-Caveat Lector- from: http://www.aci.net/kalliste/ <A HREF="http://www.aci.net/kalliste/">The Home Page of J. Orlin Grabbe</A> ----- ------------------------------------------------------------------------ Today's Lesson From The Tatum Chronicles by D.G. "Chip" Tatum General Noriega and Mr. [William] Barr greeted the aircraft when we arrived. The passengers adjourned to their meeting while I secured the aircraft. I was invited to join when I finished. Two Latin American soldiers set up the Sat/Com device and stood guard on the aircraft. I joined the meeting approximately thirty minutes later. When I arrived, the discussion was concerning the loss of over $100 million dollars worth of drugs and cash. The "Enterprise" was being drained. There were three Compaq Computers set up with operators, obviously working for Mr. Barr. There were approximately eight (8) administrative personnel correlating data provided by computer discs brought by the principles of the meeting. The discussions continued. It was obvious that the purpose of the meeting was to identify the source of the loss. The money flow was traced from Panama to several destinations in the U.S. Their Ohio source was ruled out early. Their Colorado source was also ruled out. That left Arkansas. It was discussed by the members that either Seal or Clinton were siphoning from the "Enterprise". At this point, my food was brought, so I moved to a separate table and ate. By the time I finished, Mr. Fernandez signaled me to join him. We went back to the aircraft and used the phone. He called Mr. North and told him that the loss was definitely occurring on the Arkansas drop. He said, "That means either Seal, Clinton or Noriega." (I thought it noteworthy that Mr. Fernandez added General Noriega to the suspect list.) He hung up. I started back, but Fernandez stopped me and told me to get Barr and Rodriguez. I summoned Barr and Rodriguez to the aircraft. About 15 minutes later, the phone activated and Barr answered. He listened, not speaking but nodding his head in agreement. When he spoke, he told the caller that it had been determined that the problem existed on the Arkansas connection. "I would propose that no one source would be bold enough to siphon out that much money, but it is more plausible that each are sihoning a portion causing a drastic loss." He then acknowledged something with a "Yes, sir," and told the caller he would see him and give an up-dated report in two days. At that point the phone was handed to me. I answered, "Tatum." Vice President Bush asked me to ensure that General Noriega and Mr. Harari boarded Seal's plane and departed prior to my departure. He also wanted the tail number of Seal's plane. I was told to tell no one that we spoke. He then instructed me to pass the tail number to [Oliver] North via land lines when I returned to base. I acknowledged and handed the phone back to Barr. Barr stated that he and Fernandez were staying in Costa Rica until the following day. They needed to visit the "ranch." He then terminated the call. Mr. Barr then made another call. He asked for Governor Clinton. He must have had a direct number because he didn't have to wait. He began immediately. He explained that a substantial amount of "Enterprise" monies had disappeared. He further explained to Governor Clinton that it was suspected to be in excess of $100 million dollars and that it was definitely disappearing along the Panama to Arkansas connection. He suggested that Governor Clinton investigate on that end, and that he and Mr. North would continue investigating on the Panama side and that it must be resolved or it could lead to problems. "Big problems," he reiterated. He then asked Clinton to put his best man on it and stated that this was priority one. Then he terminated the call. We broke down the equipment. I dropped Noriega and Harari at the airport and waited for Seal to leave in a Lear jet tail number N13SN. Then I returned the other passengers to Tegucigalpa, the capital of Honduras. ===== Hot Money & the Politics of Debt Russia is Bleeding Cash Aid money comes in; the oligarchs siphon it out MOSCOW - The economy of modern Russia is hemorrhaging cash: Every month, $1 billion to $2 billion slips out in wire transfers, phony import-export documents and insider price manipulations. About $100 billion to $150 billion has fled abroad since 1992, according to Russian and Western estimates, outstripping the international aid coming into the country. Capital flight is one of the most debilitating woes of Russia's eight-year attempt to transform the centrally planned economy of the Soviet Union into a free market. All of the other troubles of the country - political upheaval, lawlessness, hyperinflation, oligarchic rule - have combined to drive wealth that might otherwise go toward rebuilding and growth into overseas bank accounts, real estate, luxury resorts and offshore tax havens. The breadth of the problem has been highlighted this month with the disclosure that U.S. law enforcement officials are investigating transfers of as much as $10 billion in Russian money through the Bank of New York over the last year and a half. Some of the money organized crime bosses, and investigators have described some of it as part of a money-laundering scheme to conceal the origin of criminal profits. But the enormous transfers also appear to be part of a broader phenomenon of capital flight, money on the run from Russia from a variety of sources and for a host of reasons: to hide it from taxes or business partners, to conceal pillage of natural resources or stripped factory assets, or to skirt political and economic upheaval at home. According to Russian bankers, economists and analysts, the Bank of New York transactions are typical of several ''clean pipes'' carrying Russian capital out of the country to the West. These channels are often run by intermediaries from Switzerland, Cyprus and elsewhere, who specialize in getting the money to a safe haven. The pipe may be carrying the money of dozens of different people and companies, whether legal, shadowy or criminal, and to different destinations. Since the collapse of the ruble a year ago, the dimensions of the capital-flight problem in Russia have been thrown into high relief. The crisis itself was a shock, propelling billions of dollars abroad, and the aftermath underscored how widespread the practice had become. According to many businessmen here, the financial and political elite of Russia, from mid-level bureaucrats to high-level Kremlin officials, from factory directors in the provinces to Moscow moguls, have moved capital and assets abroad with impunity. While there are rules against exporting capital, they are widely ignored and almost never enforced. ''You see, it's a very, very easy thing to do this,'' said a Moscow banker. ''It's not a problem, technically.'' In one of the more striking cases, shares in the second-largest oil company in Russia, Yukos AO, were moved offshore late last year and earlier this year after the parent bank defaulted on Western loans for which it had pledged the shares. The shares were then traced to a maze of discreet offshore havens in the Isle of Man, the Virgin Islands and Cyprus. The case is under investigation by the Russian securities commission. In another high-profile example, Russian prosecutors have been examining how the foreign currency earnings of the national airline, Aeroflot, were reportedly channeled into a Swiss company. And, in another case receiving renewed attention, the now-suspended prosecutor general of Russia, Yuri Skuratov, has threatened to reveal the identities of people he described as high-level government officials with Swiss bank accounts. Even the Central Bank of Russia, which is supposed to be a paragon of trust in the finances of the country, secretly transferred some of the national currency reserves of Russia abroad to an obscure offshore company in recent years, according to the results of an audit. Many economists have long argued that in the increasingly globalized economy, capital flight is not the chief cause of Russia's problems, but a symptom of a more profound failure to create conditions that would attract and keep capital at work inside the country. ''The root of the evil is the political situation,'' said Denis Rodionov, an analyst at Brunswick Warburg, an investment bank here. ''People don't know who is going to be the next president and whether the Communists are going to come back to power.'' Nor has the financial system inspired confidence. In many developed Western economies, banks and stock markets perform a basic function of providing capital to businesses, but in the recent history of Russia banks have been more often tools of their owners' empires, and stock markets have rarely raised new capital. The risks of investing have been increasingly evident as Russian tycoons trample shareholder rights. ''It is the absence of clear market traditions,'' said Yevgeni Yasin, a former economics minister and one of those who supported the reform efforts of recent years. ''I mean fulfilling contracts, protecting shareholders' rights - minority shareholders have no rights whatsoever - and there is the absence of a developed financial market infrastructure, such as mutual funds and investment companies.'' Yet another factor has been Russia's arbitrary and punishing tax system, which Parliament has yet to reform. It has been the cause of pervasive tax avoidance, much of it in offshore havens. But the Russian government has appeared helpless. For years, successive ministers have stoutly promised action, but to no avail. The Parliament passed new legislation against capital flight in June, and the central bank tried to tighten restrictions, but the leakage continues. Capital flight takes many hidden routes out of Russia. For a long time, two of the most common were through import and export transactions. A company would sign a contract to export goods, but the payment would be deposited in an offshore account abroad rather than in Russia. Or, a company would send money overseas supposedly as ''prepayment'' for imports, which would never arrive. Another mechanism has been transfer pricing, in which oil or other natural resources are sold cheaply to an offshore firm, which keeps the profits abroad. Yet another tactic has been to manipulate loan payments between a Russian company and an offshore one so the profits of the Russian company are paid to the offshore firm. Recently, Alexander Livshits, a former finance minister, suggested a tax on money that appeared to be leaving the country. ''There is no point in trying to stop a flowing river,'' he said. ''It would make sense to put a power station on the river and generate electricity.'' But the Moscow banker said too many people have a stake in capital flight to stop it easily. ''There is no action against capital flight because there is a very powerful lobby in favor of capital flight,'' Mr. Livshits said. ''If someone will try and establish'' a barrier, he added, ''then he will be killed. Because it is too big a process to stop in this way.'' International Herald Tribune, August 30, 1999 Land of Mochtar Riady Will East Timor Declare Independence from Indonesia? Voting in a climate of violence DILI, East Timor - After 300 years of Portuguese rule and a quarter-century under Indonesian military occupation, the people of East Timor will finally be allowed to vote on their future Monday, and most analysts say they believe that if they are not scared away by militia violence, the voters will choose to become an independent nation. But the threat of violence seemed to hang over the territory Sunday, despite a peace agreement announced early in the day between the pro-independence guerrillas, known as Falintil, and the heavily armed militia gangs, which have weapons and backing from elements of the Indonesian military opposed to the separation of East Timor. The streets of the capital, Dili, were largely deserted Sunday; shops were shuttered, and policemen wearing chest protectors and carrying automatic weapons set up checkpoints around the city where they searched cars for weapons. The city was swept with rumors - that militiamen had moved into town overnight, that attacks were imminent. In one of Dili's poorest neighborhoods, called Becora, a pro-independence stronghold that was the scene of past militia violence, residents were arming themselves to guard against what they heard was a possible attack by Aitarak, led by Eurico Guterres, a militia whose name means ''stick of thorns.'' The neighborhood has been on edge since a suspected pro-Indonesian militiaman was beaten by a crowd, prompting fears of reprisals. ''We have rocks, sticks, and our traditional weapons,'' said one resident, Jose Amara, 21, who was standing guard at a corner with a group of young men, one of them with a large knife strapped around his chest. ''We are not afraid, because all we want is independence. We are willing to die for it.'' Other Dili neighborhoods were the same, with people anxious to vote, but also girding themselves for danger, including moving family members, especially small children, into the surrounding hills, or to find refuge on school grounds or in churches. At the Hotel Tropical, in the center of town, scores of Aitarak militiamen were gathering on the street outside, some with automatic weapons clearly visible despite a mutually agreed weapons ban between the warring factions. With the fear of violence pervasive throughout the city, the main question Sunday was whether the continuing campaign of militia intimidation and terror would be enough to counter the Timorese people's widespread enthusiasm for their first-ever chance to choose their own status. ''The turnout is the key,'' a UN official said. He said he was heartened that last month, some 450,000 people registered to vote, despite similar threats. ''The determination of people to go out and vote is so great, it's going to be difficult to stop them.'' Others were more cautious. ''I'm pessimistic about whether the ballot can go ahead,'' said Leandro Isaac, a spokesman for the National Council of Timorese Resistance, or CNRT, the main pro-independence group. ''If it can go ahead, it will be a miracle.'' Bishop Carlos Belo, the Nobel Peace Prize laureate, appealed to Timorese to ignore the threats and vote. ''At this time I ask all of you not to be afraid,'' the Dili bishop said in a message read throughout churches in this overwhelmingly Roman Catholic territory. ''Brothers and sisters, a lot of people here at this time are very afraid.'' UN Secretary-General Kofi Annan said the Timorese on Monday had ''a unique opportunity to settle a long-running dispute by peaceful means.'' ''I appeal to all sides to live up to their responsibilities before history by respecting the democratic process,'' he added President, B.J. Habibie of Indonesia, in a nationwide address, urged Timorese to reject independence and vote to stay a part of the country. But he pledged to respect the result of the referendum, whatever the outcome. The period leading up to the referendum has been decidedly weighted against the pro-independence side. The popular independence leader Xanana Gusmao remains in a Jakarta jail, and Indonesia has said he will not be freed until mid-September. The Nobel prize-winning Timorese peace campaigner Jose Ramos-Horta is in exile, banned by Indonesia from setting foot in his homeland. Pro-independence leaders have been assassinated or have fled in fear; some who remain either have heavy police protection, or stay in hiding. Pro-independence rallies have been attacked, and offices of the CNRT have been ransacked and burned. The militias here operate with impunity, carrying weapons and rampaging through the streets in full view of the police, who do nothing to intervene. They have burned houses and razed entire villages, killed independence operatives and driven thousands of people from their homes and into forests and churches as refugees. On Sunday, representatives of the pro-independence Falintil guerrillas and the militias announced a new peace agreement calling for both sides to limit the carrying of firearms in public and calling on the police to arrest violators. International Herald Tribune, August 30, 1999 Internet Gambling Will the Losers Pay Up? The future of gaming Steve Rudolf gambled on the internet - and lost. Or rather, he played and won but then found that some sites would not pay up. One even closed its operations rather than pay him his $7,000 winnings. His rotten luck was offered as a cautionary tale in a report by the US National Gambling Impact Study Commission, published in June. But the warning is going unheeded: according to Christiansen/Cummings Associates, a New York consultancy, the number of internet gamblers doubled from 6.9m to 14.5m between 1997 and 1998. "The internet offers great potential to get at the 25 to 35-year-olds," says William O'Connor, chairman and chief executive of GTech, the US-based lottery and gambling technology supplier. "They are not necessarily big lottery fans but if you have exciting games you start appealing to those who like the interactive aspect." Estimates of online betting's growth potential vary considerably but last year Datamonitor, the management consultants, forecast a jump in value from $535m in 1998 to more than $10bn per year by the end of 2002. However, the pace of change poses a huge headache for governments. Internet gambling is unregulated, unlicensed and pays little or nothing in tax. Yet scarcely a day goes by without new corporate activity in the sector. Hilton Group, the UK-based hotel and betting business, this week said it would offer internet betting from an offshore base in Gibraltar for sports gambling, and a range of casino games from next year. It cannot operate internet gambling services from the UK because there is no legislative framework for issuing internet betting licences. The company, which owns Ladbrokes, the UK's largest high street chain of betting shops, also challenged the government with the announcement that from October it will offer offshore telephone betting for UK clients free of government betting duty. The UK is unusual in requiring people to pay tax when they punt in a betting shop. But customers do not pay tax when they gamble in a casino, play bingo or buy a National Lottery ticket. The move offshore by bookmakers is driven primarily by the market: customers are charged 9 per cent tax on bets, of which 6.75 per cent is government betting duty. Victor Chandler, an independent bookmaker, started the trend when it moved its off-course credit betting business from London to Gibraltar in May and offered to charge punters only 3 per cent. This followed threats by some Irish bookmakers to target the UK market after Irish betting duty was halved from 10 per cent to 5 per cent. "Competition in telephone and internet betting has no respect for national boundaries," says Peter George, chief executive of Hilton Group. "Big punters are very price-sensitive and there are 300 betting operations on the internet with little or no tax." The government has given no indication that it is prepared to lower betting duty, which raised �480m for the Treasury in 1998-99. But the pressure on governments around the world to respond is mounting: besides the potential loss of revenue, online gambling increases the risks of under-age and criminal activity. At the moment, however, there are more questions than answers. "What are the legal jurisdictions when it comes to internet gambling? Where are the bets and wagers actually taking place?" asked the US commission which recommended a ban on internet gambling. Some governments have attempted to tackle the issue. At least three Australian states have passed laws to legalise, regulate and tax internet gambling - and to make it available to players anywhere in the world. In Europe, some countries allow gambling operators to offer an internet service but only to residents of their own country. They control players by checking social security numbers and resident bank accounts. The Gaming Board, the UK's regulatory authority, is preparing policy recommendations which it expects to submit to the government next spring. Many in the industry argue that the easy availability of gambling on the internet has increased the need for a review of all British gambling legislation. The Gaming Board agrees that piecemeal deregulation has complicated the legislation and left inconsistencies. The laws governing casinos offer one example. People wanting to enter a casino must apply for membership 24 hours in advance, if they are not already members, yet they can play at home at the click of a button. "British gambling laws hark back to an era when social attitudes were very different and when gambling was a dark deed only to be tolerated because it couldn't be stamped out," says Peter Dean, chairman of the Gaming Board. Hilton Group's move into internet gambling shows that reputable companies are not prepared to wait for regulators before acting. Such moves are good news for gamblers like Mr Rudolf: perhaps next time he plays, he will be able to collect his winnings. The Financial Times, August 30, 1999 Central Banking Central Bankers and Other Politicians at Jackson Hole Interest rates, interest rates, interest rates The delicate duet between Wall Street and the Federal Reserve that provides the setting for much of US interest rate policy dominated discussions at the weekend's annual monetary policy get-together in the Rocky Mountain redoubt of Jackson Hole. While financial market economists tried to prise from the central bank's policymakers any hints on whether last week's interest rate increase would be the last for a while, policymakers pondered aloud whether Wall Street itself held the key to the direction of monetary policy. Little was forthcoming from Fed officials on the former question, but on the latter there were some intriguing hints that the US central bank is more focused than ever on the vexed question of whether the exuberant stock market poses a threat to economic stability that might require a monetary policy response. For the first time in three years, the Kansas City Fed's symposium, which brings together central bankers and economists from around the world, was conducted without the accompaniment of a full global financial crisis. Unlike last year, when the meeting began a few days after Russia defaulted on its official debt, there were no furtive scurryings behind the scenes. Alan Greenspan, the Fed chairman, Mervyn King, deputy governor of the Bank of England, Stanley Fischer, first deputy managing director of the International Monetary Fund, and Yutaka Yamaguchi, the deputy governor of the Bank of Japan, were free to mingle with the hundred or so other participants in an atmosphere of relative calm. But there was widespread agreement that, while last year's financial tempests may have blown themselves out for now, the outlook remains unsettled. Growing imbalances in the US economy, the uncertain Japanese recovery, and volatility of international capital flows make monetary policy as challenging as ever. Mr Greenspan devoted his entire contribution to the enlarged role asset prices play in the formulation of policy. But, though he has warned repeatedly in the past that equity prices have become overvalued, he focused more on trying to understand the forces that have driven prices higher. And, for all the attention he and his colleagues are paying to Wall Street, it is still highly unclear how it will impact on policy. Indeed, the only certainty, he confirmed, was that the Fed would be forced to cut rates if the market fell sharply. This has given rise recently to concerns that the central bank is unwittingly contributing to a form of moral hazard - that it stands by ready to prop up the market if it falls, but will do nothing to stop it going up too high. "Central banks do not respond to gradually declining asset prices," said Mr Greenspan. "We do not respond to gradually rising asset prices. We do respond to sharply reduced asset prices which will create a seizing up of liquidity. But you almost never have the type of 180 degree [reverse] version of the seizing up on the upside. If indeed such an event occurred, I think we would respond to it." In fact, the consensus among Fed officials and policymakers this weekend seemed to be that to raise interest rates to try to engineer a stock market correction was impractical and rested in any case on a false premise - that the central bank can know at any point that the market is overvalued. But that does not mean, as Mr Greenspan insisted, that policy is not influenced by the market. Since equity prices can have a considerable effect on demand, they could prove inflationary, in which case the Fed would need to raise rates. But the determining factor would still seem to be signs of general price inflation rather than the market itself. Officials also indicated that the Fed needed to judge whether the market's rise was based on fundamental economic improvement, or whether it was largely speculative excess. To that end, Mr Greenspan offered a lengthy disquisition on possible understatements and overstatements of US corporate profits. Mr Yamaguchi defended the Japanese government's handling of the country's asset bubble in the 1980s, pointing out that there were minimal signs of general price inflation and that for the Bank of Japan to have raised interest rates sharply in such circumstances would have been hard to justify economically and impossible politically. Mr Fischer acknowledged that interest rates were a blunt instrument for dealing with possible asset bubbles, but he argued that there might be more scope for regulatory intervention by central banks, as had been used in the past to prevent overly loose lending that gave rise to property price explosions. "It's not entirely clear why regulations to protect against asset price rises have fallen into disuse," he said. Mr King pointed up the other challenges remaining for central bankers in an environment of generally low inflation - whether to target inflation rates or price levels, the effectiveness of monetary policy when interest rates are close to zero (the liquidity trap) and how to operate policy in an international environment of financial interdependence. Most participants agreed that the experience of the last few years suggested that pegging a country's exchange rate to another currency was of dubious value. But there were the usual differences over whether countries should let their currencies float freely or abandon their monetary sovereignty altogether. It fell to Mr King to offer perhaps the most unsettling prospect. Technological changes, which might one day enable all transactions to take place electronically, could eliminate the need for a money settlement system, and, therefore, for central banks themselves. "So let's enjoy this marvellous symposium and live it as if it were our last." The Financial Times, August 30, 1999 ----- Aloha, He'Ping, Om, Shalom, Salaam. Em Hotep, Peace Be, Omnia Bona Bonis, All My Relations. Adieu, Adios, Aloha. Amen. Roads End Kris DECLARATION & DISCLAIMER ========== CTRL is a discussion and informational exchange list. Proselyzting propagandic screeds are not allowed. Substance�not soapboxing! These are sordid matters and 'conspiracy theory', with its many half-truths, misdirections and outright frauds is used politically by different groups with major and minor effects spread throughout the spectrum of time and thought. That being said, CTRL gives no endorsement to the validity of posts, and always suggests to readers; be wary of what you read. CTRL gives no credeence to Holocaust denial and nazi's need not apply. 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