The following offers no deep analysis…..just some links and key points from a few fairly recent random articles in the global media…..and some of them will really astound you – starting with a new study estimating that 20-30 TRILLION dollars of money is parked in offshore accounts by the world’s wealthiest to avoid taxation. This is a figure larger than the entire US economy and enough to resolve virtually any of the economic troubles now plaguing our globe. (More details on this study below.)
As I pull this together, investigators are now supposedly pursuing the LIBOR scandal involving Barclay’s, UBS and other major banks worldwide. And as they do, the usual conditions are already clearly falling into place:
Immunity for the perpetrators…..More below the orange financial death spiral
a financial slap on the wrist (seen as the cost of doing business by the guilty)….
and back to business as usual.
Alison Frankel notes:
Under the leniency program overseen by the U.S. Department of Justice's antitrust division, timing is everything. The first company to spill the details of an antitrust conspiracy to government lawyers is the one that reaps the rewards, most notably immunity from criminal prosecution for antitrust violations -- and no fine or penalty. Coming in second, even if it's a matter of minutes, doesn't bring a defendant any guaranteed benefits.OK…let’s have a closer look at UBS…one of the banks involved in the Libor scandal. As the NY Times James Stewart noted in an article last year, UBS has a really really amazing track record when it comes to fiscal chicanery….but somehow, none of that seems to have had any impact on their willingness to keep doing it….over and over and over….and with essentially no negative results other than a few fines:
In the U.S. government's investigation into the manipulation of major interbank lending rates, including the London Interbank Offered Rate, or Libor, UBS has been widely believed to be the winner of the leniency sweepstakes. UBS disclosed in securities filings last year that it had received leniency or conditional immunity from various authorities, including the Justice Department's antitrust division, in connection with the rate-rigging probe.
So it was a bit of a head-scratcher last month when Barclays said it had also been granted conditional leniency from the antitrust division, which, as it happens, was not part of Barclays $453 million agreement with U.S. and British authorities to settle allegations that it manipulated key interest rates.
How can more than one company receive antitrust leniency in the same investigation? The answer may be that the Justice Department sees multiple rate-rigging conspiracies involving various different interbank lending benchmarks. That's what the UBS and Barclays disclosures suggest: UBS has said it received antitrust leniency for its submissions of Yen Libor and Euroyen Tokyo Interbank Offered Rates, or Tibor. Barclays, on the other hand, said its leniency deal involved instruments that reference the Euro Interbank Offered Rate, or Euribor.
And there may be more antitrust amnesty recipients yet to come.
When Kweku Adoboli was arrested for an illicit trading scheme that cost his employer, the global bank UBS, $2.3 billion in losses, he was instantly labeled a “rogue trader,” suggesting he was an unprincipled scoundrel acting alone.NOTE: There is some speculation that Mitt Romney may have been one of those caught in this web and that his resistance to releasing earlier tax returns, including 2009, may be related to this fact. There are no facts to support this as yet. Continuing….
In August 2008, UBS settled charges brought by Andrew Cuomo, then the New York attorney general, that it misled customers when it sold them what it described as nearly risk-free auction-rate securities even as its executives knew the market was collapsing. After the market froze and investors were unable to sell the securities, regulators sued, and UBS agreed to repay $19.4 billion and pay a $150 million fine.
In May of (2011), UBS agreed to pay $160 million and admitted that its employees had conspired to rig bids in the municipal bond derivatives market.
In 2007, a former UBS private banker turned government informant disclosed a wide ranging effort by UBS’s Europe-based wealth management operation to enroll wealthy Americans in secret Swiss accounts that would enable them to evade United States taxes. (snip) The informant himself accommodated a wealthy client by smuggling diamonds in a toothpaste tube, among the illegal acts he failed to reveal that ultimately landed him in jail. In 2009, the Justice Department contended that UBS had conspired to enable 17,000 wealthy Americans to engage in tax fraud and threatened criminal charges. In return for a deferred prosecution agreement, the bank agreed to pay a $781 million fine and divulge the names of account holders, effectively ending the historic tradition of Swiss bank secrecy and prompting a rush of United States taxpayers to confess to the I.R.S. The I.R.S. said this week that more than 30,000 taxpayers had come forward under an amnesty program.
UBS’s headlong rush into the ill-fated mortgage-backed securities market before it collapsed in 2008 will go down as one of the worst blunders in banking history. UBS absorbed a staggering $38 billion in losses and had to be bailed out by the Swiss government.OK…that’s a bit of background on UBS….how about giant HSBC? From the Guardian this week:
Last week's US Senate report into industrial-scale money laundering at banking giant HSBC reads like a John Grisham novel. Terrorists vie with Mexican drug lords for a place in the report's often breathless narrative that is as absorbing as it is alarming.And that commentary leads rather chillingly to this, also from the Guardian this past week:
But while the headlines have been about cocaine cartels, the most troubling aspect of the Senate's investigation is that the criminal, often violent, activities of the drug lords were facilitated by a byzantine, albeit legal, infrastructure that made tracking their activities near impossible.
This is particularly true of the subsidiary set up in the Cayman Islands by HSBC's Mexico division that handled some 60,000 accounts. According to the report, the drug lords used these accounts to fuel their jet-set lives. But, staggeringly, HSBC's oversight was so lax it knew nothing about who was behind 41% of the accounts.
This lack of transparency is troubling. Tax avoidance is big business. A report by the TUC found that the UK's four largest banks – HSBC,Barclays, Lloyds and RBS – have some 1,200 subsidiaries in tax havens. At a time when the banks are in the dock following a spate of scandals that have exploded the arguments for "light-touch regulation", the lack of oversight afforded by structuring transactions through tax havens threatens further scandals.
The world's super-rich have taken advantage of lax tax rules to siphon off at least $21 trillion, and possibly as much as $32tn, from their home countries and hide it abroad – a sum larger than the entire American economy.The best way to sum things up is this statement from Charles Ferguson, Director of the Documentary Inside Job, made as part of his acceptance speech for an Academy Award in 2011 (Bear with the foreign language at the start….his statement in English comes up shortly):
James Henry, a former chief economist at consultancy McKinsey and an expert on tax havens, has conducted groundbreaking new research for the Tax Justice Network campaign group – sifting through data from the Bank for International Settlements (BIS), the International Monetary Fund (IMF) and private sector analysts to construct an alarming picture that shows capital flooding out of countries across the world and disappearing into the cracks in the financial system.
Using the BIS's measure of "offshore deposits" – cash held outside the depositor's home country – and scaling it up according to the proportion of their portfolio large investors usually hold in cash, he estimates that between $21tn (£13tn) and $32tn (£20tn) in financial assets has been hidden from the world's tax authorities.
"These estimates reveal a staggering failure," says John Christensen of the Tax Justice Network. "Inequality is much, much worse than official statistics show, but politicians are still relying on trickle-down to transfer wealth to poorer people.
"This new data shows the exact opposite has happened: for three decades extraordinary wealth has been cascading into the offshore accounts of a tiny number of super-rich."
In total, 10 million individuals around the world hold assets offshore, according to Henry's analysis; but almost half of the minimum estimate of $21tn – $9.8tn – is owned by just 92,000 people. And that does not include the non-financial assets – art, yachts, mansions in Kensington – that many of the world's movers and shakers like to use as homes for their immense riches.
In fact, some experts believe the amount of assets being held offshore is so large that accounting for it fully would radically alter the balance of financial power between countries. The French economist Thomas Piketty, an expert on inequality who helps compile the World Top Incomes Database, says research by his colleagues has shown that "the wealth held in tax havens is probably sufficiently substantial to turnEurope into a very large net creditor with respect to the rest of the world."
In other words, even a solution to the eurozone's seemingly endless sovereign debt crisis might be within reach – if only Europe's governments could get a grip on the wallets of their own wealthiest citizens.
Ferguson in his opening comments noted that three years after a horrendous financial fraud, not a single financial executive had gone to jail and concluded…”That’s wrong.”
Nor is it much different today, nor, it seems, is there much chance that that situation is likely to change.