-Caveat Lector-
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Impeached POTUS
Actress Who Claimed Sex with Bill Says IRS is Hounding Her
Elizabeth Ward Gracen
An actress who says she had a long-ago fling with President Clinton came
under IRS scrutiny just weeks after a warning that she could be audited
if she didn't keep quiet, her lawyer says.
Elizabeth Ward Gracen, star of the "Highlander" TV series, has been
deluged with dozens of letters from the tax man - claiming she didn't
file returns and threatening to seize her wages and property.
Gracen, a former Miss America who says she had sex with Clinton in 1983,
isn't the first woman linked to the president to interest the IRS.
Paula Jones, who settled her sex-harassment lawsuit against him last
year, was audited after she rejected a deal with Clinton - and the
Treasury Department is investigating why the IRS got involved.
Filming her TV show in Europe, Gracen refused to talk about her
situation, but one of her lawyers contacted by The Post said the IRS is
on her case for no good reason.
"She pays her taxes, she's really square," said the lawyer, Vincent
Vento. "I don't think anybody wants to take on the government ... She
just feels it's completely unfair."
The threat of an IRS probe came from the same anonymous caller who once
warned Gracen she was about to get a subpoena and should get out of
town, Vento said.
The former beauty queen has no idea who the caller was, but her lawyer
said the list of people with a motive is a short one.
"The only person who would benefit would be the president of the United
States, unless there's some other agenda out there," Vento said.
The first call came around Christmas 1997, when Gracen was at her
parents' home in Little Rock, Ark., he said.
At the time, Jones' lawyers were trying to get Gracen to testify about
her relationship with Clinton for the sex-harassment suit.
"The call was very professional and somewhat ominous," Vento said. "They
said, 'Look, there's a subpoena out for you about Bill Clinton. I'd
advise you not to be around.'"
Gracen wouldn't have given the call a second thought - except that the
next day, after she'd left on a trip to Las Vegas, the subpoena was
served in Little Rock.
Over the next few months, Gracen - who had publicly denied an affair
with Clinton in 1992 - was on the road, dodging the process-servers.
In the spring, she recanted her six-year-old denial and admitted she and
Clinton had once had sex. By summer, she was in Canada, filming her new
show, "Highlander: The Raven."
In an interview with the Toronto Star about her show, she also talked
about how her friends and family were intimidated and how she feared for
her safety after the Clinton connection surfaced.
"The interview gets picked up and becomes a big story," Vento said.
Within weeks, Gracen got another phone call at an unlisted number in
Canada, and she recognized the voice from the call warning her about the
subpoena eight months before, Vento said.
"They say, 'You should really keep your mouth shut about Bill Clinton
and go on with your life. You could be discredited. You could have an
IRS investigation,'" the lawyer recounted.
A few weeks later, the letters from the IRS started coming in, sent to
her parents' house, which is not listed on her tax filings, Vento said.
The New York Post, Jan. 13, 1999
Impeached POTUS
Clinton Warns Senate Not to Abuse Its Powers
else he'll send Timothy McVeigh to blow up the building
THE Senate has a duty to throw out impeachment charges against President
Clinton, to protect America's democracy and system of government, White
House lawyers argued yesterday on the eve of the opening of the
prosecution case.
Mr Clinton said he was "spending as little time as possible" thinking
about the trial, and has no intention of being there, but his legal team
sent a 130-page brief to the Senate warning of dire consequences if he
becomes the first president in American history to be removed from
office.
An irony of the trial is that it will resume just as Mr Clinton finally
settles the Paula Jones sexual harassment case, which flushed out the
evidence on which the impeachment is based. The President sent Mrs Jones
a cheque for $850,000 (�522,000) on Tuesday, of which $375,000 came from
Clinton family savings, mostly earned by Hillary Clinton.
The precis of Mr Clinton's defence against perjury and obstruction
charges made it clear that he will rely on arguments which have so far
failed: that his wrongdoings were not crimes; that even if they were
crimes they were not "high crimes" or "misdemeanours" as specified in
the constitution; and that the House vote was a grave abuse of raw
partisan power by the Republican majority.
Mr Clinton's counsel wrote: "The Senate has an obligation to turn away
an unwise and unwarranted misuse of the awesome power of impeachment. If
the Senate removes this President from office for a wrongful
relationship he hoped to keep private, for what will the House ask the
Senate to remove the next president, and the next?"
With the trial now starting, it is clear that the two sides are still
talking past each other rather than addressing each other's arguments.
In their own submission to the Senate yesterday, the Republican
prosecutors made it clear that they were not proposing Mr Clinton's
removal "for a wrongful relationship" but for crimes they said amounted
to a frontal assault on the rule of law. The "managers" will prosecute
the impeachment case as though it were a conspiracy in which Mr Clinton
schemed with his lover - Monica Lewinsky - to hide their affair, and
separately plotted with aides to ruin her if she let her story out.
The White House threatened to tie up the Senate for months if the 100
members, who are judges and jury in the case, allowed any witnesses or
new evidence. Defence lawyers would demand time to interview each
witness and examine all new evidence at length before it was used in the
trial. Mr Clinton said through his legal team: "Trial by surprise
obviously has no place in the US Senate."
The White House has no power to demand anything because the Senate makes
its own rules, but the Republicans, who hold a 55-45 majority in the
upper chamber, are likely to bend over backwards to avoid accusations
that they are conducting a kangaroo court against the president.
The London Telegraph, Jan. 14, 1999
Crisis in Brazil
Alarms Ring Anew on World Economy
"A Point of No Return Has Been Reached"
LONDON - After two months of renewed optimism in financial markets that
drove stock prices up to record heights, Brazil's decision Wednesday to
devalue its currency provided a dramatic reminder that the world economy
still has huge imbalances that could undermine confidence in Wall Street
and the dollar and slow growth around the globe, economists and analysts
said.
The move by Brazil, and the resignation of the president of its central
bank, Gustavo Franco, represented a major blow to the credibility of
Brazilian policymakers as well as to the United States, its Group of
Seven partners and the International Monetary Fund, which worked
frantically last autumn to avoid just such a devaluation. Their failure
to draw a line under the Brazilian real with a $41 billion loan program
has revived the threat that the financial instability that swept Asia
and Russia during the past 18 months will spread throughout Latin
America, economists said.
''I'm very afraid a point of no return has been reached,'' said Charles
Wyplosz, professor of economics at the Graduate Institute for
International Studies in Geneva. ''It's the big, bad crisis.''
''You're bound to get a short-term repeat of all that happened after
Russia because people are going to think the worst,'' said Richard Fox
of the credit rating agency Fitch IBCA. ''Argentina will be next in the
line of fire.''
Given the importance of Latin American markets to corporate America's
profitability, the latest instability risks piercing the optimism on
Wall Street, where share prices have risen to records so quickly in
recent weeks that some analysts have talked of the market as a bubble
waiting to burst. A sharp drop in share prices could force companies and
consumers to retrench, dragging down an already-slowing economy. And any
U.S. weakness could be rapidly transmitted to Europe and Asia via a
depreciating dollar.
''This is to some extent a wake-up call,'' said Bruce Kasman, chief
economist at J.P. Morgan & Co. ''It is another indication that the
global economy is quite fragile.''
There are some grounds to believe the impact of Brazil's move can be
contained. For one thing, the country's long-running budgetary problems
make this ''probably the most well-anticipated crisis of this decade,''
Mr. Kasman said. And Brazil's importance to Latin America and the United
States provides reasonable assurance that the country will get help from
abroad.
President Bill Clinton indicated as much Wednesday after being briefed
by Treasury Secretary Robert Rubin. ''We have a strong interest in
seeing Brazil carry forward with its economic reform plan, and succeed -
and we think they will,'' he said.
But the Brazilian devaluation represented a blow to IMF and U.S. efforts
to defend fixed or semi-fixed exchange-rate regimes as part of their
recovery strategy for emerging market economies.
''It's the same mistake three times in a row,'' Mr. Wyplosz said. ''Asia
was a mistake, Russia was a mistake, and now they've done it again.''
The strength of the U.S. economy, which grew at a rate of nearly 4
percent last year and created close to 3 million jobs, suggests it is
well-placed to absorb any shocks. Low inflation in the United States and
Europe also gives central bankers leeway to ease monetary policy if
growth flags, as they did last autumn.
Some money managers said the financial shocks of the autumn, including
the near collapse of the big American hedge fund Long-Term Capital
Management LP, have wrung a lot of speculative excess out of world
markets. ''I don't think this will lead to a systemic shock like we saw
in August,'' said John Praveen of Credit Suisse Asset Management. ''We
don't have the same degree of leverage that existed at the time of
Russia's default.''
Nevertheless, analysts said the risk of a free fall in the real was
great after Brazil eliminated the daily trading band for the currency
and doubled its depreciation target for this year to as much as 15
percent. The currency plunged as much as 9 percent Wednesday, and recent
figures have indicated that capital flight has increased in recent days.
The uncertainty caused by the devaluation is likely to prevent Brazil
from lowering interest rates, worsening the country's recession. Even
before the move, the government was forecasting that output would
contract by 1 percent this year, while some analysts were forecasting a
decline of at least 4 percent. Brazil also is committed to cutting its
budget deficit to 4.7 percent of gross domestic product this year from 8
percent in 1998.
The impact of the fall of the real could spread to neighbors like
Argentina, which would have to raise interest rates to defend its
currency. Mr. Fox of Fitch IBCA said Argentina's economy could register
zero growth this year, compared with a government forecast four months
ago for up to 5 percent growth.
Brazil is the United States' No.15 trading partner, but it is a rich
source of profits for many blue-chip American companies like Whirlpool
Corp., which registers about 10 percent of sales in the country.
Bill Martin, chief economist at Phillips & Drew, the fund management arm
of the Swiss bank UBS, said rising share prices have encouraged U.S.
consumers and companies to spend more than they earn. If the stock
market falls and consumers and companies retrench, the U.S. growth rate
could be slashed by 2 percentage points a year for the next five years.
International Herald Tribune, Jan. 14, 1999
Crisis in Brazil
Real Troubles
Head of central bank resigns
The prophets of Latin American doom were vindicated yesterday as the
Brazilian real was in effect devalued by 8 per cent, and the governor of
its central bank resigned.
The effects were felt in most emerging market currencies, though most
market analysts stopped short of predicting a Russian-style crisis in
global financial markets.
The real dropped immediately to the bottom of its new band of
R$1.20-R$1.32. Few market analysts expected that the new band would last
for long, with some predicting that Brazil would be forced to let the
currency float completely or to adopt a harsher currency regime such as
a currency board, linking the real irrevocably to the dollar.
The risk of contagion throughout Latin America also pulled down the
dollar, even though US Treasuries played their traditional role of a
safe haven for capital at a time of crisis. The dollar fell to its
lowest against the euro since the beginning of the year, nearly touching
$1.18 before closing at $1.170.
The spark for the collapse in the regime may have been the decision of
the Brazilian state Minas Gerais to declare a 90-day moratorium on its
debt repayments to the central government.
But increasing capital flight from the Brazilian economy, which saw an
outflow of over $2bn on Monday and Tuesday this week, has threatened the
crawling peg exchange rate regime for some time.
Long-term real peg bears exhibited a degree of morbid satisfaction
yesterday that their predictions had come true. "Looking at the daily
capital outflows, it is clear that private investors did not share the
official enthusiasm of the Brazilian government and the International
Monetary Fund that the peg would hold," said Michael Burke, an
independent economic consultant in London.
Mr Burke said that a complete breakdown of the real peg system in the
near term could not be ruled out. "The best solution would be to let it
float, as with the South Korean won," he said, "but the involvement of
the IMF means this is unlikely."
He added that support for the real from private capital flows was not
likely to be forthcoming. "Private investors are not going to put money
into Brazil unless they are sure that the real is going to hold," he
said.
The impact of the Brazilian devaluation took predictable forms
throughout the world's currencies.
The fall-out from the crisis was felt most immediately in the rest of
Latin America. The Mexican peso dropped by around 10 per cent to around
11 pesos to the dollar. But later it recovered, and by the end of London
trading had recouped half of its losses at 10.5 pesos.
Other emerging market currencies also fell. The zloty was fixed at 4.5
per cent above the middle of its trading band yesterday, compared with
Tuesday's fix of 7.7 per cent and a five-month high of nearly nine per
cent reached last week.
The South African rand took a double blow, being both an emerging market
and having a strong commodity link. The rand closed in London yesterday
at R6.12, 1.4 per cent lower than on Tuesday.
The Canadian dollar, which rose recently as investors expected a bounce
in commodity prices, also dropped by 1.4 per cent, to C$1.5280 against
the dollar.
The technical change that so shook currency markets seemed relatively
minor.
The central bank announced two changes. The first was the lowering of
the wide band - within which the real is intended to trade throughout
the next 12 months - to R$1.20-R$1.32.
This implied a slightly faster devaluation than in 1998. The bottom of
the new band is over 8 per cent lower, compared with a 7 per cent drop
in 1998. But this was not radically different.
The sting in the tail came with the second change: abandonment of the
mini-band which formerly kept the real from devaluing too much from week
to week.
The currency markets saw the end of the mini-band as a relaxation of the
regime and an invitation for the real to fall to the bottom of the
maxi-band, which it did.
The Financial Times, Jan. 14, 1999
Chinese Finance
Investors Alarmed as Another Firm Bites the Dust
More trouble in Guangdong
HONG KONG - Stocks of major Chinese-controlled companies trading here
plunged Wednesday amid fears that their lines of credit were drying up
as a second state-controlled company stunned investors by announcing
that it was effectively insolvent, with debts far larger than expected.
Almost all Hong Kong-listed stocks of companies incorporated or doing
business in China were pummeled amid growing fears of a debt crisis on
the Chinese mainland. The Hang Seng China Enterprises Index, which
tracks Chinese shares listed in Hong Kong, fell 11.5 percent. The index
tracking ''red-chip'' stocks, those incorporated in Hong Kong but
controlled in mainland China, fell 12.5 percent.
The perceived increase in the risk of lending to China, and the effect
it could have on banks in Hong Kong, extended to Hong Kong stocks as
well. The benchmark Hang Seng Index fell 4.1 percent, to 10,273.77
points.
Investors sold stocks after a subsidiary of Guangdong Enterprises
(Holdings) Ltd. announced that its parent company had debts of $2.94
billion and could not make principal payments to creditors due by April.
More surprisingly, the subsidiary company, Guangnan (Holdings) Ltd.,
which is one of the principal shippers of fresh food from China into
Hong Kong, said it had debts of $391 million, at least 50 percent more
than most analysts had expected.
Combined with news that Guangdong Enterprises was in serious financial
trouble, the announcement about Guangnan sent stocks plunging. Guangnan
shares fell 53 percent, while shares of its sister company, Guangdong
Investment, fell 24 percent.
Chinese shares have been badly hit since the announcement Sunday that
another government-owned company that collapsed in October, Guangdong
International Trust & Investment Corp., known as GITIC, had nearly
double the debts previously figured - more than $4 billion - and that
foreign creditors would not get preferential treatment by liquidators.
Nervousness over bankruptcy proceedings has now taken a toll on lending
to many other Chinese companies such as Guangnan. ''If not for the GITIC
issue, they'd probably be able to keep borrowing to roll over their
debts,'' said Ken Luh, a China analyst at Credit Suisse First Boston in
Hong Kong.
But now, he said, ''They probably don't even have working capital.''
''Investors no longer trust the so-called guaranteed earnings of China
assets and just want to be free of them,'' Stanley Ng, head of research
at Mansion House Securities, told AFX.
For the Chinese companies, the timing is awful. A report late last year
by Goldman, Sachs & Co., ironically now serving as an adviser to
Guangdong Enterprises, said the parents of many red-chip companies had
''borrowed aggressively'' over the past two years and put most of the
proceeds into the stock and property markets. ''Given the devastation to
property and equity prices since the start of the Asia turmoil,'' it
said, ''the red chips must have accumulated huge unrealized losses.''
The report estimated that the collective debt of the red-chip companies
might exceed $12 billion.
There is growing concern about how the retreat of lenders and investors
will affect the broader economy of mainland China, which is already
slowing. Last week, the Finance Ministry painted a gloomy picture of
Chinese economic prospects this year and said it would increase
government spending to try to bolster growth.
One of the many questions investors need answered is which of the
several publicly traded companies in the Guangdong Enterprises group
will actually survive. On Tuesday, the Guangdong provincial government
said it would pump money into Guangdong Enterprises to help the company
pay debts.
''The Chinese government has to think through the ramifications of
letting Guangdong Enterprises fail,'' a senior analyst with a U.S.
investment bank said. ''Forcing GITIC to fail was probably more damaging
to confidence in Hong Kong than they had envisioned. Letting Guangdong
Enterprises fail would be even worse.''
Kalina Ip, an analyst at ABN-AMRO Asia, said she was confident that most
of the companies in the Guangdong Enterprises Group would survive, but
she pointed to another chronic problem with mainland Chinese companies:
How could a dull, predictable food business such as Guangnan have
accumulated such heavy debts - as much as 60 percent more than what most
analysts had been lead to expect?
''Nobody has any idea how they got the debt so high,'' she said. ''It
seems to tell you that you can't trust the published accounts.''
The tone of the company's announcements in Hong Kong newspapers
Wednesday signaled a very different and much more blunt attitude about
the financial hornets' nest many Chinese companies are now negotiating.
In a striking announcement, Sun Guan, the chairman of the food-shipping
subsidiary Guangnan, described the causes of his parent company's
financial difficulties as: bad investment decisions that did not take
into account business risks; imprudent lending decisions without proper
credit evaluation; inappropriate accounting for various transactions and
tardiness in recognizing write-downs, and poor decisions regarding
oversight, investment leverage and accounting policies.
In the past, investment analysts who have leveled much milder criticism
at politically connected companies, or even just rated them as a
''sell,'' have been fired for doing so.
Ominously for bankers with loans outstanding to the group, the Guangnan
chairman also said, ''The financial magnitude of these problems are
still in the process of being determined.''
The announcement of Guangdong's problems, the result of a creditors'
meeting the day before, were the last thing that international bankers
wanted to hear. Still fuming from China's peremptory treatment of them
at a GITIC creditors' meeting Sunday and what they see as a betrayal by
China's authorities in their the failure to repay GITIC's debts, they
are fighting back the only way they know how - by pulling in lines of
credit and declining to roll over loans for working capital.
International Herald Tribune, Jan. 14, 1999
-----
Aloha, He'Ping,
Om, Shalom, Salaam.
Em Hotep, Peace Be,
Omnia Bona Bonis,
All My Relations.
Adieu, Adios, Aloha.
Amen.
Roads End
Kris
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