Saturday, March 14, 2009

Offshore Tax Havens Scandal Makes New York Times Coverage (Finally!)

If you've noticed and been following the developments concerning the much-needed publicization of the political/economic issue noted on the left column of my site entitled "Offshore Tax Havens' Scandals Ensured Bailout B/Tr/illions (See Citigroup/Rubin Resignation)," you will not be surprised at what received the top editorial placement in The New York Times this morning. Of course, it's only become reaaaaalllly necessary to research this phenomena now since Obama "stole" the Presidency from its real owners as it's just one more thing that's Obama's fault.

Senate investigators estimate that Americans who hide assets in offshore bank accounts are failing to pay about $100 billion a year in taxes. In good times, that’s grossly unfair and bad for the country. In times like these, it should be intolerable. The government not only needs the money, but closing down such tax scams is essential for President Obama’s rescue effort to retain public support and credibility. Some of the banks at the center of the global financial meltdown are prominent purveyors of evasion services. UBS of Switzerland has acknowledged that as of Sept. 30, it held about 47,000 secret accounts for Americans. It has refused to disclose the names of all but a tiny number of the account holders, arguing that it would be a breach of Swiss law. But last month — after UBS got caught soliciting business in the United States — it admitted to breaking federal law by helping Americans hide assets, and the bank agreed to pay $780 million in fines and restitution. The United States Treasury isn’t the only one being shorted. The Tax Justice Network, a research and advocacy organization, estimates $11.5 trillion in assets from around the world are hidden in offshore havens.
My first thoughts about Bernie Madoff - someone who is being allowed to plead guilty to something that may not have really existed at all (that hard-to-discern Ponzi scheme) - seem to be coming online now . . . but I won't go on about this yet . . . although I do remember mentioning the phrase "due diligence" many months ago when first writing about that catchall term "Ponzi scheme." Joe Nocera, who thinks Madoff's only accomplices were his victims, has very little sympathy (and no empathy at all) for the suckers:
People did abdicate responsibility — and now, rather than face that fact, many of them are blaming the government for not, in effect, saving them from themselves. Indeed, what you discover when you talk to victims is that they harbor an anger toward the S.E.C. that is as deep or deeper than the anger they feel toward Mr. Madoff. There is a powerful sense that because the agency was asleep at the switch, they have been doubly victimized. And they want the government to do something about it. . . And yet, just about anybody who actually took the time to kick the tires of Mr. Madoff’s operation tended to run in the other direction. James R. Hedges IV, who runs an advisory firm called LJH Global Investments, says that in 1997 he spent two hours asking Mr. Madoff basic questions about his operation. “The explanation of his strategy, the consistency of his returns, the way he withheld information — it was a very clear set of warning signs,” said Mr. Hedges. When you look at the list of Madoff victims, it contains a lot of high-profile names — but almost no serious institutional investors or endowments. They insist on knowing the kind of information Mr. Madoff refused to supply. I suppose you could argue that most of Mr. Madoff’s direct investors lacked the ability or the financial sophistication of someone like Mr. Hedges. But it shouldn’t have mattered. Isn’t the first lesson of personal finance that you should never put all your money with one person or one fund? Even if you think your money manager is “God”? Diversification has many virtues; one of them is that you won’t lose everything if one of your money managers turns out to be a crook. “These were people with a fair amount of money, and most of them sought no professional advice,” said Bruce C. Greenwald, who teaches value investing at the Graduate School of Business at Columbia University. “It’s like trying to do your own dentistry.” Mr. Hedges said, “It is a real lesson that people cannot abdicate personal responsibility when it comes to their personal finances.” And that’s the point. People did abdicate responsibility — and now, rather than face that fact, many of them are blaming the government for not, in effect, saving them from themselves. Indeed, what you discover when you talk to victims is that they harbor an anger toward the S.E.C. that is as deep or deeper than the anger they feel toward Mr. Madoff. There is a powerful sense that because the agency was asleep at the switch, they have been doubly victimized. And they want the government to do something about it. I spoke, for instance, to Phyllis Molchatsky, who lost $1.7 million with Mr. Madoff — and is now suing the S.E.C. to recoup her losses, on the grounds the agency was so negligent it should be forced to pony up. Her story is sure to rouse sympathy — Mr. Madoff was recommended to her by her broker as a safe place to put her money, and she felt virtuous making 9 or 10 percent a year when others were reaching for the stars. The failure of the S.E.C., she told me, “is a double slap in the face.” And she felt the government owed her. Her lawyer, who represents several dozen Madoff victims, told me he “wouldn’t be averse” to a victims’ fund. Even Mr. Wiesel thought the government should help the victims — or at least the charitable institutions among them. “The government should come and say, ‘We bailed out so many others, we can bail you out, and when you will do better, you can give us back the money,’ ” he said at the Portfolio event. But why? What happened to the victims of Bernard Madoff is terrible. But every day in this country, people lose money due to financial fraud or negligence. Innocent investors who bought stock in Enron lost millions when that company turned out to be a fraud; nobody made them whole. Half a dozen Ponzi schemes have been discovered since Mr. Madoff was arrested in December. People lose it all because they start a company that turns out to be misguided, or because they do something that is risky, hoping to hit the jackpot. Taxpayers don’t bail them out, and they shouldn’t start now. Did the S.E.C. foul up? You bet. But that doesn’t mean the investors themselves are off the hook. Investors blaming the S.E.C. for their decision to give every last penny to Bernie Madoff is like a child blaming his mother for letting him start a fight while she wasn’t looking.
Should we let out a big "Hurrah" for Andrew Cuomo (our newest savior to emerge bigtime from the latest (to be exposed) financial gambit/fiasco?)?
Just how much of a secret are Merrill Lynch’s bonus numbers? As secret as, say, the recipe for Carvel’s ice cream? That was the comparison that Bank of America’s lawyers made Friday morning in a New York courtroom, as they tried to persuade a judge to let them keep private the investment bank’s information about its top-earning employees. The lawyers compared the legal battle over the pay data — which Andrew M. Cuomo, the attorney general of New York, is seeking as part of an investigation — to a lawsuit involving the secret formula for Carvel’s famous desserts, according to an audio feed of the testimony from the Courtroom View Network. In 1979, the New York State Supreme Court ruled that Carvel did not need to turn its secret formula over to the New York State attorney general’s office, which was investigating restraint-of-trade allegations at Carvel. But lawyers for Mr. Cuomo’s office weren’t buying the ice-cream argument. Speaking in court on Friday, they said that, unlike in the Carvel matter, pay scales aren’t a trade secret. They also argued that investment banks routinely call bankers at competing firms and ask about their compensation, in hopes of offering them a better package to encourage them to jump ship. “Bank of America top executives have acknowledged that they themselves get their competitors’ information,” said Eric O. Corngold, Mr. Cuomo’s executive deputy attorney general for economic justice. “Are they admitting that they themselves are taking trade secrets improperly?” Mr. Cuomo’s office is demanding the names of Merrill’s 200 most highly paid employees, as part of an investigation into Bank of America’s acquisition of Merrill. Merrill employees were collectively given billions of dollars in bonuses shortly before its sale to Bank of America closed. Around the same time, Bank of America learned that Merrill’s fourth-quarter loss would be much larger than expected, and the shortfall forced BofA to go to the government to seek more financial aid. Among other things, Mr. Cuomo has alleged that Merrill misled Congress about the timing of the bonuses. As part of his investigation, Mr. Cuomo’s office has interviewed Kenneth D. Lewis, Bank of America’s chief executive; John Finnegan, the chief executive of Chubb, who headed Merrill’s compensation committee; and John A. Thain, Merrill’s former chief executive. Bank of America has tried to prevent the names from being made public, arguing that it would cause the company “grave harm,” making it easier for rivals to poach employees and invading workers’ privacy.
And then we have my boy lollipop, Scott Ritter, divulging secrets again, that Obama
needs to learn the truth about Iran, and about the proposed missile defense system in Europe. This truth would be inconvenient, but it would also liberate him to develop meaningful solutions to serious problems in a manner that avoids a repeat of his embarrassing "Grand Bargain" gambit with Russia, trying to trade nothing for nothing in an effort to certify something for nothing.
Yum. Yum. And finally, another savior - Eric Margolis wants us to stay on our toes as he tells Obama
The American Rome Is Burning - So Let's Attack Iran Now, as the United States fights for its economic life, the Iran question and its alleged nuclear weapons program have again become an issue of major contention. Officials in the Obama administration and the media issued a blizzard of contradictory claims over Iran's alleged nuclear threat, leaving us wondering: who is really charge of U.S. foreign policy? This awkward question was underlined during a visit to Washington by British Prime Minister Gordon Brown. Britain is supposed to be America's most important ally and partner in their 'special relationship.' Brown's reception was dismal and Obama's obvious lack of interest in Britain's leader was quite embarrassing. The British media slammed America's cold reception as an 'insult,' and claimed that Brown had been treated like the leader of a 'minor African state.' White House aides excused the huge diplomatic faux pas by claiming President Obama was worn out from dealing with the financial and economic crisis. I'm sure he is worn out, but this still does not bode well for the conduct of US foreign policy. Much of the uproar over Iran's so-far non-existent nuclear weapons must be seen as part of efforts by neoconservatives to thwart President Obama's proposition to open Tehran and to keep up the pressure for an American attack on Iran. Israel's government and its American supporters insist Iran has secret nuclear weapons program that the West has not yet detected. We heard the same claims about Iraq before 2003. Israel certainly knows about covert nuclear programs, having run one of the world's largest and most productive ones.

I guess this is what passes for change now? Suzan __________________________

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