.

“Most wrote back in some form, but were not able to answer the questions (Global Witness had posed) citing client confidentiality,” said Lawson.

Excerpt:

By IPS Correspondents
BRIDGETOWN, Barbados, Mar 5 2009 (IPS)

Caribbean leaders emerged from a one-day special summit on Wednesday night to announce new mechanisms to deal with some of the problems plaguing the region’s financial sectors, occasioned not only by the ongoing global crisis, but by several homegrown scandals as well.

“We’re suffering from the fallout of the international crisis but it is not beyond us to sort out the difficulties, which we have. We have done so in the past,” St Vincent and the Grenadines Prime Minister Ralph Gonsalves told reporters.

Prior to the start of the talks here, Grenada’s Prime Minister Tillman Thomas told IPS that the global crisis had frozen millions of dollars in foreign investment, particularly in the tourism sector.

Caribbean countries have been further rocked by the collapse of the Trinidad-based conglomerate CL Financial and the move by United States regulators to seize the assets of Texas billionaire Sir Allen Stanford, who has substantial investments, including banks, in the region.

U.S. regulators have accused Stanford and senior executives of his company, Stanford Financial Group, of perpetrating financial fraud of a “shocking magnitude” against unsuspecting investors, provoking depositors in Antigua and Barbuda to make a run on the financial institution.

In addition, Antigua’s Baldwin Spencer government, which is campaigning for a Mar. 12 general election, was forced into reconvening a prorogued parliament so as to give authorities legal right to seize a number of assets belonging to Stanford.

In the case of CL Financial, several regional governments have also gone to the courts to safeguard the interests of those who invested significant amounts of money in the company’s flagship Colonial Life Insurance Company (CLICO). Authorities in Trinidad and Tobago have admitted that the financial problems facing the embattled conglomerate were far worse than first anticipated even though the government has agreed to plough billions of dollars into the company.

The Patrick Manning government is providing the funding in exchange for collateral and an equity interest in CLICO and will also act as a catalyst for implementing a change in the current business model and corporate governance of the insurance company that has interests throughout the Caribbean.

In addition, CL Financial is to divest itself of its entire 55 percent holding in Republic Bank Limited, the largest commercial bank in the oil-rich twin island republic, as well as shares in a methanol company.

In Barbados, Opposition Leader Mia Mottley has filed a motion of no confidence in Prime Minister David Thompson over his handling of the affair.

In the motion, the opposition contends that the prime minister misled local policyholders when he indicated that the subsidiary of the company here was “sound, prudently managed and well regulated” and that investments held by Barbadian depositors, investors and holders of insurance policies could be considered safe, while he knew, or ought to have known, that the company’s statutory fund deficit was 46.5 million dollars at the end of 2007.

Debate on the motion is scheduled for Friday.

Amid these various unfolding scandals, Manning said the special meeting here provided the leaders with an opportunity to “understand exactly what is happening in our region.”

“We see things happening in the United States that we never thought that we would see…significant changes in the international community and those things have not escaped us here in the Caribbean,” he said.

Gonsalves, who chaired the special summit, said that the discussions had resulted in commitments by regional governments to have their regulators meet on an ongoing basis to ensure the stability of the financial system.

“The message emerged, loud and clear, that the crisis which has been engendered has put us in a position that we must strengthen the regional integration process, so that we would be in a better position in the future if challenges to the financial system and especially in the non-banking financial institutions arise,” Gonsalves said, adding that Caribbean financial regulators will meet in Trinidad next week to begin the process of further cooperation.

That idea had earlier been flagged by the host Prime Minister David Thompson, who suggested it would provide his colleagues with a better opportunity to confront the financial challenges facing them.

“What is patently clear arising out of this meeting is that there needs to be more contact between the regulators so that they can verify the accuracy of information, so that they can share information about the adequacy of statutory funds or assets owned by insurance companies so that they can ensure compliance with the provisions of the legislation and so that they can ensure that there is an arms length relationship between the trustees that are holding the assets in trust for the insurance company,” Thompson said.

The meeting here on Wednesday comes a week before the leaders will gather in Belize for their scheduled inter-sessional summit and Caribbean Community (CARICOM) officials have already acknowledged that the strategies to deal with the global financial crisis will be among the most pressing matters.

Excerpt:

By IPS Correspondents
NAIROBI, Feb 23 2009 (IPS)

Kenya's civil society has rebuffed efforts by its embattled government to restore its tattered image in the wake of waning public confidence in the state. Their major grievance is that the country's problems, including high level graft, are the result of a culture of impunity that has engulfed the nation's top officials and politicians.

Kenya's civil society has rebuffed efforts by its embattled government to restore its tattered image in the wake of waning public confidence in the state. Their major grievance is that the country's problems, including high level graft, are the result of a culture of impunity that has engulfed the nation?s top officials and politicians.

Civic groups snubbed the coalition government national conference held on Feb. 4 to 7 February under the banner "One Kenya, One Dream: The Kenya We Want", intended to gather views from the public on how to improve government performance.

The National Civil Society Congress, an umbrella body of civic groups, staged a parallel gathering dubbed "The People's Conference: The Kenya We Do Not Want".

According to the civic body about $100 million in oil imports disappeared in January 2009. It's alleged that local oil marketing company Triton Oil colluded with the Kenya Pipeline Company (KPC) to release oil illegally. KPC is a state-owned agency that processes and distributes all the country's oil imports.

In another incident that also came to light in January 2009, an $11 million maize scandal has been unearthed by the Public Accounts Committee, the parliamentary watchdog on public spending. A fraudulent scheme involving key government officials and unscrupulous millers to export maize has resulted in an artificial shortage of the commodity, the country's staple food. This comes at a time when the country's president has appealed to donors to help feed 10 million Kenyans who are facing starvation.

Senior politicians implicated in the scandals have ignored public calls to step down and be investigated.

"We cannot be talking about fighting impunity while at the same time glossing over the highest form of impunity right before our eyes. Kenyans are right now experiencing hunger but elected representatives are refusing to pay tax which could go into ameliorating this situation," Morris Odhiambo, president of the congress told IPS.

"What Kenyans do not want is clear: a country with two sets of citizens – those who pay tax and those who do not."

The congress has since started collecting signatures from the public to petition members of parliament to pay tax. They have also set their sights on challenging the validity of the Parliamentary Service Commission (PSC) that was established by an Act of parliament in 1999 to, among others; look at compensation and benefits of parliamentarians. According to the congress the law creating the PSC contains provisions that clash with the constitution which requires all citizens to pay tax. The civic body wants the Commission scrapped. They claim parliamentarians have abused it to secure their interests and of awarding themselves hefty perks.

Parliamentarians only pay tax on their basic monthly salary of about $2,700; the bulk of their income – about $10,810 – is derived from allowances for mileage, housing, a sitting allowance, a responsibility allowance and a constituent?s allowance that is untaxed. Add to this a $44,000 dollar grant for a car.

$8 million would be added to the public coffers if the 222 MPs were taxed on their full compensation packages, enough to pay for 3,500 teachers, the backlog of which the Teachers Service Commission puts at 58,000. The money could also help address crippling shortages of health personnel; a scarcity the health ministry has said is due to an exodus of doctors and nurses to other countries.

"The government knows too well that it should be addressing these things. This is not the time to be asking what kind of Kenya we want when the answers are too obvious," George Nyongesa, spokesperson of the Peoples' Parliament, a forum for ordinary citizens formed 15 years ago to focus on development and governance told IPS.

"Apart from this, the same government knows it must deal with high level corruption that is rampant. We want to see big shots sacked and prosecuted for us to know that there is some seriousness in fighting graft."

His sharp remarks were provoked by Prime Minister Raila Odinga's address to the government conference on 4 February in which he claimed that "We want to be a beacon of good governance in Africa and beyond."

But to civil society actors these declarations have an all too familiar hollow ring to it. "For the President, Prime Minister and members of parliament to demonstrate that they are keen on the fight against impunity they have to fight this impunity in their midst," Odhiambo told IPS.

Excerpt:

President Barack Obama said he would crack down on firms that use offshore centres to evade taxes. He could begin with a New York subsidiary of one of the world’s largest private banks, which used a Cayman Islands company to shift its profits.

Why would a New York fund manager run operations through an office in the Caymans? “This type of structure is for optimising taxes,” explained Max Obrist, a Cayman Islands official of the global Julius Baer Group (Zurich).

He told IPS that “generating” the income where a company was actually based, “you would pay much more taxes”. Obrist was describing a company shifting claimed earnings to tax havens to evade home taxes. He allegedly helped Julius Baer Investment Management (JBIM) New York do just that.

Obrist is a director of Baer Select Management (BSM), a Cayman Islands company. According to a whistleblower who used to work with him in the Caymans, BSM is a fake firm created by Julius Baer to sign agreements with JBIM and other subsidiaries so they could evade taxes.

The whistleblower, Rudolf Elmer, 53, a German, was chief operating officer of Julius Baer Bank & Trust Company (JBBT), Caymans, at 212,000 dollars a year and served on the BSM board from 1999 to November 2002. JBIM paid fees to BSM to “manage” its investments. Elmer told IPS that JBIM moved to BSM profits it should have reported to the U.S. Internal Revenue Service.

JBIM is now called Artio Global Investors. It manages 72 billion dollars in assets. It has some 900 institutional clients, including corporations, pension funds, endowments and foundations and major financial institutions as well as more than 700,000 mutual fund shareholders.

Its chief executive and chief investment officer Richard Pell and head of international equity Rudolph-Riad Younes were paid 120 million dollars during the first nine months of 2007, leaving the company with income of 48.6 million dollars.

Artio is a subsidiary of Julius Baer Group, Switzerland’s largest private banking group with over 300 billion dollars in assets invested on behalf of institutions and very wealthy individuals. Julius Baer’s reported profits in 2007 were more than 1.1 billion dollars. It has 30 offices in world financial centres, from New York and London to Dubai and Tokyo. BSM is a Julius Baer subsidiary.

Elmer said, “There was a strategic plan adopted in 1996 to utilise Baer Select Management, JBIM New York and JBIM London to benefit from the offshore system.” He said that JBIM assigned management functions to BSM in order to award it a performance fee. He provided backup documentation to IPS, including financial spreadsheets.

He said that Obrist in the name of BSM ratified a few decisions, but really worked for JBBT. He said that control was exercised and decisions taken by JBIM New York or Julius Baer Investment Funds Services Ltd, Zürich, which were part of Bank Julius Baer & Co, Zürich.

According to Elmer, JBIM made a proposal to Julius Baer Investment Management, Zürich, to launch a fund, and Zürich approved. JBIM did the paperwork and other organisational tasks with the help of JB Zürich and Caymans lawyers.

The offering memorandum said that Baer Select Management was appointed investment manager, Elmer said, and BSM appointed JBIM investment advisor.

JBIM was generally listed as a fund “advisor”, though some public documents said that JBIM managed funds. Elizabeth Nesvold, founder of the New York investment-banking boutique Silver Lane Advisors LLC, noted that though investment managers make most of their money from performance fees, most of the JBIM’s revenue was claimed from advisory fees.

A call to the Grand Caymans phone number for BSM was picked up by a receptionist for Julius Baer Bank and Trust Co Ltd (JBBT). “Is this the number for Baer Select Management?” she was asked. “Yes,” she replied, and passed the call to Max Obrist. He identified himself as BSM’s director. He had a few other jobs. The Jan. 13, 2000 minutes of the JBBT management committee said, “Direct Money Market dealing has started. Max Obrist has assumed responsibility for this activity.”

He was also listed as a director of Directorate Inc., British Virgin Islands, the corporate director of some Julius Baer funds.

Describing BSM’s tasks, Obrist explained, “We have to follow stocks, monitor their investment policies, we monitor the risk reports we receive from the investment advisor and check if there are performance fee calculations involved if they are executed properly, all monitoring duties. We are in contact with the external auditors and the regulatory authorities and Cayman Islands monitoring authority.”

He said BSM’s fee was “a percentage of profits, and it depends on what type of duties we have to do here from Cayman.”

Why was BSM needed? He replied, “That’s an interesting question. I don’t always know when they start something. They decided on a much higher level. I wasn’t involved. We were told: ‘You act as investment manager for these new funds’.” But he didn’t manage, he “monitored”.

Fees paid to BSM resulted in lower company profits and taxes for JBIM. Fund managers generally take profits of 1 or 2 percent of assets plus 10 to 20 percent of investment gains. As the funds had high values, that involved substantial amounts. According to Elmer, BSM, acting through a board whose members worked for JBBT, transferred profits via several offshore companies to Julius Baer Holding Ltd, Zürich.

Obrist denied that BSM is a shell company. He said, “We are physically here in the Cayman Islands, not just a post office box like some companies trying to save taxes without doing anything physically.”

He insisted, “BSM is to give service from an offshore place and at the same time we can within Julius Baer optimise taxes, yes. But we are physically here. We do our job as investment manager. If Baer Select would be here just as a post office box company and generate the millions in Cayman as income instead of in the U.S. or the U.K. or Switzerland, then that would not be a very smart thing.”

Obrist said BSM stopped working for JBIM New York four or five years ago after it closed some hedge funds. However, JBIM/Artio would still be potentially liable for unpaid taxes, as the U.S. has no statute of limitations for tax fraud.

Artio CEO Richard Pell did not reply to numerous phone messages and emails describing this story and requesting an interview. Martin Somogyi, spokesperson for Julius Baer, Zurich, emailed that the company always adhered to applicable regulations and was regularly audited, but that it would not agree to an interview. (Its global auditor is KPMG.)

Julius Baer Americas Inc. (now Artio Global Investors) which owns JBIM/Artio, in February 2008 filed with the SEC that it would go public with an initial public offering (IPO) to sell up to 1 billion dollars of common stock on the New York Stock Exchange. The offering would be handled by Goldman, Sachs and Merrill Lynch. The IPO has been postponed.

Lucy Komisar is an investigative journalist who writes about the offshore bank and corporate secrecy system. Her articles are posted at http://thekomisarscoop.com/.

By IPS Correspondents
NEW YORK, Dec 22 2008 (IPS)

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.

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 Nov. 18 statement, drafted by the Papal Council for Justice and Peace and endorsed by the Vatican Secretariat of State which speaks for the Pope on foreign affairs, called offshore markets "an important link, both in the transmission of the present financial crisis, as well as in maintaining a host of mad economic and financial practices."

Among them it said were the movement of money to evade taxes and recycle profits from illegal activities and also gigantic capital flight.

The Holy See issued its "note" on the causes and consequences of the world financial crisis on the eve of the United Nations General Assembly Conference on finance and development in Doha. Its prescription: "a drastic reduction of offshore financial practices".

Dr. Flaminia Giovanelli of the Papal Council in Rome told IPS that this is the first time it has made such a statement.

She explained that the Council had been studying the problem of financing for development at the moment that the financial crisis occurred. She said the statement talked about tax havens because the Council's study connected the fact "that many companies don't pay taxes" to both financing for development and the financial crisis.

The Papal statement was published in Observatore Romano, the Vatican newspaper. Dr. Giovanelli said there have been "positive reactions from Catholic development organisations" around the world.

The statement asked, "How have we arrived at this disastrous situation, after a decade in which speeches have multiplied on the ethics of business and finance, and in which the adoption of ethical codes has spread?"

A few weeks later, on Dec. 8, in ironic counterpoint, 17 major U.S. corporations signed on to a list of ethical practices. Their statement, which appeared aimed at assuaging public displeasure at corporate misbehaviour, was built on non-controversial hot-button issues – in essence, "we won't bribe, we won't despoil the environment". The issue of offshore money flows and tax evasion was nowhere to be seen.

The Vatican came to its knowledge of offshore painfully. Italy's Banco Ambrosiano, of which the Vatican was the main shareholder, collapsed in 1982. Its CEO Roberto Calvi, in collaboration with Bishop Paul Marcinkus, the U.S. national who headed IOR, the Vatican Bank, had siphoned off multi-millions of dollars to offshore accounts.

Ambrosiano lost 3.5 billion dollars of customers' deposits. Calvi, who fled Italy, was murdered and found hanging from Blackfriars Bridge in London. Marcinkus was protected from Italian indictment by the Church and later returned to the U.S. where he lived until his death in 2006.

A few years later, in a 1985 essay on morality and economics, Cardinal Ratzinger – the future Pope Benedict XVI – warned that the decline of ethics "can actually cause the laws of the market to collapse".

Ethics and offshore. 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 prescription: comply with laws against fraud, corruption, and bribery; practice transparency; avoid conflicts of interest; be accountable to customers and protect the environment.

Ethics, according to the 17, does not include rejecting the use of the offshore system to evade regulation as well as taxes. Like the Vatican, U.S. corporations have experience with offshore. It's understandably a sensitive issue.

General Electric cuts its taxes drastically by selling its exports to offshore subsidiaries which then sell them to the real customers. That's called "transfer pricing". The corporation transfers profits offshore. GE spokesperson Gary Sheffer declined to comment on ethics and taxes or on the ethics of GE transfer pricing.

Dell, the computer company, has moved patents on intellectual property developed in the U.S. to subsidiaries in Ireland where no taxes are charged on royalties. Regarding Dell's view of ethics and taxes or the ethics of avoiding taxes on patents, Michele Glaze, spokesperson for Dell on corporate social responsibility, said, "I don't know the answer." She didn't obtain it.

PepsiCo, the global soft drink company, has 10 subsidiaries in Luxembourg, a notorious tax haven. However much soda Luxembourgers drink, that market would not seem to require ten Pepsi companies to serve it. Such companies are routinely used for financial transactions that launder profits. PepsiCo declined to discuss the purpose of its Luxembourg subsidiaries or the degree to which using offshore companies to reduce taxes is consistent with an ethics pledge. Public relations spokesperson Dave DeCecco provided a written statement: "PepsiCo manages its tax affairs in a prudent and lawful manner."

The ethics pledge was organised by Alex Brigham, founder and head of the Business Ethics Leadership Alliance of the Ethisphere Institute. He said that paying fair taxes "wasn't an issue that we brought up with these companies in large part because we're focusing on a lot of non-financial items."

He explained, "We're looking at the conflicts of interest; that's a huge problem for companies." He added, "I agree that off balance sheets assets are a major problem in the financial services sector. I know Citigroup moved massive amounts of assets off their balance sheet, but I don't know if it was offshore."

He said that the business ethics project did not anticipate taking on tax issues "either now or in the foreseeable future". The Ethisphere approach to offshore tax evasion is typical of U.S. corporate-financed "corporate social accountability": they ignore it.

However, the issue may get some attention when U.S. President-elect Barack Obama takes office. The amounts at play are huge. The Vatican cited estimates of the taxes evaded from wealth held in offshore centers as close to 255 billion dollars. U.S. tax losses from corporations are said by Senator Carl Levin, co-sponsor with Obama of the Stop Tax Haven Abuse Act, to be 50 billion dollars a year.

In his campaign, Obama spoke out frequently against corporations who don't pay their fair share of taxes. He said he would deny tax benefits to former U.S. companies that reincorporate offshore to avoid paying taxes. He said he would crack down on companies that use operations in offshore jurisdictions to evade taxes.

*Lucy Komisar is an investigative journalist who writes about the offshore system. Her articles are posted at thekomisarscoop.com/.

Excerpt:

By Julio Godoy
PARIS, Dec 17 2008 (IPS)

As many feared, little action has resulted from the latest attempt to move against tax havens.

The irony of the last event was perhaps telling of the inaction to follow. About 200 experts in international finance met last month in Monte Carlo to discuss tougher international regulations against tax evasion. Monte Carlo, in Monaco to the south of France, is one of the most conspicuous tax havens in Europe.

“At least, we were discussing tax evasion at the geographical heart of the matter,” a French financial expert told IPS. Monaco, he said, “has a very bad image even among the global financial community.”

Monaco, Andorra and Liechtenstein are the last three tax havens in Europe accused by the Organisation for Economic Cooperation and Development (OECD, a grouping of 30 wealthy nations), of not applying the body’s voluntary standards on financial transparency and exchange of information.

But the meeting in Monte Carlo, organised by the OECD’s Financial Action Task Force (FATF), was evidence at least that the fight against tax evasion is back on the international agenda.

The OECD and the FATF have been leading a fight against tax havens since the early 1990s. Tax havens are seen as the homes of speculative hedge funds, criminal money laundering, and tax evasion.

A tax haven is a territory – a state or a jurisdiction within a state – where taxes are low or not levied at all. This invites wealthy individuals and firms to set up a presence in these territories to escape taxation at home. And they are centres of money laundering because few questions are asked about the source of the money or where it goes.

The efforts of the OECD and the FATF have been largely fruitless.

The OECD hosted an international conference at its headquarters in Paris in October to seek consensus on new rules against tax havens. OECD director- general Angel Gurría said the meeting came “during the most difficult economic times we have faced in many decades.”

The conference was sought by the French and German governments. Under pressure as a result of the global financial meltdown, and the need to bail out banks facing bankruptcy due to their involvement in speculative transactions, France and Germany have been leading efforts to control, or even close, tax havens.

“We have agreed to lend money to the banks to rescue them from bankruptcy, but at the same time they cannot continue working with tax havens,” French president Nicolas Sarkozy said ahead of the OECD meeting. Tax havens must be closed, he said.

Gurría estimates that tax havens across the world hold up to 7 trillion dollars (a trillion is a thousand billion). He said at the meeting that “many countries…have over the last three years reinforced their (anti-tax evasion) provisions.”

But some figures on tax havens suggest otherwise. According to Tax Justice Network, a London-based independent organisation, some 11 trillion dollars are hidden away from taxation in European countries such as Monaco, Liechtenstein, and Switzerland, and other tax havens across the world.

Eight years ago, the International Monetary Fund (IMF) estimated the total amount in tax havens to be a trillion dollars. If these figures are all correct, they would suggest that money flows into tax havens have increased significantly.

The ‘black list’ of “non co-operative” tax havens the FATF puts together itself would suggest that there are no more tax havens. In 2000 the FATF blacklisted 15 countries, jurisdictions, and territories for not co-operating in the fight against tax evasion. The last FAFT ‘list’ released in October 2006 is blank.

According to Gurría, the OECD’s own black list has by 2008 been reduced to Andorra, Liechtenstein and Monaco.

But many experts believe this kind of listing is meaningless when there are thousands of secret bank accounts being operated throughout the tax havens. And they say renewed efforts for international regulation of tax havens seem to be starting from scratch again. “Of course, I salute this return, but I am still pessimistic,” Jean Merckaert who coordinates a French analysis group on tax havens told IPS.

Merckaert said the fight is at least 15 years old. “More than 10 years after many international forums started to debate about tax havens and how to control them, we have to admit that nothing has changed.”

The supposed international cooperation on this was merely rhetoric, he said. “To get erased from the FAFT black list, it sufficed that the tax havens signed an agreement of cooperation,” said Merckaert.

And so European Union (EU) member countries, such as Germany, have launched a crackdown on tax evasion against their citizens for maintaining secret bank accounts in other EU states.

At the FATF meeting in Monte Carlo, Prince Alberto of Monaco denied that his country is a tax haven. “I know that Monaco has to have an irreproachable conduct in its financial dealings,” he told the audience.

There are not many takers for that view. “Monaco remains a black hole of financial globalisation,” Paris judge Renaud Van Ruymbeke, who has led many inquiries into financial crimes, said in an interview published in the daily Le Monde.

Van Ruymbeke said it was odd to see renewed talk of closing down tax havens. “I am surprised that our political leaders only now discover offshore financial centres,” he said.

“Many colleagues and I denounced it in 1996 when we launched the Geneva appeal, drawing attention that tax havens are also havens for criminals,” Van Ruymbeke added.

In a recent appeal, the French Catholic organisation Le Pelerin said that a modest tax on just as modest estimated interest on capital hidden in tax havens would pay for a global campaign to provide universal access to therapy against AIDS, to guarantee universal primary education, and to eradicate hunger.

Excerpt:

By IPS Correspondents
OSLO, Jul 4 2008 (IPS)

A new commission appointed by Norway will investigate ways of putting a stop to the huge flows of money into tax havens. Tax evasion and corruption are believed to cost poor countries at least 50 billion dollars a year.

The commission, launched last week, includes Eva Joly, a special advisor on corruption for the Norwegian development agency Norad who headed the famous investigation into corruption at French oil company Elf as an investigatory judge, as well as experts in the fields of international economics, anti-corruption, fund management, and development policy.

Tax havens are places that have created special tax rules that allow operators such as companies to pay little or no taxes. The tax havens can be very secretive, making them attractive for operators that want to avoid paying taxes to their home countries, as well as for those that want to hide away money gained through corruption.

Among the areas that have been labelled as tax havens are Andorra, Monaco, Gibraltar, Jersey, the Cayman Islands, Luxembourg, the Netherlands, as well as some parts of the financial system in London.

"I am very proud of this commission and I think it is very important that it has been appointed, because there is quite a high level of confusion surrounding the damaging effects of tax havens," Joly, who is also part of an anti-corruption working group at the World Bank, told IPS.

"I believe that the damaging effects are quite large, as the tax havens have made it possible to hide illegal money flows in structures that are exclusively intended to interfere with the sovereignty of other countries by impacting on processes in those countries. This means that on the Cayman Islands, for instance, they have built a system that is not intended for use on the Cayman Islands, but for companies that have been established in other places."

According to a 2000 estimate by Oxfam International, tax havens rob developing countries of at least 50 billion dollars a year in revenues. The organisation stressed that this was a conservative estimate. Even more worryingly, Joly believes that money flows to the tax havens are increasing.

"When they were first created and they were only used by the few, other economies could handle the burden, but the use of tax havens has increased continually, and I think that it has become a danger not only for developing countries, but also for the liberal, globalised economy," said Joly.

For instance, Germany claims that it loses about 46 billion dollars a year to tax havens. In the U.S., where the estimated figure is 100 billion dollars, Democratic presidential hopeful Barak Obama has signed onto a Tax Haven Abuse Act.

Joly points out that many also believe that the main reason for the current dramatic rise in oil prices is not inadequate supply, but commodity market speculation by operators who may hide in tax havens. The leading commodities regulator in the U.S., the Commodities Future Trading Commission (CFTC), has launched a probe.

"The CFTC freely admits that it cannot do its job because many of the operators are hiding in the tax havens," Joly said.

"But we will be looking at developing countries, and the hypothesis is that we are cancelling out part of our development aid by making it possible to hide away money in the tax havens." Joly notes that it has been estimated that for every dollar invested in development projects in poor countries, the countries lose ten dollars to the tax havens.

As well as looking at ways to prevent the loss of money from poor countries to the tax havens, the commission will try to provide more definite facts and figures relating to losses that can be used by policy makers in the future, as most current estimates are very uncertain.

"We hope to be able to put a spotlight on the issue and to be a little more precise about the damaging effects than has been possible until now. The idea is that if we can prove just how damaging these tax haven activities are, then our development policies will have to change," said Joly.

"Norway has already made a start on that – Norad works a lot on helping countries help themselves by teaching them to become better negotiators, to negotiate better mining contracts, and so on. For me that is the aid of the future – to ensure that developing countries are able to retain more of their resources, although that will of course not solve the development challenge by itself. Most of these countries also have serious challenges relating to the fair distribution of those resources."

The head of the commission, Professor Guttorm Schjelderup from the Norwegian School of Economics and Business Administration, warns that estimates of money flows to the tax havens will always be beleaguered by a degree of uncertainty.

"The tax havens have been constructed in such a way as to prevent transparency. This does not mean that we won't be able to look at the consequences for developing countries, but it will never be possible to map accurately the exact amount of dollars and cents, to put it that way," he told IPS.

The commission will meet for the first time in August, and is scheduled to submit its recommendations to Norway's minister for the environment and international development Erik Solheim next summer.

Excerpt:

By IPS Correspondents
NEW DELHI, Jun 6 2008 (IPS)

With Indians spending more money abroad and even picking up blue chip firms the government has decided to take a closer look at suspected money laundering activity and dubious international fund transfers.

The cabinet of the ruling, centre-left United Progressive Alliance (UPA) will shortly introduce a bill in parliament to amend the Prevention of Money-Laundering Act making it mandatory for all financial intermediaries to report fund movements to an intelligence unit of the union finance ministry.

On Thursday, soon after the introduction of the bill was approved, senior cabinet minister Priyaranjan Dasmunshi told reporters that it would ‘’enable the government to meet certain domestic needs and international obligations,’’ referring to fund transfers that are likely to be related to criminal activity.

Under the proposed new law, all agencies engaged in money transfers across countries – such as Western Union, Visa and Mastercard – would have to compulsorily report all transactions. Existing law obligates only Indian agents of firms engaged in international transfer of funds through wire services to report transactions.

Covered by the proposed legislation are transactions involving credit cards besides earnings such as those made in casinos. There have been, in recent months, news reports of fund-transfers made through credit cards by persons suspected to have criminal backgrounds or engaging in under-invoicing of export bills.

Most significantly, however, the amendment to the law comes in the wake of widespread concerns that the Indian government is not doing enough to bring back funds illegally taken out of the country and stashed away in secret accounts in banks located in tax havens.

Even as Indian nationals are spending more outside their country and local companies are acquiring firms in different parts of the world, questions are being raised as to whether the money that is being spent is out of funds that have been illegally stashed away in tax havens.

Till the 1990s, the Indian economy used to be a closed one and foreign currency transactions were strictly controlled. As the country’s economy liberalised and as the US dollar weakened, Indians felt less inclined to illegally park their money in foreign bank accounts, outside the scrutiny of government tax authorities. Nevertheless, analysts argue that slush funds continue to flow out of the country.

This issue recently gained prominence in the Indian media after German intelligence agents acquired details of the accounts of nearly 1,400 individuals held in a bank in Liechtenstein, a small landlocked principality tucked in-between Switzerland and Austria that is known as a tax haven.

The information, obtained from a former bank employee, included details of accounts held by 600 German nationals. The German authorities made it known that they would be willing to part with the information relating to the 800 non-German account holders in the Liechtenstein bank called LTG.

Representatives of the governments of several countries, including the United States, Britain, Canada, Italy, Norway, Sweden, Finland and Ireland reportedly approached the German authorities to zero in on their citizens who have evaded taxes and smuggled their wealth to Liechtenstein, said to be the sixth smallest country in the world.

In India, a section of the media alleged that the government in New Delhi was not showing sufficient interest in obtaining information from Germany on how rich and powerful Indians may have stashed away their ill-gotten wealth in the Liechtenstein bank.

On May 21, the Times of India newspaper wrote that Indian citizens “have a right to know who is secreting away public money into personal accounts and the government has a duty to get that information if it can.”

The leader of the opposition in the Indian parliament, L.K. Advani wrote to Prime Minister Manmohan Singh urging him to accept the offer of the German government to part with information relating to the secret accounts of certain wealthy Indians.

But international fund transfers made by Indians are hard notoriously hard to track or police and Advani himself was among a group of top politicians implicated in an 18 million dollar case involving ‘hawala’ agents, caught channeling money to Hizbul Muhideen militants in Kashmir. But the accused were let off in 1997/98 because the diaries and transaction records maintained by the agents were not recognised by the courts as main evidence.

After the latest scandal broke, R.H. Tahiliani, a retired naval admiral who heads the India chapter of Transparency International, the independent body campaigning to reduce corruption worldwide, went on record stating: “It is alleged that this money belongs to rich and powerful politicians, industrialists and stock brokers and that is why the reluctance on the part of the government of India (to obtain information from Germany)…”

He added that the Indian government had “not shown much interest in finding out about those (Indians) who have their lockers on the secret banks of Liechtenstein…” and feared that this money could be used by arms dealers, terrorists and drug dealers.

On May 22, India’s Finance Minister P. Chidambaram formally stated that his ministry had requested the German tax office for information relating to Indian taxpayers and that “the German central tax office replied in March saying they were not in a position to give (information) immediately but will inform us as soon as they get it…”

The Berlin-based managing director of Transparency International Humborg Christian told Outlook magazine: “It has been reported in the media that the CD (compact disc) seized had information not just about the accounts of Germans, but also clients of the bank. There is very high probability that there might be Indian customers on this CD…”

In an interview with IPS, Kamal Nayan Kabra, former professor at the Indian Institute of Public Administration, said there is “considerable indirect evidence to indicate that laundered money is being used to purchase firms outside the country”.

He pointed to a study done by the New Delhi-based Institute for Studies in Industrial Development that documented international corporate mergers and acquisitions by Indian firms involving a sum of over five billion dollars between January 2000 and August 2007. “Only a part of this money is reflected in the accounts of the Reserve Bank of India (the country’s central bank and apex monetary authority,” added Kabra who has authored a book on “black money” in India.

Another academic, Arun Kumar, professor of economics at New Delhi’s prestigious Jawaharlal Nehru University told IPS he apprehended that the Indian government would not act in a proactive manner in obtaining information from Germany because “it is the same set of people – politicians and bureaucrats – who are likely to be involved and whose interests could get hurt.”

Kumar, who is associated with Tax Justice Network, an organization that tracks activities in 77 tax havens in different parts of the world that are used for laundering illegal money, said that even as Indians do not find it lucrative any more to park their money outside the country, illegally obtained funds go out to destinations perceived to be “safer”.

“It could be a politician or a bureaucrat who has accepted bribes; it could be doctor whose practices are unethical or a businessperson who has manipulated invoices to artificially reduce profits and evade taxes – all such people would prefer to keep their illegal money outside India in a tax haven,” he added.

Kumar, who has also written a book on the “black economy” in India, estimates that the total amount of money (with interest) that has been illegally taken out of India over the decades since 1950 would be in the region of 1.5 trillion dollars, a figure he says is corroborated by a recent study done by an association of Swiss bankers.

According to a front-page report in the Economic Times, India’s leading financial daily, illegal money coming into India in the garb of foreign direct investment (FDI) is now being closely watched by the Reserve Bank of India (RBI). The newspaper outlined the modus operandi of such transactions.

Large amounts of money flow in, but only a tiny amount leaves the country. Investments are made in shell companies in tax havens to conceal the true identities of the owners of the funds. These shell companies purchase shares of Indian companies at a hefty premium. The FDI comes in through an “automatic route’ and subsequently, the Indian firm buys out the shell companies at a fraction of the price paid for purchasing its shares.

Apart from the proposed legislation the central Reserve Bank of India has asked all commercial banks (which act as authorised dealers for foreign exchange transactions) to carry out checks on corporate entities investing in the country.

Excerpt:

By IPS Correspondents
BRUSSELS, Apr 30 2008 (IPS)

Tax havens in Europe are depriving poor countries of more money than they receive in development aid, it has been alleged.

Some 11.5 trillion (million million) dollars is held in offshore accounts across the world, according to Tax Justice Network, a grouping of economists, accountants and academics. Because tax authorities are unable to touch this money, they effectively lose 250 billion dollars per year: the equivalent of five times what the United Nations estimated in 2002 as needed to finance its Millennium Development Goals of reducing poverty.

John Christensen, the network’s spokesman, argues that the European Union has a “slightly schizophrenic” attitude towards the problems posed by massive tax evasion and avoidance.

While EU institutions have been “leading the world” in taking some initiatives against tax competition, many of the world’s most notorious tax havens are located within the EU or on the overseas territories of its member states, he noted. These include the City of London (the financial district of London), Luxembourg, the Cayman Islands, Jersey and Guernsey.

Christensen, who has previously worked in Jersey’s banking sector, cited data from the University of Massachusetts suggesting that Africa has lost 607 billion dollars because of capital flight – or five times the amount it has received in development aid – since 1970. Capital flight involves the movement of money from one country to another where a firm believes he or she will get greater returns.

According to Christensen, Britain is one of the main culprits in attracting capital flight by leaving financial services companies in the City of London to a significant extent unregulated. “The City of London is the biggest tax haven in the world,” he said. “Britain is very happy to attract capital out of Africa, Asia and Latin America. And the City of London is not asking was this capital the proceeds of crime, embezzlement or fraud.”

He voiced support for the EU’s code of conduct group on business taxation. Founded in 1998, this requires EU countries and their dependent territories to desist from tax practices that are deemed harmful, such as offering special benefits to non-residents.

Last year the European Commission found that the Isle of Man, a tax haven off the British mainland, fell foul of the code. Christensen called on the EU to similarly refuse to approve Jersey and Guernsey as these two Channel Islands operate a similar tax regime to the Isle of Man, including a zero rate of corporation tax for many companies.

Christensen also urged the Commission to take heed of a request made by the European Parliament in 2007 that stringent rules on reporting be devised for firms working in the extractive industries such as mining or oil.

Parliamentarians have demanded that each firm should be required to publish accounts stating their turnover and what taxes they pay in each of the countries where they operate. Better rules in this area, Christensen said, would “radically reduce the ability of transnational corporations to shift profits out of developing countries.”

Stephen Stork, a tax official in the European Commission, stated that the EU as a whole has limited powers in addressing matters of taxation. Responsibility for direct taxation rests primarily with the union’s 27 national governments, rather than with the Brussels-based institutions.

Still, he said that the work of the EU’s code of conduct group has proved fruitful and that the Union now strives to include clauses against tax practices deemed harmful in agreements on trade and political cooperation it signs with foreign countries. “The authors of the code of conduct knew that tax cooperation should not stop at borders,” he said. “Capital is so mobile.”

The European Network for Debt and Development (Eurodad), a Brussels-based alliance of anti-poverty campaign groups, complained that issues of financial justice are not being adequately addressed by the EU.

Although the Millennium Development Goals stipulate that the world’s governments should devise stronger regulation for the international financial system, no proposals on this matter were contained in a European Commission paper on attaining the MDGs that was published Apr. 9.

Eurodad is frustrated by the slow rate of progress being made by the World Bank and International Monetary Fund in addressing the effects of tax evasion and avoidance on poor countries. In September last year, the World Bank’s President Robert Zoellick said that he would be in favour of a study being carried out on “the development impact of offshore financial centres.” But campaigners allege that not enough has been done to follow up Zoellick’s statement.

Eurodad is also urging France, which will assume the EU’s rotating presidency in the second half of this year, to insist that the surrounding issues are placed on the international agenda. Nicolas Sarkozy, the French president, asked the IMF in February to study the possibility of a worldwide tax on profits reaped by oil companies. But campaigners also bemoan how the French government has been supportive of tax havens in Monaco and Andorra.

“It is strikingly clear that there are huge gaps in the financial regulation system,” said Alex Wilks, Eurodad’s coordinator. “We are quite disappointed to see that the European Commission hasn’t been ambitious enough in seeking to change the financial system to make it development-friendly. If proposals don’t come from the European Union it is difficult to see from which other quarter we will get leadership in the months ahead.”

Excerpt:

By Ángel Páez
LIMA, Mar 26 2008 (IPS)

Peru’s counter-terrorism police dismantled the local chapter of the Continental Bolivarian Committee (CCB-CP) and arrested its members on charges of supporting terrorism and having ties to Colombia’s guerrillas.

But human rights groups and opposition parties complain that the “war” declared by Peruvian President Alan García on groups that sympathise with Venezuela’s leftist President Hugo Chávez is aimed at silencing popular protests against the government’s free market economic policies.

Most Latin American countries have avoided declaring the Revolutionary Armed Forces of Colombia (FARC) guerrillas a “terrorist” group – as the United States and European Union have done – despite calls by Colombia’s rightwing government to do so.

However, the Peruvian government, one of the few centre-right administrations in South America today, occasionally uses the term to refer to the FARC, an insurgent group with rural roots that emerged in 1964.

On Feb. 29, DIRCOTE, Spain’s counter-terrorism police, arrested seven people along Peru’s border with Ecuador as they returned from the second CCB congress, held Feb. 24-27 in Quito.

A judge ordered that they be held in pretrial detention, and charges of supporting terrorism have been brought against them.

One of the arrested activists, Roque Gonzales La Rosa, who headed the Peruvian delegation to the CCB congress, had earlier spent eight years in prison for being a member of the Tupac Amaru Revolutionary Movement (MRTA), the smaller of the two guerrilla groups fought by counterinsurgency forces during Peru’s 1980-2000 civil war. (The larger group was the Maoist Sendero Luminoso or Shining Path).

Gonzales La Rosa formed part of an MRTA commando that kidnapped Bolivian politician and businessman Samuel Doria Medina on Nov. 1, 1995. The 1.4 million dollar ransom paid by Doria Medina’s family was used by the rebel group to finance the Dec. 17, 1996 occupation of the Japanese ambassador’s residency in Lima.

The police identified five other former MRTA members who now have links to the CCB-CP, including Chilean citizen Alejandro Astorga, a former member of the MRTA special forces, which were involved in kidnappings and extortion during the civil war. Astorga also served time in prison in Peru.

“It’s true. I was sentenced to 11 years in prison for the Doria Medina case, and served nine years. I was released in 2005, and since then, I have to sign in every month (with the parole officer) and am under police vigilance,” Gonzales La Rosa, who was arrested on Feb. 29 and is being held in the San Jorge maximum security penitentiary in Lima, told IPS.

“But I am no longer a member of the MRTA; I am involved in legal political activities,” he argued. “Those of us who took part in the internal war have every right to be engaged in politics. I cannot be persecuted for my ideas. I am a leftist politician. Neither the CCB-CP nor any of its member groups are terrorist organisations.

“It is also true that some of us were in prison at some point because of our activities in the MRTA, but we aren’t involved in those things anymore. They can’t keep us from engaging in legal activities,” said Gonzales La Rosa.

The government has alleged that former members of the now defunct MRTA are interested in reviving the organisation using the CCB-CP as a screen.

García administration officials have asserted that a key element in this process are the former MRTA members like Gonzales La Rosa, who supposedly have ties to the FARC.

“It’s all false,” said the activist. “These are unfounded allegations. Evidence has been fabricated to frame us. We are not terrorists, I repeat. We are victims of a witch hunt against the left and the opposition.”

A source with DIRCOTE showed IPS surveillance photos of several people who took part in a “José Carlos Mariátegui Bolivarian seminar” in 2006 in Lima. The pictures show Gonzales La Rosa sitting on a panel alongside Dominican Republic Communist Party leader Narciso Isa Conde.

As alleged “proof” of Gonzales La Rosa’s ties with leftwing terrorists, the police also showed this journalist photos taken in 2007 of Isa Conde wearing a FARC uniform during a visit with Iván Márquez, a member of the guerrilla group’s top brass.

“Isa Conde is a FARC propagandist, and thus a collaborator with international terrorism, and everyone who follows his instructions is as well,” said the DIRCOTE source. “That is a crime that is punished here in Peru.”

“At the same time, he is a promoter of the CCB in the region. He came here to encourage the organisation of a Peruvian branch, headed by Gonzales La Rosa,” he added.

As “evidence” of the alleged link between the CCB-CP and the FARC, the police point to a link on the CCB web site, to the Agencia Bolivariana de Prensa (Bolivarian Press Agency), whose web site in turn offers access to information on the activities of the FARC and has posted condolences from different organisations – including the MRTA – for the death of Raúl Reyes.

Reyes, the FARC’s international spokesman, was killed in a Mar. 1 bombing raid by Colombia on a rebel camp in Ecuadorean territory, which triggered a major political crisis in the region.

In fact, the CCB’s own list of its members includes the FARC, and the insurgent group’s official web site is on the CCB’s list of links to “our organisations.”

“Isa Conde came to Lima as a guest and had no problems with the police because he is not facing any warrant or charges,” said Gonzales La Rosa. “The activity he took part in was open and public, not clandestine in any way, and was held at the Universidad Nacional Mayor de San Marcos (university) with the full knowledge of the authorities. There was nothing illegal about it.”

“Narciso is well-known in the Dominican Republic because he has a television programme and writes for the leading newspapers. And with respect to his meeting with the FARC, he was writing an article that was published in several media outlets. Just because someone meets with the FARC doesn’t mean they are a terrorist. That campaign is slanderous,” he complained.

The García government has launched a major campaign against groups that it considers “pro-Chávez”, like the CCB-CP and the “Casas del ALBA” or “ALBA centres”- solidarity groups created under the influence of the Bolivarian Alternative for the Americas (ALBA), promoted by Chávez in opposition to the Washington-sponsored Free Trade Area of the Americas (FTAA), which never took shape.

García’s supporters in Congress approved the creation of a special commission to investigate the financing of the ALBA humanitarian centres, which provide assistance to the poor.

The ALBA centres’ activities include helping people gain access to education and healthcare, and coordinating trips by poor Peruvians to Venezuela, where they receive free cataract and other eye operations.

Human rights groups and the opposition Nationalist Party, whose leader Ollanta Humala was backed by Chávez in the campaign for the 2006 presidential elections, complain that García is carrying out a witch hunt targeting the left with the aim of silencing protests against his policies.

The spokesman for the Nationalist Party legislators, Cayo Galindo, told IPS that “no one can be punished or persecuted because of their ideology, unless their ideology promotes terrorism.”

He added that there is an “ideological brotherhood” between his party and Chávez.

Galindo clarified that his party supported the creation of the special commission to investigate the sources of financing of the ALBA centres, “because if we didn’t do so, they would have accused us of trying to hide something, so we hope this commission doesn’t turn into a means of ideological persecution.”

“This government is saying that ‘violent ideologies’ are penetrating social groups that protest against its policies,” said the lawmaker. “We, who defend fair social causes, believe there is persecution against our movement and our leader Humala.”

The view that the government is trying to blame popular protests on supposed “terrorist infiltrators” is shared by the executive director of the Human Rights Association, Miguel Jugo.

“The government says there are promoters of terrorism behind the demonstrations, but it has failed to substantiate its accusations,” he told IPS. “What worries me is that this kind of allegation could be used to smear the reputations of social activists and implicate them (in illegal activities). It is truly a dangerous situation.”

Excerpt:

By Julio Godoy
BERLIN, Mar 5 2008 (IPS)

The revelation that hundreds of wealthy Germans have made illegal investments in Liechtenstein to avoid taxes, and the unearthing of new cases of corruption in top enterprises, raise new questions about the way the market economy is going.

Liechtenstein is a tiny country between Switzerland and Austria with a population of around 35,000. It is better known in Europe as a tax haven.

On Feb. 14, the prosecution in Bochum city, some 400 km southwest of Berlin, searched the home and offices of Klaus Zumwinkel, then chief executive officer of Deutsche Post, the state-owned mail company. The prosecution accused Zumwinkel of illegal transactions in Liechtenstein.

The prosecutors announced that hundreds of other wealthy Germans are under investigation for similar offences. In the week following the search at Zumwinkel’s home and offices, the police carried out searches in Berlin, Munich, Frankfurt and several other cities.

The raids were based on data on a compact disk that a former Liechtenstein bank employee sold to the German secret service Bundesnachrichtendienst. The informer sold similar information to the U.S., the British, and other European governments.

Preliminary estimations put the tax evasion in Germany from these cases at some 3.4 billion euros (4.8 billion dollars). Dieter Ondracek, president of the German Fiscal Workers Union, says Germans evade taxes worth 43 billion dollars a year through illegal transactions abroad.

“We estimate that Germans have so far made illegal investments abroad of some 420 billion dollars, especially in Switzerland and in Liechtenstein,” Ondracek told IPS.

Zumwinkel, until recently respected as a sober CEO, paid a bail deposit of 5.6 million dollars to avoid prison. He accepted that he had evaded taxes through creation of a personal foundation in Vaduz, capital of Liechtenstein. He faces a prison sentence of up to 10 years.

Several private banks are being investigated for helping transfer money to Liechtenstein.

The corruption cases also in leading private companies such as Siemens, Volkswagen and Daimler, have raised further questions about the way German capitalism is going.

Spokespersons at the German car-maker Daimler and the prosecution office in the enterprise’s hometown Stuttgart, some 400 kilometres south of Berlin, confirmed last month that German officials had searched the company’s offices in Istanbul in a case of bribery of foreign officials.

Daimler’s subsidiary Evobus is accused of paying illegal commissions to Turkish officials to win a contract for 450 buses that the Istanbul city administration bought in 2005.

In late January, a former Daimler manager was found guilty of breach of trust, tax evasion, and falsification of documents, and sentenced to five-and-a-half years in prison. Several other Daimler managers have been sentenced in other corruption cases.

German high-technology giant Siemens has admitted paying 590 million dollars in illegal commissions to foreign state officials to win public contracts. Last October, Siemens paid a 280 million dollar fine to close investigation into the case.

The former leader of Volkswagen workers council Klaus Volkert was last month sentenced to three-and-a-half years in prison in a corruption case. Two other former VW managers, Peter Hartz and Hans-Joachim Gebauer, were given suspended sentences in the case.

This proliferation of corruption cases has led political commentators and also government high-ranking officials to question the lack of ethics in Germany.

“Societies collapse when popular confidence in their political and economic system is hollowed out by such frauds,” Stephan-Andreas Casdorff, leading political commentator at the Berlin-based daily newspaper Der Tagesspiegel wrote in an editorial comment. “What many citizens feel right now is the loss of ethics in our democracy and economy. They follow these (corrupt) examples. Who can blame them?”

Oscar Lafontaine, leader of the new Left Party, and former minister for finance and economics, has accused the government of passing laws that have “opened all gates to encourage greed and illegal enrichment. Now nobody can be surprised that some high-earning managers prefer to ignore all laws.”

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By Haider Rizvi
UNITED NATIONS, Jan 30 2008 (IPS)

Ongoing international talks on the question of how to strengthen a U.N. treaty against corruption are doomed to failure unless governments agree to take practical actions to demonstrate compliance, according to observers who are attending a major anti-corruption summit in Indonesia this week.

“Without a concrete plan to assess country progress in implementing the U.N. treaty, the convention will be nothing more than a dead letter,” said Huguette Labelle, chairperson of Transparency International (TI), an independent corruption watchdog based in Germany.

Adopted in 2003, the treaty requires that official delegates must submit their country reports on corruption at the meeting, which represents the need for collective action to stem unfair practices worldwide.

But according to TI and other groups, such obligations are not being taken seriously, despite the fact that 83 of the 140 signatory countries have also ratified the treaty. Most of those who have taken some steps show “lacklustre” progress, according to TI.

“Our work has shown us that only through a transparent programme of mutual evaluation will countries take such an instrument seriously, and get serious about implementing it,” said TI’s researcher Gillian Dell, who released a position paper for the group ahead of the conference.

“That’s why,” Dell continued, “we’re pushing for dates and concrete plans about how the states parties to the convention want to assess the success of their implementation. This meeting here in Indonesia is the moment.”

TI is calling for swift action not just on a review mechanism, but on the return of assets stolen by corrupt leaders and stashed abroad.

The U.N. meeting opened in the resort town of Bali Monday as preparations were still underway for the burial of Suharto, the former military dictator and president who ruled Indonesia, the fourth most populous country in the world, with an iron fist for 32 years.

Suharto, who died Sunday in a hospital bed, was accused of massive corruption and human rights abuses. He agreed to step down in 1998 only after democracy activists posed a serious challenge to his U.S.-backed regime through street power. Critics charge that during Suharto’s rule, he and his family extorted billions of dollars in kickbacks and bribes. In 1999, a Time magazine story claimed that during his rule, Suharto amassed about 73 billion dollars.

In response to the Time story, Suharto sued the magazine and was awarded more than 100 million dollars in damages. The magazine, which still stands by its claim, was preparing for an appeal against the defamation ruling when Suharto died.

In 2004, TI, which monitors worldwide cases of corrupt governance and business practices, placed Suharto at the top of its corruption list. The group’s investigations showed his illegal income ranged between 15 billion and 35 billion dollars.

Suharto evaded trial for criminal charges on medical grounds. In 2006, his doctors testified that he was brain damaged and unfit to face prosecution, which angered many rights activists who held him responsible for the killing of half a million Communist sympathisers in Indonesia.

TI has not commented on the impact of Suharto’s death on the pending corruption cases against him. However, many Indonesians seemed disappointed with the fact that he died without having been brought to justice.

Reports from Indonesia suggest that a civil case was still pending against Suharto at the time of his death, with the Indonesian government seeking 1.4 billion dollars allegedly siphoned from student scholarship programmes during his rule.

Prosecutors are likely to name at least one of Suharto’s heirs to stand trial in his place, as Indonesian law allows, but the case is now on hold until Feb. 12 to respect the national period of mourning.

On the opening day of the conference, Indonesian President Susilo Bambang Yudhoyono was scheduled to address the delegates. But instead of heading to Bali, he chose to participate in the funeral of the dictator, which TI named the world’s most corrupt political figure “of all time”.

“In Indonesia, corruption is public enemy number one,” acknowledged the political affairs minister at the conference being attended by more than 1,000 delegates from 140 countries. Speaking on behalf of the Indonesian president, however, he said that his country had managed to create enough of a “fear factor to deter corruptors”.

Though mindful that corruption is more pervasive in developing countries, such as Indonesia and others, civil society activists are also critical of the behavior of rich industrialised countries, especially those within the fold of the Group of 8 (G8) nations.

They point out that G8 members Germany, Italy, and Japan have yet to ratify the U.N. convention, even though they signed it about four years ago.

Other key global financial centres such as Singapore, Switzerland and Liechtenstein have also failed to ratify the treaty, which is not a good sign for the treaty’s implementation, according to critics who also noted that delegates from a number of signatory countries were missing at Bali.

So far, only 107 countries have ratified the treaty.

In a statement, TI and other groups urged the private sector and civil society organisations to increase their participation in the fight against corruption, even though some governments remained hostile to that approach.

Opening the conference in Bali Monday, Antonio Maria Costa, head of the U.N. Office on Drugs and Crime, made a similar call.

“Everyone has a role to play, not only governments, but also parliamentarians, business, civil society, the media, and the average citizens,” he said. “Corruption hurts us all, therefore fighting it is a shared responsibility.”

Costa warned that despite political will and good intentions, efforts to recover assets are running into resistance from “middle-level bureaucrats with connections, knowledge and entrenched interests who have a lot to lose.”

“Neutralise these black holes in your administrations,” he told delegates.

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