tag:blogger.com,1999:blog-18315161143369832382024-03-12T21:41:37.057-07:00Antifascist Calling...Exploring the shadowlands of the corporate police stateAntifascisthttp://www.blogger.com/profile/05421707682211445550noreply@blogger.comBlogger286125tag:blogger.com,1999:blog-1831516114336983238.post-22523569909417605702013-11-10T10:40:00.001-08:002013-11-10T10:41:40.503-08:00The Dark Road from the Clipper Chip to PRISM Reveals 'Crypto Wars' Never Ended<a href="http://1.bp.blogspot.com/-aB-AkUkGv0E/UmQXoAtoT9I/AAAAAAAAAgA/FN7BJf6vVck/s1600/clipperchips.jpg" imageanchor="1"><img border="0" src="https://lh3.ggpht.com/-aB-AkUkGv0E/UmQXoAtoT9I/AAAAAAAAAgA/FN7BJf6vVck/s320/clipperchips.jpg" /></a><br />
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Back in the 1990s, security researchers and privacy watchdogs were alarmed by government demands that hardware and software firms build "backdoors" into their products, the millions of personal computers and cell phones propelling communication flows along the now-quaint "information superhighway."<br />
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Never mind that the same factory-installed kit that allowed secret state agencies to troll through private communications also served as a discrete portal for criminal gangs to loot your bank account or steal your identity.<br />
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To make matters worse, instead of the accountability promised the American people by Congress in the wake of the Watergate scandal, successive US administrations have worked assiduously to erect an impenetrable secrecy regime backstopped by secret laws overseen by secret courts which operate on the basis of secret administrative subpoenas, latter day <i>lettres de cachet</i>.<br />
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But now that all their dirty secrets are popping out of Edward Snowden's "bottomless briefcase," we also know the "Crypto Wars" of the 1990s never ended.<br />
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Documents published by <i><a href="http://www.theguardian.com/world/2013/sep/05/nsa-gchq-encryption-codes-security">The Guardian</a></i> and <i><a href="http://www.nytimes.com/2013/09/06/us/nsa-foils-much-internet-encryption.html">The New York Times</a></i> revealed that the National Security Agency "actively engages the US and IT industries" and has "broadly compromised the guarantees that internet companies have given consumers to reassure them that their communications, online banking and medical records would be indecipherable to criminals or governments."<br />
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"Those methods include covert measures to ensure NSA control over setting of international encryption standards," <i>The Guardian</i> disclosed, along with "the use of supercomputers to break encryption with 'brute force', and--the most closely guarded secret of all--collaboration with technology companies and internet service providers themselves." <br />
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According to <i>The New York Times</i>, NSA "had found ways inside some of the encryption chips that scramble information for businesses and governments, either by working with chipmakers to insert back doors or by surreptitiously exploiting existing security flaws, according to the documents."<br />
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In fact, "vulnerabilities" inserted "into commercial encryption systems" would be known to NSA alone. Everyone else, including commercial customers, are referred to in the documents as "adversaries."<br />
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The cover name for this program is <a href="http://www.theguardian.com/world/interactive/2013/sep/05/nsa-project-bullrun-classification-guide">Project BULLRUN</a>. An agency classification guide asserts that "Project BULLRUN deals with NSA's abilities to defeat the encryption used in specific network communication technologies. BULLRUN involves multiple sources, all of which are extremely sensitive. They include CNE [computer network exploitation], interdiction, industry relationships, collaboration with other IC entities, and advanced mathematical techniques."<br />
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In furtherance of those goals, the agency created a "Commercial Solutions Center (NCSC) to leverage sensitive, cooperative relationships with industry partners" that will "further NSA/CSS capabilities against encryption used in network communications technologies," and already "has some capabilities against the encryption used in TLS/SSL. HTTPS, SSH, VPNs, VoIP, WEBMAIL, and other network communications technologies."<br />
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Time and again, beginning in the 1970s with the publication of perhaps the earliest NSA exposé by <i><a href="https://docs.google.com/viewer?url=http://64.62.200.70/PERIODICAL/PDF/Ramparts-1972aug/35-57/">Ramparts Magazine</a></i>, we learned that when agency schemes came to light, if they couldn't convince they resorted to threats, bribery or the outright subversion of the standard setting process itself, which destroyed trust and rendered all our electronic interactions far less safe.<br />
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Tunneling underground, NSA, telcos and corporate tech giants worked hand-in-glove to sabotage what <i>could</i> have been a free and open system of global communications, creating instead the Frankenstein monster which AT&T whistleblower Mark Klein denounced as a "Big Brother machine."<br />
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<b>The Secret State and the Internet</b><br />
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Five years after British engineer Tim Berners-Lee, Belgian computer scientist Robert Cailliau and their team at <a href="http://home.web.cern.ch/about/birth-web">CERN</a> developed a system for assembling, and sharing, hypertext documents via the internet, which they dubbed the World Wide Web, in 1994 the Clinton administration <a href="https://epic.org/crypto/clipper/white_house_statement_2_94.html">announced</a> it would compel software and hardware developers to install what came to known as the "Clipper Chip" into their products.<br />
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The veritable explosion of networked communication systems spawned by the mass marketing of easy-to-use personal computers equipped with newly-invented internet browsers, set off a panic amongst political elites.<br />
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How to <i>control</i> these seemingly anarchic information flows operating outside "normal" channels?<br />
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In theory at least, those doing the communicating--academics, dissidents, journalists, economic rivals, even other spies, hackers or "terrorists" (a fungible term generally meaning outsider groups not on board with America's imperial goals)--were the least amenable users of the new technology and would not look kindly on state efforts to corral them.<br />
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As new communication systems spread like wildfire, especially among the great unwashed mass of "little people," so too came a stream of dire pronouncements that the internet was now a "critical national asset" which required close attention and guidance.<br />
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President Clinton's Commission on Critical Infrastructure Protection released a <a href="https://www.fas.org/sgp/library/pccip.pdf">report</a> that called for a vast increase in funding to protect US infrastructure along with one of the first of many "cyberwar" tropes that would come to dominate the media landscape.<br />
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"In the cyber dimension," the report breathlessly averred, "there are no boundaries. Our infrastructures are exposed to new vulnerabilities--cyber vulnerabilities--and new threats--cyber threats. And perhaps most difficult of all, the defenses that served us so well in the past offer little protection from the cyber threat. Our infrastructures can now be struck directly by a variety of malicious tools."<br />
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And when a commercial market for cheap, accessible encryption software was added to the mix, security mandarins at Ft. Meade and Cheltenham realized the genie would soon be out of the bottle.<br />
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After all they reasoned, NSA and GCHQ were the undisputed masters of military-grade cryptography who had cracked secret Soviet codes which helped "win" the Cold War. Were they to be out maneuvered by some geeks in a garage who did not share or were perhaps even hostile to the "post-communist" triumphalism which had decreed America was now the world's "indispensable nation"?<br />
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Technological advances were leveling the playing field, creating new democratic space in the realm of knowledge creation accessible to everyone; a new mode for communicating which threatened to bypass entrenched power centers, especially in government and media circles accustomed to a monopoly over the Official Story.<br />
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US spies faced a dilemma. The same technology which created a new business model worth hundreds of billions of dollars for US tech corporations also offered the public and pesky political outliers across the political spectrum, the means to do the same.<br />
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How to stay ahead of the curve? Why not control the tempo of product development by crafting regulations, along with steep penalties for noncompliance, that all communications be accessible to our guardians, strictly for "law enforcement" purposes mind you, by including backdoors into commercially available encryption products.<br />
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<b>Total Information Awareness 1.0</b><br />
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Who to turn to? Certainly such hush-hush work needed to be in safe hands.<br />
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The Clinton administration, in keeping with their goal to "reinvent government" by privatizing everything, turned to Mykotronx, Inc., a California-based company founded in 1983 by former NSA engineers, Robert E. Gottfried and Kikuo Ogawa, mining gold in the emerging information security market.<br />
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Indeed, one of the firm's top players was Ralph O'Connell, was described in a 1993 <a href="http://cpsr.org/prevsite/cpsr/privacy/crypto/clipper/mykotronics_info.txt/">document</a> published by Computer Professionals for Social Responsibility (<a href="http://cpsr.org/">CPSR</a>) as "the father of COMSEC" and the "Principle NSA Technical Contact" on Clipper and related cryptography projects.<br />
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A 1993 Business Wire release quoted the firm's president, Leonard J. Baker, as saying that Clipper was "a good example of the transfer of military technology to the commercial and general government fields with handsome cost benefits. This technology should now pay big dividends to US taxpayers."<br />
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It would certainly pay "big dividends" to Mykotronx's owners.<br />
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Acquired by Rainbow Technologies in 1995, and eventually by Military-Industrial-Surveillance Complex powerhouse <a href="http://raytheon.mediaroom.com/index.php?s=43&item=2238">Raytheon</a> in 2012, at the time the <i><a href="http://articles.latimes.com/1995-06-02/business/fi-8710_1_rainbow-technologies">Los Angeles Times</a></i> reported that "Mykotronx had been privately held, and its owners will receive 1.82 million shares of Rainbow stock--making the deal worth $37.9 million."<br />
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The Clipper chip was touted by the administration as a simple device that would protect the private communications of users while also allowing government agents to obtain the keys that unlocked those communications, an early manifestation of what has since become know as law enforcement's alleged "going dark" problem.<br />
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Under color of a vague "legal authorization" that flew in the face of the 1987 Computer Security Act (<a href="https://epic.org/crypto/csa/">CSA</a>), which sought to limit the role of the National Security Agency in developing standards for civilian communications systems, the administration tried an end-run around the law through an export ban on Clipper-free encryption devices overseen by the <a href="https://epic.org/crypto/clipper/fips_185_clipper_feb_94.html">Commerce Department</a>.<br />
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This wasn't the first time that NSA was mired in controversy over the watering down of encryption standards. During the development of the Data Encryption Standard (DES) by IBM in the 1970s, the agency was accused of forcing developers to implement changes in the design of its basic cipher. There were strong suspicions these changes had weakened the algorithm to such a degree that one critical component, the S-box, had been altered and that a backdoor was inserted by NSA.<br />
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Early on, the agency grasped CSA's significance and sought to limit damage to global surveillance and economic espionage programs such as <a href="http://www.duncancampbell.org/menu/surveillance/echelon/IC2001-Paper1.pdf">ECHELON</a>, exposed by British and New Zealand investigative journalists <a href="http://cryptome.org/jya/echelon-dc.htm">Duncan Campbell</a> and <a href="http://cryptome.org/jya/echelon.htm">Nicky Hager</a>.<br />
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Before the 1987 law was passed however, Clinton Brooks, a Special Assistant to NSA Director Lieutenant General William Odom, wrote a Top Secret <a href="https://epic.org/crypto/csa/brooks.gif">Memorandum</a> which stated: "In 1984 NSA engineered a National Security Decision Directive, NSDD-145, through the Reagan Administration that gave responsibility for the security of all US information systems to the Director of NSA, removing NBS [National Bureau of Standards] from this."<br />
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Conceived as a follow-on to the Reagan administration's infamous 1981 <a href="http://www.archives.gov/federal-register/codification/executive-order/12333.html">Executive Order 12333</a>, which trashed anemic congressional efforts to rein-in America's out-of-control spy agencies, NSDD-145 handed power back to the National Security Agency and did so to the detriment of civilian communication networks.<br />
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Scarcely a decade after Senator Frank Church warned during post-Watergate hearings into government surveillance abuses, that NSA's "capability at any time could be turned around on the American people, and no American would have any privacy left, such is the capability to monitor everything: telephone conversations, telegrams, it doesn't matter . . . there would be no place to hide," the agency was at it with a vengeance.<br />
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"This [NSDD-145] also stated," Brooks wrote, "that we would assist the private sector. This was viewed as Big Brother stepping in and generated an adverse reaction" in Congress that helped facilitate passage of the Act.<br />
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Engineered by future Iran-Contra felon, Admiral John Poindexter, President Reagan's National Security Adviser who would later serve as President George W. Bush's Director of DARPA's Information Awareness Office, the Pentagon satrapy that brought us the <a href="https://epic.org/privacy/profiling/tia/tiasystemdescription.pdf">Total Information Awareness</a> program, <a href="https://www.fas.org/irp/offdocs/nsdd145.htm">NSDD-145</a> stated that the "Director, National Security Agency is designated the National Manager for Telecommunications and Automated Information Systems Security."<br />
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NSA's new mandate meant that the agency would "act as the government focal point for cryptography, telecommunications systems security, and automated information systems security."<br />
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Additionally, NSA would "conduct, approve, or endorse research and development of techniques and equipment for telecommunications and automated information systems security for national security information."<br />
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But it also authorized the agency to do more than that, granting it exclusive authority to "review and approve all standards, techniques, systems and equipments for telecommunications and automated information systems security." As well, NSA was directed to "enter into agreements for the procurement of technical security material and other equipment, and their provision to government agencies, where appropriate, to private organizations, including government contractors, and foreign governments."<br />
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In other words, NSA was the final arbiter when it came to setting standards for <i>all</i> government and private information systems; quite a coup for the agency responsible for standing-up Project MINARET, the Cold War-era program that spied on thousands of antiwar protesters, civil rights leaders, journalists and members of Congress, as recently <a href="http://www2.gwu.edu/~nsarchiv/NSAEBB/NSAEBB441/">declassified documents</a> published by the National Security Archive disclosed.<br />
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<b>NSA Games the System</b><br />
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Although the Computer Security Act passed unanimously by voice vote in both Houses of Congress, NSA immediately set-out to undercut the law and did so by suborning the National Bureau of Standards, now the National Institute of Standards and Technology (NIST).<br />
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The battle over the Clipper Chip would be the template for future incursions by the agency for the control, through covert infiltration, of regulatory bodies overseeing civilian communications.<br />
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According to the Clinton White House, Clipper "would provide Americans with secure telecommunications without compromising the ability of law enforcement agencies to carry out legally authorized wiretaps."<br />
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Neither safe nor secure, Clipper instead would have handed government security agencies the means to monitor all communications while giving criminal networks a leg up to do the same.<br />
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In fact, as the Electronic Privacy Information Center (<a href="https://epic.org/">EPIC</a>) discovered in <a href="https://epic.org/crypto/clipper/foia/">documents</a> unearthed through the Freedom of Information Act, the underlying algorithm deployed in Clipper, Skipjack, had been developed by NSA.<br />
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Cryptography expert Matt Blaze wrote a now famous 1994 paper on the subject before the algorithm was declassified, <i><a href="http://www.crypto.com/papers/eesproto.pdf">Protocol Failure in the Escrowed Encryption Standard</a></i>: "The EES cipher algorithm, called 'Skipjack', is itself classified, and implementations of the cipher are available to the private sector only within tamper-resistant modules supplied by government-approved vendors. Software implementations of the cipher will not be possible. Although Skipjack, which was designed by the US National Security Agency (NSA), was reviewed by a small panel of civilian experts who were granted access to the algorithm, the cipher cannot be subjected to the degree of civilian scrutiny ordinarily given to new encryption systems."<br />
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This was precisely as NSA and the Clinton administration intended.<br />
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A partially declassified 1993 <a href="https://epic.org/crypto/clipper/foia/outside_clipper_review.html">NSA memo</a> noted that "there will be vocal public doubts expressed about having a classified algorithm in the device we propose for the US law enforcement problem, the CLIPPER chip, we recommend the following to address this." We don't know what those agency recommendations were, however; more than 20 years after the memo was written they remain secret.<br />
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The memo continued: "If such people agree to this clearance and non disclosure process, we could go over the algorithm with them to let them develop confidence in its security, and we could also let them examine the detail design of the CLIPPER chip made for the US law enforcement problem to assure themselves that there were no trapdoors or other techniques built in. This would likely require crypto-mathematicians for the algorithm examination and microelectronics chip design engineers for the chip examination."<br />
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But the extreme secrecy surrounding Skipjack's proposed deployment in commercial products <i>was</i> the problem. Even if researchers learned that Clipper was indeed the government-mandated backdoor they feared, non-disclosure of these facts, backed-up by the threat of steep fines or imprisonment would hardly assure anyone of the integrity of this so-called review process.<br />
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"By far, the most controversial aspect of the EES system," Blaze wrote, "is key escrow."<br />
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"As part of the crypto-synchronization process," Blaze noted, "EES devices generate and exchange a 'Law Enforcement Access Field' (LEAF). This field contains a copy of the current session key and is intended to enable a government eavesdropper to recover the cleartext."<br />
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"The LEAF copy of the session key is encrypted with a device-unique key called the 'unit key,' assigned at the time the EES device is manufactured. Copies of the unit keys for all EES devices are to be held in 'escrow' jointly by two federal agencies that will be charged with releasing the keys to law enforcement under certain conditions."<br />
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What those conditions were however, was far from clear. In fact, as we've since learned from Snowden's cache of secret documents, even when the government seeks surveillance authorization from the FISA court, the court must rely on government assurances that dragnet spying is critical to the nation's security. Such assurances, FISA court judge Reggie B. Walton noted, were systematically "misrepresented" by secret state agencies.<br />
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That's rather rich considering that Walton presided over the farcical "trial" that upheld Bush administration demands to silence FBI whistleblower <a href="http://www.classifiedwoman.com/">Sibel Edmonds</a> under the state secrets privilege. Edmonds, a former contract linguist with the Bureau charged that top FBI officials had systematically covered-up wrongdoing at its language division and had obstructed agents' attempts to roll-up terrorist networks <i>before</i> and <i>after</i> the 9/11 provocation, facts attested to by FBI whistleblower Coleen Rowley in her <a href="http://www.apfn.org/apfn/WTC_whistleblower1.htm">2002 Memo</a> to then-FBI Director Robert Mueller.<br />
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In 2009, Walton <a href="http://www.dni.gov/files/documents/section/pub_March%202%202009%20Order%20from%20FISC.pdf">wrote</a> that "The minimization procedures proposed by the government in each successive application and approved and adopted as binding by the orders of the FISC have been so frequently and systemically violated that it can fairly be said that this critical element of the overall BR regime has never functioned effectively."<br />
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"The Court," Walton averred, "must have every confidence that the government is doing its utmost to ensure that those responsible for implementation fully comply with the Court's orders. The Court no longer has such confidence."<br />
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Predating those critical remarks, a heavily-redacted 1993 <a href="https://epic.org/crypto/clipper/foia/att3600_2_9_93.html">Memo</a> to then-Special Assistant to the President and future CIA chief, George Tenet, from FBI Director William Sessions noted that NSA "has developed a new encryption methodology and computer chip which affords encryption strength vastly superior to DES [Digital Encryption Standard], yet which allows for real time decryption by law enforcement, acting pursuant to legal process. It is referred to as 'Clipper'."<br />
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[Two redacted paragraphs] "if the devices are modified to include the 'Clipper' chip, they would be of great value to the Federal, state and local law enforcement community, especially in the area of counter narcotics, investigations, where there is a requirement to routinely communicate in a secure fashion."<br />
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But even at the time Sessions' memo was written, we now know that AT&T provided the Drug Enforcement Administration "routine access" to "an enormous AT&T database that contains the records of decades of Americans' phone calls," <i><a href="http://www.nytimes.com/2013/09/02/us/drug-agents-use-vast-phone-trove-eclipsing-nsas.html">The New York Times</a></i> reported, and had done so since 1987 under the auspices of DEA's <a href="http://www.nytimes.com/interactive/2013/09/02/us/hemisphere-project.html">Hemisphere Project</a>.<br />
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Furthermore, in the wake of Snowden revelations we also learned that listening in on the conversations of drug capos is low on NSA's list of priorities. However, programs like <a href="http://www.theguardian.com/world/2013/jul/31/nsa-top-secret-program-online-data">X-KEYSCORE</a> and <a href="http://www.guardian.co.uk/uk/2013/jun/21/gchq-mastering-the-internet">TEMPORA</a>, which copies all data flowing along fiber optic cables, encrypted and unencrypted alike, at petabyte scales, is supremely useful when it comes to building profiles of internet users by intelligence agencies.<br />
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This was an implicit goal of Clinton administration maneuvers to compel developers to insert Clipper into their product designs.<br />
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According to Sessions, "the 'Clipper' methodology envisions the participation of three distinct types of parties." [Redacted] It is proposed that the second party, the two custodians of the 'split' key infostructure [sic], be comprised of two disinterested and trustworthy non law enforcement Government agencies or entities. Although, such decision and selection are left for the Administration, a list of reccommended [sic] agencies and entities has been prepared (and included in the text), [redacted]. This party would administer and oversee all facets of the 'Clipper' program and methodology."<br />
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Based on NSDD-145's mandate, one can assume "this party" would be NSA, the agency that designed the underlying algorithm that powered Clipper.<br />
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The Sessions memo averred: "The Clipper chip provides law enforcement access by using a special chip key, unique to each device. In the AT&T TSD 3600, a unique session key is generated, external to the Clipper chip for each call."<br />
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"This session key," the memo explained, "is given to the chip to control the encryption algorithm. A device unique 'chip key' is programmed into each Clipper at the time of manufacture. When two TSD 3600s go to secure operation, the device gives out its identification (ID) number and the session key encrypted in its chip key."<br />
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Underlining a key problem with Clipper technology Sessions noted, "Anyone with access to the chip key for that identified device will be able to recover the session key and listen to the transmission simultaneously with the intended receiver. This design means that the list of chip keys associated with the chip ID number provides access to all Clipper secured devices, and thus the list must be carefully generated and protected. Loss of the list would preclude legitmate [sic] access to the encrypted information and compromise of the list could allow unauthorized access."<br />
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In fact, that "anyone" could include fabulously wealthy drug gangs or bent corporations with the wherewithal to buy chip keys from suborned government key escrow agents!<br />
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Its ubiquity would be a key selling-point for universal deployment. The memo explained, "the NSA developed chip based 'Clipper' solution works with hardware encryption applications, such as those which might be used with regard to certain telecommunications and computers devices," which of course would allow unlimited spying by "law enforcement."<br />
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Such vulnerabilities built into EES chip keys <i>by design</i> not only enabled widespread government monitoring of internet and voice traffic, but with a few tweaks by encryption-savvy "rogues" could be exploited by criminal organizations.<br />
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In his 1994 paper Blaze wrote that "a rogue system can be constructed with little more than a software modification to a legal system. Furthermore, while some expertise may be required to install and operate a rogue version of an existing system, it is likely that little or no special skill would be required to install and operate the modified software."<br />
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"In particular," Blaze noted, "one can imagine 'patches' to defeat key escrow in EES-based systems being distributed over networks such as the Internet in much the same way that other software is distributed today."<br />
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In the intervening years since Blaze observed how easy it would be to compromise key escrow systems by various bad actors, governments or criminals take your pick, the proliferation of malware powered botnets that infect hundreds of thousands of computers and smart phones every day--for blanket surveillance, fraud, or both--is a fact of life.<br />
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It didn't help matters when it emerged that "escrow agents" empowered to unlock encrypted communications would be drawn from the National Institute of Standards and Technology and the Automated Services Division of the Treasury Department, government outposts riddled with "No Such Agency" moles.<br />
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As EPIC pointed out, "Since the enactment of the Computer Security Act, the NSA has sought to undercut NIST's authority. In 1989, NSA signed a Memorandum of Understanding (MOU) which purported to transfer back to NSA the authority given to NIST."<br />
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The MOU required that NIST request NSA's "assistance" on all matters related to civilian cryptography. In fact, were NIST and NSA representatives on the Technical Working Group to disagree on standards, the ultimate authority for resolving disputes would rest solely with the Executive Branch acting through the President, the Secretary of Defense and the National Security Council, thus undercutting the clear intent of Congress when they passed the 1987 Computer Security Act.<br />
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EPIC <a href="https://epic.org/security/infowar/epic-cip.html">noted</a>: "The memorandum effectively returned to NSA many of the powers rejected by the Computer Security Act. The MOU contained several key goals that were to NSA's benefit, including: NSA providing NIST with 'technical security guidelines in trusted technology, telecommunications security, and personal identification that may be used in cost-effective systems for protecting sensitive computer data;' NSA 'initiating research and development programs in trusted technology, telecommunications security, cryptographic techniques and personal identification methods'; and NSA being responsive to NIST 'in <i>all</i> matters related to cryptographic algorithms and cryptographic techniques including <i>but not limited</i> to research, development, evaluation, or endorsement'."<br />
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A critique of the Memorandum in 1989 congressional testimony by the General Accounting Office (<a href="http://gao.justia.com/department-of-defense/1989/5/national-institute-of-standards-and-technology-and-the-national-security-agency-s-memorandum-of-understanding-on-implementing-the-computer-security-act-of-1987-t-imtec-89-7/T-IMTEC-89-7-full-report.pdf">GAO</a>) emphasized: "At issue is the degree to which responsibilities vested in NIST under the act are being subverted by the role assigned to NSA under the memorandum. The Congress, as a fundamental purpose in passing the act, sought to clearly place responsibility for the computer security of sensitive, unclassified information in a civil agency rather than in the Department of Defense. As we read the MOU, it would appear that NIST has granted NSA more than the consultative role envisioned in the act."<br />
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Five years after the GAO's critical appraisal, NSA's coup was complete.<br />
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"In 1994," EPIC noted, "President Clinton issued Presidential Decision Directive (<a href="http://www.fas.org/sgp/spb/pdd29.html">PDD-29</a>). This directive created the Security Policy Board, which has recommended that all computer security functions for the government be merged under NSA control."<br />
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Since PDD-29 was issued matters have only gotten worse. In fact, NIST is the same outfit exposed in Snowden documents published by <i>The Guardian</i> and <i>The New York Times</i> that allowed NSA to water down encryption and build backdoors into the Dual EC DRBG standard adopted by the Institute in 2006.<br />
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"Eventually, NSA became the sole editor."<br />
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Besieged by widespread opposition, the Clinton administration was out maneuvered in the court of public opinion and by 1996 had abandoned Clipper. However, this proved to be a pyrrhic victory for security-minded researchers and civil libertarians as we have since learned from Edward Snowden's revelations.<br />
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Befitting a military-intelligence agency, the dark core of America's deep state, NSA was fighting a long war--and they were playing for keeps.Antifascisthttp://www.blogger.com/profile/05421707682211445550noreply@blogger.com0tag:blogger.com,1999:blog-1831516114336983238.post-74839492054748592732013-10-02T15:55:00.000-07:002013-10-02T15:56:43.613-07:00US Cyber Command: Documents Reveal Pentagon Launching Covert Cyber Attacks<a href="http://1.bp.blogspot.com/-sdU1yNvSBzU/UioUqAevx4I/AAAAAAAAAfo/eL8rf5fS-Hs/s1600/cyber-attack-hackers-socialmarketingfella.jpg" imageanchor="1" ><img border="0" src="http://1.bp.blogspot.com/-sdU1yNvSBzU/UioUqAevx4I/AAAAAAAAAfo/eL8rf5fS-Hs/s400/cyber-attack-hackers-socialmarketingfella.jpg" /></a><br />
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In 2008, the <i><a href="http://armedforcesjournal.com/article/2008/05/3375884">Armed Forces Journal</a></i> published a prescient piece by Colonel Charles W. Williamson III, a staff judge advocate with the Air Force Intelligence, Surveillance and Reconnaissance Agency at Lackland Air Force Base in Texas, the National Security Agency <a href="http://www.wired.com/threatlevel/2012/03/ff_nsadatacenter/all/1">listening post</a> focused on intercepting communications from Latin America, the Middle East and Europe.<br />
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Titled "Carpet bombing in cyberspace," Col. Williamson wrote that "America needs a network that can project power by building an af.mil robot network (botnet) that can direct such massive amounts of traffic to target computers that they can no longer communicate and become no more useful to our adversaries than hunks of metal and plastic. America needs the ability to carpet bomb in cyberspace to create the deterrent we lack."<br />
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While Williamson's treatise was fanciful (a DDoS attack can't bring down an opponent's military forces, or for that matter a society's infrastructure), he had hit upon a theme which Air Force researchers had been working towards since the 1980s: the development of software-based weapons that can be "fired" at an adversary, potentially as lethal as a bomb dropped from 30,000 feet.<br />
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Two years later, evidence emerged that US and Israeli code warriors did something far more damaging.<br />
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Rather than deploying an "af.mil" botnet against Iran's civilian nuclear infrastructure at Natanz, they unleashed a destructive digital worm, Stuxnet. In the largest and most sophisticated attack to date, more than 1,000 centrifuges were sent spinning out of control, "no more useful" to Iranian physicists "than hunks of metal and plastic."<br />
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A line had been crossed, and by the time security experts <a href="http://www.wired.com/threatlevel/2011/07/how-digital-detectives-deciphered-stuxnet/all/1">sorted things out</a>, they learned that Stuxnet and its cousins, <a href="http://threatpost.com/anatomy-duqu-attacks-112111">Duqu</a>, <a href="http://threatpost.com/whats-meaning-flame-malware-052912">Flame</a> and <a href="http://threatpost.com/new-gauss-malware-descended-flame-and-stuxnet-found-thousands-pcs-middle-east-080912">Gauss</a>, were the most complex pieces of malware ever designed, the opening salvo in the cyberwar that has long-guided the fevered dreams of Pentagon planners.<br />
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<b>'Plan X'</b><br />
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Today, that destructive capability exists under the umbrella of US Cyber Command (<a href="http://www.stratcom.mil/factsheets/Cyber_Command">USCYBERCOM</a>), one which has the potential of holding the world hostage.<br />
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Last year the Pentagon allocated $80 million dollars to defense giant Lockheed Martin for ongoing work on the National Cyber Range (NCR), a top secret facility that designs and tests attack tools for the government.<br />
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Under terms of the five year <a href="https://www.fbo.gov/index?s=opportunity&mode=form&id=65a2b9fff52e45fbb77dfa572e0e9c57&tab=core&_cview=0">contract</a>, Lockheed Martin and niche malware developers have completed work on a test-bed housed in a "specially architected sensitive compartmented information facility with appropriate security protocols" that "emulates the public internet and other networks, and provides for the modeling of cyber attacks."<br />
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Originally developed by the Defense Advanced Research Projects Agency (DARPA), the Pentagon's geek squad, NCR has gone live and was transitioned last year to the Office of the Secretary of Defense, federal contracts uncovered by <i><a href="http://www.nextgov.com/defense/2012/08/pentagon-bolster-networks-and-cyberattack-capabilities-plan-x/57546/">NextGov</a></i> revealed.<br />
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As <i><a href="http://antifascist-calling.blogspot.com/2009/05/national-cyber-range-building-attack.html">Antifascist Calling</a></i> reported back in 2009, "NCR will potentially serve as a new and improved means to bring America's rivals to their knees. Imagine the capacity for death and destruction implicit in a tool that can . . . cause an adversary's chemical plant to suddenly release methyl isocynate (the Bhopal effect) on a sleeping city, or a nuclear power plant to go supercritical, releasing tens of billions of curies of radioactive death into the atmosphere?"<br />
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<i>NextGov</i> also reported that the "Pentagon is seeking technology to coordinate and bolster cyberattack capabilities through a funding experiment called 'Plan X,' contract documents indicate."<br />
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A notice from DARPA's Information Innovation Office (<a href="http://www.darpa.mil/Our_Work/I2O/Programs/Plan_X.aspx">I2O</a>) informs us that "Plan X is a foundational cyberwarfare program to develop platforms for the Department of Defense to plan for, conduct, and assess cyberwarfare in a manner <i>similar to kinetic warfare</i>. Towards this end the program will bridge cyber communities of interest from academe, to the defense industrial base, to the commercial tech industry, to user-experience experts." (emphasis added)<br />
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Although DARPA claims "Plan X will not develop cyber offensive technologies or effects," the program's Broad Agency Announcement, <a href="https://www.fbo.gov/utils/view?id=49be462164f948384d455587f00abf19">DARPA-BAA-13-02</a>: Foundational Cyberwarfare (Plan X), explicitly states: "Plan X will conduct novel research into the nature of cyberwarfare and support development of fundamental strategies needed to dominate the cyber battlespace. Proposed research should investigate innovative approaches that enable revolutionary advances in science, devices, or systems."<br />
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The document also gives notice that DARPA will build "an end-to-end system that enables the military to understand, plan, and manage cyberwarfare in real-time" as an "open platform architecture for integration with government and industry technologies."<br />
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The <i><a href="http://www.militaryaerospace.com/articles/2013/07/darpa-cyber-contracts.html">Military & Aerospace Electronics</a></i> web site reported that DARPA has "chosen six companies so far to define ways of understanding, planning, and managing military cyber warfare operations in real-time, large-scale, and dynamic networks."<br />
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Collectively worth some $74 million, beneficiaries of taxpayer largesse include "Data Tactics Corp. in McLean, Va.; Intific Inc. in Peckville Pa.; Raytheon SI Government Solutions in Arlington, Va.; Aptima Inc. in Woburn Mass.; Apogee Research LLC in McLean, Va.; and the Northrop Grumman Corp. Information Systems segment in McLean, Va."<br />
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Additional confirmation of US government plans to militarize the internet were revealed in top secret documents provided by former NSA contractor-turned-whistleblower Edward Snowden. Those documents show that the Pentagon's goal of "dominating cyberspace" are one step closer to reality; a nightmare for privacy rights and global peace.<br />
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Such capabilities, long suspected by security experts in the wake of Stuxnet, are useful not only for blanket domestic surveillance and political espionage but can also reveal the deepest secrets held by commercial rivals or geostrategic opponents, opening them up to covert cyber attacks which <i>will</i> kill civilians if and when the US decides that critical infrastructure should be been switched off.<br />
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Before a cyber attack attack can be launched however, US military specialists must have the means to tunnel through or around security features built into commercial software sold to the public, corporations and other governments.<br />
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Such efforts would be all the easier if military specialists held the keys that could open the most secure electronic locks guarding global communications. According to Snowden, NSA, along with their corporate partners and private military contractors embarked on a multiyear, multibillion dollar project to <a href="http://www.theguardian.com/world/2013/sep/05/nsa-gchq-encryption-codes-security">defeat encryption</a> through the subversion of the secure coding process.<br />
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Media reports published by <i><a href="http://www.businessweek.com/printer/magazine/cyber-weapons-the-new-arms-race-07212011.html">Bloomberg Businessweek</a></i>, <i><a href="http://online.wsj.com/article_email/SB10001424127887323997004578641993388259674-lMyQjAxMTAzMDAwMTEwNDEyWj.html">The Wall Street Journal</a></i> and <i><a href="http://www.washingtonpost.com/blogs/the-switch/wp/2013/08/29/the-nsa-has-its-own-team-of-elite-hackers/?print=1">The Washington Post</a></i>, also revealed that US intelligence agencies are employing "elite teams of hackers" and have sparked "a new arms race" for cyberweapons where the "most enticing targets in this war are civilian--electrical grids, food distribution systems, any essential infrastructure that runs on computers," <i>Businessweek</i> noted.<br />
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Confirming earlier reporting, <i><a href="http://www.washingtonpost.com/world/national-security/us-spy-agencies-mounted-231-offensive-cyber-operations-in-2011-documents-show/2013/08/30/d090a6ae-119e-11e3-b4cb-fd7ce041d814_print.html">The Washington Post</a></i> disclosed that the US government "carried out 231 offensive cyber-operations in 2011, the leading edge of a clandestine campaign that embraces the Internet as a theater of spying, sabotage and war, according to top-secret <a href="http://apps.washingtonpost.com/g/page/national/inside-the-2013-us-intelligence-black-budget/420/">documents</a>" provided by Snowden to the <i>Post</i>.<br />
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Since its 2009 stand-up as a "subordinate unified command" under US Strategic Command (<a href="http://www.stratcom.mil/">USSTRATCOM</a>), whose brief includes space operations (military satellites), information warfare (white, gray and black propaganda), missile defense, global command and control, intelligence, surveillance and reconnaissance (ISR), as well as global strike and strategic deterrence (America's first-strike nuclear arsenal), Cyber Command has grown from 900 personnel to a force that will soon expand to more than "4,900 troops and civilians," <i><a href="http://www.washingtonpost.com/world/national-security/pentagon-to-boost-cybersecurity-force/2013/01/19/d87d9dc2-5fec-11e2-b05a-605528f6b712_print.html">The Washington Post</a></i> reported earlier this year.<br />
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Under the USSTRATCOM umbrella, the organization is comprised of "Army Cyber Command (ARCYBER); Air Forces Cyber (AFCYBER); Fleet Cyber Command (FLTCYBERCOM); and Marine Forces Cyber Command (MARFORCYBER)."<br />
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"The Command," according to a 2009 Defense Department <a href="http://www.stratcom.mil/factsheets/Cyber_Command">Fact Sheet</a>, "is also standing up dedicated Cyber Mission Teams" that "conduct full spectrum military cyberspace operations in order to enable actions in all domains, ensure US/Allied freedom of action in cyberspace and deny the same to our adversaries."<br />
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The Defense Department <a href="http://online.wsj.com/public/resources/documents/OSD05914.pdf">Memorandum</a> authorizing it's launch specified that the Command "must be capable of synchronizing warfighting effects across the global security environment as well as providing support to civil authorities and international partners."<br />
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In written testimony to the Senate Armed Services Committee during 2010 confirmation hearings, NSA head General Keith Alexander agreed, and <i><a href="http://www.nytimes.com/2010/04/15/world/15military.html">The New York Times</a></i> reported that Cyber Command's target list would "include civilian institutions and municipal infrastructure that are essential to state sovereignty and stability, including power grids, banks and financial networks, transportation and telecommunications."<br />
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But what various "newspapers of record" still fail to report is that the deliberate targeting of civilian infrastructure are <i>war crimes</i> that cause catastrophic loss of life and incalculable suffering, as US attacks on the former Yugoslavia, Iraq and more recently, Libya, starkly demonstrate.<br />
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In a portrait of Alexander published earlier this summer by <i><a href="http://www.wired.com/threatlevel/2013/06/general-keith-alexander-cyberwar/all/">Wired</a></i>, James Bamford noted that for years the US military has "been developing offensive capabilities, giving it the power not just to defend the US but to assail its foes. Using so-called cyber-kinetic attacks, Alexander and his forces now have the capability to physically destroy an adversary's equipment and infrastructure, and potentially even to kill."<br />
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While the specter of a temporary "interruption of service" haunt modern cities with blackout or gridlock, a directed cyberattack focused on bringing down the entire system by inducing widespread technical malfunction would transform "the vast edifices of infrastructure" into "so much useless junk," according to urban geographer Stephen Graham.<br />
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In <i><a href="http://www.versobooks.com/books/1030-cities-under-siege">Cities Under Siege</a></i>, Graham discussed the effects of post-Cold War US/NATO air bombing campaigns and concluded that attacks on civilian infrastructure were not accidental; in fact, such "collateral damage" was consciously designed to inflict maximum damage on civilian populations.<br />
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"The effects of urban de-electrification," Graham wrote, "are both more ghastly and more prosaic: the mass death of the young, the weak, the ill, and the old, over protracted periods of time and extended geographies, as water systems and sanitation collapse and water-borne diseases run rampant. No wonder such a strategy has been called a 'war on public health,' an assault which amounts to 'bomb now, die later'."<br />
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A further turn in US Cyber Command's brief to plan for and wage aggressive war, was telegraphed in a 2012 Defense Department <a href="http://www.dtic.mil/whs/directives/corres/pdf/300009p.pdf">Directive</a> mandating that autonomous weapons systems and platforms be built and tested so that humans won't lose control once they're deployed.<br />
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There was one small catch, however.<br />
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According to Deputy Secretary of Defense Ashton Carter, a former member of the Board of Trustees at the spook-connected <a href="http://www.mitre.org/">MITRE Corporation</a>, the Directive explicitly states it "does not apply to autonomous or semi-autonomous cyberspace systems for cyberspace operations."<br />
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<b>Presidential Policy Directive 20: Authorizing 'Cyber-Kinetic' War Crimes</b><br />
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We now know, based on documents provided by Edward Snowden, that President Barack Obama "has ordered his senior national security and intelligence officials to draw up a list of potential overseas targets for US cyber-attacks," according to the 18-page top secret Presidential Policy Directive 20 published by <i><a href="http://www.guardian.co.uk/world/interactive/2013/jun/07/obama-cyber-directive-full-text">The Guardian</a></i>.<br />
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Though little commented upon at the time due to the avalanche of revelations surrounding dragnet domestic surveillance carried out by NSA, in light of recent disclosures by <i><a href="http://www.washingtonpost.com/world/national-security/black-budget-summary-details-us-spy-networks-successes-failures-and-objectives/2013/08/29/7e57bb78-10ab-11e3-8cdd-bcdc09410972_print.html">The Washington Post</a></i> on America's bloated $52.6 billion 2013 <a href="http://www.washingtonpost.com/wp-srv/special/national/black-budget/">intelligence budget</a>, PPD-20 deserves close scrutiny.<br />
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With Syria now in Washington's crosshairs, PPD-20 offers a glimpse into Executive Branch deliberations before the military is ordered to "put steel to target."<br />
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The directive averred that Offensive Cyber Effects Operations (OCEO) "can offer unique and unconventional capabilities to advance US national objectives around the world with little or no warning to the adversary or target and with potential effects ranging from subtle to severely damaging."<br />
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These are described in the document as "cyber effects," the "manipulation, disruption, denial, degradation, or destruction of computers, information or communications systems, networks, physical or virtual infrastructure controlled by computers or information systems, or information resident thereon."<br />
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To facilitate attacks, the directive gives notice that "cyber collection" will entail "Operations and related programs or activities conducted by or on behalf of the United States Government, in or through cyberspace, for the primary purpose of collecting intelligence--including information that can be used for future operations--from computers, information or communications systems, or networks with the intent to remain undetected."<br />
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Such clandestine exercises will involve "accessing a computer, information system, or network without authorization from the owner or operator of that computer, information system, or network or from a party to a communication or by exceeding authorized access."<br />
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In fact, PPD-20 authorizes US Cyber Command to "identify potential targets of national importance where OCEO can offer a favorable balance of effectiveness and risk as compared with other instruments of national power."<br />
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Indeed, the "directive pertains to cyber operations, including those that support or enable kinetic, information, or other types of operations . . . that are reasonably likely to result in 'significant consequences'" to an adversary.<br />
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We are informed that "malicious cyber activity" is comprised of "Activities, other than those authorized by or in accordance with US law, that seek to compromise or impair the confidentiality, integrity, or availability of computers, information or communications systems, networks, physical or virtual infrastructure controlled by computers or information systems, or information resident thereon."<br />
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In other words, if such activities <i>are</i> authorized by the President acting as Commander-in-Chief under the dubious "Unitary Executive" doctrine, like Richard Nixon, Obama now claims that "when the President does it that means that it is not illegal," a novel reading of the US Constitution and the separation of powers as it pertains to declaring and waging war!<br />
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"Military actions approved by the President and ordered by the Secretary of Defense authorize nonconsensual DCEO [Defensive Cyber Effects Operations] or OCEO, with provisions made for using existing processes to conduct appropriate interagency coordination on targets, geographic areas, levels of effect, and degrees of risk for the operations."<br />
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This has long been spelled out in US warfighting doctrine and is fully consistent with the Pentagon's goal of transforming cyberspace into an offensive military domain. In an Air Force planning document since removed from the web, theorists averred:<br />
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<blockquote>Cyberspace favors offensive operations. These operations will deny, degrade, disrupt, destroy, or deceive an adversary. Cyberspace offensive operations ensure friendly freedom of action in cyberspace while denying that same freedom to our adversaries. We will enhance our capabilities to conduct electronic systems attack, electromagnetic systems interdiction and attack, network attack, and infrastructure attack operations. Targets include the adversary's terrestrial, airborne, and space networks, electronic attack and network attack systems, and the adversary itself. As an adversary becomes more dependent on cyberspace, cyberspace offensive operations have the potential to produce greater effects. (Air Force Cyber Command, "Strategic Vision," no date)</blockquote><br />
Those plans were made explicit in 2008, when the Air Force Research Lab issued a Broad Agency Announcement entitled <a href="https://www.fbo.gov/index?s=opportunity&mode=form&id=b34f1f48d3ed2ce781f85d28f700a870&tab=core&_cview=0">Dominant Cyber Offensive Engagement and Supporting Technology, BAA-08-04-RIKA</a>.<br />
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Predating current research under "Plan X" to build "an end-to-end system that enables the military to understand, plan, and manage cyberwarfare in real-time," the earlier notification solicited bids from private military contractors to build cyberweapons.<br />
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We learned that the Air Force, now US Cyber Command, the superseding authority in the realm of cyberweapons development, a mandate made explicit in PPD-20, was "interested in technology to provide the capability to maintain an active presence within the adversaries information infrastructure completely undetected. Of interest are any and all techniques to enable stealth and persistence capabilities on an adversaries infrastructure."<br />
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"This could be a combination of hardware and/or software focused development efforts."<br />
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"Following this," the solicitation read, "it is desired to have the capability to stealthily exfiltrate information from any remotely-located open or closed computer information systems with the possibility to discover information with previously unknown existence."<br />
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While the United States has accused China of carrying out widespread espionage on US networks, we know from information Snowden provided the <i><a href="http://www.scmp.com/news/hong-kong/article/1266777/exclusive-snowden-safe-hong-kong-more-us-cyberspying-details-revealed">South China Morning Post</a></i>, that NSA and US Cyber Command have conducted "extensive hacking of major telecommunication companies in China to access text messages"; carried out "sustained attacks on network backbones at Tsinghua University, China's premier seat of learning"; and have hacked the "computers at the Hong Kong headquarters of Pacnet, which owns one of the most extensive fibre optic submarine cable networks in the region."<br />
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China isn't the only target of US industrial espionage.<br />
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Earlier this month, <i><a href="http://g1.globo.com/fantastico/noticia/2013/09/nsa-documents-show-united-states-spied-brazilian-oil-giant.html">O Globo</a></i> disclosed that "one of the prime targets of American spies in Brazil is far away from the center of power--out at sea, deep beneath the waves. Brazilian oil. The internal computer network of Petrobras, the Brazilian oil giant partly owned by the state, has been under surveillance by the NSA, the National Security Agency of the United States."<br />
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Top secret documents mined from the Snowden cache revealed that NSA employees are trained "step-by-step how to access and spy upon private computer networks--the internal networks of companies, governments, financial institutions--networks designed precisely to protect information."<br />
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In addition to Petrobras, "other targets" included "French diplomats--with access to the private network of the Ministry of Foreign Affairs of France--and the SWIFT network, the cooperative that unites over ten thousand banks in 212 countries and provides communications that enable international financial transactions. All transfers of money between banks across national borders goes through SWIFT," <i>O Globo</i> disclosed.<br />
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The 2008 Air Force solicitation stressed that the service was interested in "any and all techniques to enable exfiltration techniques on both fixed and mobile computing platforms are of interest. Consideration should be given to maintaining a 'low and slow' gathering paradigm in these development efforts to enable stealthy operation."<br />
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The Air Force however, was not solely interested in defense or industrial spying on commercial rivals; building offensive capabilities were viewed as a top priority. "Finally," the solicitation reads, "this BAA's objective includes the capability to provide a variety of techniques and technologies to be able to affect computer information systems through Deceive, Deny, Disrupt, Degrade, Destroy (D5) effects."<br />
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As <i>Bloomberg Businessweek</i> reported in 2011, recipients of that Broad Agency Announcement may have included any number of "boutique arms dealers that trade in offensive cyber weapons. Most of these are 'black' companies that camouflage their government funding and work on classified projects."<br />
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"Offensive Cyber Effects Operations" will be enhanced through the development and deployment of software-based weapons; the Obama administration's intent in PPD-20 is clear.<br />
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The US government "shall identify potential targets of national importance where OCEO can offer a favorable balance of effectiveness and risk as compared with other instruments of national power, establish and maintain OCEO capabilities integrated as appropriate with other US offensive capabilities, and execute those capabilities in a manner consistent with the provisions of this directive."<br />
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Evidence has since emerged these programs are now fully operational.<br />
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<b>On the Attack: Economic, Political and Military 'Exploits'</b><br />
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Despite diplomatic posturing and much handwringing from the "humanitarian intervention" crowd, the Obama administration's itchy trigger finger is still poised above the attack Syria button.<br />
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The conservative <i><a href="http://freebeacon.com/syria-facing-u-s-cyber-attacks-in-upcoming-strikes/">Washington Free Beacon</a></i> web site reported recently that US forces "are expected to roll out new cyber warfare capabilities during the anticipated military strike on Syria," and that the targets of "cyber attacks likely will include electronic command and control systems used by the Syrian military forces, air defense computers, and other military communications networks."<br />
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Whether or not that attack takes place, NSA and US Cyber Command are ramping-up their formidable resources and would not hesitate to use them if given the go-ahead.<br />
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This raises the question: what capabilities have <i>already</i> been rolled out?<br />
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"Under an extensive effort code-named GENIE, <i><a href="http://www.washingtonpost.com/world/national-security/us-spy-agencies-mounted-231-offensive-cyber-operations-in-2011-documents-show/2013/08/30/d090a6ae-119e-11e3-b4cb-fd7ce041d814_print.html">The Washington Post</a></i> disclosed, "US computer specialists break into foreign networks so that they can be put under surreptitious US control."<br />
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According to top secret budget documents provided by Snowden, the <i>Post</i> revealed the "$652 million project has placed 'covert implants,' sophisticated malware transmitted from far away, in computers, routers and firewalls on tens of thousands of machines every year, with plans to expand those numbers into the millions."<br />
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"Of the 231 offensive operations conducted in 2011," the <i>Post</i> reported, "nearly three-quarters were against top-priority targets, which former officials say includes adversaries such as Iran, Russia, China and North Korea and activities such as nuclear proliferation. The document provided few other details about the operations."<br />
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As other media outlets previously reported, the <i>Post</i> noted that US secret state agencies "are making routine use around the world of government-built malware that differs little in function from the 'advanced persistent threats' that US officials attribute to China."<br />
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One firm featured in <i>Bloomberg Businessweek's</i> cyberwar exposé is <a href="http://www.endgame.com/">Endgame Systems</a>, which first gained notoriety as a result of the 2011 <a href="http://www.scribd.com/doc/59114801/ENDGAME-Systems-Anonymous-WikiLeaks-Methods-Motivations-of-Cyber-Attacks">HBGary Federal hack</a> by Anonymous.<br />
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The shadowy firm has received extensive funding from venture capitalists such as Bessemer Venture Partners, Columbia Capital, Kleiner Perkins Caufield & Byers and the intelligence-connected Paladin Capital Group.<br />
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Endgame is currently led by CEO Nathaniel Flick, previously the CEO of the "nonpartisan" Center for a New American Security (<a href="http://www.cnas.org/">CNAS</a>), a warmongering Washington think tank focused on "terrorism" and "irregular warfare."<br />
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Flick replaced Christopher Rouland, Endgame's founder and CEO in December 2012. A former hacker, Rouland was "turned" by the Air Force during the course of a 1990 investigation where he was suspected of breaking into Pentagon systems, <i>Businessweek</i> reported.<br />
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The Board of Directors is currently led by Christopher Darby, the President and CEO of the CIA's venture capital arm, <a href="https://www.iqt.org/">In-Q-Tel</a>. Earlier this year, the firm announced that Kenneth Minihan, a former NSA Director and managing partner at Paladin Capital had joined the Board.<br />
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According to <i>Businessweek</i>, Endgame specializes in militarizing zero-day exploits, software vulnerabilities which take months, or even years for vendors to patch; a valuable commodity for criminals or spooks.<br />
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"People who have seen the company pitch its technology," <i>Businessweek</i> averred, "say Endgame executives will bring up maps of airports, parliament buildings, and corporate offices. The executives then create a list of the computers running inside the facilities, including what software the computers run, and a menu of attacks that could work against those particular systems."<br />
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While the United States has accused the Technical Reconnaissance Bureau of China's People's Liberation Army of launching attacks and stealing economic secrets from US networks, American cyberoperations involve "what one budget document calls 'field operations' abroad, commonly with the help of CIA operatives or clandestine military forces, 'to physically place hardware implants or software modifications,'" according to <i>The Washington Post</i>.<br />
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"Endgame weaponry comes customized by region--the Middle East, Russia, Latin America, and China--with manuals, testing software, and 'demo instructions.'"<br />
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"There are even target packs for democratic countries in Europe and other US allies," <i>Businessweek</i> noted.<br />
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Readers will recall that Snowden documents have exposed how NSA has carried out widespread economic and political espionage against erstwhile "friends and allies" such as <a href="http://www.theguardian.com/world/2013/sep/02/nsa-spied-mexico-brazil-presidents">Brazil</a>, <a href="http://www.spiegel.de/international/world/nsa-targeted-french-foreign-ministry-a-919693-druck.html">France</a>, <a href="http://www.spiegel.de/international/world/germany-is-a-both-a-partner-to-and-a-target-of-nsa-surveillance-a-916029-druck.html">Germany</a>, <a href="http://www.thehindu.com/news/national/india-among-top-targets-of-spying-by-nsa/article5157526.ece">India</a>, the <a href="http://www.guardian.co.uk/world/2013/jun/30/nsa-leaks-us-bugging-european-allies">European Union</a> and the <a href="http://www.spiegel.de/international/world/secret-nsa-documents-show-how-the-us-spies-on-europe-and-the-un-a-918625-druck.html">United Nations</a>.<br />
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Add to that list, Endgame exploits which are solely military in nature; in all probability these have been incorporated into NSA and US Cyber Command's repertoire of dirty tricks.<br />
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"Maui (product names tend toward alluring warm-weather locales) is a package of 25 zero-day exploits that runs clients $2.5 million a year," <i>Businessweek</i> reported. "The Cayman botnet-analytics package gets you access to a database of Internet addresses, organization names, and worm types for hundreds of millions of infected computers, and costs $1.5 million."<br />
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"A government or other entity could launch sophisticated attacks against just about any adversary anywhere in the world for a grand total of $6 million. Ease of use is a premium. It's cyber warfare in a box."<br />
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Sound familiar?<br />
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"An implant is coded entirely in software by an NSA group called Tailored Access Operations (TAO)," Snowden documents revealed. "As its name suggests, TAO builds attack tools that are custom-fitted to their targets," according to <i>The Washington Post</i>.<br />
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"The implants that TAO creates are intended to persist through software and equipment upgrades, to copy stored data, 'harvest' communications and tunnel into other connected networks" the <i>Post</i> disclosed.<br />
<br />
"This year TAO is working on implants that 'can identify select voice conversations of interest within a target network and exfiltrate select cuts,' or excerpts, according to one budget document. In some cases, a single compromised device opens the door to hundreds or thousands of others."<br />
<br />
This does much to explain why NSA's parallel, $800 million <a href="http://www.propublica.org/documents/item/784285-sigint-enabling-project.html">SIGINT Enabling Project</a> stresses the importance of obtaining total global access and "full operating capacity" that can "leverage commercial capabilities to remotely deliver or receive information."<br />
<br />
With "boutique arms dealers" and others from more traditional defense giants along for the ride, NSA and US Cyber Command hope their investment will help "shape the global network to benefit other collection accesses and allow the continuation of partnering with commercial Managed Security Service Providers and threat researchers, doing threat/vulnerability analysis."<br />
<br />
"By the end of this year," the <i>Post</i> noted, "GENIE is projected to control at least 85,000 implants in strategically chosen machines around the world. That is quadruple the number--21,252--available in 2008, according to the US intelligence budget."<br />
<br />
The agencies are now poised to expand the number of machines already compromised. "For GENIE's next phase, according to an authoritative reference document," the <i>Post</i> disclosed, "the NSA has brought online an automated system, code-named TURBINE, that is capable of managing 'potentially millions of implants' for intelligence gathering 'and active attack'."<br />
<br />
It should be clear, given what we have learned from Edward Snowden and other sources, that the US government views the internet, indeed the entire planet, as a battlespace.<br />
<br />
In congressional testimony earlier this year, General Alexander told the House Armed Services Committee that "Cyber offense requires a deep, persistent and pervasive presence on adversary networks in order to precisely deliver effects."<br />
<br />
"We maintain that access, gain deep understanding of the adversary, and develop offensive capabilities through the advanced skills and tradecraft of our analysts, operators and developers."<br />
<br />
With US Cyber Command fully funded and mobilized, those "offensive capabilities" are only a mouse click away.Antifascisthttp://www.blogger.com/profile/05421707682211445550noreply@blogger.com0tag:blogger.com,1999:blog-1831516114336983238.post-24687287553865758902013-07-28T10:38:00.001-07:002013-07-28T10:39:37.277-07:00'Big Data' Dynamo: How Giant Tech Firms Help the Government Spy on Us and Gut Privacy<a href="http://4.bp.blogspot.com/-e6vBjPp1LEs/Ue69gJxE9CI/AAAAAAAAAZY/6EcVdMrVdA4/s1600/PRISM+slides+from+O+Globo.jpg" imageanchor="1" ><img border="0" src="http://4.bp.blogspot.com/-e6vBjPp1LEs/Ue69gJxE9CI/AAAAAAAAAZY/6EcVdMrVdA4/s400/PRISM+slides+from+O+Globo.jpg" /></a><br />
<br />
As the secret state continues trawling the electronic communications of hundreds of millions of Americans, lusting after what securocrats euphemistically call "actionable intelligence," a notional tipping point that transforms a "good" citizen into a "criminal" suspect, the role played by telecommunications and technology firms cannot be emphasized enough.<br />
<br />
Ever since former NSA contractor Edward Snowden began leaking secrets to media outlets about government surveillance programs, one fact stands out: The <i>zero probability</i> these privacy-killing projects would be practical without close (and very profitable) "arrangements" made with phone companies, internet service providers and other technology giants.<br />
<br />
Indeed, a top secret NSA Inspector General's report published by <i><a href="http://www.guardian.co.uk/world/interactive/2013/jun/27/nsa-inspector-general-report-document-data-collection">The Guardian</a></i>, revealed that the agency "maintains relationships with over 100 US companies," adding that the US has the "home field advantage as the primary hub for worldwide telecommunications."<br />
<br />
Similarly, the British fiber optic cable tapping program, <a href="http://www.guardian.co.uk/uk/2013/jun/21/gchq-cables-secret-world-communications-nsa">TEMPORA</a>, referred to telcos and ISPs involved in the spying as "intercept partners." The names of the firms were considered so sensitive that GCHQ "went to great lengths" to keep their identities hidden, fearing exposure "would cause 'high-level political fallout'."<br />
<br />
With new privacy threats looming on the horizon, including what <a href="http://news.cnet.com/8301-13578_3-57595202-38/feds-put-heat-on-web-firms-for-master-encryption-keys/">CNET</a> described as ongoing efforts by the FBI and NSA "to obtain the master encryption keys that Internet companies use to shield millions of users' private Web communications from eavesdropping," along with <a href="http://news.cnet.com/8301-13578_3-57595529-38/feds-tell-web-firms-to-turn-over-user-account-passwords/">new government demands</a> that ISPs and cell phone carriers "divulge users' stored passwords," can we trust these firms?<br />
<br />
And with <a href="http://www.guardian.co.uk/world/2013/jul/11/microsoft-nsa-collaboration-user-data">Microsoft</a> and other tech giants, collaborating closely with "US intelligence services to allow users' communications to be intercepted, including helping the National Security Agency to circumvent the company's own encryption," can we afford to?<br />
<br />
<b>Hiding in Plain Sight</b><br />
<br />
Ever since retired union technician Mark Klein blew the lid off AT&T's secret surveillance pact with the US government in 2006, we know user privacy is <i>not</i> part of that firm's business model.<br />
<br />
The technical source for the Electronic Frontier Foundation's lawsuit, <i><a href="https://www.eff.org/cases/hepting">Hepting v. AT&T</a></i> and the author of <i><a href="http://www.booksurge.com/Wiring-Up-The-Big-Brother-Machine...And/A/1439229961.htm">Wiring Up the Big Brother Machine</a></i>, Klein was the first to publicly expose how NSA was "vacuuming up everything flowing in the Internet stream: e-mail, web browsing, Voice-Over-Internet phone calls, pictures, streaming video, you name it."<br />
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We also know from reporting by <i><a href="http://www.usatoday.com/news/washington/2006-05-10-nsa_x.htm">USA Today</a></i>, that the agency "has been secretly collecting the phone call records of tens of millions of Americans" and had amassed "the largest database ever assembled in the world."<br />
<br />
Three of those data-slurping programs, UPSTREAM, PRISM and X-KEYSCORE, shunt domestic and global communications collected from fiber optic cables, the servers of Apple, Google, Microsoft and Yahoo, along with telephone data (including metadata, call content and location) grabbed from AT&T, Sprint and Verizon into NSA-controlled databases.<br />
<br />
But however large, a database is only useful to an organization, whether its a corporation or a spy agency, if the oceans of data collected can be searched and extracted in meaningful ways.<br />
<br />
To the growing list of spooky acronyms and code-named black programs revealed by Edward Snowden, what <i>other</i> projects, including those in the public domain, are hiding in plain sight?<br />
<br />
Add Google's <a href="http://research.google.com/archive/bigtable.html">BigTable</a> and Yahoo's <a href="http://developer.yahoo.com/hadoop/">Hadoop</a> to that list. Both are massive storage and retrieval systems designed to crunch ultra-large data sets and were developed as a practical means to overcome "big data" conundrums.<br />
<br />
According to the Mountain View behemoth, "BigTable is a distributed storage system for managing structured data that is designed to scale to a very large size: petabytes of data across thousands of commodity servers." Along with web indexing, Google Earth and Google Finance, BigTable performs "bulk processing" for "real-time data serving."<br />
<br />
Down the road in Sunnyvale, Yahoo developed Hadoop as "an open source Java framework for processing and querying vast amounts of data on large clusters of commodity hardware." According to Yahoo, Hadoop has become "the industry <i>de facto</i> framework for big data processing." Like Google's offering, Hadoop enable applications to work with thousands of computers and petabytes of data simultaneously.<br />
<br />
Prominent corporate clients using these applications include Amazon, AOL, eBay, Facebook, IBM, Microsoft and Twitter, among many others.<br />
<br />
<b>'Big Data' Dynamo</b><br />
<br />
Who might <i>also</i> have a compelling interest in cataloging and searching through very large data sets, away from prying eyes, and at granular levels to boot? It should be clear following Snowden's disclosures, what's good for commerce is also a highly-prized commodity among global eavesdroppers.<br />
<br />
Despite benefits for medical and scientific researchers sifting through mountains of data, as <i><a href="http://arstechnica.com/information-technology/2013/06/what-the-nsa-can-do-with-big-data/">Ars Technica</a></i> pointed out BigTable and Hadoop "lacked compartmentalized security" vital to spy shops, so "in 2008, NSA set out to create a better version of BigTable, called Accumulo."<br />
<br />
Developed by agency specialists, it was eventually handed off to the "non-profit" Apache Software Foundation. Touted as an open software platform, <a href="https://accumulo.apache.org/">Accumulo</a> is described in Apache literature as "a robust, scalable, high performance data storage and retrieval system."<br />
<br />
"The platform allows for compartmentalization of segments of big data storage through an approach called cell-level security. The security level of each cell within an Accumulo table can be set independently, hiding it from users who don't have a need to know: whole sections of data tables can be hidden from view in such a way that users (and applications) without clearance would never know they weren't there," <i><a href="http://arstechnica.com/information-technology/2013/06/secret-sqrrl-nsa-spin-off-company-releases-data-mining-tool/">Ars Technica</a></i> explained.<br />
<br />
The tech site <i><a href="http://gigaom.com/2013/06/07/under-the-covers-of-the-nsas-big-data-effort/">Gigaom</a></i> noted, Accumulo is the "technological linchpin to everything the NSA is doing from a data-analysis perspective," enabling agency analysts to "generate near real-time reports from specific patterns in data," <i>Ars</i> averred.<br />
<br />
"For instance, the system could look for specific words or addressees in e-mail messages that come from a range of IP addresses; or, it could look for phone numbers that are two degrees of separation from a target's phone number. Then it can spit those chosen e-mails or phone numbers into another database, where NSA workers could peruse it at their leisure."<br />
<br />
(Since that <i>Ars</i> piece appeared, we have since learned that NSA is now conducting what is described as "three-hop analysis," that is, <i>three degrees of separation</i> from a target's email or phone number. This data dragnet "could allow the government to mine the records of 2.5 million Americans when investigating one suspected terrorist," the <i><a href="http://www.twincities.com/breakingnews/ci_23675608/more-questions-from-congress-surveillance">Associated Press</a></i> observed).<br />
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"In other words," <i>Ars</i> explained, "Accumulo allows the NSA to do what Google does with your e-mails and Web searches--only with everything that flows across the Internet, or with every phone call you make."<br />
<br />
Armed with a "dual-use" program like Accumulo, the dirty business of assembling a user's political profile, or shuttling the names of "suspect" Americans into a national security index, is as now easy as downloading a song from iTunes!<br />
<br />
And it isn't only Silicon Valley giants cashing-in on the "public-private" spy game.<br />
<br />
Just as the <a href="http://www.businessweek.com/magazine/palantir-the-vanguard-of-cyberterror-security-11222011.html">CIA-funded Palantir</a>, a firm currently valued at $8 billion and exposed two years ago as a "partner" in a Bank of America-brokered scheme to bring down <a href="https://www.wikileaks.org/IMG/pdf/WikiLeaks_Response_v6.pdf">WikiLeaks</a>, profited from CIA interest in its social mapping <a href="http://www.palantir.com/labs/graph/">Graph</a> application, so too, the NSA spin-off <a href="http://www.sqrrl.com/">Sqrrl</a>, launched in 2012 with agency blessings, stands to make a killing off software its corporate officers helped develop for NSA.<br />
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Co-founded by nine-year agency veteran Adam Fuchs, Sqrrl sells commercial versions of Accumulo and has partnered-up with Amazon, Dell, MapR and Northrop Grumman. According to published reports, like other start-ups with an intelligence angle, Sqrrl is hoping to hook-up with CIA's venture capital arm <a href="http://www.iqt.org/">In-Q-Tel</a>.<br />
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Its obvious why the application is of acute interest to American spy shops. Fuchs told <i>Gigaom</i> that Accumulo operates "at thousands-of-nodes scale" within NSA data centers.<br />
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"There are multiple instances each storing tens of petabytes (1 petabyte equals 1,000 terabytes or 1 million gigabytes) of data and it's the backend of the agency's most widely used analytical capabilities."<br />
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Accumulo's analytical functions work because of its ability to perform lightning-quick searches called "graph analysis," a method for uncovering unique relationships between people hidden within vast oceans of data.<br />
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According to <i><a href="http://www.forbes.com/sites/siliconangle/2013/06/07/how-the-nsa-tracks-your-calls/">Forbes</a></i>, "we know that the NSA has successfully tested Accumulo's graph analysis capabilities on some huge data sets--in one case on a 1200 node Accumulo cluster with over a petabyte of data and 70 trillion edges."<br />
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Considering, as <i><a href="http://www.wired.com/wiredenterprise/2013/07/google-internet-traffic/">Wired</a></i> reported, that "on an average day, Google accounts for about 25 percent of all consumer internet traffic running through North American ISPs," and the Mountain View firm allowed the FBI and NSA to tap directly into their central servers as <i><a href="http://www.washingtonpost.com/investigations/us-intelligence-mining-data-from-nine-us-internet-companies-in-broad-secret-program/2013/06/06/3a0c0da8-cebf-11e2-8845-d970ccb04497_print.html">The Washington Post</a></i> disclosed, the negative impact on civil rights and political liberties when systems designed for the Pentagon are monetized, should be evident.<br />
<br />
Once fully commercialized, how much more intrusive will employers, marketing firms, insurance companies or local and state police with mountains of data only a mouse click away, become?<br />
<br />
<b>Global Panopticon</b><br />
<br />
The sheer scope of NSA programs such as UPSTREAM, PRISM or X-KEYSCORE, exposed by the Brazilian daily, <i><a href="http://oglobo.globo.com/infograficos/big-brother-am-latina/">O Globo</a></i> should give pause.<br />
<br />
A crude illustration (at the top of this post), shows that all data collected in X-KEYSCORE "sessions" are processed in petabyte scale batches captured from "web-based searches" that can be "retrospectively" queried to locate and profile a "target."<br />
<br />
This requires enormous processing power; a problem the agency <i>may</i> have solved with Accumulo or similar applications.<br />
<br />
Once collected, data is separated into digestible fragments (phone numbers, email addresses and log ins), then reassembled at lightning speeds for searchable queries in graphic form. Information gathered in the hopper includes not only metadata tables, but the "full log," including what spooks call Digital Network Intelligence, i.e., user content.<br />
<br />
And while it may not <i>yet</i> be practical for NSA to collect and store each single packet flowing through the pipes, the agency is <i>already</i> collecting and storing vast reams of data intercepted from our phone records, IP addresses, emails, web searches and visits, and is doing so in much the same way that Amazon, eBay, Google and Yahoo does.<br />
<br />
As the volume of global communications increase each year at near exponential levels, data storage and processing pose distinct problems.<br />
<br />
Indeed, Cisco Systems forecast in their 2012 <a href="http://www.cisco.com/web/solutions/sp/vni/vni_forecast_highlights/index.html">Visual Networking Index</a> that global IP traffic will grow three-fold over the next five years and will carry up to 4 exabytes of data per day, for an annual rate of 1.4 zettabytes by 2017.<br />
<br />
This does much to explain why NSA is building a $2 billion Utah Data Center with 22 acres of digital storage space that can hold up to 5 zettabytes of data and expanding already existing centers at Fort Gordon, Lackland Air Force Base, NSA Hawaii and at the agency's Fort Meade headquarters.<br />
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Additionally, NSA is feverishly working to bring supercomputers online "that can execute a quadrillion operations a second" at the Multiprogram Research facility in Oak Ridge, Tennessee where enriched uranium for nuclear weapons is manufactured, as James Bamford disclosed last year in <i><a href="http://www.wired.com/threatlevel/2012/03/ff_nsadatacenter/all/1">Wired</a></i>.<br />
<br />
As the secret state sinks tens of billions of dollars into various big data digital programs, and carries out research on next-gen cyberweapons more destructive than Flame or Stuxnet, as those supercomputers come online the cost of cracking encrypted passwords and communications will continue to fall.<br />
<br />
Stanford University computer scientist David Mazières told CNET that mastering encrypted communications would "include an order to extract them from the server or network when the user logs in--which has been done before--or installing a keylogger at the client."<br />
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This is <i>precisely</i> what Microsoft has already done with its SkyDrive cloud storage service "which now has 250 million users worldwide" and exabytes of data ready to be pilfered, as <i>The Guardian</i> disclosed.<br />
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One document "stated that NSA already had pre-encryption access to Outlook email. 'For Prism collection against Hotmail, Live, and Outlook.com emails will be unaffected because Prism collects this data prior to encryption'."<br />
<br />
Call the "wrong" person or click a dodgy link and you might just be the lucky winner of a one-way trip to indefinite military detention under <a href="http://www.chicagotribune.com/news/politics/sns-rt-us-usa-security-lawsuit-20130717,0,6375574.story">NDAA</a>, or worse.<br />
<br />
What should also be clear since revelations about NSA surveillance programs began spilling out last month, is not a single ruling class sector in the United States--including corporations, the media, nor any branch of the US government--has the least interest in defending democratic rights or rolling-back America's emerging police state.Antifascisthttp://www.blogger.com/profile/05421707682211445550noreply@blogger.com0tag:blogger.com,1999:blog-1831516114336983238.post-51494272650511711682013-07-18T10:58:00.000-07:002013-07-18T10:58:42.318-07:00Documents Show Undersea Cable Firms Provide Surveillance Access to US Secret State<a href="http://1.bp.blogspot.com/-Lf9IiRbR-Ww/UeMBWWpugNI/AAAAAAAAAZA/F36AhQIghE0/s1600/x-keyscore.jpg" imageanchor="1" ><img border="0" src="http://1.bp.blogspot.com/-Lf9IiRbR-Ww/UeMBWWpugNI/AAAAAAAAAZA/F36AhQIghE0/s400/x-keyscore.jpg" /></a><br />
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Documents published last week by the Australian web site <i><a href="http://www.crikey.com.au/2013/07/12/telstras-deal-with-the-devil-fbi-access-to-its-undersea-cables/">Crikey</a></i> revealed that the US government "compelled Telstra and Hong Kong-based PCCW to give it access to their undersea cables for spying on communications traffic entering and leaving the US."<br />
<br />
The significance of the disclosure is obvious; today, more than 99 percent of the world's internet and telephone traffic is now carried by undersea fiber optic cables. An interactive <a href="http://www.submarinecablemap.com/">submarine cable map</a> published by the <a href="http://www.telegeography.com/research-services/global-bandwidth-research-service/index.html">Global Bandwidth Research Service</a> is illustrative in this regard.<br />
<br />
Since the late 1960s as part of its ECHELON spy project, the United States has been tapping undersea cables to extract communications and signals intelligence. In fact, projects such as <a href="http://www.specialoperations.com/Operations/ivybells.html">Operation Ivy Bells</a>, a joint Navy-NSA secret intelligence program directed against the former Soviet Union was designed to do just that.<br />
<br />
Prefiguring the Bush administration's <a href="http://www.nytimes.com/2005/12/16/politics/16program.html">warrantless wiretapping scandal</a> which broke in 2005, the <i><a href="http://www.nytimes.com/2005/02/20/politics/20submarine.html">Associated Press</a></i> reported that a $3.2 billion Navy Seawolf class submarine, a 453-foot behemoth called the USS Jimmy Carter, "has a special capability: it is able to tap undersea cables and eavesdrop on the communications passing through them."<br />
<br />
A year later, AT&T whistleblower Mark Klein told <i><a href="http://www.wired.com/science/discoveries/news/2006/05/70944">Wired Magazine</a></i> that NSA was tapping directly into the world's internet backbone, and was doing so from domestic listening posts the telecommunications' giant jointly built with the agency at corporate switching stations.<br />
<br />
Whatever submarine operations NSA still carry out with the US Navy and "Five Eyes" surveillance partners (Australia, Britain, Canada, New Zealand and the US), access to information flowing through undersea cables mean that the US government is well-positioned to scoop-up virtually all global communications.<br />
<br />
Since former NSA contractor Edward Snowden began spilling the beans last month, it should be clear that the American government's capabilities in amassing unprecedented volumes of information from cable traffic, also potentially hands the US and their corporate collaborators a treasure trove of sensitive economic secrets from competitors.<br />
<br />
<b>Economic Espionage</b><br />
<br />
Reporting by Australian journalists confirm information published July 6 by <i><a href="http://www.washingtonpost.com/business/technology/agreements-with-private-companies-protect-us-access-to-cables-data-for-surveillance/2013/07/06/aa5d017a-df77-11e2-b2d4-ea6d8f477a01_print.html">The Washington Post</a></i>. There we learned that overseas submarine cable companies doing business in the United States must maintain "an internal corporate cell of American citizens with government clearances," a cadre of personnel whose job is to ensure that "when US government agencies seek access to the massive amounts of data flowing through their networks, the companies have systems in place to provide it securely."<br />
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Inked just weeks after the 9/11 provocation, the 23-page Telstra <a href="http://media.crikey.com.au/wp-content/uploads/2013/07/US-NSAs-Telstra.pdf">document</a> specifies that access to undersea cable traffic by the FBI and "any US governmental authorities entitled to effect Electronic Surveillance," is an explicit condition for doing business in the United States.<br />
<br />
Similar <a href="https://publicintelligence.net/us-nsas/">agreements</a> were signed between 1999 and 2011 with telecommunication companies, satellite firms, submarine cable operators and the US government and were published earlier this month by the <a href="https://publicintelligence.net/">Public Intelligence</a> web site.<br />
<br />
It has long been known that the Australian secret state agency, the Defence Security Directorate (DSD), is a key participant in US global surveillance projects. Classified NSA maps provided by Snowden and subsequently published by Brazil's <i><a href="http://oglobo.globo.com/infograficos/big-brother-am-latina/">O Globo</a></i> newspaper, revealed the locations of dozens of US and allied signals intelligence sites worldwide. DSD currently operates four military installations involved in a top secret NSA program called X-Keyscore.<br />
<br />
Snowden described X-Keyscore and other programs to <i><a href="http://www.spiegel.de/international/world/interview-with-whistleblower-edward-snowden-on-global-spying-a-910006-druck.html">Der Spiegel</a></i> as "the intelligence community's first 'full-take' Internet buffer that doesn't care about content type . . . 'Full take' means it doesn't miss anything, and ingests the entirety of each circuit's capacity."<br />
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According to <i><a href="http://www.smh.com.au/world/snowden-reveals-australias-links-to-us-spy-web-20130708-2plyg.html">The Sydney Morning Herald</a></i>, along with the "US Australian Joint Defence Facility at Pine Gap near Alice Springs," three other DSD facilities, "the Shoal Bay Receiving Station near Darwin, the Australian Defence Satellite Communications Facility at Geraldton and the naval communications station HMAS Harman outside Canberra," were identified as X-Keyscore "contributors." The paper also reported that "a new state-of-the-art data storage facility at HMAS Harman to support the Australian signals directorate and other Australian intelligence agencies" is currently under construction.<br />
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The <i>Herald</i> described the project as "an intelligence collection program" that "processes all signals before they are shunted off to various 'production lines' that deal with specific issues and the exploitation of different data types for analysis--variously code-named Nucleon (voice), Pinwale (video), Mainway (call records) and Marina (internet records). US intelligence expert William Arkin describes X-Keyscore as a 'national Intelligence collection mission system'."<br />
<br />
Two of the Australian bases illustrated on the X-Keyscore map sit adjacent to major undersea cable sites transiting the Pacific and Indian Oceans.<br />
<br />
Cozy arrangements with Telstra and other firms however, hardly represent mere passive acceptance of terms and conditions laid out by the US government. On the contrary, these, and dozens of other agreements which have come to light, are emblematic of decades-long US corporate-state "public-private partnerships."<br />
<br />
As <i><a href="http://www.bloomberg.com/news/2013-06-14/u-s-agencies-said-to-swap-data-with-thousands-of-firms.html">Bloomberg</a></i> reported last month, "thousands of technology, finance and manufacturing companies are working closely with US national security agencies, providing sensitive information and in return receiving benefits that include access to classified intelligence."<br />
<br />
It's a two-way street, Bloomberg noted. Firms providing "US intelligence organizations with additional data, such as equipment specifications" use it "to help infiltrate computers of its adversaries." In return, "companies are given quick warnings about threats that could affect their bottom line." Such sensitive data can also be used to undermine the position of their foreign competitors.<br />
<br />
We now know, based on documents provided by Snowden, that the "infiltration" of computer networks by US secret state agencies are useful not only for filching military secrets and mass spying but also for economic and industrial espionage.<br />
<br />
That point was driven home more than a decade ago in a <a href="http://www.duncancampbell.org/menu/surveillance/echelon/IC2001-Paper2.pdf">paper</a> prepared by journalist Duncan Campbell for the European Parliament.<br />
<br />
"By the end of the 1990s," Campbell wrote, "the US administration claimed that intelligence activity against foreign companies had gained the US nearly $150 billion in exports."<br />
<br />
"Although US intelligence officials and spokespeople have admitted using Comint [communications intelligence] against European companies . . . documents show that the CIA has been directly involved in obtaining competitor intelligence for business purposes."<br />
<br />
At the time the <a href="http://telstra.com.au/">Telstra</a> pact was signed, the Australian telecommunications and internet giant was "50.1% owned" by the Australian government. <a href="http://www.reach.com/about/overview.php">Reach Global Services</a>, is described in the document as "a joint venture indirectly owned 50% by Telstra" and "50% owned" by Hong Kong's Pacific Century CyberWorks Limited (<a href="http://www.pccwglobal.com/">PCCW</a>).<br />
<br />
With controlling interest in more than 40 undersea fiber optic cables, and with landing rights in global markets that include Hong Kong, Japan, Korea, Taiwan, Singapore, Australia, North America and Europe, the joint venture was then the largest commercial telecommunications carrier in Asia with some 82,000 kilometers of undersea cables. Reach also operates international satellite systems that cover two-third's of the planet's surface.<br />
<br />
Such assets would be prime targets of "Five Eyes" spy agencies under terms of the UKUSA Communications Intelligence Agreement.<br />
<br />
Telstra and PCCW restructured their partnership in 2011, with the Australian firm now controlling the lion's share of an undersea cable network that stretches "more than 364,000 kilometres and connects more than 240 markets worldwide," the <i><a href="http://www.scmp.com/article/739626/pccw-telstra-restructure-reach">South Morning China Post</a></i> reported. Inevitably, the restructuring will afford the US government an even greater opportunity for spying.<br />
<br />
Network security agreements hammered out among undersea cable firms and the US government have profound implications for global commerce. Their geopolitical significance hasn't been lost on America's closet "allies."<br />
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<i><a href="http://www.guardian.co.uk/world/2013/jun/30/nsa-leaks-us-bugging-european-allies">The Guardian</a></i> revealed last month that the US is "spying on the European Union mission in New York and its embassy in Washington." In addition to the EU mission, target lists include "the French, Italian and Greek embassies, as well as a number of other American allies, including Japan, Mexico, South Korea, India and Turkey."<br />
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That list has since been supplemented by further disclosures.<br />
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Snowden told the <i><a href="http://www.scmp.com/news/hong-kong/article/1266777/exclusive-snowden-safe-hong-kong-more-us-cyberspying-details-revealed">South China Morning Post</a></i> that NSA hacked into the "computers at the Hong Kong headquarters of Pacnet, which owns one of the most extensive fibre optic submarine cable networks in the region."<br />
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Recently, the firm signed major deals with the Chinese mainland's "top mobile phone companies" and "owns more than 46,000 kilometres of fibre-optic cables."<br />
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According to the paper, Pacnet "cables connect its regional data centres across the Asia-Pacific region, including Hong Kong, the mainland, Japan, South Korea, Singapore and Taiwan. It also has offices in the US."<br />
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The <i>South Morning China Post</i> also disclosed that Tsinghua University, "China's premier seat of learning" has sustained extensive attacks on the school's "network backbones."<br />
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Available documents based on Snowden disclosures and other sources seem to suggest that President Obama's militaristic "pivot to Asia" is also an aggressive campaign to steal commercial and trade secrets from US imperialism's Asian rivals.<br />
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Whether or not these revelations will effect negotiations over the proposed Trans-Pacific Partnership (TPP), a NAFTA-style "free trade" agreement between the US and ten Pacific Rim nations, including Chile, Japan, Malaysia, Mexico, Peru and Singapore--all prime US-UK targets of PRISM, TEMPORA and X-Keyscore--remains to be seen.<br />
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<b>'Legal' License to Spy</b><br />
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If we have learned anything since Snowden's revelations began surfacing last month, it is that the US secret state relies on a body of "secret laws" overseen by a Star Chamber-like FISA court described in the polite language <i><a href="https://www.nytimes.com/2013/07/07/us/in-secret-court-vastly-broadens-powers-of-nsa.html">The New York Times</a></i> as a "parallel Supreme Court," to do its dirty work.<br />
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Along with leaked NSA documents, published agreements between telecommunications firms, internet service providers and the US government should demolish the fiction that blanket surveillance is "legal," "limited in scope" or chiefly concerned with fighting "crime" and "terrorism."<br />
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Proclaiming that "US communications systems are essential to the ability of the US government to fulfill its responsibilities to the public to preserve the national security of the United States, to enforce the laws, and to maintain the safety of the public," the Telstra summary posted by <i>Crikey</i> should dispel any illusions on that score.<br />
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On the contrary, the agreement reveals the existence of a vast surveillance web linking private companies to the government's relentless drive, as <i><a href="http://www.washingtonpost.com/world/national-security/for-nsa-chief-terrorist-threat-drives-passion-to-collect-it-all/2013/07/14/3d26ef80-ea49-11e2-a301-ea5a8116d211_print.html">The Washington Post</a></i> explained, to "collect it all."<br />
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<blockquote>● All customer billing data to be stored for two years;<br />
● Ability to provide to agencies any stored telecommunications or internet communications and comply with preservation requests;<br />
● Ability to provide any stored metadata, billing data or subscriber information about US customers;<br />
● They are not to comply with any foreign privacy laws that might lead to mandatory destruction of stored data;<br />
● Plans and infrastructure to demonstrate other states cannot spy on US customers;<br />
● They are not to comply with information requests from other countries without DoJ permission;<br />
● A requirement to:<br />
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. . . designate points of contact within the United States with the authority and responsibility for accepting and overseeing the carrying out of Lawful US Process to conduct Electronic Surveillance of or relating to Domestic Communications carried by or through Domestic Communications Infrastructure; or relating to customers or subscribers of Domestic Communications Companies. The points of contact shall be assigned to Domestic Communications Companies security office(s) in the United States, shall be available twenty-four (24) hours per day, seven (7) days per week and shall be responsible for accepting service and maintaining the security of Classified Information and any Lawful US Process for Electronic Surveillance . . . The Points of contact shall be resident US citizens who are eligible for US security clearances.</blockquote><br />
In other words, an "internal corporate cell of American citizens," charged with providing confidential customer data to the secret state, as <i>The Washington Post</i> first reported.<br />
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Additional demands include:<br />
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<blockquote>● A requirement to keep such surveillance confidential, and to use US citizens "who meet high standards of trustworthiness for maintaining the confidentiality of Sensitive Information" to handle requests;<br />
● A right for the FBI and the DoJ to conduct inspection visits of the companies' infrastructure and offices; and<br />
● An annual compliance report, to be protected from Freedom of Information requests.<br />
</blockquote><br />
This is not a one-off as the other 27 Agreements published by Public Intelligence readily attest.<br />
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For example, the 31-page 2011 <a href="http://info.publicintelligence.net/US-NSAs/US-NSAs-Level3.pdf">Agreement</a> between the US government and <a href="http://www.level3.com/">Level 3 Communications</a>, which operates in North America, Europe, Latin America and the Asia-Pacific, which acquired Global Crossing from from the Hong Kong-based Hutchison Whampoa and Singapore Technologies Telemedia (the focus of <i>The Washington Post's</i> July 6 report), was expanded beyond the FBI and Department of Justice to include the Department of Homeland Security and the Department of Defense, NSA's "parent" agency.<br />
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As with the 2001 Telstra agreement, "Access" to Level 3's systems by governmental entities is defined as "the ability to physically or logically undertake any of the following actions: (a) read, divert, or otherwise obtain non-public information or technology from or about software, hardware, a system or a network; (b) add, edit or alter information or technology stored on or by software, hardware, a system or a network; and (c) alter the physical or logical state of software, hardware, a system or a network (e.g., turning it on or off, changing configuration, removing or adding components or connections)."<br />
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NSA, the principle US spy agency charged with obtaining, storing and analyzing COMINT/SIGINT "products, i.e., user data, has been handed virtually unlimited access to information flowing through Level 3 fiber optic cables as it enters the US.<br />
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This includes what is described as "Domestic Communications," content, not simply the metadata, of any phone call or email that transit Level 3 systems: "'Domestic Communications' means: (a) Wire Communications or Electronic Communications (whether stored or not) from one US location to another US location; and (b) the US portion of a Wire Communication or Electronic Communication (whether stored or not) that originates or terminates in the United States."<br />
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So much for President Obama's mendacious claim that "nobody is listening to your phone calls"!<br />
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Access to the entirety of customer records and communications is clearly spelled out in the section entitled "Electronic Surveillance."<br />
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Note: the "USC." provisions refer to (18) the Stored Communications Act which compels disclosure to the government of stored wire, electronic and transactional data; a provision that greatly weakened the Fourth Amendment right to privacy. 50 USC outlines the role of War and National Defense in the United States Code and includes "foreign intelligence," "electronic surveillance authorization without court order," "internal security," including the "control of subversive activities" and the "exercise of emergency powers and authorities" by the Executive Branch.<br />
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<blockquote>'Electronic Surveillance,' for the purposes of this Agreement, includes: (a) the interception of wire, oral, or electronic communications as defined in 18 U.S.C. §§ 2510(1), (2), (4) and (12), respectively, and electronic surveillance as defined in 50 U.S.C. § 1801(f); (b) Access to stored wire or electronic communications, as referred to in 18 U.S.C. § 2701 et seq.; (c) acquisition of dialing, routing, addressing, or signaling information through pen register or trap and trace devices or other devices or features capable of acquiring such information pursuant to law as defined in 18 U.S.C. § 3121 et seq. and 50 U.S.C. § 1841 et seq.; (d) acquisition of location-related information concerning a service subscriber or facility; (e) preservation of any of the above information pursuant to 18 U.S.C.§ 2703(f); and (f) Access to, or acquisition, interception, or preservation of, wire, oral, or electronic communications or information as described in (a) through (e) above and comparable state laws.</blockquote><br />
Level 3 is further enjoined from disclosing what is described as "Sensitive Information," that is, "information that is not Classified Information regarding: (a) the persons or facilities that are the subjects of Lawful US Process; (b) the identity of the Government Authority or Government Authorities serving such Lawful US Process; (c) the location or identity of the line, circuit, transmission path, or other facilities or equipment used to conduct Electronic Surveillance; (d) the means of carrying out Electronic Surveillance."<br />
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In other words, <i>we</i> do the spying; <i>you</i> hand over it over and keep your mouths shut.<br />
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The electronic driftnet thrown over global communications is expedited by <i>direct access</i> to Level 3's equipment by the US government.<br />
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<blockquote>'Principal Equipment' means the primary electronic components of a submarine cable system, to include the hardware used at the NOC(s) [Network Operations Center], landing station(s) and the cable itself, such as servers, repeaters, submarine line terminal equipment (SLTE), system supervisory equipment (SSE), power feed equipment (PFE), tilt and shape equalizer units (TEQ/SEQ), optical distribution frames (ODF), and synchronous optical network (SONET), synchronous digital hierarchy (SDH), wave division multiplexing (WDM), dense wave division multiplexing (DWDM), coarse wave division multiplexing (CWDM) or optical carrier network (OCx) equipment, as applicable.</blockquote><br />
Who oversees the set-up? On paper it appears that Level 3 control their operations. However, the Agreement specifies that the firm must utilize "primary US NOCs for any Domestic Communications Infrastructure" and it "shall be maintained and remain within the United States and US territories, to be operated by Level 3, exclusively using Screened Personnel."<br />
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Who signs off on "screened personnel"? Why the US government of course, which raises the suspicion that corporate employees are little more than spook assets.<br />
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But here's where it gets interesting. "Level 3 may nonetheless use the United Kingdom NOC for routine day-to-day management of any of the Cable Systems as such management is in existence as of the Effective Date."<br />
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Why might that be the case, pray tell?<br />
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Could it be that fiber optic cables transiting the UK are <i>already</i> lovingly scrutinized by NSA's kissin' cousins across the pond? GCHQ, as <i><a href="http://www.guardian.co.uk/uk/2013/jun/21/gchq-cables-secret-world-communications-nsa">The Guardian</a></i> disclosed, is merrily ingesting "vast quantities of global email messages, Facebook posts, internet histories and calls, and shares them" with the American agency.<br />
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Therefore, since UK undersea cable traffic is already under close "management" via the British agency's TEMPORA program, described as having the "'biggest internet access' of any member of the Five Eyes electronic eavesdropping alliance," it makes sense that Level 3 is allowed to "use the United Kingdom NOC" as a hub for its "Domestic Communications Infrastructure"!<br />
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In conclusion, these publicly available documents provide additional confirmation of how major corporations are empowering the US surveillance octopus.<br />
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By entering into devil's pacts with the world's "sole superpower," giant telcos and internet firms view the destruction of privacy rights as just another item on the balance sheet, a necessary cost of doing business in America.<br />
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And business is <i>very</i> good.Antifascisthttp://www.blogger.com/profile/05421707682211445550noreply@blogger.com0tag:blogger.com,1999:blog-1831516114336983238.post-34220712441975393112013-07-12T13:08:00.000-07:002013-07-12T13:08:54.470-07:00ECHELON Today: The Evolution of an NSA Black Program<a href="http://2.bp.blogspot.com/-zYXklk17qYU/UdcbEKYL9SI/AAAAAAAAAYw/G74-xzDbjtc/s1600/nsa.jpg" imageanchor="1" ><img border="0" src="http://2.bp.blogspot.com/-zYXklk17qYU/UdcbEKYL9SI/AAAAAAAAAYw/G74-xzDbjtc/s400/nsa.jpg" /></a><br />
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People are shocked by the scope of secret state spying on their private communications, especially in light of documentary evidence leaked to media outlets by former NSA contractor Edward Snowden.<br />
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While the public is rightly angered by the illegal, unconstitutional nature of NSA programs which seize and store data for retrospective harvesting by intelligence and law enforcement officials, including the content of phone calls, emails, geolocational information, bank records, credit card purchases, travel itineraries, even medical records--in secret, and with little in the way of effective oversight--the historical context of how, and why, this vast spying apparatus came to be is often given short shrift.<br />
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Revelations about NSA spying didn't begin June 5, 2013 however, the day when <i><a href="http://www.guardian.co.uk/world/2013/jun/06/nsa-phone-records-verizon-court-order">The Guardian</a></i> published a top secret <a href="http://www.guardian.co.uk/world/interactive/2013/jun/06/verizon-telephone-data-court-order">FISA Court Order</a> to Verizon, ordering the firm turn over the telephone records on millions of its customers "on an ongoing daily basis."<br />
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Before PRISM there was ECHELON: the top secret surveillance program whose all-encompassing "dictionaries" (high-speed computers powered by complex algorithms) ingest and sort key words and text scooped-up by a global network of satellites, from undersea cables and land-based microwave towers.<br />
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<b>Past as Prologue</b><br />
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Confronted by a dizzying array of code-named programs, the casual observer will assume the spymasters running these intrusive operations are all-knowing mandarins with their fingers on the pulse of global events.<br />
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Yet, if disastrous US policies from Afghanistan and Iraq to the ongoing capitalist economic meltdown tell us anything, it is that the American superpower, in President Nixon's immortal words, really is "a pitiful, helpless giant."<br />
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In fact, the same programs used to surveil the population at large have also been turned inward by the National Security State against itself and targets military and political elites who long thought themselves immune from such close attention.<br />
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Coupled with Snowden's disclosures, those of former NSA officer Russell Tice (first reported <a href="http://www.boilingfrogspost.com/2013/06/19/podcast-show-112-nsa-whistleblower-goes-on-record-reveals-new-information-names-culprits/">here</a> and <a href="http://www.corbettreport.com/interview-685-russ-tice-reveals-the-truth-about-nsa-spying/">here</a>), revealed that the agency--far in excess of the dirt collected by FBI spymaster J. Edgar Hoover in his "secret and confidential" black files--has compiled dossiers on their alleged controllers, for political leverage and probably for blackmail purposes to boot.<br />
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While Tice's allegations certainly raised eyebrows and posed fundamental questions about who is really in charge of American policy--elected officials or unaccountable securocrats with deep ties to private security corporations--despite being deep-sixed by US media, they confirm previous reporting about the agency.<br />
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When investigative journalist Duncan Campbell first blew the lid off NSA's ECHELON program, his 1988 piece for <i><a href="http://cryptome.org/jya/echelon-dc.htm">New Statesman</a></i> revealed that a whistleblower, Margaret Newsham, a software designer employed by Lockheed at the giant agency listening post at Menwith Hill in North Yorkshire, England, stepped forward and told the House Permanent Select Committee on Intelligence in closed session, that NSA was using its formidable intercept capabilities "to locate the telephone or other messages of target individuals."<br />
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Campbell's reporting was followed in 1996 by New Zealand investigative journalist Nicky Hager's groundbreaking book, <i><a href="http://www.nickyhager.info/secret-power-new-zealands-role-in-the-international-spy-network/">Secret Power</a></i>, the first detailed account of NSA's global surveillance system. A summary of Hager's findings can be found in the 1997 piece that appeared in <i><a href="http://www.nickyhager.info/exposing-the-global-surveillance-system/">CovertAction Quarterly</a></i>.<br />
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As Campbell was preparing that 1988 article, a report in the <i>Cleveland Plain Dealer</i> alleged that arch-conservative US Senator Strom Thurman was one target of agency phone intercepts, raising fears in political circles that "NSA has restored domestic, electronic, surveillance programmes," said to have been dialed-back in the wake of the Watergate scandal.<br />
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Ironically enough, congressional efforts to mitigate abuses by the intelligence agencies exposed by the Church and Pike Committees in the 1970s, resulted in the 1978 creation of the Foreign Intelligence Surveillance Court. However, as <i><a href="https://www.nytimes.com/2013/07/07/us/in-secret-court-vastly-broadens-powers-of-nsa.html">The New York Times</a></i> reported July 7, that court "in more than a dozen classified rulings . . . has created a secret body of law giving the National Security Agency the power to amass vast collections of data on Americans," a "parallel Supreme Court" whose rulings are beyond legal challenge.<br />
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In an 88-page report on ECHELON published in 2000 by the Electronic Privacy Information Center (<a href="http://www.duncancampbell.org/menu/surveillance/echelon/EPIC_report.pdf">EPIC</a>) Newsham said that when she worked on the development of SILKWORTH at the secret US base, described as "a system for processing information relayed from signals intelligence satellites," she told Campbell and other reporters, including CBS News' <i><a href="http://cryptome.org/echelon-60min.htm">60 Minutes</a></i>, that "she witnessed and overheard" one of Thurman's intercepted phone calls.<br />
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Like Thomas Drake, the senior NSA official prosecuted by the Obama administration under the 1917 Espionage Act, for information he provided <i><a href="http://articles.baltimoresun.com/2006-01-29/news/0601290158_1_saic-information-technology-intelligence-experts">The Baltimore Sun</a></i> over widespread waste, fraud and abuse in the agency's failed Trailblazer program, Newsham had testified before Congress and filed a lawsuit against Lockheed over charges of sexual harassment, "corruption and mis-spending on other US government 'black' projects."<br />
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A year earlier, in a 1999 on the record interview with the Danish newspaper <i><a href="http://www.mail-archive.com/kominform@lists.eunet.fi/msg00493.html">Ekstra Bladet</a></i>, Newsham spoke to journalists Bo Elkjaer and Kenan Seeberg, telling them of her "constant fear" that "certain elements" within the US secret state would "try to silence her"; a point not lost on Edward Snowden today.<br />
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"As a result," the newspaper reported, "she sleeps with a loaded pistol under her mattress, and her best friend is Mr. Gunther--a 120-pound German shepherd that was trained to be a guard and attack dog by a good friend in the Nevada State Police."<br />
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"To me," the whistleblower said, "there are only two issues at stake here: right or wrong. And the longer I worked on the clandestine surveillance projects, the more I could see that they were not only illegal, but also unconstitutional."<br />
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"Even then," between 1974 and 1984 when she worked on ECHELON, it "was very big and sophisticated."<br />
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"As early as 1979 we could track a specific person and zoom in on his phone conversation while he was communicating," Newsham averred. "Since our satellites could in 1984 film a postage stamp lying on the ground, it is almost impossible to imagine how all-encompassing the system must be today."<br />
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When queried about "which part of the system is named Echelon," Newsham told the reporters: "The computer network itself. The software programs are known as SILKWORTH and SIRE, and one of the most important surveillance satellites is named VORTEX. It intercepts things like phone conversations."<br />
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Despite evidence presented in her congressional testimony about these illegal operations, "no substantive investigation took place, and no report was made to Congress," Campbell later wrote.<br />
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"Since then," the British journalist averred, "investigators have subpoenaed other witnesses and asked them to provide the complete plans and manuals of the ECHELON system and related projects. The plans and blueprints are said to show that <i>targeting of US political figures would not occur by accident, but was designed into the system from the start</i>." (emphasis added)<br />
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This would explain why members of Congress, the federal Judiciary and the Executive Branch itself, as Tice alleges, tread lightly when it comes to crossing NSA. However, as information continues to emerge about these privacy-killing programs it should also be clear that the agency's prime targets are not "terrorists," judges or politicians, but the American people themselves.<br />
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In fact, as Snowden stated in a powerful message published by <a href="http://wikileaks.org/Statement-from-Edward-Snowden-in.html">WikiLeaks</a>: "In the end the Obama administration is not afraid of whistleblowers like me, Bradley Manning or Thomas Drake. We are stateless, imprisoned, or powerless. No, the Obama administration is afraid of you. It is afraid of an informed, angry public demanding the constitutional government it was promised--and it should be."<br />
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How did we get here? Is there a direct line from Cold War-era programs which targeted the Soviet Union and their allies, and which now, in the age of capitalist globalization, the epoch of planet-wide theft and plunder, now targets the entire world's population?<br />
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<b>ECHELON's Roots: The UKUSA Agreement</b><br />
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Lost in the historical mists surrounding the origins of the Cold War, the close collaboration amongst Britain and the United States as they waged war against Nazi Germany and Imperial Japan, by war's end had morphed into a permanent intelligence-military alliance which predated the founding of NATO. With the defeat of the Axis powers, a new global division of labor was in the offing led by the undisputed superpower which emerged from the conflagration, the United States.<br />
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Self-appointed administrator over Europe's old colonial holdings across Africa, Asia and the Middle East (the US already viewed Latin America as its private export dumping ground and source for raw materials), the US used its unparalleled position to benefit the giant multinational American firms grown larger and more profitable than ever as a result of wartime economic mobilization managed by the state.<br />
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By 1946, the permanent war economy which later came to be known as the Military-Industrial Complex, a semi-command economy directed by corporate executives, based on military, but also on emerging high-tech industries bolstered by taxpayer-based government investments, was already firmly entrenched and formed the political-economic base on which the so-called "American Century" was constructed.<br />
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While resource extraction and export market domination remained the primary goal of successive US administrations (best summarized by the slogan, "the business of government is business"), advances in technology in general and telecommunications in particular, meant that the system's overlords required an intelligence apparatus that was always "on" as it "captured" the flood of electronic signals coursing across the planet.<br />
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The secret British and US agencies responsible for cracking German, Japanese and Russian codes during the war found themselves in a quandary. Should they declare victory and go home or train their sights on the new (old) adversary--their former ally, the Soviet Union--but also on home grown and indigenous communist and socialist movements more generally?<br />
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In opting for the latter, the UK-US wartime partnership evolved into a broad agreement to share signals and communications intelligence (SIGINT and COMINT), a set-up which persists today.<br />
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In 1946, Britain and the United States signed the United Kingdom-United States of America Agreement (UKUSA), a multilateral treaty to share signals intelligence amongst the two nations and Britain's Commonwealth partners, Canada, Australia and New Zealand. Known as the "Five Eyes" agreement, the treaty was such a closely-guarded secret that Australia's Prime Minister was kept in the dark until 1973!<br />
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In 2010, the British <a href="https://www.nationalarchives.gov.uk/ukusa/">National Archives</a> released previously classified Government Communications Headquarters (GCHQ) files that provide an important historical overview of the agreement. Also in 2010, the National Security Agency followed suit and published formerly classified <a href="http://www.nsa.gov/public_info/declass/ukusa.shtml">files</a> from their archives. Accompanying NSA's release was a 1955 <a href="http://www.nsa.gov/public_info/_files/ukusa/new_ukusa_agree_10may55.pdf">amended version</a> of the treaty.<br />
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It's secretive nature is clearly spelled out: "It will be contrary to this Agreement to reveal its existence to any third party unless otherwise agreed by the two parties."<br />
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In <a href="http://www.gwu.edu/~nsarchiv/NSAEBB/NSAEBB24/index.htm">2005</a>, <a href="http://www.gwu.edu/~nsarchiv/NSAEBB/NSAEBB278/index.htm">2009</a> and <a href="http://www.gwu.edu/~nsarchiv/NSAEBB/NSAEBB424/">2013</a>, <a href="http://www.gwu.edu/~nsarchiv/index.html">The National Security Archive</a> published a series of previously classified documents obtained from NSA under the Freedom of Information Act that revealed agency thinking on a range of subjects, from global surveillance to cyberwar.<br />
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What we have learned from these sources and reporting by Duncan Campbell and Nicky Hager, are that the five agencies feeding the surveillance behemoth, America's NSA, Britain's GCHQ, Canada's Communications Security Establishment (CSE), Australia's Defence Signals Directorate (DSD) and New Zealand's Government Communications Security Bureau (GCSB), are subdivided into first and second tier partners, with the US, as befitting a hyperpower, forming the "1st party" and the UK, Australia, Canada and New Zealand forming "2nd party" partners.<br />
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Under terms of UKUSA, intelligence "products" are defined as "01. Collection of traffic. 02. Acquisition of communications documents and equipment. 03. Traffic analysis. 04. Cryptanalysis. 05. Decryption and translation. 06. Acquisition of information regarding communications organizations, procedures, practices and equipment."<br />
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"Such exchange," NSA informed us, "will be unrestricted on all work undertaken except when specifically excluded from the agreement at the request of either party and with the agreement of the other."<br />
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"It is the intention of each party," we're told, "to limit such exceptions to the absolute minimum and to exercise no restrictions other than those reported and mutually agreed upon."<br />
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This certainly leaves wide latitude for mischief as we learned with the Snowden disclosures.<br />
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Amid serious charges that "Five Eyes" were illegally seizing industrial and trade secrets from "3rd party" European partners such as France and Germany, detailed in the European Parliament's 2001 <a href="http://www.duncancampbell.org/menu/surveillance/echelon/EU_resolution.pdf">ECHELON report</a>, it should be clear by now that since its launch in 1968 when satellite communications became a practical reality, ECHELON has evolved into a global surveillance complex under US control.<br />
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<b>The Global Surveillance System Today</b><br />
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The echoes of those earlier secret programs reverberate in today's headlines.<br />
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Last month, <i><a href="http://www.guardian.co.uk/uk/2013/jun/21/gchq-cables-secret-world-communications-nsa">The Guardian</a></i> reported that the "collection of traffic" cited in UKUSA has been expanded to GCHQ's "ability to tap into and store huge volumes of data drawn from fibre-optic cables for up to 30 days so that it can be sifted and analysed. That operation, codenamed Tempora, has been running for some 18 months."<br />
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Then on July 6, <i><a href="http://www.washingtonpost.com/business/technology/agreements-with-private-companies-protect-us-access-to-cables-data-for-surveillance/2013/07/06/aa5d017a-df77-11e2-b2d4-ea6d8f477a01_print.html">The Washington Post</a></i> disclosed that NSA has tapped directly into those fiber optic cables, as AT&T whistleblower Mark Klein described to <i><a href="http://www.wired.com/science/discoveries/news/2006/05/70944">Wired Magazine</a></i> in 2006, and now scoops-up <i>petabyte scale</i> communications flowing through the US internet backbone. The agency was able to accomplish this due to the existence of "an internal corporate cell of American citizens with government clearances."<br />
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"Among their jobs documents show, was ensuring that surveillance requests got fulfilled quickly and confidentially."<br />
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Following up on July 10, the <i><a href="http://www.washingtonpost.com/business/economy/the-nsa-slide-you-havent-seen/2013/07/10/32801426-e8e6-11e2-aa9f-c03a72e2d342_story.html">Post</a></i> published a new PRISM slide from the 41-slide deck provided to the paper by Edward Snowden.<br />
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The slide revealed that "two types of collection" now occur. One is the PRISM program that collects information from technology firms such as Google, Apple and Microsoft. The second source is "a separate category labeled 'Upstream,' described as accessing 'communications on fiber cables and infrastructure as data flows past'."<br />
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Recently, <i><a href="http://www.spiegel.de/international/world/secret-documents-nsa-targeted-germany-and-eu-buildings-a-908609-druck.html">Der Spiegel</a></i>, reported that NSA averred the agency "does NOT target its 2nd party partners, nor request that 2nd parties do anything that is inherently illegal for NSA to do." This is an outright falsehood exposed by former Canadian Communications Security Establishment (CSE) officer Mike Frost.<br />
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In a 1997 <i>CovertAction Quarterly</i> exposé, Frost recounted how "CSE operated alone or joined with NSA or GCHQ to: intercept communications in other countries from the confines of Canadian embassies around the world with the knowledge of the ambassador; aid politicians, political parties, or factions in an allied country to gain partisan advantage; spy on its allies; spy on its own citizens; and perform 'favors' that helped its allies evade domestic laws against spying."<br />
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"Throughout it all," Frost insisted, "I was trained and controlled by US intelligence which told us what to do and how to do it."<br />
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Everyone else, <i>Der Spiegel</i> reports, is fair game. "For all other countries, including the group of around 30 nations that are considered to be 3rd party partners, however, this protection does not apply. 'We can, and often do, target the signals of most 3rd party foreign partners,' the NSA boasts in an internal presentation."<br />
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It should also be clear that targeting isn't strictly limited to the governments and economic institutions of "3rd party foreign partners," but extends to the private communications of their citizens. <i>Der Spiegel</i>, citing documents supplied by Snowden, reported that the agency "gathered metadata from some 15 million telephone conversations and 10 million Internet datasets." The newsmagazine noted that "the Americans are collecting from up to half a billion communications a month in Germany," describing the surveillance as "a complete structural acquisition of data."<br />
<br />
Despite hypocritical protests by European governments, on the contrary, Snowden disclosed that those "3rd party" partners are joined at the hip with their "Five Eyes" cousins.<br />
<br />
In a recent interview with <i><a href="http://www.spiegel.de/international/world/interview-with-whistleblower-edward-snowden-on-global-spying-a-910006-druck.html">Der Spiegel</a></i>, Snowden was asked if "German authorities or German politicians [are] involved in the NSA surveillance system?"<br />
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"Yes, of course. We're in bed together with the Germans the same as with most other Western countries. For example, we tip them off when someone we want is flying through their airports (that we for example, have learned from the cell phone of a suspected hacker's girlfriend in a totally unrelated third country--and they hand them over to us. They don't ask to justify how we know something, and vice versa, to insulate their political leaders from the backlash of knowing how grievously they're violating global privacy."<br />
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Disclosing new information on how UKUSA functions today, Snowden told the German newsmagazine: "In some cases, the so-called Five Eye Partners go beyond what NSA itself does. For instance, the UK's General [sic] Communications Headquarters (GCHQ) has a system called TEMPORA."<br />
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"TEMPORA," the whistleblower averred, "is the signals intelligence community's first 'full-take' Internet buffer that doesn't care about content type and pays only marginal attention to the Human Rights Act. It snarfs everything, in a rolling buffer to allow retroactive investigation without missing a single bit."<br />
<br />
"Right now," Snowden said, "the buffer can hold three days of traffic, but that's being improved. Three days may not sound like much, but remember that that's not metadata. 'Full-take' means it doesn't miss anything, and ingests the entirety of each circuit's capacity. If you send a single ICMP packet and it routes through the UK, we get it. If you download something and the CDN (Content Delivery Network) happens to serve from the UK, we get it. If your sick daughter's medical records get processed at a London call center . . . well, you get the idea."<br />
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We do; and thanks to Edward Snowden we now know that everyone is a target.Antifascisthttp://www.blogger.com/profile/05421707682211445550noreply@blogger.com3tag:blogger.com,1999:blog-1831516114336983238.post-18259605893825286802013-07-01T10:40:00.002-07:002013-07-01T10:41:23.816-07:00New Documents Shed Light on NSA's Dragnet Surveillance<a href="http://1.bp.blogspot.com/-3ZIEuWeFXSI/UdG52mhjrEI/AAAAAAAAAYg/kA62rTIVX2Y/s320/Big+Brother+is+Watching+you+4.png" imageanchor="1" ><img border="0" src="http://1.bp.blogspot.com/-3ZIEuWeFXSI/UdG52mhjrEI/AAAAAAAAAYg/kA62rTIVX2Y/s320/Big+Brother+is+Watching+you+4.png" /></a><br />
<br />
With the Obama administration in full damage control mode over revelations of blanket surveillance of global electronic communications, new documents published by <i><a href="http://www.guardian.co.uk/world/2013/jun/27/nsa-data-mining-authorised-obama">The Guardian</a></i>, including the draft of a 2009 <a href="http://www.guardian.co.uk/world/interactive/2013/jun/27/nsa-inspector-general-report-document-data-collection">report</a> by the NSA's Inspector General marked Top Secret and a Secret 2007 Justice Department <a href="http://www.guardian.co.uk/world/interactive/2013/jun/27/nsa-data-collection-justice-department">memo</a> prepared for then US Attorney General Michael Mukasey, show that "a federal judge sitting on the secret surveillance panel called the Fisa court would approve a bulk collection order for internet metadata 'every 90 days'."<br />
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An unnamed "senior administration official" confirmed the existence of a Bush-era surveillance program which gobbled-up "vast amounts of records detailing the email and internet usage of Americans," but claimed, without evidence, that "it ended in 2001," according to <i>The Guardian</i>.<br />
<br />
Early last month, the British newspaper began publishing documents provided by former NSA contractor Edward Snowden, including a Top Secret <a href="http://www.guardian.co.uk/world/interactive/2013/jun/06/verizon-telephone-data-court-order">FISA court order</a> to Verizon Business Services, which requires the firm "on an ongoing, daily basis" to hand over information on all telephone calls within its system.<br />
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<i><a href="http://online.wsj.com/article/SB10001424127887324299104578529112289298922.html">The Wall Street Journal</a></i> reported that the NSA's "monitoring of Americans includes customer records from the three major phone networks as well as emails and Web searches, and the agency also has cataloged credit-card transactions." The secret state's spying initiative "also encompasses phone-call data from AT&T Inc. and Sprint Nextel Corp., records from Internet-service providers and purchase information."<br />
<br />
Days later, <i><a href="http://www.washingtonpost.com/investigations/us-surveillance-architecture-includes-collection-of-revealing-internet-phone-metadata/2013/06/15/e9bf004a-d511-11e2-b05f-3ea3f0e7bb5a_print.html">The Washington Post</a></i> revealed that the Bush administration's "warrantless wiretapping" program known as STELLAR WIND, had been succeeded by four "collection programs" two of which, MAINWAY and MARINA, "process trillions of 'metadata' records for storage and analysis."<br />
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Additional programs, the <i>Post</i> reported, operating "on a much smaller scale, are aimed at content," one of which "intercepts telephone calls and routes the spoken words to a system called NUCLEON."<br />
<br />
Although the news outlets principally responsible for bringing these stories to light, principally <i>The Guardian</i>, <i>Washington Post</i>, <i>South China Morning Post</i>, and now <i><a href="http://www.spiegel.de/international/world/secret-documents-nsa-targeted-germany-and-eu-buildings-a-908609-druck.html">Der Spiegel</a></i>, have not (as yet) published complete sets of NSA documents, and their reporting has barely scratched the surface of content-siphoning deep packet inspection (DPI) programs for internet and telephone surveillance (indeed, PRISM may be a subset of larger and more pernicious programs that collect, analyze and store everything), what we <i>have</i> learned so far is deeply troubling and pose grave threats to civil liberties.<br />
<br />
<b>New PRISM Slides, More Questions</b><br />
<br />
Filling in some of the blanks, on June 29 <i><a href="http://www.washingtonpost.com/wp-srv/special/politics/prism-collection-documents/">The Washington Post</a></i> published four additional PRISM slides from the 41-slide deck provided to <i>The Guardian</i> and <i>Post</i> by Edward Snowden.<br />
<br />
Confirming what civil libertarians, journalists and political analysts have long maintained, NSA can and probably does "acquire" anything an individual analyst might request as Snowden averred. This includes, according to new information provided by the <i>Post</i>: chats, email, file transfers, internet telephone, login/ID, metadata, photos, social networking, stored data in the cloud, video, video conferencing.<br />
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If <i>that</i> isn't a surveillance dragnet, then words fail.<br />
<br />
Recall, that previous reporting disclosed that major US internet and high tech firms, Microsoft, Yahoo, Google, Facebook, PalTalk, YouTube, Skype, AOL and Apple gave NSA "direct access" to their systems.<br />
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"The program," according to <i><a href="http://www.guardian.co.uk/world/2013/jun/06/us-tech-giants-nsa-data">The Guardian</a></i>, "facilitates extensive, in-depth surveillance on live communications and stored information. The law allows for the targeting of any customers of participating firms who live outside the US, or those Americans whose communications include people outside the US."<br />
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"It also opens the possibility of communications made entirely within the US being collected without warrants," a near probability in this writer's opinion.<br />
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In a report that appeared the same day, <i><a href="http://www.washingtonpost.com/investigations/us-intelligence-mining-data-from-nine-us-internet-companies-in-broad-secret-program/2013/06/06/3a0c0da8-cebf-11e2-8845-d970ccb04497_print.html">The Washington Post</a></i> disclosed that NSA and the FBI "are tapping directly into the central servers of nine leading U.S. Internet companies, extracting audio and video chats, photographs, e-mails, documents, and connection logs that enable analysts to track foreign targets," and that the agency "s accustomed to corporate partnerships that help it divert data traffic or sidestep barriers."<br />
<br />
Although the firms all denied that they hand over customer data to the government, their self-serving claims are undercut by evidence that NSA-cleared company personnel, including "collection managers," send "content tasking instructions directly to equipment installed at company-controlled locations," rather than directly to company servers.<br />
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"Under Prism," the <i><a href="http://bigstory.ap.org/article/secret-prism-success-even-bigger-data-seizure">Associated Press</a></i> reported, "the delivery process varied by company."<br />
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"Google, for instance, says it makes secure file transfers. Others use contractors or have set up stand-alone systems. Some have set up user interfaces making it easier for the government, according to a security expert familiar with the process."<br />
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"With Prism," AP reported, "the government gets a user's entire email inbox. Every email, including contacts with American citizens, becomes government property."<br />
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"Once the NSA has an inbox, it can search its huge archives for information about everyone with whom the target communicated. All those people can be investigated, too."<br />
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The slides published June 29 shed some light on how the process works. We learn for example that when an analyst "tasks" PRISM for information on a new "target," it is automatically passed on to a supervisor who "who reviews the 'selectors' or search terms. The supervisor must endorse the analyst's 'reasonable belief,' defined as 51 percent confidence, that the specified target is a foreign national who is overseas at the time of collection."<br />
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Tasking orders can be sent to multiple sources, "for example, to a private company and to an NSA access point that taps into the Internet's main gateway switches." (for background see: Mark Klein, <i><a href="http://www.booksurge.com/Wiring-Up-The-Big-Brother-Machine...And/A/1439229961.htm">Wiring Up the Big Brother Machine</a></i>, Klein's <a href="https://www.eff.org/node/55051">affidavit</a> in EFF's lawsuit, <i><a href="https://www.eff.org/cases/hepting">Hepting v. AT&T</a></i> and his groundbreaking 2006 piece for <i><a href="http://www.wired.com/science/discoveries/news/2006/05/70944">Wired Magazine</a></i>).<br />
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The FBI "uses government equipment on private company property to retrieve matching information from a participating company, such as Microsoft or Yahoo and pass it without further review to the NSA." (see Verizon whistleblower Babak Pasdar's <a href="http://www.wired.com/images_blogs/threatlevel/files/Affidavit-BP-Final.pdf">affidavit</a> on how FBI "tasking" is accomplished via its Quantico circuit).<br />
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"For stored communications, but not for live surveillance" we're informed that the Bureau's Electronic Communications Surveillance Unit (ECSU) "consults its own databases to make sure the selectors do not match known Americans."<br />
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If this is what the Bureau is now claiming, it is disingenuous at best. In fact, as <i><a href="http://antifascist-calling.blogspot.com/2009/05/fbis-department-of-precrime.html">Antifascist Calling</a></i> reported back in 2009, the FBI's Investigative Data Warehouse (IDW), a virtual Library of Babel, is a content management and data mining system with the ability to access and analyze aggregated data from some fifty hitherto separate datasets. That the Bureau would feel compelled to "minimize" domestic information it provides to a "sister" agency beggars belief.<br />
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In fact, one of the new PRISM slides reveal that from "the FBI's interception unit on the premises of private companies, the information is passed to one or more 'customers' at the NSA, CIA or FBI."<br />
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"Depending on the company," Barton Gellman and Todd Lindeman report, "a tasking may return e-mails, attachments, address books, calendars, files stored in the cloud, text or audio or video chats and 'metadata' that identify the locations, devices used and other information about a target."<br />
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Elapsed times from "tasking to response" from the above-named firms or other "partners" such as banks, credit card companies, etc. range from "minutes to hours." An unnamed "senior intelligence official" told the <i>Post</i>, "Much as we might wish otherwise, the latency is not zero."<br />
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"After communications information is acquired," the data is "processed and analyzed by specialized systems that handle voice, text, video and 'digital network information' that includes the locations and unique device signatures of targets."<br />
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We also learn how some of these code named systems function.<br />
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For example, PRINTURA is described as a tool "which automates the traffic flow." The <i>Post</i> reports that "the same FBI-run equipment sends the search results to the NSA." Once it is received, in bulk, "PRINTURA sorts and dispatches the data stream through a complex sequence of systems that extract and process voice, text, video and metadata."<br />
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Once dispatched from PRINTURA, described as a "librarian and traffic cop," SCISSORS and Protocol Exploitation "sort data types for analysis in NUCLEON (voice), PINWALE (video), MAINWAY (call records) and MARINA (internet records)."<br />
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While the <i>Post</i> claims that "systems identified as FALLOUT and CONVEYANCE appear to be the final filtering to reduce the intake of information about Americans," information provided by NSA whistleblower William Binney dispute such assertions.<br />
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In fact, Binney told investigative journalist James Bamford for his <i><a href="http://www.wired.com/threatlevel/2012/03/ff_nsadatacenter/all/1">Wired Magazine</a></i> piece on NSA's giant Utah Data Center, that the agency "could have installed its tapping gear at the nation's cable landing stations--the more than two dozen sites on the periphery of the US where fiber-optic cables come ashore. If it had taken that route, the NSA would have been able to limit its eavesdropping to just international communications, which at the time was all that was allowed under US law."<br />
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"Instead," the former cofounder of the agency's Signals Intelligence Automation Research Center (SARC) told Bamford that NSA "chose to put the wiretapping rooms at key junction points throughout the country--large, windowless buildings known as switches--thus gaining access to not just international communications but also to most of the domestic traffic flowing through the US."<br />
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"The network of intercept stations goes far beyond the single room in an AT&T building in San Francisco exposed by a whistle-blower in 2006. 'I think there's 10 to 20 of them,' Binney says. 'That's not just San Francisco; they have them in the middle of the country and also on the East Coast'."<br />
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In other words, NSA's network of "secret rooms" were installed at key junctures that would facilitate, not "minimize" wholesale domestic surveillance.<br />
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Expanding on just how intrusive NSA "collection" programs are, Binney told <i><a href="http://www.newyorker.com/reporting/2011/05/23/110523fa_fact_mayer?currentPage=all">The New Yorker</a></i> in a Jane Mayer piece on the Obama regime's prosecution of NSA whistleblower Thomas Drake, that a surveillance program he helped design as SARC director, ThinThread, was "bastardized" after 9/11 and "stripped of privacy controls" that would filter out Americans' communications.<br />
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"'It was my brainchild,' Binney told Mayer. "'But they removed the protections, the anonymization process. When you remove that, you can target anyone.' He said that although he was not 'read in' to the new secret surveillance program, 'my people were brought in, and they told me, 'Can you believe they're doing this? They're getting billing records on US citizens! They're putting pen registers'--logs of dialed phone numbers--'on everyone in the country!'"<br />
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And they continue to do so today without one iota of oversight from a thoroughly compromised Congress.<br />
<br />
<b>New Programs Exposed</b><br />
<br />
The programs described above all evolved from the Bush administration's so-called President's Surveillance Program, PSP, which has continued under Obama. As <i><a href="http://antifascist-calling.blogspot.com/2009/10/fbi-data-mining-programs-resurrect.html">Antifascist Calling</a></i> reported in 2009, citing a declassified 38-page <a href="http://judiciary.house.gov/hearings/pdf/IGTSPReport090710.pdf">report</a> by inspectors general of the CIA, NSA, the Departments of Defense, Justice and the Office of the Director of National Intelligence, the report failed to disclose what these programs actually do, claiming they are "too sensitive" for an "unclassified setting."<br />
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Shrouded beneath impenetrable layers of secrecy and deceit, these undisclosed programs lie at the dark heart of the state's war against the American people.<br />
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For example, the DOJ's Office of the Inspector General described FBI participation in the PSP as that of a "passive recipient of intelligence collected under the program." Recent revelations by Edward Snowden expose such statements as bald-faced lies. And when the OIG claimed that Bureau efforts "to improve cooperation with the NSA to enhance the usefulness of PSP-derived information to FBI agents," that too, is a craven misrepresentation given what we now know about the key role the FBI plays in NSA's PRISM program.<br />
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However, the unclassified version of NSA's Inspector General's report on the PSP published by <i><a href="http://www.guardian.co.uk/world/interactive/2013/jun/27/nsa-inspector-general-report-document-data-collection">The Guardian</a></i> paints a far-different picture.<br />
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A close reading of the document reveals that a federal judge sitting on the FISA would approve a bulk collection order for metadata "every 90 days," as long as it "involved" the "communications with at least one communicant outside the United States or for which no communicant was known to be a citizen of the United States".<br />
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"Eventually," Glenn Greenwald and Spencer Ackerman reported, the agency "gained authority to 'analyze communications metadata associated with United States persons and persons believed to be in the United States'."<br />
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Although the administration now claims that specific program ended in 2011, online collection of data on Americans continues today.<br />
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Last week <i><a href="http://www.guardian.co.uk/world/2013/jun/27/nsa-online-metadata-collection">The Guardian</a></i> reported that NSA's Special Source Operations (SSO) directorate running PRISM is collecting and analyzing "significant amounts of data from US communications systems in the course of monitoring foreign targets."<br />
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"The NSA," Greenwald and Ackerman disclosed, "called it the 'One-End Foreign (1EF) solution'."<br />
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That program, code named EVIL OLIVE, was intended to broaden "the scope" of what it is able to surveil and relied, "legally, on 'FAA Authority', a reference to the 2008 Fisa Amendments Act that relaxed surveillance restrictions."<br />
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"This new system, SSO stated in December, enables vastly increased collection by the NSA of internet traffic. 'The 1EF solution is allowing more than 75% of the traffic to pass through the filter,' the SSO December document reads. 'This milestone not only opened the aperture of the access but allowed the possibility for more traffic to be identified, selected and forwarded to NSA repositories'."<br />
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After EVIL OLIVE's "deployment, traffic has literally doubled."<br />
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Referencing another NSA collection program, this one code named SHELL TRUMPET, an SSO official wrote that the program had just "processed its One Trillionth metadata record."<br />
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"Explaining that the five-year old program 'began as a near-real-time metadata analyzer ... for a classic collection system', the SSO official noted: 'In its five year history, numerous other systems from across the Agency have come to use ShellTrumpet's processing capabilities for performance monitoring' and other tasks, such as 'direct email tip alerting'," <i>The Guardian</i> reported.<br />
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These, and hitherto as yet unknown programs, are advancing by leaps and bounds due to technological breakthroughs, the result of tens of billions of taxpayer dollars showered on the agency in wake of the 9/11 provocation. As Greenwald and Ackerman reported, "almost half of those trillion pieces of internet metadata were processed in 2012, the document detailed: 'though it took five years to get to the one trillion mark, almost half of this volume was processed in this calendar year'."<br />
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"Another SSO entry," this one dated February 6, 2013, "described ongoing plans to expand metadata collection. A joint surveillance collection operation with an unnamed partner agency yielded a new program 'to query metadata' that was 'turned on in the Fall 2012'."<br />
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Two additional programs, code named MOON LIGHT PATH AND SPINNERET, "are planned to be added by September 2013." Curiously enough, this is when NSA's Utah Data Center is slated to "go live."<br />
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In fact, these programs and their siblings are useful not simply for harvesting metadata, but for "collecting" and storing all electronic communications, including their content; hence the rather circumspect reference to "direct email tip alerting."<br />
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Fully a transatlantic affair, Greenwald and Ackerman noted that another SSO entry dated September 21, 2012 revealed that a program called TRANSIENT THURIBLE is "'a new Government Communications Head Quarters (GCHQ) managed XKeyScore (XKS) Deep Dive was declared operational.' The entry states that GCHQ 'modified' an existing program so the NSA could 'benefit' from what GCHQ harvested."<br />
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There is much we do not yet know about these programs, how "collected" data is exploited by government agencies, nor the present and future implications for civil liberties and privacy in the United States and globally. What we do know however, is that the Obama administration, including their national security spokespeople and their media and political apologists are lying.Antifascisthttp://www.blogger.com/profile/05421707682211445550noreply@blogger.com1tag:blogger.com,1999:blog-1831516114336983238.post-73946163158609834452013-06-24T08:44:00.002-07:002013-06-24T08:44:53.854-07:00NSA Spying: So They Are Listening In, After All<a href="http://4.bp.blogspot.com/-ko0IwBKMeFA/Ucc_k_KEjfI/AAAAAAAAAXk/5_oF5hMvpBY/s1600/nsa_eye.jpg" imageanchor="1" ><img border="0" src="http://4.bp.blogspot.com/-ko0IwBKMeFA/Ucc_k_KEjfI/AAAAAAAAAXk/5_oF5hMvpBY/s400/nsa_eye.jpg" /></a><br />
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Despite a stream of mendacious twaddle from President Obama, congressional grifters and spook agency mouthpieces like Office of the Director of National Intelligence head James Clapper, FBI Director Robert Mueller and NSA chief General Keith Alexander, it turns out our guardians are listening in to America's, and most of the world's, telephone conversations after all.<br />
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In the wake of the Boston Marathon bombing, former FBI counterterrorism agent Tim Clemente was <a href="http://transcripts.cnn.com/TRANSCRIPTS/1305/01/ebo.01.html">asked</a> by CNN whether there's a way that investigators "can get the phone companies" to cough up audio of a particular conversation.<br />
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Clemente responded: "No, there is a way. We certainly have ways in national security investigations to find out exactly what was said in that conversation. It's not necessarily something that the FBI is going to want to present in court, but it may help lead the investigation and/or lead to questioning of her [the alleged bomber's wife]. We certainly can find that out."<br />
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CNN's incredulous reply: "So they can actually get that? People are saying, look, that is incredible."<br />
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Clemente: "No, welcome to America. All of that stuff is being captured as we speak whether we know it or like it or not."<br />
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When <a href="http://transcripts.cnn.com/TRANSCRIPTS/1305/02/cnr.03.html">questioned</a> the next day whether he would confirm his previous statements, Clemente told CNN, "I'm talking about all digital communications are--there's a way to look at digital communications in the past. I can't go into detail of how that's done or what's done. But I can tell you that no digital communication is secure. So these communications will be found out. The conversation will be known."<br />
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While there was scant media follow-up to Clemente's assertions, recent revelations of NSA dragnet spying have confirmed what analysts, researchers and whistleblowers have been saying for years: the secret state has the technological wherewithal to digitally record the content of all electronic communications, including telephone calls, and store them in massive cloud computing server farms in the event they're needed for future "reference."<br />
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And as it turns out, according to <a href="http://archive.org/index.php">Internet Archive</a> founder, computer engineer Brewster Kahle, who has wide experience storing large amounts of data, the cost of doing so is incredibly cheap.<br />
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A <a href="https://docs.google.com/spreadsheet/ccc?key=0AuqlWHQKlooOdGJrSzhBVnh0WGlzWHpCZFNVcURkX0E#gid=0">spreadsheet</a> created by Kahle estimates it would cost the government a mere $27 million to "store all phonecalls made in a year in the 'cloud'." To do so would require less than 5,000 square feet of space and $2 million in electricity costs to store the estimated 272 petabytes of data generated annually in the United States!<br />
<br />
<b>A Giant Blackmail Machine</b><br />
<br />
Recent disclosures by NSA whistleblower Edward Snowden have done much to dispel remaining myths (government spying is "focused," "legal," etc.) surrounding the secret state's privacy-killing surveillance programs.<br />
<br />
It now seems likely that NSA is hoovering up far more than the "telephony metadata" revealed by <i>The Guardian's</i> publication of the secret <a href="http://www.guardian.co.uk/world/interactive/2013/jun/06/verizon-telephone-data-court-order">FISA Court Order</a> to Verizon Business Services.<br />
<br />
Following-up on PRISM program reporting, <i><a href="http://www.washingtonpost.com/investigations/us-surveillance-architecture-includes-collection-of-revealing-internet-phone-metadata/2013/06/15/e9bf004a-d511-11e2-b05f-3ea3f0e7bb5a_print.html">The Washington Post</a></i> disclosed June 15 that the Bush administration's "warrantless wiretapping" program STELLAR WIND "was succeeded by four major lines of intelligence collection in the territorial United States, together capable of spanning the full range of modern telecommunications, according to the interviews and documents."<br />
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"Two of the four collection programs, one each for telephony and the Internet," Barton Gellman reported, "process trillions of 'metadata' records for storage and analysis in systems called MAINWAY and MARINA, respectively."<br />
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According to the <i>Post</i>, "Metadata includes highly revealing information about the times, places, devices and participants in electronic communication, but not its contents. The bulk collection of telephone call records from Verizon Business Services, disclosed this month by the British newspaper the Guardian, is one source of raw intelligence for MAINWAY."<br />
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Dropping a bombshell, although withholding supporting documents, Gellman reports that the "other two types of collection, which operate on a much smaller scale, are aimed at content. One of them intercepts telephone calls and routes the spoken words to a system called NUCLEON."<br />
<br />
"MARINA and the collection tools that feed it are probably the least known of the NSA's domestic operations," the <i>Post</i> averred. "Yet they probably capture information about more American citizens than any other, because the volume of e-mail, chats and other Internet communications far exceeds the volume of standard telephone calls."<br />
<br />
"The NSA calls Internet metadata 'digital network information.' Sophisticated analysis of those records can reveal unknown associates of known terrorism suspects. Depending on the methods applied, it can also expose medical conditions, political or religious affiliations, confidential business negotiations and extramarital affairs."<br />
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In other words, it seems likely that harvested data gleaned from phone calls, emails, video chats and credit card records are being used in ways that are as old as the spy game itself: political and economic <i>blackmail</i>.<br />
<br />
Indeed, NSA whistleblower Russ Tice, the principal source for <i><a href="http://www.nytimes.com/2005/12/16/politics/16program.html">The New York Times</a></i> exposé of illegal Bush administration spy programs, told Sibel Edmonds' <i>Boiling Frogs Post</i> <a href="http://www.boilingfrogspost.com/2013/06/19/podcast-show-112-nsa-whistleblower-goes-on-record-reveals-new-information-names-culprits/">podcast</a> that the secret state has ordered surveillance on a wide range of groups and individuals, including antiwar activists, high-ranking military officials, lawmakers and diplomats.<br />
<br />
According to Tice: "Okay. They went after--and I know this because I had my hands literally on the paperwork for these sort of things--they went after high-ranking military officers; they went after members of Congress, both Senate and the House, especially on the intelligence committees and on the armed services committees and some of the--and judicial. But they went after other ones, too. They went after lawyers and law firms. All kinds of--heaps of lawyers and law firms. They went after judges. One of the judges is now sitting on the Supreme Court that I had his wiretap information in my hand. Two are former FISA court judges. They went after State Department officials. They went after people in the executive service that were part of the White House--their own people. They went after antiwar groups. They went after US international--US companies that that do international business, you know, business around the world. They went after US banking firms and financial firms that do international business. They went after NGOs that--like the Red Cross, people like that that go overseas and do humanitarian work. They went after a few antiwar and civil rights groups. So, you know, don't tell me that there's no abuse, because I've had this stuff in my hand and looked at it."<br />
<br />
"Here's the big one," Tice told hosts Sibel Edmonds and Peter B. Collins, "this was in summer of 2004, one of the papers that I held in my hand was to wiretap a bunch of numbers associated with a 40-something-year-old wannabe senator for Illinois. You wouldn't happen to know where that guy lives right now would you? It's a big white house in Washington, D.C. That's who they went after, and that's the president of the United States now."<br />
<br />
Other political targets revealed by Tice included <i>all nine</i> Supreme Court justices, Senate Intelligence Committee head Dianne Feinstein (D-CA), Sen. John McCain (R-AZ), House Minority leader Nancy Pelosi (D-CA) and ousted CIA director General David Petraeus, who allegedly resigned over a sex scandal.<br />
<br />
Is it any wonder then, that House and Senate leaders driving the "oversight" clown car are the ones now braying loudest for Ed Snowden's head!<br />
<br />
<b>Like ECHELON, Only on Steroids</b><br />
<br />
A new series of disclosures published by <i><a href="http://www.guardian.co.uk/uk/2013/jun/21/gchq-cables-secret-world-communications-nsa">The Guardian</a></i>, based on the Snowden files but, like the <i>Post</i>, without public disclosure of the actual documents, we learned that Britain's Government Communications Headquarters (GCHQ) "has secretly gained access to the network of cables which carry the world's phone calls and internet traffic and has started to process vast streams of sensitive personal information which it is sharing with its American partner, the National Security Agency (NSA)."<br />
<br />
"The sheer scale of the agency's ambition is reflected in the titles of its two principal components: Mastering the Internet and Global Telecoms Exploitation, aimed at scooping up as much online and telephone traffic as possible," <i>The Guardian</i> reported.<br />
<br />
Britain's "Mastering the Internet" scheme was first reported by <i><a href="http://www.theregister.co.uk/2009/05/03/gchq_mti/">The Register</a></i> and <i><a href="http://www.timesonline.co.uk/tol/news/politics/article6211101.ece">The Sunday Times</a></i> back in 2009; <i><a href="http://antifascist-calling.blogspot.com/2009/05/spying-in-uk-gchq-awards-lockheed.html">Antifascist Calling</a></i> published an analysis of NSA's key role in the GCHQ program; a few months later, citing documents posted by <a href="https://en.wikinews.org/wiki/Listening_to_you_at_last:_EU_plans_to_tap_cell_phones">WikiLeaks</a>, <i><a href="http://antifascist-calling.blogspot.com/2009/10/mind-your-tweets-cia-and-european-union.html">AFC</a></i> commented on the cozy relations amongst private intelligence contractors, the European Union and the secret state.<br />
<br />
The architecture of these highly intrusive, illegal programs was created decades ago however, in intelligence-sharing arrangements in the English speaking world under the rubric of NSA's global surveillance network known as ECHELON.<br />
<br />
As one of the "Five Eyes" partner agencies of the Cold War-era UKUSA Security Agreement (US, UK, Canada, Australia and New Zealand) exposed by journalists <a href="http://cryptome.org/jya/echelon-dc.htm">Duncan Campbell</a> and <a href="http://cryptome.org/jya/echelon.htm">Nicky Hager</a> in their ECHELON investigations, GCHQ, through a contemporary operation code named TEMPORA, has tapped into and stored vast quantities of data gleaned from fiber optic cables passing through the UK.<br />
<br />
"This includes recordings of phone calls, the content of email messages, entries on Facebook and the history of any internet user's access to websites--all of which is deemed legal, even though the warrant system was supposed to limit interception to a specified range of targets," <i>The Guardian</i> reported.<br />
<br />
But as we know from Campbell and Hager's reporting, while intelligence and law enforcement officials in Britain and the United States are required to obtain an <i>individualized</i> warrant to target a suspect's communications in their own nation, <i>no such restrictions apply</i> should one of the five "partner agencies" spy on another country's citizens. One must assume this arrangement continues today.<br />
<br />
"The documents reveal that by last year GCHQ was handling 600m 'telephone events' each day," <i>The Guardian</i> disclosed, and "had tapped more than 200 fibre-optic cables and was able to process data from at least 46 of them at a time."<br />
<br />
That GCHQ did so on the basis of "secret agreements with commercial companies, described in one document as 'intercept partners'," should come as now surprise to readers of this blog.<br />
<br />
According to Snowden documents "seen" but not published by <i>The Guardian</i>, "some companies have been paid for the cost of their co-operation and GCHQ went to great lengths to keep their names secret. They were assigned 'sensitive relationship teams' and staff were urged in one internal guidance paper to disguise the origin of 'special source' material in their reports for fear that the role of the companies as intercept partners would cause 'high-level political fallout'."<br />
<br />
"It's not just a US problem. The UK has a huge dog in this fight," Snowden told <i>The Guardian</i>. "They [GCHQ] are worse than the US."<br />
<br />
The latest revelations have certainly raised eyebrows in Hong Kong and China, long accused by US political hacks of waging "aggressive cyberwarfare" against US defense and financial networks.<br />
<br />
On Sunday, the <i><a href="http://www.scmp.com/news/hong-kong/article/1266777/exclusive-snowden-safe-hong-kong-more-us-cyberspying-details-revealed">South China Morning Post</a></i> disclosed that "US spies are hacking into Chinese mobile phone companies to steal text messages and attacking the servers at Tsinghua University," according to documents provided to the <i>Post</i> by Edward Snowden.<br />
<br />
The <i>Post</i> revealed that the US is "hacking" computers "at the Hong Kong headquarters of Pacnet, which owns one of the most extensive submarine cable networks in the region."<br />
<br />
"Pacnet," the Hong Kong newspaper explained, "recently signed major deals with the mainland's top mobile phone companies, owns more than 46,000 kilometres of fibre-optic cables. The cables connect its regional data centres across the Asia-Pacific region, including Hong Kong, the mainland, Japan, South Korea, Singapore and Taiwan. It also has offices in the US."<br />
<br />
Talk about the (US) pot calling the (Chinese) kettle black!<br />
<br />
<b>NSA Data Fed to Main Core Security Index?</b><br />
<br />
As sinister as these programs are, is there another component which taps "into data from an ad-hoc collection of so-called 'black programs' whose existence is undisclosed," as alluded to by <i><a href="http://online.wsj.com/article/SB120511973377523845.html">The Wall Street Journal</a></i> five years ago?<br />
<br />
In a recent interview with the conservative web site, <i><a href="http://dailycaller.com/2013/06/10/what-do-they-know-about-you-an-interview-with-nsa-analyst-william-binney/?print=1">The Daily Caller</a></i>, former NSA technical director and whistleblower William Binney said while he doesn't think "they're recording all of it," what they do however, "is take their target list, which is somewhere on the order of 500,000 to a million people. They look through these phone numbers and they target those and that's what they record."<br />
<br />
"500,000 to a million people"? Who are they? Foreign citizens, Americans? If the latter, is Binney's statement confirmation of reporting by journalists <a href="http://www.informationclearinghouse.info/article19871.htm">Christopher Ketchum</a> and <a href="http://www.salon.com/2008/07/23/new_churchcomm/">Tim Shorrock</a> about the existence of a secret "Continuity of Government" database of "suspect" Americans known as Main Core?<br />
<br />
"One knowledgeable source claims that 8 million Americans are now listed in Main Core as potentially suspect," Ketchum reported. "In the event of a national emergency, these people could be subject to everything from heightened surveillance and tracking to direct questioning and possibly even detention."<br />
<br />
As we now know, US government intelligence agencies including the CIA, DHS, the FBI, military outfits such as US Northern Command and the 70-odd "public-private" fusion centers scattered across the country have spied on antiwar activists, Ron Paul supporters, anarchists, socialists, gun rights' proponents and, as revealed by journalist Beau Hodai in his troubling report, <i><a href="http://dbapress.com/wp-content/uploads/2013/05/Dissent-or-Terror-PLAIN-TEXT-FINAL.pdf">Dissent or Terror</a></i>, Occupy Wall Street.<br />
<br />
Did all the data secretly scooped up on law-abiding Americans exercising their constitutionally protected right to free speech wind up in the government's ultra-secret Main Core security index?<br />
<br />
"Another well-informed source--a former military operative regularly briefed by members of the intelligence community" told Ketchum: "'The more data you have on a particular target, the better [the software] can predict what the target will do, where the target will go, who it will turn to for help,' he says. 'Main Core is the table of contents for all the illegal information that the U.S. government has [compiled] on specific targets.' An intelligence expert who has been briefed by high-level contacts in the Department of Homeland Security confirms that a database of this sort exists, but adds that 'it is less a mega-database than a way to search numerous other agency databases at the same time'."<br />
<br />
A few months after Ketchum's report appeared, Shorrock informed us that during an interview with financial consultant Norman Bailey, who headed "a special unit within the Office of the Director of National Intelligence focused on financial intelligence on Cuba and Venezuela--the NSA has been using its vast powers with signals intelligence to track financial transactions around the world since the early 1980s."<br />
<br />
"After 9/11," Bailey told Shorrock, NSA signals intelligence intercept capabilities were "instantly seen within the US government as a critical tool in the war on terror--and apparently was deployed by the Bush administration inside the United States."<br />
<br />
"In September 2001," Shorrock disclosed, "a contemporary version of the [Reagan era] Continuity of Government program was put into play in the hours after the 9/11 terrorist attacks, when Vice President Cheney and senior members of Congress were dispersed to 'undisclosed locations' to maintain government functions."<br />
<br />
"It was during this emergency period," Shorrock wrote, "that President Bush may have authorized the NSA to begin actively using the Main Core database for domestic surveillance."<br />
<br />
"If Main Core does exist, says Philip Giraldi, a former CIA counterterrorism officer and an outspoken critic of the agency, the Department of Homeland Security (DHS) is its likely home," Ketchum averred.<br />
<br />
"'If a master list is being compiled, it would have to be in a place where there are no legal issues'--the CIA and FBI would be restricted by oversight and accountability laws--'so I suspect it is at DHS, which as far as I know operates with no such restraints'."<br />
<br />
"Giraldi notes that DHS already maintains a central list of suspected terrorists and has been freely adding people who pose no reasonable threat to domestic security. 'It's clear that DHS has the mandate for controlling and owning master lists. The process is not transparent, and the criteria for getting on the list are not clear.' Giraldi continues, 'I am certain that the content of such a master list [as Main Core] would not be carefully vetted, and there would be many names on it for many reasons--quite likely, including the two of us'."<br />
<br />
While we don't know whether Binney is referring to the NSA component of Main Core, or some other highly illegal, hitherto unknown program, his statements seem to confirm Gellman's reporting in <i>The Washington Post</i> that "spoken words" are routed "to a system called NUCLEON." Again, without publishing supporting documentation supplied by Edward Snowden, the picture is far from clear.<br />
<br />
Recent revelations however, building on scandals surrounding the interception of the sensitive communications of Associated Press and Fox News reporters, along with President Obama's Nixonian obsession with stopping "leaks" as part of the administration's war on whistleblowers, it should be clear by now that the police state Rubicon has <i>already</i> been crossed.<br />
<br />
In 1976, during Senate hearings into earlier government lawbreaking, Senator Frank Church warned: "The National Security Agency's capability at any time could be turned around on the American people, and no American would have any privacy left, such is the capability to monitor everything: telephone conversations, telegrams, it doesn't matter. There would be no place to hide. If a dictator ever took over, the NSA could enable it to impose total tyranny, and there would be no way to fight back."<br />
<br />
"I don't want to see this country ever go across the bridge," Senator Church cautioned. "I know the capacity that is there to make tyranny total in America, and we must see to it that this agency and all agencies that possess this technology operate within the law and under proper supervision, so that we never cross over that abyss. That is the abyss from which there is no return."<br />
<br />
What should also be clear, is that the <i>bipartisan consensus</i> that seeks to criminalize the leak and not the illegality of the programs exposed, reflects the profound fear in elite Washington circles of the American people. As opposition to endless war and austerity continues to percolate below the surface, it is only a matter of time before the breaking point is reached.Antifascisthttp://www.blogger.com/profile/05421707682211445550noreply@blogger.com0tag:blogger.com,1999:blog-1831516114336983238.post-76284317481773405462013-06-15T10:55:00.000-07:002013-06-15T10:55:57.039-07:00What the NSA Revelations Tell Us about America's Police State<a href="http://3.bp.blogspot.com/-iEQAA8YuYv8/UbyRCgMyGLI/AAAAAAAAAW8/HqCNaQGjHLI/s1600/Obama-NSA-yes-we-scan.png" imageanchor="1" ><img border="0" src="http://3.bp.blogspot.com/-iEQAA8YuYv8/UbyRCgMyGLI/AAAAAAAAAW8/HqCNaQGjHLI/s400/Obama-NSA-yes-we-scan.png" /></a><br />
<br />
Ongoing revelations by <i><a href="http://www.guardian.co.uk/world/2013/jun/06/nsa-phone-records-verizon-court-order">The Guardian</a></i> and <i><a href="http://www.washingtonpost.com/investigations/us-intelligence-mining-data-from-nine-us-internet-companies-in-broad-secret-program/2013/06/06/3a0c0da8-cebf-11e2-8845-d970ccb04497_print.html">The Washington Post</a></i> of massive, illegal secret state surveillance of the American people along with advanced plans for waging <a href="http://www.guardian.co.uk/world/2013/jun/07/obama-china-targets-cyber-overseas">offensive cyberwarfare</a> on a global scale, including inside the US, underscores what <i>Antifascist Calling</i> has reported throughout the five years of our existence: that democracy and democratic institutions in the United States are dead letters.<br />
<br />
Last week, <i>Guardian</i> investigative journalist Glenn Greenwald revealed that NSA "is currently collecting the telephone records of millions of US customers of Verizon, one of America's largest telecoms providers, under a top secret court order issued in April."<br />
<br />
That order from the <a href="http://www.guardian.co.uk/world/interactive/2013/jun/06/verizon-telephone-data-court-order">FISA court</a> "requires Verizon on an 'ongoing, daily basis' to give the NSA information on all telephone calls in its systems, both within the US and between the US and other countries."<br />
<br />
"The document shows for the first time that under the Obama administration the communication records of millions of US citizens are being collected indiscriminately and in bulk--regardless of whether they are suspected of any wrongdoing."<br />
<br />
The latest revelations track directly back to what <i><a href="http://www.usatoday.com/news/washington/2006-05-10-nsa_x.htm">USA Today</a></i> reported in 2006: "The National Security Agency has been secretly collecting the phone call records of tens of millions of Americans, using data provided by AT&T, Verizon and BellSouth," and that secretive NSA program "reaches into homes and businesses across the nation by amassing information about the calls of ordinary Americans--most of whom aren't suspected of any crime."<br />
<br />
"'It's the largest database ever assembled in the world,' said one person, who, like the others who agreed to talk about the NSA's activities, declined to be identified by name or affiliation. The agency's goal is 'to create a database of every call ever made' within the nation's borders," <i>USA Today</i> disclosed.<br />
<br />
Mission accomplished!<br />
<br />
The publication of the FISA order confirms what whistleblowers such as former AT&T technician <a href="https://www.eff.org/sites/default/files/filenode/att/kleinamicus.pdf">Mark Klein</a>, Babak Pasdar, as well as NSA insiders <a href="https://publicintelligence.net/binney-nsa-declaration/">William Binney</a>, <a href="http://nswbc.org/Press%20Releases/NSA-RussTice.htm">Russell Tice</a> and <a href="http://www.guardian.co.uk/commentisfree/2013/jun/12/snowden-surveillance-subverting-constitution">Thomas Drake</a> have been warning for years: the architecture of an American police state is not only in place but fully functioning.<br />
<br />
According to <a href="http://www.wired.com/threatlevel/2012/03/ff_nsadatacenter/all/1">Binney</a>, just one Narus STA 6400 "traffic analyzer" installed in one of AT&T's "secret rooms" exposed by Klein (there are upwards of 20 scattered across the United States) can can analyze 1,250,000 1,000-character emails every second, or some 100 billion emails a day.<br />
<br />
While the Obama administration and their coterie of media flacks argue that these programs are "legal," we would do well to recall that in 2009, <i><a href="http://www.nytimes.com/2009/04/16/us/16nsa.html">The New York Times</a></i> reported that NSA "intercepted private e-mail messages and phone calls of Americans in recent months on a scale that went beyond the broad legal limits established by Congress last year."<br />
<br />
Although Justice Department and intelligence officials described NSA's massive communications' dragnet as simple "overcollection" that was "unintentional," documents published so far expose such statements for what they are: lies.<br />
<br />
<b>Babak Pasdar's Verizon Disclosure</b><br />
<br />
More than five years ago I <a href="http://antifascist-calling.blogspot.com/2008/04/fbis-quantico-circuit-still-spying.html">wrote</a> that "a new FISA whistleblower has stepped forward with information about a major wireless provider apparently granting the state unrestricted access to all of their customers' voice communications and electronic data via a so-called 'Quantico Circuit'."<br />
<br />
That whistleblower, Babak Pasdar, the CEO of Bat Blue, revealed in a 2008 <a href="http://www.wired.com/images_blogs/threatlevel/files/Affidavit-BP-Final.pdf">affidavit</a> filed with the Government Accountability Project (<a href="http://www.whistleblower.org/program-areas/homeland-security-a-human-rights/surveillance/fisababak-pasdar">GAP</a>) that Verizon maintained a high-speed DS-3 digital line that allowed the FBI, the agency which oversees the "Quantico Circuit," virtually "unfettered" access to Verizon's wireless network, including billing records and customer data "transmitted wirelessly."<br />
<br />
A year prior to Pasdar's disclosure, <i><a href="http://www.wired.com/politics/law/news/2007/07/fbi_spyware?currentPage=all">Wired Magazine</a></i> revealed that the FBI was deploying malware which it described as a "computer and internet protocol address verifier," or CIPAV, to spy on selected targets.<br />
<br />
<i>Wired</i> disclosed, citing a court affidavit filed in US District Court in the Western District of Washington, that "the spyware program gathers a wide range of information, including the computer's IP address; MAC address; open ports; a list of running programs; the operating system type, version and serial number; preferred internet browser and version; the computer's registered owner and registered company name; the current logged-in user name and the last-visited URL."<br />
<br />
Compare <i>Wired's</i> description of CIPAV with what we have learned about the NSA's black program, PRISM, from <i>The Guardian</i> and <i>The Washington Post</i>.<br />
<br />
According to Glenn Greenwald and Ewen MacAskill's reporting in <i>The Guardian</i>: "The program facilitates extensive, in-depth surveillance on live communications and stored information." Additionally, one "chart prepared by the NSA, contained within the top-secret document obtained by the Guardian, underscores the breadth of the data it is able to obtain: email, video and voice chat, videos, photos, voice-over-IP (Skype, for example) chats, file transfers, social networking details, and more."<br />
<br />
"Once that data is gathered," <i>Wired</i> reported in 2007, "the CIPAV begins secretly monitoring the computer's internet use, logging every IP address to which the machine connects," and sends that data "to a central FBI server located somewhere in eastern Virginia."<br />
<br />
"The server's precise location wasn't specified, but previous FBI internet surveillance technology--notably its Carnivore packet-sniffing hardware--was developed and run out of the bureau's technology laboratory at the FBI Academy in Quantico, Virginia."<br />
<br />
According to Pasdar, with such access the FBI and the NSA are allowed to listen in and record all conversations en-masse; collect and record mobile phone data en-masse; obtain the data that a subscriber accessed from their mobile phone, including internet access, email and web queries; trend individual call patterns and call behavior; identify inbound and outbound callers; track all inbound and outbound calls and trace the user's physical location.<br />
<br />
And as we learned last week from <i><a href="http://www.guardian.co.uk/world/2013/jun/06/us-tech-giants-nsa-data">The Guardian</a></i> and <i><a href="http://www.washingtonpost.com/investigations/us-intelligence-mining-data-from-nine-us-internet-companies-in-broad-secret-program/2013/06/06/3a0c0da8-cebf-11e2-8845-d970ccb04497_print.html">The Washington Post</a></i>, the secret state's technical capabilities have evolved by whole orders of magnitude since initial stories of secret government surveillance were first reported nearly eight years ago by <i><a href="http://www.nytimes.com/2005/12/16/politics/16program.html">The New York Times</a></i>.<br />
<br />
For example, under NSA's internet-tapping PRISM program the <i>Guardian</i> and <i>Post</i> revealed that "nine leading US Internet companies," have given over access to their central servers to the FBI and NSA, thereby enabling high-tech spooks to extract "audio and video chats, photographs, e-mails, documents, and connection logs."<br />
<br />
So pervasive, and intrusive, are these programs, that the whistleblower who revealed their existence, who we now know is former CIA technical specialist Edward Snowden, who had "firsthand experience with these systems, and horror at their capabilities," are what led him "to provide PowerPoint slides about PRISM and supporting materials to <i>The Washington Post</i> in order to expose what he believes to be a gross intrusion on privacy. 'They quite literally can watch your ideas form as you type'," the officer said."<br />
<br />
Hints of the frightening capabilities of these, and other as yet unknown programs, had been revealed years earlier.<br />
<br />
When Pasdar was in the process of migrating Verizon servers and installing a newer and more secure set of firewalls, the security specialist discovered an unnamed "third party" had installed the above-mentioned DS-3 line, a "45 megabit per second circuit that supports data and voice communications."<br />
<br />
Stunned when he learned that Verizon officials insisted the circuit should "not have any access control" and "should not be firewalled," Pasdar was told in no uncertain terms that the "owners" of the DS-3 line specified that no record of its existence should ever be made.<br />
<br />
"'Everything at the least SHOULD be logged,' I emphasized."<br />
<br />
"I don't think that is what they want."<br />
<br />
A top project manager who drove out to the site warned Pasdar to "forget about the circuit" and "move on" with the migration. He was further warned that if he "couldn't do that then he would get someone who could."<br />
<br />
When the manager left, Pasdar asked one of his Verizon colleagues, "Is that what I think it is?"<br />
<br />
"What do you think?", he replied.<br />
<br />
"I shifted the focus. 'Forgetting about who it is, don't you think it is unusual for some third party to have completely open access to your systems like this? You guys are even firewalling your internal offices, and they are part of your own company!'"<br />
<br />
His colleague replied, "Dude, that's what they want."<br />
<br />
"I didn't bother asking who 'they' were this time. 'They' now had a surrogate face,'" top manager dubbed "DS" by Pasdar. "They told me that 'they' went all the way to the top [of Verizon], which is why the once uncertain DS could now be so sure and emphatic."<br />
<br />
Disturbed that Verizon was turning over access of their communications infrastructure to secret government agencies, Pasdar wrote: "For the balance of the evening and for some time to come I thought about all the systems to which this circuit had complete and possibly unfettered access. The circuit was tied to the organization's core network. It had access to the billing system, text messaging, fraud detection, web site, and pretty much all the systems in the data center without apparent restrictions."<br />
<br />
"What really struck me," Pasdar noted, "was that it seemed no one was logging any of the activity across this circuit. And if they were, the logging system was so abysmal that they wouldn't capture enough information to build any type of a picture of what had transpired. Who knew what was being sent across the circuit and who was sending it? To my knowledge no historical logs of the communications traversing the 'Quantico Circuit' exists."<br />
<br />
The security consultant affirmed that government snoops "may be able to access the billing system to find information on a particular person. This information may include their billing address, phone number(s), as well as the numbers and information of other people on the plan. Other information could also include any previous numbers that the person or others on their plan called, and the outside numbers who have called the people on the plan."<br />
<br />
And once the Electronic Security Number (ESN) of any plan member's phone has been identified, well, the sky's the limit!<br />
<br />
"With the ESN information and access to the fraud detection systems, a third party can locate or track any particular mobile device. The person's call patterns and location can be trended and analyzed."<br />
<br />
"With the ESN," Pasdar averred, "the third party could tap into any and all data being transmitted from any particular mobile device. This would include Internet usage, e-mails, web, file transfers, text messages and access to any remote applications."<br />
<br />
"It would also be possible in real-time to tap into any conversation on any mobile phone supported by the carrier at any point."<br />
<br />
While the major firms identified by <i>Guardian</i> and <i>Post</i> reporters in the PRISM disclosures deny that NSA has built backdoors into their systems, <i><a href="https://www.nytimes.com/2013/06/08/technology/tech-companies-bristling-concede-to-government-surveillance-efforts.html">The New York Times</a></i> revealed although Twitter declined to make it easier for the government to spy on their users, "other companies were more compliant, according to people briefed on the negotiations. They opened discussions with national security officials about developing technical methods to more efficiently and securely share the personal data of foreign users in response to lawful government requests. And in some cases, they changed their computer systems to do so."<br />
<br />
According to the <i>Times</i>, the "companies that negotiated with the government include Google, which owns YouTube; Microsoft, which owns Hotmail and Skype; Yahoo; Facebook; AOL; Apple; and Paltalk, according to one of the people briefed on the discussions," the same tech giants called out by the PRISM revelations.<br />
<br />
"In at least two cases, at Google and Facebook," reporter Claire Cain Miller disclosed, "one of the plans discussed was to build separate, secure portals, like a digital version of the secure physical rooms that have long existed for classified information, in some instances on company servers. Through these online rooms, the government would request data, companies would deposit it and the government would retrieve it, people briefed on the discussions said."<br />
<br />
So much for their non-denial denials!<br />
<br />
More pertinently however, the "digital version of the secure physical rooms" described by the <i>Times</i> track directly back to what whistleblower Mark Klein told <i><a href="http://www.wired.com/science/discoveries/news/2006/05/70944">Wired</a></i>, along with supporting <a href="http://www.wired.com/threatlevel/2007/05/mark_klein_docu/">documents</a> in 2006, about AT&T's secret Room 641A housed in San Francisco.<br />
<br />
Klein revealed: "In 2003 AT&T built 'secret rooms' hidden deep in the bowels of its central offices in various cities, housing computer gear for a government spy operation which taps into the company's popular WorldNet service and the entire internet. These installations enable the government to look at every individual message on the internet and analyze exactly what people are doing. Documents showing the hardwire installation in San Francisco suggest that there are similar locations being installed in numerous other cities."<br />
<br />
And as with the "separate, secure portals" described by the <i>Times</i>, AT&T's "secret rooms" are staffed with NSA-cleared corporate employees of the tech giants.<br />
<br />
Klein informed us: "The normal work force of unionized technicians in the office are forbidden to enter the 'secret room,' which has a special combination lock on the main door. The telltale sign of an illicit government spy operation is the fact that <i>only people with security clearance from the National Security Agency can enter this room</i>." (emphasis in original)<br />
<br />
<b>How Extensive Is the Surveillance? Well, Boundless!</b><br />
<br />
Back in 2008, <i><a href="http://online.wsj.com/article/SB120511973377523845.html">The Wall Street Journal</a></i> reported that NSA "now monitors huge volumes of records of domestic emails and Internet searches as well as bank transfers, credit-card transactions, travel and telephone records. The NSA receives this so-called 'transactional' data from other agencies or private companies, and its sophisticated software programs analyze the various transactions for suspicious patterns."<br />
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With the Verizon and PRISM disclosures, we now know who those "private companies" are: major US high tech and telecommunications giants.<br />
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Journalist Siobhan Gorman revealed that the NSA's "enterprise involves a cluster of powerful intelligence-gathering programs, all of which sparked civil-liberties complaints when they came to light. They include a Federal Bureau of Investigation program to track telecommunications data once known as Carnivore, now called the Digital Collection System, and a U.S. arrangement with the world's main international banking clearinghouse to track money movements."<br />
<br />
"The effort also ties into data from an ad-hoc collection of so-called 'black programs' whose existence is undisclosed, the current and former officials say."<br />
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Amongst the "black programs" disclosed by <i><a href="http://www.guardian.co.uk/world/2013/jun/08/nsa-boundless-informant-global-datamining">The Guardian</a></i>, we learned last week that through the NSA's top secret Boundless Informant program the agency "has developed a powerful tool for recording and analysing where its intelligence comes from, raising questions about its repeated assurances to Congress that it cannot keep track of all the surveillance it performs on American communications."<br />
<br />
As Glenn Greenwald and Ewen MacAskill disclosed, the "Boundless Informant documents show the agency collecting almost 3 billion pieces of intelligence from US computer networks over a 30-day period ending in March 2013. One document says it is designed to give NSA officials answers to questions like, 'What type of coverage do we have on country X' in 'near real-time by asking the SIGINT [signals intelligence] infrastructure'."<br />
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Like their Bushist predecessors, the Obama regime claims the security apparatus is "not listening in" to the phone calls of Americans, asserting instead they are "merely" harvesting metadata, the digital footprints and signatures of electronic devices.<br />
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But as the Electronic Frontier Foundation (<a href="https://www.eff.org/deeplinks/2013/06/why-metadata-matters">EFF</a>) points out: "Metadata provides enough context to know some of the most intimate details of your lives. And the government has given no assurances that this data will never be correlated with other easily obtained data. They may start out with just a phone number, but a <a href="http://www.whitepages.com/reverse_phone">reverse telephone directory</a> is not hard to find. Given the public positions the government has taken on <a href="https://www.eff.org/issues/location-privacy">location information</a>, it would be no surprise if they include location information demands in Section 215 orders for metadata."<br />
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Conservative estimates since the 9/11 provocation have revealed that the NSA phone database now contains upwards of 1.9 trillion call-detail records under a program code name MARINA and that a similar database for email and web queries also exists, PINWALE.<br />
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The FISA court order signed in April by Judge Roger Vinson directs Verizon to hand over to the NSA "on an ongoing daily basis thereafter for the duration of this order, unless otherwise directed by the Court, an electronic copy of the following tangible things: all call detail records or 'telephony metadata' created by Verizon for communications (i) between the United States and abroad; or (ii) wholly within the United States, including local telephone calls."<br />
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One can only assume that other carriers such as AT&T and Sprint have been issued similar orders by the FISA court.<br />
<br />
According to the Order, "Telephony metadata includes comprehensive communications routing information, including but not limited to session identifying information (e.g., originating and terminating telephone number, International Mobile Subscriber Identity (ISMI) number, International Mobile station Equipment Identity (IMEI) number, etc.), trunk identifier, telephone calling card numbers, and time and duration of call."<br />
<br />
While the order specifies that "telephony metadata" does not include the "substantive content of any communication" or "the name, address, or financial information of a subscriber or customer," that information, should an individual come in for "special handling" by the secret state, call and internet content is fully-retrievable, courtesy of US high-tech firms, under the MARINA, PINWALE and PRISM programs.<br />
<br />
As the heroic whistleblower Edward Snowden told <i><a href="http://www.guardian.co.uk/world/2013/jun/09/nsa-whistleblower-edward-snowden-why">The Guardian</a></i> last Sunday: "The NSA has built an infrastructure that allows it to intercept almost everything. With this capability, the vast majority of human communications are automatically ingested without targeting. If I wanted to see your emails or your wife's phone, all I have to do is use intercepts. I can get your emails, passwords, phone records, credit cards."<br />
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"What they're doing,” Snowden said, poses "an existential threat to democracy."<br />
<br />
If what the Bush and now, Obama regimes are doing is not Orwellian blanket surveillance of the American people, then words fail.Antifascisthttp://www.blogger.com/profile/05421707682211445550noreply@blogger.com3tag:blogger.com,1999:blog-1831516114336983238.post-56405086714564207062013-05-27T10:51:00.001-07:002013-05-27T10:51:45.126-07:00Bankster Lobbyists Writing Regulatory 'Reform' Legislation<a href="http://1.bp.blogspot.com/-1Thim4ku2bY/UaEL-L9uYWI/AAAAAAAAAWM/-on1uInD7p8/s1600/png.png" imageanchor="1" ><img border="0" src="http://1.bp.blogspot.com/-1Thim4ku2bY/UaEL-L9uYWI/AAAAAAAAAWM/-on1uInD7p8/s320/png.png" /></a><br />
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Nearly six years since massive financial fraud and speculative market manipulation drove the global capitalist economy off the rails, congressional grifters in both benighted political parties have turned over the legislative process to bankster lobbyists.<br />
<br />
Talk about technocratic efficiency!<br />
<br />
Last week, <i><a href="http://dealbook.nytimes.com/2013/05/23/banks-lobbyists-help-in-drafting-financial-bills/">The New York Times</a></i> revealed that "Bank lobbyists are not leaving it to lawmakers to draft legislation that softens financial regulations. Instead, the lobbyists are helping to write it themselves."<br />
<br />
According to emails leaked to the <i>Times</i>, a bill that "sailed through the House Financial Services Committee this month--over the objections of the Treasury Department--was essentially Citigroup's."<br />
<br />
Despite huge losses during the capitalist economic meltdown, which included heavy exposure to toxic collateralized debt obligations (CDOs) which cost shareholders some 85 percent of asset value by early 2009, by 2012 the bank had built up an enormous cash horde to the tune of $420 billion (£277.7bn), derived from selling some $500 billion (£330.6bn) of "special assets" placed in Citi holdings that were guaranteed from losses by the US Treasury Department; this included untaxed overseas profits of some $35.9 billion (£23.74bn) according to <i><a href="http://www.bloomberg.com/news/2012-03-02/cash-horde-expands-by-187-billion-in-untaxed-offshore-accounts.html">Bloomberg</a></i>.<br />
<br />
As I <a href="http://antifascist-calling.blogspot.com/2013/04/toothless-federal-reserve-enforcement.html">reported</a> last month, Citigroup was handed some $45 billion (£29.78bn) in TARP funds while the Treasury Department and Federal Reserve secretly backstopped more than $300 billion (£197.31bn) in toxic assets on their books. In addition to receiving "$2.5 trillion [£1.64tn] of support from the American taxpayer through capital infusions, asset guarantees and low-cost loans," as <i><a href="http://wallstreetonparade.com/2013/04/courts-and-regulators-keep-wall-street%E2%80%99s-dirtiest-secrets/">Wall Street on Parade</a></i> analyst Pam Martens pointed out, like other too-big-to-jail banks such as Wachovia and HSBC, the Citi brand has long been associated with washing dirty cash for drug cartels.<br />
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Hit with a toothless <a href="http://www.federalreserve.gov/newsevents/press/enforcement/enf20130326a1.pdf">Consent Order</a> by the Federal Reserve in March over "deficiencies in the Banks' BSA/AML [Bank Secrecy Act/Anti-Money Laundering] compliance programs," federal regulators charged that Citigroup and their affiliate Banamex "lacked effective systems of governance and internal controls to adequately oversee the activities of the Banks with respect to legal, compliance, and reputational risk related to the Banks' respective BSA/AML compliance programs."<br />
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The Federal Reserve "action" followed an anemic <a href="http://www.occ.gov/news-issuances/news-releases/2012/nr-occ-2012-57a.pdf">Consent Order</a> last year by the Office of the Comptroller of the Currency (OCC) which also cited Citi's failure to "adopt and implement a compliance program that adequately covers the required BSA/AML program elements due to an inadequate system of internal controls." Additionally, the OCC charged that the "Bank did not develop adequate due diligence on foreign correspondent bank customers and failed to file Suspicious Activity Reports ('SARs') related to its remote deposit capture/international cash letter instrument activity in a timely manner."<br />
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Nevertheless, as with other criminogenic banks such as JPMorgan Chase, similarly hit with an equally toothless <a href="http://www.occ.gov/news-issuances/news-releases/2013/nr-occ-2013-8a.pdf">Consent Order</a> by the Office of the Comptroller of the Currency in January, in their infinite wisdom the Federal Reserve averred that their Citigroup action was issued "without this Order constituting an admission or denial by Citigroup of any allegation made or implied by the Board of Governors in connection with this matter, and solely for the purpose of settling this matter without a formal proceeding being filed and without the necessity for protracted or extended hearings or testimony."<br />
<br />
In other words, let's sweep this under the rug as quickly as possible and move on. But before we do, let's step back for a moment and wrap our heads around a few salient facts.<br />
<br />
Here's a bank with a documented history as the <a href="http://www.gao.gov/archive/1999/os99001.pdf">GAO</a> revealed in 1998, of laundering drug money for well-placed Juárez and Gulf Cartel crony Raúl Salinas de Gortari, the brother of former Mexican president Carlos Salinas, charged with amassing a multimillion dollar fortune from narcotics rackets and then squirreling it away in London, Switzerland and the Cayman Islands.<br />
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Does this evoke any memories?<br />
<br />
According to GAO investigators, "Mr. Salinas was able to transfer $90 million to $100 million between 1992 and 1994 by using a private banking relationship formed by Citibank New York in 1992. The funds were transferred through Citibank Mexico and Citibank New York to private banking investment accounts in Citibank London and Citibank Switzerland."<br />
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Beginning in 1992, Citibank "assisted Mr. Salinas with these transfers and effectively disguised the funds' source and destination, thus breaking the funds' paper trail." And they did so by creating "an offshore private investment company named Trocca, to hold Mr. Salinas's assets, through Cititrust (Cayman) and investment accounts in Citibank London and Citibank Switzerland," and then failed to "prepare a financial profile on him or request a waiver for the profile, as required by then Citibank know your customer policy."<br />
<br />
Keep in mind that when Swiss prosecutors completed their money laundering investigation, <i><a href="http://www.latinamericanstudies.org/mexico/salinas.htm">The New York Times</a></i> disclosed that "Swiss police investigators have concluded that a brother of former President Carlos Salinas de Gortari played a central role in Mexico's cocaine trade, raking in huge bribes to protect the flow of drugs into the United States."<br />
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That Swiss report stated, "When Carlos Salinas de Gortari became President of Mexico in 1988, Raúl Salinas de Gortari assumed control over practically all drug shipments through Mexico. Through his influence and bribes paid with drug money, officials of the army and the police supported and protected the flourishing drug business."<br />
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Does the name of former Banamex CEO Roberto Hernández ring any bells?<br />
<br />
Described as "the single biggest winner" of Mexican bank privatizations engineered by the Bush and Clinton regimes during the 1990s as <i><a href="http://narconews.com/fraud1994.html">Narco News</a></i> disclosed, a subsequent <a href="http://www.narconews.com/Issue45/article2584.html">investigation</a> revealed that "Hernández had been accused--publicly and via a criminal complaint--by the daily newspaper <i>Por Esto!</i> of trafficking tons of Colombian cocaine through his Caribbean costa properties on that peninsula since 1997."<br />
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And when Citigroup acquired Banamex in 2001 for the then-princely sum of $12.5 billion (£8.27bn), it was described as the largest US-Mexican corporate merger in history. Should it surprise us that this Citi subsidiary was named alongside parent Citigroup by the OCC and Federal Reserve for repeated failures to adequately police dirty money flowing into their coffers?<br />
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Members of the House Financial Services Committee should examine <i>why</i> they would turn over the legislative process to a criminal financial cartel!<br />
<br />
As <i>Times'</i> journalists Eric Lipton and Ben Protess reported, "Citigroup's recommendations were reflected in more than 70 lines of the House committee's 85-line bill. Two crucial paragraphs, prepared by Citigroup in conjunction with other Wall Street banks, were copied nearly word for word. (Lawmakers changed two words to make them plural.)"<br />
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Proving yet again, that Washington lawmakers are beholden to their Wall Street masters, <a href="http://maplight.org/">MapLight</a>, a nonpartisan research group that "reveals money's influence on politics in the US Congress," <a href="http://maplight.org/content/73256">disclosed</a> that legislators "serving" on the House Financial Services Committee "approved six bills that would roll back pieces of the Dodd-Frank Act designed to improve regulation of the derivatives market."<br />
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Lawmakers who voted "yes" on <a href="http://www.govtrack.us/congress/bills/113/hr992/text">HR 992</a>, the Orwellian-named Swaps Regulatory Improvement Act, "received, on average, 2.6 times more money from top banks than committee members" who voted "no." MapLight further disclosed that lawmakers who voted "yes" on this pernicious piece of legislative detritus "received, on average, 3 times more money from the Finance, Insurance, and Real Estate (FIRE) sector," than committee members who voted "no."<br />
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The $700 trillion derivatives market, 93.2 percent of which is controlled by the four largest too-big-to-fail-and-jail US banks, Bank of America, Goldman Sachs, JPMorgan Chase and Citigroup, is a cash cow and shadow market for crooked financial insiders. HR 992, which rolled-back a key provision of 2010's anemic Dodd-Frank financial "reform" legislation, Sec. 716, would have required banks to spin off their derivatives activities into separate units that would not have access to federal bank subsidies, i.e., taxpayer bailouts.<br />
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"In recent weeks, the <i>Times</i> reported, "Wall Street groups also held fund-raisers for lawmakers who co-sponsored the bills. At one dinner Wednesday night, corporate executives and lobbyists paid up to $2,500 to dine in a private room of a Greek restaurant just blocks from the Capitol with Representative Sean Patrick Maloney, Democrat of New York, a co-sponsor of the bill championed by Citigroup."<br />
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Responding to questions, Financial Services Committee member Jim Himes, a former Goldman Sachs banker, third-term Connecticut Democrat and one of the top recipients of Wall Street largess to the tune of $194,500 according to <a href="https://www.opensecrets.org/politicians/summary.php?cid=N00029070&cycle=2012">OpenSecrets</a> told the <i>Times</i>: "It's appalling, it's disgusting, it's wasteful and it opens the possibility of conflicts of interest and corruption. It's unfortunately the world we live in."<br />
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No Mr. Himes, it's the world <i>you</i> live in.<br />
<br />
While your colleague across the aisle, Stephen Fincher (R-TN), cites Bible verses to justify gutting federal nutritional assistance to 47 million hungry Americans while being the "the second largest recipient of farm subsidies in the United States Congress" according to <i><a href="http://www.forbes.com/sites/rickungar/2013/05/22/gop-congressman-stephen-fincher-on-a-mission-from-god-starve-the-poor-while-personally-pocketing-millions-in-farm-subsidies/">Forbes</a></i>, and received some $3.48 million (£2.3m) since 1999 in USDA farm subsidies while doing the "Lord's work" according to the <a href="http://www.ewg.org/agmag/2013/05/fincher-stole-food-stamps#.UZuNCBIGM-M.twitter">Environmental Working Group</a>, the US Congress, including "liberal" Obama Democrats have promoted every filthy piece of legislation that facilitates Wall Street's plundering of the American people.<br />
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Referencing the recent vote on HR 992, the Center for Responsive Politics <a href="https://www.opensecrets.org/news/2013/05/wall-street-shaped-regulatory-refor.html">reported</a> that in the first quarter of 2013, members of the Financial Services Committee "received more than $1.3 million in donations to their campaigns and leadership PACs from the securities and investment industry and commercial banks."<br />
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According to OpenSecrets, "By far the largest source of cash from the two industries was the <a href="https://www.opensecrets.org/orgs/summary.php?id=D000000262">Investment Company Institute</a>, a trade association representing Wall Street firms. The ICI gave at least $129,000 to members of the House Financial Services Committee. Other trade groups representing banks and investment firms, including the <a href="https://www.opensecrets.org/orgs/summary.php?id=D000000087">American Bankers Association</a> and the <a href="https://www.opensecrets.org/orgs/summary.php?id=D000000261">Independent Community Bankers of America</a>, were also major contributors."<br />
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OpenSecrets reported that "Banking industry companies increased their contributions in 2013 to $640,286, from $497,169 in early 2011. Citigroup, in particular, jumped from $19,500 in donations to committee members to $39,500. UBS went from $64,250 to $88,000. Wells Fargo also opened its checkbook a little wider this year, giving $80,000, compared with $31,250 in 2011."<br />
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Commenting on this latest gift to Wall Street criminals, the <i><a href="https://www.wsws.org/en/articles/2013/05/25/pers-m25.html">World Socialist Web Site</a></i> observed: "Flush with the $85 billion in cash printed up and handed to the banks every month by the Federal Reserve, business at the Wall Street casino is booming. Stock values are at record levels and so are bank profits, amidst declining wages and mass poverty."<br />
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"Under these conditions," Marxist critic Andre Damon averred, "the banks have been pushing to rip up even the very modest restrictions on financial speculation, while broadening the scope of government bailout laws. The aim is simple: to give banks the maximum ability to speculate without constraint, while getting the maximum possible government assistance if and when the bubble collapses."<br />
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None of this should surprise anyone who has paid the least attention to the cronyism and financial parasitism of the Obama regime.<br />
<br />
From get-out-of-jail-free-cards passed out to drug money laundering banks by Eric Holder's Justice Department, to the appointments of Citigroup alumnus and <a href="http://wallstreetonparade.com/2013/02/democrats-disgrace-themselves-with-jack-lew-confirmation-for-treasury-secretary/">Cayman Islands tax-dodger</a> Jacob Lew as Treasury Secretary, Debevoise & Plimpton partner <a href="http://antifascist-calling.blogspot.com/2013/03/obamas-new-sec-sheriff-no-conflict-of.html">Mary Jo White</a> over at the Securities and Exchange Commission to the nomination of billionaire Hyatt Hotel heiress, <a href="http://www.consortiumnews.com/2008/022708a.html">subprime mortgage "pioneer"</a> and union-buster <a href="http://www.counterpunch.org/2013/05/03/the-privilege-of-the-pritzkers/">Penny Pritzker</a> to lead the Commerce Department, it's a bankster world, all the time.<br />
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How's <i>that</i> for Hope and Change™!Antifascisthttp://www.blogger.com/profile/05421707682211445550noreply@blogger.com0tag:blogger.com,1999:blog-1831516114336983238.post-11278515024220756822013-05-19T10:30:00.000-07:002013-05-19T10:30:04.347-07:00New Sleaze Allegations Tarnish JPMorgan Chase's 'Teflon Don'<a href="http://4.bp.blogspot.com/-teQ9rOy4j0Q/UY_lG0Jj76I/AAAAAAAAAV8/zyR21xLoOk8/s1600/jdcapone0.jpg" imageanchor="1" ><img border="0" src="http://4.bp.blogspot.com/-teQ9rOy4j0Q/UY_lG0Jj76I/AAAAAAAAAV8/zyR21xLoOk8/s320/jdcapone0.jpg" /></a><br />
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While Barack Obama's "favorite banker" continues to receive the royal treatment in Washington, new sleaze allegations threaten to further tarnish the golden boy image of "teflon don" Jamie Dimon, the CEO and Chairman of JPMorgan Chase.<br />
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Wearing multiple hats, Dimon is the Chairman of <a href="http://www.thebusinesscouncil.org/about/">The Business Council</a>, a long-time member of the <a href="http://www.cfr.org/about/membership/roster.html?letter=D">Council on Foreign Relations</a>, <a href="http://www.trilateral.org/">The Trilateral Commission</a>, a "Class A" Director of the New York Federal Reserve and Advisory Board member of the <a href="http://www.whitehouse.gov/administration/advisory-boards/jobs-council/about">President's Council on Jobs and Competitiveness</a>, that is, until the Council was foreclosed on earlier this year.<br />
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It doesn't hurt that JPM's embattled <i>capo di tutti capi</i> is also a leading light and Executive Committee member of <a href="http://businessroundtable.org/">The Business Roundtable</a>, a corporatist "association of chief executive officers of leading U.S. companies with more than $7.3 trillion in annual revenues and nearly 16 million employees."<br />
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As they say on the street, Dimon has <i>juice</i>.<br />
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So much in fact, that when he and Brian Moynihan, the CEO of the Bank of America, and other members of the <a href="http://www.financialservicesforum.org/">Financial Services Forum</a>, a benighted cabal chaired by Goldman Sachs CEO Lloyd Blankfein and comprised of serial financial predators such as Deutsche Bank, AIG, Citigroup, Credit Suisse, UBS, HSBC, Morgan Stanley and Wells Fargo, met with Obama at the White House for April discussions, the press was barred.<br />
<br />
As investigative journalist Pam Martens reported in <i><a href="http://wallstreetonparade.com/2013/04/wall-street-journal-de-links-headline-that-jamie-dimon-will-meet-the-president-at-the-white-house-today/">Wall Street On Parade</a></i> at the time, "The Financial Services Forum is a lobby group composed of 19 CEOs of the too-big-to-fail banks, both U.S. and foreign. . . . The Forum is not bashful about its lobbying agenda. According to the lobby disclosure document it filed with the Senate last year, it doesn't believe big banks should be broken up: 'The Forum opposes legislation to preemptively dismantle or limit the activities of well-capitalized and well-managed financial institutions, haircuts on secured creditors to financial institutions in the course of a resolution, and punitive taxes or levies on financial institutions'."<br />
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One result of that April White House meeting may be watered-down rules adopted by the Commodity Futures Trading Commission (CFTC) last week over domination by too-big-to-fail-and-jail banks of the $700 trillion (£461.4tn) global derivatives markets.<br />
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As <i><a href="http://www.reuters.com/article/2013/05/16/us-derivatives-trading-idUSBRE94F1AK20130516">Reuters</a></i> reported, the new rules are a "compromise" that will leave regulators "fewer tools in hand to rein in the opaque derivatives trading between two parties that was among the causes of the 2007-2009 credit meltdown."<br />
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Allegedly "designed to make trading less opaque as part of the Dodd-Frank law overhauling Wall Street practices," the rules are "an important nod to an industry dominated by big banks, such as Citigroup Inc, Bank of America Corp and JPMorgan Chase & Co, the CFTC lowered the number of quotes clients need to collect from banks."<br />
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Indeed, the deeply-flawed, Wall Street-friendly Dodd-Frank legislation <i>had</i> a provision that would have made bidding on derivatives contracts public but it was left to CFTC to iron out the details. Well, we see where that went. CFTC's Chairman Gary Gensler, caving to pressure by lobbyists had already compromised on moves to make those trades public; hence his proposal to require at least five banks to issue price quotes on financialized garbage.<br />
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"But even that plan," <i><a href="http://dealbook.nytimes.com/2013/05/15/compromise-seen-on-derivatives-rule/">The New York Times</a></i> reported, "prompted a full-court press from Wall Street lobbyists. Banks and other groups that opposed the plan held more than 80 meetings with agency officials over the last three years, an analysis of meeting records shows. Goldman Sachs attended 19 meetings; the Securities Industry and Financial Markets Association, Wall Street's main lobbying group, was there for 11."<br />
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"The outcome was a 'massive convenience' for the largest banks," Will Rhodes, "an analyst at Tabb Group, a market structure research and consultancy firm," told <i>Reuters</i>.<br />
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"I don't think it's going to have the same impact in terms of . . . the decentralization of risk that would have occurred had there been a requirement (for five quotes) in place."<br />
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But even these weak-kneed rules were too much for the best Congress that FIRE sector money can <a href="https://www.opensecrets.org/industries/indus.php?Ind=F">buy</a>. One particularly filthy piece of legislative detritus which passed out on the House Agriculture and Financial Services Committees in March, <a href="http://www.govtrack.us/congress/bills/113/hr992/text">HR 992</a>, would allow banks to hold any kind of derivative in the same account as depositor funds, i.e., checking and savings accounts which enjoy FDIC insurance protection against bank losses.<br />
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And should one of these corrupt banks go belly up, since derivatives are senior in terms of bankruptcy pay-outs, hedge fund pirates sitting on the other side of trades with the bank would get paid back first with depositors potentially left holding the bag!<br />
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In other words, as banking analyst Ellen Brown <a href="https://webofdebt.wordpress.com/2013/04/09/winner-takes-all-the-super-priority-status-of-derivatives/">pointed out</a> last month in the wake of Cyprus' confiscation of depositor funds, when captured governments "are no longer willing to use taxpayer money to bail out banks that have gambled away their capital, the banks are now being instructed to 'recapitalize' themselves by confiscating the funds of their creditors, turning debt into equity, or stock; and the 'creditors' include the depositors who put their money in the bank thinking it was a secure place to store their savings."<br />
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"Too big to fail" now trumps all," Brown wrote. "Rather than banks being put into bankruptcy to salvage the deposits of their customers, the customers will be put into bankruptcy to save the banks."<br />
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And standing at the front of the line with his hand out is none other than Wall Street "maestro," Jamie Dimon.<br />
<br />
<b>JPM Energy Price Manipulation: History Repeats as Tragedy <i>and</i> Farce</b><br />
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The latest scandal to rock JPM concern fraudulent schemes to manipulate energy markets.<br />
<br />
Earlier this month, <i><a href="http://dealbook.nytimes.com/2013/05/02/jpmorgan-caught-in-swirl-of-regulatory-woes/">The New York Times</a></i> reported that multiple government investigations uncovered evidence that America's largest bank, with some $2.5 trillion (£1.61tn) in assets, "devised 'manipulative schemes' that transformed 'money-losing power plants into powerful profit centers,' and that one of its most senior executives gave 'false and misleading statements' under oath."<br />
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That senior executive, Blythe Masters, one of JPM's "smartest gals in the room" who helped develop "credit default swaps, a derivative that played a role in the financial crisis," that is, blow up the global capitalist economy, was accused by the Federal Energy Regulatory Commission (FERC) in a 70-page document cited by the <i>Times</i>, for her "'knowledge and approval of schemes' carried out by a group of energy traders in Houston" to manipulate energy prices in the "California and Michigan electric markets."<br />
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"The agency's investigators claimed," the <i>Times</i> disclosed, "that Ms. Masters had 'falsely' denied under oath her awareness of the problems and said that JPMorgan had made 'scores of false and misleading statements and material omissions' to authorities, the document shows."<br />
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In other words, Masters may have committed perjury, a jailable offense.<br />
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The FERC investigation was triggered by charges last year by the California Independent System Operator, a nonprofit run by California's state government, which estimated that "JPMorgan may have gamed the state's power market," resulting in tens of millions of dollars in "improper payments" in 2010 and 2011. "But that could be just the tip of the iceberg," the <i><a href="http://articles.latimes.com/2012/jul/18/business/la-fi-hiltzik-20120718">Los Angeles Times</a></i> reported last summer.<br />
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According to the <i>LA Times</i>, "The bank continued its activities past that time frame, according to the ISO. It also says JPMorgan's alleged manipulation could have helped throw the entire energy market out of whack, imposing what could be incalculable costs on ratepayers."<br />
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Though suspended from energy trading in California," <i><a href="http://washpost.bloomberg.com/Story?docId=1376-MMLMLG6S972D01-0AKO1099793HPTIP2C6I17AER6">Bloomberg</a></i> reported that JPM "may be evading the ban through swap agreements with EDF Group and Cargill Inc. subsidiaries, the state's grid operator said."<br />
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According to <i>Bloomberg</i>, Cal ISO said in a recent filing with FERC that JPM may be using "using swap contracts to secure a portion of the profit stream from a unit, while masking the identity of a party that has some level of control over the bidding."<br />
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Through its contracts with EDF and Cargill, "JPMorgan could be bringing in profits during its suspension 'beyond those contemplated' by FERC in its order, Cal ISO said. The operator recommended broad changes that would capture any situation in which 'a market participant structured transactions to evade its suspension of market-based rate authority'."<br />
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If any of this sounds familiar, it should. "What's worse," the <i>Los Angeles Times</i> reported, "it shows that we haven't learned anything from Enron's bogus energy trading, the disclosure of which helped destroy that firm in 2001 and land several of its executives in jail."<br />
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According to reporter Michael Hiltzik, "To the extent it was designed to exploit loopholes in energy trading rules, experts say, the scheme allegedly perpetrated by JPMorgan Ventures Energy Corp. is cut from the same cloth as Enron's infamous 'fat boy' swindle, which cost the state's ratepayers an estimated $1.4 billion in 2000."<br />
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Indeed, during the Securities and Exchange Commission's 2003 <a href="https://www.sec.gov/litigation/litreleases/lr18252.htm">investigation</a> into JPM's collusion with Enron, federal regulators charged Chase with "aiding and abetting Enron Corp.'s securities fraud."<br />
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At the time, the SEC said that "J.P. Morgan Chase aided and abetted Enron's manipulation of its reported financial results through a series of complex structured finance transactions, called 'prepays,' over a period of several years preceding Enron's bankruptcy."<br />
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Those fraudulent transactions were exploited by Enron officers led by "Bush Ranger," Chairman Kenneth "Kenny Boy" Lay, CEO Jeffrey Skilling and CFO Andrew Fastow, "to report loans from J.P. Morgan Chase as cash from operating activities. The structural complexity of these transactions <i>had no business purpose</i> aside from masking the fact that, in substance, they were loans from J.P. Morgan Chase to Enron. Between December 1997 and September 2001, J.P. Morgan Chase effectively loaned Enron a total of approximately $2.6 billion in the form of seven such transactions." (emphasis added)<br />
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But as a Florida airline executive once told investigative journalist <a href="http://www.madcowprod.com/">Daniel Hopsicker</a> during his probe into the 9/11 attacks: "Sometimes when things don't make business sense, its because they <i>do</i> make sense . . . <i>just in some other way</i>."<br />
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According to the SEC complaint, "the critical difference in the J.P. Morgan Chase/Enron prepays--and the reason that these transactions were in substance loans--was that they employed a structure that passed the counter-party commodity price risk back to Enron, thus eliminating all commodity risk from the transaction."<br />
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In other words, this was a classic example of what criminologist William K. Black describes as an "accounting control fraud." Under such schemes, a firm's chief operating officers are the recipients of massive corporate bonuses as they loot their own companies. As became evident during Enron's collapse, as well as during the 2007-2008 financial meltdown, Enron executives manipulated company books as fraudulently reported income drove share prices higher, which enriched those at the top through inflated asset values, while simultaneously disappearing liabilities, which were hidden from shareholders and Enron employees.<br />
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In the wake of Enron's collapse, shareholders lost $74 billion (£48.78bn), $45 billion (£29.66bn) of which was attributed to fraud, and the firm's 20,000 employees lost more than $2 billion (£1.32bn) from looted pension funds.<br />
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SEC investigators found that the JPM-Enron fraud was "accomplished through a series of simultaneous trades whereby Enron passed the counter-party commodity price risk to a J.P. Morgan Chase-sponsored special purpose vehicle called Mahonia, which passed the risk to J.P. Morgan Chase, which, in turn, passed the risk back to Enron."<br />
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The complaint charged that JPM's "Mahonia was included in the structure solely to effectuate Enron's accounting and financial reporting objectives. Enron told J.P. Morgan Chase that Enron needed Mahonia in the transactions for Enron's accounting. Mahonia was controlled by Chase and was directed by Chase to participate in the transactions ostensibly as a separate, independent, commodities-trading entity. As the complaint further alleges, in order to facilitate Enron's accounting objectives, J.P. Morgan Chase took various steps to make it appear that Mahonia was an independent third party."<br />
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Any future obligation assumed by Enron "were reduced to the repayment of cash it received from J.P. Morgan Chase with negotiated interest. The interest was calculated with reference to," wait for it, "LIBOR." (!)<br />
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"Since all price risk and, in certain transactions, even the obligation to transport a commodity were eliminated, the only risk in the transactions was Chase's risk that Enron would not make its payments when due, i.e., credit risk. In short, the complaint alleges, these seven prepays were in substance loans."<br />
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What penalties were extracted from JPM by the SEC for helping design Enron's massive fraud? A measly $120 million; in other words, chump change.<br />
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"Adopting eight different 'schemes' between September 2010 and June 2011," <i>The New York Times</i> reported, "the traders offered the energy at prices 'calculated to falsely appear attractive' to state energy authorities. The effort prompted authorities in California and Michigan to dole out about $83 million in 'excessive' payments to JPMorgan, the investigators said. The behavior had 'harmful effects' on the markets, according to the document."<br />
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As a result of fraudulent "schemes," designed solely to "generate large profits" at the expense of consumers in California and Michigan, FERC "enforcement officials plan to recommend that the commission hold the traders and Ms. Masters 'individually liable.' While Ms. Masters was 'less involved in the day-to-day decisions,' investigators nonetheless noted that she received PowerPoint presentations and e-mails outlining the energy trading strategies."<br />
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Plausible deniability aside, it appears that Masters was up to her eyeballs in the grift and "'planned and executed a systematic cover-up' of documents that exposed the strategy, including profit and loss statements," the <i>Times</i> averred.<br />
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Citing regulators' complaints that their investigation was "obstructed" by Masters and her cohorts, when "state authorities began to object to the strategy, Ms. Masters 'personally participated in JPMorgan's efforts to block' the state authorities 'from understanding the reasons behind JPMorgan’s bidding schemes,' the document said."<br />
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Referencing an April 2011 email, "Masters ordered a 'rewrite' of an internal document that raised questions about whether the bank had run afoul of the law. The new wording stated that 'JPMorgan does not believe that it violated FERC's policies'."<br />
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Will history repeat? You bet it will! Even if FERC were to levy a maximum penalty of $1 million per day for violating the rules, "the $180-million bill would be a pittance compared with the $14 billion in revenue collected annually by JPMorgan's investment banking arm, which houses the energy trading," the <i>Los Angeles Times</i> reported.<br />
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Talk about a sweet deal!<br />
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<b>A Criminal Enterprise</b><br />
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Coming on the heels of a scathing 307-page Senate <a href="http://online.wsj.com/public/resources/documents/JPMWhalePSI.pdf">report</a> released by the Permanent Subcommittee on Investigations in March, which provided details of the scandalous actions by senior officers as they covered-up bank overexposure in the synthetic credit derivatives market along with a mammoth $6.2 billion (£3.98bn) loss for investors, and a toothless <a href="http://www.occ.gov/news-issuances/news-releases/2013/nr-occ-2013-8a.pdf">Consent Order</a> by the Office of the Comptroller of the Currency over allegations of JPM drug money laundering, the question is: Why hasn't Jamie Dimon <i>already</i> landed in the dock?<br />
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Leaving aside the criminal behavior of US Attorney General Eric Holder, adept at prosecuting national security whistleblowers and seizing the phone records of Associated Press reporters through the mechanism of an administrative subpoena, i.e., solely on the say-so of the Justice Department and the FBI, when it comes to prosecuting corporate criminals, including those who collude with transnational drug cartels, The Most Transparent Administration Ever™ has surpassed the deceitful practices of the Bush regime.<br />
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No where is this more apparent than with the non-prosecution of criminogenic banks.<br />
<br />
A withering 45-page report authored by GrahamFisher analyst Joshua Rosner, <i><a href="http://www.scribd.com/doc/130291230/GF-Co-JPM-Out-of-Control">JPMorgan Chase: Out of Control</a></i>, paints the organization as a criminal enterprise. According to Rosner: "Even without the inclusion" of some $16 billion [£10.41bn] in "litigation expenses" arising from JPM's foreclosure scandals, "since 2009, the Company has paid more than $8.5 billion [£5.53bn] in settlements for the various regulatory and legal problems discussed in this report. These settlement costs, which include a small number of recent settlements of older issues, represent almost 12% of the net income generated between 2009-2012."<br />
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Amongst the patently illegal schemes hatched by JPM detailed in Rosner's report we find the following:<br />
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● Bank Secrecy Act violations<br />
● Money laundering for drug cartels<br />
● Sanctions busting<br />
● Violations of the Commodities Exchange Act<br />
● The execution of fictitious trades where the customer, with JPM's full knowledge, is on both sides of the deal<br />
● SEC enforcement actions relating to CDO and RMBS misrepresentations<br />
● Foreclosure fraud and abuse<br />
● Failure to properly segregate customer funds and then failing to report it<br />
● Consumer abuses related to check overdraft penalties<br />
● Violations of NY State's ERISA Act, the result of JPM investments in failing structured investment vehicles (SIVs)<br />
● Credit card collection practices, "eerily similar" to JPM's foreclosure abuses<br />
● Violations of the Servicemembers Civil Relief Act; i.e., illegally foreclosing on the homes of soldiers, including those stationed in Afghanistan and Iraq<br />
● Illegal flood insurance commissions<br />
● Municipal bond market manipulation, including $8 million in bribes paid to "close friends" of Jefferson County, Alabama commissioners for sewer system bonds that eventually bankrupted the county<br />
● Violation of the Sherman Antitrust Act related to bid rigging and payments associated with "seeing competitors' bids in 93 municipal bond deals"<br />
● Repeated obstruction and refusal to hand over documents to the OCC related to their investigation of JPM's role in the Madoff fraud<br />
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Will any of this change? It's doubtful.<br />
<br />
Rosner writes: "JPM appears to have taken a page out of the Fannie Mae playbook in which the company perfected the art of cozying up to elected officials, dominating trade associations, employing political heavyweights and their former staffers and creating the image of American Flag-waving, apple-pie-eating, good corporate-citizen, all of which supported an 'implied government guarantee' and seemingly lowered their cost of funding. Additionally, rather than being driven by the strength of its operations and management, many of the JPM's returns appear to be supported by an implied guarantee it receives as a too-big-to-fail institution."<br />
<br />
In other words, as with other well-connected "Families" that come to mind, "too-big-to-fail-and-jail" is bankster code for "we can do whatever the fuck we want."Antifascisthttp://www.blogger.com/profile/05421707682211445550noreply@blogger.com2tag:blogger.com,1999:blog-1831516114336983238.post-84468906469816546832013-04-28T11:51:00.000-07:002013-04-28T11:51:13.562-07:00In the Wake of Last Year's 'Soft Coup' Against Paraguay's President, Will a New Narco-Dictatorship Emerge?<a href="http://2.bp.blogspot.com/-WfFFFVBFRuE/UXwSsZekR1I/AAAAAAAAAVo/P3_Td7mwLIA/s1600/photo1A.jpg" imageanchor="1" ><img border="0" src="http://2.bp.blogspot.com/-WfFFFVBFRuE/UXwSsZekR1I/AAAAAAAAAVo/P3_Td7mwLIA/s320/photo1A.jpg" /></a><br />
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Paraguay's April 21 election of Horacio Cartes, a dodgy "tobacco magnate," rancher and banker, whose Banco Amambay has been accused of laundering drug money, tax evasion and other crimes, raises the specter of "state capture" by powerful drug cartels linked to US intelligence agencies.<br />
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In the context of US efforts to <i>manage</i> not <i>eliminate</i>, the multibillion dollar global trade in illegal narcotics, Cartes electoral victory might very well be a shot in the arm for certain three-lettered US intelligence agencies, eager beavers always on the lookout for new allies--and an endless supply of black funds--to carry out hemisphere-wide dirty ops against leftist governments. The current US <a href="http://venezuelanalysis.com/analysis/8813">destabilization campaign</a> targeting Venezuela's newly elected president, Nicolás Maduro and the Bolivarian revolution, is instructive in this regard.<br />
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A key factor driving US regional operations is control over the narcotics market. As researchers Oliver Villar and Drew Cottle revealed in <i><a href="http://monthlyreview.org/press/books/pb2518/">Cocaine, Death Squads and the war on Terror</a></i>: "Paraguay was the first country in Latin America to be publicly exposed for its involvement in the drug trade. Paraguay in the early 1970s was a vital center for the Corsican mafia, leading to the development of a vast heroin-trafficking network supplied from Turkey, and based in Marseille, the infamous 'French Connection.' Corsicans coordinated the transport of heroin from Marseille to the United States via Paraguay. The CIA," Villar and Cottle averred, "used such networks as transit stops in transporting Asian heroin to the United States with the help of corrupt high-ranking government and military officials."<br />
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"Later," journalist Vicky Pelaez disclosed in <i><a href="http://themoscownews.com/international/20130423/191464600-print/Paraguay-Narcodemocracy-and-presidential-elections.html">The Moscow News</a></i>, "cocaine trafficking was added. It was transported through Chaco's wild and rough terrain. Chaco is a vast, semi-arid and semi-humid region in western Paraguay, where there are at least 900 covert airplane runways and where between 60 and 70 tons of cocaine circulate annually, according to former Interior Minister Carlos Filizzola."<br />
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"Curiously," Pelaez averred, "there are two US bases in that region. One is located in the city of Pedro Juan Caballero, in the Amambay province, and is operated by the Drug Enforcement Agency (DEA). The other, run by the Pentagon, is part of the Mariscal Estigarribia airport, in the Boquerón province, and boasts a 3,800-meter long runway."<br />
<br />
When Fernando Lugo was removed from office last year after an expedited impeachment "trial" by Paraguay's Senate, it was widely denounced across Latin American as a parliamentary coup d'état which had more than a passing resemblance to the 2009 ouster of Honduran President Manuel Zelaya.<br />
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And like the Honduran coup against Zelaya, the <i><a href="https://www.wsws.org/en/articles/2012/07/pers-j03.html">World Socialist Web Site</a></i> pointed out that "both countries have been the focus of attention of the US military and intelligence apparatus, which shares intimate connections with its local counterparts. Security forces in both countries have been trained and advised by the Pentagon and would not support the overthrow of an existing government without its approval."<br />
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Elected in 2008, Lugo, a former Catholic bishop and proponent of Liberation Theology, promised to combat Paraguay's endemic corruption and implement policies favoring a "preferential option for the poor." Lugo however, was no Hugo Chávez, Evo Morales or Rafael Correa, populist leaders who defied the Global Godfather by charting an independent course.<br />
<br />
Despite a mildly reformist agenda which increased access to healthcare and education for Paraguay's working class majority, when it came to the key issue of land reform Lugo's administration hit a brick wall.<br />
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Shortly after assuming office, Lugo became the target of that nation's entrenched landed oligarchy, multinational agricultural corporations (including such paragons of virtue as Monsanto, Pioneer, Syngenta, Dupont, Cargill, Archer Daniels Midland, and Bunge) and the transnational drug cartels which continue to rule Paraguay with an iron fist much as they did under the 35-year dictatorship of Alfredo Stroessner.<br />
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Paraguay, a landlocked nation in which 2 percent of the population control more than 80 percent of the landed wealth, most of which had been expropriated by the kleptocratic Stroessner regime and handed out to favored cronies of his Colorado party, agrarian reform should have topped Lugo's agenda.<br />
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As <i>The Moscow News</i> pointed out, "Monsanto was naturally involved in the conspiracy. The world's largest producer of genetically modified crops disapproved of Lugo's idea to abolish the per-ton royalty of $4 on soybeans, to be paid by growers using Roundup Ready RR1 and Intenta RR2 Pro seeds. Recall that on his fifth day in office, the new president, Federico Franco, offered new concessions to Monsanto concerning the distribution of its GM cotton, soybean and corn seeds in Paraguay."<br />
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According to Pelaez, "Over the past ten months, unofficial employment has soared to 66% (this proportion is higher only in Peru (67%) and in Haiti (92%)). The bulk of the shadow labor market is formed by farmers pushed off the fields by such groups as Monsanto and Cargill, which use biotechnology to industrialize agricultural production and convert farmland into a contaminated 'green desert,' slowly but surely implanting a system of 'farming without farmers'."<br />
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Blocked at every step, and relying on the right's largesse to remain in office, Lugo's betrayal of the campesino base that put him in office and his retreat and capitulation to Paraguay's elite doomed his administration.<br />
<br />
In fact, as journalist and researcher Benjamin Dangl reported in <i><a href="http://upsidedownworld.org/main/paraguay-archives-44/3758-a-coup-over-land-the-resource-war-behind-paraguays-crisis">UpSideDownWorld</a></i> last year, "Lugo was no friend of the campesino sector that helped bring him into power. His administration regularly called for the severe repression and criminalization of the country's campesino movements. He was therefore isolated from above at the political level, and lacked a strong political base below due to his stance toward social movements and the slow pace of land reform."<br />
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Using a police provocation and subsequent massacre of 11 landless farmers who had occupied land belonging to ex-Colorado Senator Blas Riquelme, illegally seized by the Stroessner regime as a pretext, the Chamber of Deputies launched proceedings to remove Lugo from office. Scarcely 24 hours later, the Senate voted to impeach the president. Who was leading the charge for Lugo's removal? Why none other than the Colorado Party's declared candidate for the presidency, then-Senator Horacio Cartes. <br />
<br />
But the final straw may have been the decision by Lugo's administration three years earlier, to cut off access to the country by the US military. By 2007, the Pentagon had deployed some 400 Marines under the guise of "medical readiness training" exercises that were denounced by grassroots activists as a ploy to identify "dangerous" rural leaders of the landless movement. At the same time, the Pentagon was planning to expand US operations at the giant Mariscal Estigarribia air base, 120 miles from the Argentine and Bolivian borders.<br />
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Journalist Conn Hallinan <a href="http://www.fpif.org/articles/dark_armies_secret_bases_and_rummy_oh_my">reported</a> back in 2005, "US Special Forces began arriving this past summer at Paraguay's Mariscal Estigarribia air base, a sprawling complex built in 1982 during the reign of dictator Alfredo Stroessner. Argentinean journalists who got a peek at the place say the airfield can handle B-52 bombers and Galaxy C-5 cargo planes. It also has a huge radar system, vast hangers, and can house up to 16,000 troops. The air base is larger than the international airport at the capital city, Asunción."<br />
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During a 2009 press conference, Lugo rejected further US troop deployments under the Bush-era "New Horizons" program. In a decision that greatly angered Washington, Lugo remarked, "we don't see it as convenient that the Southern Command has a presence in Paraguay."<br />
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Coming on the heels of Ecuador's 2009 closure of the giant US airbase at Manta, of which Ecuadorean president Rafael Correa famously said: "We can negotiate with the US about a base in Manta, if they let us put a military base in Miami," the Pentagon and CIA looked to Paraguay for a platform for what Southern Command described as "counternarcotics surveillance," but which regional neighbors denounced as a threat to hemispheric security.<br />
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Ominously, the US ambassador in Asunción, Liliana Ayalde declared: "It's a regrettable decision."<br />
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Indeed it was, for Lugo and the Paraguayan people.<br />
<br />
<b>The (Narco) Ties that Bind</b><br />
<br />
In their relentless drive to accumulate riches at the expense of their citizens, comprador elites, particularly those who mix land grabs, far-right politics with currying favor from their imperialist overlords, utilize state institutions as cash cows.<br />
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And when those elites are also plugged into the international narcotics trade and control the state's machinery of repression, well, it's a win-win all around!<br />
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Who would imagine that a central banker would have ties to criminals and narcotraffickers? Why, the US Embassy that's who!<br />
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A 2007 Cable Gate file published by <a href="http://wikileaks.org/cable/2007/08/07ASUNCION714.html">WikiLeaks</a> noted that former Central Bank president Dr. Angel Gabriel González Cáceres, "a strong Colorado with close ties to [former] President Duarte, who appointed him Central Bank president in September 2003," was named "Paraguay's new director of SEPRELAD, the Secretariat for the Prevention of Money Laundering," and that reviews of his previous performance were "quite mixed."<br />
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Variously described by the Embassy as "a technician with a long trajectory at the Central Bank who has cooperated with the Embassy on money laundering and terrorist financing," as Banking Superintendent however, González "opposed creation of SEPRELAD because he wanted the Central Bank to retain responsibility for fighting money laundering."<br />
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But perhaps there were other factors, and interests, at work?<br />
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According to Asunción Deputy Chief of Mission Michael J. Fitzpatrick, Paraguay's counternarcotics director Hugo Ibarra would have "nothing to do with" González. The counternarcotics chief then "volunteered that González had a direct personal role as Central Bank president in white-washing ('blanquear') funds for so-called pillar of the community Horacio Cartes and his Banco Amambay, noting that 80 percent of money laundering in Paraguay moves through that banking institution."<br />
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"Ibarra indicated," Embassy officials averred, "that González is still involved with Amambay, and questioned why a former Central Bank president would take a lower level position as SEPRELAD director--managing an office with less than a dozen employees--in the absence of some other financial incentive."<br />
<br />
Certainly a relevant question; however, no answers were forthcoming.<br />
<br />
In 2008, another <a href="http://wikileaks.org/cable/2008/09/08ASUNCION624.html">WikiLeaks</a> file disclosed that shortly after assuming office, Lugo informed the US Embassy of his interest "in closer counternarcotics cooperation with the United States and requested U.S. assistance with microenterprise development during a Friday, August 29 dinner with the Ambassador."<br />
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Significantly, "Lugo made clear that he does not trust some of his closest advisors or cabinet ministers. During dinner, which took place before the weekend rumors emerged regarding coup planning, Lugo told Ambassador about a tape recording of former President Duarte and General Lino Oviedo betting that Lugo will last only three to eight months in office."<br />
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A 2009 secret <a href="http://wikileaks.org/cable/2009/03/09ASUNCION189.html">WikiLeaks</a> file, "Paraguayan Pols Plot Paraguayan Putsch," noted that "discredited General and UNACE party leader Lino Oviedo and ex-president Nicanor Duarte Frutos are now working together to assume power via (mostly) legal means should President Lugo stumble in coming months."<br />
<br />
Oviedo, "serving time for involvement in the 1999 assassination of Vice President Luis Argana and the subsequent Marzo Paraguayo massacre of unarmed student protesters," the Embassy noted it was Duarte "who used his control of the Supreme Court to free Oviedo from jail" in 2007.<br />
<br />
A 2003 CIA report published by the <a href="http://loc.gov/rr/frd/pdf-files/TerrOrgCrime_TBA.pdf">Library of Congress</a> informed us that "Brazilian and U.S. officials generally consider former General Lino César Oviedo to be head of the so-called Paraguay Cartel. He reportedly has amassed at least US$1 billion, including numerous properties in the TBA [Tri Border Area]."<br />
<br />
The Argentine investigative news magazine <i><a href="http://www.pagina12.com.ar/2001/suple/carrio/cap11.pdf">Página/12</a></i> published a 2001 Argentine Chamber of Deputies report on money laundering which noted that according to Brazilian officials, the US Embassy and the DEA, Oviedo was involved with "drug trafficking (cocaine and marijuana), weapons, money laundering and the smuggling of various items."<br />
<br />
In 1994 for example, a "load of seven tons of cocaine, worth $70 million, which was seized with the participation of the CIA, and destined for the USA," was linked to Oviedo and his employees. Later that year, according to DEA documents, another load of five tons of cocaine was seized from "Oviedo accomplices" attempting to smuggle it across the Paraguayan border.<br />
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The Chamber of Deputies report concluded: "Oviedo is accused of being the head of a drug trafficking, arms trafficking [cartel] and being involved in the murder of media entrepreneur Carlos Honorio Cubillas and Paraguayan Vice President Argana. The various charges against him made by the DEA were, by former U.S. Ambassador to Paraguay and the Brazilian CPI."<br />
<br />
As noted above, in 2007, Oviedo's conviction for orchestrating an attempted military coup in 1996 was annulled by Paraguay's Supreme Court. Again a candidate for the presidency in 2013, nominated by the ironically named National Union of Ethical Citizens (Unión Nacional de Ciudadanos Éticos, UNACE), Oviedo died in a "helicopter accident" after a campaign appearance in February, clearing the path to power for Horacio Cartes.<br />
<br />
<b>The Cartel: Back in Power</b><br />
<br />
Last Sunday in an unusually critical article, <i><a href="http://www.nytimes.com/2013/04/22/world/americas/horacio-cartes-wins-paraguays-presidential-election.html">The New York Times</a></i> reported that during the campaign, Cartes "was pressed to explain why antinarcotics police officers apprehended a plane carrying cocaine and marijuana on his ranch in 2000; why he went to prison in 1989 on currency fraud charges; and why he had never even voted in past general elections."<br />
<br />
Good questions, all of which were dismissed by Cartes' top aides as "conspiracy theories" and "slander."<br />
<br />
The most serious charges involve Cartes connection to drug trafficking, money laundering and the smuggling of contraband cigarettes.<br />
<br />
Another <a href="http://wikileaks.org/cable/2010/01/10BUENOSAIRES5.html">WikiLeaks</a> file, this one from 2010, informed us that a joint that a joint ATF-DEA-ICE-OFAC US anti-money laundering investigation dubbed "Heart of Stone," revealed that Cartes is the head of a transnational criminal organization and the main target of the operation.<br />
<br />
"OPERATION HEART OF STONE is a coordinated, transnational investigation focused on the disruption and dismantlement of a significant drug trafficking and money laundering enterprise operating within the Tri Border Area (TBA) of Argentina, Paraguay, and Brazil, and elsewhere throughout the world. This investigation has established links between and among drug trafficking, money laundering and other criminal organizations and, as such, was approved as a designated Consolidated Priority Organizational Target (CPOT) investigation during April 2009."<br />
<br />
The WikiLeaks file averred: "The investigative team has implemented strategies and operations aimed at attacking the financial infrastructure of drug trafficking supply network (DTO's) and other criminal enterprises operating within the TBA. Using a strategic approach to target the international command and control centers of these criminal organizations based in the TBA, agents have successfully focused investigative activity in an effort to develop this investigation with an aim toward a DEA UC introduction to CPOT designee Horacio CARTES. Through the utilization of a DEA BACO cooperating source and other DEA undercover personnel, agents have infiltrated CARTES' money laundering enterprise, an organization believed to launder large quantities of United States currency generated through illegal means, including through the sale of narcotics, from the TBA to the United States."<br />
<br />
Despite the seriousness of the allegations, and others enumerated below, <i><a href="http://www.independent.co.uk/news/world/americas/horacio-cartes-millionaire-criminal-business-titanhomophobe-the-next-president-of-paraguay-8580851.html">The Independent</a></i> reported that Cartes "has publicly denied the allegations and says he has received assurances from the embassy that the US Drugs Enforcement Agency and Bureau of Alcohol, Tobacco and Firearms are conducting no investigations against him, something the cables allege."<br />
<br />
If true, this raises a disturbing question: did the DEA drop the ball or were they ordered to back away from the investigation by Obama's State Department?<br />
<br />
"'When it comes to drug trafficking, Horacio has made it clear what his position is,' says Julio Velazquez, a Colorado senator standing for re-election tomorrow."<br />
<br />
Ludicrously, Velazquez told <i>The Independent</i>: "'There's no concrete allegation against him. Horacio has investments in the US. Do you think the Americans would allow a narco to bring money into their country?'"<br />
<br />
Memo to Senator Velazquez: Not only would the Yankees "allow a narco to bring money into their country," they'd look the other way as US banksters laundered the funds and extracted hefty fees in the process!<br />
<br />
Another front in the Cartes empire involved Banco Amambay and illegal tax evasion. The International Consortium of Investigative Journalists (<a href="http://www.icij.org/offshore/bank-owned-paraguays-leading-presidential-candidate-linked-tax-haven">ICIJ</a>) reported earlier this month that "five directors of Banco Amambay created a secret bank in the Cook Islands with no building and no staff."<br />
<br />
Journalists Marina Walker Guevara and Mabel Rehnfeldt disclosed that "top officials of a Paraguayan bank owned by Horacio Manuel Cartes, the country’s leading candidate in this month's presidential election, operated a secret financial institution in a tax haven in the South Pacific."<br />
<br />
According to the ICIJ's investigation, "Cartes' father, Ramón Telmo Cartes Lind, and four other executives of Paraguay's Banco Amambay S.A. created Amambay Trust Bank Ltd. in 1995 in the Cook Islands, a tiny chain of atolls and volcanic outcroppings more than 6,000 miles away from the South American nation."<br />
<br />
"The Cook Islands bank, which was operational until 2000," the same year the Cook Islands landed on of the OECD's money laundering blacklist, "a dishonor roll for places the OECD considers havens for dirty money," was de-registered a month prior to OECD sanctions.<br />
<br />
Guevara and Rehnfeldt reported that the Cook Islands were condemned for "'excessive secrecy provisions'" that "allowed owners of offshore companies and accounts to hide in the shadows. It noted the islands' government had 'no relevant information on approximately 1,200 international companies that it had registered' and that the offshore banks located in the Cooks weren't required to document the identity of their customers."<br />
<br />
"It was not the only time that Banco Amambay and its officials made headlines for alleged money laundering, but the accusations have never resulted in convictions."<br />
<br />
"Just last month," the ICIJ averred, "the head of Paraguay's anti-money laundering agency said that the bank was being investigated alongside other financial institutions for illegal money transfers abroad. The following day the official recanted his words and said he had misspoken. Amambay denied any involvement in criminal activities."<br />
<br />
With the election of another "teflon president" accused of operating a drug trafficking and money laundering enterprise, and with powerful connections to prominent right-wing politicians suspected of decades' long ties to global narcotics rackets, the Pentagon and US secret state agencies must be salivating over the prospect of the cartel's return to power.<br />
<br />
After all, as State Department spokesperson Patrick Ventrell said during an April 22 <a href="http://www.state.gov/r/pa/prs/dpb/2013/04/207854.htm#PARAGUAY">press briefing</a> when queried about Cartes dodgy record: "The United States values its relationship with Paraguay and looks forward to working with the President-elect, with President-elect Cartes, on many of our shared interests, such as defending and promoting democracy, human rights, and the rule of law, and expanding trade and economic opportunities."<br />
<br />
When pressed about Cartes long history of criminal allegations, Ventrell didn't bat an eyelash and averred: "I'm not aware of specific allegations one way or another, but we do congratulate him on his electoral victory. And I think I just was clear about working with him going forward."<br />
<br />
And so it goes...Antifascisthttp://www.blogger.com/profile/05421707682211445550noreply@blogger.com1tag:blogger.com,1999:blog-1831516114336983238.post-89690845006741921152013-04-07T11:09:00.000-07:002013-04-07T11:09:24.504-07:00Toothless Federal Reserve 'Enforcement Action' Hands Citigroup/Banamex a Pass Over Drug Money Laundering<a href="http://3.bp.blogspot.com/-z6cI_7U5S4c/UWBvwXqXjCI/AAAAAAAAAVY/sPOE70xfRn4/s1600/DrugMoney.jpg" imageanchor="1" ><img border="0" src="http://3.bp.blogspot.com/-z6cI_7U5S4c/UWBvwXqXjCI/AAAAAAAAAVY/sPOE70xfRn4/s320/DrugMoney.jpg" /></a><br />
<br />
In October 2005, at the height of the speculative financial bubble that eventually cost taxpayers trillions of dollars and devastated millions of lives, Citigroup Equity Strategy analysts Ajay Kapur, Niall Macleod and Narendra Singh published their provocative, though accurate portrayal of bourgeois amorality, <i><a href="http://www.sourcewatch.org/images/8/86/CITIGROUP-OCTOBER-16-2005-PLUTONOMY-MEMO.pdf">Plutonomy: Buying Luxury, Explaining Global Imbalances</a></i>.<br />
<br />
According to these worthies, the egregious economic disparities between the filthy ruling rich and the rest of us revolve around the salient fact that the "world is dividing into two blocs--the plutonomies where economic growth is powered by and largely consumed by the wealthy few," and the great mass of proletarians who need to sit down, shut up and worship at the feet of their masters.<br />
<br />
To whit, their evocation of "disruptive technology-driven productivity gains, creative financial innovation, capitalist-friendly cooperative governments . . . overseas conquests invigorating wealth creation" as the engines driving capitalism's criminogenic "wealth waves . . . exploited best by the rich and educated," recalled Orwell's dystopian vision of a future which imagined "a boot stamping on a human face--forever."<br />
<br />
In a follow-up <a href="http://www.sourcewatch.org/images/b/bc/CITIGROUP-MARCH-5-2006-PLUTONOMY-MEMO_.pdf">piece</a> published in March 2006, Citi claimed that "so long as the rich continue to get richer, the likelihood of these conundrums [obscene income disparities] resolving themselves through traditionally disruptive means (currency collapses, consumer recessions etc) looks low."<br />
<br />
Indeed, "While we have concerns about the spending power of the middle-income consumer in the US in the event of a housing slowdown, the richest 10% are less exposed to a housing slowdown, as their wealth is more diversified."<br />
<br />
In other words, while Citi's "plutonomic" clients were gobbling up an ever greater share of the world's wealth, hyperinflating the real estate bubble and peddling fraudulent "investment instruments" that <i>still</i> threaten to drive the global economy into the abyss, "we believe that the rich are going to keep getting richer in coming years, as capitalists (the rich) get an even bigger share of GDP as a result, principally, of globalization."<br />
<br />
"We expect the global pool of labor in developing economies to keep wage inflation in check," they opined, "and profit margins rising--good for the wealth of capitalists, relatively bad for developed market unskilled/outsource-able labor."<br />
<br />
If you're an average worker, even one with an advanced degree and mountains of student debt, well, too bad suckers!<br />
<br />
What could go wrong with this rosy picture? "Beyond war, inflation, the end of the technology/productivity wave, and financial collapse, we think the <i>most potent and short-term threat would be societies demanding a more 'equitable' share of wealth</i>." (emphasis added)<br />
<br />
Worry not dear plutonomes, there's an app for that too in the form of militarized police deploying the latest in "less than lethal" technologies--pepper spray, tear gas, tasers and the like to keep those uppity proles at bay!<br />
<br />
Lost amidst their prattle about the merits of investing in firms which cater to the rich ("do I buy Bulgari, Burberry and Coach or do I limit my options to Hermes and Toll Brothers?" The consensus opinion: "Buy them all!"), was any discussion of the social costs of these massive frauds, bloody imperialist wars of conquest or the hyperinflation of bank balance sheets with veritable "wealth waves" generated by the global drug trade and organized crime, some "3.6 percent of GDP (2.3-5.5 percent) or around US$2.1 trillion in 2009," according to the United Nations Office on Drugs and Crime (<a href="http://www.unodoc.org/documents/data-and-analysis/Studies/Illicit_financial_flows_2011_web.pdf">UNODC</a>).<br />
<br />
There you have it, "market wisdom" in all its glory from an insolvent, bailed out bank!<br />
<br />
Handed some $45 billion (£29.78bn) in TARP funds, the Treasury Department and Federal Reserve secretly backstopped more than $300 billion (£197.31bn) in toxic assets on their books in addition to the "$2.5 trillion [£1.64tn] of support from the American taxpayer through capital infusions, asset guarantees and low-cost loans," as financial analyst Pam Martens pointed out in <i><a href="http://wallstreetonparade.com/2013/04/courts-and-regulators-keep-wall-street%E2%80%99s-dirtiest-secrets/">Wall Street on Parade</a></i>.<br />
<br />
<b>'Dark Alliance' 2.0</b><br />
<br />
Although journalists and researchers have spent decades documenting the links between secret state intelligence agencies like the CIA and organized crime conglomerates who butter their bread through global narcotics rackets, the role of major financial institutions in the grisly trade continues to be relegated by corporate media to the realm of "conspiracy theory."<br />
<br />
But in the wake of rising public anger over the Obama administration's collusion with Wall Street drug banks, we were informed by <i><a href="http://dealbook.nytimes.com/2013/03/26/federal-reserve-faults-citigroup-over-money-laundering-controls/">The New York Times</a></i> that the "Federal Reserve hit Citigroup with an enforcement action on Tuesday over breakdowns in money laundering controls that threatened to allow tainted money to move through the United States."<br />
<br />
According to the <i>Times</i>, the Federal Reserve "took aim at Citigroup and its subsidiary Banamex USA over failure to monitor cash transactions for potentially suspicious activity."<br />
<br />
The Fed's <a href="http://www.federalreserve.gov/newsevents/press/enforcement/enf20130326a1.pdf">Consent Order</a> charged that Citigroup and Banamex USA "lacked effective systems of governance and internal controls to adequately oversee the activities of the Banks with respect to legal, compliance, and reputational risk related to the Banks' respective BSA/AML [Bank Secrecy Act/Anti-Money Laundering] compliance programs."<br />
<br />
An unnamed bank spokeswoman told the <i>Times</i>, "Citi has made substantial progress in a comprehensive manner across products, business lines and geographies," and will continue "to take the appropriate steps to address remaining requirements and build a strong and sustainable program."<br />
<br />
Nothing to see here, right?<br />
<br />
Tellingly however, neither Citigroup nor Banamex USA admitted wrongdoing. In what is standard boilerplate in such agreements, the Fed meekly submitted that their "enforcement action" was issued "without this Order constituting an admission or denial by Citigroup of any allegation made or implied by the Board of Governors." Nor did the Fed "give specific examples of problems" at either bank, <i><a href="http://www.reuters.com/article/2013/03/26/citigroup-moneylaundering-idUSL2N0CI0XA20130326">Reuters</a></i> reported.<br />
<br />
During Senate Banking Committee hearings last month, Senator Elizabeth Warren (D-MA) grilled federal banking regulators over their non-prosecution of Wall Street drug banks.<br />
<br />
Referencing penalties levied against HSBC after the British banking giant was caught red-handed laundering billions of dollars for Colombian and Mexican drug cartels, Warren demanded: "What does it take? How many billions of dollars do you have to launder for drug lords" before a criminal prosecution?<br />
<br />
Judging by the actions of Obama's Justice Department, apparently the sky's the limit.<br />
<br />
But if history is any guide to current Citigroup "lapses," you can bet that the bank's balance sheet is awash with dirty money.<br />
<br />
As a prelude to the Federal Reserve's Consent Order, last April the Office of the Currency (OCC) issued a <a href="http://www.occ.gov/news-issuances/news-releases/2012/nr-occ-2012-57a.pdf">cease-and-desist order</a> charging Citigroup with "deficiencies in its BSA/AML compliance program."<br />
<br />
OCC regulators stated that the bank had "failed to adopt and implement a compliance program that adequately covers the required BSA/AML program elements due to an inadequate system of internal controls and ineffective independent testing."<br />
<br />
According to OCC, Citigroup "did not develop adequate due diligence on foreign correspondent bank customers and failed to file Suspicious Activity Reports ('SARs') related to its remote deposit capture/international cash letter instrument activity in a timely manner."<br />
<br />
In their infinite wisdom, the Federal Reserve did not include fines against the bank, but the Board of Governors hastened to assure Citigroup's masters (their future employers?) that the Consent Order was issued "solely for the purpose of settling this matter without a formal proceeding being filed and without the necessity for protracted or extended hearings or testimony."<br />
<br />
You bet it was!<br />
<br />
<b>Citigroup and Banamex: The Salinas Affair</b><br />
<br />
If all this sounds familiar, it should.<br />
<br />
One of the more infamous cases involving taxpayer bailed-out Citigroup's ties to money laundering drug cartels emerged in the late 1990s when Raúl Salinas de Gortari, the brother of former Mexican President Carlos Salinas, was arrested after his wife, Paulina Castañón, attempted to withdraw $84 million from a Swiss account controlled by Raúl under an alias.<br />
<br />
Salinas, who spent ten years in prison over the murder of his brother-in-law, political rival José Francisco Ruiz, was released in 2005 when a Mexican appeals court overturned that conviction.<br />
<br />
After nearly 13 years of legal proceedings into the origins of the Salinas fortune, <i><a href="http://www.swissinfo.ch/eng/Salinas_funds_finally_head_back_to_Mexico.html?cid=6740256">SwissInfo</a></i> reported that "Switzerland will hand over $74 million (SFr77.3 million) to Mexico from bank accounts linked to the brother of a former Mexican president."<br />
<br />
"The funds--more than $110 million in bank accounts linked to Raúl Salinas--were originally frozen after the Swiss authorities initiated criminal proceedings against Salinas in 1995 for money laundering."<br />
<br />
But as <i><a href="http://narconews.com/fraud1994.html">Narco News</a></i> investigative journalist Al Giordano reported back in 2000, "The Chief Operating Officers of drug trafficking are not Mexicans, nor Colombians: they are US and European bankers, those who launder the illicit proceeds of drug trafficking. Institutions like Citibank of New York--as this report documents--are the true beneficiaries of the prohibition on drugs and its illegal profits."<br />
<br />
Indeed, "some of these men," Giordano asserted, "like Banamex CEO Roberto Hernández Ramírez--are rags-to-riches stories. Hernández, according to Forbes magazine, could not afford to finance an American Express credit card in 1980. Today he earns the largest annual salary in Mexico--reported as $29 million dollars--and is a billionaire presiding over Mexico's top banking institution."<br />
<br />
According to <i>Narco News</i>, when former President Carlos Salinas initiated bank privatization during the 1990s at the urging of the Bush and Clinton administrations, "the single biggest winner" was none other than his old pal Roberto Hernández. And Hernández, according to investigative journalist Mario R. Menéndez Rodríguez, the editor of <i><a href="http://www.poresto.net/">Por Esto!</a></i>, was "the financial engineer of the Gulf Cartel, launched in the 1980s by Juan N. Guerra and based in the Texas border city of Matamoros, Tamaulipas."<br />
<br />
Reprising their earlier investigations, Giordano <a href="http://www.narconews.com/Issue45/article2584.html">reported</a> that "Hernández had been accused--publicly and via a criminal complaint--by the daily newspaper <i>Por Esto!</i> of trafficking tons of Colombian cocaine through his Caribbean costa properties on that peninsula since 1997."<br />
<br />
"The newspaper," <i>Narco News</i> averred, "published photos of the drugs, the smuggling boats, the Colombian garbage strewn upon the shores, the airfield and small airplanes that, witnesses testified, brought the cocaine north to the United States, with confirmation from sources as diverse as local fishermen and high officials of the Mexican Armed Forces."<br />
<br />
For their investigative efforts both Giordano and Menéndez were sued for libel by Banamex and Hernández in 2000, a case summarily dismissed by the New York Supreme Court, which "established, for the first time, First Amendment protections for Internet journalists in the United States."<br />
<br />
Banamex was bought by Citigroup in 2001 for the then princely sum of $12.5 billion (£8.21bn).<br />
<br />
As <i>El Universal Gráfico</i> journalist José Martínez <a href="http://narconews.com/martinez2.html">reported</a> at the time of the Citibank-Banamex buy out, "One of the mechanisms utilized by Mexican investors is the opening of secret accounts in foreign banks that have business in this country. There, the exclusive Citibank, for decades, has been the preferred bank of the elite of wealthy and powerful people involved in the middle of scandal. In recent years this financial institution has been involved in innumerable cases connected to the management of dirty money."<br />
<br />
According to Martínez, "Citibank has been linked to the political scandals derived from the diversion of funds by part of the Mexican elite, among them some narco-traffickers."<br />
<br />
And as Mexico City's <i>Milenio</i> newspaper columnist Jorge Fernández Menéndez detailed in his 1999 book <i>Narcotráfico y Poder</i> in reference to Raúl Salinas:<br />
<br />
<blockquote>The relation of of Raúl Salinas with the Gulf Cartel presumably surged at the end of the 1980s and began with Juan N. Guerra, who since the middle of the decade had led this organization dedicated to drug trafficking (above all, marijuana) and contraband. In 1989, Guerra made various investments in construction projects, mainly in Villahermosa, with Raúl Salinas. But, already an old man with grave health problems, with a limited vision of his activity, Juan N. Guerra was not the ideal individual to head the project that would be settled by the strong growth of the Cali Cartel: the change from marijuana to cocaine.</blockquote><br />
Fernández noted that when the Gulf Cartel was taken over by Juan García Abrego, "...as the person responsible for the operation of the cartel, Raúl Salinas de Gortari [w]as the presumed chief of political relations and power of the same."<br />
<br />
Never mind that before his arrest on money laundering charges, Raúl only earned an annual salary of $190,000 as a "public servant," Swiss and US investigators uncovered an illicit cash horde to the tune of hundreds of millions of dollars.<br />
<br />
Where did Salinas' money come from?<br />
<br />
In addition to the outright theft of funds from the Treasury as alleged by federal prosecutors in Mexico, according to a 1995 <i><a href="http://articles.latimes.com/1995-12-07/news/mn-11445_1_raul-salinas">Los Angeles Times</a></i> report, Salinas "amassed at least $100 million in suspected drug money."<br />
<br />
Switzerland's top prosecutor at the time, Carla del Ponte, "launched the investigation after the U.S. Drug Enforcement Administration supplied information that led Swiss agents to the accounts in Geneva, where they arrested Raúl Salinas' wife and her brother on Nov. 15 as the pair attempted to withdraw more than $83 million."<br />
<br />
Del Ponte told the <i>Los Angeles Times</i> that after observing Salinas' interrogation by Mexican federal prosecutors the sums found in those accounts were "suspected to be from the laundering of money related to narcotics trafficking."<br />
<br />
In 1998, when Swiss prosecutors completed their Salinas investigation, <i><a href="http://www.latinamericanstudies.org/mexico/salinas.htm">The New York Times</a></i> disclosed that "Swiss police investigators have concluded that a brother of former President Carlos Salinas de Gortari played a central role in Mexico's cocaine trade, raking in huge bribes to protect the flow of drugs into the United States."<br />
<br />
That Swiss report stated, "When Carlos Salinas de Gortari became President of Mexico in 1988, Raúl Salinas de Gortari assumed control over practically all drug shipments through Mexico. Through his influence and bribes paid with drug money, officials of the army and the police supported and protected the flourishing drug business."<br />
<br />
Leveraging "a low-profile position in the administration's food-distribution agency," Swiss investigators revealed that "Raúl Salinas commandeered Government trucks and railroad cars to haul cocaine north, skimming payoffs that the Swiss estimate at upwards of $500 million. On what some of his reputed former associates referred to as 'green light days,' he arranged for drug loads to transit Mexico without concern that they might be checked by the army, the coast guard or the federal police."<br />
<br />
But without the complicity of major banks, amassing and then hiding, that much loot would be impossible. Enter Citibank's "Private Banking" division.<br />
<br />
A 1998 report by the General Accounting Office (<a href="http://www.gao.gov/archive/1999/os99001.pdf">GAO</a>) pointed a finger directly at Citibank. Investigators revealed that "Mr. Salinas was able to transfer $90 million to $100 million between 1992 and 1994 by using a private banking relationship formed by Citibank New York in 1992. The funds were transferred through Citibank Mexico and Citibank New York to private banking investment accounts in Citibank London and Citibank Switzerland."<br />
<br />
With the connivance of bank officials, in 1992 Salinas was able to "effectively disguise" the source of those funds and their destination.<br />
<br />
Indeed, with hefty fees secured from assisting their well-connected client Salinas, Citibank "set up an offshore private investment company named Trocca, to hold Mr. Salinas's assets, through Cititrust (Cayman) and investment accounts in Citibank London and Citibank Switzerland."<br />
<br />
Forget due diligence or "know your customer" (KYC) rules firmly in place under the Bank Secrecy Act (BSA), Citibank "waived bank references for Mr. Salinas and did not prepare a financial profile on him or request a waiver for the profile, as required by then Citibank know your customer policy" and "facilitated Mrs. Salinas's use of another name to initiate fund transfers in Mexico."<br />
<br />
This should have triggered alarm bells over at OCC, but like today's banking scandals involving Wachovia, HSBC and JPMorgan Chase, US "regulators" sat on their hands and did nothing.<br />
<br />
Eager to extract those fees from a dodgy client, Citibank's Vice President for Legal Affairs was forced to admit to GAO investigators that the bank "only" violated one aspect of their KYC policy, their failure to prepare a financial profile of Salinas.<br />
<br />
However, a 1999 Senate Permanent Subcommittee on Investigations <a href="http://handy.gslsolutions.com/gov/senate/hsgac/public/_archive/110999_report.htm">report</a> on "Private Banking and Money Laundering" revealed that "a culture of secrecy pervades the private banking industry."<br />
<br />
"For example," Senate investigators disclosed, "in the case of Raul Salinas . . . the private bank hid Mr. Salinas' ownership of Trocca by omitting his name from the Trocca incorporation papers and naming still other shell companies as the shareholders, directors, and officers. Citibank consistently referred to Mr. Salinas in internal bank communications by the code name 'Confidential Client Number 2' or 'CC-2.' The private bank's Swiss office opened a special name account for him under the name of 'Bonaparte'."<br />
<br />
And despite the fact, as Senate staff averred, "Federal Reserve examiners stated in internal documents that the Citibank private bank lagged behind other private banks they had reviewed," and that Citi's Swiss headquarters had received the "worst possible audit rating" in 1995, and that Citibank's "poor audit score were 'not taken seriously' within the private bank," no regulatory action was taken.<br />
<br />
Two years later, a Federal Reserve examiner wrote: "The auditors are a key asset of [the private bank]. The problem is that for years audit has been identifying problems and nothing has been done about it. In 1992 [the private bank had] 66% favorable audits in 1997 the percentage of favorable audits was 62%. ... It appears that there are no consequences for bad audits as long as [the private bank] meets their financial goals."<br />
<br />
Bingo!<br />
<br />
As <i><a href="http://www.time.com/time/magazine/article/0,9171,140711,00.html">Time Magazine</a></i> investigative journalist S.C. Gwynne reported at the time, Citibank and the soon-to-be-merged with Travelers behemoth now known as Citigroup (that 1998 merger was illegal under Glass-Steagall, but that's another story, one which directly correlates to the Act's 1999 repeal by the Clinton crime family and their Republican co-conspirators in Congress), private banking for upscale clients with the means to invest at $1 million "is now the crown jewel in the financial giant's strategy for growth."<br />
<br />
"That strategy," Gwynne wrote, "calls for Citibank and its parent, Citigroup, to reduce their reliance on cyclical corporate and real estate lending, which tends to be high risk and relatively low profit. It will emphasize the lower-risk, higher-margin business of consumer banking--and especially one-stop financial shopping for the world's booming population of the newly rich."<br />
<br />
Keep in mind, Gwynne was writing in 1998 before the real estate bubble was inflated and Wall Street banksters dove head first into the dubious "residential mortgage" marketing machine that nearly sunk, and still threatens to sink, the capitalist economy under endless waves of fraud and corruption.<br />
<br />
"At Citigroup and like-minded institutions around the world," Gwynne noted, "folks with six- and seven-figure portfolios can find not only traditional banking services like checking and savings accounts but also strategic financial advice; introduction to high-yield investment vehicles like hedge funds; tax advice and accounting; estate planning and all manner of insurance. They can also get help in protecting their assets from potential claimants like creditors and ex-spouses, which can involve moving money discreetly from country to country."<br />
<br />
Indeed, private banking funds were "part of a $17 trillion global pool of money belonging to what bankers euphemistically call 'high-net-worth individuals'--a pool that generates more than $150 billion a year in banking revenue."<br />
<br />
Hidey holes in the Cayman Islands and other destinations used for squirreling-away illicit cash, such as the world's <i>largest</i> financial black holes, the US State of Delaware and the City of London, remain convenient resting places for loot amassed by various global narcotics combines.<br />
<br />
Limited at the time by an "ongoing Department of Justice investigation," a lawyerly dodge that prevents corporate criminality from <i>ever</i> coming to light, GAO investigators "could not determine whether Citibank's actions violated law or regulation."<br />
<br />
The Federal Reserve were also less than forthcoming and "did not comment on whether Citibank's actions were violations because information available to it at the time we inquired was insufficient for it to make a determination."<br />
<br />
According to asleep at the wheel regulators at OCC, Citibank's "actions did not violate civil aspects of the Bank Secrecy Act" since under rules then in place "private banking's know your customer policies are voluntary and not governed by law or regulation."<br />
<br />
But as the Mexican weekly news magazine <i><a href="http://www.thirdworldtraveler.com/Banks/FollowMoney_Citibank.html">Proceso</a></i> reported in 2001 during the Salinas affair, "Citibank of New York was transferring Juárez drug cartel money to Uruguay and Argentina, where Mexican drug lord Amado Carrillo Fuentes and his associates went calmly about their business, with help from local politicians and businessmen. Not long after, investigations would reveal that in 1998-99, more than $300 million belonging to Mexican drug traffickers went through Citibank."<br />
<br />
As <i>El Universal Gráfico</i> noted, when the self-described "Lord of the Heavens" sought refuge in South America, he "had account # 36111386 in Citibank of New York. From this place, the financial operators of the narco-trafficker passed large sums in millions of dollars to ghost banks like MA Bank of the fiscal paradise of the Cayman Islands."<br />
<br />
In late 2000, when the Senate Permanent Subcommittee on Investigations again began looking into drug money laundering allegations against Citibank, they received information from Argentine legislators who claimed there was "a gigantic political-financial conspiracy involving even Citibank President John Reed."<br />
<br />
Years later, those suspicions were corroborated when a US investigation, Operation Casablanca, "revealed that [money from] the Juárez cartel entered Argentina through two Citibank accounts and others in shell banks in the Cayman Islands and the Bahamas."<br />
<br />
Juan Miguel Ponce, the head of Mexico's Interpol branch, "took advantage of Operation Casablanca to explore the vein of Juárez cartel allies in Argentina. He claims to have discovered documents in Mexico proving that large contributions were made by the cartel to 1999 campaign in Argentina of Peronist presidential and vice presidential candidates Eduardo Duhalde and Ramon 'Palito' Ortega," <i>Proceso</i> disclosed<br />
<br />
As James Petras <a href="http://www.thirdworldtraveler.com/Banks/DirtyMoneyEmpire.html">reported</a> in 2001, when Salinas was arrested "and his large-scale theft of government funds was exposed, his private bank manager at Citibank, Amy Elliott, said in a phone conversation with colleagues (the transcript of which was made available to Congressional investigators) that 'this goes [on] in the very, very top of the corporation, this was known ... on the very top. We are little pawns in this whole thing'."<br />
<br />
Fast forward twelve years: More than 120,000 Mexican citizens have paid with their lives as a result of the grisly trade and the American people are still the pawns of "plutonomic" banksters whose "wealth waves" come from the perverse influence bought by oceans of drug money flowing through a thoroughly corrupt capitalist system.Antifascisthttp://www.blogger.com/profile/05421707682211445550noreply@blogger.com0tag:blogger.com,1999:blog-1831516114336983238.post-79942213140111306022013-03-24T09:48:00.001-07:002013-03-24T09:48:33.799-07:00Obama's New SEC 'Sheriff.' No Conflict of Interest When it Comes to Shielding Wall Street's Pin Striped Mafia<a href="http://3.bp.blogspot.com/-LBLR05NoA0s/UUXy8NH6afI/AAAAAAAAAVI/KW9DS_Eb5Qw/s1600/Relvolving_door.jpg" imageanchor="1"><img border="0" src="https://lh3.ggpht.com/-LBLR05NoA0s/UUXy8NH6afI/AAAAAAAAAVI/KW9DS_Eb5Qw/s320/Relvolving_door.jpg" /></a><br />
<br />
One indelible sign of state capture by pirate corporations and the financial jackals holding sway on Wall Street and the City of London is the ease with which former "regulators" slip into plum positions with the firms whom they supposedly "regulated" as "public servants."<br />
<br />
While the drone kill-crazy Obama regime has done yeoman's work cementing in place extra-constitutional policies first enacted by the Bush gang--only to exceed Bushist depredations by a whole order of magnitude--kool-aid sipping "progressives" and troglodytic "conservatives" have given the president a free pass when it comes to policing the financial criminals who blew up the world economy.<br />
<br />
But when it comes to US spy agencies probing and sweeping up <i>your</i> financial information, well, the sky's the limit!<br />
<br />
As <i><a href="http://www.reuters.com/article/2013/03/13/us-usa-banks-spying-idUSBRE92C12720130313">Reuters</a></i> reported last week, the administration "is drawing up plans" to give securocrats "full access to a massive database that contains financial data on American citizens and others who bank in the country, according to a Treasury Department document."<br />
<br />
That Treasury plan would give secret state apparatchiks, including those ensconced at CIA, NSA and the Pentagon free reign to rummage through the Financial Crimes Enforcement Network's (FinCEN) massive database of "suspicious activity reports" routinely filed by "banks, securities dealers, casinos and money and wire transfer agencies." The FBI and DHS already have full access to that database under the Orwellian USA Patriot Act.<br />
<br />
Under the proposal, FinCen data will be linked "with a computer network used by US defense and law enforcement agencies to share classified information called the Joint Worldwide Intelligence Communications System," according to <i>Reuters</i>.<br />
<br />
And since requirements for filing SARs are "so strict," banks often "over-report," this "raises the possibility that the financial details of ordinary citizens could wind up in the hands of spy agencies," where it will live in perpetuity, "criminal evidence, ready for use in a trial," as <a href="https://secure.cryptohippie.com/pubs/EPS-2010.pdf">Cryptohippie</a> famously warned.<br />
<br />
Got that? While Wall Street drug banks are handled with care because of the "collateral consequences" that <i>might</i> result from a criminal referral for laundering billions of narco-dollars, the average citizen's financial data will be fair game.<br />
<br />
Which brings us back to Obama's anemic regulatory regime and the "sheriffs" eager to do the bankster's bidding.<br />
<br />
<b>Wall Street's Choice</b><br />
<br />
As one of the filthiest dens of corruption in Washington, the Securities and Exchange Commission (SEC) is in a league of its own.<br />
<br />
In late January, when the president announced he was nominating former federal prosecutor Mary Jo White to lead the Securities and Exchange Commission (SEC), <i><a href="http://dealbook.nytimes.com/2013/01/24/mary-jo-white-to-be-named-new-s-e-c-boss/">The New York Times</a></i>, as they are wont to do, proclaimed that the "White House delivered a strong message to Wall Street."<br />
<br />
A rather ironic assertion considering the tens of millions of dollars "earned" defending Wall Street criminals by Debevoise & Plimpton partner Mary Jo and her millionaire lawyer husband John, a partner at the white shoe corporate litigation shop Cravath, Swaine & Moore, as <i><a href="http://abovethelaw.com/2013/02/just-how-rich-is-mary-jo-white-debevoise-partner-and-likely-future-sec-chair/">Above the Law</a></i> disclosed.<br />
<br />
Keep in mind that White will soon lead an agency that for years covered-up financial crimes by routinely shredding tens of thousands of case files on everything from insider trading, securities fraud, market manipulation and the Madoff and Stanford Ponzi schemes, as a 2011 <i><a href="http://www.rollingstone.com/politics/news/is-the-sec-covering-up-wall-street-crimes-20110817?print=true">Rolling Stone</a></i> investigation disclosed.<br />
<br />
As I reported nearly three years ago during my <a href="http://antifascist-calling.blogspot.com/2010/08/full-service-bank-r-allen-stanford-and.html">investigation</a> into now-convicted fraudster Allen Stanford's ties to the CIA over his role in laundering oceans of cash for the Agency's narcotrafficking assets, the SEC's Fort Worth office "stood down" multiple probes "at the request of another federal agency," which regional head of enforcement Stephen J. Korotash "declined to name."<br />
<br />
Indeed, a 2010 <a href="http://www.sec.gov/news/studies/2010/oig-526.pdf">report</a> by the SEC's Office of the Inspector General found that another "former head of Enforcement in Fort Worth," Spencer C. Barasch, "played a significant role in multiple decisions over the years to quash investigations of Stanford," and sought to represent the dodgy banker "on three separate occasions after he left the Commission, and in fact represented Stanford briefly in 2006 before he was informed by the SEC Ethics Office that it was improper to do so."<br />
<br />
Barasch eventually paid a $50,000 fine for ethics violations and "moved on."<br />
<br />
Despite the SEC's documented history of sleaze and lax enforcement of rules that would earn the average citizen a one-way ticket to the slammer, on March 19 the Senate Banking Committee approved White's nomination by a vote of 21-1; the lone dissenter was Sherrod Brown (D-OH). A vote by the full Senate could come as early as next week and she is expected to be confirmed easily.<br />
<br />
As a former US Attorney for the Southern District in New York (1993-2002), White has been described by corporate media as a "tough as nails" prosecutor for her role in bringing down Mafia wise guy John Gotti and for running to ground criminal mastermind Ramzi Yousef, the architect of the 1993 World Trade Center bombing. (For a gripping account of how the FBI and US prosecutor's office <i>botched</i> that investigation and "foamed the runway" for the mass murder of 3,000 people on 9/11, readers should train their sights on Peter Lance's exposé, <i><a href="http://www.amazon.com/1000-Years-Revenge-International-FBI/dp/0060597259">1000 Years for Revenge</a></i>).<br />
<br />
White's record when it came to holding financial criminals to account however, was even more dubious; in fact, for more than a decade she's defended them.<br />
<br />
<i>Times'</i> stenographers dialed back their glowing encomiums for the Obama nominee, writing that "translating that message into action will not be easy, given the complexities of the market and Wall Street's aggressive nature."<br />
<br />
As reliable hands on the financial beat, Dealbook reporters routinely trumpet everything from the Justice Department's <a href="http://dealbook.nytimes.com/2012/12/10/hsbc-said-to-near-1-9-billion-settlement-over-money-laundering/">sweetheart deal</a> with drug money laundering and terrorist coddling banking giant HSBC to kissing Jamie Dimon's hem over billions of <a href="http://dealbook.nytimes.com/2013/01/16/jpmorgan-4th-quarter-profit-jumps-53-to-5-7-billion/">JPMorgan Chase losses</a> last year in what were euphemistically described as a "bad bet on derivatives."<br />
<br />
In the January puff-piece, reporters Ben Protess and Benjamin Weiser outdid themselves, claiming that with the White nomination "the president showed a renewed resolve to hold Wall Street accountable for wrongdoing."<br />
<br />
However, a less than laudatory piece published by <i><a href="http://www.bloomberg.com/news/2013-01-24/obama-picks-morgan-stanley-s-laywer-to-lead-sec.html">Bloomberg News</a></i> took those fatuous claims to task. Financial columnist Jonathan Weil observed that while "The Securities and Exchange Commission couldn't get Ken Lewis on any securities-law violations after he helped drive Bank of America Corp. into the ground as its chief executive officer," the agency "is poised to get his attorney as its new chairman--and Morgan Stanley's, too."<br />
<br />
But hey, it's not like the SEC is chock-a-block with conflicts of interest, right? Well, if a bracing read is what the doctor ordered, then turn your attention to a damning study released last month by the Project on Government Oversight (<a href="http://pogoarchives.org/ebooks/20130211-dangerous-liaisons-sec-revolving-door.pdf">POGO</a>). Entitled, <i>Dangerous Liaisons: Revolving Door at SEC Creates Risk of Regulatory Capture</i>, author Michael Smallberg takes us on a 60-page tour of insider dealing and corruption that would make a Roman emperor blush.<br />
<br />
According to Smallberg: "Between 2001 and 2010, more than 400 SEC alumni filed nearly 2,000 disclosure statements saying they planned to represent employers or clients before the agency. These alumni have represented companies during SEC investigations, lobbied the agency on proposed regulations, obtained waivers to soften the blow of enforcement actions, and helped clients win exemptions from federal law. On the other side of the revolving door, when industry veterans join the SEC, they may be in a position to oversee their former employers or clients, or may be forced to recuse themselves from working on crucial agency issues."<br />
<br />
Talk about an agency blind in <i>both</i> eyes by design!<br />
<br />
<b>A Counsel with 'Juice'</b><br />
<br />
One of the more egregious cases which came to light was SEC's handling of a 2005 insider trading case involving former agency enforcement head, Linda Thomsen, White and her client, Morgan Stanley CEO John Mack.<br />
<br />
Before her tenure as the agency's chief enforcement officer, Thomsen was in private practice at the powerhouse New York law firm, Davis, Polk & Wardell. During the capitalist financial meltdown, the company represented upstanding corporate citizens such as AIG, Freddie Mack, Lehman Brothers and drug-tainted <a href="http://narcosphere.narconews.com/notebook/bill-conroy/2012/12/banks-are-where-money-drug-war">Citigroup</a>. Bulking up a stable of attorneys well-versed in regulatory matters, the firm has hired other former SEC officials, including Commissioner Annette Nazareth and Linda Thomsen.<br />
<br />
Before sailing off to greener shores at Davis, Polk, Nazareth's claim to fame was standing up a voluntary "supervisory regime" for the largest "investment bank holding companies" who "policed" themselves by cratering the economy and costing taxpayers trillions in bailouts.<br />
<br />
That program, the Consolidated Supervised Entity was scrapped in 2008. Why? According to a <a href="http://www.sec.gov/news/press/2008/2008-230.htm">press release</a> by then SEC head Christopher Cox (no slouch himself when it came to defending his corporatist masters): "The last six months have made it abundantly clear that <i>voluntary regulation does not work</i>. When Congress passed the Gramm-Leach-Bliley Act, it created a significant regulatory gap by failing to give to the SEC or any agency the authority to regulate large investment bank holding companies, like Goldman Sachs, Morgan Stanley, Merrill Lynch, Lehman Brothers, and Bear Stearns." (emphasis added)<br />
<br />
A "gap" large enough to fly a fleet 747s through and still have enough wiggle room to launch a dozen Saturn 5s into deep space!<br />
<br />
And that insider trading case?<br />
<br />
According to Matt Taibbi's <i><a href="http://www.rollingstone.com/politics/news/why-isnt-wall-street-in-jail-20110216?print=true">Rolling Stone</a></i> investigation, in September 2004 SEC investigator Gary Aguirre was tasked to look into an insider trading complaint against "a hedge-fund megastar named Art Samberg. One day, with no advance research or discussion, Samberg had suddenly started buying up huge quantities of shares in a firm called Heller Financial."<br />
<br />
Samberg was the founder of the multibillion dollar hedge fund, Pequot Capital Management, a firm which invested in a multitude of private and public equities and what are known as "distressed securities." These are investment instruments held by firms or government entities (paging Fannie Mae!) that are either in default, under bankruptcy protection or will soon be heading south. The most common securities of this type are bonds and bank debt (think residential mortgage backed securities and other toxic assets). Since the financial crisis, a booming market in distressed securities have earned savvy hedge fund mangers billions in fees as they seek influence with regulators over <i>how</i> that debt is restructured.<br />
<br />
And since "influence" in Washington and the "juice" that comes with it on Wall Street is the name of the game, well, you get the picture.<br />
<br />
"'It was as if Art Samberg woke up one morning and a voice from the heavens told him to start buying Heller,' Aguirre recalls. 'And he wasn't just buying shares--there were some days when he was trying to buy three times as many shares as were being traded that day.' A few weeks later, Heller was bought by General Electric--and Samberg pocketed $18 million."<br />
<br />
"After some digging," Taibbi wrote, "Aguirre found himself focusing on one suspect as the likely source who had tipped Samberg off: John Mack, a close friend of Samberg's who had just stepped down as president of Morgan Stanley."<br />
<br />
According to Taibbi, "Mack flew to Switzerland to interview for a top job at Credit Suisse First Boston. Among the investment bank's clients, as it happened, was a firm called Heller Financial. We don't know for sure what Mack learned on his Swiss trip; years later, Mack would claim that he had thrown away his notes about the meetings."<br />
<br />
Rather conveniently, one might say.<br />
<br />
In any event after returning from his Swiss Alps sojourn, in a classic case of "you scratch my back" Samberg cut his buddy Mack into a deal with a tech firm called Lucent, "a favor that netted him [Mack] more than $10 million." Shortly thereafter, "Samberg began buying-up every Heller share in sight, right before it was snapped up by GE."<br />
<br />
An insider trading case worthy of further scrutiny, right? But when Aguirre told his boss [Robert Hanson] that he intended to interview Mack and the other principals, "things started getting weird." Taibbi noted that Aguirre's boss told the investigator that Mack "had powerful political connections."<br />
<br />
Indeed he did. Like other Wall Street banksters, Mack had been a fundraising "Ranger" for the 2004 George W. Bush campaign, and when it became clear that a new product line needed to be rolled out, Mack crossed party lines and backed Hillary Clinton's ill-starred 2008 bid for the Oval Office.<br />
<br />
How's that for clubby "bipartisanship"!<br />
<br />
A 2007 <a href="http://www.finance.senate.gov/library/prints/download/?id=f9d94204-7602-49f7-8bab-cb932c05310e">report</a> (large PDF file) published by the Senate Finance Committee titled <i>The Firing of an SEC Attorney and the Investigation of Pequot Management</i>, disclosed that "at least three experienced SEC officials believed in the summer of 2005 that questioning John Mack was an appropriate next step in the Pequot Investigation."<br />
<br />
Indeed, Senate investigators revealed that "the most significant aspect" of Mack's 2006 SEC testimony (<i>after</i> the statute of limitations for prosecution had expired) "is his acknowledgement that he went to Switzerland to discuss becoming CSFB's CEO from July 26-28, 2001."<br />
<br />
"In view of the fact that Mack also spoke with Samberg immediately upon his return to the United States on July 29, 2001," Senate staff disclosed, "the trading day before Samberg began heavily betting on Heller Financial stock, and on the same night Mack was permitted into a lucrative deal, there was more than a sufficient basis to justify taking Mack's testimony in the summer of 2005."<br />
<br />
After first being given the go-ahead to interview Mack, "Aguirre's direct line of supervisors" including Hanson, Mark Kreitman and Paul Berger, got cold feet. Unfortunately for Aguirre, this came after he had briefed attorneys at Mary Jo White's old stomping ground and "criminal authorities in the Southern District opened their own investigations" into dubious deals between Samberg and Mack.<br />
<br />
At that point, Senate investigators averred, "his supervisors' attitudes shifted dramatically," that is, "when officials from Morgan Stanley began contacting the SEC to learn about the potential impact of the investigation on its prospective CEO, John Mack." Only then did Hanson warn Aguirre that "it would be difficult to subpoena John Mack because of his 'powerful political connections'."<br />
<br />
Aguirre told Senate investigators that "in a face-to-face meeting" with his boss, "Hanson said it would be very difficult to get permission to question Mack because of Mack's 'powerful political connections'."<br />
<br />
Hanson however, denied everything and said during his Senate testimony "That doesn't sound like something I would say."<br />
<br />
"As a general matter," Hanson testified, "I try to alert folk above me about significant developments in investigations that may trigger calls and the like so that they are not caught flat footed. I also think that Paul [Berger] and Linda [Thomsen] would want to know if and when we are planning to take Mack's testimony so that they can anticipate the response, which may include press calls that will likely follow. Mack's counsel will have 'juice' as I described last night--meaning that they will reach out to Paul and Linda (and possibly others)."<br />
<br />
And who was Mack's "juiced" attorney? Why none other than Mary Jo White!<br />
<br />
Unbeknownst to Aguirre, his supervisors were trading emails about his imminent firing from the agency. "With no knowledge of those emails," Senate investigators disclosed that Aguirre wrote Hanson again stating, that "before and after the Mack decision, you have told [me] several times that the problem in taking Mack's exam is his political clout, e.g., all the people that Mary Jo White can contact with a phone call."<br />
<br />
At the same time that Aguirre was seeking to subpoena Mack's testimony, Morgan Stanley's board hired Debevoise & Plimpton to vet their soon-to-be reinstalled CEO. "Only two days after being retained," the Senate reported, "White did what the SEC did not do until more than a year later. She questioned John Mack: 'The other thing that I did for the board to gather what information I could on that time frame was to interview John Mack himself,'" White told investigators.<br />
<br />
But she did more than that, demonstrating she indeed had plenty of "juice."<br />
<br />
"That evening," the Senate disclosed, "White sent Thomsen an e-mail message marked 'URGENT' and asked that Thomsen return the call 'this evening.' Aguirre complained that the next day White delivered the e-mails that he had subpoenaed from Morgan Stanley directly to Linda Thomsen."<br />
<br />
"On June 27," Aguirre testified, "I learned that Mack-Samberg emails, which I had subpoenaed from Morgan Stanley, had been delivered directly to the Director of Enforcement, Linda Thomsen. Neither I nor other staff had heard of this happening before. Indeed, the subpoena explicitly stated that the documents were to be delivered to me."<br />
<br />
Evidence reviewed by the Senate Finance Committee "suggests that the reluctance to question Mack represents a much more subtle and pervasive problem than an individual partisan political favor. SEC officials were overly deferential to Mack--not because of his politics--but because he was an 'industry captain' who could hire influential counsel to represent him."<br />
<br />
"In a shocking move that was later singled out by Senate investigators," Taibbi wrote, "the director actually appeared to reassure White, dismissing the case against Mack as 'smoke' rather than 'fire'."<br />
<br />
"Aguirre didn't stand a chance," Taibbi noted. "A month after he complained to his supervisors that he was being blocked from interviewing Mack, he was summarily fired, without notice. The case against Mack was immediately dropped: all depositions canceled, no further subpoenas issued. 'It all happened so fast, I needed a seat belt,' recalls Aguirre, who had just received a stellar performance review from his bosses. The SEC eventually paid Aguirre a settlement of $755,000 for wrongful dismissal."<br />
<br />
It gets better.<br />
<br />
In a subsequent <a href="http://www.rollingstone.com/politics/blogs/taibblog/choice-of-mary-jo-white-to-head-sec-puts-fox-in-charge-of-hen-house-20130125?print=true">piece</a>, Taibbi followed-up and discovered "not only did the SEC ultimately delay the interview of Mack until after the statute of limitations had expired, and not only did the agency demand an investigation into possible alternative sources for Samberg's tip (what Aguirre jokes was like 'O.J.'s search for the real killers'), but the SEC official who had quashed the Mack investigation, Paul Berger, took a lucrative job working for Morgan Stanley's law firm, Debevoise and Plimpton, just nine months after Aguirre was fired."<br />
<br />
As it turned out, at the <i>exact moment</i> that Aguirre's investigation was being sabotaged, Senate investigators "uncovered an email to Berger from another SEC official, Lawrence West, who was also interviewing with Debevoise and Plimpton at the time."<br />
<br />
"The e-mail was dated September 8, 2005 and addressed to Paul Berger with the subject line, 'Debevoise.' The body of the message read, 'Mary Jo [White] just called. I mentioned your interest'."<br />
<br />
Taibbi observed: "So Berger was passing notes in class to Mary Jo White about wanting to work for Morgan Stanley's law firm while he was in the middle of quashing an investigation into a major insider trading case involving the CEO of the bank. After the case dies, Berger later gets the multimillion-dollar posting and the circle is closed."<br />
<br />
In later testimony to the Inspector General into Debevoise & Plimpton's eventual hiring of Berger by a firm that boasts on their <a href="http://www.debevoise.com/attorneys/detail.aspx?id=26af1fa8-0acf-4ef5-9c3b-1f08b1aa7de0&type=showfullbio">web site</a> that she leads a "team" which "includes eleven former Assistant US Attorneys," White's comments on whether Berger was considered too "aggressive" in prosecuting Wall Street criminals is all-too-revealing.<br />
<br />
"You always have a spectrum on the aggressiveness scale for government types and was this an issue that was beyond real commitment to the job and the mission and bringing cases," White affirmed, "which is a positive thing in the government, to a point. Or was it a broader issue that could leave resentment in the business community or in the legal community that would hamper his ability to function well in the private sector?"<br />
<br />
"It's certainly strange that White has to qualify the idea that bringing cases is a positive thing in a government official--that bringing cases is a 'positive thing . . . to a point'," Taibbi noted. "Can anyone imagine the future head of the DEA saying something like, 'For a prosecutor, bringing drug cases is a positive, to a point'?"<br />
<br />
And what about Linda Thomsen? In 2008, the SEC's inspector general, H. David Kotz, urged disciplinary action against her over her role in Aguirre's squashed investigation of Samberg and Mack. While Samberg was eventually forced out of business, barred from working as an investment adviser and paid a $28 million fine for his shenanigans, Thomsen landed on her feet.<br />
<br />
After refusing to answer relevant questions in 2009 before the House Committee on Financial Services probe into the SEC's failure to investigate the Bernie Madoff Ponzi scheme, due to a "collective desire to preserve the integrity of the investigative and prosecution processes" mind you, Thomsen resigned and rejoined Davis, Polk and Wardell.<br />
<br />
Later that year, Kotz released a report to Congress of the IG's investigation into a "Senior Officer" who provided "inside information" to a "former official." As it turns out that "Senior Officer" was Linda Thomsen and that "official" was her former boss Stephen Cutler who had jumped ship and joined JPMorgan Chase.<br />
<br />
According to <i><a href="http://dealbook.nytimes.com/2009/12/01/sec-watchdog-outlines-internal-investigations/">The New York Times</a></i>, "Kotz said his office has concluded its well-publicized investigation into whether the SEC's enforcement director, Linda Chatman Thomsen, inappropriately provided inside information to her former boss, Stephen Cutler, now the general counsel of JPMorgan Chase, amid the bank's negotiations to buy Bear Stearns in March 2008."<br />
<br />
"The inquiry," the <i>Times</i> reported, "which began in response to an anonymous tip, confirmed that Mr. Cutler sought assurances from Ms. Thomsen before the takeover that JPMorgan would not be sued for prior actions by Bear Stearns."<br />
<br />
And who was representing JPMorgan Chase in the wake of the Bear Stearns collapse? If you guessed Mary Jo White, you'd be right again.<br />
<br />
Less than three years later, during Senate Banking Committee confirmation hearings, White told the panel that "the American people will be my client, and I will work as zealously as possible on behalf of them."<br />
<br />
But when questioned by Sherrod Brown (D-OH) whether or not White agreed with US Attorney General Eric Holder's statement which affirmed that "federal prosecutors are instructed . . . to look at . . . collateral consequences" should a financial institution or its officers be criminally charged, White agreed.<br />
<br />
In a follow-up question, Brown wondered whether there is "a two-tiered system where we exempt the biggest banks because they have the most employees and shareholders who could be affected by criminal prosecution?"<br />
<br />
White's answer pretty much sums up everything that's bent about Washington's culture of impunity when it comes to the Wall Street crimes: "It's a factor that prosecutors are directed to consider."<br />
<br />
"I do think the deferred prosecution instrument," White asserted, "has been used a great deal on a number of companies, [and] was designed to be tough in terms of monetary sanctions, monitors--everything but the charge itself that might cause what the prosecutor might consider to be negative and undesirable collateral consequences to the public interest."<br />
<br />
But what about harsher sanctions such as stripped assets, handcuffs and a jail cell for drug money laundering and securities scamming banksters, punishments that might actually <i>deter</i> corporate crime?<br />
<br />
Forgetaboutit!Antifascisthttp://www.blogger.com/profile/05421707682211445550noreply@blogger.com0tag:blogger.com,1999:blog-1831516114336983238.post-68353428154872079752013-03-02T11:12:00.000-08:002013-03-02T11:12:09.977-08:00DOJ Urges Federal Court to Approve Sweetheart Deal with Drug-Tainted HSBC<a href="http://4.bp.blogspot.com/-SvRoOjxTBWQ/USEFfHZfrJI/AAAAAAAAAU0/bsE4rGxxT0Q/s1600/0.jpg" imageanchor="1"><img border="0" src="https://lh3.ggpht.com/-SvRoOjxTBWQ/USEFfHZfrJI/AAAAAAAAAU0/bsE4rGxxT0Q/s320/0.jpg" /></a><br />
<br />
<b><i>You can get much farther with a kind word and a gun than you can with a kind word alone.</i> -- Al Capone</b><br />
<br />
In <i><a href="http://us.macmillan.com/recklessendangerment/GretchenMorgenson">Reckless Endangerment</a></i>, a lively exposé of the frauds at the heart of the subprime meltdown, journalists Gretchen Morgenson and Joshua Rosner wrote that if "mortgage originators like NovaStar or Countrywide were the equivalent of drug pushers hanging around a schoolyard and the ratings agencies were the narcotics cops looking the other way, brokerage firms providing capital to the anything-goes lenders were the overseers of the cartel."<br />
<br />
Their observations are all the more relevant given the outrageous behavior by major banks which polluted an already terminally corrupt financial system with blood-spattered cash siphoned-off from the global drug trade.<br />
<br />
It wouldn't be much of a stretch to insist that drug money laundered by financial giants like HSBC and Wachovia were in fact, little more than "hedges" designed to offset losses in residential mortgage backed securities (RMBS), sliced and diced into toxic collateralized debt obligations, as the 2007-2008 global economic crisis cratered the capitalist "free market."<br />
<br />
And like Wachovia's ill-fated $25.5 billion (£16.96bn) buy-out of Golden West Financial/World Savings Bank at the top of the market in 2006, HSBC's 2002 purchase of Household International and its mortgage unit, Household Finance Corporation for the then princely sum of $15.2 billion (£10.02bn) also proved to be a proverbial deal too far.<br />
<br />
Evidence suggests that HSBC stepped up money laundering for their cartel clients as the hyperinflated real estate bubble collapsed. Along with other self-styled masters of the universe who were bleeding cash faster than you can say credit default swaps, HSBC posted 2008 projected first quarter losses of "$17.2 billion (£8.7bn) after the decline in the US housing market hit the value of its loans," <a href="http://news.bbc.co.uk/2/hi/business/7274385.stm">BBC News</a> reported.<br />
<br />
From there RMBS deficits skyrocketed. By 2010, as Senate and Justice Department investigators were taking a hard look at bank shenanigans, <i><a href="http://in.reuters.com/article/2010/05/24/hsbc-idINHKU00233120100524">Reuters</a></i> reported that HSBC Holdings was "working off $20 billion [£13.19bn] worth of loans per year in its US Household Finance Corp. unit" where "liabilities stood at about $70 billion [£46.17bn]."<br />
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However you slice today's epidemic of financial corruption, a trend already clear two decades ago when economists George Akerlof and Paul Romer published their seminal paper, <i><a href="http://www.brookings.edu/~/media/projects/bpea/1993%202/1993b_bpea_akerlof_romer_hall_mankiw.pdf">Looting: The Economic Underworld of Bankruptcy for Profit</a></i>, incentives were huge as senior bank executives inflated their balance sheets with "criminal proceeds ... likely to have amounted to some 3.6 per cent of GDP (2.3-5.5 per cent) or around US$2.1 trillion in 2009," according to a 2011 estimate by the United Nations Office on Drugs and Crime (<a href="http://www.unodc.org/documents/data-and-analysis/Studies/Illicit_financial_flows_2011_web.pdf">UNODC</a>).<br />
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To make matters worse, willful criminality at the apex of the financial pyramid was aided and abetted by the US Justice Department and the federal regulatory apparatus who allowed these storied economic predators to walk.<br />
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<b>'Change' that Banksters Can Believe In</b><br />
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In late January, <i><a href="http://www.bloomberg.com/news/2013-01-30/hsbc-judge-urged-to-approve-1-9-billion-drug-cash-accord.html">Bloomberg News</a></i> reported that US prosecutors have "asked a federal judge to sign off on HSBC Holdings Plc (HSBA)'s $1.9 billion [£1.2bn] settlement of charges it enabled drug cartels to launder millions of dollars in trafficking proceeds."<br />
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Prosecutors justified the settlement on grounds that "it includes the largest-ever forfeiture in the prosecution of a bank and provides for monitoring to prevent future violations," arguing that "strict conditions, and the unprecedented forfeiture and penalties imposed, serve as a significant deterrent against future similar conduct."<br />
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Let's get this sick joke straight: here's a bank that laundered billions of dollars for Colombian and Mexican drug lords, admittedly amongst the most violent gangsters on earth (120,000 dead Mexicans and counting since 2006) and we're supposed to take this deal seriously. <i>Seriously?</i> Remember, this an institution whose pretax 2012 profits will exceed $23.5 billion (£15.63bn) when earnings are reported next week and the best the US government can do is extract a promise to "do better"--next time.<br />
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That deal, a deferred prosecution agreement (<a href="http://www.justice.gov/opa/documents/hsbc/dpa-attachment-a.pdf">DPA</a>) was cobbled together between the outgoing head of the Justice Department's Criminal Division, Lanny A. Breuer and HSBC, Europe's largest bank. At the urging of former Treasury Secretary Timothy Geithner, no criminal charges were sought--or brought--against senior bank executives.<br />
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Why might that be the case?<br />
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During a press conference trumpeting the government's "shitty deal," Breuer breezily declared that DOJ's decision not to move forcefully against HSBC was in everyone's best interest: "Had the US authorities decided to press criminal charges, HSBC would almost certainly have lost its banking license in the US, the future of the institution would have been under threat and the entire banking system would have been destabilized."<br />
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As if allowing drug-connected money launderers license to pollute one of the world's largest financial institutions hadn't <i>already</i> "destabilized" the banking system!<br />
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Although Obama's Justice Department smeared "lipstick" on this pig of a deal, their own "Statement of Facts" submitted to US District Judge John Gleeson paints a damning picture of criminal negligence that crossed the line into <i>outright collusion</i> with their Cartel clients:<br />
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<blockquote>From 2006 to 2010, HSBC Bank USA violated the BSA and its implementing regulations. Specifically, HSBC Bank USA ignored the money laundering risks associated with doing business with certain Mexican customers and failed to implement a BSA/AML program that was adequate to monitor suspicious transactions from Mexico. At the same time, Grupo Financiero HSBC, S.A. de C.V. ("HSBC Mexico"), one of HSBC Bank USA's largest Mexican customers, had its own significant AML problems. As a result of these concurrent AML failures, at least $881 million in drug trafficking proceeds, including proceeds of drug trafficking by the Sinaloa Cartel in Mexico and the Norte del Valle Cartel in Colombia, were laundered through HSBC Bank USA without being detected. HSBC Group was aware of the significant AML compliance problems at HSBC Mexico, yet did not inform HSBC Bank USA of these problems and their potential impact on HSBC Bank USA's AML program.</blockquote><br />
As with Wachovia, oceans of cash generated through drug trafficking were laundered by HSBC via the Black Market Peso Exchange (BMPE), a nexus of interconnected firms controlled by Colombian and Mexican drug cartels.<br />
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According to the DPA, "peso brokers purchase bulk cash in United States dollars from drug cartels at a discounted rate, in return for Colombian pesos that belong to Colombian businessmen. The peso brokers then use the US dollars to purchase legitimate goods from businesses in the United States and other foreign countries, on behalf of the Colombian businessmen. These goods are then sent to the Colombian businessmen, who sell the goods for Colombian pesos to recoup their original investment."<br />
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"In the end," the Justice Department informed us, "the Colombian businessmen obtain US dollars at a lower exchange rate than otherwise available in Colombia, the Colombian cartel leaders receive Colombian pesos while avoiding the costs associated with depositing US dollars directly into Colombian financial institutions, and the peso brokers receive fees for their services as middlemen."<br />
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Got that? And it wasn't only plasma TVs, diamond-studded Rolexes or armored-up SUVs that cartel heavies were buying from enterprising businessmen on <i>this</i> side of the border. Add to their list of must-haves: fleets of airplanes and enough weapons to equip an army!<br />
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DOJ investigators discovered that "drug traffickers were depositing hundreds of thousands of dollars in bulk US currency each day into HSBC Mexico accounts. In order to efficiently move this volume of cash through the teller windows at HSBC Mexico branches, drug traffickers designed specially shaped boxes that fit the precise dimensions of the teller windows. The drug traffickers would send numerous boxes filled with cash through the teller windows for deposit into HSBC Mexico accounts. After the cash was deposited in the accounts, peso brokers then wire transferred the US dollars to various exporters located in New York City and other locations throughout the United States to purchase goods for Colombian businesses. The US exporters then sent the goods directly to the businesses in Colombia."<br />
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The investigation further revealed that "because of its lax AML controls, HSBC Mexico was the preferred financial institution for drug cartels and money launderers. The drug trafficking proceeds (in physical US dollars) deposited at HSBC Mexico as part of the BMPE were sold to HSBC Bank USA through Banknotes."<br />
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What's the "get" for the bank? Former Senate investigator Jack Blum told <i><a href="http://www.rollingstone.com/politics/news/gangster-bankers-too-big-to-jail-20130214">Rolling Stone's</a></i> Matt Taibbi: "If you have clients who are interested in 'specialty services'--that's the euphemism for the bad stuff--you can charge 'em whatever you want." Blum said "the margin on laundered money for years has been roughly 20 percent."<br />
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How's <i>that</i> for an incentive!<br />
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<b>'Big Audits, Big Problems. No Audits, No Problems'</b><br />
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In cobbling together the HSBC deal, the Justice Department ignored Senate testimony by whistleblowers, some of whom were fired or eventually resigned in disgust when higher-ups thwarted their efforts to get a handle on AML "lapses" by the North American branch during a critical period when it was becoming clear that losses in the subprime market would be huge.<br />
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We were informed that senior level officials at HBUS were keep in the dark about the extent of problems plaguing HBMX by HSBC Group (London) executives, "including the CEO, Head of Compliance, Head of Audit, and Head of Legal," all of whom were aware "that the problems at HSBC Mexico involved US dollars and US dollar accounts."<br />
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We're supposed to believe that Canary Wharf "did not contact their counterparts at HSBC Bank USA to explain the significance of the problems or the potential effect on HSBC Bank USA's business." This fairy tale is further enlarged upon when we're informed that "HSBC North America's General Counsel/Regional Compliance Officer first learned of the problems at HSBC Mexico and their potential impact on HSBC Bank USA in 2010 as a result of this investigation."<br />
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According to the suspect narrative concocted by government prosecutors, HBUS's General Counsel was informed by HSBC Group Compliance Chief, David Bagley, that she wasn't told about "potential problems" at HBMX because the bank doesn't "air the dirty linen of one affiliate with another . . . we go in and fix the problems."<br />
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Really?<br />
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Keep in mind that the Office of the Comptroller of the Currency had issued not one, but <i>two</i> toothless cease-and-desist orders between 2003 and 2010 ordering HSBC to clean up their act, all of which revolved around strengthening anti-money laundering controls which were promptly ignored.<br />
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But as the US Senate Permanent Subcommittee on Investigations revealed in their 335-page <a href="http://www.hsgac.senate.gov/download/report-us-vulnerabilities-to-money-laundering-drugs-and-terrorist-financing-hsbc-case-history">report</a> (large PDF file) and related <a href="http://www.hsgac.senate.gov/subcommittees/investigations/hearings/us-vulnerabilities-to-money-laundering-drugs-and-terrorist-financing-hsbc-case-history">hearings</a> last summer, despite the fact that "Compliance and AML staffing levels were kept low for many years as part of a cost cutting measure," Senate investigators learned through HSBC internal correspondence that those charged with monitoring suspicious transactions were "struggling to 'handle the growing monitoring requirements' associated with the bank's correspondent banking and cash management programs, and requested additional staff."<br />
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"Despite requests for additional AML staffing," the Senate reported that "HBUS decided to hold staff levels to a flat headcount."<br />
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"After being turned down for additional staff, Carolyn Wind, longtime HBUS Compliance head and AML director, raised the issue of inadequate resources with the HNAH board of directors. A month after the board meeting, after seven years as HBUS' Compliance head Ms. Wind was fired," Senate investigators disclosed.<br />
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Wind, who had met with HNAH's board in October 2007 to discuss staffing, was reprimanded by her supervisor, Regional Compliance Officer and Senior Executive Vice President Janet L. Burak, for raising the issue. In an email to disgraced Group Compliance chief David Bagley, who dramatically resigned on camera during those Senate hearings, Burak "expressed displeasure" with Wind and told Bagley:<br />
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"I indicated to her my strong concerns about her ability to do the job I need her to do, particularly in light of the comments made by her at yesterday's audit committee meeting .... I noted that her comments caused inappropriate concern with the committee around: our willingness to pay as necessary to staff critical compliance functions (specifically embassy banking AML support), and the position of the OCC with respect to the merger of AML and general Compliance."<br />
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In marked contrast to the government's version, it appears that HBUS had been fully apprised of "cash management" problems <i>three years</i> earlier than claimed in the DPA, yet senior level executives choose to look the other way--so long as the cash keep flowing.<br />
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Burak's firing of Wind should have raised eyebrows at the Justice Department. As Regional Legal Department Head for North America, Burak was appointed by the HNAH board to serve as the bank's Regional Compliance Officer, a move which was even criticized by Bagley, but he was overruled by his Canary Wharf masters.<br />
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Her appointment as Regional Compliance Officer shouldn't come as a surprise however, considering that before joining the HSBC team, Burak "was group general counsel, Household International . . . as well as for Household's federal regulatory coordination and compliance function," according to a 2004 <a href="http://www.businesswire.com/news/home/20040406005586/en/HSBC-Appoints-Burak-General-Counsel">BusinessWire</a> profile. And with the bank on the hook for some $70 billion (£46.17bn) and counting in toxic Household International mortgage liabilities, her choice by London to supervise AML operations was a slam dunk.<br />
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In her new dual-hatted role, Burak was taken to the woodshed by both the Office of the Comptroller of the Currency and the Federal Reserve "for her lack of understanding of AML risks or controls" according to the Senate report. Indeed, OCC stated that Burak had "not regularly attended key committee or compliance department meetings" and had failed to keep herself and other bank executives "fully informed about issues and risks within the BSA/AML compliance program."<br />
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But if the task at hand was to keep AML staff to a "flat headcount" and not make waves with pesky audits that might force compliance with trivial matters such as legal requirements under the Bank Secrecy Act, well you get the picture! Senate investigators learned however, that BSA compliance issues were legion and what they found was just a <i>tad</i> troubling:<br />
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<blockquote>The identified problems included a once massive backlog of over 17,000 alerts identifying possible suspicious activity that had yet to be reviewed; ineffective methods for identifying suspicious activity; a failure to file timely Suspicious Activity Reports with U.S. law enforcement; a failure to conduct any due diligence to assess the risks of HSBC affiliates before opening correspondent accounts for them; a 3-year failure by HBUS, from mid-2006 to mid-2009, to conduct any AML monitoring of $15 billion [£9.53bn] in bulk cash transactions with those same HSBC affiliates, despite the risks associated with large cash transactions; poor procedures for assigning country and client risk ratings; a failure to monitor $60 trillion [£38.14tn] in annual wire transfer activity by customers domiciled in countries rated by HBUS as lower risk; inadequate and unqualified AML staffing; inadequate AML resources; and AML leadership problems.</blockquote><br />
But wait, there's more!<br />
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After Wind's dismissal, the HNAH board hired Lesley Midzain to fill the posts of Compliance head and AML director. But as Senate investigators revealed, "Ms. Midzain had no professional experience and little familiarity with US AML laws." Indeed, in December 2008 "HNAH's regulator, the Federal Reserve, provided a negative critique of Ms. Midzain's management of the bank's AML program."<br />
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According to Senate staff, the Federal Reserve complained that "Ms. Midzain did 'not possess the technical knowledge or industry experience to continue as the BSA/AML officer'." It noted that she "was interviewed by OCC examiners from another team and they supported the conclusion of the OCC resident staff that Midzain's knowledge and experience with BSA/AML risk is not commensurate to HNAH's BSA/AML high risk profile, especially when compared to other large national banks."<br />
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As a result of these rather pointed criticisms, Midzain was removed from the AML post and HBUS hired a new director, Wyndham Clark, a former US Treasury official. According to the Senate report, Clark "was required to report to Curt Cunningham, an HBUS Compliance official who freely admitted having no AML expertise, and through him to Ms. Midzain, whom the OCC had also found to lack AML expertise."<br />
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Call it a small world.<br />
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It soon became clear to Clark that although the bank had an "extremely high risk business model from AML perspective," as director he was "granted only limited authority to the AML director to remedy problems." According to a memorandum sent by Clark to his boss Curt Cunningham, he complained that "AML Director has the responsibility for AML compliance, but very little control over its success."<br />
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If one were a "conspiracy buff" one might even argue this was <i>precisely as intended</i>.<br />
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Senate investigators revealed that as he continued his work, "Clark grew increasingly concerned that the bank was not effectively addressing its AML problems. In February 2010, Mr. Clark met with the Audit Committee of the HNAH board of directors and informed the committee that he had never seen a bank with as high of an AML risk profile as HBUS."<br />
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In May 2010, he wrote to a more senior compliance officer: "With every passing day I become more concerned...if that's even possible."<br />
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Less than a year after taking the thankless job, in July 2010 Clark quit. He wrote HSBC Group Compliance chief David Bagley that he had neither the authority nor the support from senior managers needed to do his job. He told Bagley in no uncertain terms:<br />
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<blockquote>[T]he bank has not provided me the proper authority or reporting structure that is necessary for the responsibility and liability that this position holds, thereby impairing my ability to direct and manage the AML program effectively. This has resulted in most of the critical decisions in Compliance and AML being made by senior Management who have minimal expertise in compliance, AML or our regulatory environment, or for that matter, knowledge of the bank (HBUS) where most of our AML risk resides. Until we appoint senior compliance management that have the requisite knowledge and skills in these areas, reduce our current reliance on consultants to fill our knowledge gap, and provide the AML Director appropriate authority, we will continue to have limited credibility with the regulators.</blockquote><br />
According to the DPA, despite the risks associated with HSBC's highly-profitable Banknotes business, used and abused by all manner of shady customers, "from 2006 to 2009, Banknotes' AML compliance consisted of one, or at times two, compliance officers."<br />
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In 2006, the Treasury Department's Financial Crimes Enforcement Network (FinCEN) issued an Advisory warning that "US law enforcement has observed a dramatic increase in the smuggling of bulk cash proceeds from the sale of narcotics and other criminal activities from the United States into Mexico. Once the US currency is in Mexico, numerous layered transactions may be used to disguise its origins, after which it may be returned directly to the United States or further transshipped to or through other jurisdictions."<br />
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What was HSBC's response? The Justice Department informed us that despite the FinCEN notification "Banknotes stopped regular monthly monitoring of transactions for HSBC Group Affiliates, including HSBC Mexico, in July 2006."<br />
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And despite multiple notifications from government regulators, the bank accelerated their shady purchases: "Banknotes purchased approximately $7 billion [£4.51bn] in US currency from Mexico each year, with nearly half of that amount supplied by HSBC Mexico. From July 2006 to December 2008, Banknotes purchased over $9.4 [£6.06bn] billion in physical US dollars from HSBC Mexico, including over $4.1 billion [£2.64bn] in 2008 alone."<br />
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As a result of these rather willful "lapses" by senior executives, the Justice Department's "Statement of Facts" cited HSBC's,<br />
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<blockquote>a. Failure to obtain or maintain due diligence or KYC information on HSBC Group Affiliates, including HSBC Mexico; b. Failure to adequately monitor over $200 trillion [£126.9tn] in wire transfers between 2006 and 2009 from customers located in countries that HSBC Bank USA classified as "standard" or "medium" risk, including over $670 billion [£425.1bn] in wire transfers from HSBC Mexico; c. Failure to adequately monitor billions of dollars in purchases of physical US dollars ("banknotes") between July 2006 and July 2009 from HSBC Group Affiliates, including over $9.4 billion [£5.96bn] from HSBC Mexico; and d. Failure to provide adequate staffing and other resources to maintain an effective AML program.</blockquote><br />
Yet in the face of evidence that laundering drug money was anything but a mistake, Judge Gleeson was told that DOJ's decision not to criminally prosecute senior HSBC executives was predicated on the fiction that the $1.9 billion settlement's "strict conditions, and the unprecedented forfeiture and penalties imposed, [will] serve as a significant deterrent against future similar conduct."<br />
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Never mind the lack of evidence that DPA's are a "deterrent" to financial crimes. Indeed, a 2009 study by the US Government Accountability Office (<a href="http://www.gao.gov/products/GAO-10-110">GAO</a>) concluded "that the Department of Justice (DOJ) lacked performance measures to assess how Deferred Prosecution Agreements (DPA) and Non-Prosecution Agreements (NPA) contribute to its efforts to combat corporate crime."<br />
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Well, if the Justice Department lacked "metrics" as to whether or not their agreements with corporate criminals act as a deterrent to future crimes, were there other considerations behind the sweetheart deals forged between the Criminal Division, HSBC and other banks?<br />
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You bet there were and it's worth recalling statements by former UNODC director Antonio Maria Costa in this regard. In 2009, Costa told <i><a href="http://www.guardian.co.uk/global/2009/dec/13/drug-money-banks-saved-un-cfief-claims">The Observer</a></i> that "he has seen evidence that the proceeds of organised crime were 'the only liquid investment capital' available to some banks on the brink of collapse last year. He said that a majority of the $352bn (£216bn) of drugs profits was absorbed into the economic system as a result."<br />
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Costa said 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."<br />
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"Inter-bank loans were funded by money that originated from the drugs trade and other illegal activities... There were signs that some banks were rescued that way." Although Costa declined to identify the banks involved because it would not be "appropriate," he told <i>The Observer</i> that "money is now a part of the official system and had been effectively laundered."<br />
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"That was the moment [last year] when the system was basically paralysed because of the unwillingness of banks to lend money to one another," Costa averred. "The progressive liquidisation to the system and the progressive improvement by some banks of their share values [has meant that] the problem [of illegal money] has become much less serious than it was."<br />
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In other words, as illegal cash propped up the banks while the crisis was being sorted out, at the expense of the working class mind you, the financial pirates responsible for the capitalist meltdown have become even larger, thanks to taxpayer bailouts, in effect holding the economy hostage as they became "too big" to either "fail or jail."<br />
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As Matt Taibbi observed in <i><a href="http://www.rollingstone.com/politics/news/gangster-bankers-too-big-to-jail-20130214">Rolling Stone</a></i>, "At HSBC, the bank did more than avert its eyes to a few shady transactions. It repeatedly defied government orders as it made a conscious, years-long effort to completely stop discriminating between illegitimate and legitimate money. And when it somehow talked the U.S. government into crafting a settlement over these offenses with the lunatic aim of preserving the bank's license, it succeeded, finally, in making crime mainstream."<br />
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What we are dealing with here is nothing less than a perverse economic system thoroughly criminalized by its elites; a bizarro world as Michel Chossudovsky <a href="http://www.globalresearch.ca/articles/CHO402A.html">pointed out</a> where "war criminals legitimately occupy positions of authority, which enable them to decide 'who are the criminals', when in fact they are the criminals."Antifascisthttp://www.blogger.com/profile/05421707682211445550noreply@blogger.com0tag:blogger.com,1999:blog-1831516114336983238.post-48893088220794934172013-01-21T10:47:00.001-08:002013-01-21T10:47:23.769-08:00Wrist Slap for 'Too Big to Fail or Jail' JPMorgan Chase<div class="separator" style="clear: both; text-align: center;"><a href="http://4.bp.blogspot.com/-IgTdgaDOlWs/UPsEXwlzuiI/AAAAAAAAAUg/hjxOaoMeM5E/s1600/Copy-of-Narcos.jpg" imageanchor="1" style="clear:left; float:left;margin-right:1em; margin-bottom:1em"><img border="0" height="163" width="320" src="http://4.bp.blogspot.com/-IgTdgaDOlWs/UPsEXwlzuiI/AAAAAAAAAUg/hjxOaoMeM5E/s320/Copy-of-Narcos.jpg" /></a></div><br />
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With money laundering "lapses" and CEO mea culpas all the rage on Wall Street and the City of London, you would think that Hope and Change™ grifter Barack Obama's Justice and Treasury Departments would want to send a strong message to banksters who break the law.<br />
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You'd be wrong of course.<br />
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<b>'There's Nothing to See Here…'</b><br />
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While the financial press is all aflutter over news that JPMorgan Chase (JPMC) CEO Jamie Dimon had his annual pay package cut by 50 percent, from $23 million (£14.5m) to $11.5 million (£7.25m) over $6.2 billion (£3.91bn) in losses in the risky derivatives market, you'd almost believe that Dimon was lining up for food stamps or hunting down mittens to stave off New York's bone-chilling winter.<br />
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Despite allusions to what are euphemistically called "bad bets" by JPMC trader Bruno Iksil, the so-called "London Whale" on the hook for proverbial "shitty deals" that cost shareholders billions, <i><a href="http://www.bloomberg.com/news/2013-01-16/jpmorgan-reports-53-earnings-increase-as-mortgage-fees-rise.html">Bloomberg News</a></i> reported that JPMC's "fourth-quarter profit rose 53 percent, beating analysts' estimates as mortgage revenue more than doubled on record-low interest rates and government incentives."<br />
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Incentives? Now there's a polite word for a megabank with more than $2.3 trillion (£1.45tn) in assets handed some $600 billion (£378.24bn) in TARP funds, which included Federal Reserve engineered deals for their buy-out of Bear Stearns and Washington Mutual that wiped out shareholder equity as the capitalist system threatened to implode in 2008.<br />
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Adding to the sleaze factor, it emerged in 2011 that JPMC had wrongfully overcharged thousands of military families on their mortgages, including active duty personnel serving in Afghanistan. As a result of a class-action lawsuit, the bank was forced to admit they had illegally overcharged 6,000 active duty military personnel, had seized the homes of 18 military families and then paid out $27 million (£17.05m) in compensation. At a shareholder's meeting later that year Dimon "apologized" for the "error" and lending chief David Lowman fell on his sword as he was shown the door.<br />
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Talk about stand-up guys!<br />
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And never mind, as <i><a href="http://www.rollingstone.com/politics/news/secret-and-lies-of-the-bailout-20130104?print=true">Rolling Stone's</a></i> Matt Taibbi pointed out, "at the same moment that leading banks were taking trillions in secret loans from the Fed, top officials at those firms were buying up stock in their companies, privy to insider info that was not available to the public at large."<br />
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While <a href="http://www.narconews.com/whitecollarterror1.html">drug-tainted</a> Citigroup's former CEO Vikram Pandit "bought nearly $7 million in Citi stock in November 2008, just as his firm was secretly taking out $99.5 billion in Fed loans," that other paragon of banking virtue, Jamie Dimon, who "respects" the JPMC board's decision to slice his pay in half "bought more than $11 million in Chase stock in early 2009, at a time when his firm was receiving as much as $60 billion in secret Fed loans."<br />
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Such "stock purchases by America's top bankers," Taibbi wrote, "raise serious questions of insider trading." Yet not a <i>single</i> bankster has been seriously investigated let alone held to account, by the Justice Department.<br />
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How sweet a year was it for JPMorgan Chase? Pretty sweet by all accounts.<br />
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Overall, <i>Bloomberg</i> reported, "revenue increased 10 percent to $23.7 billion [£14.96bn] from $21.5 billion [£13.57bn] in the fourth quarter of 2011. Annual revenue was $97 billion [£61.23bn], down from $97.2 billion [£61.35bn] the prior year." This included investment banking fees which jumped 54 percent to $1.7 billion (£1.07bn) and revenue in the commercial banking sector which rose to $1.75 billion (£1.1bn). And with the formation of a new housing bubble due to taxpayer-subsidized record low interest rates, JPMC's profits in the mortgage writing mill rose to $418 million (£263.5m) in 2012, compared to losses which topped $263 million (£165.8m) a year earlier.<br />
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But far from being a sign that the economic black hole opened by 2008's financial collapse has contracted, there's bad news on the horizon for distressed homeowners and taxpayers who will be forced to pay the piper for the next round of predatory loans.<br />
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As analyst Mike Whitney recently pointed out in <i><a href="http://www.counterpunch.org/2013/01/11/housing-bubble-on-the-horizon/">CounterPunch</a></i> a new rule defining a "qualified mortgage" by the US Consumer Financial Protection Bureau "creates vast new opportunities for the nation's biggest banks to engage in predatory lending practices with impunity."<br />
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According to Whitney, while the financial press have described the rule "as an attempt to protect borrowers from the risky types of loans that caused the financial crisis, the opposite is true. The real purpose of the rule is to provide legal protection for the banks from homeowner lawsuits, and to lay the groundwork for more reckless lending that could inflate another housing bubble."<br />
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"In other words," Whitney noted, "the rule was designed to serve the interests of the banks and the banks alone. This is why bankers everywhere are celebrating the final draft."<br />
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Never mind that leading financial institutions were forced to cough up $25 billion (£15.76bn) in a settlement with the Office of the Comptroller of the Currency (OCC) and the Federal Reserve over shady foreclosure practices and wrongful homeowner evictions that ruined millions of lives.<br />
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JPMC's $2 billion (£1.26bn) portion of the settlement, which included "a one-time pretax charge [write down] of $700 million [£441.77m] in the fourth quarter to cover the costs associated with [the] settlement" according to Bloomberg, was a pittance compared to the trillions of dollars in assets controlled by the bank.<br />
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<b>'A Trillion Here, a Trillion There…'</b><br />
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But as bad as these gift horses are, they pale in comparison with federal government inaction when it comes to policing financial predators who inflate their balance sheets with laundered drug money and loot derived from terrorist financing and organized crime.<br />
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As Yury Fedotov, the Executive Director of the United Nations Office on Drugs and Crime (UNODC), pointed out in that agency's 2011 report, <i><a href="http://www.unodc.org/documents/data-and-analysis/Studies/Illicit_financial_flows_2011_web.pdf"">Estimating Illicit Financial Flows Resulting from Drug Trafficking and Other Transnational Organized Crime</a></i>: "Prior to this report, perhaps the most widely quoted figure for the extent of money laundering was the IMF's 'consensus range' of between 2-5 per cent of global GDP, made public in 1998. A study-of-studies, or meta-analysis, conducted for this report, suggests that all criminal proceeds are likely to have amounted to some 3.6 per cent of GDP (2.3-5.5 per cent) or around US$2.1 trillion in 2009."<br />
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The UNODC research team averred: "If only flows related to drug trafficking and other transnational organized crime activities were considered, related proceeds would have been equivalent to around US$650 billion per year in the first decade of the new millennium, equivalent to 1.5% of global GDP or US$870 billion in 2009 assuming that the proportions remained unchanged. The funds available for laundering through the financial system would have been equivalent to some 1% of global GDP or US$580 billion in 2009."<br />
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However you slice these grim estimates, it should be obvious that banks have <i>every</i> incentive to remain key players in the transnational narcotics complex and will continue to do so thanks to the federal government.<br />
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Last week, the Office of the Comptroller of the Currency (OCC) released their <a href="http://www.occ.gov/news-issuances/news-releases/2013/nr-occ-2013-8a.pdf">cease-and-desist order</a> against JPMC.<br />
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Unlike other drug money laundering banks such as Wells Fargo-owned Wachovia Bank, which agreed to a mere $160 <i>million</i> (£100.86m) settlement in 2010 in a deferred prosecution agreement (<a href="http://www.justice.gov/usao/fls/PressReleases/Attachments/100317-02.Agreement.pdf">DPA</a>) after admitting to laundering upwards of $368 <i>billion</i> (£231.99bn) for Colombian and Mexican drug cartels or the recent $1.9 billion (£1.2bn) <a href="http://www.justice.gov/opa/documents/hsbc/dpa-attachment-a.pdf">DPA</a> with Britain's HSBC global financial empire, the OCC's consent order didn't even impose a fine on JPMC for money laundering "lapses."<br />
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Now that's <i>juice!</i><br />
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Though short on details the order however, is a damning indictment of JPMC "indiscretions" when it comes to drug and other criminal money laundering. Keep in mind this is an institution that was slapped with an $88.3 million (£55.66m) fine less than 18 months ago for shipping a ton of gold bullion to Iran in breach of harsh Treasury Department sanctions. (I neither endorse nor support draconian sanctions imposed by the imperialists on the Islamic Republic, my purpose here is to point out the double standards which would land the average citizen in the slammer under "material support" statutes for trading with Iran). The January 2013 Consent Order stated although the Comptroller found serious "flaws" in their accounting practices, "the Bank neither admits nor denies" the following:<br />
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<blockquote>(1) The OCC's examination findings establish that the Bank has deficiencies in its BSA/AML [Bank Secrecy Act/anti-money laundering] compliance program. These deficiencies have resulted in the failure to correct a previously reported problem and a BSA/AML compliance program violation under 12 U.S.C. § 1818(s) and its implementing regulation, 12 C.F.R. § 21.21 (BSA Compliance Program). In addition, the Bank has violated 12 C.F.R. § 21.11 (Suspicious Activity Report Filings).<br />
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(2) The Bank has failed to adopt and implement a compliance program that adequately covers the required BSA/AML program elements due to an inadequate system of internal controls, and ineffective independent testing. The Bank did not develop adequate due diligence on customers, particularly in the Commercial and Business Banking Unit, a repeat problem, and failed to file all necessary Suspicious Activity Reports ("SARs") related to suspicious customer activity.<br />
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(3) The Bank failed to correct previously identified systemic weaknesses in the adequacy of customer due diligence and the effectiveness of monitoring in light of the customers' cash activity and business type, constituting a deficiency in its BSA/AML compliance program and resulting in a violation of 12 U.S.C. § 1818(s)(3)(B).</blockquote><br />
Wait a minute, if these were "previously identified systemic weaknesses" and if JPMC "failed to adopt and implement a compliance program" that would shield the American financial system from a tsunami of drug-tainted cash annually washing through the economy, especially "in light of the customers' cash activity and business type," why then has OCC issued another toothless Consent Order rather than forcing the bank to comply with the law? Accordingly, federal regulators charge:<br />
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<blockquote>(4) Some of the critical deficiencies in the elements of the Bank's BSA/AML compliance program, resulting in a violation of 12 U.S.C. § 1818(s)(3)(A) and 12 C.F.R. § 21.21, include the following:<br />
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(a) The Bank has an inadequate system of internal controls and independent testing.<br />
(b) The Bank has less than satisfactory risk assessment processes that do not provide an adequate foundation for management's efforts to identify, manage, and control risk.<br />
(c) The Bank has systemic deficiencies in its transaction monitoring systems, due diligence processes, risk management, and quality assurance programs.<br />
(d) The Bank does not have enterprise-wide policies and procedures to ensure that foreign branch suspicious activity involving customers of other bank branches is effectively communicated to other affected branch locations and applicable AML operations staff. The Bank also does not have enterprise-wide policies and procedures to ensure that on a risk basis, customer transactions at foreign branch locations can be assessed, aggregated, and monitored.<br />
(e) The Bank has significant shortcomings in SAR decision-making protocols and an ineffective method for ensuring that referrals and alerts are properly documented, tracked, and resolved.<br />
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(5) The Bank failed to identify significant volumes of suspicious activity and file the required SARs concerning suspicious customer activities, in violation of 12 C.F.R. § 21.11. In some of these cases, the Bank self-identified the issues and is engaged in remediation.<br />
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(6) The Bank's internal controls, including filtering processes and independent testing, with respect to Office of Foreign Asset Control ("OFAC") compliance are inadequate.</blockquote><br />
How <i>large</i> were the "significant volumes" of "suspicious activity" alluded to opaquely? <i>Where</i> did they originate? <i>Who</i> were the "suspicious customers" and <i>why</i> did JPMC <i>not</i> have "enterprise-wide policies and procedures" after being previously ordered to do so to ensure that said "suspicious customers" at foreign bank branches didn't include drug lords or terrorist financiers? All of these are unanswered questions for which the Obama administration should be held to account.<br />
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In fact, according to OCC's own <a href="http://www.occ.treas.gov/topics/compliance-bsa/bsa/bsa-regulations/index-bsa-regulations.html">regulations</a>, 12 C.F.R. § 21.21 clearly states that the federal government "requires every national bank to have a written, board approved program that is reasonably designed to assure and monitor compliance with the BSA."<br />
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At a <i>minimum</i>, an anti-money laundering program "must" (this is not optional): "1. provide for a system of internal controls to assure ongoing compliance; 2. provide for independent testing for compliance; 3. designate an individual responsible for coordinating and monitoring day-to-day compliance; and 4. provide training for appropriate personnel. In addition, the implementing regulation for section 326 of the PATRIOT Act requires that every bank adopt a customer identification program identification program as part of its BSA compliance program."<br />
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Keep in mind that Wachovia and HSBC under terms of their DPA's were forced to admit that illegal transactions "ignored the money laundering risks associated with doing business with certain Mexican customers and failed to implement a BSA/AML program that was adequate to monitor suspicious transactions from Mexico."<br />
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Furthermore, those risks were compounded, wilfully in this writer's opinion, in order to inflate bank balance sheets with drug money, through their failure to correct "systemic deficiencies in its transaction monitoring systems, due diligence processes, risk management, and quality assurance programs."<br />
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On every level, JPMorgan Chase failed to comply with existing rules and regulations that have earned penny-ante offenders terms in federal prison.<br />
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In fact, just last week Los Angeles-based "G&A Check Cashing, its manager, Karen Gasparian, and its compliance officer, Humberto Sanchez" were sentenced by US Judge John Walker to stiff prison terms, <i><a href="http://blogs.wsj.com/corruption-currents/2013/01/15/los-angeles-check-cashing-store-manager-compliance-officer-sentenced/">The Wall Street Journal</a></i> reported. For violating the Bank Secrecy Act, Gasparian was "ordered to prison for five years and Sanchez for eight months."<br />
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Are you kidding me! The <i>Journal</i> averred, "While it is common for banks to face scrutiny from the U.S. for complying with the Bank Secrecy Act, it is rare for authorities to pursue check-cashing businesses for anti-money laundering compliance issues, as they are often used by the poor, who may not have the funds to maintain a bank account."<br />
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In full clown-car mode, Assistant Attorney General Lanny Breuer, Obama's chieftain over at the Justice Department's Criminal Division, who last month refused to file criminal charges against drug-money laundering banksters at HSBC said in a <a href="http://www.justice.gov/opa/pr/2013/January/13-crm-059.html">statement</a>: "Karen Gasparian, Humberto Sanchez and their company G&A Check Cashing purposefully thwarted the Bank Secrecy Act, making it easier for others to use G&A to commit illegal activity. They knew they were required to report transactions over $10,000, but deliberately failed to do so."<br />
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Although the OCC Consent Order does not spell out who benefited from JPMC's "systemic weaknesses" when it came to lax drug money laundering controls, the suspicion persists that somewhere fugitive billionaire drug lord Chapo Guzmán is smiling as he enlarges his stable of thoroughbreds.<br />
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(Image courtesy of Daniel Hopsicker's <i><a href="http://www.madcowprod.com/">MadCow Morning News</a></i>)Antifascisthttp://www.blogger.com/profile/05421707682211445550noreply@blogger.com1tag:blogger.com,1999:blog-1831516114336983238.post-24419363871038848042013-01-13T11:04:00.001-08:002013-01-13T11:04:25.239-08:00Will JPMorgan Chase Be Held to Account for Money Laundering 'Lapses' by US Regulators?<div class="separator" style="clear: both; text-align: center;"><a href="http://3.bp.blogspot.com/-j6xLNOaXGYo/UPGwMPuLTNI/AAAAAAAAAUI/wF_S-FrqS4I/s1600/e14ae_money-black-hole.jpg" imageanchor="1" style="clear:left; float:left;margin-right:1em; margin-bottom:1em"><img border="0" height="238" width="320" src="http://3.bp.blogspot.com/-j6xLNOaXGYo/UPGwMPuLTNI/AAAAAAAAAUI/wF_S-FrqS4I/s320/e14ae_money-black-hole.jpg" /></a></div><br />
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As a sop to outraged public opinion over Wall Street's looting of the real economy, criminal banksters are coming under increased scrutiny by federal regulators.<br />
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Scrutiny however, is not the same thing as enforcement of laws such as the Bank Secrecy Act and other regulatory measures meant to stop the flow of dirty money from organized crime into the financial system.<br />
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And never mind that President Obama and his hand-picked coterie of insiders from Bank of America, Citigroup, JPMorgan Chase and Wells Fargo (all of whom figured prominently in recent narcotics scandals) are moving to impose Eurozone-style austerity measures that threaten to ravage the social safety net, the American people are spoon-fed a pack of lies that this cabal will protect their interests and enforce the law when it comes to drug money laundering.<br />
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Late last week, <i><a href="http://www.reuters.com/article/2013/01/11/us-jpmorgan-compliance-idUSBRE90A0DN20130111">Reuters</a></i> reported that "U.S. regulators are expected to order JPMorgan Chase & Co to correct lapses in how it polices suspect money flows … in the latest move by officials to force banks to tighten their anti money-laundering systems."<br />
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In December, the Department of Justice cobbled together a widely criticized deferred prosecution agreement (DPA) with Europe's largest bank, HSBC, over charges that the institution, founded in 1865 by British drug lords when the British Crown seized Hong Kong from China in the wake of the First Opium War, knowingly laundered billions of dollars in drug and terrorist money for some of the most violent gangsters on earth.<br />
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Despite the fact that DOJ imposed a $1.9 billion (£1.2bn) fine which included $655 million (£408m) in civil penalties, not a single senior officer at HSBC was criminally charged with enabling Mexican drug cartels and Al Qaeda terrorists to illegally move money through its American subsidiaries.<br />
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More outrageously, even when stiff fines are levied against criminal banks and corporations, as likely as not "some or all of these payments will probably be tax-deductible. The banks can claim them as business expenses. Taxpayers, therefore, will likely lighten the banks' loads," <i><a href="https://www.nytimes.com/2013/01/13/business/paying-the-price-in-settlements-but-often-deducting-it.html">The New York Times</a></i> disclosed.<br />
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"The action against JPMorgan," <i>Reuters</i> reported, "would be in the form of a cease-and-desist order, which regulators use to force banks to improve compliance weaknesses, the sources said. JPMorgan will probably not have to pay a monetary penalty, one of the sources said."<br />
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Read that sentence again. America's largest bank, responsible for some of the worst depredations of the housing crisis which tossed millions of citizens out of their homes and fined $7.3 billion (£4.53bn) for doing so, will not be fined nor will their officers be criminally charged for presumably washing black money for organized crime.<br />
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Despite the recklessness of senior officials at JPMorgan, including CEO Jamie Dimon, former CFO Doug Braunstein and former CIO Ina Drew over the bank's massive losses in the credit derivatives market last year, <i><a href="http://www.bloomberg.com/news/2013-01-12/jpmorgan-said-to-weigh-releasing-report-faulting-dimon-on-trades.html">Bloomberg News</a></i> reported that the board will only "consider" whether to release a report on the fiasco which wiped out close to $51 billion in shareholder value at this "too big to fail" bank.<br />
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The Office of the Comptroller of the Currency (OCC), severely criticized by the US Permanent Subcommittee on Investigations in their 335-page <a href="http://www.hsgac.senate.gov/download/?id=2BC90323-71BD-4613-A501-7562E6BADCC3">report</a> into HSBC, along with the Federal Reserve are expected to issue the cease-and-desist order as early as this week.<br />
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Last April however, when OCC issued a cease-and-desist order against Citigroup for alleged "gaps" in their oversight of cash transactions similar to those of drug-tainted HSBC and Wells-owned Wachovia, which laundered hundreds of billions of dollars for narcotics traffickers through dodgy cash exchange houses in Mexico, no monetary penalties were attached.<br />
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A "person close" to Citigroup "attributed part of the problem to an accident when a computer was unplugged from anti-money-laundering systems," according to <i><a href="https://www.nytimes.com/2012/09/15/business/money-laundering-inquiry-said-to-target-us-banks.html">The New York Times</a></i>.<br />
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While such bald-faced misrepresentations may pass muster with America's "newspaper of record," Citigroup's sorry history when it comes to facilitating criminal money flows is not so easily swept under the rug.<br />
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Late last year investigative journalist Bill Conroy reported in <i><a href="http://narcosphere.narconews.com/notebook/bill-conroy/2012/12/banks-are-where-money-drug-war">Narco News</a></i>: "In the 1990s, Raul Salinas de Gortari, the brother of former Mexican President Carlos Salinas, tapped US-based Citibank to help transfer up to $100 million out of Mexico and into Swiss bank accounts. Although US authorities investigated the suspicious money movements, ultimately no charges were brought against Raul Salinas or Citibank--a Citigroup Inc. subsidiary."<br />
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"Again," Conroy reported, "in January 2010, Citigroup popped up on banking regulators' radar, this time in Mexico, when a Mexican judge accused a half dozen casa de cambios (money transmitters) of laundering drug funds through various banks, including Citigroup's Mexican subsidiary. In that case, Citigroup again was not accused of violating any laws."<br />
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However, despite that fact that the OCC's <a href="http://www.occ.treas.gov/news-issuances/news-releases/2012/nr-occ-2012-57a.pdf">cease-and-desist order</a> against Citigroup accused the bank of systemic "internal control weaknesses" that opened the institution up to shady transactions by "high-risk customers," presumably including flush-with-cash narcotics traffickers, the bank was not indicted for criminal violations under the Bank Secrecy Act and did not admit wrongdoing, instead promising to "institute reforms."<br />
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As with Wachovia and HSBC, OCC charged that Citigroup's "lapses" included "the incomplete identification of high risk customers in multiple areas of the bank, inability to assess and monitor client relationships on a bank-wide basis, inadequate scope of periodic reviews of customers, weaknesses in the scope and documentation of the validation and optimization process applied to the automated transaction monitoring system, and inadequate customer due diligence."<br />
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Additionally, Citigroup "failed to adequately conduct customer due diligence and enhanced due diligence on its foreign correspondent customers, its retail banking customers, and its international personal banking customers and did not properly obtain and analyze information to ascertain the risk and expected activity of particular customers."<br />
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According to OCC auditors, Citigroup "self-reported" that "from 2006 through 2010, the Bank failed to adequately monitor its remote deposit capture/international cash letter instrument processing in connection with foreign correspondent banking." As I have pointed out, correspondent and private banking are gateways for laundering drug and other criminal money flows.<br />
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In other words, replicating patterns employed for decades by the world's leading financial institutions, organized criminals and terrorist financiers were enabled, with a wink-and-a-nod by the US government, above all by US secret state agencies which siphoned off part of the loot for covert operations, to wash black cash through the system as a whole.<br />
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Already stung by billions of dollars in losses due to risky trades in credit derivatives as noted above, <i><a href="http://www.cbsnews.com/8301-505123_162-57563462/jpmorgan-chase-bank-faces-major-regulatory-action/">MoneyWatch</a></i> reported "CEO Jamie Dimon can't blame this on a 'flawed, complex, poorly reviewed, poorly executed and poorly monitored' strategy, like he did when the bank lost $6.2 billion on the so-called 'London Whale' trade."<br />
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"In many ways," reporter Jill Schlesinger wrote, "the current potential regulatory action is worse than any trading loss, because it indicates a systemic lapse in controls."<br />
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According to <i>MoneyWatch</i>, regulators "appear to have found a company-wide lapse in procedures and oversight connected to anti-money-laundering (AML) surveillance and risk management. AML controls are intended to deter and detect the misuse of legitimate financial channels for the funding of money laundering, terrorist financing and other criminal acts."<br />
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But there's the rub; federal regulators are loathe to police, let alone hold to account those responsible for such illicit transactions precisely because the infusion of dirty money into the system is a splendid means to keep failed capitalist financial institutions afloat, a process which <i><a href="http://globalresearch.ca/">Global Research</a></i> political analyst Michel Chossudovsky has termed "the criminalization of the state."<br />
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In fact, as former London Metropolitan Police financial crimes specialist Rowan Bosworth-Davies recently wrote on his <a href="http://rowans-blog.blogspot.ch/2012/12/why-major-global-banks-have-become.html">website</a>: "These institutions exist … to handle and facilitate the through-put of the staggering volume of criminal and dirty money which daily flows through the financial sector, because the profits there from are just so incredibly valuable."<br />
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"The biggest problem for these banks," Bosworth-Davies observed, "is that by far the greatest amount of this money is illegal to handle under international money laundering laws. All banking institutions are now effectively subject to international laws which prohibit the handling or the facilitation of criminally-acquired money from whatever source, and that money includes the proceeds of drug trafficking, all other criminal activities (including tax evasion), and the proceeds of terrorism."<br />
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Indeed, "The money they were moving was so huge … that it became very easy to persuade Governments to turn a blind eye, while regulators were encouraged to look the other way, when the banks began engaging in a series of wholesale criminal activities."<br />
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Until OCC reveals the content of its cease-and-desist order pending against JPMorgan Chase we do not know the extent of the bank's potential criminal "lapses" under the Bank Secrecy Act.<br />
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However, as <i>Reuters</i> reported although "no immediate action is expected from US prosecutors," it is a near certainty that the federal government and complicit media will disappear whatever dirty secrets eventually emerge down the proverbial memory hole.Antifascisthttp://www.blogger.com/profile/05421707682211445550noreply@blogger.com0tag:blogger.com,1999:blog-1831516114336983238.post-23424810292975416572012-12-30T13:01:00.001-08:002012-12-30T13:01:25.781-08:00HSBC: Impunity of the Oligarchs<div class="separator" style="clear: both; text-align: center;"><a href="http://4.bp.blogspot.com/-DsGhy_BQmd8/UMzcdjm7LHI/AAAAAAAAATo/4Yr8FSMcjlw/s1600/bloodmoney.jpg" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" height="215" src="https://lh3.ggpht.com/-DsGhy_BQmd8/UMzcdjm7LHI/AAAAAAAAATo/4Yr8FSMcjlw/s320/bloodmoney.jpg" width="320" /></a></div><br />
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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.<br />
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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.<br />
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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.<br />
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Not that anything so trifling as terrorist financing or global narcotrafficking mattered much to the Obama administration.<br />
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As I previously reported, (<a href="http://antifascist-calling.blogspot.com/2012/07/black-dossier-hsbc-terrorist-finance.html">here</a>, <a href="http://antifascist-calling.blogspot.com/2012/09/black-dossier-2-hsbc-global-drug-trade.html">here</a>, <a href="http://antifascist-calling.blogspot.com/2012/10/hsbc-caught-in-new-drug-money.html">here</a> and <a href="http://antifascist-calling.blogspot.com/2012/11/greek-journalist-acquitted-for-blowing.html">here</a>), when the Senate Permanent Subcommittee on Investigations issued their mammoth 335-page <a href="http://www.hsgac.senate.gov/subcommittees/investigations/hearings/us-vulnerabilities-to-money-laundering-drugs-and-terrorist-financing-hsbc-case-history">report</a>, "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.<br />
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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.<br />
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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 <i>single</i> 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.<br />
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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.<br />
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Revelations of widespread institutional criminality are hardly a recent phenomenon. More than a decade ago journalist Stephen Bender published a <i><a href="http://www.zcommunications.org/american-banks-and-the-war-on-drugs-by-stephen-bender">Z Magazine</a></i> 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."<br />
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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."<br />
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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 <i>state capture</i> by criminal financial elites.<br />
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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).<br />
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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."<br />
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"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'."<br />
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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.<br />
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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.<br />
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In <i><a href="http://books.google.co.uk/books?id=SI3F8wEuT24C&printsec=frontcover&dq=Control+fraud+theory&hl=en&sa=X&ei=3tvVUJf5LsTmiwLhg4HYAQ&ved=0CDUQ6AEwAA#v=onepage&q=Control%20fraud%20theory&f=false">The Best Way to Rob a Bank Is to Own One</a></i>, 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."<br />
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"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."<br />
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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."<br />
<br />
In their <a href="http://www.justice.gov/opa/pr/2012/December/12-crm-1478.html">press release</a>, 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)."<br />
<br />
"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."<br />
<br />
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."<br />
<br />
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."<br />
<br />
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 <i>forever!</i><br />
<br />
Why might that be the case?<br />
<br />
<i><a href="http://dealbook.nytimes.com/2012/12/10/hsbc-said-to-near-1-9-billion-settlement-over-money-laundering/">The New York Times</a></i> 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."<br />
<br />
Keep in mind this is a "system" which former United Nations Office of Drugs and Crime director Antonio Maria Costa told <i><a href="http://www.guardian.co.uk/global/2009/dec/13/drug-money-banks-saved-un-cfief-claims">The Observer</a></i> 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."<br />
<br />
Glossing over these facts, <i>Times'</i> 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."<br />
<br />
"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."<br />
<br />
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?<br />
<br />
"A money-laundering indictment, or a guilty plea over such charges," the <i>Times</i> 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."<br />
<br />
Many of the same lame excuses for prosecutorial inaction were also prominent features in the British press.<br />
<br />
<i><a href="http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/9743839/Banks-are-too-big-to-prosecute-says-FSAs-Andrew-Bailey.html">The Daily Telegraph</a></i> 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."<br />
<br />
"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'."<br />
<br />
"'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 <i>Telegraph</i>.<br />
<br />
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."<br />
<br />
This from an administration that continues to prosecute--and jail--low-level drug offenders at record rates!<br />
<br />
"Breuer's argument is facially absurd," according to William K. Black. In a piece published by <i><a href="http://neweconomicperspectives.org/2012/12/the-second-great-betrayal-obama-and-cameron-decide-that-banks-are-above-the-law.html">New Economic Perspectives</a></i>, Black argues:<br />
<br />
<blockquote>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.</blockquote><br />
As Rowan Bosworth-Davies, a former financial crimes specialist with London's Metropolitan Police observed on his <a href="http://rowans-blog.blogspot.ch/2012/12/beware-snake-oil-salesmen-saying-that.html">web site</a>, "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?"<br />
<br />
"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?"<br />
<br />
"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?"<br />
<br />
Instead, as with the 2010 deal with Wachovia Bank, federal prosecutors cobbled together a <a href="http://www.justice.gov/usao/fls/PressReleases/Attachments/100317-02.Agreement.pdf">DPA</a> that levied a "fine" of $160 million (£99.2m) on laundered drug profits that topped $378 billion (£234.5bn).<br />
<br />
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 <i><a href="http://in.reuters.com/article/2012/09/26/hsbc-idINDEE88P03E20120926">Reuters</a></i> in September that this was merely the "tip of the iceberg."<br />
<br />
In fact, as Senate investigators discovered during their probe, the bank failed to monitor more than $670 <i>billion</i> (£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.<br />
<br />
Assistant Attorney General Lanny A. Breuer, said in <a href="http://www.justice.gov/criminal/pr/speeches/2012/crm-speech-1212111.html">prepared remarks</a> 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."<br />
<br />
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 <i>why</i> he chose not to criminally charge the bank.<br />
<br />
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"!<br />
<br />
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 <i>The Baltimore Sun</i>.<br />
<br />
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.<br />
<br />
"A Justice official said Breuer has been 'admonished'" by U.S. Attorney General Eric Holder, "but will not be disciplined," <i><a href="http://www.washingtonpost.com/world/national-security/justice-ig-critical-of-atf-in-gun-operation/2012/09/19/379daf18-0273-11e2-8102-ebee9c66e190_story.html">The Washington Post</a></i> reported.<br />
<br />
Breuer had the temerity to claim that deferred prosecution agreements "have the same punitive, deterrent, and rehabilitative effect as a guilty plea."<br />
<br />
"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."<br />
<br />
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.<br />
<br />
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."<br />
<br />
"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."<br />
<br />
Yes, you read that correctly. Despite charges that would land the average citizen in a federal gulag for <i>decades</i>, senior managers have "agreed" to "partially defer bonus compensation" for the length of the DPA!<br />
<br />
As <i><a href="http://www.rollingstone.com/politics/blogs/taibblog/outrageous-hsbc-settlement-proves-the-drug-war-is-a-joke-20121213">Rolling Stone</a></i> financial journalist Matt Taibbi commented: "Wow. So the executives who spent a decade laundering billions of dollars will have to <i>partially</i> 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 <i>completely</i> 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?"<br />
<br />
"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?"<br />
<br />
"How about <i>all</i> 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 <i>then</i> throw them in jail."<br />
<br />
But there's the rub and the proverbial fly in the ointment. The government <i>can't</i> and <i>won't</i> 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.<br />
<br />
Writing for the <i><a href="https://www.wsws.org/articles/2012/dec2012/pers-d14.shtml">World Socialist Web Site</a></i>, 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."<br />
<br />
"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.<br />
<br />
"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."<br />
<br />
Regarding America's fraudulent "War on Drugs," researcher Oliver Villar, who with Drew Cottle coauthored the essential book, <i><a href="http://monthlyreview.org/press/books/pb2518/">Cocaine, Death Squads, and the War on Terror: US Imperialism and Class Struggle in Colombia</a></i>, told <i><a href="http://www.atimes.com/atimes/Global_Economy/NI08Dj05.html">Asia Times Online</a></i>, it is a "war" that the state and leading banks and financial institutions in the capitalist West have no interest whatsoever in "winning."<br />
<br />
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."<br />
<br />
Equally important, what does the impunity shamelessly enjoyed by such loathsome parasites say about <i>us?</i><br />
<br />
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 <i>are?</i><br />
<br />
As the late author J. G. Ballard pointed out in his masterful novel <i><a href="http://www.4thestate.co.uk/publication/kingdom-come-epub-edition/">Kingdom Come</a></i>, "Consumer fascism provides its own ideology, no one needs to sit down and dictate <i>Mein Kampf</i>. Evil and psychopathy have been reconfigured into lifestyle statements."<br />
<br />
Paranoid fantasy? Wake up and smell the corporatized police state.Antifascisthttp://www.blogger.com/profile/05421707682211445550noreply@blogger.com0tag:blogger.com,1999:blog-1831516114336983238.post-49481212674530063922012-11-25T10:01:00.001-08:002012-11-25T10:01:36.991-08:00Senate Set to Introduce Bill for Broad Email Spying<div class="separator" style="clear: both; text-align: center;"><a href="http://1.bp.blogspot.com/-5BXLpV4TdGY/UK56CSmDFWI/AAAAAAAAATM/zYh5aWcdA7o/s1600/surv_clock_content.gif" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" height="179" src="https://lh3.ggpht.com/-5BXLpV4TdGY/UK56CSmDFWI/AAAAAAAAATM/zYh5aWcdA7o/s320/surv_clock_content.gif" width="160" /></a></div><br />
<br />
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," <a href="http://news.cnet.com/8301-13578_3-57552225-38/senate-bill-rewrite-lets-feds-read-your-e-mail-without-warrants/">CNET</a> revealed.<br />
<br />
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.<br />
<br />
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.<br />
<br />
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 <a href="http://www.chris-floyd.com/component/content/article/1-latest-news/2298-blogging-and-nothingness-progressives-turn-their-gaze-from-gaza.html">Chris Floyd</a> and <a href="http://powerofnarrative.blogspot.com/2012/11/when-murder-of-innocent-no-longer.html">Arthur Silber</a> pointed out.<br />
<br />
What about other "liberal icons," stalwart champions of civil liberties; what have <i>they</i> been up to since the election?<br />
<br />
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."<br />
<br />
Among the proposals found in the Leahy revisions are the following:<br />
<br />
<blockquote>• 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.<br />
<br />
• Permits state and local law enforcement to warrantlessly access Americans' correspondence stored on systems not offered "to the public," including university networks.<br />
<br />
• Authorizes any law enforcement agency to access accounts without a warrant--or subsequent court review--if they claim "emergency" situations exist.<br />
<br />
• 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.</blockquote><br />
Although a follow-up <a href="http://news.cnet.com/8301-13578_3-57552687-38/leahy-scuttles-his-warrantless-e-mail-surveillance-bill/">CNET</a> 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.<br />
<br />
"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."<br />
<br />
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."<br />
<br />
The strongest objections to providing the public with privacy safeguards came, you guessed it, from officials within Obama's Department of Justice.<br />
<br />
Earlier this year, <a href="http://news.cnet.com/8301-31921_3-20051461-281.html">CNET</a> reported that the DOJ "offered what amounts to a frontal attack on proposals to amend federal law to better protect Americans' privacy."<br />
<br />
"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."<br />
<br />
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'."<br />
<br />
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.<br />
<br />
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.<br />
<br />
Earlier this month, <i><a href="https://rt.com/usa/news/dark-fbi-internet-calea-876/">Russia Today</a></i> 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."<br />
<br />
"Washington," <i>RT</i> 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."<br />
<br />
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."<br />
<br />
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 <i>that</i> for "transparency"!<br />
<br />
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 <i><a href="http://www.washingtonpost.com/world/national-security/new-counterterrorism-guidelines-would-permit-data-on-us-citizens-to-be-held-longer/2012/03/21/gIQAFLm7TS_story.html">The Washington Post</a></i> 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.<br />
<br />
The trend towards retaining more and more data by intelligence agencies and local police has accelerated with technological advances. As <i><a href="http://thecaucus.blogs.nytimes.com/2012/08/14/advances-in-data-storage-have-implications-for-government-surveillance/">The New York Times</a></i> 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."<br />
<br />
"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."<br />
<br />
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."<br />
<br />
"Tracking a person's movements for a year, collected from their cellphone, would take so little space as to carry a trivial cost," the <i>Times</i> 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."<br />
<br />
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."<br />
<br />
This "parallel revolution" was hinted at by investigative journalist James Bamford. In his March piece in <i><a href="http://www.wired.com/threatlevel/2012/03/ff_nsadatacenter/all/1">Wired Magazine</a></i>, Bamford described efforts by the National Security Agency to build "super-fast computers to conduct brute-force attacks on encrypted messages."<br />
<br />
In 2009, "they made a big breakthrough," a former "senior intelligence official" told <i>Wired</i>. "The NSA believes it's on the verge of breaking a key encryption algorithm--opening up hoards of data."<br />
<br />
"That," the former official noted, "is where the value of Bluffdale, and its mountains of long-stored data, will come in," Bamford wrote.<br />
<br />
"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."<br />
<br />
And if it can be intercepted, mined and stored, it can be searched, giving government snoops an unprecedented window into our lives.<br />
<br />
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."<br />
<br />
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.<br />
<br />
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.<br />
<br />
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."<br />
<br />
The Electronic Privacy Information Center (<a href="https://epic.org/alert/epic_alert_1920.html">EPIC</a>) 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'."<br />
<br />
"In February 2011," <a href="https://epic.org/foia/epic-v-dhs-media-monitoring/">EPIC</a> 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."<br />
<br />
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'."<br />
<br />
"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."<br />
<br />
Ironically enough, in October the U.S. Senate Permanent Subcommittee on Investigations issued a report, <a href="http://www.hsgac.senate.gov/subcommittees/investigations/media/investigative-report-criticizes-counterterrorism-reporting-waste-at-state-and-local-intelligence-fusion-centers">Federal Support for and Involvement in State and Local Fusion Centers</a>, 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."<br />
<br />
"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."<br />
<br />
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."<br />
<br />
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."<br />
<br />
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, <i><a href="http://washingtontechnology.com/articles/2012/11/13/dhs-contractor-breakdown.aspx">Washington Technology</a></i> 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."<br />
<br />
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.<br />
<br />
<div style="text-align: center;">• • •</div><br />
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."<br />
<br />
Recent revelations by <i><a href="http://www.washingtonpost.com/world/national-security/plan-for-hunting-terrorists-signals-us-intends-to-keep-adding-names-to-kill-lists/2012/10/23/4789b2ae-18b3-11e2-a55c-39408fbe6a4b_print.html">The Washington Post</a></i> 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.<br />
<br />
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.Antifascisthttp://www.blogger.com/profile/05421707682211445550noreply@blogger.com0tag:blogger.com,1999:blog-1831516114336983238.post-47071963852318226082012-11-11T09:23:00.002-08:002012-11-11T09:25:04.117-08:00Greek Journalist Acquitted for Blowing Tax Fraud Whistle. Widespread Corruption Linked to Private HSBC Accounts<div class="separator" style="clear: both; text-align: center;"><a href="http://4.bp.blogspot.com/-Tjgu-ynme5E/UJVphhwqpoI/AAAAAAAAAS4/CRcrUL-ljBc/s1600/euro-examples.jpg" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" height="188" src="https://lh3.ggpht.com/-Tjgu-ynme5E/UJVphhwqpoI/AAAAAAAAAS4/CRcrUL-ljBc/s200/euro-examples.jpg" width="200" /></a></div><br />
<br />
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.<br />
<br />
Vaxevanis, who publishes the investigative news magazine <i><a href="http://www.hotdoc.gr/">Hot Doc</a></i>, 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.<br />
<br />
Known as the "<a href="http://www.wikileaks-forum.com/index.php/topic,15772.0.html">Lagarde List</a>," 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.<br />
<br />
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.<br />
<br />
<b>Insider Leaks</b><br />
<br />
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.<br />
<br />
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.<br />
<br />
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.<br />
<br />
Increasingly troubled by the bank's dubious practices, for two years beginning in 2006, he mirrored account information onto his laptop.<br />
<br />
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.<br />
<br />
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.<br />
<br />
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.<br />
<br />
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.<br />
<br />
If convicted, Falciani faces a three-year prison term and a fine that could top €200,000 ($253,000).<br />
<br />
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.<br />
<br />
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.<br />
<br />
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.<br />
<br />
Last spring, <i><a href="http://elpais.com/elpais/2012/05/22/inenglish/1337711565_616291.html">El País</a></i> 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."<br />
<br />
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).<br />
<br />
In a report last summer on Switzerland's extradition request, <i><a href="http://elpais.com/elpais/2012/08/19/inenglish/1345394254_320779.html">El País</a></i> reported, "now that Falciani is being held in a Spanish jail, the High Court is faced with a legal problem, according to judicial sources."<br />
<br />
Why might that be the case?<br />
<br />
"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."<br />
<br />
The most serious hurdle which Swiss authorities must overcome are that allegations against Falciani are not considered criminal offenses in Spain.<br />
<br />
"In fact," <i>El País</i> 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."<br />
<br />
The same cannot be said for HSBC, Santander or other financial giants considered "too big to fail, or jail."<br />
<br />
After his July arrest, <i><a href="http://www.telegraph.co.uk/finance/financial-crime/9424836/Former-HSBC-worker-Herve-Falciani-arrested-over-stolen-account-details.html">The Daily Telegraph</a></i> 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."<br />
<br />
"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?"<br />
<br />
Why you <i>expose</i> the bastards, of course!<br />
<br />
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.<br />
<br />
Moves against Falciani by the Swiss government are reminiscent of the U.S. Justice Department's 2008 prosecution of UBS whistleblower <a href="http://www.whistleblowers.org/index.php?option=com_content&task=view&id=1036">Bradley Birkenfeld</a>.<br />
<br />
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.<br />
<br />
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.<br />
<br />
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 <i><a href="http://www.pbs.org/wgbh/pages/frontline/shows/tax/etc/synopsis.html">Frontline</a></i> 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.<br />
<br />
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 <i>single</i> UBS official was criminally prosecuted, or even charged, the result of a sweetheart "deferred prosecution agreement" negotiated with the Justice Department.<br />
<br />
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.<br />
<br />
Readers will recall that the 2010 <a href="http://www.justice.gov/usao/fls/PressReleases/Attachments/100317-02.Agreement.pdf">deferred prosecution agreement</a> cobbled together between the Justice Department and Wachovia Bank led to a microscopic $160 <i>million</i> fine despite strong evidence that the bank, now owned by Wells Fargo, as <i><a href="http://www.bloomberg.com/news/2010-07-07/wachovia-s-drug-habit.html">Bloomberg Markets</a></i> magazine revealed, had laundered upwards of $378 <i>billion</i> for Colombian and Mexican drug cartels.<br />
<br />
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 <i><a href="http://www.forbes.com/profile/igor-olenicoff/">Forbes</a></i> profile.<br />
<br />
However, federal prosecutors lied to the judge when they claimed during his sentencing hearing that he had <i>not</i> exposed Olenicoff's fraud; in fact, he <i>had</i>, on multiple occasions, beginning with his 2007 testimony before the U.S. Senate Permanent Subcommittee on Investigations.<br />
<br />
Set to be released this month, Birkenfeld, whom the <i><a href="https://www.nydailynews.com/news/national/ubs-whistleblower-bradley-birkenfeld-deserves-statue-wall-street-prison-sentence-article-1.168809">New York Daily News</a></i> 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.<br />
<br />
<b>Another Day, Another Filthy HSBC Scandal</b><br />
<br />
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."<br />
<br />
Press reports failed to mention whether HSBC apologized to European taxpayers for the role they played in continent-wide tax fraud.<br />
<br />
As <i>Antifascist Calling</i> has previously reported (<a href="http://antifascist-calling.blogspot.com/2012/10/hsbc-caught-in-new-drug-money.html">here</a>, <a href="http://antifascist-calling.blogspot.com/2012/09/black-dossier-2-hsbc-global-drug-trade.html">here</a> and <a href="http://antifascist-calling.blogspot.com/2012/07/black-dossier-hsbc-terrorist-finance.html">here</a>), the multinational banking giant stands <a href="http://www.hsgac.senate.gov/download/?id=2BC90323-71BD-4613-A501-7562E6BADCC3">accused</a> by U.S. Senate investigators of smoothing the way for terrorist financiers and money laundering drug cartels.<br />
<br />
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), <i><a href="http://www.guardian.co.uk/business/2012/nov/05/hsbc-warns-money-laundering-fines">The Guardian</a></i> reported.<br />
<br />
According to <i><a href="http://dealbook.nytimes.com/2012/11/05/hsbc-sets-aside-extra-800-million-for-u-s-money-laundering-case/">The New York Times</a></i>, "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."<br />
<br />
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," <i><a href="http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/9665741/HSBC-investigation-Drug-dealers-gun-runners-and-Britains-biggest-bank.html">The Daily Telegraph</a></i> disclosed.<br />
<br />
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'."<br />
<br />
According to the <i>Telegraph</i>, 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."<br />
<br />
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."<br />
<br />
"One investment manager has more than £6 million in his account," the <i>Telegraph</i> 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."<br />
<br />
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.<br />
<br />
Richard Murphy, a prominent British tax accountant and campaigner against offshore tax havens like Jersey told <i><a href="http://www.dailymail.co.uk/news/article-2230349/HSBC-accused-setting-thousands-tax-evading-accounts-Jersey-including-drugs-arms-dealers.html">The Daily Mail</a></i> the leaked HSBC accounts could be the "tip of the iceberg."<br />
<br />
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."<br />
<br />
It now appears from these latest revelations this continues to be the case.<br />
<br />
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 <i>Telegraph</i> story broke.<br />
<br />
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."<br />
<br />
Translation: "if you catch us in the act we'll 'fess up, otherwise mum's the word chumps!"<br />
<br />
More recently, <i><a href="http://www.dailymail.co.uk/news/article-2226819/Tax-evaders-wont-prosecuted--stay-anonymous-HMRC-refuses-500-Britons-Lagarde-List.html">The Daily Mail</a></i> reported that "hundreds of tax dodgers" on the Lagarde List "will escape prosecution and will be allowed to keep their identities hidden."<br />
<br />
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."<br />
<br />
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 <i>Mail</i> disclosed.<br />
<br />
Trifling details such as these shouldn't surprise anyone. As the <a href="http://taxjustice.blogspot.com/2012/11/britains-tax-offices-owned-offhore-may.html">Tax Justice Network</a> 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."<br />
<br />
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 <i>owners</i>--and note carefully that does not mean they make a lot of money for their foolish <i>investors</i>."<br />
<br />
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."<br />
<br />
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."<br />
<br />
Talk about "state capture"!<br />
<br />
But it gets worse. As Rowan Bosworth-Davies, a former financial crimes specialist with London's Metropolitan Police observed on his <a href="http://rowans-blog.blogspot.ch/2012/11/the-fsa-proves-that-it-has-finally-lost.html">web site</a> Friday, Britain's Financial Service Authority (FSA) are utterly clueless when it comes to cracking down on illegal drug money laundering by British banks.<br />
<br />
"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...'"<br />
<br />
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."<br />
<br />
"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."<br />
<br />
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!"<br />
<br />
<b>"Austerity" Regimes: Fronts for Global Crime</b><br />
<br />
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 <a href="http://globalresearch.ca/">Center for Research on Globalization</a> has long observed, represents the "criminalization of the state," that is, the end stage of a capitalist system in terminal crisis.<br />
<br />
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.<br />
<br />
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 <i>and</i> financial speculation.<br />
<br />
Although <i>Hot Doc's</i> publication of secret HSBC accounts embarrassed the Greek government and their European paymasters, moves to reduce Greek workers to abject poverty continue apace.<br />
<br />
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.<br />
<br />
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 <i>grift</i> which Greeks are forced to pay with their lives.<br />
<br />
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.<br />
<br />
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!<br />
<br />
<i><a href="http://www.reuters.com/article/2012/11/05/greece-idUSL5E8M5CXS20121105">Reuters</a></i> 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."<br />
<br />
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."<br />
<br />
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.<br />
<br />
As the <i><a href="https://www.wsws.org/articles/2012/sep2012/gree-s22.shtml">World Socialist Web Site</a></i> 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."<br />
<br />
"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."<br />
<br />
Last week, the <i><a href="https://www.wsws.org/articles/2012/oct2012/gree-o27.shtml">World Socialist Web Site</a></i> 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."<br />
<br />
Cuts in the budget have already seriously impacted the delivery of vital health care services to Greek citizens.<br />
<br />
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."<br />
<br />
"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."<br />
<br />
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.<br />
<br />
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.<br />
<br />
"In the two years since it had been handed to Greek authorities by the IMF's chief Christine Lagarde," <i><a href="http://www.guardian.co.uk/world/2012/nov/01/greek-editor-kostas-vaevanis-acquitted">The Guardian</a></i> 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."<br />
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Greece, Vaxevanis wrote in <i><a href="http://www.guardian.co.uk/commentisfree/2012/oct/30/greece-democracy-hot-doc-lagarde-list">The Guardian</a></i>, 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."<br />
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"The 'Lagarde' case in Greece is merely an extreme expression of this situation," Vaxevanis averred.<br />
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"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."<br />
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"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."<br />
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"It is quite clear the political system did everything not to publish this list" he said.<br />
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"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 <i>Guardian</i> during a recess in his recent trial.<br />
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"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."<br />
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"They can no longer play hide and seek," Vaxevanis told <i><a href="http://www.telegraph.co.uk/news/worldnews/europe/greece/9646667/Greek-journalists-being-muzzled-by-government.html">The Daily Telegraph</a></i>, "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."<br />
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In a <i><a href="http://www.reuters.com/article/2012/11/02/us-greece-journalist-idUSBRE8A113420121102">Reuters</a></i> 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."<br />
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Sound familiar? It should. And if you think "austerity" is a game that only the Europeans are playing, better think again!<br />
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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.<br />
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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.Antifascisthttp://www.blogger.com/profile/05421707682211445550noreply@blogger.com0tag:blogger.com,1999:blog-1831516114336983238.post-9134888033186543582012-10-30T12:05:00.002-07:002012-10-30T12:06:48.675-07:00HSBC Caught in New Drug Money Laundering Scandal<div class="separator" style="clear: both; text-align: center;"><a href="http://4.bp.blogspot.com/-ZGNA_mMpsdE/UI1z-bV3tOI/AAAAAAAAASQ/mHy8bgriIsQ/s1600/Copy-of-Narcos.jpg" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" height="163" src="https://lh3.ggpht.com/-ZGNA_mMpsdE/UI1z-bV3tOI/AAAAAAAAASQ/mHy8bgriIsQ/s320/Copy-of-Narcos.jpg" width="320" /></a></div><br />
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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 <a href="http://www.hsgac.senate.gov/download/?id=2BC90323-71BD-4613-A501-7562E6BADCC3">report</a> charged, new evidence emerged that its business as usual for the multinational banking giant founded by Hong Kong-based British opium merchants.<br />
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Earlier this month, <i><a href="http://www.independent.co.uk/news/world/europe/the-assistant--mayor-the-swiss-bank-accounts-and-the-350000-of-moroccan-drugs-money-8210969.html">The Independent</a></i> 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."<br />
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The bank embroiled in this latest scandal? Why HSBC, of course!<br />
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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."<br />
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But that's not the only place where crisp bundles of cash were turning up.<br />
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"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," <i>The Independent</i> averred.<br />
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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.<br />
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<i>The Independent</i> 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."<br />
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"The HSBC bank has confirmed that its employee was involved in the affair," <i><a href="http://www.swissinfo.ch/eng/politics/foreign_affairs/Bank_secrecy_targeted_in_money_laundering_case.html?cid=33750772">Swiss Info</a></i> 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."<br />
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Talk about closing the barn door after the horses have escaped!<br />
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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.<br />
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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!<br />
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When Lamblin's home was raided "police discovered €400,000 (SFr484,000) in low-value notes" in safes belonging to the "progressive" politician, <i>Swiss Info</i> averred.<br />
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In the wake of her arrest, Lamblin was forced to resign although she denied "any involvement" in the drug smuggling scheme.<br />
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Her lawyer, Jérôme Boursican told <a href="http://au.news.yahoo.com/thewest/a/-/world/15113792/french-and-swiss-crack-down-on-drug-money-laundering/">AFP</a> "she had held 350,000 euros from a family legacy in a Swiss account."<br />
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"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.<br />
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The attorney told <a href="http://www.france24.com/en/20121013-france-green-party-official-charged-money-laundering-florence-lamblin">France 24</a> 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'."<br />
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The "error" of <i>getting caught</i> perhaps?<br />
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Despite Lamblin's professed innocence, <i>Swiss Info</i> 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."<br />
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As preliminary reports suggest it appears that Lamblin was keen on keeping more than the environment "green."<br />
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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," <i>The Independent</i> reported.<br />
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"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."<br />
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"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," <i>The Independent</i> averred.<br />
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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.<br />
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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."<br />
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"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."<br />
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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!<br />
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As financial researcher James S. Henry pointed out in <i><a href="http://www.taxjustice.net/cms/upload/pdf/Price_of_Offshore_Revisited_120722.pdf">The Price of Offshore Revisited</a></i>: "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."<br />
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"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."<br />
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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.<br />
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In July however, when the Senate pointed a finger directly at HSBC over anti-money laundering "lapses," <i><a href="http://www.thebureauinvestigates.com/2012/07/28/the-200m-question-trade-minister-lord-green-linked-to-swiss-hsbc-tax-scandal/">The Bureau of Investigative Journalism</a></i> 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."<br />
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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.<br />
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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 <i>Bureau</i> 'the early indications are that the amounts are significant'."<br />
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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 <i>Bureau</i> the average amount evaded in the 6,000 accounts is likely to range between £33,000 and £50,000."<br />
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While the sums involved in the Parisian money laundering and drugs scandal may be chump change in comparison to the <i>trillions of dollars</i> 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 (<a href="http://www.unodoc.org/documents/data-and-analysis/Studies/Illicit_financial_flows_2011_web.pdf">UNODC</a>) revealed last year, it does demonstrate the utterly corrupt nature of the system as a whole.<br />
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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.<br />
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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."<br />
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Public sector thefts that enrich the shareholders and officers of corrupt institutions like HSBC.<br />
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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.<br />
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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.<br />
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"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," <i><a href="http://www.bloomberg.com/news/2012-08-24/hsbc-in-settlement-talks-with-u-s-over-money-laundering.html">Bloomberg News</a></i> reported.<br />
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According to <i><a href="http://dealbook.nytimes.com/2012/08/28/hsbcs-mounting-legal-liability/">The New York Times</a></i>, "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'."<br />
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A spokesperson for HSBC however, told the <i>Times</i> 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'."<br />
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But as Rowan Bosworth-Davies, a former financial crimes specialist with London's Metropolitan Police <a href="http://rowans-blog.blogspot.ch/2012/10/why-americans-must-prosecute-hsbc-if.html">observed</a>: "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."<br />
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For their part, Swiss bankers are scrambling to put as much daylight as possible between themselves, the Paris money laundering scandal and HSBC.<br />
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Bernard Droux, the chairman of the Geneva Financial Center foundation, an umbrella group of independent banks and wealth managers told <i>Swiss Info</i>: "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."<br />
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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."<br />
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He hastened to add that Switzerland was at the "forefront" of the international fight against drug money.<br />
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However, Droux's "black sheep" brush-off was undercut by a recent <i><a href="http://www.businessweek.com/news/2012-10-25/swiss-banks-go-local-in-bid-to-lure-latin-american-millionaires">Bloomberg Businessweek</a></i> 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."<br />
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This "changing relationship," <i>Bloomberg</i> 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."<br />
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"'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'."<br />
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It is worth recalling in this context that Julius Baer's Cayman Islands division, as the whistleblowing web site <a href="http://wikileaks.org/wiki/Bank_Julius_Baer_millions_of_USD_in_trust_for_Mexican_mass_murderer_and_drug_trafficker_Arturo_Acosta_Chapparo,_1998">WikiLeaks</a> 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.<br />
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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.<br />
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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."<br />
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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?<br />
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Paging Chapo Guzmán, white courtesy telephone!<br />
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(Image courtesy of Daniel Hopsicker's <i><a href="http://madcowprod.com/">MadCow Morning News</a></i>)Antifascisthttp://www.blogger.com/profile/05421707682211445550noreply@blogger.com0tag:blogger.com,1999:blog-1831516114336983238.post-26309395918330983942012-10-21T12:11:00.000-07:002012-10-21T12:14:07.354-07:00Teflon President? Noose Tightens Around Uribe as Former Death Squad Leaders Spill the Beans<div class="separator" style="clear: both; text-align: center;"><a href="http://4.bp.blogspot.com/-oug4ULbrmKo/UHsEdEICTgI/AAAAAAAAAR4/2wiNm0rJdSk/s1600/uribe-narcoterrorista.jpg" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" height="290" src="https://lh3.ggpht.com/-oug4ULbrmKo/UHsEdEICTgI/AAAAAAAAAR4/2wiNm0rJdSk/s320/uribe-narcoterrorista.jpg" width="320" /></a></div><br />
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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."<br />
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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."<br />
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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 <a href="http://www.newscorp.com/corp_gov/bod.html">News Corporation</a>?<br />
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When will <i>they</i> be brought to ground?<br />
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<b>A Family Affair</b><br />
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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.<br />
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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.<br />
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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.<br />
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As the net tightens, members of the president's own family are sharply focused in the cross-hairs of investigators. Back in June, <i><a href="http://antifascist-calling.blogspot.com/2012/06/american-narcos-real-masters-of.html">Antifascist Calling</a></i> 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.<br />
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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.<br />
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According to the <a href="http://www.justice.gov/usao/fls/PressReleases/120809-01.html">Justice Department</a>, 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.<br />
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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.<br />
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Among the firms targeted were <i>Linea Aerea Pueblos Amazonicos S.A.S.</i>, a newly-created airline operating in eastern Colombia, <i>Red Mundial Inmobiliaria, S.A. de C.V.</i>, a real estate company located near Mexico City, along with <i>Gestores del Ecuador Gestorum S.A.</i>, a consulting firm located in Quito, Ecuador.<br />
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It is also worth noting that the Cifuentes Villa organization, as the <a href="http://www.publicintegrity.org/node/8284">Center of Public Integrity</a> reported, have also profited from illegal mining operations that traffic rare-earth minerals destined for the world market.<br />
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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."<br />
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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," <i><a href="http://www.colombiareports.com/colombia-news/news/24546-colombias-justice-minister-not-aware-of-extradition-request-for-uribes-niece.html">Colombia Reports</a></i> informed us.<br />
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Imagine that.<br />
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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," <i>Colombia Reports</i> averred.<br />
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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 <i><a href="http://www.arcoiris.com.co/2012/06/sobrina-y-cunada-de-alvaro-uribe-apresadas-en-colombia-con-fines-de-extradicion-a-ee-uu-por-ser-socias-y-aliadas-estrategicas-del-cartel-de-sinaloa-segun-la-dea/">Nuevo Arco Iris</a></i> political research center in Bogotá disclosed.<br />
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Among the unanswered questions surrounding these recent arrests, investigative journalist Daniel Hopsicker <a href="http://www.madcowprod.com/2012/08/16/queen-pacific-sister-alvaro-uribe/">wondered</a>: "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?"<br />
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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.<br />
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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?"<br />
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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," <i><a href="http://www.colombiareports.com/colombia-news/news/16097-new-book-adds-to-claims-against-uribes-brother-that-he-led-paramilitary-group.html">Colombia Reports</a></i> disclosed.<br />
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Investigations into that group, the notorious death squad the 12 Apostles, again surfaced when <i><a href="http://www.washingtonpost.com/wp-dyn/content/article/2010/05/23/AR2010052303821.html">The Washington Post</a></i> 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."<br />
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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 <i>Post</i> "he received a monthly payment of about $2,000 delivered by Santiago Uribe."<br />
<br />
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."<br />
<br />
"The revelations," according to the <i>Post</i>, "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."<br />
<br />
"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.<br />
<br />
"Meneses," the <i>Post</i> 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."<br />
<br />
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."<br />
<br />
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 <i>Post</i> that the former police chief "'incriminates himself and also the brother of the president who managed the paramilitary group, but also President Uribe'."<br />
<br />
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.<br />
<br />
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.<br />
<br />
And with two more senators now under investigation for suspected ties to paramilitary death squads <i><a href="http://colombiareports.com/colombia-news/news/26551-more-senators-to-be-investigated-for-parapolitics.html">Colombia Reports</a></i> averred, Uribe's teflon armor is slowly being chipped away.<br />
<br />
<b>Parapolitical Scandal</b><br />
<br />
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?<br />
<br />
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.<br />
<br />
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 <i>Autodefensas Unidas de Colombia</i> (United Self-Defense Forces of Colombia, or AUC).<br />
<br />
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.<br />
<br />
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 <i>Águilas Negras</i>, or Black Eagles, and the <i>Ejército Revolucionario Popular Antiterrorista Colombiano</i> (Popular Revolutionary Anti-Terrorist Army of Colombia, ERPAC), derive the bulk of their income from drug trafficking as they wage war against the leftist <i>Fuerzas Armadas Revolucionarias de Colombia</i> (Revolutionary Armed Forces of Colombia, or FARC), trade unionists and land reform activists.<br />
<br />
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.<br />
<br />
In fact, as the Agency was forced to admit in the wake of "suicided" journalist Gary Webb's "<a href="http://www.narconews.com/darkalliance/">Dark Alliance</a>" investigation, the CIA and Reagan's Justice Department agreed to a <a href="http://ciadrugs.homestead.com/files/cia-doj-agreement.gif">Memorandum of Understanding</a> that handed their dope-dealing Contra assets get-out-of-jail-free cards.<br />
<br />
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.<br />
<br />
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.<br />
<br />
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 <i>Departamento Administrativo de Seguridad</i> (Administrative Department of Security), the Colombian equivalent of the CIA.<br />
<br />
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 <i>sicarios</i> (assassins) and drug traffickers in exchange for erasing their criminal histories, along with those of the Cifuentes Villa clan, from the state intelligence database.<br />
<br />
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.<br />
<br />
More recently, the not-so-hidden hand of the United States emerged.<br />
<br />
<i><a href="http://www.washingtonpost.com/national/national-security/us-aid-implicated-in-abuses-of-power-in-colombia/2011/06/21/gIQABrZpSJ_story.html">The Washington Post</a></i> 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."<br />
<br />
<i>Post</i> 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."<br />
<br />
In fact, Colombia prosecutors told the <i>Post</i> 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."<br />
<br />
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."<br />
<br />
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.<br />
<br />
"Some of those charged or under investigation have described the importance of U.S. intelligence resources and guidance," the <i>Post</i> disclosed, "and say they regularly briefed embassy 'liaison' officials on their intelligence-gathering activities."<br />
<br />
"'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."<br />
<br />
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 <i>Post</i> reported.<br />
<br />
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.<br />
<br />
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," <i><a href="http://colombiareports.com/colombia-news/news/25614-former-senator-charged-with-promoting-financing-death-squads.html">Colombia Reports</a></i> disclosed.<br />
<br />
"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."<br />
<br />
Mancuso, who took over the AUC when <a href="http://www.narconews.com/Issue29/article729.html">Israeli-trained</a> narcotrafficker and death-squad <i>führer</i> 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 <i><a href="http://colombiareports.com/colombia-news/news/25739-auc-commander-confirms-paramilitary-support-for-uribes-2002-campaign.html">Colombia Reports</a></i>.<br />
<br />
Prior to his arrest, the human rights organization <a href="http://www.derechos.org/nizkor/colombia/doc/narcoseng.html">Equipo Nizkor</a> reported that Mancuso, the son of Italian immigrants, along with being an AUC "godfather," was also a member of the <i>'Ndrangheta</i>, "the powerful Calabrian mafia which according to Italian police, exceeds the Sicilian Cosa Nostra in both strength and size."<br />
<br />
In fact, when Italian anti-Mafia prosecutor Nicola Gratteri flew to Bogotá to investigate the <i>'Ndrangheta's</i> Colombian drugs network, Gratteri was told by Mancuso he had spied on him the entire time.<br />
<br />
"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 <i><a href="http://www.thedailybeast.com/articles/2012/06/14/the-mafia-s-public-enemy-number-one-italian-prosecutor-nicola-gratteri.html">The Daily Beast</a></i>. "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?"<br />
<br />
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.<br />
<br />
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."<br />
<br />
Rather conveniently, one might say.<br />
<br />
"According to El Iguano," <i>Colombia Reports</i> 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."<br />
<br />
The former president denounced these claims and said he would launch "a criminal complaint against the former paramilitary for libel."<br />
<br />
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," <i><a href="http://colombiareports.com/colombia-news/news/26195-uribe-knew-paramilitaries-supported-2002-campaign-former-ally.html">Colombia Reports</a></i> disclosed last month.<br />
<br />
The now-disgraced politician said that Uribe "never objected" to meeting with the AUC-backed politicians, but "simply maintained a prudent silence."<br />
<br />
In a recent interview, de la Espriella told <i><a href="http://www.elespectador.com/impreso/cuadernilloa/entrevista-de-cecilia-orozco/articulo-379748-fuimos-voceros-de-mancuso">El Espectador</a></i> that the AUC had donated some $134 thousand to Uribe's 2002 presidential campaign.<br />
<br />
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."<br />
<br />
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 <i><a href="http://www.colombiareports.com/colombia-news/news/26208-ex-security-chief-willing-to-testify-against-uribe-w-radio.html">Colombia Reports</a></i>.<br />
<br />
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."<br />
<br />
According to "highly credible sources" cited by <i>Colombia Reports</i>, Santoyo "is willing to implicate the ex-president and other top officials," in exchange for a "reduced sentence."<br />
<br />
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.<br />
<br />
"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," <i><a href="http://www.colombiareports.com/colombia-news/news/26080-us-not-investigating-colombian-officials-police-.html">Colombia Reports</a></i> 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'."<br />
<br />
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.<br />
<br />
<b>Back to the Future: U.S. Complicity and Cover-Up</b><br />
<br />
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."<br />
<br />
In declassified documents published by the <a href="http://www.gwu.edu/~nsarchiv/NSAEBB/NSAEBB131/index.htm">National Security Archive</a> 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."<br />
<br />
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'."<br />
<br />
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."<br />
<br />
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."<br />
<br />
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.<br />
<br />
"Uribe," the <i>Archive</i> 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."<br />
<br />
"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."<br />
<br />
Four years later in another release of previously <a href="http://www.gwu.edu/~nsarchiv/NSAEBB/NSAEBB243/index.htm">classified documents</a>, the <i>Archive</i> 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."<br />
<br />
"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."<br />
<br />
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."<br />
<br />
"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."<br />
<br />
In this context, as Peter Dale Scott observed in <i><a href="https://rowman.com/ISBN/9780742525214">Drugs, Oil, and War</a></i>, "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."<br />
<br />
"Allies" like Álvaro Uribe.Antifascisthttp://www.blogger.com/profile/05421707682211445550noreply@blogger.com2tag:blogger.com,1999:blog-1831516114336983238.post-69621773645512706762012-09-24T08:00:00.001-07:002012-09-24T08:01:33.788-07:00Black Dossier 2: HSBC & the Global Drug Trade<a href="http://1.bp.blogspot.com/-aC79hfeAYLI/UC-9PR12VmI/AAAAAAAAAP0/yhTLqy5Oqes/s1600/money_laundering_scheme_big.jpg"><img alt="" border="0" id="BLOGGER_PHOTO_ID_5778044917124585058" src="http://1.bp.blogspot.com/-aC79hfeAYLI/UC-9PR12VmI/AAAAAAAAAP0/yhTLqy5Oqes/s320/money_laundering_scheme_big.jpg" style="cursor: hand; cursor: pointer; float: left; height: 194px; margin: 0 10px 10px 0; width: 320px;" /></a><br />
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<br />
<span style="font-weight: bold;"><span style="font-style: italic;">Death penalty doesn't mean anything unless you use it on people who are afraid to die. Like... the bankers who launder the drug money. The bankers, who launder, the drug money. Forget the dealers, you want to slow down that drug traffic, you got to start executing a few of these fucking bankers. White, middle class Republican bankers.</span> -- George Carlin, 'Back in Town Special,' 1996</span><br />
<br />
In a recent <a href="http://antifascist-calling.blogspot.com/2012/07/black-dossier-hsbc-terrorist-finance.html">investigation</a> I presented the case that British banking and financial giant HSBC conspired with banking institutions with documented links to terrorist financing, including those responsible for helping bankroll the 9/11 attacks.<br />
<br />
Drawing upon evidence published by the Senate Permanent Subcommittee on Investigations in their mammoth <a href="http://www.hsgac.senate.gov/download/?id=2BC90323-71BD-4613-A501-7562E6BADCC3">report</a>, "U.S. Vulnerabilities to Money Laundering, Drugs, and Terrorist Financing: HSBC Case History," we learned that senior HSBC officers, despite misgivings voiced by staff in internal correspondence, choose to continue profitable relations with Saudi Arabia's Al Rajhi Bank, described by U.S. law enforcement agencies as moneymen for the CIA's false flag specialists, Al Qaeda.<br />
<br />
The same callous indifference which guided bank policy when it came to financing terrorists was HSBC's <i>modus operandi</i> as they aided and abetted drug money laundering by some of the most violent gangsters on earth.<br />
<br />
And with "all criminal proceeds ... likely to have amounted to some 3.6 per cent of GDP (2.3-5.5 per cent) or around US$2.1 trillion in 2009," as the United Nations Office on Drugs and Crime (UNODC) pointed out in that agency's 2011 report, <span style="font-style: italic;"><a href="http://www.unodoc.org/documents/data-and-analysis/Studies/Illicit_financial_flows_2011_web.pdf">Estimating Illicit Financial Flows Resulting from Drug Trafficking and Other Transnational Crimes</a></span>, the incentives for big banks to continue inflating their balance sheets with funds derived from global crime are compelling.<br />
<br />
<b>A Leg Up for Chapo</b><br />
<br />
While it is oft said that "crime doesn't pay," that's only true if you aren't amongst the privileged few with enough cash and connections to avoid a trip to the slammer.<br />
<br />
"Over the last decade," Senate investigators reported, "the U.S. Senate Permanent Subcommittee on Investigations has worked to strengthen U.S. AML efforts by investigating how money launderers, terrorists, organized crime, corrupt officials, tax evaders, and other wrongdoers have utilized U.S. financial institutions to conceal, transfer, and spend suspect funds."<br />
<br />
In the wake of the 9/11 attacks, the Subcommittee focused "on how U.S. banks, through the correspondent services they provide to foreign financial institutions, had become conduits for illegal proceeds associated with organized crime, drug trafficking, and financial fraud."<br />
<br />
The report underlined the key role that correspondent banking plays in washing illegal proceeds through the system. Senate investigators averred that "Correspondent banking occurs when one financial institution provides services to another financial institution to move funds, exchange currencies, cash monetary instruments, or carry out other financial transactions."<br />
<br />
For HSBC's Canary Wharf masters, the U.S. affiliate was a key part of their strategy to expand the bank's tentacles into the lucrative North American market and they did so by standing up HSBC Bank USA N.A. (HNAH), better known as HBUS.<br />
<br />
Indeed, a senior executive told the Subcommittee that the bank "acquired its U.S. affiliate, not just to compete with other U.S. banks for U.S. clients, but primarily to provide a U.S. platform to its non-U.S. clients and to use its U.S. platform as a selling point to attract still more non-U.S. clients."<br />
<br />
Clients like Chapo Guzmán, the fugitive billionaire who runs Mexico's Sinaloa Cartel.<br />
<br />
Investigators found that "until recently," that is, only after top officials were apprised of increased scrutiny by regulators, that "HSBC Group policy instructed its affiliates to assume that all HSBC affiliates met the Group's AML standards and to open correspondent accounts for those affiliates without additional due diligence."<br />
<br />
"For years," Senate staff noted, "HBUS followed that policy, opening U.S. correspondent accounts for HSBC affiliates without conducting any AML due diligence. Those affiliates have since become major clients of the bank." In other words, liquidity trumped inconvenient rules and regulations which after all, following Leona Helmsley's maxim, only applied to "little people."<br />
<br />
"In 2009, for example, HBUS determined that 'HSBC Group affiliates clear[ed] virtually all USD [U.S. dollar] payments through accounts held at HBUS, representing 63% of all USD payments processed by HBUS.' HBUS failed to conduct due diligence on HSBC affiliates despite a U.S. law that has required all U.S. banks, since 2002, to conduct these due diligence reviews before opening a U.S. correspondent account for any foreign financial institution, with no exception made for foreign affiliates."<br />
<br />
One HSBC affiliate which amply illustrated the bank's shady proclivities was HSBC Mexico, known as HBMX. The Subcommittee asserted that "HBUS should have, but did not, treat HBMX as a high risk correspondent client subject to enhanced due diligence and monitoring. HBMX operated in Mexico, a country under siege from drug crime, violence and money laundering; it had high risk clients, such as Mexican casas de cambios and U.S. money service businesses; and it offered high risk products, such as U.S. dollar accounts in the Cayman Islands."<br />
<br />
Despite the risks, "from 2007 through 2008, HBMX was the single largest exporter of U.S. dollars to HBUS, shipping $7 billion in cash to HBUS over two years, outstripping larger Mexican banks and other HSBC affiliates."<br />
<br />
The Subcommittee noted that "Mexican and U.S. authorities expressed repeated concern that HBMX's bulk cash shipments could reach that volume only if they included illegal drug proceeds. The concern was that drug traffickers unable to deposit large amounts of cash in U.S. banks due to AML controls, were transporting U.S. dollars to Mexico, arranging for bulk deposits there, and then using Mexican financial institutions to insert the cash back into the U.S. financial system."<br />
<br />
But as we previously learned when we explored cosy relations between suspected terrorist financiers at the Al Rajhi Bank and HSBC's London Banknotes division, senior managers cared not a whit that billions of dollars entering the United States from Mexico came from laundered drug money. <br />
<br />
<b>Gateway for Narcodollars</b><br />
<br />
One "line of business" that proved particularly lucrative for the bank and their drug lord clients was the "Global Banking and Markets" division. Operating in some 60 countries, the office provided a wide range of "'tailored financial solutions' to major government, corporate, and institutional clients."<br />
<br />
"This line of business," Senate investigators reported, "includes an extensive network of correspondent banking relationships, in which HBUS provides banks from other countries with U.S. dollar accounts to transact business in the United States. Due to its affiliates in over 80 countries, HSBC is one of the largest providers of correspondent banking services in the world."<br />
<br />
What made this division particularly prone to manipulation was its brief to provide "access to the U.S. financial system by handling international wire transfers, clearing a variety of U.S. dollar instruments, including travelers cheques and money orders, and providing foreign exchange services. HBUS Payment and Cash Management (PCM) is a key banking division, located in New York, that supports HBUS' correspondent relationships."<br />
<br />
Senate staff reported that until 2010, "HBUS housed the Global Banknotes Department, which used offices in New York City, London, Hong Kong, and elsewhere to buy, sell, and ship large amounts of physical U.S. dollars."<br />
<br />
"The Banknotes Department," investigators disclosed, "derived its income from the trading, transportation, and storage of bulk cash, doing business primarily with other banks and currency exchange businesses, but also with HSBC affiliates."<br />
<br />
It doesn't take a rocket scientist to suspect that unscrupulous managers, once the wheels were sufficiently greased by clients such as Chapo Guzmán or cartel moneyman Pedro Alatorre, wouldn't bend over backwards to clear dodgy transactions whatever the source.<br />
<br />
Despite suspicions that all wasn't well, "for a number of years, HBUS held a contract with the U.S. Federal Reserve Bank of New York (FRBNY) to operate U.S. currency vaults in several cities around the world to assist in the physical distribution of U.S. dollars to central banks, large commercial banks, and businesses involved with currency exchange."<br />
<br />
Undoubtedly, readers are aware that current U.S. Treasury Secretary Timothy Geithner, a former employee of Kissinger Associates was past president of FRBNY. From his perch at the New York Fed, Geithner worked assiduously to reduce the capital required to run a bank; an additional factor which led to the mammoth train wreck known as the 2008 capitalist economic crisis.<br />
<br />
A protégé of former Treasury Secretary Robert Rubin, a Board Chairman of Goldman Sachs and one-time CEO at drug-tainted Citigroup, Geithner, in addition to a stint as a "Senior Fellow" at the Council on Foreign Relations, oversaw the $350 billion swindle known as the Troubled Asset Relief Program (TARP) which bailed out his good friends at Goldman and AIG in the wake of Lehman Brothers collapse.<br />
<br />
As Senate staff reported, HBUS' "'Global Asset Management' line of business offers worldwide investment management services to clients, and currently manages nearly $400 billion in assets. It is one of the largest investment businesses in the world."<br />
<br />
Through their correspondent banking and Payments and Cash Management businesses, "HBUS has become one of the largest facilitators of cash transfers in the world. Between 2005 and 2009," investigators informed us, "the total number of PCM wire transactions at HBUS grew from 20.4 million to 30.2 million transfers per year, with a total annual dollar volume that climbed from $62.4 trillion to $94.5 trillion."<br />
<br />
In 2008 alone according to Subcommittee findings, "HBUS processed about 600,000 wire transfers per week. In 2009, PCM was the third largest participant in the CHIPS wire transfer service which provides over 95% of U.S. dollar wire transfers across U.S. borders and nearly half of all wire transfers within the United States, totaling $1.5 trillion per day and over $400 trillion in 2011."<br />
<br />
How many of these trillions of dollars in wire transfers handled by HBUS were the result of illegal money laundering by drug gangsters? According to United Nations Office on Drugs and Crime estimates, with some 3.6 percent of global GDP resulting from "criminal proceeds," amounting to some $2.1 trillion in 2009 alone, certainly billions in hot money washed through the U.S. financial system while no one was looking.<br />
<br />
<b>Shooting the Messenger</b><br />
<br />
While senior officers turned a blind eye to the bank's criminal practices, honest officials who tried to warn HSBC higher-ups that there were severe deficiencies in monitoring dodgy transactions faced retaliation.<br />
<br />
As a result of losses suffered by HSBC's purchase of Household International and its portfolio of bad mortgages, the bank turned down requests to expand personnel at its Anti-Money Laundering division.<br />
<br />
Despite the fact that "Compliance and AML staffing levels were kept low for many years as part of a cost cutting measure," Senate investigators learned through HSBC internal correspondence that those charged with monitoring suspicious transactions were "struggling to 'handle the growing monitoring requirements' associated with the bank's correspondent banking and cash management programs, and requested additional staff." <br />
<br />
Compliance officer Alan Ketley wrote higher-ups that despite having "very efficient processes," his Compliance team was "handling an average of 3,800 [alerts] per person and [was] becoming overwhelmed thus potentially placing the business and the bank at risk."<br />
<br />
"Despite requests for additional AML staffing," the Senate reported, "HBUS decided to hold staff levels to a flat headcount."<br />
<br />
"After being turned down for additional staff, Carolyn Wind, longtime HBUS Compliance head and AML director, raised the issue of inadequate resources with the HNAH board of directors. A month after the board meeting, after seven years as HBUS' Compliance head Ms. Wind was fired," Senate investigators disclosed.<br />
<br />
Wind, who had met with HNAH's board in October 2007 to discuss staffing, was reprimanded by her supervisor, Regional Compliance Officer and Senior Executive Vice President Janet L. Burak, for raising the issue. In an email to disgraced HSBC Group Compliance chief David Bagley, who dramatically resigned on camera during Senate hearings in July, Burak "expressed displeasure" with Wind. She told Bagley:<br />
<br />
"I indicated to her [Ms. Wind] my strong concerns about her ability to do the job I need her to do, particularly in light of the comments made by her at yesterday's audit committee meeting .... I noted that her comments caused inappropriate concern with the committee around: our willingness to pay as necessary to staff critical compliance functions (specifically embassy banking AML support), and the position of the OCC with respect to the merger of AML and general Compliance."<br />
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In other words, because Wind had challenged shoddy staffing practices that led the institution into dangerous waters, she was fired by higher-ups more concerned with inflating the balance sheet, and raising their own profiles and salaries in the process, rather than complying with the law. <br />
<br />
And despite a mountain of unresolved "alerts" and "suspicious activity reports," and with only eight Compliance officers under "rigorous pressure to complete manual reviews of about 30,000 OFAC [Office of Foreign Assets Control] alerts per week," Senate investigators found serious "deficiencies in the quality of the work" which required "an independent assessment. The independent assessment found that 34% of the alerts supposedly resolved had to be re-done."<br />
<br />
While HSBC has cut some 27,000 jobs since 2011, the scandal-plagued bank still managed a 26 percent rise in 2012 first-quarter profits to the tune of $6.8bn (£4.18bn) according to <a href="http://dealbook.nytimes.com/2012/05/08/hsbc-profit-rises-26-in-first-quarter/"><i>The New York Times</i></a>, attributed to "growth in its Asian and Latin American banking businesses [that] more than made up for a slump in Europe." <br />
<br />
Why if one were inclined to believe various "conspiracy theories," one would almost believe that banks actually <i>sought out</i> dirty money from drug traffickers as a splendid means to bulk-up the bottom line. <br />
<br />
<b>Like Spots on a Hyena</b><br />
<br />
As with other banks caught-up in recent money laundering scandals, HSBC's Mexican affiliate is a case study in how banks get away with murder. Senate investigators disclosed that HBMX "illustrates how providing a correspondent account and U.S. dollar services to a high risk affiliate increased AML risks for HBUS."<br />
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Created when HSBC Group purchased the Bital bank in 2002, we learned that a "pre-purchase review disclosed that the bank had no functioning compliance program, despite operating in a country confronting both drug trafficking and money laundering."<br />
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"For years," the Senate reported, "HSBC Group knew that HBMX continued to operate with multiple AML deficiencies while serving high risk clients and selling high risk products. HSBC Group also knew that HBMX had an extensive correspondent relationship with HBUS and that suspect funds moved through the HBMX account, but failed to inform HBUS of the extent of the AML problems at HBMX so that HBUS could treat HBMX as a high risk account. Instead, until 2009, HBUS treated HBMX as low risk."<br />
<br />
As in the case of Wachovia, "HBMX engaged in many high risk activities. It opened accounts for high risk clients, including Mexican casas de cambios and U.S. money service businesses, such as Casa de Cambio Puebla and Sigue Corporation which later legal proceedings showed had laundered funds from illegal drug sales in the United States."<br />
<br />
Undeterred by the risks involved, HBMX "offered high risk products, including providing U.S. dollar accounts in the Cayman Islands to nearly 50,000 clients with $2.1 billion in assets, many of which supplied no KYC information and some of which misused their accounts on behalf of a drug cartel."<br />
<br />
"HBMX was also the single largest exporter of U.S. dollars to HBUS, transferring over $3 billion in 2007 and $4 billion in 2008, amounts that far outstripped larger Mexican banks and other HSBC affiliates," investigators disclosed.<br />
<br />
Indeed, "Mexican and U.S. law enforcement and regulatory authorities expressed concern that HBMX's bulk cash shipments could reach that volume only if they included illegal drug proceeds that had been brought back to Mexico from the United States."<br />
<br />
So blatant were HSBC's dodgy practices that for a three-year period between 2006-2009, Senate investigators discovered that "HBUS failed to conduct any AML monitoring of its U.S. dollar transactions with HSBC affiliates, including HBMX, which meant that it made no effort to identify any suspicious activity, despite the inherent risks in large cash transactions."<br />
<br />
Proving that crime pays if you're well connected, "HBMX used those accounts to process U.S. dollar wire transfers, clear bulk U.S. dollar travelers cheques, and accept and make deposits of bulk cash, all of which exposed, not only itself, but also HBUS, to substantial money laundering risks."<br />
<br />
"HSBC Group also compounded the AML risks by failing to alert HBUS to HBMX's ongoing, severe AML deficiencies," the Senate reported. But why would they? Given Carolyn Wind's firing when she sought to increase staff who might be in position to monitor shady transactions from a very profitable Mexican affiliate, one can only conclude that higher-ups were more than happy to turn a blind eye when it came to illegal practices.<br />
<br />
A 2006 State Department International Narcotics Control Strategy Report (INCSR), noted that Mexico is a country of "primary" concern for money laundering, its highest rating.<br />
<br />
"The State Department's relentlessly negative assessments of Mexico's drug trafficking and money laundering vulnerabilities continued unabated," Senate investigators observed.<br />
<br />
"In 2008, the State Department wrote that 'U.S. officials estimate that since 2003, as much as U.S. $22 billion may have been repatriated to Mexico from the United States by drug trafficking organizations'."<br />
<br />
"Four years later, in 2012" Senate staff averred, "the State Department wrote that drug cartels were using Mexican and U.S. financial institutions to launder as much as $39 billion each year: 'According to U.S. authorities, drug trafficking organizations send between $19 and $39 billion annually to Mexico from the United States'."<br />
<br />
"As a consequence," of HBMX's "lowest-risk rating" the Senate reported, "under HSBC Group policy, clients from Mexico were not subjected to enhanced monitoring by HBUS, unless they were also designated a Special Category Client (SCC), a relatively rare designation that indicates a client poses high AML risks."<br />
In other words, with upwards of $39 billion washing through the system annually, "enhanced due diligence and account monitoring" by HBUS of their clients wasn't in the cards.<br />
<br />
Indeed, in a 2009 risk assessment conducted by HSBC, Mexico was assigned a score of "2," which was "one of the lowest scores."<br />
<br />
When queried by Senate investigators about the low score, Ali Kazmy, the HBUS compliance officer responsible for country risk assessments "told the Subcommittee that, since 2006, HBUS' assessments had inadvertently failed to take into account a 2006 FinCEN advisory related to Mexico that would have added 10 points to its score each year. As a result of its low score, Mexico was rated a 'standard' risk, the lowest of the four risk ratings."<br />
<br />
As U.S. law enforcement agencies, ironically enough under pressure from Mexican officials to crackdown on money laundering by U.S. banks, "Mexican regulators confronted HBMX with suspicions that drug proceeds were moving through its accounts at HBUS."<br />
<br />
In 2009, the Immigration and Customs Enforcement Agency (ICE) "informed the OCC that ICE was investigating possible money laundering activity involving banknote accounts at HBUS. ICE indicated that Mexican drug traffickers appeared to be using the black market peso exchange in New York to transfer funds through a particular Mexican financial institution, which then sent the funds through its U.S. correspondent account at HBUS."<br />
<br />
"What U.S. law enforcement officials had found was that, because drug traffickers in the United States were having difficulty finding a U.S. financial institution that would accept large amounts of cash, due to strict U.S. AML controls, many were instead transporting large volumes of U.S. dollars to Mexico, and depositing the dollars at Mexican financial institutions."<br />
<br />
"The drug traffickers could then keep their deposits in U.S. dollars through the Mexican financial institution's correspondent account at a U.S. bank, or exchange the dollars for pesos," the Senate reported. "The Mexican banks, casas de cambio, and other financial institutions that were the recipients of the cash typically shipped the physical dollars back to the United States for credit to their own U.S. dollar correspondent accounts at U.S. banks."<br />
<br />
In 2009, OCC Deputy Chief Counsel Dan Stipano explained the grift to Sally Belshaw, the OCC Examiner-In-Charge at HBUS:<br />
<br />
"The scheme ... is similar to activity that we have seen at Union Bank, Wachovia, and Zions. Basically, the way it works is that drug money is physically hauled across the border into Mexico, then brought back into the United States through wire transfers from casas de cambio or small Mexican banks, or else smuggled across the border in armored cars, etc., before being deposited in US. Institutions. According to AUSA [Assistant U.S. Attorney] Weitz, most U.S. banks, recognizing the risks involved, have gotten out of this business, <i>but HSBC NY is one of the last holdouts</i> (although, interestingly, he said that HSBC-Mexico will no longer accept U.S. currency)." (emphasis added)<br />
<br />
HBMX was rocked by scandal when it emerged that one of its biggest clients, the wealthy Chinese-Mexican citizen, Zhenli Ye Gon, was accused by the Drug Enforcement Administration, in a joint operation with Mexican authorities, of high-level drug trafficking. In March 2007, the Mexican Government "seized over $205 million in U.S. dollars, $17 million in Mexican pesos, firearms, and international wire transfer records" from Zhenli's residence.<br />
<br />
The cash, hidden in a secret locked room in Zhenli's home was described by the media at the time as the largest cash seizure in a drug-related case in history.<br />
<br />
Zhenli, a self-described "prominent businessman," was "the owner of three Mexican corporations involved in the pharmaceutical field, Unimed Pharm Chem Mexico S.A. de C.V.; Constructora e Inmobiliaria Federal S.A. de C.V.; and Unimed Pharmaceutical, S.A. de C.V."<br />
<br />
According to Senate investigators, he was accused of using his corporations as fronts "to import, manufacture, and sell chemicals to drug cartels for use in manufacturing methamphetamine, an illegal drug sold in the United States. He was also accused of displaying 'significant unexplained wealth,' despite reporting no gross income for his companies for the years 2005, 2006, and 2007."<br />
<br />
Although Zhenli was indicted in Mexico on drug, firearm and money laundering charges, he "could not be located." Why? Because he had fled to the United States where he awaits extradition to Mexico on drug trafficking charges.<br />
<br />
Eventually indicted by U.S. federal prosecutors "for aiding and abetting the manufacture of methamphetamine," two years later "U.S. prosecutors dismissed the charges, after a witness recanted key testimony."<br />
<br />
What made Zhenli's arrest particularly embarrassing to HBUS officials was the fact that internal documents revealed that Zhenli's Unimed "accounts were opened by Bital, retained by HBMX, and housed in HMBX's Personal Financial Services (PFS) division, even though the official clients were corporations and should not have been serviced by the PFS division."<br />
<br />
Despite the dodgy nature of the accounts, they were not designated "high risk." One top HSBC executive, John Root, told the Senate that although the Unimed account "had attracted the attention" of HBMX regulators and they had been instructed to terminate the account, he and another top official, Susan Wright "did not realize the account was still open, until he and Ms. Wright saw the press articles regarding Unimed in 2007."<br />
<br />
Imagine that!<br />
<br />
<b>Another Day, Another 'Investigation' </b><br />
<br />
Regulatory "lapses" and half-hearted "investigations" continue.<br />
<br />
Recently, <a href="https://www.nytimes.com/2012/09/15/business/money-laundering-inquiry-said-to-target-us-banks.html"><i>The New York Times</i></a> reported that "federal and state authorities are investigating a handful of major American banks for failing to monitor cash transactions in and out of their branches, a lapse that may have enabled drug dealers and terrorists to launder tainted money."<br />
<br />
Citing (who else!) "anonymous officials," regulators "led by the Office of the Comptroller of the Currency, are close to taking action against JPMorgan Chase for insufficient safeguards, the officials said. The agency is also scrutinizing several other Wall Street giants, including Bank of America."<br />
<br />
But rather than investigating the role of laundered drug money in inflating the balance sheets of the big banks, the <i>Times</i>, citing "compliance experts," argued that "violations are typically unintentional and often harmless because they aren't always exploited by criminals."<br />
<br />
An April cease-and-desist order against drug-tainted Citigroup is instructive in this regard. Charging there were "gaps" in Citi's oversight of cash transactions, the order specified there were "internal control weaknesses including the incomplete identification of high-risk customers in multiple areas of the bank."<br />
<br />
According to an unnamed "person close to the bank," Citi's "internal control weaknesses" were attributed "to an accident when a computer was unplugged from anti-money-laundering systems."<br />
<br />
Such mendacity is the banking equivalent of "the dog ate my homework," yet for America's "newspaper of record" such fabrications are accepted at face value despite Citigroup's decades-long history of financial fraud, stock manipulation and other crimes, including laundering billions of dollars of <a href="http://www.narconews.com/whitecollarterror1.html">drug money</a>.<br />
<br />
Today, the stakes are immeasurably higher. As the capitalist system threatens to implode and sinks ever-deeper into a liquidity crisis brought on in no small part by the gross criminality of our masters, a recent study by James Henry, author of <span style="font-style: italic;"><a href="http://www.taxjustice.net/cms/upload/pdf/Price_of_Offshore_Revisited_120722.pdf">The Price of Offshore Revisited</a></span>, has shown that at least $21-$32 trillion (£13-£20.5tn) has been hidden in tax havens that operate as little more than global money laundering centers.<br />
<br />
According to Henry: "The subterranean system that we are trying to measure is the economic equivalent of an astrophysical black hole." Indeed, "The very existence of the global offshore industry, and the tax-free status of the enormous sums invested by their wealthy clients, is predicated on secrecy: that is what this industry really 'supplies' as it competes for, conceals, and manages private capital from all over the planet, from any and all sources, no questions asked."<br />
<br />
As former U.S. Customs deep-cover specialist Robert Mazur, the author of <a href="http://www.the-infiltrator.com/"><i>The Infiltrator: My Secret Life Inside the Dirty Banks Behind Pablo Escobar's Medellín Cartel</i></a>, explained to <a href="http://www.businessinsider.com/robert-mazur-on-whats-wrong-with-banking-system-2012-9"><i>Business Insider</i></a>, "'the international community is today doing the same thing that BCCI and their officers were doing 20 years ago'--citing the HSBC money-laundering scandal and the tax havens of the super-rich--and told <i>BI</i> that the problem is much larger than the estimated $2.1 trillion that crime generates each year."<br />
<br />
According to Mazur, HSBC employed methods "traditionally used by banks in a big way [to] facilitate relationships with people who want to hide money from governments" and explained that bankers provide these services "to entice these people to bank with them" thereby enabling banks to increase their deposits.<br />
<br />
More attuned to the needs of their banking "clients" to remain "healthy," regulators are "not as focused on the issue of criminal conduct." In fact, "there's nothing built in the system to engage criminal investigations up front."<br />
<br />
"One straightforward way" to deter financial officers from profiting from criminal activities, "would be to crack down on bankers who solicit shady business--like the ones at HSBC--by putting a few 'behind bars for a very long period of time' instead of just giving them a fine," Mazur said.<br />
<br />
This is unlikely to happen. After all, the first order of business during a period of unprecedented elite criminality is to shield financial institutions and their officers, deemed "too big to fail or jail" from accountability.<br />
<br />
Never mind that such practices facilitate global crime in all their varied forms--from drug trafficking to terrorism and from imperialist wars of conquest to the outright theft of public property for private profit--incentives for regulators to crackdown or for prosecutors to send corporate criminals to prison remain virtually nonexistent.Antifascisthttp://www.blogger.com/profile/05421707682211445550noreply@blogger.com0tag:blogger.com,1999:blog-1831516114336983238.post-65498651682980193192012-09-03T10:40:00.001-07:002012-09-03T10:41:13.614-07:00'Managing' the Plaza: America's Secret Deal with Mexican Drug Cartels<a href="http://2.bp.blogspot.com/-gtuvWZA5OcU/UETOKnfRzOI/AAAAAAAAARI/3ikORZaMiRE/s1600/cia_drugs_s.jpg"><img style="float:left; margin:0 10px 10px 0;cursor:pointer; cursor:hand;width: 120px; height: 77px;" src="http://2.bp.blogspot.com/-gtuvWZA5OcU/UETOKnfRzOI/AAAAAAAAARI/3ikORZaMiRE/s400/cia_drugs_s.jpg" border="0" alt=""id="BLOGGER_PHOTO_ID_5783974503244745954" /></a><br /><br /><br />In a story which <span style="font-style:italic;">should</span> have made front page headlines, <span style="font-style:italic;"><a href="http://www.narconews.com/Issue67/article4621.html">Narco News</a></span> investigative journalist Bill Conroy revealed that "A high-ranking Sinaloa narco-trafficking organization member's claim that US officials have struck a deal with the leadership of the Mexican 'cartel' appears to be corroborated in large part by the statements of a Mexican diplomat in email correspondence made public recently by the nonprofit media group WikiLeaks."<br /><br />A series of some five million emails, <a href="http://wikileaks.org/the-gifiles.html">The Global Intelligence Files</a>, were obtained by the secret-spilling organization as a result of last year's hack by Anonymous of the Texas-based "global intelligence" firm <a href="http://www.stratfor.com/">Stratfor</a>.<br /><br />Bad tradecraft aside, the Stratfor dump offer readers insight into a shadowy world where information is sold to the highest bidder through a "a global network of informants who are paid via Swiss banks accounts and pre-paid credit cards. Stratfor has a mix of covert and overt informants, which includes government employees, embassy staff and journalists around the world."<br /><br />One of those informants was a Mexican intelligence officer with the <span style="font-style:italic;">Centro de Investigación y Seguridad Nacional</span>, or CISEN, Mexico's equivalent to the CIA. Dubbed "MX1" by Stratfor, he operates under diplomatic cover at the Mexican consulate in Phoenix, Arizona after a similar posting at the consulate in El Paso, Texas.<br /><br />His cover was blown by the intelligence grifters when they identified him in their <a href="http://wl.wikileaks-press.org/gifiles/docs/1722109_re-meeting-tomorrow-.html">correspondence</a> as Fernando de la Mora, described by Stratfor as "being molded to be the Mexican 'tip of the spear' in the U.S."<br /><br />In an earlier <span style="font-style:italic;"><a href="http://www.narconews.com/Issue67/article4620.html">Narco News</a></span> story, Conroy revealed that "US soldiers are operating inside Mexico as part of the drug war and the Mexican government provided critical intelligence to US agents in the now-discredited Fast and Furious gun-running operation," the Mexican diplomat claimed in email correspondence.<br /><br />Those emails disclosed "details of a secret meeting between US and Mexican officials held in 2010 at Fort Bliss, a US Army installation located near El Paso, Texas. The meeting was part of an effort to create better communications between US undercover operatives in Mexico and the Mexican federal police, the Mexican diplomat reveals."<br /><br />"However," Conroy wrote, "the diplomat expresses concern that the Fort Bliss meeting was infiltrated by the 'cartels,' whom he contends have 'penetrated both US and Mexican law enforcement'."<br /><br />Such misgivings are thoroughly justified given the fact, as <span style="font-style:italic;"><a href="http://antifascist-calling.blogspot.com/2012_05_01_archive.html">Antifascist Calling</a></span> reported last spring, that the Mexican government had arrested three high-ranking Army generals over their links to narcotrafficking organizations.<br /><br />In Conroy's latest piece the journalist disclosed that the "Mexican diplomat's assessment of the US and Mexican strategy in the war on drugs, as revealed by the email trail, paints a picture of a 'simulated war' in which the Mexican and US governments are willing to show favor to a dominant narco-trafficking organization in order to minimize the violence and business disruption in the major drug plazas, or markets."<br /><br />A "simulated war"? Where have we heard <span style="font-style:italic;">that</span> before? Like the bogus "War on Terror" which arms and unleashes throat-slitting terrorists from the CIA's favorite all-purpose zombie army of "Islamist extremists," Al Qaeda, similarly, America's fraudulent "War on Drugs" has been a splendid means of <span style="font-style:italic;">managing</span> the global drug trade in the interest of securing geopolitical advantage over their rivals.<br /><br />That major financial powerhouses in Europe and the U.S. (can you say Bank of America, Barclays, Citigroup, Credit Suisse, HSBC, ING and Wachovia) have been accused of reaping the lions' share of profits derived from the grim trade, now a veritable Narco-Industrial Complex, the public continues to be regaled with tales that this ersatz war is being "won."<br /><br />While the Mexican body count continues to rise (nearly 120,000 dead since 2006 according to the latest estimates published by the <span style="font-style:italic;">Instituto Nacional de Estadística y Geografía</span>, or <a href="http://www.inegi.org.mx/default.aspx">INEGI</a>, as reported by the Paris daily <span style="font-style:italic;"><a href="http://www.lemonde.fr/idees/article/2012/08/23/mexique-la-spirale-de-la-barbarie_1749042_3232.html">Le Monde</a></span> in a recent editorial) the United States is escalating its not-so-covert military involvement in Mexico and putting proverbial boots on the ground as part of the $1.6 billion U.S.-financed Mérida Initiative.<br /><br />But have such "initiatives" (in actuality, taxpayer-funded boondoggles for <a href="http://reason.com/archives/2011/06/10/all-aboard-the-latin-american">giant military contractors</a>), turned the corner in the drug war? Not if estimates published the United Nations are accurate.<br /><br />According to the <a href="https://www.unodc.org/unodc/en/data-and-analysis/WDR-2011.html">2011 World Drug Report</a>, published by the United Nations Office on Drugs and Crime (UNODC): "US authorities have estimated for the last couple of years that some 90% of the cocaine consumed in North America comes from Colombia, supplemented by some cocaine from Peru and limited amounts from the Plurinational State of Bolivia. For the year 2009, results of the US Cocaine Signature Program, based on an analysis of approximately 3,000 cocaine HCl samples, revealed that 95.5% originated in Colombia (down from 99% in 2002) and 1.7% in Peru; for the rest (2.8%), the origin could not be determined. The trafficking of cocaine into the United States is nowadays largely controlled by various Mexican drug cartels, while until the mid-1990s, large Colombian cartels dominated these operations."<br /><br />Despite more than $8 billion lavished on programs such as Plan Colombia, and despite evidence that leading Colombian politicians, including former President Álvaro Uribe and his entourage had <a href="http://www.gwu.edu/~nsarchiv/NSAEBB/NSAEBB131/index.htm">documented links</a> to major drug trafficking organizations that go back decades, the myth persists that pouring money into the drug war sinkhole will somehow turn the tide.<br /><br />But drug seizures by U.S. agencies only partially tell the tale.<br /><br />As UNODC Executive Director Yury Fedotov pointed out in the introduction to the agency's 2011 report, <span style="font-style:italic;"><a href="http://www.unodoc.org/documents/data-and-analysis/Studies/Illicit_financial_flows_2011_web.pdf">Estimating Illicit Financial Flows Resulting from Drug Trafficking and Other Transnational Crimes</a></span>, "all criminal proceeds are likely to have amounted to some 3.6 per cent of GDP (2.3-5.5 per cent) or around US$2.1 trillion in 2009."<br /><br />UNODC analysts disclosed that illicit money flows related to "transnational organized crime, represent the equivalent of some 1.5 percent of global GDP, 70 percent of which would have been available for laundering through the financial system. The largest income for transnational organized crime seems to come from illicit drugs, accounting for a fifth of all crime proceeds."<br /><br />"If only flows related to drug trafficking and other transnational organized crime activities were considered," UNODC asserted, "related proceeds would have been equivalent to around US$650 billion per year in the first decade of the new millennium, equivalent to 1.5% of global GDP or US$870 billion in 2009 assuming that the proportions remained unchanged. The funds available for laundering through the financial system would have been equivalent to some 1% of global GDP or US$580 billion in 2009."<br /><br />"The results," according to UNODC, "also suggest that the 'interception rate' for anti-money-laundering efforts at the global level remains low. Globally, it appears that much less than 1% (probably around 0.2%) of the proceeds of crime laundered via the financial system are seized and frozen."<br /><br />Commenting on the nexus between global drug mafias and our capitalist overlords, former UNODC director Antonio Maria Costa told <span style="font-style:italic;"><a href="http://www.guardian.co.uk/global/2009/dec/13/drug-money-banks-saved-un-cfief-claims">The Observer</a></span> in 2009, "that the proceeds of organised crime were 'the only liquid investment capital' available to some banks on the brink of collapse last year. He said that a majority of the $352bn (£216bn) of drugs profits was absorbed into the economic system as a result."<br /><br />Would there be an incentive then, for U.S. officials to dismantle a global business that benefits their real constituents, the blood-sucking gangsters at the apex of the capitalist financial pyramid? Hardly.<br /><br />Nor would there be any incentive for American drug warriors to target organizations that inflate the balance sheets of the big banks. Wouldn't they be more likely then, given the enormous flows of illicit cash flooding the system, to negotiate an "arrangement" with the biggest players, particularly the Sinaloa Cartel run by fugitive billionaire Joaquín "El Chapo" Guzmán?<br /><br />In fact, as <span style="font-style:italic;"><a href="http://narcosphere.narconews.com/notebook/bill-conroy/2011/12/zambada-niebla-case-exposes-us-drug-war-quid-pro-quo">Narco News</a></span> disclosed last December, a "quid-pro-quo arrangement is precisely what indicted narco-trafficker Jesus Vicente Zambada Niebla, who is slated to stand trial in Chicago this fall, alleges was agreed to by the US government and the leaders of the Sinaloa 'Cartel'--the dominant narco-trafficking organization in Mexico. The US government, however, denies that any such arrangement exists."<br /><br /><span style="font-style:italic;">Narco News</span> reported that according to "Zambada Niebla, he and the rest of the Sinaloa leadership, through the US informant Loya Castro, negotiated an immunity deal with the US government in which they were guaranteed protection from prosecution in exchange for providing US law enforcers and intelligence agencies with information that could be used to compromise rival Mexican cartels and their operations."<br /><br />In court pleadings, Zambada Niebla's attorneys argued that "the United States government considered the arrangements with the Sinaloa Cartel an acceptable price to pay, because the principal objective was the destruction and dismantling of rival cartels by using the assistance of the Sinaloa Cartel--without regard for the fact that tons of illicit drugs continued to be smuggled into Chicago and other parts of the United States and consumption continued virtually unabated."<br /><br />Those assertions seem to be borne out by emails released by WikiLeaks. Conroy disclosed: "In a Stratfor <a href="http://wikileaks.org/gifiles/docs/1747720_re-fwd-re-fw-from-mx1-2-.html">email</a> dated April 19, 2010, MX1 lays out the Mexican government's negotiating, or 'signaling,' strategy with respect to the major narco-trafficking organizations as follows:<br /><br /><blockquote>The Mexican strategy is not to negotiate directly.<br /><br />In any event, "negotiations" would take place as follows:<br /><br />Assuming a non-disputed plaza [a major drug market, such as Ciudad Juarez]:<br /><br />• [If] they [a big narco-trafficking group] bring [in] some drugs, transport some drugs, [and] they are discrete, they don't bother anyone, [then] no one gets hurt;<br /><br />• [And the] government turns the other way.<br /><br />• [If] they [the narco-traffickers] kill someone or do something violent, [then the] government responds by taking down [the] drug network or making arrests.<br /><br />(Now, assuming a disputed plaza:)<br /><br />• [A narco-trafficking] group comes [into a plaza], [then the] government waits to see how dominant cartel responds.<br /><br />• If [the] dominant cartel fights them [the new narco-trafficking group], [then the] government takes them down.<br /><br />• If [the] dominant cartel is allied [with the new group], no problem.<br /><br />• If [a new] group comes in and start[s] committing violence, they get taken down: first by the government letting the dominant cartel do their thing, then [by] punishing both cartels.</blockquote><br /><br />"MX1," <span style="font-style:italic;">Narco News</span> revealed, "then goes on to describe what he interprets as the US strategy in negotiating with the major narco-trafficking players in Ciudad Juarez--a major Mexican narco-trafficking 'plaza' located across the border from El Paso, Texas:"<br /><br /><blockquote>... This is how "negotiations" take place with cartels, through signals. There are no meetings, etc. ...<br /><br />So, the MX [Mexican] strategy is not to negotiate. However, I think the US [recently] sent a signal that could be construed as follows:<br /><br />"To the VCF [the Vicente Carrillo Fuentes] and Sinaloa cartels: Thank you for providing our market with drugs over the years. We are now concerned about your perpetration of violence, and would like to see you stop that. In this regard, please know that Sinaloa is bigger and better than [the] VCF. Also note that CDJ [Juarez] is very important to us, as is the whole border. In this light, please talk amongst yourselves and lets all get back to business. Again, we recognize that Sinaloa is bigger and better, so either VCF gets in line or we will mess you up."<br /><br />I don't know what the US strategy is, but I can tell you that if the message was understood by Sinaloa and VCF as I described above, the Mexican government would not be opposed at all.<br /><br />In sum, I have a gut feeling that the US agencies tried to send a signal telling the cartels to negotiate themselves. They unilaterally declared a winner [the Sinaloa Cartel], and this is unprecedented, and deserves analysis. If there was no strategy behind this, and it was simply a leaked report, then I will be interested to see how it plays out in the coming months.</blockquote><br /><br />Keep in mind that this "analysis" is from a senior CISEN officer describing U.S. "strategy" for <span style="font-style:italic;">managing</span>, not putting a stop to the flood of narcotics crossing the border.<br /><br />"In a separate Stratfor <a href="http://wikileaks.org/gifiles/docs/389862_fw-from-mx1-2-.html">email</a> dated April 15, 2010," Conroy wrote, "MX1's views on the US strategy with respect to the drug organizations in Juarez, essentially favoring the Sinaloa 'Cartel,' is referenced yet again:"<br /><br /><blockquote>We believe that when the US made an announcement that was corroborated by several federal spokespersons simultaneously (that Sinaloa controlled CDJ [Juarez]), it was a message that the DEA wanted to send to Sinaloa. The message was that the US recognized Sinaloa's dominance in the area [Juarez], although it was not absolute. It was meant to be read by the cartels as a sort of ultimatum: negotiate and put your house in order once and for all.<br /><br />One dissenting analyst thinks that the message is the opposite, telling Sinaloa to take what it had and to leave what remains of VCF. Regardless, the reports are saying that the US message to the cartels was to negotiate and stop the violence. It says that the US has never before pronounced that a cartel controls a particular plaza, so it is an unusual event.</blockquote><br /><br />"Unusual" perhaps, but not surprising given the secret state's documented history of close collaboration with major drug trafficking networks that serve as unofficial, though highly-effective instruments, for advancing U.S. imperial strategies.<br /><br />In a recent piece published by <span style="font-style:italic;"><a href="http://www.globalresearch.ca/why-americans-must-end-americas-self-generating-wars/">Global Research</a></span>, analyst Peter Dale Scott observed that America's two "self-generating wars" on "terror" and "drugs" have "in effect become one."<br /><br />"By launching a War on Drugs in Colombia and Mexico," Scott wrote, "America has contributed to a parastate of organized terror in Colombia (the so-called AUC, United Self-Defense Forces of Colombia) and an even bloodier reign of terror in Mexico (with 50,000 killed in the last six years)."<br /><br />And by "launching a War on Terror in Afghanistan in 2001, America has contributed to a doubling of opium production there, making Afghanistan now the source of 90 percent of the world's heroin and most of the world's hashish."<br /><br />"Americans should be aware of the overall pattern that drug production repeatedly rises where America intervenes militarily--Southeast Asia in the 1950s and 60s, Colombia and Afghanistan since then," Scott noted. "(Opium cultivation also increased in Iraq after the 2003 US invasion.) And the opposite is also true: where America ceases to intervene militarily, notably in Southeast Asia since the 1970s, drug production declines."<br /><br />"Both of America's self-generating wars are lucrative to the private interests that lobby for their continuance," Scott averred. "At the same time, both of these self-generating wars contribute to increasing insecurity and destabilization in America and in the world."<br /><br />In this light, <span style="font-style:italic;">Narco News</span> revelations make perfect sense. As the global financial crisis deepens, brought on in no small part by the massive frauds perpetrated by leading capitalist institutions, they have inflated their balance sheets with a veritable tsunami of hot cash generated by the Narco-Industrial Complex.<br /><br />In turn, the American secret state, working to recapitalize financial markets beset by a seemingly insolvable liquidity crisis resulting from massive bank frauds, turn a blind eye as these same institutions become major centers of organized crime, monopoly enterprises which could not survive without the trillions of dollars of illicit funds parked in offshore accounts.Antifascisthttp://www.blogger.com/profile/05421707682211445550noreply@blogger.com1tag:blogger.com,1999:blog-1831516114336983238.post-75156943357579611022012-08-26T10:26:00.001-07:002012-08-26T10:27:20.163-07:00Another Day, Another Shameful Ruling on Police State Spying<a href="http://3.bp.blogspot.com/-Zk0S2Jt-C-Y/UDE55txVleI/AAAAAAAAAQM/5xSLy6JqBr8/s1600/bush-obama-joker.jpg"><img style="float:left; margin:0 10px 10px 0;cursor:pointer; cursor:hand;width: 320px; height: 232px;" src="http://3.bp.blogspot.com/-Zk0S2Jt-C-Y/UDE55txVleI/AAAAAAAAAQM/5xSLy6JqBr8/s320/bush-obama-joker.jpg" border="0" alt=""id="BLOGGER_PHOTO_ID_5778463460594914786" /></a><br /><br />Recently, federal district court Judge Cormac J. Carney of the Central District of California, dismissed a civil rights lawsuit filed against the Federal Bureau of Investigation (FBI) on grounds of bogus "state secrets privilege" claims made by the Obama administration.<br /><br />That suit, <span style="font-style:italic;"><a href="https://www.aclu-sc.org/fazaga/">Fazaga v. FBI</a></span>, was brought by the American Civil Liberties Union (<a href="https://www.aclu-sc.org/">ACLU</a>) and the Council on American-Islamic Relations (<a href="http://www.cair.com/Home.aspx">CAIR</a>). The plaintiffs forcefully argued that the Bureau illegally spied on Muslim residents in southern California, targeting them for "special handling" solely on the basis of their religious beliefs.<br /><br />The atrocity played out in Carney's court against a citizens' right to due process under the Fourth and Fifth Amendments, constitutional guarantees that extend to <span style="font-style:italic;">all</span> government actions and proceedings that can result in harm to an individual either civilly or criminally, is only the latest in a long line of capitulatory rulings by a diminished Judicial Branch.<br /><br />Under Bush, and now Obama, the Justice Department demanded that <span style="font-style:italic;">Fazaga</span> be thrown out on the most specious grounds: that presidential authority in all matters relating to national security cannot be challenged by those who are the victims of predatory actions, regardless of their egregious nature, by the secret state.<br /><br /><a href="https://www.aclu-sc.org/response-to-domestic-surveillance-suit-ruling/"><br />Denouncing</a> Carney's cave-in to the Justice Department, Ahilan Arulanantham, the deputy legal director for the ACLU of Southern California said: "Under today's ruling dozens of law-abiding Muslim Americans in Southern California will never know if the government violated their constitutional rights. Every American should be deeply troubled when the government can win dismissal of a case involving the most basic constitutional rights by claiming that it is acting, in secret, in the interests of national security. The notion that our basic safety requires relinquishing our most cherished liberties is as inconsistent with the Constitution as it is frightening."<br /><br />But in a collapsing Empire, where the indefinite detention or even the liquidation of "terrorism" suspects, alongside illegal warrantless spying, the trampling of First Amendment rights to free speech and assembly, the persecution of government whistleblowers who bring high state crimes to light, are now deemed unreviewable by any court by a quasi-fascist "Unitary Executive."<br /><br />According to a <a href="http://www.aclu.org/blog/national-security/you-have-right-remain-spied">case summary</a> posted by the ACLU of Southern California, Peter Bibring informed us: "From the term 'state secrets,' you might think the case involved spies, hush-hush arrangements with foreign governments, or people detained at secret foreign prisons--as some state secrets cases do. But this one involves the FBI's investigation into law-abiding U.S. citizens and residents in Orange County, California, called 'Operation Flex'."<br /><br />"In June 2006," Bibring wrote, "FBI agents recruited Craig Monteilh, a man with a file full of felony convictions, to pose as a convert to Islam at one of the largest mosques in the area. The FBI paid Monteilh to spend the next fourteen months meeting as many members of the Muslim community as he could. He made audio recordings of every interaction, as he gathered names, telephone numbers, e-mails, political and religious views, travel plans, and other information on hundreds of individuals in the Muslim community. According to Monteilh's own sworn statement, he was told to pay special attention to community leaders and those who seemed especially devout."<br /><br />FBI snitch Monteilh, a steroid-enhanced "fitness freak" and con man, who the <span style="font-style:italic;"><a href="http://www.ocweekly.com/content/printVersion/411452/">Orange County Weekly</a></span> reported had once told an unwitting dupe of one of his scams, "my body is my business card," that is, before "liberating" her of tens of thousands of dollars even as he pocketed upwards of a quarter million more from the Bureau, was eventually sent back to state prison for grand-theft.<br /><br />"When asked if the FBI had particular targets in the Muslim community that they wanted to have investigated, Monteilh said, 'No. They said the targets would come to me.' In other words," Bibring averred, "Operation Flex was a fishing expedition that targeted people because of their religion. But in the end, after Monteilh began incessantly about jihad and violence, members of the community did exactly what you're supposed to do: they reported him to the FBI. After hundreds of hours of Monteilh's time and thousands of taxpayer dollars 'Operation Flex' resulted in zero criminal convictions. No one was ever even charged with a terrorism offense."<br /><br />Monteilh's "cover" was blown when members of the Islamic Center of Irvine grew increasingly suspicious--and disturbed--by his provocative chatter about "jihad" and "terrorism." Two members of the Orange County mosque contacted Hussam Ayloush, executive director of CAIR's Southern California chapter, and told him that during a car ride Monteilh said he "wanted to blow up buildings."<br /><br />Ayloush contacted J. Stephen Tidwell, an FBI assistant director who mendaciously told a gathering at the Islamic Center of Irvine in 2006 that the FBI "would never spy on mosques."<br /><br />"'I am calling to report a possible terrorist'," Ayloush told the assistant director, the <span style="font-style:italic;">Weekly</span> disclosed. "'He is a white convert in Irvine.' As soon as Ayloush uttered those words, he says Tidwell cut him off. 'Okay,' he reportedly replied. 'Thanks for letting us know'."<br /><br />"Ayloush offered to provide the FBI with the man's name and address, but, he says, Tidwell told him to give the information to the Irvine P.D., which he promptly did. 'Neither the FBI nor the Irvine P.D. ever bothered to talk to the guy after he was reported,' Ayloush says."<br /><br />Instead of "preventing terrorism" however, Operation Flex like a score of other filthy entrapment exercises run by the FBI worked precisely as intended: as a means to <span style="font-style:italic;">terrorize</span> the Muslim community and let the "hajis" know who's boss.<br /><br />As Pulitzer Prize winning <span style="font-style:italic;"><a href="http://www.ap.org/Content/AP-In-The-News/2012/NYPD-Muslim-spying-led-to-no-leads-terror-cases">Associated Press</a></span> investigative journalists Adam Goldman and Matt Apuzzo reported last week, the New York City Police Department's sinister Demographics Unit, tasked with "spying on Muslim neighborhoods, eavesdropping on conversations and cataloguing mosques ... never generated a lead or triggered a terrorism investigation."<br /><br />"The Demographics Unit is at the heart of a police spying program," Goldman and Apuzzo wrote, and was "built with help from the CIA." With millions of taxpayer-provided "homeland security" handouts, the unit "assembled databases on where Muslims lived, shopped, worked and prayed. Police infiltrated Muslim student groups, put informants in mosques, monitored sermons and catalogued every Muslim in New York who adopted new, Americanized surnames."<br /><br />"But in a June 28 deposition as part of a longstanding federal civil rights case," AP reported, "Assistant Chief Thomas Galati said none of the conversations the officers overheard ever led to a case."<br /><br />"'Related to Demographics,' Galati testified that information that has come in 'has not commenced an investigation'."<br /><br />But when it comes to evidence of widespread FBI abuse uncovered in <span style="font-style:italic;">Fazaga</span>, we're supposed to believe that none of this can be discussed, let alone litigated in open court, since to do so would let the "terrorists" win!<br /><br />The court, caving-in to arguments made by Hope and Change™ fraudster Barack Obama's Justice Department, tossed the case on the basis of assertions made by government attorneys that to allow the plaintiffs their day in court "would require or unjustifiably risk disclosure of secret and classified information regarding the nature and scope of the FBI's counterterrorism investigations, the specific individuals under investigation and their associates, and the tactics and sources of information used in combating possible terrorist attacks on the United States and its allies."<br /><br />In <a href="http://www.fas.org/sgp/jud/statesec/fazaga-dismiss.pdf">ruling</a> against victims of the Bureau's anti-Muslim witchhunt, Judge Carney averred that "the state secrets privilege is specifically designed to protect against disclosure of such information that is so vital to our country's national security."<br /><br />"The state secrets privilege strives to achieve a difficult compromise between the principles of national security and constitutional freedoms," Carney wrote.<br /><br />But as Shahid Buttar, the executive director of the Bill of Rights Defense Committee <a href="http://www.bordc.org/">BORDC</a>), <a href="http://www.constitutioncampaign.org/blog/?p=9569#.UDpAG0Sfu_F">wrote</a>: "First, by invoking the state secrets privilege, the decision extends the judiciary's capitulation to executive lawlessness across the Bush & Obama administrations. Since initially emerging as a narrow evidentiary doctrine (in a 1953 case that ultimately proved to be part of a Pentagon coverup), federal courts have recently accepted the privilege as a wholesale immunity doctrine, a 'get out of jail free' card for executive abuses of various kinds."<br /><br />If we were inclined to believe the good judge (we're not), with logic worthy of a Monty Python skit, Carney claimed that "The state secrets privilege can only be invoked and applied with restraint, in narrow circumstances, and infused with judicial skepticism. Yet, when properly invoked, it is absolute--the interest of protecting state secrets cannot give way to any other need or interest."<br /><br />Accordingly, Carney, appointed to the federal bench by that champion of civil liberties and human rights, George W. Bush, asserted that "the proper application of the state secrets privilege may unfortunately mean the sacrifice of individual liberties for the sake of national security."<br /><br />Seeking to immunize himself from charges that he is little more than a toady for Executive Branch mandarins, Carney went to great lengths to cover his juridical ass-ets: "Plaintiffs raise the specter of <span style="font-style:italic;">Korematsu v. United States</span>... and protest that dismissing their claims based upon the state secrets privilege would permit a 'remarkable assertion of power' by the Executive, and that any practice, no matter how abusive, may be immunized from legal challenge by being labeled as 'counterterrorism' and 'state secrets.' But such a claim assumes that courts simply rubber stamp the Executive's assertion of the state secrets privilege. That is not the case here."<br /><br />Perish the thought! After all, only anti-patriotic, terrorist-loving, constitutional "extremists" would countenance otherwise! Never mind that the Bush and Obama regimes have raised the specter of "state secrets" to dismiss a score of cases relating to kidnapping and forced disappearance ("extraordinary rendition"), indefinite detention, torture, illegal wiretapping and state murder.<br /><br />Last year, U.S. Attorney General Eric Holder, filed a <a href="http://www.fas.org/sgp/jud/statesec/fazaga-holder.pdf">declaration</a> on the case which claimed that various aspects of the case would be "too sensitive" to be aired in open court. Indeed, according to Holder several categories of information that would be presented by plaintiffs' attorneys "could reasonably be expected to cause significant harm to the national security."<br /><br />This is the same Eric Holder who as Deputy Attorney General under President Clinton, pimped himself out to secure the last-minute pardon of fugitive financier and Democratic Party moneyman Marc Rich before the Great Triangulator left office.<br /><br />Commenting on Holder's role in securing Rich's pardon, investigative journalist Jim Hougan <a href="http://jimhougan.com/wordpress/?p=102">wrote</a>: "Other than Richard Nixon, I can think of no other felon, or quasi-felon, who has been pardoned for his crimes without having first been convicted of them. Perhaps the explanation is that Rich and [Pinky] Green have been helping their countries--the United States and Israel--behind the scenes. Like Hollywood tycoon Arnan Milchan, who is widely alleged to have long used his businesses to help finance the operations of the Mossad, former 20th Century Fox honcho Rich may well have done the same...if not for the Mossad, then perhaps for the CIA."<br /><br />But wait, there's more!<br /><br />Proving once again that crime pays, if you're well-connected, upon leaving office Holder, a shrewd operator who knows which side his bread is buttered, joined the white shoe law firm of Covington & Burling. From his D.C. perch, Holder helped negotiate an agreement with the Justice Department over charges that Chiquita Brands International had ponied-up "protection money" to the drug-dealing Colombian death squad, the <span style="font-style:italic;">Autodefensas Unidas de Colombia</span>, or AUC.<br /><br />Close allies of former Colombian President Álvaro Uribe, three of whose relatives were recently extradited to the United States where they face cocaine trafficking charges, only after American taxpayers had doled out billions of dollars to "fight drugs" under Plan Colombia that is, Chiquita hired far-right AUC killers to murder trade unionists, peasant activists and human rights' campaigners to protect their blood-soaked "investments."<br /><br />According to case files, Chiquita arranged payments totaling millions of dollars during a 1997 meeting between late AUC, <a href="http://www.narconews.com/Issue29/article729.html">Israeli-trained</a> <span style="font-style:italic;">führer</span> Carlos Castaño and officials from Chiquita subsidiary Banadex.<br /><br />At the time, Colombia's attorney general, Mario Iguarán, charged that Chiquita had used one of its ships to smuggle some 3,400 AK-47 assault rifles and 4 million rounds of ammunition to AUC drug lords. Although Iguarán had sought the extradition of Chiquita executives over these charges, none were. It is unknown whether or not cocaine was transported into the United States by that ship on its return voyage. In the wake of the $25 million "settlement" with the Justice Department, Holder then represented Chiquita in a civil action that followed the criminal case.<br /><br />More recently, as financial journalist Matt Taibbi pointed out in <span style="font-style:italic;"><a href="http://www.rollingstone.com/politics/blogs/taibblog/ag-eric-holder-has-no-balls-20120815">Rolling Stone</a></span>, Holder's "predictable decision" not to criminally pursue Goldman Sachs for massive fraud is "not just because Holder has repeatedly proven himself to be a spineless bureaucrat and obsequious political creature masquerading as a cop, and not just because rumors continue to circulate that the Obama administration--supposedly in the interests of staving off market panic--made a conscious decision sometime in early 2009 to give all of Wall Street a pass on pre-crisis offenses."<br /><br />"No," Taibbi wrote, "the real reason this wasn’t surprising is that Holder's decision followed a general pattern that has been coming into focus for years in American law enforcement. Our prosecutors and regulators have basically admitted now that they only go after the most obvious and easily prosecutable cases."<br /><br />Like the persecution of Muslims, antiwar activists, national security whistleblowers or anyone else who's rocked the boat: easy prey for an FBI stitch-up.Antifascisthttp://www.blogger.com/profile/05421707682211445550noreply@blogger.com0tag:blogger.com,1999:blog-1831516114336983238.post-19840643564756900952012-07-29T11:25:00.001-07:002012-07-29T11:26:20.238-07:00Black Dossier: HSBC & Terrorist Finance<a href="http://3.bp.blogspot.com/-t3qJJlHd2NQ/UAWpEExL8JI/AAAAAAAAAPk/bwT-UNzLEVo/s1600/guns-money.jpg"><img style="float:left; margin:0 10px 10px 0;cursor:pointer; cursor:hand;width: 320px; height: 213px;" src="http://3.bp.blogspot.com/-t3qJJlHd2NQ/UAWpEExL8JI/AAAAAAAAAPk/bwT-UNzLEVo/s320/guns-money.jpg" alt="" id="BLOGGER_PHOTO_ID_5766200785382404242" border="0" /></a><br /><br /><br />It's tough being the world's second largest bank.<br /><br />HSBC, the London-based British multinational banking and financial services giant operates in 85 countries with 7,200 offices worldwide with assets totaling more than $2.6 trillion (£4.06tn).<br /><br />They're also caught-up in serial scandals: the Libor interest rate-fixing scam, serious charges of drug money laundering as well as suspicions that bank officers "palled around" with terrorist financiers.<br /><br />Founded in 1865 when the British Crown seized Hong Kong as a colony in the aftermath of the First Opium War, British merchants (today we'd call them drug lords) needed a bank to handle the brisk trade in the illicit substance and launched the Hongkong and Shanghai Banking Company Limited. Rebranded "HSBC" in 1991, the bank expanded at breakneck speed in the heady days after The Wall fell.<br /><br />While some might call them a success story, exemplars of financial wizardry in tough economic times, more appropriately perhaps, we might borrow a term from Mafia lore to describe their preeminent position in the capitalist pantheon of corrupt institutions: <span style="font-style:italic;">juiced</span>.<br /><br /><span style="font-weight:bold;">'Sorry, now Go Away'</span><br /><br />Today, the "War on Drugs" rivals the "War on Terror" for top spot on the global hypocrisy index.<br /><br />Moral equivalencies abound. After all, when American secret state agencies <span style="font-style:italic;">manage</span> drug flows or <span style="font-style:italic;">direct</span> terrorist proxies to attack official enemies it's not <span style="font-style:italic;">quite</span> the same as battling terror or crime.<br /><br />Pounding home that point, a new report by the Senate Permanent Subcommittee on Investigations accused HSBC of exposing "the U.S. financial system to a wide array of money laundering, drug trafficking, and terrorist financing risks due to poor anti-money laundering (AML) controls."<br /><br />That 335-page report, "U.S. Vulnerabilities to Money Laundering, Drugs, and Terrorist Financing: HSBC Case History," (large pdf file available <a href="http://www.hsgac.senate.gov/subcommittees/investigations/hearings/us-vulnerabilities-to-money-laundering-drugs-and-terrorist-financing-hsbc-case-history">here</a>) was issued after a year-long Senate investigation zeroed-in on the bank's U.S. affiliate, HSBC Bank USA, N.A., better known as HBUS.<br /><br />Drilling down, we learned that amongst the "services" offered by HSBC subsidiaries and correspondent banks were sweet deals with financial entities with terrorist ties; the transportation of billions of dollars in cash by plane and armored car through their London Banknotes division; the clearing of sequentially-numbered travelers checks through dodgy Cayman Islands accounts for Mexican drug lords and Russian mafiosi.<br /><br />From richly-appointed suites at Canary Wharf, London, the bank's "smartest guys in the room" handed some of the most violent gangsters on earth the financial wherewithal to organize their respective industries: global crime.<br /><br />A case in point. In 2008 alone the Senate revealed that the bank's Cayman Islands branch handled some 50,000 client accounts (all without benefit of offices or staff on Grand Cayman, mind you), yet <span style="font-style:italic;">still</span> managed to ship some $7 billion (£10.9bn) in cash from Mexico into the U.S. Now <span style="font-style:italic;">that's</span> creative accounting!<br /><br />Playing fast and loose with U.S. banking rules, Subcommittee Chairman Carl Levin (D-MI) <a href="http://www.hsgac.senate.gov/subcommittees/investigations/media/hsbc-exposed-us-finacial-system-to-money-laundering-drug-terrorist-financing-risks">said</a> that by exploiting the bank's "poor AML controls, HBUS exposed the United States to Mexican drug money, suspicious travelers cheques, bearer share corporations, and rogue jurisdictions."<br /><br />Describing a "compliance culture" that was "pervasively polluted for a long time," Levin said it "will take more than words for the bank to change course."<br /><br />Yet weasel words and butt-covering were all that were proffered to the American people even before Senate hearings began. Bank spokesman Robert Sherman said in an emailed statement that HSBC "will acknowledge that, in the past, we have sometimes failed to meet the standards that regulators and customers expect. We will apologize, acknowledge these mistakes, answer for our actions and give our absolute commitment to fixing what went wrong."<br /><br />Right on cue, chief compliance officer David Bagley dramatically fell on his sword during those hearings and resigned on camera. It was quite a performance even by Washington's tawdry standards.<br /><br />Appearing contrite, Bagley told the panel: "Despite the best efforts and intentions of many dedicated professionals, HSBC has fallen short of our own expectations and the expectations of our regulators. ... I recommended to the group that now is the appropriate time for me and for the bank, for someone new to serve as the head of group compliance."<br /><br />While there's no word yet just how big Bagley's golden parachute will be, it's a sure bet he won't spend a day in jail, nor for that matter will Lord Stephen Green, HSBC's former Chairman and Chief Executive Officer.<br /><br />Between 2003-2010, Green tilled the helm after serial stints directing The Bank of Bermuda Ltd., HSBC Mexico, SA, HSBC Private Banking Holdings (Suisse) SA and HSBC North American Holdings Inc.; units which feature prominently in the scandal. Sensing perhaps that the jig was up, last year he joined David Cameron's Conservative government as Minister of State for Trade and Investment.<br /><br />Unlike Pappy Bush who claimed to be "out of the loop" during the Iran-Contra guns-for-drugs affair, Green was fully apprised of bank shenanigans and the Senate published emails which prove it.<br /><br />Cheekily however, while underlings take the fall, Green told <span style="font-style:italic;"><a href="http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/9427116/Lord-Green-I-have-no-case-to-answer-over-HSBC-money-laundering-scandal.html">The Daily Telegraph</a></span>, "I do not believe that I have a case to answer other than in the important sense that as chairman and chief executive I was responsible for what the company did. HSBC has expressed regret for the failures. I share that regret."<br /><br />The <span style="font-style:italic;">Telegraph</span> noted that Green has not considered resigning from Cameron's government, saying he was "very engaged" with his current plum post.<br /><br />Ironically enough, the current Baron of Hurstpierpoint is an ordained priest in the Church of England and the author of an inspirational tome, <span style="font-style:italic;">Good Value: Reflections on Money, Morality and an Uncertain World</span>. And no, you can't make this stuff up!<br /><br />The top spot is now occupied by Stuart Gulliver who, quicker than you can say "we're sorry," admonished employees to "do better" and expressed remorse over his firm's "unacceptable behavior." Never mind that before ascending the throne, Gulliver was director of HBUS, HSBC Latin American Holdings Ltd., and HSBC Bank Middle East Ltd., divisions that have raised more than an eyebrow or two amongst Subcommittee investigators.<br /><br />Topping Bagley's Kabuki-lite performance with her own rendition of clown car camp, Irene Dorner, HBUS's President and CEO told the Senate: "We deeply regret and apologize for the fact that HSBC did not live up to the expectations of our regulators, our customers, our employees, and the general public. HSBC's compliance history, as examined today, is unacceptable. ... We've worked hard to foster a new culture that values and rewards effective compliance, and that starts at the top."<br /><br />Bathos aside, it was a polite way of saying "let's move on" and get back to the business of lining our pockets; after all, it's what <span style="font-style:italic;">we do best</span>.<br /><br /><span style="font-weight:bold;">'The past is never dead. It's not even past'</span><br /><br />Years before hijackers slammed passenger planes into the World Trade Center and the Pentagon killing nearly 3,000 people, secret state agencies began to exploit the fraternal links between Osama bin Laden's Afghan-Arab database of disposable Western intelligence assets, also known as al Qaeda, and prominent financial institutions.<br /><br />In his 1999 book, <span style="font-style:italic;"><a href="http://www.algora.com/12/book/details.html">Dollars for Terror</a></span>, journalist Richard Labévière relates how a former CIA analyst explained: "The policy of guiding the evolution of Islam and helping them against our adversaries worked marvelously well in Afghanistan against the Red Army. The same doctrines can still be used to destabilize what remains of Russian power, and especially to counter the Chinese influence in Central Asia."<br /><br />Was a <span style="font-style:italic;">new</span> Cold War dawning?<br /><br />No. In fact, it was the <span style="font-style:italic;">same</span> Cold War. Only this time it was tricked-out in seductive finery by denizens of Western think-tanks and on-the-make NGOs. In the age of spin and endless news cycles, they'd hit upon a splendid formula to pour the "old" imperialist wine into new bottles: "humanitarian intervention" and a "responsibility to protect."<br /><br />It was a brilliant script. In the blink of an eye our media-saavy masters could "enhance democracy" and "reform markets," magically transforming <span style="font-style:italic;">publicly-owned</span> resources into <span style="font-style:italic;">privately-held</span> assets controlled by banks! That terrorist proxies would serve as walk-ons and help drive the final nail into the coffin of national sovereignty wasn't considered proper conversation in polite company.<br /><br />Labévière wondered whether "the new forms of terrorism actually embody the highest stage of capitalism?" They did, and "the straw men of the bin Laden Organization's subsidiaries [were] very well received by the business lawyers of Wall Street and the Bahamas, by the wealth managers of Geneva, Zurich and Lugano, and in the hushed salons of the City of London."<br /><br />Not so curiously perhaps, "the privatization of violence and the privatization of the economy has become paradigmatic." In fact, "apart from any religious purpose," Labévière wrote, "the 'Jihad' is gaining ground as a profitable activity. It becomes liable to all the mafioso devolutions, and sinks into pure banditry. In many cases, Islamist ideology is used as a wonder worker to paper over banditry in all its forms."<br /><br />Bin Laden as a Mafia <span style="font-style:italic;">capo di tutti capi</span>? It certainly was a novel reading of geopolitical machinations!<br /><br />More to the point, if an "army marches on its stomach," who then are the money men who put food in their bellies and kalashnikovs in their hands?<br /><br />Bankrolled by Saudi and Gulf banks with a wink, a nod and logistical support from their old friends, the CIA and the Pentagon, today's Green <span style="font-style:italic;">condottieri</span> once again are on the march, wrecking havoc and sowing chaos, with particular attention paid to states targeted as official enemies by the Global Godfather. Just ask the Iraqis, Libyans and Syrians.<br /><br />While the Senate report may have disclosed that HSBC turned a blind eye to terrorist financing among it correspondent banks, the Riyadh-based Al Rajhi Bank for one, Saudi Arabia's largest privately-held financial institution, such arrangements hardly flourished in a vacuum.<br /><br />With assets totaling $59 billion (£92.5bn), the Al Rajhi's are amongst the wealthiest families in the Kingdom. Investigators found that after 9/11 "evidence began to emerge that Al Rajhi Bank and some of its owners had links to organizations associated with financing terrorism, including that one of the bank's founders was an early financial benefactor of al Qaeda."<br /><br />While the Al Rajhi family deny any role in financing terrorism, they have declined "to address specific allegations made in American intelligence and law-enforcement records, citing client confidentiality," <span style="font-style:italic;"><a href="http://online.wsj.com/public/article/SB118530038250476405.html">The Wall Street Journal</a></span> reported back in 2007.<br /><br />Journalist Glenn R. Simpson averred that "a 2003 CIA report claims that a year after Sept. 11, with a spotlight on Islamic charities, Mr. Al Rajhi ordered Al Rajhi Bank's board 'to explore financial instruments that would allow the bank's charitable contributions to avoid official Saudi scrutiny'."<br /><br />"A few weeks earlier," the <span style="font-style:italic;">Journal</span> disclosed, the Agency said that "Mr. Al Rajhi 'transferred $1.1 billion to offshore accounts--using commodity swaps and two Lebanese banks--citing a concern that U.S. and Saudi authorities might freeze his assets.' The report was titled 'Al Rajhi Bank: Conduit for Extremist Finance'."<br /><br />Although U.S. law enforcement and secret state agencies "acknowledge it is possible that extremists use the bank's far-flung branches and money-transfer services without bank officials' knowledge," the <span style="font-style:italic;">Journal</span> noted that CIA analysts had concluded that "senior Al Rajhi family members have long supported Islamic extremists and probably know that terrorists use their bank."<br /><br />It goes without saying that one should always approach CIA reports with a healthy dose of skepticism, especially in light of the Agency's well-documented history of employing cut-outs such as al Qaeda as terrorist cats' paws.<br /><br />Such reports however, lay a trail of bread crumbs that policy makers can either act upon or more likely, ignore. That senior Bush and Obama administration officials did nothing with this information, never mind the regulatory agencies charged to enforce anti-money laundering laws, is testament to the corrupt, <span style="font-style:italic;">bipartisan</span> nature of American policy as a whole.<br /><br />It also beggars belief that Lord Green or the bank's compliance officers were unaware of CIA allegations or that Britain's own foreign intelligence arm, MI6, hadn't apprised top officials of the risks involved. In fact, as we'll see below, HSBC's own internal documents prove otherwise.<br /><br /><span style="font-weight:bold;">Osama's 'Golden Chain'</span><br /><br />There were certainly plenty of red flags flying which should have alerted bank officials.<br /><br />In March 2002, al Qaeda's list of financial benefactors surfaced when computers were seized in Sarajevo at the Bosnian headquarters of the Benevolence International Foundation, "a Saudi based nonprofit organization which was also designated a terrorist organization by the Treasury Department."<br /><br />Osama bin Laden, who held a Bosnian passport issued by the breakaway government fronted by Western "liberal interventionist" darling Alija Izetbegović during NATO's dismemberment of socialist Yugoslavia, was a supporter of the Nazi SS <span style="font-style:italic;">Handschar</span> Division during World War II. Bin Laden referred to this group of financial angels as his "Golden Chain."<br /><br />Additional evidence also emerged in 2002 during Operation Green Quest, a Treasury Department effort to "disrupt terrorist financing in the United States."<br /><br />In March of that year, law enforcement officials raided the Herndon, Virginia offices of the SAAR Foundation "an Al Rajhi-related entity." Indeed, the name "SAAR" was an acronym for the organization's founder, Sulaiman Abdul Aziz Al Rajhi, the controlling partner of the Al Rajhi Bank.<br /><br />Subcommittee investigators commented that "one of the 20 handwritten names in the Golden Chain document identifying al Qaeda's early key financial benefactors is Sulaiman bin Abdul Aziz Al Rajhi, one of Al Rajhi Bank's key founders and most senior officials."<br /><br />An affidavit supporting the search warrants "detailed numerous connections between the targeted entities and Al Rajhi family members and related ventures. The affidavit stated that over 100 active and defunct nonprofit and business ventures in Virginia were part of what it described as the 'Safa Group,' which the United States had reasonable cause to believe was 'engaged in the money laundering tactic of 'layering' to hide from law enforcement authorities the trail of its support for terrorists."<br /><br />Green Quest investigators were particularly keen on unraveling links between the SAAR Foundation and the Swiss Al Taqwa Bank, incorporated in the Bahamas in 1988 for "tax purposes."<br /><br />Founded by Swiss Nazi sympathizer and convert to Islam, Albert Armand (Achmed) Huber, who professed admiration for both Adolph Hitler and Osama bin Laden, the bank was accused by U.S. officials in helping al Qaeda launder funds. Although the Treasury Department froze its assets in 2001, the investigation was shut down by the Bush administration before deeper linkages could be fully uncovered.<br /><br />In 2011, a lawsuit was filed by insurance giant Lloyd's of London against Saudi Arabia which sought to recover pay outs to victims of the 9/11 attacks. The suit noted "that two individuals who were former executives at Bank al Taqwa, Ibrahim Hassabella and Samir Salah, were also associated with the SAAR Foundation."<br /><br />At the time, <span style="font-style:italic;"><a href="http://www.independent.co.uk/news/uk/home-news/lloyds-insurer-sues-saudi-arabia-for-funding-911-attacks-2356857.html">The Independent</a></span> reported that the legal claim suggested that defendants "'knowingly' provided resources, including funding, to al-Qa'ida in the years before the attack and encouraged anti-Western sentiment which increased support for the terror group."<br /><br />According to court briefs, "Absent the sponsorship of al-Qa'ida's material sponsors and supporters, including the defendants named therein, al-Qa'ida would not have possessed the capacity to conceive, plan and execute the 11 September attacks. The success of al-Qa'ida's agenda, including the 11 September attacks themselves, has been made possible by the lavish sponsorship al-Qa'ida has received from its material sponsors and supporters over more than a decade leading up to 11 September 2001."<br /><br />Senate investigators, citing Green Quest and Lloyd's case files, noted that "Mr. Hassabella was a former secretary of al Taqwa Bank and a shareholder of SAAR Foundation Inc. Mr. Saleh was a former director and treasurer of the Bahamas branch of al Taqwa Bank, and president of the Piedmont Trading Corporation which was part of the SAAR network. The U.S. Treasury Department has stated: 'The Al Taqwa group has long acted as financial advisers to al Qaeda, with offices in Switzerland, Liechtenstein, Italy and the Caribbean.' Regarding Akida Bank, the lawsuit complaint alleged that Sulaiman bin Abdul Aziz Al Rajhi was 'on the board of directors of Akida Bank in the Bahamas' and that 'Akida Bank was run by Youssef Nada, a noted terrorist financier'."<br /><br />The report went on to state that "HSBC was fully aware of the suspicions that Al Rajhi Bank and its owners were associated with terrorist financing, describing many of the alleged links in the Al Rajhi Bank client profile."<br /><br />As icing on the cake, a 2007 study published by the Congressional Research Service (<a href="http://www.fas.org/sgp/crs/terror/RL32499.pdf">CRS</a>) also found that "Saudi individuals and other financiers associated with the Golden Chain enabled bin Laden and Al Qaeda to replace lost financial assets and establish a base in Afghanistan following their abrupt departure from Sudan in 1996."<br /><br />Assets I might add, that were used to bankroll the 9/11 attacks.<br /><br /><span style="font-weight:bold;">'Keen to maintain the relationships'</span><br /><br />HSBC's dubious links to the Al Rajhi Bank didn't end with information discovered in the "Golden Chain" files; it fact, they were the tip of the proverbial iceberg.<br /><br />After 9/11, the FBI reported that three of the hijackers, Hani Hanjour, Nawaf Alhazmi and Abdulaziz Alomari cashed thousands of dollars in travelers checks and received wire transfers from an unnamed individual drawn on accounts at the Al Rajhi Bank.<br /><br />As researcher Kevin Fenton pointed out in <span style="font-style:italic;"><a href="http://www.trineday.com/paypal_store/product_pages/9780984185856-Disconnecting_Dots/index.html">Disconnecting the Dots</a></span>, links among <span style="font-style:italic;">most</span> of the hijackers were discovered through their banking transactions. "In this context," Fenton wrote, "it is worth noting that Global Objectives, a British banking compliance company, identified fifteen of the nineteen hijackers as high-risk individuals and established database profiles for them before the attacks. ... The list of high-risk people maintained by Global Objectives was available to dozens of banks," a list that presumably also included HSBC.<br /><br />While there is no evidence that HSBC, or for that matter the Al Rajhi Bank, had prior knowledge of the 2001 atrocity, the gross indifference exhibited by these institutions through their violation of "know your client" (KYC) rules governing financial transactions reveal a callous disdain for elemental norms as they raced to inflate their balance sheets come hell or high water.<br /><br />Privileged communications amongst senior staff revealed they were well aware of the issues and risks involved, yet did <span style="font-style:italic;">worse</span> than nothing, they lobbied that HSBC <span style="font-style:italic;">continue</span> their arrangements with the Al Rajhi Bank.<br /><br />Suspicions were such that senior staff "classified Al Rajhi Bank as a 'Special Category of Client' (SCC), its highest risk designation." This was done, Senate investigators noted, because the Kingdom was considered a "high risk country" and due to the fact Al Rajhi's largest shareholder, Sulaiman bin Abdul Aziz Al Rajhi was considered "a Politically Exposed Person (PEP)."<br /><br />Internal HSBC documents also revealed that in 2002, that is, after the 9/11 provocation, "the International Private Banking Department asked to transfer [several] accounts to HSBC's Institutional Banking Department in Delaware which had superior ability to monitor account activity."<br /><br />In fact, transferring Al Rajhi accounts to the bank's Delaware division would have just the <span style="font-style:italic;">opposite</span> effect and bank officials knew it.<br /><br />As journalist Nicholas Shaxson noted in his exposé of offshore banking, <span style="font-style:italic;"><a href="http://us.macmillan.com/treasureislands/NicholasShaxson">Treasure Islands</a></span>, "Delaware is the biggest state provider of offshore corporate secrecy." Shaxson pointed out that Delaware's Chancery Court has a "'business judgement rule' under which courts should not second-guess corporate managers," thereby "granting corporate bosses extraordinary freedoms from bothersome stockholders, judicial review, and even public opinion."<br /><br />So much for any alleged "superior ability to monitor account activity"!<br /><br />HBUS's Joseph Harpster wrote an email, stating: "The most recent concern arose when three wire transfers for small amounts ($50k, $3k and $1.5k) were transferred through the account for names that closely resembled names, not exact matches, of the terrorists involved in the 9/11 World Trade Center attack. ... The profile of the main account reflects a doubling of wire transfer volume since 9/01, a large number of travelers checks but with relatively low value and some check/cash deposits. According to the account officer, traffic increased because they have chosen to send us more business due to their relationship with Saudi British Bank and the added strength of HBC versus Republic. ... Maintaining our business with this name is strongly supported by David Hodghinson of [Saudi British Bank] and Andre Dixon, Deputy Chairman of [HSBC Bank Middle East]. Niall Booker and Alba Khoury [of HBUS] also support."<br /><br />Aside from adverse publicity, the "low value" of the transactions seemed not to have troubled Harpster or his associates in the least. After all, the total "cost" of murdering 3,000 human beings were certainly small compared to the price of a vacation home in the Hamptons or a new Maserati.<br /><br />Anxious there might be increased scrutiny from regulators (no worries there!), Harpster's email was forwarded by Douglas Stolberg, the head of Commercial and Institutional Banking to Alexander Flockhart, then a senior executive in Retail and Commercial Banking at HBUS. Stolberg noted: "As we discussed previously, Compliance has raised some concerns regarding the ongoing maintenance of operating/clearing accounts for Al Rajhi group." He forwarded recommendations on how to handle the account: "Retain [International Private Banking] as the relationship manager domicile for continuity purposes, and as we understand there is interest in further developing private banking business with family members. ... Domicile the actual accounts with Delaware where HBUS's most robust account screening capabilities reside."<br /><br />"Screening capabilities" which could be shielded from nosy regulators due to Delaware's strict bank secrecy laws.<br /><br />Stolberg went on to state: "[T]his has become a fairly high profile situation. Compliance’s concerns relate to the possibility that Al Rajhi's account may have been used by terrorists. If true, this could potentially open HBUS up to public scrutiny and/or regulatory criticism. SABB [Saudi British Bank] are understandably <span style="font-style:italic;">keen to maintain the relationships</span>. As this matter concerns primarily reputational and compliance risks, we felt it appropriate for SMC [Senior Management Committee] members to be briefed ... so that they may opine on the acceptability of the plan. Please advise how you would prefer us to proceed." (emphasis added)<br /><br />According to Senate staff, "Mr. Harpster reported a week later that Mr. Flockhart had decided to transfer the accounts to HBUS in the Delaware office."<br /><br />But HSBC weren't the only entities hoping to curry favor with the Kingdom. A 2009 Government Accountability Office (<a href="http://www.gao.gov/new.items/d09883.pdf">GAO</a>) report went on to note that "certain performance targets set by the State Department had been dropped in 2009, such as the establishment of a Saudi Commission on Charities to oversee actions taken by Saudi charities abroad as well as certain regulations of cash couriers."<br /><br />Although GAO "recommended that the United States reinstate the dropped performance targets to prevent the flow of funds from Saudi Arabia 'through mechanisms such as cash couriers, to terrorists and extremists outside Saudi Arabia,' the State Department's "most recent annual International Narcotics Control Strategy Report contains no information about Saudi Arabia's anti-money laundering or terrorist financing efforts."<br /><br />One reason <span style="font-style:italic;">why</span> the State Department's report contains "no information" just might be the Obama administration's policy of supporting Saudi-backed Salafi terrorists soon to come online in Libya and Syria, financed through "Saudi charities abroad" or more directly through "cash couriers."<br /><br /><span style="font-weight:bold;">'You'd better be making lots of money!'</span><br /><br />The Senate disclosed that HSBC "provided Al Rajhi Bank with a wide range of banking services, including wire transfers, foreign exchange, trade financing, and asset management services."<br /><br />"In the United States," investigators learned that "a key service was supplying Al Rajhi Bank with large amounts of physical U.S. dollars, through the HBUS U.S. Banknotes Department."<br /><br />"The physical delivery of U.S. dollars to Al Rajhi Bank was carried out primarily through the London branch of HBUS, often referred to internally as 'London Banknotes'."<br /><br />Indeed, "HBUS records indicate that the London Banknotes office had been supplying U.S. dollars to Al Rajhi Bank for '25+ years.' In addition to the London branch, HBUS headquarters in New York opened a banknotes account for Al Rajhi Bank in January 2001. The U.S. dollars were physically delivered to Al Rajhi Bank in Saudi Arabia."<br /><br />"On one occasion in 2008," Senate staff reported, the head of HSBC Global Banknotes Department told a colleague: 'In case you don't know, no other banknotes counterparty has received so much attention in the last 8 years than Alrajhi.' Despite, in the words of the KYC client profile, a 'multitude' of allegations, HSBC chose to provide Al Rajhi bank with banking services on a global basis."<br /><br />Even though the Al Rajhi Bank "had not been indicted, designated a terrorist financier, or sanctioned," HSBC's Group Compliance section recommended that affiliates should sever their ties.<br /><br />After that initial decision however, "HSBC affiliates disregarded the recommendation and continued to do business with the bank, while others terminated their relationships but protested HSBC's decision and urged HSBC to reverse it."<br /><br />Complaints by lower level staff continued, disregarded by higher-ups, even though a U.S. indictment was issued in February 2005 for two individuals "accused among other matters, of cashing $130,000 in U.S. travelers cheques at Al Rajhi Bank in Saudi Arabia" and then smuggling the cash to CIA-backed terrorists in Chechnya.<br /><br />Although internal bank documents showed that officials decided to cut their ties to the Saudi financial institution, they reversed themselves when pressure was brought to bear by Al Rajhi officials. Between 2006 and 2010, Al Rajhi received shipments totaling more than $1 billion in physical cash in the lucrative banknotes business from HSBC's U.S. affiliate according to investigators. Officials at the Saudi bank "had threatened to pull all of its business from HSBC if the U.S. banknotes business were not restored."<br /><br />Senate staff reported that on January 4, 2005, "HBUS AML Compliance head Ms. Pesce sent an email to Daniel Jack, an HBUS AML Compliance Officer who often dealt with the London Banknotes office, instructing him to: '[p]lease communicate that Group Compliance will be recommending terminating the Al Rajhi relationship.' Mr. Jack inquired as to when that recommendation would be made. She responded: 'I expect to see an email from Susan Wright today. She tells me that HBME [HSBC Bank Middle East] does not agree with Compliance and will not be terminating the relationship from the Middle East, but she/David B[agley] recommend that in light of US scrutiny, climate, and interest by law enforcement, we in the US sever the relationship from here'."<br /><br />At the time, Susan Wright was "the Chief Money Laundering Control Officer for the entire HSBC Group. She reported to David Bagley, head of the HSBC Group's overall Compliance Department."<br /><br />Senate investigators noted that the "documents do not explain why HSBC Middle East disagreed with the decision or why it was allowed to continue its relationship with Al Rajhi Bank, when HSBC's Group Compliance had decided to sever the relationship between the bank and other HSBC affiliates due to terrorist financing concerns."<br /><br />It soon became clear however, that "HSBC Group Compliance began to narrow its scope." Shortly thereafter a trader in the Banknotes department wrote, "for us is business as usual." Alan Ketley, HBUS AML Compliance Officer commented on the decision not to include Al Rajhi Trading in their earlier decision to sever all ties: "Looks like you're fine to continue dealing with Al Rajhi. You'd better be making lots of money!"<br /><br />Meanwhile, "Al Rajhi Bank communicated the threat to 'pull any new business with HSBC' unless given a 'satisfactory explanation' why HSBC had stopped supplying it with U.S. dollars via its relationship managers," the Senate disclosed.<br /><br />In short order, it was business as usual.<br /><br />Despite continuing allegations of terrorist financing swirling around Al Rajhi Bank, HBUS "continued to supply, through its London branch, hundreds of millions of U.S. dollars to Al Rajhi Bank in Saudi Arabia. In addition, at Al Rajhi Bank's request, HBUS <span style="font-style:italic;">expanded</span> the relationship in January 2009, by authorizing its Hong Kong branch to supply Al Rajhi Bank with non-U.S. currencies, including the Thai bat, Indian rupee, and Hong Kong dollar." (emphasis added)<br /><br />When concerns were raised internally once again, Christopher Lok, the head of HSBC's Global Banknotes Department in New York fired back: "This is an on-going debate that will never go away. My stance remains the same, i.e. until it[']s proved we cannot simply rely on the Wall Street Journal['s] reports and unconfirmed allegations and 'punish’ the client'."<br /><br />Needless to say, Hong Kong's "arrangement" with Al Rajhi went forward.<br /><br />Despite "troubling information" which should have led to HSBC's quick exit from the banknotes market, the Senate reported that "HBUS continued to supply U.S. dollars to the bank, and even expanded its business, until 2010, when HSBC decided, on a global basis, to exit the U.S. banknotes business."<br /><br /><div align="center">• • •<br /></div><br />In conclusion, one needn't be a "conspiracy buff" to posit a link from HSBC to Al Rajhi to "cash couriers" operating across the Middle East in support of a multitude of U.S.-Saudi-backed "regime change" gambits in play today; policies which "worked marvelously well in Afghanistan against the Red Army."<br /><br />As investigative journalist Ed Vulliamy pointed out in <span style="font-style:italic;"><a href="http://www.guardian.co.uk/world/2012/jul/21/drug-cartels-banks-hsbc-money-laundering">The Observer</a></span>, the issues involved here are wider than drug money laundering or terrorist finance. "It is about where banks, law enforcement officers and the regulators--and politics and society generally--want to draw the line between the criminal and supposed 'legal' economies."<br /><br />Commenting on the HSBC scandal, Robert Mazur, a former Customs Department deep-cover specialist and author of <span style="font-style:italic;"><a href="http://www.the-infiltrator.com/">The Infiltrator</a></span>, who penetrated Medellín cartel money laundering operations during the prosecution and collapse of BCCI in 1991, told <span style="font-style:italic;">The Observer</span> that "the only thing that will make the banks properly vigilant to what is happening is when they hear the rattle of handcuffs in the boardroom."<br /><br />"The stark truth is," Vulliamy wrote, "the notion of any dichotomy between the global criminal economy and the 'legal' one is fantasy. Worse, it is a lie. They are seamless, mutually interdependent--one and the same."Antifascisthttp://www.blogger.com/profile/05421707682211445550noreply@blogger.com4