Wednesday, March 18, 2009

BARCLAYS BANK INVOLVED IN TAX EVASION FRAUD Guardian: "Barclays Bank obtained a court order early today banning the Guardian from publishing documents which showed how the bank set up companies to avoid hundreds of millions of pounds in tax. The gagging order was granted by Mr Justice Ouseley after Barclays complained about seven documents on the Guardian's website which had been leaked to the Liberal Democrats' deputy leader, Vince Cable. The internal Barclays memos - leaked by a Barclays whistleblower - showed executives from SCM, Barclays's structured capital markets division, seeking approval for a 2007 plan to sink more than $16bn (£11.4bn) into US loans. Tax benefits were to be generated by an elaborate circuit of Cayman islands companies, US partnerships and Luxembourg subsidiaries. The documents had been leaked to Cable by a former employee of the bank, who wrote a long account of how the bank works." Guardian: "HM Revenue & Customs was tonight investigating explosive allegations about tax avoidance schemes operated by Barclays Bank, made by a whistleblower in the firm and apparently substantiated by leaked documents. HMRC's moves came as the government announced steps to try to discourage tax avoidance by Britain's banks, now frequently dependent on state aid. The chancellor launched plans for a code of practice in which banks would be expected to abide by the 'spirit of the law'. The whistleblower in Barclays's apparently troubled structured-finance department at Canary Wharf has disclosed to the Liberal Democrats the existence of a scheme codenamed Project Knight. In memos seen by the Guardian, executives from SCM, Barclays's structured capital markets division, sought approval for a 2007 plan to sink a total of more than $16bn (£11.4bn) into US loans. Tax benefits were to be generated by an elaborate circuit of Caymans companies, US partnerships and Luxembourg subsidiaries, in a $4bn deal with North Carolina Branch Banking & Trust Co (BB&T). Memos detailing a number of alleged tax avoidance schemes in elaborately structured international loans were published by the Guardian on its website. The Guardian today identified two similar, larger schemes which Barclays apparently carried out. One, involving an entity called Pelleas, involved a $6bn loan and the other, Claudas, swallowed up $7bn." Download the memos here. "Insider reveals how firm's 110-strong team operated Bank hopes to increase tax avoidance revenues In the finest traditions of his calling, the Barclays whistleblower has lobbed a sizeable hand grenade into his own place of work, no doubt sending both his bosses and colleagues diving for cover. In doing so, he has shed some fascinating light upon the bank's highly secretive, enormously lucrative and - we should stress - entirely legal tax-dodging operation. But he has done much more than this. He also provided a 3,200-word covering letter that offers a vivid picture of life at the heart of this anxiety-ridden and testosterone-powered enterprise. Along with the documentation that Vince Cable, the recipient of the letter, felt compelled to pass on to HM Revenue & Customs, the whistleblower has given us Fear and Loathing in Canary Wharf. 'Hidden away on the top floor of 5 The North Colonnade sit the formidable Barcap SCM (Structured Capital Markets) team,' he writes. 'A team of some 110 people with the sole purpose of structuring tax-aggressive transactions to avoid tax not only for Barclays but also for banks and companies across the world. Once upon a time the story was about the avoidance of UK tax, this rapidly expanded into the avoidance of US tax too but now the business has grown to encompass Europe, Brazil, the Middle East, South Africa and other emerging markets. 'It is true to say no other tax arbitrage team has the financial resources or the senior management support from the very top that the SCM team enjoys at Barclays. Indeed many joke within SCM that they are the tax structuring market, thinking up all the ideas in all the major jurisdictions, sourcing the counterparties, instructing counsel (for themselves as well as for the counterparty) and executing the trade for both sides. Indeed all the counterparty need do is turn up, sign some documents and collect a large sum of money from the fiscal authorities. 'Where the world sees turmoil and destruction, the leaders of SCM see opportunities arising from tax loss exploitation and corporate restructurings throwing up all sorts of new and juicy areas of the tax code which can be profitably exploited. For the last 10 years the SCM team has generated a formidable amount of profit peaking in the last few years at circa £1bn per annum.' (Barclays disputes this figure.) The organisation is expanding in the US, he writes. In New York, he says, the 15-strong team has been 'swelled by the numbers from the Lehman acquisition, to establish a US business aimed at destroying rivals and taking the new administration in Washington head on. Indeed, with a new administration burdened with two wars, economic meltdown and the choice of new drapes for the White House, SCM management is banking on the administration taking their eye off the ball.' The whistleblower concludes by explaining to Cable why he has sent him the documents. 'The last year has seen the global taxpayer having to rescue the global financial system. The taxpayer has already had a gun put to their head and been told to pay up or to watch the financial system and life as we know it disappear into a black hole. It is increasingly difficult to accept that an unintended consequence of saving the financial system is that teams such as SCM will grow more aggressively to reduce tax globally whilst their competitors wilt under increased government scrutiny (as a result of the UK and US governments taking stakes in these banks). Banks should now be encouraged to pay a fair tax (and restrict the sizes of their SCM teams) on their profits given the service provided by society to banks thereby easing the pain taxpayers all face today.' He writes that the way in which SCM reduces tax 'has made many in the industry feel uncomfortable especially when this means less hospitals and less schools being built' during a recession. 'It is a commonly held view that no agency in the US or the UK (and least of all the European agencies) has the resources or the commitment to challenge SCM. SCM has a huge amount of resources, the best minds rewarded with millions of pounds. Compare this with HMRC recently advertising for a tax and accounting expert with the pay at £45,000. The Revenue will always be behind the curve. Indeed even the recent much-trumpeted disclosure regime has no impact on SCM as through the use of lawyers and client confidentiality SCM regularly circumvent these rules, just one example of why HMRC will never, in its current state, be up to the job of combating this business.' And with a flourish, the poacherturned-gamekeeper makes his final point: 'An open debate on the future of banks promoting aggressive tax trades is necessary, especially now given the role of public money in saving the global financial system.'" 1:56:16 PM

ZIONISM LATimes: "It's hard to imagine now, but in 1944, six years after Kristallnacht, Lessing J. Rosenwald, president of the American Council for Judaism, felt comfortable equating the Zionist ideal of Jewish statehood with 'the concept of a racial state - the Hitlerian concept'. For most of the last century, a principled opposition to Zionism was a mainstream stance within American Judaism. Even after the foundation of Israel, anti-Zionism was not a particularly heretical position. Assimilated Reform Jews like Rosenwald believed that Judaism should remain a matter of religious rather than political allegiance; the ultra-Orthodox saw Jewish statehood as an impious attempt to 'push the hand of God'; and Marxist Jews - my grandparents among them - tended to see Zionism, and all nationalisms, as a distraction from the more essential struggle between classes." 10:38:27 AM

PREDATORY CAPITALISM THROUGH THE BACKDOOR ICH: "The US Treasury will borrow no less than one trillion dollars from the developing world in 2009. It will need even more in 2010. Pepe Escobar argues the US is indeed in a privileged position: not only it unleashes a global financial crisis, it then sucks up money from all over the world, based on the fact that the US in fact remains the 'manager' of choice of global capitalism. As if this was not hardship enough for the developing world, it now also has to cope with the resurgence of the discredited World Bank and IMF." Telegraph: "Lloyds bankers will receive around £80m in bonuses in a move agreed by the Government as it prepared to take a controlling stake in the business." DownWithTyranny: "Under TARP, the government gave Bank of America $25 billion in bailout funds - and at Republican insistence, with no strings attached - to jump-start the economy by unfreezing the credit stream. Instead Bank of America bought foreign banks, bought corporate jets - and gave top executives at Merrill Lynch (which it bought) $4 billion in 'performance bonuses'. Every single dollar that goes into workers' wages generates $4 worth of economic activity, more than enough to stop the economic downturn dead in its tracks. But the wealthy and powerful who have done so very, very well under Bush misrule, like the way the country's wealth has been skewered in their direction over the last couple of decades. That's why they are so hysterical about stopping Obama's plans to regenerate the middle class. And part of that regeneration is giving workers an opportunity to organize and bargain collectively again." Guardian: "In the latest figures published by the TUC, Jersey was identified as the number one centre for tax dodging by individuals seeking to avoid payment of their UK dues. It is also an important centre for corporate tax dodging. The big four high street banks (RBS, Lloyds TSB, Barclays and HSBC) have 170 subsidiaries based in Jersey, making it the second most popular tax haven for banks behind the Cayman Islands. It is important to be aware of the full extent of the challenge posed by tax dodging, as much of the recent reporting in the Guardian has focused on isolated aspects of the problem. When tax avoidance, tax evasion and non-payment of declared taxes are added together, the loss to the UK exchequer is estimated at a staggering £100bn each year. Yet rather than boosting capacity to pursue this lost revenue, the Labour government intends to close over 200 tax offices across the UK, with the loss of 25,000 jobs. The impact of tax dodging on the economies of the rich world is bad enough. For poorer countries, the consequences of corporations failing to pay their dues is catastrophic. Estimates suggest that developing countries lose up to £250bn each year as a result of corporate tax dodging. This includes not just the amounts tucked away into tax havens but also the sums lost to scams such as transfer pricing, where multinational corporations shift goods and services between subsidiaries in various jurisdictions and fabricate charges in order to avoid paying the tax due." AlternativeLondonSummit: "General Secretary of the University & College Lecturers' Union, will open the Alternative G20 Summit. The event will take place from 4.00 to 9.00 pm at the Docklands campus of the University of East London on April 1st, one day before the official summit opens at the ExCeL centre nearby." BailOutPeople: "April 3 & 4 National March on Wall St. Jobs Not War!" 10:29:23 AM

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