Thursday, December 08, 2005

Update to Saipan, Abramoff, etc.

Further to my post "Of Saipan, Abramoff and Jews for Jesus":

The Marianas Variety is reporting today that "GOVERNOR-ELECT Benigno R. Fitial says he will cooperate with federal authorities...." I'm posting the whole article because the Variety tends to let them lapse off-line the day after publication:
"GOVERNOR-ELECT Benigno R. Fitial says he will cooperate with federal authorities in the ongoing investigation of Rep. Tom Delay and former Washington lobbyist Jack Abramoff, whom he once described as his “close friends.”
House leadership spokesman Charles P. Reyes Jr. said Speaker Fitial “will comply with all the legal requirements asked of him.”
But Reyes said it’s unfair that Fitial’s name is always being associated with Delay, R-Texas, and Abramoff.
In April, when news about DeLay’s and Abramoff’s possible ethical violations broke, Fitial issued a statement in their defense.
“I join Congressman DeLay in condemning this unfair criticism, which has even gone to the extent of attacking the Northern Marianas for its efforts to rightfully defend itself against hostile federal takeover attempts orchestrated by partisan political groups and other liberal special interest groups,” said Fitial in a statement issued on April 20.
Back then, Fitial said certain left-leaning parties hostile to the local garment industry are “attempting to undermine” his 2005 gubernatorial bid by linking him to the controversy surrounding DeLay and Abramoff, whom Fitial credited as the individuals who “successfully thwarted repeated federal takeover attempts against the CNMI.”
Supporters of Fitial’s Republican opponent in the election, Gov. Juan N. Babauta, tried to make an issue out of the speaker’s links with DeLay and Abramoff, but it never caught on.
According to the Associated Press, DeLay and two GOP fundraisers, John Colyandro and Jim Ellis, are accused of illegally funneling $190,000 in corporate donations to 2002 Republican candidates for the Texas Legislature.
Under Texas law, corporate money cannot be directly used for political campaigns, but it can be used for administrative purposes.
On Monday a Texas judge threw out a conspiracy charge against DeLay but allowed money laundering charges to stand.
In a separate news article, the AP reported that the 2001 donations to Burns, a Montana Republican, included money directly from Abramoff and Northern Marianas garment magnate Willie Tan’s company, Tan Holdings Corp.
In that same article, Eloy Inos, a corporate executive of Tan Holdings, was mentioned as donating $5,000 to Burns’ political action committee.
Inos now serves on Fitial’s transition committee.
Fitial, a former executive of Tan’s, became speaker of the 12th Legislature largely through the help of DeLay’s aides.
But Reyes said if Fitial was given help it was “not surprising” since at that time he was still with the local GOP.
In a separate interview, Press Secreatry Peter Callaghan said the CNMI Attorney General’s Office has provided federal authorities with all the documents they needed regarding the CNMI’s previous transactions with Abramoff."

Well it's the way it's done at home

"THE US military has named a navy admiral to investigate an "information operations" program that paid some Iraqi newspapers to publish pro-American articles, defence officials said today. News of the program last week sparked complaints from some members of the US Congress who said paying Iraqi media to print positive articles could undermine the credibility of the United States at a time when Washington was trying to foster democratic institutions, including a free media, in Iraq.

Rear Admiral Scott Van Buskirk, already serving in the US military command in Iraq, will conduct a fact-finding investigation that could lead to recommendations on possible punishment, officials said. "He has been given authority to do as thorough a job as necessary to determine whether the placement of stories is in accordance with all legal guidelines and is appropriate to the situation," Lieutenant Colonel Barry Johnson, a military spokesman in Baghdad, said by email.

Lt-Col Johnson indicated that the program is continuing. "There has been no directive by MNF-I (the US command in Iraq) for the program to ... discontinue operations."

The command said it would review whether the program was functioning differently than intended and would investigate any improprieties. The US command in Iraq has argued that it is important to take steps to counter what it says is misinformation and propaganda spread by insurgents and aimed at discrediting the United States and the US-backed Iraqi government. US Defence Secretary Donald Rumsfeld on Tuesday criticised news coverage of the matter, saying, "That story has been pounded in the media ... but we don't know what the facts are yet."

Mr Rumsfeld also questioned whether Lincoln Group, the Washington-based defence contractor given a multi-million dollar contract to help deal with the Iraqi media, was implementing the policy properly. Lincoln Group issued a statement last week saying that "we counter the lies, intimidation and pure evil of terror with factual stories"."
US probe into planted stories

Frankly, the leftist wimpies have been way off the mark in their derision of this matter. They say this is no way to try to export democracy to Iraq. They say we should be setting a better example of the way democracy works. Who are they zooming? Isn't that the way democracy is practiced in the West?

Conservative, traditionalist jurist takes dim view of security-mongering

The Federal government is preparing to prosecute a man who "is accused of working with the suspected French terrorist Willy Brigitte for five months last year to target the national electricity grid and bomb Sydney military sites." The prosecuters want to clamp down on the court's security.

Security measures requested by the prosecutors include
"that all documents be kept in safes - there was even discussion whether the courtroom floor could take the weight - and transported in "security-endorsed" briefcases. Another of the 15 requests signed by the director-general of ASIO, Paul O'Sullivan, is that transcripts be done on "secure" government-supplied laptops by "security-cleared" staff. The Director of Public Prosecutions also wants barristers to go through metal detectors, ceiling lights in the court removed so bugging devices cannot be placed there and the courtroom swept daily by electronic equipment."

The requests, which the Commonwealth prosecutor Richard Maidment, SC, said were necessary to comply with the Federal Government's National Security Information (Criminal and Civil Proceedings Act) 2004, have raised concerns about the prospects of a fair trial. Mr Maidment indicated he expected the federal Attorney-General, Philip Ruddock, to issue a certificate before Monday seeking that the bulk of proceedings be heard behind closed doors in the interests of national security. It could mean the evidence will never be made public.

Justice Anthony Whealy expressed several concerns yesterday, including the need to make very clear to any jury member that the security measures should not prejudice the accused. "My preference is, as a conservative traditionalist, that in a sense what should happen should happen in open court."

"I do think that I have to run this court … that's what's concerning me," he said. "I'm very happy that we're doing this in open court. I'm very happy about that."
Judge questions security blitz in terrorism trial

Snap, Crackle, Pop

US Secretary of State, Condoleezza Rice, went to Europe to sing "America the Beautiful", but gave the wrong rendition.

"This week the US Secretary of State, Condoleezza Rice, came to Europe to mend the rifts of the Iraq war, but found herself embroiled in a damaging dispute over the prisoner flights. As she left Washington, Rice made an extraordinary statement: both the first formal admission that the US flies suspects elsewhere for interrogation and a detailed defence of it. She said the practice enabled intelligence gathering "where the local government cannot detain or prosecute a suspect, and traditional extradition is not a good option".

In late 2003, Khaled el-Masri, a German of Lebanese background, was detained in Macedonia on suspicion of holding a false passport. His name also sounded like that of an al-Qaeda suspect. When the CIA learnt of his arrest, it persuaded the Macedonians to hand him over. He says masked agents flew him to Afghanistan, where he was beaten and held for five months in isolation in a freezing cell, while the CIA interrogated him.

Last year the United States freed Masri, saying there was no longer "evidence or intelligence to justify his continued detention". But before it did so, US officials told Schroeder's interior minister, Otto Schily, that they wanted to free Masri as quietly as possible. According to media reports that have not been denied, Schily and his government colleagues not only agreed, they refused Masri's lawyer any help in investigating the case. These revelations and others have provoked a storm of questions across Europe about the role of European governments in the US policy of "extraordinary rendition" - the abduction of terrorism suspects and their removal to countries where they can be interrogated outside the protection of US law.

It is believed that in the past four years the US has "rendered" about 150 suspects, mainly to Middle Eastern countries such as Egypt, Jordan and Syria. How many of these men have been tortured is unclear. Two who say they were are Canadian Maher Arar and Australian Mamdouh Habib.

Rice insisted the US was categorically opposed to torture and did not move suspects to countries "for the purpose of interrogation using torture". Where appropriate it sought assurances that suspects would not be tortured.

Rice's defence in effect sought to absolve the US of responsibility for what happens when a suspect is sent away, [The Washington Post] argued. Indeed, the national security adviser, Stephen Hadley, acknowledged this week he did not know how many transfers of suspects had been wrongly made. "The folks who are fighting the war on terror have a difficult job," he said. "Sometimes mistakes get made."

Mistakes such as the abduction of Muhammad Zery, perhaps. In December 2001 a CIA jet landed at Stockholm Airport and six hooded CIA agents stepped onto the tarmac. Inside an airport police station, they took charge of two alleged Islamic radicals from Egypt, Zery and Ahmed Agiza, said The Washington Post. They sliced off their clothes and searched inside their mouths and ears, before leading them in chains to the plane.

The men were flown to Egypt, where, they later told lawyers and Swedish diplomats, they were tortured. Agiza was charged with being a leader of Egyptian Islamic Jihad - an accusation his lawyers said was once true but had not been for many years - and convicted in a military court. He is serving a 15-year jail sentence. Zery was released in October 2003. Egyptian officials told the Swedish Government last year he was no longer under suspicion, though his lawyer says he remains under surveillance.

The case caused a furore in Sweden because the Government, believing the men to be a security threat, had co-operated in the kidnapping. The parliamentary investigator found that the CIA agents subjected the prisoners to "degrading and inhuman treatment". Sweden's security police deserved "extremely grave criticism" for losing control of the operation and for being "remarkably submissive" to the Americans. A parliamentary committee is due to open hearings into the expulsion.

The heat is on both sides of the Atlantic. Recently, the Republican Senator John McCain moved an amendment to a defence appropriations bill that sought to make the US Government ban on torture explicit and inescapable.

One casualty of the row could be ties between US and European intelligence services, which have strengthened in recent years after the divisions over Iraq. Nevertheless, Professor Paul Wilkinson, of the Centre for the Study of Terrorism and Political Violence at Scotland's St Andrew's University, thinks the EU must pursue the allegations. "Respect for the rule of law and human rights is an absolutely essential part of tackling terrorism," he says. "It is not a kind of luxury you can duck out of when you wish."

He believes opposition to torture and detention without legal process is not just moral but the way to win the war on terrorism. "If we don't show that we live up to the declarations and conventions that we proclaim we follow, then we are open to the charge of hypocrisy," he said.

"The battle of ideas may not be very dramatic or glamorous. But in my view it's essential if we are to prevent future generations of angry, alienated Muslim youth from being attracted to terrorist organisations"."
The nowhere men

"SO-CALLED renditions are not new. The US began using the policy in the 1980s, sometimes to seize Latin American drug lords who could not be extradited. In 1994 France seized the terrorist Carlos the Jackal from Sudan in a similar way.

In the mid-1990s the US began to apply the policy to Islamic terrorism, bringing the mastermind of the first World Trade Centre bombing, Ramzi Yousef, from Pakistan to the US.

In those days torture was not on the menu, and renditions were mainly extra-judicial extraditions. But the CIA didn't want terrorism suspects to enjoy the due process of the law. It didn't want to have to disclose secrets in US courts about its intelligence gathering, either.

Besides, it didn't always have enough evidence to convict. It needed to find countries where suspects could be interrogated but not tried under US law.

First it chose Egypt, then Morocco, Jordan and Syria - all countries that have been cited for human rights violations, including the use of torture.

After September 11, new imperatives drove US policy. National security trumped the niceties of international law. Vice-President Dick Cheney spoke of the need to "work through … the dark side".

An insight into the new thinking came from Cofer Black, then head of CIA counter-terrorism, who told a senate committee in 2002 that the arrest and detention of terrorists was "a very classified area … all you need to know is that there was a before 9/11 and … an after 9/11. After 9/11 the gloves came off". From there a straight line led to the legal memos, many of them written in the office of a White House counsel, Alberto Gonzales, that changed the definition of torture to enable a range of harsh interrogation methods to be used.

Serious doubts are now emerging about whether the approach works. Michael Scheuer, a former head of the CIA's Islamic militant unit who helped to devise the policy, said he hadn't considered "what would happen when it was found out we were turning them [terrorism suspects] over to governments that the human-rights world reviled."

Once detainees' rights had been violated, he said, "you absolutely can't" reinstate them into the court system. "You can't kill him either. All we've done is create a nightmare"."
Trials beyond the law

"The US Secretary of State, Condoleezza Rice, has indicated a shift in US policy on harsh interrogation of prisoners, saying a ban on US personnel subjecting prisoners to cruelty extended to Americans working overseas.

"As a matter of US policy, the United States's obligations under the CAT [Convention Against Torture], which prohibits cruel, inhumane and degrading treatment - those obligations extend to US personnel wherever they are, whether they are in the United States or outside of the United States," Dr Rice said yesterday.

The Bush Administration had previously said the ban on cruel, inhumane and degrading treatment did not apply to Americans working overseas.

In practice, that meant CIA employees could use methods in overseas prisons that would not be allowed in the US. Human rights organisations and critics in Europe have called that a loophole for treatment almost indistinguishable from torture.

The move is also an important concession in US domestic politics, where Senator John McCain, a Republican and a former prisoner of war who was mistreated in Vietnam, has pressed the Administration to close the loophole. The Vice-President, Dick Cheney, had resisted legislation proposed by Senator McCain that was widely backed in Congress.

Dr Rice's visit to Germany - the first stop of her four-day tour - had been billed as the start of a new era in relations but instead it was dominated by the trans-Atlantic row over the CIA's activities in Europe, and one case in which the CIA mistook a German citizen for a terrorist suspect and abducted him. A large part of Dr Rice's talks with Dr Merkel focused on the case of the German national Khaled el-Masri, who was flown by the CIA from the Balkans to Afghanistan, held for five months and released because he was the wrong man.

"I am happy to say that we spoke about the individual case, which the US Administration has accepted as a mistake," Dr Merkel said. However, US officials later bridled at Dr Merkel's comments. They said Dr Rice had informed Germany about Mr Masri's detention and release. "We are not quite sure what was in her head," one senior US official said, referring to the German Chancellor.

The row was a bad conclusion to a meeting that the US and Germany had hoped would usher in a new era of ties following the appalling relationship between Gerhard Schroeder, Dr Merkel's predecessor, and Mr Bush."
Rice rethinks US torture policy

Sham Sham[e] Sham[bles]

It's hard to assess whether Saddam is more evil than arrogant, or vise versa. The Herald's star reporter in the region, Paul McGeough, reports on the latest in Saddam's trial:
"THE witnesses come to recount harrowing days of torture and rape, of beatings and detention in grim desert camps. But Saddam Hussein is demanding a change of underwear.

The emotional cost of retelling stories that could only be whispered in days of dictatorship is all too painful, despite the electronic distortion of witnesses' voices to protect their identities; an overriding translation - laboured and monotone; and a 30-minute delay as their testimony is relayed to the world. But at times it seems to ebb away through procedural cracks, legal game-playing and political point-scoring before it might be captured and held for long enough to help us all grasp the brutal enormity of life in Iraq under Saddam.

Observers were stunned when Saddam leapt in. Seeming utterly deaf to the suffering of the witness's past, he demanded that the court investigate his present. "Does anyone ask Saddam Hussein whether he was tortured? Whether he was hit? I live in an iron cage covered by a tent under American democratic rule. You are supposed to come see my cage," he admonished Judge Rizgar Amin.

Threatening to boycott the court, he railed: "Are you deliberately hauling defendants before the trial when they are exhausted? We've spent three days in these shirts - no underwear, no chance to take a shower and no chance to smoke a cigarette if some do smoke, no chance to walk a couple of steps outside the small room. This is terrorism."

It's early days, but after the first five witnesses, the case for the prosecution over the death of 148 people from Dujail seems to lack direction. At the same time, the bones of a defence case are being revealed in cross-examination and interjections.

The prosecution does not seem to have come with what the the former CIA chief George Tenet might call a "slam dunk" case. The combined weight of the testimony is tragic beyond belief, but so far witnesses have directly linked only one of the defendants to the scenes of the crime - Saddam's half-brother, Barzan Ibrahim al-Tikriti.

After a traumatic account of torture and what sounded like rape, the judge asked the first woman witness - Witness A - if she could specifically blame any of the defendants. "No," she said, only that she held Saddam responsible because he was running the country. Each witness has been asked the same question and the half-brother was the only one named - twice.

The defence is also combining politics with legal arguments. After Witness A detailed the horror of Abu Ghraib, the defence suggested that the Americans were no different to the Saddam regime, with one lawyer saying: "I agree things in Abu Ghraib were, until recently, bad. But did they use dogs on you? Did they photograph you?"

She remained silent. He pushed: "Did they?" "No," she replied.

More broadly, the defence appears to be shaping an argument that, in 1982, Saddam was a leader at war with neighbouring Iran and that the Shiite people of Dujail were linked to Iran through the outlawed Dawa party."

Apparently it really does cost you brains

"MALE animals can produce a lot of sperm or grow big brains but cannot do both, according to a study that may confirm the suspicions of many women. Writing in Proceedings of the Royal Society, Biological Sciences, Scott Pitnick, of Syracuse University, New York, reported that species [of bats - as in Guambats] with promiscuous females had evolved extra large testicles but smaller brains."
Read all about it.

More "interesting" searches

The Stew came up on this search from a visitor today : "average gross yearly income christian comparison non-christian"

It's always interesting trying to guess where visitors are going with any particular line of inquiry.

Anyway, Welcome, Visitor! Pull up a chair and have a bite of Guambat Stew! (Easy to chew on but often difficult to swallow.)

Wednesday, December 07, 2005

Guam re-discovered (again)

Just ran acrosst this post from an Aussie's introduction to Guam. Haven't yet looked, but he seems to have further, more recent posts, too, mentioned in his sidebar.

Hafa adai, Simon

It was by the book

"KAREN BARLOW: Scott Parkin spent three months in Australia this year on a tourist visa, conducting peace workshops and taking part in anti-war protests as he travelled down the Pacific coastline.

Melbourne is where ASIO took interest and for reasons not made public, Scott Parkin had his visa cancelled, was arrested, put in immigration detention and later deported.

The Federal Attorney-General, Philip Ruddock, says the Inspector-General of Intelligence and Security, Ian Carnell, has vindicated ASIO's actions.

PHILIP RUDDOCK: He found in this particular case, that the security assessment was based on credible and reliable information, and the legislative requirements were met.

KAREN BARLOW: The substance of the security assessment, does that remain secret? Are we not to find out exactly what the allegations against Scott Parkin are?

PHILIP RUDDOCK: Well, security assessments are always confidential.

KAREN BARLOW: You have that discretion though. If you wanted to, you could release that information?

PHILIP RUDDOCK: Well, attorneys have never, in relation to these matters, confirmed or denied the details of intelligence information and the reason is that it's quite inappropriate and in the public interest for it not to be made public."

For more posts on this topic, type (or copy) ' scott parkin ' into the "Search this blog" window on the right side of this page (for Technorati) or on the NavBar along the very top (for Google BlogSearch).

Markets and the theory of relativity

Nobody likes to pay much attention to the bond markets. Nevermind that it is the biggest, most complex and most ubiquitous financial trade in the world. It is just so boring, arcane and, well, completely lacking in sex appeal. What really gets the heart throbbing, the pulse pumping and the business news journos jumping is stocks and real estate and art collectibles and the like. Not for them or your average day trader is the world of coupons and mere interest. Nope, the eyes of the investment crowd is on the high-octane world of equities where capital grows, ownership crows and money flows.

Which is rather odd when you really think it through, because the benchmark against which all else is ultimately valued is the boring old bond rate. It doesn't matter whether you're using the rocket science of the Black-Scholes nobel prize winning model for figuring out the value of options or the mundane model the Fed uses to value the stock market, the keystone is the risk-free proxy of the plane-jane bond rate.

The concept is simple enough, really: if, accounting for the risk, I can make more money with an investment option than the bond rate (the interest you get on your ownership of the bond), then I should pursue the riskier investment option. But if, accounting for the risk, the bond pays me the same or more, then I just shouldn't bother with the riskier investment and should content myself with loaning my money at the bond rate of interest.

Now, ALL corporations need money in some kind of financing form. This is because they can (theoretically) make more money from operating the business than from simply selling it and putting the proceeds in the bank; if they can get an additional $100 and earn $15 with that, it pays them to find some way to get that additional $100 at a cost up to something less than $15. They can either borrow it (and pay interest) or convince investors to give it to them. Businesses don't usually share their wealth-making enterprises, but they will do so if it is cheaper for them to do that than it is to borrow the money in the first place - or if that is their only viable option if the business is too risky for lenders to touch. Thus it is that, in the usual course of events, corporations clamor for capital from the markets rather than borrowings from the banks. It's all relative, you see.

When a corporation borrows money they are dealing with professional lenders, who are often regulated by central banks, and who take a great deal of effort to understand and protect against the risk of their loan. They expect a return OF their investment as well as a return ON their investment and security to boot. But that's all they expect. Equity investors have stars in their eyes and expect that, in spite of the unsecured risk, they will get all that and more; they're betting on capital growth, too, which doesn't cost the corporation anything out of pocket. So corporations can generally get their financing money from investors cheaper than from lenders because the investors are expecting the total growth rate to beat the bond rate.

So it says something about the state of affairs when a company determines that it is cheaper for them to borrow money than to convince investors to invest in them. It suggests investors may not be so easy with their money because the expected total return from capital is not as great as the return from bond interest. It suggests investors are unwilling to count on the expected growth. It suggests the cost of capital - and the value put on it - is too high.

The Herald's Alan Kohler tells us we are in one of those times when corporations are finding it more condusive to their own needs to borrow than go to the capital markets.

"ONE of the most powerful themes in global capital at the moment is called "de-equitisation", the shrinking of equity markets as companies return capital to shareholders and replace it with debt. In the 1980s it was called borrowing and brought many to grief by 1990; now it's de-equitisation.

The UK equity market has shrunk by 3.8 per cent this year. Across Europe, sharemarkets have contracted by 1.2 per cent. This is an astonishing turnaround for markets that grew by 5 to 10 per cent a year for two decades during the 1980s and 1990s. In the US the size of the equity market has been flat this year after a decade of averaging 5 per cent annual growth. The capitalisation of the Australian sharemarket has grown 14 per cent this year, down from 20 per cent growth last year....

The global shift from equity to debt is caused by the simple fact that their relative costs have undergone a dramatic reversal. Bond yields and [shares] earnings yields have essentially switched over the past five years - broadly speaking, from 7 per cent and 5 per cent, to 5 per cent and 7 per cent. At the same time, corporations have found themselves with the strongest balance sheets for a decade and well able to justify more debt. The case to de-equitise has been compelling.
I have been in the camp, along with the likes of John Bollinger and Richard Arms (well, not in the same camp as those gifted ones, but lets just say I find what they say more valuable than what others may suggest, and if I were to find myself in their camp I'd surely be the camp cook's kitchen slave), who believe that, at least in the US, the stock markets are in a cyclical consolidation phase that will last several more years before another major bull market asserts itself.

But I've been uneasy with that because, at its base, it is a conclusion arrived at by looking at the average lenghts of bull and bear cycles over the last 100 years and is nothing more than reliance on a continuation of that pattern. What Kohler's column does for me is provide some fundamental underpinning to that belief. It suggests a reason to expect the markets to continue to consolidate. It suggests to me that we cannot even think about a new bull run until relative equity to bond values revert to the equity-favoured relationship over bonds, and in the course of things, I'd expect that to take a while to develop and thrash out.

Kohler hints that relativity of bonds and equities in Australia may not be so divergent because of somewhat unique characteristics of the equity market here, which, apart from risk premium, give equity investors near parity of return as bond investors. He points out:
"Australia has a couple of extra wrinkles to the global theme: much higher dividend payout ratios than elsewhere, plus an obsession with "capital management" among investment funds, which is code for giving capital back to them.

Compulsory superannuation in this country has created a glut of capital - a torrent of cash looking for double-digit investment returns. Yet the one constant in investor presentations in Australia these days is capital management: managers of all listed companies are under enormous and constant pressure to give back capital.

Most of them succumb, no matter what their own ambitions for investing the capital might be, because their salaries are tied to sharemarket value (or rather "total shareholder return") and they can't afford a collapse in the share price because they might get sacked and find that the short-term bonuses with which they depart are not what they would like.

Capital management is the fastest way for a chief executive to get a share price up and keep investors happy; investing the capital in the business to make money over the long term - which is what he or she is there for - is more risky and less likely to result in a short term kick in the share price.

Why are Australian funds so obsessed with capital management? I've been asking fund managers this and apart from the constant pressure on them for short-term performance - which they pass on to those running the companies - there is a deep, lingering distrust of corporate empire-building.

There's nothing especially new about this but you might have thought the huge successes of Australian companies expanding offshore over the past five years would have wiped out the bad taste of the bumbling adventurism of the past. Companies like CSL, Computershare, Macquarie Bank, BHP Billiton, Ansell, Cochlear and so on have created a completely new paradigm for global expansion by Australian businesses.

The other Australian wrinkle to the global theme of de-equitisation is the high dividend payout ratio in this country. AMP's Shane Oliver highlighted this recently when he showed that Australia's average payout ratio (dividend as a percentage of earnings) is 64 per cent, compared to a global average of 39 per cent and even less in the US (34 per cent) and Japan (31 per cent).

Oliver says that of the 12.4 per cent average annual return from Australian shares in the 105 years since 1900, just over half has been due to dividends, providing a stable anchor for investment returns. He used the stats to argue that high dividends tend to produce better company returns because they indicate that the reported earnings are real - that is, they have actual cash flow backing them, which Oliver says is especially relevant after Enron and HIH etc.

In their hearts, institutional investors like Shane Oliver's employer no doubt think the cash is better in their hands than in those of overpaid, over-ambitious CEOs. The trouble is that this is forcing managers to take on more debt. The global trend towards "de-equitisation" we are now seeing has haunting echoes of the great gearing up of the world's balance sheets that occurred during the 1980s, driven by Kohlberg Kravis Roberts, Michael Milken, Alan Bond, Christopher Skase and the rest.

That whooshing sound you can hear is the debt-to-equity pendulum swinging past."
Franking credits on dividends and tax-free return of capital arrangements in Australia tend to give equity investors here an advantage over equity investors elsewhere, but even so, if the large Australian corporations, most of whom have overseas connections making them part of the wider global markets, can borrow cheaper than their cost of capital, the Australian share market will not be immune from the swinging pendulum of relative debt-equity values.

Time to re-arrange the deck chairs

The Chartered Secretaries Australia is reported to have conducted a survey which has discovered the big end of town is finding it necessary to tinker with the compensation packages.

"SHAREHOLDERS' increasing propensity to vote against increases in corporate remuneration has changed the way Australia's top companies approach their payments to directors, a survey has found. Polling of the top 200 companies revealed almost 90 per cent of them would be concerned if 20 per cent of their shareholders voted against the remuneration report, the Chartered Secretaries Australia research found.

The non-binding vote, based on the UK model, was introduced this year, and while companies are not forced to change their remuneration, they are listening to what their shareholders have to tell them.

"It has been the issue for the 2005 AGM season," Melbourne University's Professor of Commercial Law, Ian Ramsay, said. "Companies are clearly sensitive to this issue. We've seen a number of companies rethink their remuneration - obviously sometimes after the vote - and we've also seen companies amend their remuneration plans before the AGM by informal polling of institutional shareholders." A significant protest vote against remuneration was very embarrassing for a company, Professor Ramsay said.

Investa's managing director, Chris O'Donnell, said his company was surprised by the high vote against its report and said changes had been introduced to ensure it did not occur again.

"It highlighted there was some difference between our view and the investment community and we will work with them to adjust the remuneration structure, so we are more in keeping with what the investors are looking for," he said. Investa did not change its 2005 remuneration...."

Read all about it.


Dozer, that is. John "Bulldozer" Howard and his unchecked power. The Guambat has previously pointed out the almost undemocratic lack of checks and balances in the Australian governmental framework. and and

At the heart of the matter is the failure to provide for a separation of the executive from the legislative functions. And if you scratch the surface of any Malcolm Turnbull-style republican who will do absolutely anything to avoid a popular election of the Executive, you will understand why they are so nervous about having to share power with a properly independendent legislature.

Today, the Herald's editorial, "Surrender of the Senate" bemoans this situation, but not in so many words or so generally, just in this one result, but it is an event that will last from time to time throughout the rest of the history of Australian until the fundamental defect of the one-legged stool is changed:
"If voters had wanted the Senate to expose to genuine scrutiny the towers of legislation being lined up for the end-of-year dash, they would have ensured the Senate retained more than a semblance of independence from the executive, instead of allowing even that pretence to evaporate. Wouldn't they?

[John Howard] has the authority to sell the rest of Telstra and to sweep away a century of industrial relations practices, to screw down welfare and to diminish liberty in the name of defending it. And the Government has still got a dozen or so bills it wants crunched through in the next couple of days. Why the rush? Because the Government can.

Chris Ellison, the manager of government business in the Senate, last week tried to pass off the shutting down of debate as a necessary response to the obstructionism of the Labor Party and others. "This is an occasion where we have to put in place a reform for which this Government has been elected, and we have had an extensive second reading debate," he said of the dash on industrial relations. Wrong on both counts, Senator Ellison. There was no voters' mandate and there was certainly nothing extensive about the Senate debate.

WorkChoices cost $131 million to draft and implement, yet the Government had to move 337 amendments, which were given to non-government senators half an hour before the debate began. The legislation runs to 700 pages, and nearly as many again in explanatory notes. To the average reader it is impenetrable, but its impact will be vast and broad. Yet consideration was squeezed into a cursory five-day committee inquiry and five days of Senate debate. And that is just a taste of the Government's new-found zeal to get on with the job."

Seeing red

Arizona is a red state. Michael Gawenda, Heraldc orrespondent, reports from Tucson:
"We are in Republican country, the home of the late Barry Goldwater, beaten in a landslide by Lyndon Johnson in the 1964 presidential election, but the godfather of the new conservatism that was to sweep Ronald Reagan to power in 1980 and to which President George Bush swore allegiance.

Mr Bush carried Arizona easily in 2000 and again in 2004, though out here in the south-west Republican ideology is based on a deep distrust of Washington, a commitment to small government (which means cutting most government programs), tax cuts and the free market. But throughout the state, there is now an almost universal dislike and distrust of George Bush. There is a sense that America is not what it used to be, that Mr Bush has become just another Washington big spender and that Iraq has become his Vietnam.

There are people like Kate Polly, who works in a hotel in Phoenix and who voted for Mr Bush but no longer trusts him, who thinks America is in decline and that the Federal Government has been captured by lobbyists and moneymen and that everything is now about money. "We are hated everywhere," she says. "We are spending all this money and blood in Iraq and they despise us. And Bush couldn't even get it together to help the victims of Katrina, our own people."

There is perhaps one generalisation that can be made about Americans: they want to be liked and their country to be liked. They want the US to be seen as a force for the good, and almost everyone in Arizona is angry that Bush, in their view, has allowed the US to be seen as a bully that wants to dominate the world."
Read all about it.

Having a bob each way

The Herald reports on the most amazing duplicity of the Australian government's involvement, via the AWB as previously reported, during Saddam's Iraq pre-invasion times:
"THE Australian Navy took command of the economic sanctions blockade against Saddam Hussein's Iraq at the same time Australia's wheat exporter, AWB, was increasing its illicit payments to the dictator's regime.

In January 2002 the Minister for Defence, Robert Hill, announced that Australia had taken command of the multinational force in the Persian Gulf under Captain Allan Du Toi. Three Australian navy vessels, including HMAS Kanimbla, Adelaide and Sydney joined the force aimed at preventing Saddam defying the United Nations-imposed economic blockage.

But while Australia funded the naval operation, the Volcker report on the UN oil-for-food scandal revealed that AWB agreed to increase hugely the trucking fees to transport its wheat inside Iraq. The fees on Australia's $1 billion wheat exports to Iraq were being syphoned off to the regime in violation of the sanctions.

The trucking fees were raised from $US10-$US12 a tonne to more than $US50 by mid-2002. Former AWB officials told the Herald this week that the hefty price rise would have rung alarm bells inside the AWB."

Read all about it.

When old Guambat first heard about the story, he said, "I've had a wee bit of experience in shipping commodities in bulk, and that small portal on the industry taught me that, generally, most shippers, especially the large ones, know every cent involved in the transport of the product and how it is justified and do a major job heavying the carriers to get costs down. But I have no knowledge of AWB or how it has operated and cast no aspersions, implicitly or explicitly." But that old Guambat is an ass-covering bootlick and what would he know, anyway?

Of Saipan, Abramoff and Jews for Jesus

This could be classified as "Further to last post". And I have to tip that Super-Hip Grandma retired to Washington for pointing out that not all Jews are Anti-Christs. In addition to disclosing The Burgeoning Alliance Between Leftists and Islamists, she tells us
"Rabbi Daniel Lapin of Toward Tradition -- a nonprofit group promoting Judeo-Christian values -- is voicing concern about the growing hatred and intolerance against Christians across society. "If you think anti-Semitism is an evil in this world," he says, "then fairness requires that we also admit that there is another parallel evil in this world, and that's called anti-Christianism." Rabbi Lapin is part of a group known as Jews Against Anti-Christian Defamation, which believes Jews should stand by and support Christians who have been their allies since the Second World War. Lapin agrees with a man he calls "one of the great rabbinic leaders of the 20th century, Rabbi Weinberg," that society is "entering an era where anti-Christianism will be a bigger threat to Jews than anti-Semitism"."

My Rove-ing eye drifted to Google to find out more about Rabbi Lapin. This NY Times article quoted in the Jewishwhistleblower blog came up:
"The government of a United States territory in the Pacific said Thursday that it had been unable to determine what work was performed for a $1.2 million contract awarded to a close associate of a Washington lobbyist at the center of a growing corruption scandal here.

The no-bid contract to promote "ethics in government" was awarded in 1996 to David Lapin, a rabbi whom the lobbyist, Jack Abramoff, later hired to run a private Jewish school, now defunct, near Washington. The contract was one of several totaling about $9 million given to Mr. Abramoff and his associates that have provoked questions about the lobbyist's activities in the Commonwealth of the Northern Mariana Islands.

Those activities included a 1998 trip arranged for Representative Tom DeLay, the House majority leader, who is facing ethics questions about his relationship with Mr. Abramoff. Democrats in Congress have also said that two of Mr. DeLay's former staff members improperly influenced island elections in part to assure that Mr. Abramoff continued to win contracts there.

Mr. Lapin's brother, Daniel, a Seattle rabbi who has long promoted conservative causes in Washington, introduced Mr. DeLay and Mr. Abramoff, the lobbyist said, shortly before Republicans gained control of Congress in 1994.

In audits in late 2001, the Marianas government said that it had overpaid for eight years of lobbying contracts with Mr. Abramoff, that he had been paid without a contract in some cases and that it had been difficult to justify his hiring based on his work.

The investigations of Mr. Abramoff in Congress and by a federal grand jury in Washington have looked into accusations of fraud in his dealings with Indian tribes, but two weeks ago, the ranking Democrat on the Congressional committee that oversees the islands demanded that the investigation be expanded to include his work in the Northern Marianas.

The islands, an American commonwealth with a large garment industry that employs mostly Chinese laborers, hired Mr. Abramoff in 1994 to help its government fend off legislation imposing American standards on wages and working conditions. The contract was awarded by Gov. Froilan Tenorio, under fire from the Clinton administration for what it labeled the islands' exploitive labor practices.

The audit, conducted after Mr. Tenorio left office, found that the islands had paid $9.5 million to lobbyists, most of it, $6.7 million, to Preston Gates & Ellis, the lobbying firm where Mr. Abramoff then worked, and $500,000 to the firm Greenberg Traurig for eight months in 2001 after Mr. Abramoff moved there.

In addition, Mr. Abramoff had lobbying contracts with the textile industry trade group there. Supportive columnists with The Saipan Tribune, owned by the owner of the largest garment business in the commonwealth, have said he is a star in Washington because of his prowess in deflecting Congressional efforts to tighten labor laws.

Mr. Abramoff's biggest year, according to the audit, was 1997, when Preston Gates earned $3.1 million from the commonwealth. Around that time, the commonwealth hired David Lapin. The Lapin brothers are from South Africa and met Mr. Abramoff on one of his trips there. Mr. Abramoff later helped Daniel Lapin found Toward Tradition, a Seattle group that describes itself as working "against anti-religion bigotry," and remains a board member.

In a 2002 interview with The New York Times, Mr. Abramoff said he first met Mr. DeLay through Daniel Lapin, who would meet frequently with members of Congress to press conservative causes.

Pam Brown, the attorney general for the Marianas, said Thursday that the government had been unable to determine what work David Lapin had done.

"We haven't been able to figure out what the deliverables were," Ms. Brown said. "He was tasked with providing some sort of ethical parameters for government work. That's all I know at this point. We're more amazed at the cost."

A woman answering the phone at Strategic Business Ethics in California, where Mr. Lapin is chief executive, said Mr. Lapin could not be reached for comment because of the Passover holidays.

Mr. DeLay, whose foreign travel arranged by lobbyists has drawn criticism in Congress for possible ethics violations, visited the Marianas in 1998 with his wife and daughter and three aides. Upon his return, he declared dead a bill that Democrats had hoped to pass raising wages and controlling immigration in the Marianas.

In 1999, Mr. DeLay's former chief of staff, Edwin Buckham, and his former spokesman, Michael Scanlon, both of whom later worked with Mr. Abramoff in his lobbying firm, visited the islands to persuade two local lawmakers to change their votes for speaker of the islands' House of Representatives. The DeLay associates wanted the two legislators to support the candidate of the garment industry, Ben Fitial, who was close to Mr. Abramoff, and promised that federal contracts to the islands would follow if they did.

Mr. Buckham later represented Enron in its bid to build an energy plant in the Northern Marianas, and when Enron lost to a Japanese concern, Mr. DeLay worked to get the bidding reopened.

"For years, Mr. Abramoff lobbied to protect a Marianas industry that exploited tens of thousands of women workers, many of whom were channeled into the island sex trade," said Representative George Miller, the California Democrat who called for the investigation of Mr. Abramoff's work in the Marianas.

He noted the audits and added that newspapers on the islands had reported this week that Mr. Fitial admitted he had won the speakership because of the work by Mr. DeLay's associates. "Given the evidence in the public reports, it's long past time for Congress to investigate allegations of undue influence and corruption," Mr. Miller said."
Now, I just know that I, too, am going to be tarred as an anit-christ. Heaven knows I've ranted not quite enough about the encroachment of the Christian evangelists. But I would hope those more discerning would take note that I have never once suggested the suppression or oppression of any religious group. My beef has always been the encroachment of any fundamentalist or other religion on the civil affairs; on the shrinking of the doctrine of separation of church and state; on the theocratisation of the state; on the notion that America has a state religion in christianity; on the notion that if you are not a christian you are a second-class person, let alone citizen. But I suppose that's all you need to say to be branded anti-christ these days.

Tuesday, December 06, 2005

In Christ we're thrust

"Washington is a town where the best and the brightest usually coexist with well-connected political hacks. However, the Bush administration has taken promotion of the latter to embarrassing extremes, selecting unqualified people for posts because of their political loyalty and ideological persuasion. The most recent example of this was the appointment of Paul Bonicelli to be deputy director of the United States Agency for International Development (USAID), which is in charge of all programs to promote democracy and good governance overseas.

Like [FEMA's Michael] Brown and [Supreme Court Justice nominee Harriet] Miers, Bonicelli has little experience in the field he has been tapped to supervise. The closest he comes to democracy-promotion or good governance is having worked as a staffer for the Republican Party in the International Relations Committee of the House of Representatives.

More significant to the administration, perhaps, is the fact that Bonicelli is dean of academic affairs at tiny Patrick Henry College in rural Virginia. The fundamentalist institution's motto is "For Christ and Liberty." It requires that all of its 300 students sign a 10-part "statement of faith" declaring, among other things, that they believe "Jesus Christ, born of a virgin, is God come in the flesh;" that "Jesus Christ literally rose bodily from the dead"; and that hell is a place where "all who die outside of Christ shall be confined in conscious torment for eternity."

Faculty members, too, must sign a pledge stating they share a generally literalist belief in the Bible. Revealingly, only biology and theology teachers are required to hold a literal view specifically of the Bible's six-day creation story. Bonicelli has stated, "I think the most important thing is our academic excellence, [and the fact that we] combine it with a serious statement about our faith and values ... I believe in six literal days, but I remain open to someone persuading me otherwise."

Patrick Henry was founded in 2000 for home-schooled students. Among the fundamentalist community, home-schooling is seen as a way to promote Christian values as an alternative to what is regarded as an increasingly secular and irreligious culture prevalent in public schools. The college says it aims to "prepare Christian men and women who will lead our nation and shape our culture with timeless biblical values and fidelity to the spirit of the American founding." It seeks "to aid in the transformation of American society by training Christian students to serve God and mankind with a passion for righteousness, justice and mercy, through careers of public service and cultural influence."

Though Bonicelli has scant credentials for his new post, he and his institution enjoy close ties to the Bush administration and to fundamentalist religious groups that form such a critical part of the president's base. Many Patrick Henry students have been chosen to serve as interns working for White House political adviser Karl Rove, for the White House Office of Public Liaison, and for Republican members of the House and Senate. "Most students' values don't link up with [those of] the Democrats," Bonicelli says.

In 2002, Bush appointed Bonicelli, along with former Vatican adviser John Klink and Janice Crouse of the ultra-conservative Concerned Women for America, to an American delegation attending a United Nations children's conference, where they sought to promote biblical values in U.S. foreign policy. This sparked angry protests from groups advocating women's rights and the separation of church and state.

One can only wonder how Muslims, the target audience for these USAID programs, will react to the view that "all who die outside of Christ shall be confined in conscious torment for eternity"."

For more of William Fisher's opinions, see

"On Nov. 3, Abraham Foxman gave a speech to an ADL meeting, calling attacks on church-state separation the "key domestic challenge to the American Jewish community and to our democratic values." "[T]oday we face a better financed, more sophisticated, coordinated, unified, energized, and organized coalition of groups in opposition to our policy positions on church-state separation than ever before," he said. "Their goal is to implement their Christian worldview. To Christianize America. To save us!" Among the major players in this campaign, Foxman listed Focus on the Family, the Alliance Defense Fund, the American Family Association and the Family Research Council.

"We are particularly offended by the suggestion that the opposite of the religious right is the voice of atheism," [Rabbi Eric Yoffie] told his audience. "We are appalled when 'people of faith' is used in such a way that it excludes us, as well as most Jews, Catholics and Muslims. What could be more bigoted than to claim that you have a monopoly on God and that anyone who disagrees with you is not a person of faith?"

Christian Zionism, inspired by end-times beliefs that make the return of Jews to Israel a precondition for the second coming, has made American evangelicals the world's staunchest backers of Israeli hawks. (Their Jewish allies usually choose to ignore the fact that the Christian Zionist's apocalyptic scenario ends with unsaved Jews being slaughtered and condemned to hell.) But while evangelicals support Israel for their own eschatological reasons, there have been threats, implicit and explicit, that such support might weaken if Jews oppose their domestic agenda too aggressively. Indeed, in response to Foxman's speech, Tom Minnery, vice president of government and public policy at Focus on the Family, told the Forward, "If you keep bullying your friends, pretty soon you won't have any.'" (Neither he nor anyone else from Focus on the Family returned a call for comment from Salon.)

Meanwhile, secular Europe treats Israel like a pariah. "And who are the only ones who are coming out and standing with Israel? The evangelical Christians," Eckstein says. Eckstein acknowledges Foxman's fear about the erosion of church-state separation, but thinks any danger posed by the American religious right pales beside the threats to Israel. "Jews need to always be on guard for their survival as Jews, and for their rights as Jews here in America, but I don't believe that those rights are threatened to the point that Jewish leaders like Abe Foxman should try to galvanize the Jewish community and start a battle with a constituency that includes the president of the United States, and that includes such a large part of the Republican Party and such a large part of America," he says. "I don't think it's reached that point that Jews should be alienating their greatest friends in the real battle of Jewish survival."

When I spoke to Eckstein, he had just gotten off the phone with someone from Focus on the Family. Christian leaders, he said, feel hurt and victimized by Foxman's speech. And he feared what might result: "Rhetoric can create an anti-Jewish feeling among good Bible-believing Christians," he says. "Certainly in the evangelical world they're very focused on their leadership. It's very different than the Jewish community -- most of the Jewish community doesn't care what Abe Foxman says. If their pastor says that black is white and white is black, well, the pastor said so. If leaders themselves start to say it's the Jews who are preventing us from having a moral society in America … that's what we saw in history."

Jews in America aren't endangered, but the power of the religious right has clearly reached a point where a great many feel exceedingly nervous. The fear is not of pogroms or outright discrimination; rather, it's of the disappearance of the secular civic culture that allowed Jews to feel like full citizens of America rather than a tolerated minority.

Throughout the last decade, the Anti-Defamation League and other Jewish groups had reached a kind of accommodation with the religious right that was based in part on Christian leaders toning down their more theocratic rhetoric. In 1995, Ralph Reed, then the executive director of the Christian Coalition, addressed the ADL and apologetically acknowledged that much of his movement's language alarmed Jews. "This is true not only of the blatant wrongs of a few -- those who claimed that 'God does not hear the prayers of Jews,' those who said that this is a 'Christian nation,' suggesting that others may not be welcome, and those who say that the only prayers uttered in public school should be Christian prayers. It is also true because of the thoughtless lapses of many -- the use of religious-military metaphors, a false and patronizing philo-Semitism, and the belief that being pro-Israel somehow answers for all other insensitivity to Jewish concerns."

Such sensitivity has virtually vanished from today's religious right, replaced with a triumphalist religious nationalism. Foxman was especially alarmed by the situation at the Air Force Academy in Colorado Springs, Colo., where, according to numerous reports, a climate of outright religious bigotry prevailed. Some faculty members introduced themselves to their classes as born-again Christians and encouraged their charges to convert. Upperclassmen exerted similar pressure on undergraduates; one Jewish cadet was slurred as a Christ killer. Several cadets have filed a lawsuit.

Even more disturbing to Foxman than the abuses themselves was the religious right's response when they came to light. Few were apologetic -- instead, they declared themselves the victims. When Democratic Rep. David Obey offered an amendment to a defense appropriations bill calling for an investigation into the situation at the academy, Republican John Hostettler stood up and said, "The long war on Christianity in America continues today on the floor of the House of Representatives."

When the Air Force adopted guidelines intended to remedy the situation, the religious right reacted furiously. The guidelines didn't prevent senior officers from proselytizing to those under their authority, though they did urge them to be "sensitive." They also called for public prayers to be non-sectarian. Christian conservative leaders interpreted this as an assault, and 70 congressmen joined movement representatives in signing a letter to President Bush decrying the guidelines and asking him to issue an executive order protecting "the constitutional right of military chaplains to pray according to their faith."

"There is an arrogance in their efforts to pull every institution toward Christianity," says Foxman. "It's a concerted effort to use government to achieve that which religion should achieve in the open marketplace." The more theocratic elements of the religious right -- elements Reed tried to marginalize, at least in public -- have now taken center stage. A decade ago, Foxman says, the drive to Christianize America "wasn't in the open, it wasn't as blatant, it wasn't as aggressive."

As Foxman said in his speech, "Make no mistake: We are facing an emerging Christian right leadership that intends to 'Christianize' all aspects of American life, from the halls of government to the libraries, to the movies, to recording studios, to the playing fields and local rooms of professional collegiate and amateur sport, from the military to SpongeBob SquarePants."

Given this onslaught, Jews can't simply cede their place in America in exchange for support for Israel. Speaking of those who caution him not to disturb the Jewish-evangelical alliance, Foxman says, "If we cannot disagree, what kind of a friendship is it?""
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Monday, December 05, 2005

Oh, thank haven

"AN ESTIMATED $5 billion is moved out of Australia each year to tax havens around the world, according to Deputy Commissioner of Taxation Paul Duffus. Claiming that the Commonwealth was being defrauded of about $300 million in revenue each year, the Tax Office, along with the Australian Crime Commission and the Australian Federal Police, have commenced a major investigation of the use of offshore tax havens for money laundering and tax evasion."

"The Tax Office abandoned its serious claim of "tax evasion" against Gerard Industries and ultimately levied no penalties, despite its investigators finding that the company's elaborate tax haven insurance dealings were a "sham" designed to evade tax.

Revealing details of his family company's confidential tax settlement for the first time, the [recently and now resigned] Reserve Bank board member Robert Gerard said through his barrister yesterday that he had paid "just over" $75 million to settle unpaid taxes and interest - but none of the onerous penalties that apply for tax fraud or evasion.

The Tax Office's report from a 12-year audit found that Mr Gerard had, as a director of Gerard Industries, jointly established a company called FAI Insurances NV in the Netherlands Antilles and claimed deductions for millions of dollars of premiums paid to that company. It also found Mr Gerard and his co-director, Bill Henderson, made false statements and misled investigators by denying their links to the "artificial" company.

The settlement, agreed in late 2002 but not finalised until a year later, closely followed a letter from Mr Gerard to the then federal attorney-general, Daryl Williams, urging him to "urgently intervene" because he was getting a "hard time" from the Tax Office. The letter, dated October 18, 2002, was promptly passed to the Tax Commissioner, Michael Carmody.

Tax professionals yesterday expressed surprise at the gap between the Tax Office's harsh findings in this case and the lack of any punishment. This was contrasted with the case of a 36-year-old mother of three who last year was sentenced to three years' jail for submitting false business activity statements and avoiding $85,000 in tax."
[In olden times, companies tended to be taxed where they had their biggest presence, which was usually where they had their production facilities or most of their workers. Today, though, they exist in some electronic file on a computer on a tiny rock somewhere surrounded by water -- and secrecy. Now, let me get one thing straight. Guam is most definitely not a tax haven; it's tax code is a copy of the US tax code. So there is nothing untoward in that respect from my planned relocation back there. There have been efforts to create some financial activities there but it just is not in the "offshore" league of islands. These so-called havens are mere legal artifices concocted by huge money interests, legitimate and illegitimate, to hide earnings, avoid tax payments and stay under the radar screens of the business press and regulatory agencies. These havens have no natural resources to sustain them and live off the greed of the great and mighty who are not inclined to share their profits with the countries which host their profit-making enterprises.]

"The Cayman Islands is the fifth largest financial center in the world. It is where deals are made and large amounts of capital are banked overnight. It is fully in the international financial system.

Caymans 97 [is] a holding company for BP - the world's second largest oil producer. Now, this company holds controlling ownership in Cayman of many of BP's worldwide operations. It serves a variety of useful purposes for BP, the most useful being the pooling together in one place of a massive portion of the income and assets of the entire BP group. The goal is to fill the holding company pool to the brim with revenue and then keep that money in play and wash it back through the company - untaxed - only landing it onshore in the U.S. or UK when tax rates have been engineered through the company's offshore network to be the most advantageous.

Secrecy is at the heart of the process I've just described - it's central to the way corporations move their money around to avoid and evade the scrutiny of regulators and governments. BP - and any multinational you care to mention - all operate in the same way. Most will be public companies and so theoretically transparent - but behind the scenes will be these networks of offshore subsidiaries that no one knows about - and if you do discover them like Caymans 97 - offshore secrecy structures prevent governments and the public from seeing what they really do, which is essentially engineering their income so as to pay as little tax as possible.

Enron had 692 subsidiaries incorporated in Cayman before it went bankrupt. It had about 200 other offshore companies in other tax havens around the world. Its offshore network was set up with the prime intention of avoiding tax in any country where it operated - the company even had a special unit working out the best offshore transactions for tax purposes. It was that kind of set up which made profits for Enron of nearly $2 billion between 1996 and 2000 - while the company only paid $17 million in tax. And it was that kind of aggressive offshore setup that allowed Enron to grow and expand in the 1990s and become the global multinational it so aspired to be.

But of course there was another offshore side to Enron which says a lot about how corporations use offshore setups these days. This is "corporate financialization" - and what that means is the way that multinationals now engage in very complex trading on the world's markets using derivatives and other financial instruments to hedge loans, do deals and swaps, convert currencies, buy contracts and so on. No longer do companies just make their product and sell it - they have become banks and finance companies as well - and offshore subsidiaries and entities are absolutely critical to that, because they specifically allow companies to get around various laws in the countries where they operate to get the offshore advantage with a particular type of deal or contract they have in mind. Tax figures too in this advantage, but so do issues of secrecy, where, for example, a company might not want some loan to show up in its public accounts. And as we see at the moment - just think AIG and its reinsurance subsidiaries in Bermuda - this covering up of liabilities offshore is all too common.

The offshore world of tax havens and financial centers knows no national boundaries and differences when it comes to corporations and money. To the offshore tax haven, corporations and capital are all the same, wherever they come from, and new tricks can be pulled out of the offshore box to give them that extra advantage. The main thing is the legal and financial expertise that resides in any given tax haven. At the top end you will have the best offshore lawyers and accountants in the world as well as a few dregs, and at the bottom you will have just the dregs.

Look at Cayman: side by side, you have U.S. hedge funds - it's where Bayou Management, the most recent casualty in that industry, was incorporated; Japanese credit card companies setting up structured finance deals offshore that they couldn't do at home; Britain's BP with its offshore income pools; and of course it's where all the offshore cards in Parmalat's hand where based.

It's offshore where the real world of international finance and business exists - and it's all hidden away under a cloak of secrecy, transfer pricing and tax dodging. The global economy that knows no boundaries or borders - the kind of economy constantly talked up by neoliberals and free-marketeers - does exist, just not where they say it does. Instead, it's offshore, where capital and corporations that know no national borders are owned and controlled by the world's wealthy ultimately for their benefit.

There was a lawyer named Bill Walker who came to Cayman in 1963 from Guyana. At the time, there were cows wondering through George Town, and only one bank and only one paved road, and no telephones.

He had experience in the Bahamas, which had been the hottest offshore tax haven in the Caribbean up until Cayman came along. And Cayman was ripe for turning into a tax haven. It had the same legal foundations - English law, and specifically English company law, a very primitive and straightforward company law which held that corporations did not pay taxes. Companies just didn't pay tax in the 185Os when this law was set up.

There were other factors as well that were very instrumental in turning Cayman into a fully fledged tax haven. They needed a technological infrastructure. It gained an international phone system in the mid-1960s. They built an airport as well.

It is a dependent territory. There is a governor who is appointed essentially by the United Kingdom. He is a representative of the British Crown in the Cayman Islands. Their political system is developing all the time. They are now beginning to have political parties.

To a certain extent, our modern world is offshore. Things arenot fixed or attached to the nation-state. Increasingly, people and companies are not fixed to the ground as they would have been perhaps just 50 years ago, or even more recently.

That's not saying that the nation-state has disappeared. But its function has probably moved on and has less of a hold over more of the day-to-day aspects of people's lives.

In economic terms, there are two key factors at play here. First, offshore tax havens have contributed to the global growth of corporations - corporations that have subsidiaries and holding companies across the world. And second, offshore centers have had an enormous impact on the global financial system.

If you look back at the 1970s, tax rates in the UK were in the 90 percent range. Capital was controlled by the nation state. These offshore tax havens put an enormous amount of pressure on domestic banking systems to deregulate and liberalize. The onshore nation- state world had to become offshore. It had to loosen up, deregulate and liberalize. They had to get rid of that basic connection between people and their nations.

And that's what has largely happened. We now live in an offshore world - an economically free market world that has paradoxically been opened up through these secretive offshore entities.

This is the dark side to that mobility, to that movement, to that fast exchange across the world. And that dark side can be one where crime, fraud and money laundering can be largely protected in secret by the very instruments that were the cause of opening up the economy in the first place.

This is the big, historical picture of what happened: In short, the neoliberal revolution that swept through Britain and the U.S. in the 1980s was the moment that international financial capital - which had until then been kept in offshore tax havens - came onshore to remake the state in its own image. Over the course of the next two decades, offshore capital - and the corporations that depended on it to expand - asserted their dominance over sovereign national economies. Old style nation-state capitalism was replaced by a new phenomenon: I call it offshore capitalism.

Getting into more detail, my belief is that both factors that make up economic globalization today - the global financial market and the global corporation - owe their origin directly to offshore tax havens. Let's start with the huge expansion of American corporations across the world from the 1950s. These corporations - Procter & Gamble, DuPont, IBM would not have become the massive, integrated organizations they are today without the direct involvement of tax havens. Tax havens allowed these huge companies to retain their profits and so allowed them to expand exponentially across Europe and elsewhere. Without tax havens, and without a little help from the federal government in the form of tax credits and rebates, U.S. corporations would have found it too expensive and time-consuming to internationalize.

But the multinationals would not have been able to gain such dominance without the freeing up of capital in the world's economies. For this to happen there needed to be a single, global financial market that integrated national economies across the world. Certainly, opening up national economies to international capital was what neoliberal politicians did - but they were only responding to the pressure that offshore tax havens were already putting on states to internationalize their economies. Onshore banks and monetary authorities tried desperately in the 1970s to control and regulate the new international capital markets that were based offshore. But it was an unequal struggle, and onshore nation-states eventually repealed their own regulations and let offshore capital come onshore. The rest is history, as they say.

The point about the offshore world is that it is extremely useful for corporations. And therefore it is not something that western industrial nations are in the end going to crack down on.

Corporations need these offshore financial centers to function. That is the situation today.

Of course, now and again there are huge scandals. And after the scandal erupts, politicians say we can't have this happening anymore. But I suppose for every scandal with a corporation, there are thousands of corporations that use these offshore tax havens and nothing negative happens.

Any kind of hard regulation on an offshore jurisdiction is very unlikely to succeed. These jurisdictions are set up to evade these kinds of regulations. And there is no international body that can impose those kind of regulations on offshore jurisdictions. There can be multilateral agreements where the industrialized nations say that if offshore centers don't reform, then they will be ostracized from the international economy."
All that and more at

"Sen. John F. Kerry (Mass.), the front-runner for the Democratic presidential nomination, frequently calls companies and chief executives "Benedict Arnolds" if they move jobs and operations overseas to avoid paying U.S. taxes. Executives and employees at such companies have contributed more than $140,000 to Kerry's presidential campaign, a review of his donor records shows. Additionally, two of Kerry's biggest fundraisers, who together have raised more than $400,000 for the candidate, are top executives at investment firms that helped set up companies in the world's best-known offshore tax havens, federal records show.

Kerry has taken aim at "Benedict Arnold" companies as part of a much broader political and policy debate over stemming the flow of well-paying U.S. jobs overseas, a chief cause of unemployment, especially in the hardest-hit manufacturing sector. Kerry's solution, detailed in a speech yesterday in Toledo, is to enforce trade agreements, track and slow the outsourcing of U.S. jobs, and stop government contracts and tax incentives from going to companies that move operations or jobs offshore.

Bush has taken exponentially more from these companies than Kerry, though the president has not made a major campaign issue out of clamping down on them."

"The Eastleigh Conservatives are being funded by the controversial offshore financier Lord Ashcroft, according to figures published this week by the Electoral Commission. Lord Ashcroft has given £161,840 to the Conservatives according to the latest figures. The contributions have been funnelled through Lord Ashcroft's company, Bearwood Corporate Services. This is a subsidiary of Bearwood Holdings, which the Belize-based Baron controls through a network of Belize and Virgin Islands trusts."

Not quite back in the saddle

I really should, I suppose, explain my patchy posting of late. I've been a bit distracted because we are busy these days, Mrs Guambat and I, packing and getting stuff into storage and the place tarted up as we prepare to up stumps and journey back to Guam for a spell. On top of that, my son is off to a visit to Singapore with his Singapore girl (he's plastic-wrapping his bags) and my turning Japanese Baby Bat has announced she's turning married Japanese and moving to Miami. So I've got stacks of bits of paper with bloggable material scattered around but find myself too scattered to organise any thoughts before all the stories turn stale.

(Yeah, but where's the horse?)

Maybe I should be looking for a sign that says "This site is under de-construction" but I'm hoping that I can muddle along.
Thanks for checking in from time to time and for your patience.

How propaganda ads up

" VICTORIAN taxpayers are carrying the multi-million-dollar cost of the Howard and Bracks governments' shameless public relations campaigns. Victorians were already contributing to the $55 million spent by the Howard Government on advertising its IR reforms. Now the Bracks Government is spending $9 million on an advertising blitz extolling its record on health, major projects, public safety and business investment.",5478,17333132%255E24218,00.html

"This year, the Pentagon granted three contractors $300 million over five years to offer "creative ideas" for psychological operations aimed at what the PR experts call "international perception management." That $300 million will buy a lot of Arabic press releases, but it's unavailable for, say, body armor.

The contractor implicated in the planted Iraqi press story is the Lincoln Group, formerly Iraqex, which boasts to prospective clients that it provides services ranging from "political campaign intelligence" (dirt on your opponents in American elections) to "commercial real estate in Iraq" (so you can buy the choicest properties and tick off the Iraqis even more). It's run by one Christian Bailey, a 30-year-old Oxford-educated fop who helped run the 2004 Republican National Convention, and once cohosted parties in New York limited to those who had graduated from Oxford, Cambridge, Harvard or Yale (Princeton was apparently beneath them). I tried to learn whether Bailey's British accent reflected British citizenship or more "perception management," but no one from the Lincoln Group would call me back. Other reporters were told that everything about the firm's operations was "classified." Bailey has put a bunch of Bush campaign hacks on the gravy train, finagled security clearances, then assigned them to corrupt the Iraqi media. Democracy in action!

This outsourcing of covert propaganda (everything is outsourced these days) tells us a lot about the two biggest stories around—the venality of Republican Washington and the colossal failure in Iraq—and how they're connected by a shadowy world of global public relations. We got into the war with the help of something called the Rendon Group, a secretive firm that won a huge government contract to "create the conditions for the removal of [Saddam] Hussein from power." (According to an article by James Bamford in last week's Rolling Stone, Rendon invented the "Iraqi National Congress" and put Judith Miller and other reporters in touch with their bum sources on WMD.)

Friday, December 02, 2005

Flying too close to the son

It was cold and late winter in 1954 when I set out with my mother, 2 year old younger sister and 9 month old younger brother from our little country town of Ripley, Tennessee to join my father at his duty post at the US Air Force Base in Tripoli, Libya, North Africa. My mother was a strikingly beautiful young woman, younger then than my own daughter now. Heading out from the Halls of Tennessee to the Shores of Tripoli must have been daunting, but herding along the three young 'uns must have been a fright.

I don't remember much of the trip, but I do remember getting on an airplane somewhere on the East Coast. It would have been a long trip in those days, with a layover in the Azores if not elsewhere as well. And what I recall of that trip is that a very pleasant and "uncle-y" kind of man took me off my Mom's hands, to give her a chance to focus on the 2 younger ones and perhaps get a touch of much-needed sleep. He was probably another GI; I don't know.

I don't recall that we talked, though we probably did. What I do recall is that the world opened up for me that day and showed me that perfect strangers can and do provide security, care and compassion, and it was kinda neat. It was a feeling that sticks to me these 50 years later.

Imagine, then, my mixed feelings about the following story:
The airlines have been criticised following revelations an Auckland man was ordered to change seats during a Qantas domestic flight in New Zealand because he was sitting next to a young boy travelling alone.

Mark Worsley, a 37-year-old father of two, was approached by a flight attendant on a Christchurch to Auckland flight and told to change seats with a woman sitting two rows in front. [Other reports had it that the woman, who was sitting with her husband and didn't want to be separated, was also upset.]

Both airlines on Tuesday confirmed they did not allow men to sit next to unaccompanied children, with Qantas saying the move was intended to "maximise the child's safety". "The policy reflects parents' concerns and a need to maximise the child's safety," Qantas said in a statement. "Where possible we aim to seat children near crew areas or next to an empty seat."

Air New Zealand said the policy was common practice among airlines and that it had been in place on its domestic and international flights for "a long time". It's in line with other carriers' policies internationally," a spokesman for the airline said.