Sunday, December 30, 2012

HSBC: Impunity of the Oligarchs

In another shameful decision by the US Department of Justice, earlier this month federal prosecutors reached a deferred prosecution agreement (DPA) with UK banking giant HSBC, Europe's largest bank.

Shameful perhaps, but entirely predictable. After all, in an era characterized by economic collapse owing to gross criminality by leading financial actors, policy decisions and the legal environment framing those decisions have been shaped by oligarchs who quite literally have "captured" the state.

Founded in 1865 by flush-with-cash opium merchants after the British Crown seized Hong Kong from China in the aftermath of the First Opium War, HSBC has been a permanent fixture on the radar of US law enforcement and regulatory agencies for more than a decade.

Not that anything so trifling as terrorist financing or global narcotrafficking mattered much to the Obama administration.

As I previously reported, (here, here, here and here), when the Senate Permanent Subcommittee on Investigations issued their mammoth 335-page report, "U.S. Vulnerabilities to Money Laundering, Drugs, and Terrorist Financing: HSBC Case History," we learned that amongst the "services" offered by HSBC subsidiaries and correspondent banks were sweet deals, to the tune of hundreds of billions of dollars, with financial entities with ties to international terrorism and the grisly drug trade.

Charged with multiple violations of the Bank Secrecy Act for their role in laundering blood money for Mexican and Colombian drug cartels, as a sideline HSBC's Canary Wharf masters conducted a highly profitable business with the financiers of the 9/11 attacks who washed funds through Saudi Arabia's Al Rajhi Bank into accounts controlled by whomever controlled the hijackers.

While the media breathlessly reported that the DPA will levy fines totaling some $1.92 billion (£1.2bn) which includes $655 million (£408m) in civil penalties, the largest penalty of its kind ever levied against a bank, under terms of the agreement not a single senior officer will be criminally charged. In fact, those fines will be paid by shareholders which include municipal investors, pension funds and the public at large.

With some 7,200 offices in more than 80 countries and 2011 profits topping $22 billion (£13.6bn), Senate investigators found that HSBC's web of 1,200 correspondent banks provided drug traffickers, other organized crime groups and terrorists with "U.S. dollar services, including services to move funds, exchange currencies, cash monetary instruments, and carry out other financial transactions. Correspondent banking can become a major conduit for illicit money flows unless U.S. laws to prevent money laundering are followed." They weren't and as a result the bank's balance sheets were inflated with illicit proceeds from terrorists and drug gangsters.

Revelations of widespread institutional criminality are hardly a recent phenomenon. More than a decade ago journalist Stephen Bender published a Z Magazine piece which found that "99.9 percent of the laundered criminal money that is presented for deposit in the United States gets comfortably into secure accounts."

According to Bender: "The key institution in the enabling of money laundering is the 'private bank,' a subdivision of every major US financial institution. Private banks exclusively seek out a wealthy clientele, the threshold often being an annual income in excess of $1 million. With the prerogatives of wealth comes a certain regulatory deference."

Such "regulatory deference" in the era of "too big to fail" and its corollary, "too big to prosecute," is a signal characteristic as noted above, of state capture by criminal financial elites.

Indeed, HSBC's private banking arm, HSBC Private Bank is the principal private banking business of the HSBC Group. A holding company wholly owned by HSBC Bank Plc, its subsidiaries include HSBC Private Bank (Suisse) SA, HSBC Private Bank (UK) Limited, HSBC Private Bank (CI) Limited, HSBC Private Bank (Luxembourg) SA, HSBC Private Bank (Monaco) SA and HSBC Financial Services (Cayman) Limited. All of these entities featured prominently in money laundering and tax evasion schemes uncovered by the Senate Permanent Subcommittee in their report. Combined client assets have been estimated by regulators to top $352 billion (£217.68).

According to Senate investigators, HSBC Financial Services (Cayman) was the principle conduit through which drug money laundered through HSBC Mexico (HBMX) flowed. "This branch," Senate staff averred, "is a shell operation with no physical presence in the Caymans, and is managed by HBMX personnel in Mexico City who allow Cayman accounts to be opened by any HBMX branch across Mexico."

"Total assets in the Cayman accounts peaked at $2.1 billion in 2008. Internal documents show that the Cayman accounts had operated for years with deficient AML [anti-money laundering] and KYC [know your client] controls and information. An estimated 15% of the accounts had no KYC information at all, which meant that HBMX had no idea who was behind them, while other accounts were, in the words of one HBMX compliance officer, misused by 'organized crime'."

In fact, the "normal" business model employed by HSBC and other entities bailed out by Western governments fully conform to the "control fraud" model first described by financial crime expert William K. Black.

According to Black, a control fraud occurs when a CEO and other senior managers remove checks and balances that prevent criminal behaviors, thus subverting regulatory requirements that prevent things like money laundering, shortfalls due to bad investments or the sale of toxic financial instruments.

In The Best Way to Rob a Bank Is to Own One, Black informed us: "A control fraud is a company run by a criminal who uses it as a weapon and shield to defraud others and makes it difficult to detect and punish the fraud."

"Control frauds," Black reported, "are financial superpredators that cause vastly larger losses than blue-collar thieves. They cause catastrophic business failures. Control frauds can occur in waves that imperil the general economy. The savings and loan (S&L) debacle was one such wave."

Indeed, "control frauds" like HSBC "create a 'fraud friendly' corporate culture by hiring yes-men. They combine excessive pay, ego strokes (e.g., calling the employees 'geniuses') and terror to get employees who will not cross the CEO." In such a "criminogenic" environment, the CEO (paging Lord Green!) "optimizes the firm as a fraud vehicle and can optimize the regulatory environment."

In their press release, the Department of Justice announced that HSBC Group "have agreed to forfeit $1.256 billion and enter into a deferred prosecution agreement with the Justice Department for HSBC's violations of the Bank Secrecy Act (BSA), the International Emergency Economic Powers Act (IEEPA) and the Trading with the Enemy Act (TWEA)."

"According to court documents," the DOJ's Office of Public Affairs informed us, "HSBC Bank USA violated the BSA by failing to maintain an effective anti-money laundering program and to conduct appropriate due diligence on its foreign correspondent account holders."

The DOJ goes on to state, "A four-count felony criminal information was filed today in federal court in the Eastern District of New York charging HSBC with willfully failing to maintain an effective anti-money laundering (AML) program, willfully failing to conduct due diligence on its foreign correspondent affiliates, violating IEEPA and violating TWEA."

However, "HSBC has waived federal indictment, agreed to the filing of the information, and has accepted responsibility for its criminal conduct and that of its employees."

In other words, because they accepted "responsibility" for acts that would land the average citizen in the slammer for decades, those guilty of "palling around with terrorists" or smoothing the way as billionaire drug traffickers hid their loot in the so-called "legitimate economy," got a free pass. In fact, under terms of the agreement DOJ's "deferred prosecution" will be "deferred" alright, like forever!

Why might that be the case?

The New York Times informed us that state and federal officials, eager beavers when it comes to protecting the integrity of a system lacking all integrity, "decided against indicting HSBC in a money-laundering case over concerns that criminal charges could jeopardize one of the world's largest banks and ultimately destabilize the global financial system."

Keep in mind this is a "system" which former United Nations Office of Drugs and Crime director Antonio Maria Costa told The Observer thrives on illicit money flows. In 2009, Costa told the London broadsheet that "in many instances, the money from drugs was the only liquid investment capital. In the second half of 2008, liquidity was the banking system's main problem and hence liquid capital became an important factor." Costa said that "a majority of the $352bn (£216bn) of drugs profits was absorbed into the economic system as a result."

Glossing over these facts, Times' stenographers Ben Protess and Jessica Silver-Greenberg, cautioned that "four years after the failure of Lehman Brothers nearly toppled the financial system," federal regulators "are still wary that a single institution could undermine the recovery of the industry and the economy."

"Given the extent of the evidence against HSBC, some prosecutors saw the charge as a healthy compromise between a settlement and a harsher money-laundering indictment. While the charge would most likely tarnish the bank's reputation, some officials argued that it would not set off a series of devastating consequences."

Devastating to whom one might ask? The 100,000 Mexicans brutally murdered by drug gangsters, corrupt police and Mexican Army soldiers whose scorched-earth campaign kills off the competition on behalf of Mexico's largest narcotics organization, the Sinaloa Cartel run by fugitive billionaire drug lord Chapo Guzmán?

"A money-laundering indictment, or a guilty plea over such charges," the Times averred, "would essentially be a death sentence for the bank. Such actions could cut off the bank from certain investors like pension funds and ultimately cost it its charter to operate in the United States, officials said."

Many of the same lame excuses for prosecutorial inaction were also prominent features in the British press.

The Daily Telegraph reported that the "largest banks have become too big to prosecute because of the impact criminal charges would have on confidence in them, Britain's most senior bank regulator has admitted."

"In a variant of the 'too big to fail' problem, Andrew Bailey, chief executive designate of the Prudential Regulation Authority, said bringing a legal action against a major financial institution raised 'very difficult questions'."

"'Because of the confidence issue with banks, a major criminal indictment, which we haven't seen and I'm not saying we are going to see… this is not an ordinary criminal indictment'," Bailey told the Telegraph.

Echoing Bailey, Assistant Attorney General Lanny Breuer said the decision not to prosecute HSBC was made because "in this day and age we have to evaluate that innocent people will face very big consequences if you make a decision."

This from an administration that continues to prosecute--and jail--low-level drug offenders at record rates!

"Breuer's argument is facially absurd," according to William K. Black. In a piece published by New Economic Perspectives, Black argues:

Prosecuting HSBC's fraudulent controlling managers would not harm anyone innocent other than their families--and virtually all prosecutions hurt some family members. Breuer claims that virtually all of HSBC's senior officers have been removed, so his argument is doubly absurd. Mostly, however, Breuer ignores all of the innocents harmed by the control frauds. SDIs [systemically dangerous institutions] that are control frauds are weapons of mass economic destruction that drive global crises and are the greatest enemy of 'free' markets. They are also the greatest threat to democracy, for they create crony capitalism. We are all innocent victims of these control frauds--and the Obama and Cameron governments are allowing them to commit their frauds with impunity from criminal prosecutions. The controlling officers get wealthy without fear of prosecution. The SDIs controlled by fraudulent officers have to purchase an indulgence, but the price of the indulgence is capped by the 'too big to prosecute' doctrine at a level that will not cause it any real distress. Breuer's and Bailey's embrace of too big to prosecute should have led to their immediate dismissals. Obama and Cameron should either fire them or announce that they stand with the criminal enterprises and their fraudulent controlling officers against their citizens.

As Rowan Bosworth-Davies, a former financial crimes specialist with London's Metropolitan Police observed on his web site, "When you get a bank which admits, like HSBC has just done, that it is nothing more than a low-life money launderer for Mexican drug kingpins, and when it serves powerful vested interests to get round internationally-ratified sanctions against rogue nations, what possible benefit is achieved by trying to pretend that they cannot be prosecuted and charged with criminal offences?"

"Oh, excuse me," Bosworth-Davies wrote, "it might impact the confidence they enjoy? Whose confidence, their Mexican drug traffickers, their international sanctions breakers, their global tax evaders, or the ordinary, law-abiding clients who are entitled to assume that their bank will obey the laws imposed on them and will provide a safe place of deposit?"

"Confidence," the former Met detective averred, "what bloody confidence can anyone have when they know their bank is an admitted criminal? When their money is deposited with a bank that breaks the criminal law at every possible opportunity, which cheats them at every turn, sells them fraudulent products, launders drug money, evades international sanctions, moves foreign oligarchs' tax evasion, safeguards the deposit accounts of Third World dictators and their families, then what is that confidence worth?"

Instead, as with the 2010 deal with Wachovia Bank, federal prosecutors cobbled together a DPA that levied a "fine" of $160 million (£99.2m) on laundered drug profits that topped $378 billion (£234.5bn).

Although top Justice Department officials charged that HSBC laundered upwards of $881 million (£546.5m) on behalf of the Sinaloa and Colombia's Norte del Valle drug cartels, federal prosecutors investigating the bank told Reuters in September that this was merely the "tip of the iceberg."

In fact, as Senate investigators discovered during their probe, the bank failed to monitor more than $670 billion (£415.6bn) in wire transfers from HSBC Mexico (HBMX) between 2006 and 2009, and failed to adequately monitor over $9.4 billion (£5.83bn) in purchases of physical U.S. dollars from HBMX during the same period.

Assistant Attorney General Lanny A. Breuer, said in prepared remarks announcing the DPA that "traffickers didn't have to try very hard" when it came to laundering drug cash. "They would sometimes deposit hundreds of thousands of dollars in cash, in a single day, into a single account," Breuer said, "using boxes designed to fit the precise dimensions of the teller windows in HSBC Mexico's branches."

While Breuer's dramatic account of the money laundering process may have offered a gullible financial press corps a breathless moment or two, a closer look at Breuer's CV offer hints as to why he chose not to criminally charge the bank.

A corporatist insider, after representing President Bill Clinton during ginned-up impeachment hearings, Breuer became a partner in the white shoe Washington, DC law firm Covington & Burling. From his perch, he represented Moody's Investor Service in the wake of Enron's ignominious collapse and Dick Cheney's old firm Halliburton/KBR during Bush regime scandals. Talk about "safe hands"!

Appointed as the head of the Justice Department's Criminal Division by Obama in 2009, Breuer presided over the prosecution/persecution of NSA whistleblower Thomas A. Drake on charges that he violated the Espionage Act of 1917 for disclosing massive contractor fraud at NSA to The Baltimore Sun.

More recently, along with 14 other officials Breuer was recommended for potential "disciplinary action" by the Justice Department's Office of the Inspector General over the Fast and Furious gun-walking scandal which put some 2,000 firearms into the hands of cartel killers in Mexico.

"A Justice official said Breuer has been 'admonished'" by U.S. Attorney General Eric Holder, "but will not be disciplined," The Washington Post reported.

Breuer had the temerity to claim that deferred prosecution agreements "have the same punitive, deterrent, and rehabilitative effect as a guilty plea."

"When a company enters into a deferred prosecution agreement with the government, or an non prosecution agreement for that matter," Breuer asserted, "it almost always must acknowledge wrongdoing, agree to cooperate with the government's investigation, pay a fine, agree to improve its compliance program, and agree to face prosecution if it fails to satisfy the terms of the agreement."

As is evident from this brief synopsis, when it came to holding HSBC to account, the fix was already in even before a single signature was affixed to the DPA.

Without batting an eyelash, Breuer informed us that HSBC has "committed" to undertake "enhanced AML and other compliance obligations and structural changes within its entire global operations to prevent a repeat of the conduct that led to this prosecution."

"HSBC has replaced almost all of its senior management, 'clawed back' deferred compensation bonuses given to its most senior AML and compliance officers, and has agreed to partially defer bonus compensation for its most senior executives--its group general managers and group managing directors--during the period of the five-year DPA."

Yes, you read that correctly. Despite charges that would land the average citizen in a federal gulag for decades, senior managers have "agreed" to "partially defer bonus compensation" for the length of the DPA!

As Rolling Stone financial journalist Matt Taibbi commented: "Wow. So the executives who spent a decade laundering billions of dollars will have to partially defer their bonuses during the five-year deferred prosecution agreement? Are you fucking kidding me? That's the punishment? The government's negotiators couldn't hold firm on forcing HSBC officials to completely wait to receive their ill-gotten bonuses? They had to settle on making them 'partially' wait? Every honest prosecutor in America has to be puking his guts out at such bargaining tactics. What was the Justice Department's opening offer--asking executives to restrict their Caribbean vacation time to nine weeks a year?"

"So you might ask," Taibbi writes, "what's the appropriate penalty for a bank in HSBC's position? Exactly how much money should one extract from a firm that has been shamelessly profiting from business with criminals for years and years? Remember, we're talking about a company that has admitted to a smorgasbord of serious banking crimes. If you're the prosecutor, you've got this bank by the balls. So how much money should you take?"

"How about all of it? How about every last dollar the bank has made since it started its illegal activity? How about you dive into every bank account of every single executive involved in this mess and take every last bonus dollar they've ever earned? Then take their houses, their cars, the paintings they bought at Sotheby's auctions, the clothes in their closets, the loose change in the jars on their kitchen counters, every last freaking thing. Take it all and don't think twice. And then throw them in jail."

But there's the rub and the proverbial fly in the ointment. The government can't and won't take such measures. Far from being impartial arbiters sworn to defend us from financial predators, speculators, drug lords, terrorists, warmongers and out-of-control corporate vultures hiding trillions of taxable dollars offshore, officials of this criminalized state are hand picked servants of a thoroughly debauched ruling class.

Writing for the World Socialist Web Site, Barry Grey observed: HSBC "was allowed to pay a token fine--less than 10 percent of its profits for 2011 and a fraction of the money it made laundering the drug bosses' blood money. Meanwhile, small-time drug dealers and users, often among the most impoverished and oppressed sections of the population, are routinely arrested and locked up for years in the American prison gulag."

"The financial parasites who keep the global drug trade churning and make the lion’s share of money from the social devastation it wreaks are above the law," Grey noted.

"Here, in a nutshell," Grey wrote, "is the modern-day aristocratic principle that prevails behind the threadbare trappings of 'democracy.' The financial robber barons of today are a law unto themselves. They can steal, plunder, even murder at will, without fear of being called to account. They devote a portion of their fabulous wealth to bribing politicians, regulators, judges and police--from the heights of power in Washington down to the local police precinct--to make sure their wealth is protected and they remain immune from criminal prosecution."

Regarding America's fraudulent "War on Drugs," researcher Oliver Villar, who with Drew Cottle coauthored the essential book, Cocaine, Death Squads, and the War on Terror: US Imperialism and Class Struggle in Colombia, told Asia Times Online, it is a "war" that the state and leading banks and financial institutions in the capitalist West have no interest whatsoever in "winning."

When queried why he argued that the "war on drugs is no failure at all, but a success," Villar noted: "I come to that conclusion because what do we know so far about the war on drugs? Well, the US has spent about US$1 trillion throughout the globe. Can we simply say it has failed? Has it failed the drug money-laundering banks? No. Has it failed the key Western financial centers? No. Has it failed the narco-bourgeoisie in Colombia--or in Afghanistan, where we can see similar patterns emerging? No. Is it a success in maintaining that political economy? Absolutely."

Equally important, what does the impunity shamelessly enjoyed by such loathsome parasites say about us?

Have we become so indifferent to officially sanctioned crime and corruption, the myriad petty tyrannies and tyrants, from the boardroom to the security checkpoint to the job, not to mention murderous state policies that have transformed so-called "advanced" democracies into hated and loathed pariah states, who we really are?

As the late author J. G. Ballard pointed out in his masterful novel Kingdom Come, "Consumer fascism provides its own ideology, no one needs to sit down and dictate Mein Kampf. Evil and psychopathy have been reconfigured into lifestyle statements."

Paranoid fantasy? Wake up and smell the corporatized police state.

Sunday, November 25, 2012

Senate Set to Introduce Bill for Broad Email Spying

A Senate proposal claiming to "protect" Americans' email privacy from unwarranted secret state intrusions "has been quietly rewritten, giving government agencies more surveillance power than they possess under current law," CNET revealed.

As provisions of the 1986 Electronic Communications Privacy Act (ECPA) are "updated" to better reflect the insatiable needs of our police state minders, law enforcement groups and corporate lobbyists are clamoring for greater access to our electronic communications.

While doe-eyed "progressives" claim that the reelection of war criminal Barack Obama portends an imminent "2.0 reset" by his administration, actions speak louder than words, particularly as they pertain to Americans' constitutional rights.

Most recently the Hope and Change™ fraudster signaled his intentions by giving Israel a green light to murder Palestinians in the open air prison of Gaza. The silence from "progressive" quarters was worse than deafening as writers Chris Floyd and Arthur Silber pointed out.

What about other "liberal icons," stalwart champions of civil liberties; what have they been up to since the election?

CNET investigative reporter Declan McCullagh informed us that "Patrick Leahy, the influential Democratic chairman of the Senate Judiciary Committee, has dramatically reshaped his legislation in response to law enforcement concerns," and that a "vote on his bill, which now authorizes warrantless access to Americans' e-mail, is scheduled for next week."

Among the proposals found in the Leahy revisions are the following:

• Grants warrantless access to Americans' electronic correspondence to over 22 federal agencies. Only a subpoena is required, not a search warrant signed by a judge based on probable cause.

• Permits state and local law enforcement to warrantlessly access Americans' correspondence stored on systems not offered "to the public," including university networks.

• Authorizes any law enforcement agency to access accounts without a warrant--or subsequent court review--if they claim "emergency" situations exist.

• Delays notification of customers whose accounts have been accessed from 3 days to "10 business days." This notification can be postponed by up to 360 days.

Although a follow-up CNET article reported that Leahy, reacting to widespread opposition, has now "abandoned his controversial proposal that would grant government agencies more surveillance power--including warrantless access to Americans' e-mail accounts," given Congress's near universal embrace of the "Total Information Awareness" paradigm, it is a near certainty these measures will return in some form.

"It's an abrupt departure from Leahy's earlier approach," McCullough noted, one "which required police to obtain a search warrant backed by probable cause before they could read the contents of e-mail or other communications."

But in the best tradition of "bipartisanship," i.e., capitulation to the Security State, "after law enforcement groups including the National District Attorneys' Association and the National Sheriffs' Association organizations objected to the legislation," Leahy "pushed back the vote and reworked the bill as a package of amendments to be offered next Thursday."

The strongest objections to providing the public with privacy safeguards came, you guessed it, from officials within Obama's Department of Justice.

Earlier this year, CNET reported that the DOJ "offered what amounts to a frontal attack on proposals to amend federal law to better protect Americans' privacy."

"James Baker, the associate deputy attorney general, warned that rewriting a 1986 privacy law to grant cloud computing users more privacy protections and to require court approval before tracking Americans' cell phones would hinder police investigations."

During Senate testimony back in April, Baker claimed that requiring a search warrant "to obtain stored e-mail could have an 'adverse impact' on criminal investigations. And making location information only available with a search warrant, he said, would hinder 'the government's ability to obtain important information in investigations of serious crimes'."

In other words, even when there is no evidence a crime has been committed the Obama administration is asserting that constitutional safeguards on email stored in the cloud would get in the government's way and impose "an unnecessary burden" on state fishing expeditions by a multitude of law enforcement agencies.

Such fallacious claims come hot on the heels of administration efforts to convince Congress to rewrite wiretapping laws that would require internet firms such as Facebook, Google, Microsoft and Yahoo to build backdoors into their infrastructure for government surveillance.

Earlier this month, Russia Today disclosed that although the FBI "has been adamant about withholding information about their plans to ensure the government can access any encrypted emails or messages sent over the Internet," a federal judge ordered the Bureau to "come clean."

"Washington," RT reported, "hopes to eventually roll out a program that will see that the FBI and other federal agencies are allowed backdoor access to any and all online communications."

The ruling by U.S. District Court Judge Richard Seeborg, in response to charges by the Electronic Frontier Foundation (EFF) that a government stonewall hindered their Freedom of Information Act lawsuit on the FBI's "Going Dark" program, ordered the Department of Justice to conduct "further review of the materials previously withheld."

Although the DOJ's Criminal Division had located 8,425 pages of "potentially responsive information," they only released "one page in full and 6 pages in part, and withheld 51 pages in full." How's that for "transparency"!

And with new Justice Department guidelines allowing "counterterrorism officials" to "lengthen the period of time they retain information about U.S. residents, even if they have no known connection to terrorism" as The Washington Post reported earlier this year, any and every scrap of electronic detritus generated by the billions of cell phone calls, text messages, emails and web searches made by Americans every day is considered fair game by government snoops.

The trend towards retaining more and more data by intelligence agencies and local police has accelerated with technological advances. As The New York Times reported in August, "not so long ago even the most aggressive government surveillance had to be selective: the cost of data storage was too high and the capacity too low to keep everything."

"Not anymore." According to to John Villasenor, a "senior fellow" at the elitist Brookings Institution, as data storage costs plummet "it will soon be technically feasible and affordable to record and store everything that can be recorded about what everyone in a country says or does."

The Brookings analyst averred that "estimates ... to store the audio from telephone calls made by an average person in the course of a year would require about 3.3 gigabytes and cost just 17 cents to store, a price that is expected to fall to 2 cents by 2015."

"Tracking a person's movements for a year, collected from their cellphone, would take so little space as to carry a trivial cost," the Times averred. "Storing video takes far more space, but the price is dropping so steadily that storing millions of hours of material will not be a problem soon."

But wouldn't securocrats drown in these vast oceans of electronic data? Not really. A "parallel revolution in search technology" will soon allow even the dimmest bulb at DHS or the FBI "to efficiently find anything of interest in the data."

This "parallel revolution" was hinted at by investigative journalist James Bamford. In his March piece in Wired Magazine, Bamford described efforts by the National Security Agency to build "super-fast computers to conduct brute-force attacks on encrypted messages."

In 2009, "they made a big breakthrough," a former "senior intelligence official" told Wired. "The NSA believes it's on the verge of breaking a key encryption algorithm--opening up hoards of data."

"That," the former official noted, "is where the value of Bluffdale, and its mountains of long-stored data, will come in," Bamford wrote.

"What can't be broken today may be broken tomorrow. 'Then you can see what they were saying in the past,' he says. 'By extrapolating the way they did business, it gives us an indication of how they may do things now.' The danger, the former official says, is that it's not only foreign government information that is locked in weaker algorithms, it's also a great deal of personal domestic communications, such as Americans' email intercepted by the NSA in the past decade."

And if it can be intercepted, mined and stored, it can be searched, giving government snoops an unprecedented window into our lives.

More troubling still, with ECPA "reform" on the horizon, CNET disclosed that "Leahy's rewritten bill would allow more than 22 agencies--including the Securities and Exchange Commission and the Federal Communications Commission--to access Americans' e-mail, Google Docs files, Facebook wall posts, and Twitter direct messages without a search warrant."

In addition to the SEC, civil subpoena authority would be granted to diverse agencies such as the "Federal Reserve, the Federal Trade Commission, the Federal Maritime Commission, the Postal Regulatory Commission, the National Labor Relations Board, and the Mine Enforcement Safety and Health Review Commission," McCullough wrote.

It doesn't take a rocket scientist to infer that investigative digging by concerned citizens and journalists into the filthy shenanigans and "shitty deals" foisted on the public by banks, shady brokerage houses, mortgage lenders, defense corporations, petrochemical and mining interests, or unions out to "organize the unorganized," would be viewed as a dire threat to the current corporatist set-up.

According to draft proposals leaked to CNET we learn that if passed the new law "would give the FBI and Homeland Security more authority, in some circumstances, to gain full access to Internet accounts without notifying either the owner or a judge."

The Electronic Privacy Information Center (EPIC) reported last month, the organization "is seeking documents about DHS Internet monitoring that some Justice Department officials believe may 'run afoul of privacy laws forbidding government surveillance of private Internet traffic'."

"In February 2011," EPIC disclosed that "the Department of Homeland Security announced that the agency planned to implement a program that would monitor media content, including social media data."

The DHS initiative "would gather information from 'online forums, blogs, public websites, and messages boards' and disseminate information to 'federal, state, local, and foreign government and private sector partners'."

"The program would be executed, in part," EPIC also revealed, "by individuals who established fictitious usernames and passwords to create covert social media profiles to spy on other users. The agency stated it would store personal information for up to five years."

Ironically enough, in October the U.S. Senate Permanent Subcommittee on Investigations issued a report, Federal Support for and Involvement in State and Local Fusion Centers, which found "that DHS-assigned detailees to the fusion centers forwarded 'intelligence' of uneven quality--oftentimes shoddy, rarely timely, sometimes endangering citizens' civil liberties and Privacy Act protections, occasionally taken from already-published public sources, and more often than not unrelated to terrorism."

"Despite reviewing 13 months' worth of reporting originating from fusion centers from April 1, 2009 to April 30, 2010," Senate staff averred, "the Subcommittee investigation could identify no reporting which uncovered a terrorist threat, nor could it identify a contribution such fusion center reporting made to disrupt an active terrorist plot."

In their Freedom of Information Act lawsuit against DHS, the privacy watchdogs obtained nearly three hundreds pages of documents which revealed that the sprawling bureaucracy "is monitoring political dissent." According to EPIC, the documents described widespread surveillance by the agency and included "contracts and statements of work with General Dynamics for 24/7 media and social network monitoring and periodic reports to DHS. The documents reveal that the agency is tracking media stories that 'reflect adversely' on DHS or the U.S. government."

Meanwhile, Senate Subcommittee investigators also found that the agency's disbursement practices were so shoddy that "DHS revealed that it was unable to provide an accurate tally of how much it had granted to states and cities to support fusion centers efforts, instead producing broad estimates of the total amount of Federal dollars spent on fusion center activities from 2003 to 2011, estimates which ranged from $289 million to $1.4 billion."

But as I have pointed out many times, the machinery of state repression is lubricated with cold cash bestowed by taxpayers on privileged corporate insiders. Earlier this month, Washington Technology reported that "the top 20 contractors at the Homeland Security Department represent more than a third of all business done by contract at the department during fiscal 2011."

According to the report, "DHS spent $5.1 billion with the top 20 companies, and $14.2 billion on all contractors," with "IT and systems integration firms," integral to constructing and running the secret state's panopticon, topping the list.

• • •

Since the 9/11 provocation, intrusive surveillance of the American people by a host of shadowy government agencies and private corporations clearly demonstrates there is broad ruling class consensus for expanding authoritarian and dictatorial forms of rule under an unconstitutional "Unitary Executive."

Recent revelations by The Washington Post that the Obama regime "has been secretly developing a new blueprint for pursuing terrorists, a next-generation targeting list called the 'disposition matrix'," starkly reveals that when the president can spy on or kill whomever he pleases, on his own initiative and without the checks and balances enshrined in the U.S. Constitution, the Bill of Rights is effectively a dead letter.

While we do not know what form a "new and improved" ECPA will take when it emerges from the bipartisan congressional snake pit, the prospects for ever emerging from America's "friendly fascist" nightmare are growing dimmer.

Sunday, November 11, 2012

Greek Journalist Acquitted for Blowing Tax Fraud Whistle. Widespread Corruption Linked to Private HSBC Accounts

Earlier this month, Greek investigative journalist Kostas Vaxevanis was acquitted by an Athens court of charges that he breached data privacy laws with the publication of a list of tax cheats and money launderers.

Vaxevanis, who publishes the investigative news magazine Hot Doc, faced two years in prison and a €30,000 ($38,000) fine over that publication's outing of 2,000 Greeks who hold secret banks accounts at HSBC's private banking arm in Switzerland.

Known as the "Lagarde List," data on high-profile offenders had been transferred to Greek authorities by Christine Lagarde, the former French Finance Minister and current head of the International Monetary Fund (IMF), where it languished for two years.

While the Greek people are forced into abject poverty under an "austerity" regime designed to enrich their corporate masters, a criminal class of political overseers backed by brutal police and rampaging neo-Nazis, billions of euros were shielded as successive "left" and "right" governments failed to act.

Insider Leaks

The Vaxevanis arrest was unique in one respect: unlike official probes into drug money laundering, tax fraud and terrorist financing by major banks, explosive allegations of widespread financial corruption was kick-started by a journalist's investigative digging despite government complicity and cover-up.

And as with other major disclosures which have come to light in the last decade--from the Iraq-Niger uranium fraud, the Downing Street Memo or spying on UN officials by Western intelligence services--Hot Doc's revelations began with insider leaks from a whistleblower.

The source of Madame Lagarde's List was Hervé Falciani, a computer services specialist with HSBC Private Bank (Suisse) N.A., who supervised data migration on individual accounts.

Increasingly troubled by the bank's dubious practices, for two years beginning in 2006, he mirrored account information onto his laptop.

In 2008, an international arrest warrant was issued by Swiss authorities; however, they committed a serious error. Falciani, a dual French-Italian citizen whom neither country would extradite, was picked up in Nice. When French prosecutors, acting on behalf of Swiss police, searched his home and seized his laptop, they discovered files on 130,000 alleged tax evaders.

Rather then arresting Falciani, they opened an investigation into the alleged tax evaders. When French authorities let it slip to the media that had files on some 3,000 Swiss HSBC account holders and that they would prosecute, they recuperated some €1.2 billion ($1.5bn) in unpaid taxes from profligate citizens.

In the interim, a diplomatic row ensued; Switzerland accused France of using stolen data and the French countered, threatening to have Switzerland added to the OECD Tax Haven Black List. Over Swiss objections, then Finance Minister Lagarde shared the data with tax officials in cooperating countries.

Arrested in Barcelona on July 1, Swiss authorities are demanding Falciani's extradition to Switzerland where he faces charges of data theft and violation of bank secrecy laws.

If convicted, Falciani faces a three-year prison term and a fine that could top €200,000 ($253,000).

Revelations contained in those leaked files touched off major probes across Europe. In Italy, Italian Treasury officials recovered some €570 million ($730m) from HSBC account holders.

In Spain, the high-profile investigation into the finances of the banking clan led by Emilio Botín, the wealthy Chairman of the Santander banking dynasty caused a sensation.

And why wouldn't it? Like Greece, Spain's working class is confronted by demands from international lenders to impose draconian austerity measures, including some €37 billion ($46.9bn) in budget cuts in the face of a severe recession and record-high unemployment.

Last spring, El País reported that "Botín, his daughter Ana Patricia Botín (the head of Santander's British banking unit), his brother Jaime and five of his brother's children were among the names of 659 Spanish residents who hold secret Swiss accounts at HSBC Private Bank, with a combined value of some six billion euros."

Confronted by public outrage and threats of criminal prosecution by Spanish authorities over allegations of tax fraud, the Botín clan caved-in and ponied-up €200 million ($253m).

In a report last summer on Switzerland's extradition request, El País reported, "now that Falciani is being held in a Spanish jail, the High Court is faced with a legal problem, according to judicial sources."

Why might that be the case?

"The information coming from Falciani's database has already been used to prosecute Spaniards and no one in Spain has presented a complaint against the former HSBC computer analyst for 'stealing' private bank records."

The most serious hurdle which Swiss authorities must overcome are that allegations against Falciani are not considered criminal offenses in Spain.

"In fact," El País noted, "the Law for the Prevention of Money Laundering states that banks have the obligation to report any illicit activities. This might not apply to Falciani because he was only an employee, but the results from the hundreds of investigations opened in Spain because of his list prove that he complied with the law."

The same cannot be said for HSBC, Santander or other financial giants considered "too big to fail, or jail."

After his July arrest, The Daily Telegraph reported Falciani as saying that "he took the customer details in order to expose tax evasion among HSBC's customers," considering it his "civic duty."

"If you discover that...offshore structures have no other aim than to avoid taxation and that the sole legitimacy of these structures is that purpose," he asked, "what would you do?"

Why you expose the bastards, of course!

This wouldn't be the first time the hammer of "justice" came crashing down on a financial insider who exposed gross financial chicanery, while state officials allowed perpetrators to walk.

Moves against Falciani by the Swiss government are reminiscent of the U.S. Justice Department's 2008 prosecution of UBS whistleblower Bradley Birkenfeld.

A former UBS banker in Switzerland, Birkenfeld blew the lid off a massive scheme by the bank to illegally hide 19,000 U.S. client accounts squirreled away in dodgy offshore tax havens for purposes of money laundering and tax fraud.

The IRS has calculated that the total cost in lost revenue stolen from the American people by wealthy elites may be in excess of $100 billion annually.

This however, pales in comparison to the so-called "tax gap"--the gap between taxes owed and collected. Former IRS Commissioner Charles Rossotti told PBS Frontline nearly a decade ago that the "biggest single source" of the problem are abusive offshore tax shelters which account for an estimated $250 to $300 billion in uncollected revenues; the equivalent of a 15 percent surtax on everyone else.

A U.S. Senate panel at the time, recalling their recent investigation of HSBC, accused UBS and Liechtenstein's LGT Group of marketing tax fraud strategies to rich Americans. In 2009, UBS agreed to pay $780 million in fines and the Treasury Department recovered some $20 billion in unpaid taxes. However, not a single UBS official was criminally prosecuted, or even charged, the result of a sweetheart "deferred prosecution agreement" negotiated with the Justice Department.

Such deals result in little more than a slap on the wrist for well-connected offenders and are considered to be a small cost of doing business.

Readers will recall that the 2010 deferred prosecution agreement cobbled together between the Justice Department and Wachovia Bank led to a microscopic $160 million fine despite strong evidence that the bank, now owned by Wells Fargo, as Bloomberg Markets magazine revealed, had laundered upwards of $378 billion for Colombian and Mexican drug cartels.

As for Birkenfeld? Despite his testimony and cooperation with the federal government in exposing massive fraud by UBS, he was tried and sentenced to 40 months in prison. He pled guilty in 2008 for helping Florida real estate billionaire Igor Olenicoff stash more than $350 million offshore according to Olenicoff's Forbes profile.

However, federal prosecutors lied to the judge when they claimed during his sentencing hearing that he had not exposed Olenicoff's fraud; in fact, he had, on multiple occasions, beginning with his 2007 testimony before the U.S. Senate Permanent Subcommittee on Investigations.

Set to be released this month, Birkenfeld, whom the New York Daily News said deserved "a statue on Wall Street," was eventually paid a $104 million award by the IRS in September for acting as a corporate whistleblower.

Another Day, Another Filthy HSBC Scandal

When news of the Falciani leak went public, Alexandre Zeller, the chief executive of HSBC's Swiss subsidiary said at the time, "We deeply regret this situation and unreservedly apologize to our clients for this threat to their privacy."

Press reports failed to mention whether HSBC apologized to European taxpayers for the role they played in continent-wide tax fraud.

As Antifascist Calling has previously reported (here, here and here), the multinational banking giant stands accused by U.S. Senate investigators of smoothing the way for terrorist financiers and money laundering drug cartels.

Vaxevanis's revelations over the bank's secret Swiss accounts comes at a time when HSBC is "actively engaged" in settlement talks with federal prosecutors. Fines for serious breaches of U.S. banking laws could now reach upwards of $1.5 billion (£940m), The Guardian reported.

According to The New York Times, "prosecutors are considering criminal charges related to money laundering, according to several law enforcement officials with knowledge of the matter. It would be the first such case stemming from the broad investigation."

Despite these facts, and despite claims by current CEO Stuart Gulliver that HSBC's criminal practices were "regrettable" and that the bank "failed to spot and deal with unacceptable behavior," British tax authorities "obtained details of every British client of HSBC in Jersey after a whistleblower secretly provided a detailed list of names, addresses and account balances earlier this week," The Daily Telegraph disclosed.

Among those receiving the red carpet treatment at HSBC's Jersey branch were drug dealer Daniel Bayes, currently on the lam in Venezuela, "Michael Lee, who was convicted of possessing more than 300 weapons at his house in Devon; three bankers facing major fraud allegations and a man once dubbed London's 'number two computer crook'."

According to the Telegraph, the list "identifies 4,388 people holding £699 million in offshore current accounts and they are also likely to have billions of pounds more in investment schemes. Several celebrities and other well-known figures are understood to be identified in the client data."

Unsurprisingly, HSBC's Jersey client list is "heavily dominated by senior figures in the City. Dozens of bankers are understood to have deposited six-figure sums offshore with some institutions said to have 'clusters' of employees taking advantage of the accounts."

"One investment manager has more than £6 million in his account," the Telegraph noted, "while the average amount held is £337,000. Under Britain's non-domicile rules, those with foreign roots only have to pay tax on money entering Britain--provided it is earned abroad. However, more seriously for HSBC, dozens of people with no obvious legal source of substantial income are holding large sums in Jersey."

In other words, like their North American banking affiliate, HBUS, accused of laundering billions of dollars for Mexican drug cartels, HSBC Jersey may be a conduit for European drug syndicates seeking a safe harbor for illicit wealth.

Richard Murphy, a prominent British tax accountant and campaigner against offshore tax havens like Jersey told The Daily Mail the leaked HSBC accounts could be the "tip of the iceberg."

Murphy added: "This bank was clearly out of control. It confirms what we've begun to realise, that this is a bank that was, during the period that the Reverend Lord Stephen Green was in charge, the world's biggest money-launderer."

It now appears from these latest revelations this continues to be the case.

Contradicting claims made in sworn testimony before the Senate Permanent Subcommittee on Investigations last summer that the bank would "apologize, acknowledge these mistakes, answer for our actions and give our absolute commitment to fixing what went wrong," they were singing another tune last week when the Telegraph story broke.

A bank spokesperson averred: "HSBC has a duty of confidentiality and cannot comment on clients even to confirm or deny they are clients. We have good relationships with our regulators and co-operate with investigations when required to do so."

Translation: "if you catch us in the act we'll 'fess up, otherwise mum's the word chumps!"

More recently, The Daily Mail reported that "hundreds of tax dodgers" on the Lagarde List "will escape prosecution and will be allowed to keep their identities hidden."

Despite the fact that some "6,000 British names linked to HSBC bank accounts in Geneva were handed to the tax authorities in 2010 by Mrs Lagarde," HM Revenue and Custom's officials "have decided to offer them immunity in exchange for payment of a penalty and their tax bills."

While "critics have accused tax officials of offering immunity deals to almost everyone on the HSBC list, whether they owe a few pounds or billions," HMRC handed tax fraudsters a cozy arrangement which protected their anonymity and simultaneously shielded serious offenders from prosecution, the Mail disclosed.

Trifling details such as these shouldn't surprise anyone. As the Tax Justice Network pointed out, British tax officials "had sold off 650 of their offices to a company called Mapeley Steps Ltd., a company owned in Bermuda, and leased them back for 20 years."

Mapeley is now owned by the U.S. private equity firm, Fortress, "headquartered in the tax haven of Guernsey. Now private equity firms make a lot of money for their owners--and note carefully that does not mean they make a lot of money for their foolish investors."

It turns out the "company has now revealed a £103m loss and the directors admit that there are material uncertainties as to the group as a going concern."

Ironically enough, guess who might own Mapeley if it goes under? You guessed right if you said: "Britain's tax offices will become the property of its bankers."

Talk about "state capture"!

But it gets worse. As Rowan Bosworth-Davies, a former financial crimes specialist with London's Metropolitan Police observed on his web site Friday, Britain's Financial Service Authority (FSA) are utterly clueless when it comes to cracking down on illegal drug money laundering by British banks.

"The importance of this question is that it goes right to the heart of the whole responsibility of the FSA for regulating one major element of the UK financial market," Bosworth-Davies wrote, "the element of money laundering. Yet the answers appear to be frankly unsatisfactory, complacent, almost evasive, although the first answer from Lord Turner, boss of the UK's financial regulatory agency, was right on the money when he said: 'I would have to say that I do not know the answer to that...'"

Commenting on hearings in the House of Commons by its Home Affairs Committee into the illegal proceeds of the narcotics trade washed through British banks, the former Met detective wrote that "FSA lost the plot a long time ago."

"As a result, the industry they sit above generally despises them, and ignores them most of the time. How else can you interpret the level of financial criminality that goes repeatedly unpunished, the level of organised criminality which is endemic within the British banking sector, and the criminogenic culture which permeates the sector."

In the face of pervasive corruption and official negligence which crosses the line into outright complicity, Bosworth-Davies wonders: "Can we expect prosecutions now to be brought against HSBC as a result of the Jersey revelations today, which are clearly so blatant and so scandalous as to be nothing more than a direct challenge to the authority of the law. Might be ok if we had a prosecuting authority willing to take responsibility to bring a case, but I wouldn't hold your breath!"

"Austerity" Regimes: Fronts for Global Crime

The problem of money laundering, tax fraud and the illegal offshoring of wealth isn't solely an issue for Britain, Greece or for that matter, the United States: it is a global phenomenon. One which clearly demonstrates, as economic analyst Michel Chossudovsky, the director of the Center for Research on Globalization has long observed, represents the "criminalization of the state," that is, the end stage of a capitalist system in terminal crisis.

On the one hand, the managed drug trade overseen by wealthy banking elites, and exploited as a tool by Western intelligence services, and on the other, moves to impose "fiscal austerity" on a planetary scale would seem to be unrelated phenomenon. On the contrary, they represent two sides of the same coin, the upward transfer of wealth by well-connected insiders seeking geopolitical advantage for those in on the game.

Indeed, the same crooked bankers now demanding that supposedly "irresponsible" governments get their "fiscal houses in order" are the very miscreants who thrive on the chaos arising from laundered drug money and financial speculation.

Although Hot Doc's publication of secret HSBC accounts embarrassed the Greek government and their European paymasters, moves to reduce Greek workers to abject poverty continue apace.

With the Greek government knuckling under to "austerity" measures demanded by the European Central Bank (ECB), European Union (EU) and the IMF, a new €31.5bn ($39.9bn) "bailout"--designed to indemnify hyena bankers, not struggling Greeks, from losses--will impose ever-harsher conditions on the working class.

Lining the pockets of institutional lenders who drove the crisis in the first place, let's call the raft of complex cross-currency "swaps," dodgy derivatives and "rescue packages" what they are: a filthy grift which Greeks are forced to pay with their lives.

The "Troika's" latest demands include the imposition of a six-day work week, the continued sell-off of public assets to vampire investors at fire sale prices and the virtual destruction of the social safety net.

Quite naturally, such measures are viewed as a splendid means to bailout financial speculators in Berlin, Wall St. and the City of London responsible for looting the Greek economy. And if millions of people are consigned to the scrap heap? Well, tough luck suckers!

Reuters reported that the Greek government "presented a new austerity package to parliament on Monday as a week of strikes and protests kicked off over proposals that lawmakers must approve if the country is to secure more aid and stave off bankruptcy."

Key features lusted after by the Euro bosses include a "package of measures making it easier to hire and fire workers and a series of cost cuts and tax hikes that should amount to 13.5 billion euros ($17 billion) by 2016."

Greece's powerful unions launched a 48-hour general strike against the government. Tens of thousands of Greek workers took to the streets, opposing a regime that engineered the virtual collapse of living standards. Since the eruption of the so-called European "debt crisis" three years ago, disposable income has fallen by a staggering 35 percent for the average Greek worker.

As the World Socialist Web Site noted in September, "The social situation of the majority of Greeks is already catastrophic. While pensions and wages have fallen by up to 60 percent, mass consumption taxes have been hiked up and millions of jobs cut. In the first three months of this year wages fell by 11.5 percent compared to the previous year."

"The official unemployment rate," reporter Christoph Dreier averred, "stands at 24.4 percent and at 55 percent among young people. Nearly sixty percent of the unemployed receive no state support at all. According to the unions, the real level of unemployment is much higher."

Last week, the World Socialist Web Site reported that austerity measures imposed by the Greek government will include massive "cuts to the health care system. Already decided are savings in health care totaling €2 billion. Part of this sum is to be achieved by laying off 10 percent of doctors and other staff in public hospitals."

Cuts in the budget have already seriously impacted the delivery of vital health care services to Greek citizens.

According to Dreier, doctors and pharmacists "are owed €230 million by the country's biggest health insurance company, EOPYY. As a result," as in cash-strapped Third World countries, "patients must pay in advance at pharmacies and also for some doctors' services and submit the bills later to their health insurer. Such upfront payments are often impossible for the old, the poor and the chronically ill, meaning they have to do without medicines and treatment."

"A growing number of children," the leftist critics noted, "are contracting infectious diseases such as diphtheria and meningitis because their parents cannot afford the necessary vaccines. New HIV infections also increased by over 50 percent in 2011 alone."

In the context of endemic corruption and massive fraud among wealthy elites, it is no surprise that Lagarde's list was passed to Greek officials--and ignored--more than two years ago.

According to multiple press reports, the list was buried by successive governments. Among those charged with the cover-up were officials from the right-wing New Democracy party led by current Prime Minister Antonis Samaras and former Prime Minister George Papandreou's fake "socialist" PASOK organization.

"In the two years since it had been handed to Greek authorities by the IMF's chief Christine Lagarde," The Guardian reported, "the infamous tally of suspected tax evaders had caught the popular imagination ... the failure of successive governments to act on the list and crack down on tax evaders had raised suspicions that corrupt vested interests ran to the top of society."

Greece, Vaxevanis wrote in The Guardian, is an "exclusive club of powerful people" which "engages in illegal practices, then pushes through necessary laws to legalise these practices, granting itself an amnesty, and in the end, there are no media to uncover what really happened."

"The 'Lagarde' case in Greece is merely an extreme expression of this situation," Vaxevanis averred.

"In 2010, Lagarde handed to the then minister of finance, George Papaconstantinou, a list of Greeks who held bank accounts abroad. Some of this was 'black money'--money that may not have been taxed or needed to be laundered."

"In a convoluted train of events," Vaxevanis noted, "Papaconstantinou admitted to losing the original data, but was able to pass another copy to his successor Evangelos Venizelos, who eventually admitted to having held it but has failed to produce it so far. The list has still never been properly investigated."

"It is quite clear the political system did everything not to publish this list" he said.

"If you look at the names, or the offshore companies linked to certain individuals, you see that these are all friends of those in power," he told the Guardian during a recess in his recent trial.

"We live in a country where, on the one hand, tax evasion is rampant and, on the other, people are eating out of rubbish trucks because of salary cuts, because they can't make ends meet."

"They can no longer play hide and seek," Vaxevanis told The Daily Telegraph, "and they cannot demand the little old lady in a village to make more painful sacrifices and have her pension cut when a small group of oligarchs continues to grow wealthy."

In a Reuters interview the journalist said that "the main problem in Greece is the people who govern it. It is a closed group, an elite, one part of which is composed of people from all the parties and the second connected directly or indirectly to business people."

Sound familiar? It should. And if you think "austerity" is a game that only the Europeans are playing, better think again!

With talk of a "grand bargain" in Washington over an alleged "fiscal cliff," Hope and Change™ grifter Barack Obama, feckless Democrats and their Republican brethren are planning to implement a program that will slash the federal budget deficit through massive cuts in education, health care and social spending while leaving the Pentagon's bloated budget virtually untouched.

With "comprehensive tax reform" in the offing, the sole beneficiaries will be giant corporations and the rich who will continue to launder trillions of dollars in "non-taxable" wealth offshore.

Tuesday, October 30, 2012

HSBC Caught in New Drug Money Laundering Scandal

While HSBC's Canary Wharf masters are back-peddling furiously over charges that they gave a leg up to terrorist financiers and drug traffickers as a recent U.S. Senate report charged, new evidence emerged that its business as usual for the multinational banking giant founded by Hong Kong-based British opium merchants.

Earlier this month, The Independent reported that French police had "intercepted one of the dozens of 'go-fast' cars which transport cannabis at high speed from Spain to Paris. The seizure--banal in itself--unravelled an extraordinary network of drug-trafficking, money-laundering, fraud and tax evasion which sprawled over the invisible barrier which separates Paris from the city's poor, multiracial suburbs."

The bank embroiled in this latest scandal? Why HSBC, of course!

According to reporter John Lichfield, "bank notes handed by clients to street drug dealers in the suburbs were ending up, French and Swiss investigators discovered, in the safes of seemingly law-abiding, well-heeled citizens in the French capital."

But that's not the only place where crisp bundles of cash were turning up.

"A trio of Moroccan brothers, including a prominent fund manager in Geneva, are alleged to have concocted an elaborate scheme to launder money by balancing two illegal flows of cash," The Independent averred.

At the center of this multimillion euro money laundering spider's web were: Meyer El-Maleh, the managing director of the fund management firm GPF SA, and brothers Mardoché El-Maleh, the alleged bagman of the cannabis-for-cash scheme and Nessim El-Maleh, a fund management specialist with the Swiss private banking arm of HSBC, HSBC Private Bank (Suisse) S.A.

The Independent reported that the trio "are suspected of handling up to €12m (£9.6m) in cash in the past seven months (and far more over the past four years). Assets seized by the police include €2m in cash, gold ingots, art treasures and guns."

"The HSBC bank has confirmed that its employee was involved in the affair," Swiss Info disclosed, "but says that it has been 'cooperating actively with the authorities about this over the past few months'. The Swiss newspaper Le Temps reports that GPF SA is about to dismiss the other brother."

Talk about closing the barn door after the horses have escaped!

Among the well-heeled perps arrested by authorities on charges of "conspiracy to launder money and association with criminals" was Florence Lamblin, a prominent Green Party politician and deputy mayor of the 13th arrondissement in Paris.

Her arrest was all the more ironic considering that fake "left" Greens are currently in coalition with François Hollande's pro-austerity "Socialist" government. Lamblin and her coalition partners had run on a platform demanding tougher action against (wait for it) international money laundering!

When Lamblin's home was raided "police discovered €400,000 (SFr484,000) in low-value notes" in safes belonging to the "progressive" politician, Swiss Info averred.

In the wake of her arrest, Lamblin was forced to resign although she denied "any involvement" in the drug smuggling scheme.

Her lawyer, Jérôme Boursican told AFP "she had held 350,000 euros from a family legacy in a Swiss account."

"If anything, my client may be guilty of tax fraud, over the transfer back to France of a sum of €350,000 from a family inheritance which was placed in a Swiss bank account in 1920," Boursican explained.

The attorney told France 24 that he would ask a judge "to dismiss the case against his client 'as soon as possible' and blamed her involvement on a 'judicial error'."

The "error" of getting caught perhaps?

Despite Lamblin's professed innocence, Swiss Info reported that "the sums involved are huge." French police have charged that "the sum involved in the money laundering is about €40 million, while French Interior Minister Manuel Valls says that the drug smuggling must have brought in about €100 million."

As preliminary reports suggest it appears that Lamblin was keen on keeping more than the environment "green."

A typical money laundering "placement" scheme, "cannabis profits leaving France were 'swapped' for assets hidden in Switzerland which tax cheats or business fraudsters wished to repatriate," The Independent reported.

"The risky job of smuggling drug-trafficking proceeds over the Franco-Swiss border was avoided," Lichfield wrote. "Instead, the drugs cash was handed over in plastic bags to Parisians who had hidden Swiss accounts."

"The same sums were debited from their banks in Geneva and sent on a complex route through shell companies in London and offshore tax havens to purchase assets for the drug barons in Morocco, Dubai or Spain. A commission was allegedly paid on both transactions," The Independent averred.

Referred to as "layering," the transfer of funds took place through a series of opaque financial transactions that camouflaged their illegal origins. In the case of our well-heeled Parisians, drug profits were swapped through bank-to-bank and bulk cash transfers via private banks in Geneva, one of which was owned by HSBC.

As Senate investigators disclosed, "Bulk cash shipments typically use common carriers ... to ship U.S. dollars by air, land, or sea. Shipments have gone via airplanes, armored trucks, ships, and railroads."

"Shippers," Senate staff averred, "may be 'currency originators,' such as businesses that generate cash from sales of goods or services; or 'intermediaries' that gather currency from originators or other intermediaries to form large shipments. Intermediaries are typically central banks, commercial banks, money service businesses, or their agents."

Eschewing armored cars, airplanes or ships, the "originators" of these illegal cash flows preferred ubiquitous black plastic trash bags and "go-fast" limousines as the method of choice for bulk cash transfers. It would certainly cut down on shipping costs as the loot moved "offshore" and entered the shadow world of private banking!

As financial researcher James S. Henry pointed out in The Price of Offshore Revisited: "The term 'offshore' refers not so much to the actual physical location of private assets or liabilities, but to nominal, hyper-portable, multi-jurisdictional, often quite temporary locations of networks of legal and quasi-legal entities and arrangements that manage and control private wealth--always in the interests of those who manage it, supposedly in the interests of its beneficial owners, and often in indifference or outright defiance of the interests and laws of multiple nation states."

"A painting or a bank account may be located inside Switzerland's borders," Henry wrote, "but the all-important legal structure that owns it--typically that asset would be owned by an anonymous offshore company in one jurisdiction, which is in turn owned by a trust in another jurisdiction, whose trustees are in yet another jurisdiction (and that is one of the simplest offshore structures)--is likely to be fragmented in many pieces around the globe."

Given Switzerland's strict bank secrecy laws, we do not know, and Senate investigators did not disclose, how many billions of dollars were hidden for HSBC's private banking clients in Geneva, where it originated or whether or not occult wealth shielded from scrutiny was derived from organized criminal activities.

In July however, when the Senate pointed a finger directly at HSBC over anti-money laundering "lapses," The Bureau of Investigative Journalism revealed that "British clients of an HSBC-owned private Swiss bank that is the focus of a major HM Revenue & Customs investigation are alleged to have evaded tax by an amount likely to exceed £200m."

Lord Stephen Green, Baron of Hurstpierpoint and current Minister of Trade and Investment in David Cameron's Conservative government, was previously HSBC's chief executive and the chairman and director of HSBC Private Banking Holdings (Suisse) N.A. for ten years.

During Green's tenure, journalist Nick Mathiason disclosed that "the sums allegedly evaded by Britons using HSBC's Swiss bank are massive. HMRC told the Bureau 'the early indications are that the amounts are significant'."

According to Mathiason, in 2010 the HMRC "received data smuggled out of HSBC by a former bank IT worker, now under arrest in Spain and facing possible extradition to Switzerland, that contained details of 6,000 UK-linked individuals, companies and trusts. Two senior tax investigators who both worked at HMRC told the Bureau the average amount evaded in the 6,000 accounts is likely to range between £33,000 and £50,000."

While the sums involved in the Parisian money laundering and drugs scandal may be chump change in comparison to the trillions of dollars in illicit drug money that enters the system each year as a result of "normal business relations" between global drug cartels and the international financial system as the United Nations Office on Drugs and Crime (UNODC) revealed last year, it does demonstrate the utterly corrupt nature of the system as a whole.

Indeed, seeming ideological foes are joined at the hip when it comes to fleecing the working class and imposing austerity and privatization schemes that profit their real constituents--the global class of financial parasites who "win" regardless of which party of hucksters gain power.

As Henry observed, "private elites ... had accumulated $7.3 to $9.3 trillion of unrecorded offshore wealth in 2010, conservatively estimated, even while many of their public sectors were borrowing themselves into bankruptcy, enduring agonizing 'structural adjustment' and low growth, and holding fire sales of public assets."

Public sector thefts that enrich the shareholders and officers of corrupt institutions like HSBC.

Although settlement talks between U.S. regulatory agencies and HSBC has forced the bank to set aside at least $700m (£441m) to meet the cost of any fines, it is highly unlikely that officials at the bank will be criminally charged.

Currently negotiating with the Justice Department, the Federal Reserve and the Office of the Comptroller of the Currency over serious allegations that the bank conducted a multiyear, multibillion dollar business with terrorist financiers and global drug cartels, the price tag may balloon even higher.

"HSBC's $700 million set-aside, if paid, would constitute the largest U.S. settlement reached over such allegations, topping the $619 million in penalties and forfeitures paid in June by ING Groep NV, the biggest Dutch financial-services company," Bloomberg News reported.

According to The New York Times, "federal authorities think HSBC could end up paying at least $1 billion. The bank itself said 'it is possible that the amounts when finally determined could be higher, possibly significantly higher'."

A spokesperson for HSBC however, told the Times this "case is not about HSBC complicity in money laundering. Rather, it's about lax compliance standards that fell short of regulators' expectations and our expectations, and we are absolutely committed to remedying what went wrong and learning from it'."

But as Rowan Bosworth-Davies, a former financial crimes specialist with London's Metropolitan Police observed: "You don't launder this volume of money by accident, because somewhere along the line, your systems and controls for preventing money laundering just 'broke down'! You do it because you work in a bank which is willing to flout every rule in the book and engage in layer upon layer of criminal conduct if the money is right! You do it because your management structure is defined by a criminogenic determination to amplify the anomic environment within which you operate and in which you expect your staff to co-operate."

For their part, Swiss bankers are scrambling to put as much daylight as possible between themselves, the Paris money laundering scandal and HSBC.

Bernard Droux, the chairman of the Geneva Financial Center foundation, an umbrella group of independent banks and wealth managers told Swiss Info: "We were surprised that it should still be possible to do this today. This is a practice that has been forbidden by law for more than 20 years."

But as with other recent examples of financial skullduggery, Droux reverted to form and claimed "You can never rule out the possibility of black sheep in any profession. No international centre is totally protected from this kind of thing."

He hastened to add that Switzerland was at the "forefront" of the international fight against drug money.

However, Droux's "black sheep" brush-off was undercut by a recent Bloomberg Businessweek report. We were informed that "Swiss private banks are looking for footholds in Latin America as the lower fees and higher interest rates offered by local wealth managers deter the region's super-rich from traveling to Geneva and Zurich."

This "changing relationship," Bloomberg reported, began "in the 19th century when Swiss banks guarded the fortunes of plantation owners and mining magnates. UBS AG (UBSN), Credit Suisse Group AG (CSGN) and other Swiss banks are being forced to seek acquisitions as Latin America’s $3.5 trillion wealth management market is set to grow by more than half by 2016, according to Boston Consulting Group."

"'People are becoming richer and richer,' said Gustavo Raitzin, head of Latin America for Julius Baer Group Ltd. (BAER). 'An emerging consumer class wants to make liquid investments and they need private banks and wealth managers'."

It is worth recalling in this context that Julius Baer's Cayman Islands division, as the whistleblowing web site WikiLeaks revealed, was instrumental in squirreling away "several million dollars" of funds controlled by late Mexican Army General Mario Acosta Chaparro and his wife, Silvia, through a shell company known as Symac Investments.

Acosta, who served time in prison for his ties to the late drug trafficking kingpin Amado Carrillo Fuentes, the self-styled "Lord of the Heavens" who ran the Juárez Cartel, was killed in May when an assassin fired three rounds from a a 9mm revolver into his head.

The secret-spilling web site averred: "With the assistance of Julius Baer, Mr Chaparro was able to invest several millions of USD in Symac with all the secrecy which the Caymans allowed and to draw out some $12,000 a month."

Who else might be in need of "private banks and wealth managers" employed by the likes of HSBC and Julius Baer to make such "liquid investments" possible with no questions asked?

Paging Chapo Guzmán, white courtesy telephone!

(Image courtesy of Daniel Hopsicker's MadCow Morning News)

Sunday, October 21, 2012

Teflon President? Noose Tightens Around Uribe as Former Death Squad Leaders Spill the Beans

Last month's capture of Colombian drug lord Daniel "El Loco" Barrera by Venezuelan police was hailed as a "victory" in the "War on Drugs."

Barrera, accused of smuggling some 900 tons of cocaine into Europe and the U.S. throughout his infamous career, was described by Colombian President Juan Manuel Santos, who announced the arrest on national television, as "the last of the great capos."

But what of the "capo" who enjoyed high office, is wined and dined by U.S. corporations and conservative think-tanks, owns vast tracks of land, is a "visiting scholar" at a prominent American university (Georgetown) and now sits on the Board of Directors of Rupert Murdoch's News Corporation?

When will they be brought to ground?

A Family Affair

To clarify the questions above, one need look no further than the kid-gloves approach taken by the media when it comes to former Colombian President, the U.S. "Presidential Medal of Freedom" recipient Álvaro Uribe.

Accused by human rights organizations over his role in the forced disappearance of thousands of Colombians during two terms in office (2002-2010), Uribe may still land in the dock as a result of ongoing investigations by Colombia's Supreme Court into official corruption, drug trafficking and mass murder.

Recent arrests by Colombian authorities and revelations by the president's former allies however, are beginning to draw a circle around Uribe and the U.S. secret state in some of the hemisphere's worst human rights abuses of previous decades.

As the net tightens, members of the president's own family are sharply focused in the cross-hairs of investigators. Back in June, Antifascist Calling reported on the arrest of Ana Maria Uribe Cifuentes and her mother, Dolly Cifuentes Villa on drug trafficking and money laundering charges. The U.S Treasury Department froze their assets last year.

Accused by the Justice Department of having trafficked some 30 tons of cocaine into the U.S. as business partners of Sinaloa Cartel boss Joaquín "El Chapo" Guzmán, the women, members of the Cifuentes Villa crime family led by Dolly's brother, Jorge Milton Cifuentes Villa, are prominent members of Colombia's jet-setting narco-bourgeoisie.

According to the Justice Department, the investigation revealed that "the Cifuentes Villa drug trafficking organization was using sophisticated drug trafficking routes to distribute multi-ton cocaine loads from Colombia through Central America, for ultimate distribution in Mexico and the United States." In 2009, some 8.3 tons of cocaine which the family were attempting to export to Mexico were seized by law enforcement officials in Ecuador.

Federal prosecutors charged that the Cifuentes Villa family owns or controls 15 companies operating in Colombia, Mexico and Ecuador involved in a variety of ventures that supported their narcotrafficking enterprise.

Among the firms targeted were Linea Aerea Pueblos Amazonicos S.A.S., a newly-created airline operating in eastern Colombia, Red Mundial Inmobiliaria, S.A. de C.V., a real estate company located near Mexico City, along with Gestores del Ecuador Gestorum S.A., a consulting firm located in Quito, Ecuador.

It is also worth noting that the Cifuentes Villa organization, as the Center of Public Integrity reported, have also profited from illegal mining operations that traffic rare-earth minerals destined for the world market.

Accordingly, the Cifuentes Villa clan employed the same smuggling routes that trafficked cocaine to move precious metallic ores such as coltan and tungsten, used by the communications industry and weapons manufacturers, onto the international market. When the Treasury Department placed family members onto its drug kingpin list they identified their mining fronts as "a money-laundering operation in support of a cocaine-smuggling enterprise."

While U.S. media were mesmerized by the extradition of Sandra Ávila Beltrán, whom the press had dubbed "La Reina del Pacífico" (The Queen of the Pacific), over her lavish lifestyle and family ties to legendary Mexican drug lord Miguel Ángel Félix Gallardo, onetime godfather of the Guadalajara Cartel, Uribe's relatives inexplicably "disappeared" from "court records and authorities were unable to pinpoint the pair's whereabouts," Colombia Reports informed us.

Imagine that.

For his part, the former president denied allegations leveled against his brother Jaime, who died in 2001, and claimed that unnamed "criminals," who conducted "business" from his brother's car phone had cloned it. He also "denied any knowledge of his brother's relationship with Cifuentes or the existence of his niece, despite a birth certificate that was uncovered proving Jaime Uribe was her father," Colombia Reports averred.

What Uribe continues to gloss over however, is the inconvenient fact that brother Jaime had been arrested and interrogated by the Colombian Army after investigators recorded calls \made from his phone to none other than Pablo Escobar, the Nuevo Arco Iris political research center in Bogotá disclosed.

Among the unanswered questions surrounding these recent arrests, investigative journalist Daniel Hopsicker wondered: "Did Álvaro Uribe okay the loading of 3.6 tons of cocaine at an airport he controlled in Rio Negro Colombia onto a 'former' CIA Gulfstream (N987SA) jet from St. Petersburg Florida that crashed in the Yucatan in 2007?"

That fateful crash eventually led to the deferred prosecution agreement between the U.S. federal government and Wachovia Bank, fined $160 million for laundering some $378 billion for Mexico's Sinaloa Cartel, "business associates" of the Cifuentes Villa clan.

More pointedly Hopsicker asked: "Why did two successive U.S. Administrations lavish billions of dollars to stop drug trafficking on a President of Colombia who was himself involved in the drug trade?"

As the investigative net is drawn around the family of the former president, another Uribe brother, Santiago, "is facing a criminal investigation for the alleged founding and leading of a paramilitary group," Colombia Reports disclosed.

Investigations into that group, the notorious death squad the 12 Apostles, again surfaced when The Washington Post revealed that a former police chief, Juan Carlos Meneses, charged that Santiago "led a fearsome paramilitary group in the 1990s ... that killed petty thieves, guerrilla sympathizers and suspected subversives."

Meneses, who fled to Venezuela with his family, disclosed that the "group's hit men trained at La Carolina, where the Uribe family ran an agro-business in the early 1990s." For services rendered, Meneses told the Post "he received a monthly payment of about $2,000 delivered by Santiago Uribe."

The former police official said he came forward "because associates in the security services warned him he would soon be killed for knowing too much."

"The revelations," according to the Post, "threaten to renew a criminal investigation against Santiago Uribe and raise new questions about the president's past in a region where private militias funded with drug-trafficking proceeds and supported by cattlemen wreaked havoc in the 1990s. The disclosures could prove uncomfortable to the United States, which has long seen Uribe as a trusted caretaker of American money in the fight against armed groups and the cocaine trade."

"Uncomfortable" perhaps, but not surprising given the U.S. track record in support of drug-trafficking death squads, especially those which advanced corporate America's geopolitical interests throughout Latin America.

"Meneses," the Post averred, "is the first close collaborator of the 12 Apostles to speak publicly about the group's inner workings. His declarations are also the most extensive recounting by a security services official of how Colombia's militarized police and its army worked in tandem with death squads in one community--a model that investigators of the paramilitary movement say was duplicated nationwide."

For his part, the former president accused human rights' activists who have leveled charges against his family "of being guerrilla stooges who disseminate false accusations against his government."

However, Nobel Peace Prize laureate, Adolfo Pérez Esquivel, who was present when Meneses recounted his story during a taped interview in Buenos Aires, told the Post that the former police chief "'incriminates himself and also the brother of the president who managed the paramilitary group, but also President Uribe'."

Interestingly enough, Uribe's appointment to News Corp's board came while the former president is under investigation for illegally wiretapping human rights activists, journalists, Supreme Court justices and opposition politicians.

His former chief of staff is currently in jail awaiting trial on criminal wiretapping charges and his former secret police chief, Maria Pilar Hurtado, fled Colombia and sought asylum in Panama before similar charges could be filed against her.

And with two more senators now under investigation for suspected ties to paramilitary death squads Colombia Reports averred, Uribe's teflon armor is slowly being chipped away.

Parapolitical Scandal

If, as Voltaire once said, "the history of the great events of this world are scarcely more than the history of crime," what of the powerful actors who have looted entire nations and did so while serving the interests of their imperialist overlords?

Dubbed the "parapolitical scandal" by Colombian media, the investigation was set in motion when leftist opposition politician, Clara López Obregón, formally denounced and provided evidence in 2005 to the Supreme Court of links between drug trafficking organizations, the military/intelligence apparatus, right-wing death squads and members of Congress, including prominent officials of Álvaro Uribe's then-governing coalition.

That investigation gathered steam when a laptop was seized by authorities in 2006 from Rodrigo Tovar Pupo, alias Jorge 40, a leader of the Northern Bloc of the Autodefensas Unidas de Colombia (United Self-Defense Forces of Colombia, or AUC).

The origins of the AUC can be traced to the take-down of the Medellín Cartel and murder of "cocaine king" Pablo Escobar by rival drug organizations, principally the Cali Cartel run by the Rodríguez Orejuela brothers, who were provided logistical support and firepower by the CIA and U.S. Delta Force commandos to eliminate the competition.

An umbrella group comprised of far-right militants and drug capos aligned with Colombia's ruling class, the AUC and splinter groups such as the Águilas Negras, or Black Eagles, and the Ejército Revolucionario Popular Antiterrorista Colombiano (Popular Revolutionary Anti-Terrorist Army of Colombia, ERPAC), derive the bulk of their income from drug trafficking as they wage war against the leftist Fuerzas Armadas Revolucionarias de Colombia (Revolutionary Armed Forces of Colombia, or FARC), trade unionists and land reform activists.

Readers will recall that during the 1980s both the Medellín and Cali cartels were given a leg up by the Reagan administration's CIA as funds derived from the drug trade were diverted to the Nicaraguan Contras as part of the administration's anti-Communist crusade in Central America.

In fact, as the Agency was forced to admit in the wake of "suicided" journalist Gary Webb's "Dark Alliance" investigation, the CIA and Reagan's Justice Department agreed to a Memorandum of Understanding that handed their dope-dealing Contra assets get-out-of-jail-free cards.

As political fallout from the latest "War on Drugs" scandal--the "gun walking" Fast and Furious affair that put thousands of high-powered weapons into the hands of cartel killers in Mexico--hovers like a radioactive cloud over the Justice Department, the old watchword of the 1980s, "drugs in, guns out," is all the more timely.

And like the Contras, the AUC were more than simply an enforcement arm of Colombia's narco-elites; they served as an unofficial though deadly instrument, to preserve the status quo. For Washington policy makers, this meant continued access by U.S. petroleum corporations, mining and agro-business interests to Colombia's vast wealth. If thousands of tons of cocaine entered the United States as the price for stamping out "leftist subversion," then so be it.

Along with incriminating evidence that linked Tovar's gang to 550 murders, it later emerged that Tovar was a close political associate of Jorge Noguera, the former head of DAS, the Departamento Administrativo de Seguridad (Administrative Department of Security), the Colombian equivalent of the CIA.

Noguera's links to Tovar came to light when his deputy, Rafael García Torres, DAS's former chief of Information Technologies, was arrested and charged by Supreme Court investigators of accepting bribes from right-wing sicarios (assassins) and drug traffickers in exchange for erasing their criminal histories, along with those of the Cifuentes Villa clan, from the state intelligence database.

In his testimony, García charged that Noguera, a Uribe crony, collaborated with Tovar's Northern Bloc in a coordinated move by the AUC to support local, regional and national candidates for office who supported their hardline against the left.

More recently, the not-so-hidden hand of the United States emerged.

The Washington Post reported that "American cash, equipment and training, supplied to elite units of the Colombian intelligence service over the past decade to help smash cocaine-trafficking rings, were used to carry out spying operations and smear campaigns against Supreme Court justices, Uribe's political opponents and civil society groups."

Post reporters Karen DeYoung and Claudia J. Duque disclosed that despite billions of dollars of aid supplied by U.S. taxpayers under Plan Colombia, "the DAS under Uribe emphasized political targets over insurgents and drug lords."

In fact, Colombia prosecutors told the Post that the "Uribe government wanted to 'neutralize' the Supreme Court because its investigative magistrates were unraveling ties between presidential allies in the Colombian congress and drug-trafficking paramilitary groups."

Based on "thousands of pages of DAS documents and the testimony of nine top former DAS officials, the prosecutors say the agency was directed by the president's office to collect the banking records of magistrates, follow their families, bug their offices and analyze their court rulings."

These black operations however, were not the work of a few proverbial "bad apples" but were a direct result of projects designed by the CIA.

"Some of those charged or under investigation have described the importance of U.S. intelligence resources and guidance," the Post disclosed, "and say they regularly briefed embassy 'liaison' officials on their intelligence-gathering activities."

"'We were organized through the American Embassy,' said William Romero, who ran the DAS's network of informants and oversaw infiltration of the Supreme Court. Like many of the top DAS officials in jail or facing charges, he received CIA training. Some were given scholarships to complete coursework on intelligence-gathering at American universities."

As with the previous Clinton and Bush regimes, the Obama administration vociferously denies any knowledge of corrupt practices by Colombian officials and in fact, "anti-drug" programs such as Plan Colombia "are viewed as so successful that it has become a model for strategy in Afghanistan," the Post reported.

By 2012 however, some 139 members of Congress were under investigation; five governors and 32 lawmakers, including President Uribe's cousin, Mario Uribe Escobar, a former President of Congress, were convicted of paramilitary ties and subsequently jailed.

In late August, former Colombian senator Jorge Visbal, a Uribe ally, "was charged with the promoting and financing of paramilitary groups, held responsible for tens of thousands of human rights violations," Colombia Reports disclosed.

"Former AUC leader Salvatore Mancuso testified before Colombian prosecutors that Visbal had an 'identical ideology' to the extreme-right paramilitaries and, on behalf of the cattle ranchers, brought 'information and suggestions' to meetings with paramilitary leaders to secure the expansion of paramilitary power in the north of Colombia."

Mancuso, who took over the AUC when Israeli-trained narcotrafficker and death-squad führer Carlos Castaño "disappeared" in 2004, said during recent court proceedings that Uribe was aware that the organization supported his campaign for president in 2002 "economically and logistically," according to Colombia Reports.

Prior to his arrest, the human rights organization Equipo Nizkor reported that Mancuso, the son of Italian immigrants, along with being an AUC "godfather," was also a member of the 'Ndrangheta, "the powerful Calabrian mafia which according to Italian police, exceeds the Sicilian Cosa Nostra in both strength and size."

In fact, when Italian anti-Mafia prosecutor Nicola Gratteri flew to Bogotá to investigate the 'Ndrangheta's Colombian drugs network, Gratteri was told by Mancuso he had spied on him the entire time.

"I was in the center of Bogotá, with lots of security protecting me. I didn't know that all the armored cars that I could see around my hotel belonged to Mancuso," Gratteri told The Daily Beast. "He told me his protection consisted of 600 men! Not even the U.S. President has such an escort. Can you imagine how much money he had?"

Mancuso claimed Uribe was aware of the AUC's backing. "There were previous meetings with members of Álvaro Uribe's campaign, including those delegates that asked us to decrease military operations because it was affecting the campaign and image of the candidate," Mancuso said.

During those same proceedings, another former AUC leader, Jorge Ivan Laverde, alias "El Iguano," said that "no evidence exists of these financial transactions because the groups burned all of their paramilitary records before they demobilized."

Rather conveniently, one might say.

"According to El Iguano," Colombia Reports disclosed, "the support of the ex-president all began when the righthand man of AUC creator Carlos Castaño called all groups to give them the order that they must support the Uribe campaign and spend money where necessary."

The former president denounced these claims and said he would launch "a criminal complaint against the former paramilitary for libel."

However, former Congressman Miguel Alfonso de la Espriella, who was part of Uribe's coalition government and later sentenced for ties to the AUC, told prosecutors in September that Uribe "knew he was receiving support from paramilitary groups during his 2002 election campaign," Colombia Reports disclosed last month.

The now-disgraced politician said that Uribe "never objected" to meeting with the AUC-backed politicians, but "simply maintained a prudent silence."

In a recent interview, de la Espriella told El Espectador that the AUC had donated some $134 thousand to Uribe's 2002 presidential campaign.

The former senator told the paper that Mancuso said "our participation in the self defense forces was to seek a deal with his [Uribe's] government. He [Uribe] did not explicitly reject this possibility or the support. What he did say was that we wait and if he got elected we would talk again."

More recently, Uribe's jailed ex-security chief, Mauricio Santoyo Velasco, accused of illegally ordering driftnet surveillance over electronic communications and the forced disappearance of human rights workers in Medellín, "is willing to officially testify against his old boss and other senior officials," according to Colombia Reports.

Santoyo is presently jailed in the U.S. for collaborating with the AUC and "previously acknowledged accepting bribes from paramilitary members in exchange for giving them information about police operations being carried out against them."

According to "highly credible sources" cited by Colombia Reports, Santoyo "is willing to implicate the ex-president and other top officials," in exchange for a "reduced sentence."

Although U.S. prosecutors previously said that the Santoyo case was the "tip of the iceberg" and an opposition senator accused the former president of bringing "a criminal apparatus" to the presidential palace in 2002, the current director of Colombia's National Police, General José Roberto León Riaño, denied that the U.S. is investigating anyone other than Santoyo.

"Yesterday I personally interviewed the toughest prosecutor of the United States on the matter of drug trafficking, Neil MacBride, who is running the case against [retired general Mauricio] Santoyo," Colombia Reports averred. "He indicated: 'there are bad apples in every institution, Santoyo is an apple that acted on his own, but that can't affect the whole organization'."

While evidence has yet to emerge that Uribe met with Mancuso as the former AUC chief testified, ubiquitous "facts on the ground" in the form of thousands of tons of exported dope, forced "disappearances" and the mass murder of peasants and left-wing activists tell a different tale and point to official complicity amongst Colombian elites and their U.S. "drug war" sponsors.

Back to the Future: U.S. Complicity and Cover-Up

The sordid history of collaboration between Colombian elites, drug gangs, the military and right-wing death squads was known for years by U.S. secret state agencies and federal prosecutors but was covered-up in the interest of "national security."

In declassified documents published by the National Security Archive in 2004, we learned that then Senator "Álvaro Uribe Vélez of Colombia was a 'close personal friend of Pablo Escobar' who was 'dedicated to collaboration with the Medellín [drug] cartel at high government levels,' according to a 1991 intelligence report from U.S. Defense Intelligence Agency (DIA) officials in Colombia."

Researcher Michael Evans revealed that the "newly-declassified report, dated 23 September 1991, is a numbered list of 'the more important Colombian narco-traffickers contracted by the Colombian narcotic cartels for security, transportation, distribution, collection and enforcement of narcotics operations'."

The former president, a "key U.S. partner in the drug war" and a major recipient of billions of dollars of taxpayer-supplied funds for Plan Colombia, "was linked to a business involved in narcotics activities in the United States" and "has worked for the Medellín cartel."

Evans disclosed that "The document is marked 'CONFIDENTIAL NOFORN WNINTEL,' indicating that its disclosure could reasonably be expected to damage national security, that its content was based on intelligence sources and methods, and that it should not be shared with foreign nationals."

One cannot help but ask: whose "national security" was threatened by the disclosure? Certainly not that of thousands of Colombian citizens murdered by drug-linked paramilitary gangsters or the hundreds of thousands of "drug war" victims incarcerated in American gulags for drug use or low-level sales.

"Uribe," the Archive informed us, was "the 82nd name on the list," and appeared "on the same page as Escobar and Fidel Castaño, who went on to form the country's major paramilitary army, a State Department-designated terrorist group now engaged in peace negotiations with the Uribe government. Written in March 1991 while Escobar was still a fugitive, the report was forwarded to Washington several months after his surrender to Colombian authorities in June 1991."

"Most of those on the list are well-known drug traffickers or assassins associated with the Medellín cartel," Evans averred. "Others listed include ex-president of Panama Manuel Noriega [and] Iran-contra arms dealer Adnan Khashoggi."

Four years later in another release of previously classified documents, the Archive revealed that "U.S. espionage operations targeting top Colombian government officials in 1993 provided key evidence linking the U.S.-Colombia task force charged with tracking down fugitive drug lord Pablo Escobar to one of Colombia's most notorious paramilitary chiefs."

"The documents," Evans wrote, "reveal that the U.S.-Colombia Medellín Task Force, known in Spanish as the Bloque de Búsqueda or 'Search Block,' was sharing intelligence information with Fidel Castaño, paramilitary leader of Los Pepes (Perseguidos por Pablo Escobar or 'People Persecuted by Pablo Escobar'), a clandestine terrorist organization that waged a bloody campaign against people and property associated with the reputed narcotics kingpin."

After Escobar's take-down, Los Pepes morphed into the AUC and led to a strategic realignment "between Colombian intelligence agencies, rival drug traffickers and disaffected former Escobar associates like Castaño, the godfather of a new generation of narcotics-fueled paramilitary forces that still plagues Colombia today."

"The collaboration between paramilitaries and government security forces evident in the Pepes episode is a direct precursor of today's 'para-political' scandal," said Evans. "The Pepes affair is the archetype for the pattern of collaboration between drug cartels, paramilitary warlords and Colombian security forces that developed over the next decade into one of the most dangerous threats to Colombian security and U.S. anti-narcotics programs. Evidence still concealed within secret U.S. intelligence files forms a critical part of that hidden history."

In this context, as Peter Dale Scott observed in Drugs, Oil, and War, "The true purpose of most of these campaigns has not been the hopeless ideal of eradication. It has been to alter market share: to target specific enemies and thus ensure that the drug traffic remains under the control of those traffickers who are allies of the Colombian state security apparatus and/or the CIA."

"Allies" like Álvaro Uribe.