Terrorist Financing Made Easy with Hidden Treuhand

In spite of new controls, Austrian tax haven practices continue to ease the financing of terrorism, money laundering and organized crime.  

By Shelley Stark

      Austria’s measures to combat money laundering and terrorist financing still face obstacles achieving their goals, according to a December 2009 report by the International Monetary Fund’s Financial Action Task Force (FATF). Limitations on access to ownership of assets through custodial Treuhand arrangements, foundations, and companies issuing bearer shares all help protect criminal activity.

      Despite all good intentions, the FATF reports that it is impossible to satisfy the needs of clients seeking to keep banking relationships secret and hide beneficial ownership and still impose stringent verifiable rules that mandate transparency. 

      In Austria, custodial “Treuhand” arrangements are different from the trusts familiar to British or American clients.  The Austrian legal code as described in Rummel: Kommentar zum Allegemeinen bürgerlichen Gesetzbuch states, “it is self evident that a third-party should not ever be made aware that any indirect or direct relationship exists between the businessman and the asset via the lawyer. The relationship between the businessman and the lawyer is secret, which often includes even knowledge of a ‘power of attorney’ existing between the lawyer and the businessman”. 

      These “Treuhand” accounts can have either a lawyer or a notary as official trustee or Treuhänder, and thus play an important role in the sale and purchase of enterprises and real estate. These trustees administer assets and securities, create foundations, operate trusts and open bank accounts with banks that correspondingly want this kind of business. One possibility for the trustee is to create an ‘open Treuhand’ arrangement where the legal relationship between them and the client is not held secret, or they may decide on a ‘hidden Treuhand’ where attorney-client privilege prevents disclosure of a Treuhand contract.

      With a hidden Treuhand arrangement, it is effectively impossible to ascertain beneficial ownership of private foundations, corporations, and bank accounts. According to Austrian law as described in Rummel, “Treuhand contracts are not regulated, because there exists the freedom to make contracts as one pleases.”

      In Austria, both lawyers and notaries serve as official trustees and thus play an important role in the sale and purchase of enterprises and real estate.

      “They let the bank know an account is a trust account,” Rummel explains, “but do not have to disclose the name of the client, because the banking relationship is between the trustee and the bank, and not the bank and the client.”

      Currently, there are no measures in place for persons acting as official trustees who are not lawyers or notaries, the FATF report stated. As there is no central register of people authorized to be trustees, ownership could only be traced through a police search, involving a check of every relevant professional. In a case where the person is not a member of the Bar Association, or a notary, then the search is effectively impossible.

      The impetus for the FATF initiatives lies an interest eliminating the opportunities for terrorist financing. The assumption made in the FATF report, however, is that neither criminals nor terrorists would be interested in engaging in the traditional financial activities or identity subterfuge, where the participation of lawyers and notaries would be required.

      Complicating matters further, the laundering of personal funds is not treated as a crime under Austrian law, as Article 165 limits the scope of money laundering offences to assets “that derive from the crime of another person.” In essence, these unregulated activities leave a wide loophole for criminals and terrorist financiers.

      Although the criminalization of the financing of terrorist activities is consistent with the 1999 UN Terrorist Convention, credit institutions individually assess whether customers or products represent a low risk of money laundering or terrorist financing. The FATF report states “even though banks will comply with requests by the Austrian Financial Investigative Unit, court orders from the public prosecutor are rejected if in the view of the bank, adequate evidence was not presented and the legal conditions for disclosure were not met.”

      Another problem in identifying criminal activities is how legal authorities can become aware of criminal activities outside the due-diligence banks. Even high-level staffers at Austrian regulators often lack the expertise to identify activities that lie outside the law. In a Jan. 25 interview, Dr. Edwin Zauchner at the Austrian Finance Ministry admitted that there is not one tax expert on his staff familiar with hidden Treuhand and thus capable of identifying tax avoidance using the with hidden Treuhand mechanism.

      In addition, Dir. Franz Kurz at the Tax Investigation Unit (Steuerfahndung) revealed that there are at least 70 staff people with knowledge concerning hidden Treuhand, but that not one of them has ever pursed a reported case, because the obstacles to doing so “make the effort pointless.”

      “Unless one provided the Treuhand contract and illustrated what illegality is occurring,” says Mag. Rudolf Unterköfler of the Criminal Intelligence Service with the Federal Ministry of Interior,  “an investigation would not be pursued.” Outside of the due diligence of the banks, there is little laudable chance of an investigation into any hidden Treuhand activities.

      How then is it possible to satisfy the needs of clients seeking to keep beneficial ownership of domestic or international enterprises discrete and still impose the necessary due diligence and stringent verifiable rules that make corporate transparency rules essential for market stability effective?

      According to the FATF, beneficiary identity in the case of fiduciary accounts held by attorneys or notaries from Austria, or any other country, does not need to be provided to credit or financial institutions if several requirements are fulfilled. Those include the infeasibility of the beneficiary identity due to the representation of large co-ownership communities of changing composition, as well as the certainty that the client is not domiciled in a non-cooperative country and that no money laundering or terrorist financing have taken place.

      Clearly, some people are interested in hiding their economic activities as well as their income because. And while there is no data available for assets under management in the private banking sector, aggregated balance sheets of banks in Austria show a growing trend in the ratio of foreign deposits.

      Consider this: Afghanistan’s opium production has gone from 640 tons in 2001 to 8,200 tons in 2007, worth an estimated $6.4 billion on the streets of Western countries. Afghanistan now supplies over 93% of the global opiate market. And while the Taliban may move heroin out of Afghanistan to supply world consumption, it is doubtful that they will truck their ill-gotten gains back into the country just to hide them in a cave. It is highly more likely that this money would remain in tax havens in Europe where it would be safe and could be readily used to purchase ever-increasingly sophisticated equipment to carry out terrorist activities.

      Despite recommendations, however, the status quo suggests that the legal community is unaware of criminal organizations’ and terrorist financiers’ intentions to hide or create profits by engaging a lawyer and possibly working in legitimate capital markets. While the FATF has recommended greater transparency regarding Treuhand relationships, there is still no viable means to achieve it as long as lawyers and banks are still the guardians of secrecy.  

Shelley Stark is the author of Hidden Treuhand: How Corporations and Individuals Hide Assets and Money, published by Universal Publishers, Boca Raton, Florida. Also available through Amazon and Barnes & Noble bookstores.

DSS Fails Oversight of Contractors

The GAO’s Director of Acquisition, Ann Calvaresi-Barr is quoted, (in an article by William Matthews), as saying,“Defense Security Service (DSS) agents also lacked basic understanding of complex transactions, such as the security implications of foreign hedge funds buying interests in U.S. defense firms.   That is increasingly common, and it is difficult to know where the money is coming from and who the players are.” 

See the Matthews article:  http://www.owlcti.com/pdfs/Swiss_Cheese_and_DSS.pdf

The whole financial arena is fraught with danger, from a security and oversight perspective, as the tools used by financial fraudsters and criminals are extremely complex and their activities are multi-layered.  With the advent and rapid development of a global technological world, our government oversight employees are hard pressed to keep up with the needed expertise in technology as well as current financial business practices. (We’ve come along way from security merely being physical security.)  DSS is not alone in the struggle; this challenge is shared by all oversight agencies.  The modus operandi of the criminals has become very sophisticated.  It is hard and sometimes impossible to detect where money is coming from and going to.  And many things maybe hidden, such as true owners, stockholders, and recipients of pay-offs for services rendered, as well as the money itself. 

Threads to any particular example of such crime may lead all over the world in multinational webs of secret contracts and accounts.  One such type of secret account, which is gaining in popularity rapidly in corporate circles, is the Hidden Treuhand, (pronounced troy-hawnd).  Although illegal in the US, this type of financial instrument is legally protected in certain countries and marketed by many of those countries throughout the world.  It is necessary to understand what a Hidden Treuhand is and how many ways it may be effectively used to evade accountability to U.S. law and oversight authorities in order to understand the challenges our oversight field people are up against. 

The term Treuhand is often translated over to “Trust” for English speakers.  Author, Shelley Stark, Hidden Treuhand:  How  Corporations and Individuals Hide Assets and Money, states this is not entirely accurate.   If you use your search engine and type in “treuhand,” you will get a great number of pages of links to companies, many in the German language who offer Treuhands, (the open and visible kind). 

Hidden Treuhands are a different kind of trust and may only be accessed in certain countries that have laws, which allow them, or do not have laws that prohibit them, and all the invisibility and secrecy that goes with them.  Ms. Stark discusses this very succinctly in her book.  Her book makes it possible to understand how the Hidden Treuhand, which few in the U.S. know anything about, is used as a financial manipulation tool to accomplish many things, legal and illegal.  Because of the impact and increasing use of Hidden Treuhand accounts by Americans and American/Multinational Corporations, including defense contractors, this book should be required reading for all federal oversight employees. 

Due to growing problems with tax evasion, money laundering, and financing of drug cartels and terrorism, many governments are beginning to try to investigate this arena.  How would a financial instrument that has created problems with tax evasion, money laundering and with connections to drug cartels, organized crime, and terrorists have anything to do with oversight of defense and other contractors?

Hidden Treuhands are not only being used for notorious crime in arenas of violence and intrigue, but are also being accessed quietly by seemingly normal upper income citizens and corporations with seemingly bland missions.  Some European countries have suffered great tax losses due to Hidden Treuhands, which that country’s citizens have set up in neighboring nations who offer them.  But loss of tax monies is really the least of the problems these secret accounts may create in Europe or here in the United States.   

This concern has now become publicly acknowledged in the United States as well.  If individuals, families, or corporations can access Hidden Treuhands, they can not only evade paying taxes here in the US, but can also hide a great variety of things, such as money, property, and other assets, as well as hide people or beneficiaries, specific stock holders or consultants who are paid or are benefitting some other way financially (boats, cars, houses, etc.).  Recently a large number of Americans were discovered to have secret accounts in certain European countries and were using them as illegal tax shelters.  And were it not for an insider (Bradley Birkenfeld) coming forward with testimony and paperwork, in the UBS tax haven scandal, the U.S. government would never have been able to prevail in prosecuting the financial crimes and recovering millions of dollars.  In fact, they probably would not have even been able to recognize the problem.  

The use of a Hidden Treuhand is illegal in America, but that does not stop a person or corporation determined to find a way to hide money, stockholders, or the true owner of an asset from obtaining and using one.  People can be paid through arrangements invisible to an outsider using a Hidden Treuhand.  Payments may be made for services rendered as a consultant or other relationship.  People who may have reasons they cannot maintain a public business relationship because of ‘conflict of interest’ concerns or laws, can be hidden and still profit, using a Hidden Treuhand with no one on the outside being the wiser.

If a corporation has a subsidiary in one of the countries that offer Hidden Treuhands, then they are well on their way to setting up such an account.  Some corporations set up what appear to be subsidiaries, but which conduct no business, do not produce or sell a product and simply are used to transfer money in and out to other locations.  If a corporation has a number of subsidiaries in multiple countries with either Hidden Treuhands, or with banking secrecy, they may devise a complicated pathway for moving funds about, making it more difficult for anyone to follow the trail, even if they could get the proof of the existence of such accounts.   And consider the amplification of this movement of funds using computers and technology and it becomes a momentary twinkle over the Internet. 

Stark clarifies, “A Hidden Treuhand is completely non-transparent, only somewhat legal and operates covertly by owning the asset through a corporate structure, where real shareholder identity remains anonymous in all business dealings.”  She goes on to say that “lawyers are often called upon to act as a ‘trustee’ in a hidden ‘Treuhand.’  There is no law regulating hidden ‘Treuhand,’ only law specifying that the lawyer cannot divulge any secrets pertaining to the client.”

In Austria, the Austrian Lawyers Chamber and its associated lawyers have control over this type of contract.  Stark states that, “This kind of trust is not so much protected by law as protected by lawyers.  If questioned, the lawyer will simply evoke attorney-client privilege.”   The contracts themselves are kept under lock and key with perfect invisibility.  The only way to even be able to investigate such a situation to find out where money is, where it came from or where it went, or in the case of assets, who the real owner is, would be to obtain copies of the original contract or other paperwork proving the existence of such an agreement.  And even then there would be a long battle in court to try to prevail.  Without the insider paperwork, you will most likely have a judge or attorney blandly ask you to show the paperwork to prove that it exists.   Since normal investigations will not turn up the paperwork, you will be quite effectively routed. 

This is possibly one of our biggest challenges in being able to detect and prosecute fraud, and other criminal behavior revolving around ownership, partnerships, stockholders of defense contractors, and others who profit from contracting with the U.S. Government.  It is also potentially an issue from the standpoint of controlling who has access to government proprietary or secret information or technology. 

Streamlining and reducing the number of competently trained security specialists who are experts in this type of oversight is exactly the wrong thing to do if the goal is truly to get a handle on the complex tools criminal individuals and contractor corporations are using to hide money as well as people or other business relationships who might cause them trouble in the contracting oversight world if the U.S. oversight authorities knew of them.  The types of violations occurring now are much more complicated and take even more time to work as cases, even if the oversight employee is fully trained and knowledgeable about the modus operandi of the criminals 

So, you perhaps can see why enforcing our laws about foreign ownership and the movement of money to invisible foreign owners, stockholders, consultants, or those whose primary interest may be espionage, might be quite problematic.  It would in fact be problematic in the best of circumstances where our oversight field people had sufficient levels of employees in fully staffed offices, appropriate and useful training offered all along the journey from neophyte to senior level agent, and solid support and assistance from upper managers and resource specialists in the regional and Washington DC offices. 

Despite what may be officially said by DSS directors and managers, the historical and current practice of crippling offices with lack of sufficient number of well qualified and trained agents, backbreaking workloads, and extreme pressure to turn the numbers (statistics) and not spend the time necessary to fully develop and work the cases is the main problem.  Since the business environment has been changing so rapidly, if the Agency sincerely had the goal of competently overseeing defense contractors, a commitment of resources and adjustment of employees work loads to allow for ongoing training and education in areas of useful purpose that would prepare them to become ever more skillful at finding and identifying fraud, waste, abuse, and other crimes, would be what we should be seeing.  Leaving people essentially with 20^th century understanding and skills to deal with 21rst century criminal modus operandi will not be successful.  DSS and other agencies facing the same challenges must wake up and jolt themselves into reality.

All the previous statements apply in the case that there is no corruption or compromise of authority figures within the government and federal oversight agencies.  Consider for a moment, that may not be the case. 

Think about what might happen if industry, with it’s profit driven motives and values were to gain untoward influence and perhaps even control of government oversight, including many of those in positions of power or authority in elected, appointed, or career civil service positions. 

What if people were encouraged to use the revolving door to more effectively serve the interests of their corporate affiliations to the detriment of the American taxpayer and our national security?  

What if this was happening by design and not by accident and some thoroughly corrupted forces within our government and within industry were cooperatively directing the dysfunction? 

Consider human nature, and what would happen if the greed we’ve seen take such a devastating toll on our economic world, should co-opt some federal managers and employees?   What if managers in a federal agency are compromised through their past and present relationships with contractors, or other compromised and corrupted federal employees who’ve worked themselves into positions of authority and power at high levels in our government? 

What if those managers do not really want their field people empowered?  What if they want to be sure the problems are not found, or recognized and take steps to hobble their employees to be sure the work is not accomplished?  What if they want to be sure none of the criminals are brought to justice?  What if the disintegration we’ve been seeing in DSS and other oversight agencies are just that, the malfeasance of upper and middle managers in order to service the wishes of their industry confederates?

What if in this age of corruption and greed, corporations were pressuring our elected politicians and even placing them in their positions through effective campaign and election manipulation in order to make convenient use of their job authority?  (Follow the money, and take a look at the recent Supreme Court case, which now unleashes corporate ability to donate to candidates and campaigns.)

All of these ‘what if’s” must be considered and investigated by someone higher in authority who can audit with integrity, all of our oversight agencies who supervise defense and other contractors.  The chaos that DSS and other federal oversight agencies have been going through with all of the technology and globalization issues, combined with the trend toward outsourcing, and laissez-faire policies pushed by elected leaders, and various ‘Think Tanks,’ advisory groups, and the much discussed culture of corruption and greed could very well lead to the mess we are currently experiencing.  This would be replete with honest employees who are trying to ethically do their jobs, being called non team-players, labeled whistleblowers, and made targets of every type of retribution by the wrongdoers in order to drive them out of their jobs or to an early grave, which ever comes first.  Presently, honest oversight employees are a threat to the corrupted activities that are going on and to those who protect and cover up those activities. 

With these beleaguered federal agents goes the “corporate memory” and expertise of the oversight agency, leaving neophyte employees who will not be up to dealing with the contractors, particularly if the useful and necessary training and education are withheld, and heavy handed negative managers assure an environment of anxiety, fear and utter frustration are the daily environment our federal oversight employees must endure.   So, the extreme dysfunction within our oversight agencies appears to this observer, to be a combination of lack of vision and understanding by management of the current critical issues at hand combined with some systemic problems with corruption, and cover-ups of waste fraud and abuse, sometimes it appears in collusion with contractors.  It is not a pretty thought, but one we must consider upon studying the history of the past few decades which have created a perfect storm of sorts that government oversight has not been prepared to overcome. 

For those of you interested in learning more about Hidden Truehands, what they can do and how they function, read Ms. Stark’s book and also visit the Financial Action Task Force (FATF), that the United States and many other countries have joined, in order to try to successfully deal with these kinds of financial liabilities.  The first is the link to the portion about the FATF:

 http://www.fatf-gafi.org/pages/0,3417,en_32250379_32236836_1_1_1_1_1,00.html

The next is the link to the FATF’s full Mutual Evaluation Report on Anti-Money Laundering and Combating the Financing of Terrorism, Austria, 26 June 2009. 

This report is 358 pages long.  Hidden Treuhand information may be found throughout, but there are some key issues discussed pages 218-225.  For those of you with knowledge in this area, you will want to read this report.  If this appears to be daunting to you, please read Ms. Stark’s book which has been written to make it an easier read for the average non-career-financial-professional person to absorb. 

http://www.fatf-gafi.org/dataoecd/22/50/44146250.pdf

UBS Whistleblower to hold conference

 

National Whistleblowers Center

3238 P Street, NW

Washington, D.C. 20007

http://www.whistleblowers.org

FOR MORE INFORMATION, CONTACT:

Lindsey M. Williams (202) 342-1903

lmw@whistleblowers.org

FOR IMMEDIATE RELEASE

UBS Whistleblower Will Hold Brief Press Conference Tomorrow

Before Surrendering to Federal Authorities

Washington, D.C. January 7, 2010. UBS whistleblower Bradley Birkenfeld will surrender to U.S. authorities and report to Schuylkill County Federal Correctional Institution in Minersville, Pennsylvania, at 2pm, Friday, January 8, 2010.

Prior to entering the penitentiary, at approximately 1:15 pm, Mr. Birkenfeld and his counsel will make brief public remarks.

Mr. Birkenfeld will commence serving a 40-month sentence as a direct result of blowing the whistle on one of the largest tax fraud schemes in U.S. history, which has resulted in UBS bank paying a $780 million dollar penalty to the United States, and over 14,000 “taxpayers” voluntarily disclosing their illegal offshore accounts. Despite the fact that Mr. Birkenfeld’s disclosures have resulted in a multi-billion dollar net-gain to American taxpayers, and have forced UBS bank to shut down a massive illegal offshore banking practice, Mr. Birkenfeld was sentenced to an unprecedented 40-months in prison.

Why do I keep pushing Hidden Treuhand, Shelley Stark’s new book, on all of you?

 Someone wrote and asked me that today.  First I want to assure you that I am not being paid one penny in fees, nor have I received any gifts or even any non-profit organization sponsored trips to Lichtenstein for talking about this book.  (If you’ve been reading my blog for a while, you’ll get the humor intended.)

The author, Shelley Stark is not a relative, business associate or long time friend.  In fact, I’ve never met her in person.  When she wrote her first article for Truthout while completing her research and writing of Hidden Treuhand, I wrote about her article and upcoming book in my blogs.  When I read what she had to say, a light went on for me, as suddenly I could see how the Hidden Treuhand could be used for the benefit of greedy individuals or corporations.  As you know I’ve been keeping my radar on to alert for greedy and corrupt corporations.  

Shortly before the book was published Ms. Stark saw my blog on the Internet and contacted me to ask if I would like to write about her book, with her permission.  I suspected this was a very important book and am convinced of that now that it is published and I’ve had a chance to thoroughly read it.  So I agreed to help her bring her book to the attention of my readers.  We have become better acquainted though emails and the sharing of information and articles over the Internet spanning from the US to Europe, where Ms. Stark currently resides.  She continues to be committed to trying to help right the terrible wrongs committed against individuals and groups of citizens with the use of these financial manipulation instruments, Hidden Treuhands. 

If you are paying any attention to the news, you will be able to make connections between what is being reported, in some cases only surface coverage reporting, and what Ms. Stark is trying to raise an alarm about.  We are all affected by this kind of fraud and greed.  It is not going to be easy to get it addressed.  Even those in our government in charge of oversight are lackluster in their motivation to learn about and go after this kind of crime, even though there are a couple of notable instances in the news now. 

I would like to see this change.  I would imagine many of you would also.  That is why it is important that everyone read this book.  What we don’t know will certainly have the ability to hurt us in this arena.  Thank you for paying attention.  GFS

Hidden Treuhand may be purchased at Amazon.Com and Barnes and Noble.  You may also find it on the shelves of your public library. 

Banks: No Law; No Crime

Shelley Stark in the Vienna Review:  No Law; No Crime

The greed and manipulation continue.  Read what Shelley Stark, author of Hidden Treuhand:  How Corporations and Individuals Hide Assets and Money  (Universal Publishers) has to say about it now.

Link to the Vienna Review:

http://www.viennareview.net/shelley-stark-3173.html

Hidden Treuhand is available through Amazon.com and Barnes and Noble.  This is a must read.  It will shine light on some areas that prior to this have been going on in the shadows, areas of financial manipulation and fraud that have been affecting all of us, some of us very dramatically. 

The Bank Fraud Circus Marches On: More Trouble Coming

Default Swap Reforms Roiled as Aiful Tests Settlement (Update1)

 

Link to original: http://www.bloomberg.com/apps/news?pid=20601109&sid=aANN.DJq5h1E#

 

 

 

By Abigail Moses and Shannon D. Harrington

Nov. 27 (Bloomberg) — Wall Street’s system for determining payments on derivatives linked to the debt of defaulted companies is showing cracks less than a year after securities firms changed practices to avoid “Draconian” regulation.

Credit-default swaps tied to Thomson SA, the Paris-based owner of film processor Technicolor Inc., paid some holders 30 percent less than those with contracts expiring a day later. In Japan, owners of swaps on Aiful Corp. haven’t been compensated, though one of its banks said the consumer lender skipped loan repayments. Dealers can’t agree whether to reimburse investors in Mexican cement maker Cemex SAB’s debt swaps.

Disparities are arising in spite of practices adopted in April and July to standardize settlements and curb risk in a market that exacerbated the worst financial crisis since the 1930s by contributing to the downfall of American International Group Inc. Analysts at Bank of America-Merrill Lynch, Barclays Capital and UniCredit SpA say changes are needed as dealers examine how to interpret existing rules to maintain investor confidence.

“The first cracks are being shown in the protocols,” said Edmund Parker, head of derivatives at Chicago-based law firm Mayer Brown LLP in London.

The rules are being tested as the global default rate rises. The rate for companies ranked below investment-grade reached the highest since the Great Depression in October and will peak at 12.5 percent next month, Moody’s Investors Service said Nov. 5.

Lawmaker Ammunition

Flaws in the system may provide ammunition to President Barack Obama and lawmakers who want to rein in derivatives, including credit-default swaps, which rise in price as investor confidence decreases and pay off when a borrower fails to adhere to its debt agreements.

Regulators demanded more transparency after the meltdowns 14 months ago of Lehman Brothers Holdings Inc. and AIG, two of the largest traders, froze credit markets and worsened the first global recession since World War II.

The swaps had been the world’s fastest-growing market, with contracts protecting against defaults on as much as $62 trillion at the end of 2007, almost 10 times the amount of the U.S. government’s debt outstanding, according to the International Swaps & Derivatives Association, a trade group based in New York. The swaps totaled less than $632 billion in 2001 and the figure is $26 trillion now.

Hedge fund manager George Soros has called the market “unsafe,” and billionaire investor Warren Buffett once likened the derivatives to “financial weapons of mass destruction.”

Revenue Stream

Banks are making changes to avoid stricter rules imposed by regulators, said Atish Kakodkar, a CreditSights analyst in New York.

“The risk of over-regulation is real,” Kakodkar said in a Nov. 15 research report. “Self-regulation in the credit derivatives market seems to be driven largely by the need to pre-empt any Draconian regulation.”

Five U.S. commercial banks, including JPMorgan Chase & Co., Goldman Sachs Group Inc. and Bank of America Corp., were on track to earn more than $35 billion this year trading unregulated derivatives contracts of all types as of August, according to data compiled by Bloomberg.

Credit-default swaps are derivatives, contracts with values derived from assets or events, including stocks, bonds, commodities, currencies, interest rates or the weather. Banks, hedge funds and insurance companies use the swaps to insure bonds and loans against default or to speculate on the creditworthiness of countries and companies.

Failure to Pay

If a borrower fails to adhere to its debt commitments, bondholders who own swaps get paid the debt’s face value in exchange for the bonds. Those that don’t own the underlying bonds get the face value in cash minus the debt’s current market value as determined by industry-run auctions where holders of the securities sell them to the highest bidders.

Dealers and investors standardized the contracts this year to make them easier to trade through clearinghouses, which act as buyers to sellers and sellers to buyers, preventing a single default tripping a domino-like financial system catastrophe.

As part of that effort, ISDA formed regional committees of 15 dealers and investors in March to make binding decisions on when contracts are triggered. The committees base decisions on publicly available information such as regulatory filings, press releases and news articles. Swaps usually are triggered by one of three events in most countries: bankruptcy, failure to pay or debt restructuring, including a reduction or postponement in principal or interest. Under the new rules, traders eliminated restructuring as a credit event in the U.S.

Successful Auctions

Traders successfully auctioned debt to settle contracts linked to 41 companies and Ecuador’s government this year, with about half of those happening since ISDA created the committees.

“The determinations committee provides one place where we can resolve a lot of these issues centrally,” said Athanassios Diplas, global head of counterparty portfolio management in New York for Frankfurt-based Deutsche Bank AG and co-chair of the ISDA panel that wrote the protocols. “Imagine if we were to face all of this in the world where we had to arbitrate potential disputes bilaterally. That would be complete chaos.”

The new protocols helped eased the market’s stigma, with the net amount of protection bought and sold rising to $2.6 trillion as of Nov. 13, the highest since at least February, Depository Trust & Clearing Corp. data show.

Credit-default swaps on the Markit iTraxx Crossover Index of 50 companies with mostly high-yield credit ratings has fallen to 558 basis points, from as much as 1,100 basis points in March, according to JPMorgan Chase & Co. prices.

Thomson provided the first test of the procedures for settling contracts triggered by a restructuring in Europe when it said in August it was deferring payments on $72.5 million of 6.05 percent private notes due this year.

Multiple Auctions

The system for restructurings uses multiple auctions that set different payouts based on swap expiration dates. Dealers couldn’t settle the Thomson contracts with simpler failure-to- pay procedures that produce one recovery value because they were unable to prove the electronics company defaulted.

Asked in a July conference call with investors whether Thomson still owed the money, Chief Executive Officer Frederic Rose responded, “Since I am not a qualified lawyer, I prefer not to answer that question.” Marine Boulot, a Thomson spokeswoman in Paris, declined to comment.

To determine the size of the payouts on contracts covering $2 billion in debt, bonds and loans were split by maturity date ranges into three so-called buckets and sold at auction.

Contracts that expired on June 20, 2012 — the first bucket’s latest date — sold for 96.25 percent of the face amount, meaning swap holders received 3.75 percent of the amount covered. Swaps expiring a day later paid 34.875 percent because the debt in that bucket went for 65.125 percent.

Too Few Securities

Holders of June 20 swaps covering 10 million euros in debt got 375,000 euros, while those with June 21 contracts received almost 3.5 million euros. Swaps that terminated after Oct. 24, 2014, paid the most, 36.75 percent.

The disparity was a result of too few securities in the first bucket to settle swaps, according to Matthew Leeming, a London-based strategist at Barclays. “An imbalance of supply and demand for the deliverables can affect the recovery rate,” he said in a note.

Because they were part of industry indexes, swaps referencing the company “dwarfed the amount of Thomson debt,” said Teo Lasarte, an analyst at Bank of America-Merrill Lynch in London.

The more swaps there are, the more investors with stakes in the contracts need bonds to settle them. About 81 million euros- worth of debt was auctioned from the first bucket, compared with 221 million euros and 148 million euros from the second and third, according to data released by auction administrators Markit Group Ltd. and Creditex Group Inc.

Sufficient Debt

Lasarte favors changing rules governing indexes so companies in them have enough debt available to produce settlement auctions that don’t cause distortions.

“To strengthen the robustness of this product, there are some issues to be solved,” said Tim Brunne, a UniCredit strategist in Munich.

Leeming of Barclays said in a report to clients that the Thomson settlement “raises questions regarding the future of restructuring as a credit event.”

Banks that bought contracts on loans to Kyoto-based Aiful aren’t being paid because ISDA’s determinations committee ruled that there isn’t sufficient evidence to trigger swaps as the company and its lenders hold confidential restructuring talks.

Suspended Payments

Aozora Bank Ltd., one of Aiful’s creditors, said in a statement to the ISDA committee that the company “suspended scheduled payments of loan principal to all of its lenders” on Sept. 30. The committee rejected the request on Oct. 19 because the protocols only allow it to consider “publicly available information.” If the “sole source” of that evidence bought or sold swaps, it isn’t deemed publicly available. Aozora has said it owns some Aiful swaps.

Katsuyuki Komiya, a spokesman for Aiful, declined to comment.

Contracts protecting a net $1.36 billion of Aiful’s debt were outstanding as of Nov. 6, more than any other Japanese company, according to New York-based DTCC. As much as $238 million more of Aiful’s debt is protected through credit swaps based on indexes in which the company is a member. Aiful is meanwhile seeking to secure a credit line from Sumitomo Trust & Banking Co., its main bank, two people familiar with the matter said.

Aiful Swaps

The value of Aiful credit-default swaps that mature in December plunged on speculation they may expire without being triggered. Contracts protecting 100 million yen ($1.2 million) of Aiful debt from default through Dec. 20 dropped to 10 million yen upfront, from 55 million yen on Oct. 15, according to a trader who asked not to be identified because the prices are private.

The Japanese Association of Turnaround Professionals, which is mediating Aiful’s so-called alternative dispute resolution process, is forming a group of bankers, lawyers and government officials to study whether talks between companies and creditors on rescheduling debt payments should trigger swap payouts, said Miyako Hara, an executive secretary for the trade group.

The ISDA determination committee was asked on Oct. 9 to rule that swaps linked to Monterrey, Mexico-based Cemex should be paid out after the company agreed with lenders to extend the maturity on about $15 billion of debt for five years.

After four weeks of deliberations, the committee was deadlocked, and the issue will now be decided by an arbitration panel set up by ISDA. The panel will rule in December.

Struggling With Debt

The biggest cement maker in the Americas has struggled to repay debt since shipments started dropping in the second- quarter of 2006, before it paid $14.2 billion in July 2007 for Australian rival Rinker Group Ltd. Cemex has $19.67 billion of debt, according to data compiled by Bloomberg, and is rated B by Standard & Poor’s, five steps below investment grade.

Cemex spokesman Jorge Perez declined to comment.

The cost of credit-default swaps on Cemex surged as high as 1,500 basis points in March, or $1.5 million a year to protect $10 million of debt for five years, according to CMA DataVision, as the price of its 900 million euros of 4.75 percent bonds due 2014 dropped to 38 cents on the euro.

Credit-default swaps are “not a perfect product,” said J. Paul Forrester, a Mayer Brown partner and co-head of its derivatives and structured products practice. “These are difficult questions, and unfortunately as we continue to use this product and explore it we’re going to find that it has these sorts of issues,” he said.

To contact the reporter on this story: Abigail Moses in London at Amoses5@bloomberg.net; Shannon D. Harrington in New York at sharrington6@bloomberg.net;

Last Updated: November 27, 2009 07:26 EST

Shelley Stark in the Vienna Review: No Law; No Crime

The greed and manipulation continue.  Read what Shelley Stark, author of Hidden Treuhand:  How Corporations and Individuals Hide Assets and Money  (Universal Publishers) has to say about it now.

 

 

Link to the Vienna Review:

 

http://www.viennareview.net/shelley-stark-3173.html

 

DO YOU KNOW WHERE YOUR MONEY IS?

Get It Yet?  Americans Being Taken to the Cleaners by Big Corporations and Banks, and It’s Legal…. In Europe!

 

It just keeps getting worse.  Any day, check the articles popping in mainstream media as well as the Internet about financial intrigue and crime.  Missing money, (bailout or not), missing estates, missing retirement accounts, you name it, it’s been happening.  As the operations of the ruthless and greedy, (in this wild-west economic time we are in),  break out of the shadows, we all wonder, how could this have happened? After all, we have laws to protect people in the U.S. don’t we? 

Below is the introductory article written by author, Shelley A. Stark, about an secret banking institution called Hidden Treuhand, and a recent follow up article regarding the same.

   Since the preliminary article in August of 2008, Ms. Stark’s book has been published and is now available.  Copies have been going fast.  Last night Amazon had only three left.  If you delay, you’ll have to wait for the next printing.

 This book will open your eyes to the drama that has been going on out of sight and frankly for most American’s below our radar.  Ignorance is NOT bliss!  It is a must read for everyone, but in particular federal oversight employees, ALL federal oversight employees.  -GFS

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Halliburton’s Hidden Treuhand

Monday 11 August 2008

by: Shelley Stark, t r u t h o u t | Report
Vanity Fair reported shipments of over $12 billion in cash to Iraq. $9 billion of the cash is gone and unaccounted for. (Photo: The Village Voice)

Halliburton takes advantage of a European loophole that lets corporations hide beneficiaries and assets.

    Little is known of a customary European legal practice that offers corporations and individuals an opportunity to profit from assets while maintaining complete anonymity of the beneficiary’s identity. This practice is referred to as “Hidden Treuhand” in the English language. The practice of Hidden Treuhand submits to legal local customs in Austria, Germany, Liechtenstein, Luxemburg and Switzerland, but due to globalization, has moved beyond European borders via corporations and individuals, who put it to personal use.

    The practice of Hidden Treuhand is relevant and unregulated. More and more, the relevant practice of Treuhand is used in hiding an asset owner’s identity from the outside world. Assets, whether they are corporate shares or fixed assets, can be owned in secret. The personal income derived from these assets can also be kept secret from tax authorities. An example of how Hidden Treuhand facilitates tax evasion is part of the latest scandal where thousands of Germans evaded tax through the services of the LGT Treuhand Bank in Liechtenstein, using a combination of Treuhand and foundations to hide true owner identity of bank accounts.

    Hidden Treuhands in Europe impact the lives of American citizens. Hidden Treuhands enable even American corporations to hide the identity of beneficiaries, assets and income. Halliburton has a Hidden Treuhand embedded in its Austrian subsidiary. It prevents transparency regarding corporate activities.

    The lack of transparency creates special advantages for some, and consequences for others such as governments, competitors, stockholders and citizens. For example, a beneficiary can evade personal income tax, because the income derived from a hidden asset is not linked to the beneficiary. There is another advantage to Hidden Treuhands that borrows from the concept of a “trust.” The “trust” concept allows for dividends to be removed. Money transferred to a subsidiary may be considered a dividend. By using a network of subsidiaries, favorable tax laws and banking secrecy, CEOs and insiders can profit without transparency. The Hidden Treuhand is an important aspect of what makes globalization so attractive to American and European corporations.

    Given these attributes, it is alarming when a Hidden Treuhand is discovered in a subsidiary that is fully owned by Halliburton USA. Halliburton’s Hidden Treuhand is evident in the firm’s corporate records. Halliburton International GmbH was created in Austria in June of 1992, although another subsidiary, at the same address, was in existence in Austria since 1958. The new subsidiary, Halliburton International GmbH, has no apparent reasons for existing other than to house a Hidden Treuhand in its corporate structure, receive dividends from other subsidiaries and acquire other subsidiaries. This firm has no employees. It creates no income. Another company, Halliburton Company Austria GmbH, at the same address, could have equally performed whatever function this subsidiary has, but it has no Hidden Treuhand. The obvious conclusion is Halliburton USA needed a subsidiary with a Hidden Treuhand.

    The Hidden Treuhand easily accomplishes tax evasion because dividends transferred to a subsidiary with a Hidden Treuhand can be anonymously distributed or used to purchase other holdings. For example, Halliburton International GmbH has acquired acquisitions in Russia and Kazakhstan that later disappear from the corporate records.

    Halliburton attracts a certain limelight in connection with any Treuhand activities because of its link to a highly controversial war and Vice President Dick Cheney’s earlier association with Halliburton. We would have expected all ties to his former employer to be have been severed when he took office to avoid a conflict of interest. The impenetrability of the Hidden Treuhand makes it impossible to know who else is involved beyond the CEOs listed on Halliburton International GmbH historic corporate data.

    Dick Cheney claims to no longer own stock in Halliburton, but he was its chairman and CEO for five years, and either hired or promoted many of the executives now running Halliburton, or formerly involved with the subsidiary with the Hidden Treuhand in Austria. It is highly unlikely the chief executive officer, Dick Cheney, would be unaware of the Austrian subsidiary’s existence, originally headed by the executive vice president and chief legal officer, Lester L. Coleman, of Halliburton International USA. But it is an absolute certainty Lester L. Coleman and all the other CEOs listed on Halliburton International GmbH corporate historic records do know of the subsidiaries existence and its Hidden Treuhand. It was the intention of these CEOs to set up a secret subsidiary in 1992 with a Hidden Treuhand embedded.

    Perhaps more importantly, Halliburton’s CEOs, listed in the corporate historic records of Halliburton International GmbH in Austria, should know Hidden Treuhands could be used to undermine American security by providing a means for financing terrorists. Currently, one of the strongest arguments the US and the OECD are using against banks, lawyers and Treuhand activities in Europe to combat tax evasion and money laundering is how these activities can be used to fund terrorism. The Iraq War is one portion of the overall strategy of the ‘War on Terror’ that also includes preventing any funding for terrorism. It takes little imagination to see the huge potential Treuhands facilitate: creating a means for terrorists and criminal organizations to conceal their true identities and motives and yet work openly in the capitalist system.

    Halliburton’s CEOs must be aware of the potential misuse of Hidden Treuhands, as they have not been particularly open about their own use of Hidden Treuhands to date. Halliburton simultaneously contracts to fight a “war on terror,” while utilizing the same nontransparent mechanisms concerned authorities seek to prevent access to by terrorists. Faced with a conflict of interest, Halliburton CEOs demonstrate with their silence a willingness to protect their own interests, and doing so while we are at war with an enemy that works in the shadows.

    The noncompetitive contract awarded Halliburton was orchestrated by Vice President Dick Cheney and backed by the Bush administration. This contract has afforded an estimated US$1.4 trillion to US$3 trillion of US taxpayer money to flow through the coffers of Halliburton, virtually unmonitored and fraught with accounting irregularities. The receiver of much of this US taxpayer money is Halliburton USA, its affiliates and subsidiaries. One of the subsidiaries, the Austrian subsidiary, is capable of dispersing any money sent to it to unknown persons, without a hint of transparency.

    The Hidden Treuhand is more than just a means of profiting without transparency; it is a national security threat, whether wielded by al-Qaeda or Halliburton. If Americans were brought into a war based on a profit motive while we were supposed to be focused on alleviating the threat of terrorism, it could amount to treason. This risk should be given some credence and investigated. For this reason, Halliburton’s corporate records were given to the US Internal Revenue Service. Maybe they will find something illegal, tax evasion for example, or maybe they will come back and say they found nothing illegal: The Hidden Treuhand is just a little bit naughty.

    There is no transparency to a Hidden Treuhand, and, therefore, no means to identify the real benefactors. But the most important factor concerning a Treuhand contract is this: If a Treuhand contract is embedded in the corporate structure, then its sole purpose is to prevent the public from knowing the identity of the real stockholders. Who is calling the shots and who is benefiting is kept secret.

    The “True Hands,” the true benefactors’ identity, is hidden from public knowledge; they remain anonymous and nameless in transactions, and that is the sole incentive for creating a Hidden Treuhand.

    ——–

    Shelley Stark is the author of  “The Hidden Treuhand: How Corporations and Individuals Hide Assets and Money,” now available at Barnes and Noble and Amazon.com.

 

 

In the Age of Stealth Wealth – Bank Secrecy is Alive and Well!

Written by Shelley Stark author of: ‘Hidden Treuhand: How Corporations and Individuals Hide Assets and Money’ 

“Bank Secrecy Bites the Dust in Europe”- Newsweek. “Switzerland, Luxembourg, Austria Loosen Secrecy Rules” – Bloomberg. “Tax Havens Give in to EU Pressure” – Spiegel ONLINE.

Has banking secrecy finally come to an end? This is what newspapers are unanimously saying. Is it true or should these headlines be punctuated with a question mark? Well, once again Switzerland, Austria, Luxembourg, Liechtenstein, and Belgium too are in the spotlight for their bank secrecy rules. There have been strong words emanating from the international community in the past and they produced little, or we would not be entertaining headlines such as these today. 

Changes to bank secrecy have come along way since the day of the anonymous savings book (‘Sparbuch’ in the German language). On January 1st 1994 some provisions concerning banking secrecy were partly amended in response to concerns of money laundering, but these provisions were largely undertaken on a voluntary basis by each bank. Up until this time, one could simply show up at the bank with $10 or $10 million dollars, and put it in anonymous savings account.  It was anonymous because you didn’t have to show any identification. The bank account was identified by a secret password, which the owner of the account assigned to the savings book and was subsequently registered in the bank. To get the money, you would have to show up at the bank with the savings book and give the secret password. This means in reality, to make a pay-off as seen in spy-thrillers, nobody needed to run around with suitcases of money. One could simply make a pay-off by handing over the savings book with the password and the recipient could visit his money at leisure. The new account holder could change the password to afford more security, but as longs as he had the savings book and the password, the money was safe and the old owner could not obtain these funds. Of course, this also meant if the savings book was lost or the password forgotten, then no one could access the money. The password account is much like its Swiss cousin the numbered account. The concept of the number and the password account originated when Hitler sought to stem the flow of money seeking a safe haven in Switzerland and in Austria. The capital exodus began due to inflation, but later due to Nazi persecution of Jewish citizens, it was feared that Hitler would try to force the Swiss to reveal Jewish accounts. By giving out numbers, the Swiss bank could claim not to know whom the account belonged to. In Austria, the practice became passwords. 

In 1995, Austria became a member of the European Union. Many of the earlier voluntary duties became law so that by November 1^st 2000 the ability to open anonymous accounts was finally ended and no payments or withdrawals could be made to existing accounts unless the bank identified the identity of the savings account holder and money laundering was finally rendered a criminal offence. Tax evasion on the other hand, the concealing of income and not falsifying any documents, is merely a civil offense, not unlike a traffic violation. In addition, as of January 1^st 2000 any cash transaction over €15,000 with a customer that didn’t have an ongoing relationship with the bank or was wired to the bank from offshore, needed to register their identity with the bank. These changes were brought about as the result of a European Council Directive to prevent the financial system from being used to launder money.  As a result of these amendments to the banking law, the European Commission withdrew its complaints against the Republic of Austria.                                           

The story regarding Switzerland and Liechtenstein is slightly rockier. German federal investigators paid €5 million to a former bank employee of the Liechtenstein Große Treuhand bank (LGT). The employee, Heinrich Kieber, is alleged to have removed the secret bank data from the LGT bank, thus kicking off a row over tax evasion in the EU. Before the dust settled, U.S. investigators charged Switzerland’s UBS bank for deliberately encouraging American citizens to engage in tax fraud activities. The Swiss have always attracted a certain limelight regarding chocolate, cheese, cuckoo clocks, and banking secrecy – a financial business model that attracts an estimated $1.84 trillion in assets of which about €450 billion belong to private customers. In Switzerland, the hoopla began when the bank was found to have offered tax evasion tactics to Americans that were invented by auditors at KPMG, who only managed to avoid criminal prosecution when they paid up $456 million in fines and penalties. The UBS bank was ordered to pay $780 million, and then they did the unthinkable, they handed over the names of 300 customers after the U.S. government produced strong evidence of tax evasion. The U.S. authorities are still seeking the names of an estimated 52,000 Americans with secretive UBS accounts.

According to mainstream press, these events are what have sparked the U.S., British, and German push for an ‘end’ of banking secrecy and prompted bankers from Switzerland, Austria, Luxembourg, and Liechtenstein to hoist their skirts and run for cover. Baa-humbug!

Firstly, tax evasion is not a criminal offense in any of these countries currently being hounded for their bank secrecy laws and for the most part bank secrecy is federal and constitutional law in these countries.

Basically the international community has pushed these European tax havens to accept Article 26 of the OECD Model Tax Convention on Income and Capital. Article 26 creates an obligation to exchange information, but the contracting state is not at liberty to engage on a “fishing expedition”. The contracting country must firstly show evidence of tax evasion, can only request information that is relevant to the tax affairs of a given taxpayer, must demonstrate the foreseeable relevance of the requested information, and prove to have pursued all domestic means to access such information. As of yet, it is unclear just how much tax evasion evidence even need be presented.

Austria, Belgium, Luxembourg, and Switzerland were opposed to the current version of Article 26, last updated on July 17, 2008, but since March 2009 each of these countries has notified the OECD that they are withdrawing their reservation to Article 26. They now believe that bank secrecy is not incompatible with the requirements of Article 26. And with little wonder, because the particulars of Article 26 are easily circumvented with a legal phenomenon called ‘Hidden Treuhand’.

Hidden Treuhand is a customary practice in Austria, Switzerland, Luxembourg, Liechtenstein, and even Germany. Due to globalization, it has transcended its national borders to impact industry, commerce, and banking worldwide. It is key to creating shell companies, foundations, and bank accounts where the real owner identity is hidden and cannot be exposed by any legal means. A Hidden Treuhand creates conditions where a lawyer conducts the duties required of him on behalf and in the interest of the client, but all business actions appear to be in the name of the lawyer. The real beneficial owner remains unknown. This construct can be liberally applied to stock in corporations, foundations, real estate, patent and copyrights, financial instruments such as derivatives and bonds, and of course, cash.

In 2000, some aspects of banking secrecy came to an end, but the Hidden Treuhand is frequently used to close the gap that those transparency laws were supposed to fill. In essence, the Hidden Treuhand is somewhat like a hidden trust, but legally it and the environment in which it functions, can achieve far more than is presently realized. Hidden Treuhand hides the beneficial owner of any asset and that includes bank accounts. Hidden Treuhand, when combined with banking secrecy, hides profits beyond the reach of tax investigations and governments. It’s like missile shield for money – nothing gets past this protective barrier.

Article 26 of the OECD MODEL TAX CONVENTION ON INCOME AND CAPITAL concerns the exchange of information between Contracting States. Hidden Treuhand is the creation of customary practice, but it is not regulated and there are no laws in existence that could be equated as regulatory. The following Hidden Treuhand provisions are quoted from law books referring to customary practice and illustrate how each of the OECD provisions is rendered mute. Compare the inherent capabilities of Hidden Treuhand with text of Article 26 where it states that none of the following provisions shall be construed so as to impose the obligation to:

OECD: to carry out administrative measures at variance with the laws and administrative practice of that or of the other Contracting State;

Hidden Treuhand: “What makes a Treuhand contract so special and unique under Austrian Law is that there is no special law regulating Treuhand contracts…there is no regulation of Treuhand contracts under Austrian Civil Law, and there are not any laws that could be equated as regulatory.” 

OECD: to supply information which is not obtainable under the laws or in the normal course of the administration of that or of the other Contracting State;

Hidden Treuhand: “It is not to be expressed that any direct legal relationship or connection exists between the businessmen and the lawyer. In fact, the lawyer would be guilty of misconduct should the lawyer reveal that a legal relationship (power of attorney) exists between himself and the client”.  

OECD: to supply information which would disclose any trade, business, industrial commercial or professional secret or trade process, or information the disclosure of which would be contrary to public policy (ordre public).

Hidden Treuhand: “When using a Hidden Treuhand, trustees are referred to as a Straw Man. A trustee functions like a Straw Man and acts in the name of the client who remains undeclared in the background. The relationship between the businessman and the lawyer is secret, which often includes even knowledge of a ‘power of attorney’ existing between the lawyer and the businessman”

When it comes to Hidden Treuhand, lawyers exploit attorney client privilege and claim it their legal duty to deny information and to keep all matters pertaining to their client confidential. No one, no court or authority, no government, can force an attorney to reveal any secrets concerning his client. And what of banking or bank accounts?  

The EU and international money laundering laws have striven to eliminate any criminal elements from the banking system, but Hidden Treuhand works within the law and in the banking system. Hidden Treuhand bank accounts are not made public because only the trustee is entitled to use the account, and there is no legal relationship between the client and the bank account. A lawyer lets the bank know that an account is a trust account, but does not have to disclose the name of the beneficiary. A Treuhand account means a banking relationship exists between the bank and the trustee and the bank is not entitled to know whom the lawyer represents anymore than anyone else.

“According to leading banks, designating an account as a Treuhand account alters nothing. The true account beneficiary remains a secret because only the trustee is authorized to use the account and there is no legal relationship between the client and the ‘special account’. The clients’ identity is not exposed when making bank transactions because it is the trustee’s responsibility to make money transfers from this ‘special lawyer trust account’ (Anderkonto)”.

As result of the crackdown against tax havens, more clients will have to resort to Hidden Treuhand and lawyers services. Already Liechtenstein has sold its Treuhand services to a separate company, quite possible even to itself via Hidden Treuhand. Their business model will no doubt resemble the Austrian one where the registration of foundations and Hidden Treuhand is separate from bank institutions. If foreign tax authorities manage the first hurdle and can provide strong evidence of tax evasion and seek further information regarding bank accounts they will firstly have to petition the cooperation of the Ministry of Finance. The ministry will ask the banks, but to what end? The bank cannot tell them what they do not know.  

So much for the grandiose announcement heralding the end of bank secrecy and tax havens!

Many large-cap US corporations have headquarters or subsidiaries based in tax havens. For example: McDonalds recently moved to Switzerland. Moreover, it is possible for a hedge fund to own an offshore bank. For example: the highly secretive hedge fund Cerberus owns Bawag, an Austrian bank, as well as a majority shareholder stake in Chrysler and GMAC. If questioned, would Bawag reveal information regarding any accounts held by a stakeholder of Cerberus?

Just how big is the offshore banking industry? The OECD estimates that assets held by the offshore banking industry might be as high as $11.5 trillion. Little wonder U.S. banks are having trouble lending money and no big surprise the European legal community claims to have no objection to Article 26.

Bank secrecy is alive and well! No question mark necessary. It just got a bit more expensive and devious. It is high time someone made the announcement: we have officially entered the ‘Age of Stealth Wealth’!

To learn more about Hidden Treuhand and what role it is playing in the financial crisis, bank secrecy, bailouts, globalization, the privatization of Iraq, and your financial security, please read: Hidden Treuhand: How Corporations and Individuals Hide Assets and Money

Available direct from publisher and Amazon and Barnes and Noble

Goldman Sachs: Lead Perpetrator or Victim?

 

 

First read August 3^rd’s Blogs & Stories by Charlie Gasparino  “Stop Blaming Goldman-Sachs” on The Daily Beast.

 

Gasparino references a recent Rolling Stone story by Matt Taibbi, (http://www.rollingstone.com/videos/video/28915248/matt_taibbi_on_goldman_sachs_roles_in_the_housing_and_internet_busts), which he says attacked Goldman Sachs for bursting America’s financial bubble He then goes on to give his opinion about why the Rolling Stone article is wrong.

 

Link:  http://www.thedailybeast.com/blogs-and-stories/2009-08-02/stop-blaming-goldman-sachs/

 

 

Then read the Reader Comments.  Shelley Stark, author of Hidden Treuhand:  How Corporations and Individuals Hide Assets and Money, has commented quite effectively as discussion on this story has progressed.

Reports of Earlier Hidden Treuhand Use, Fraud, Theft

Someone from Whistleblower 411 (Yahoo Group)  sent me information about prior problems involving money gone missing, allegedly because of Hidden Treuhand use.  S/he said they exposed FDIC Fraud linked to Hidden Treuhand for the years 2004 to the present date.  I have not verified that indeed European Hidden Treuhand was actually involved in the Kryder case described in the link below.  This site is rather complex and involved.  It will take some time to decipher it.   Do you like historical and financial mysteries complete with the expected intrigue and skullduggery?   Let me know what you think.  And if you have any knowlege or information about this, contact the Kryder family estate. 

 

I’ve received a large amount of information from the estate this evening.  It is an interesting story, if you follow the link  to their site and look at the various menu choices on the left.  Quite a long period of history and quite a story.  I will be posting more about this in the future.  -GFS

 

Here is the link for the Kryder estate site:

 

Where is Kryder’s Money?  http://www.frankkryder.com/