2009 February » Tax Research UK

They were talking Madoff

Feb 182009

As the FT notes, follwoing my comments written last night before I saw the news:

Sir Allen Stanford, the billionaire Texan and cricket bankroller, was charged by US securities regulators on Tuesday over a “massive” investment fraud through his Antigua-based offshore bank.

The Securities and Exchange Commission alleged that Stanford International Bank, based in St John’s, Antigua, and one of several companies run by Sir Allen, sold about $8bn in “certificates of deposits”, promising “improbable and unsubstantiated high interest rates”.

Rose Romero at the SEC’s Fort Worth office called the alleged fraud one “of shocking magnitude that has spread its tentacles throughout the world”.

How much evidence do we need of offshore corruption before we close it down?

Going down – and about time too

Corruption Comments Off

Feb 182009

I worked on the BBC Panorama programme on David Mills a few years ago.

I am delighted he has got four years. It was very, very obvious the man was very, very corrupt.

There’s a moral to the tale: people are corrupted by offshore secrecy.

Are they Madoff?

Tax Havens 3 Responses »

Feb 172009

According to the Wall Street Journal:

Depositors from as far away as Colombia have begun arriving in the island nation of Antigua, seeking to withdraw their money from an offshore bank under investigation by U.S. state and federal authorities.

Stanford International Bank Ltd. and related firms controlled by Texas businessman R. Allen Stanford have fallen under scrutiny by the Federal Bureau of Investigation, the Securities and Exchange Commission and other regulatory bodies, according to people familiar with the matter.

Authorities are examining the group’s marketing practices, which include offering certificates of deposit with unusually high interest rates, as well as a mutual-fund product sold by Stanford Trust Co., a person familiar with the matter says.

On its Web site, Stanford says the product, known as Stanford Allocation Strategies, aims to “reduce volatility throughout the investment cycle.” Investigators are looking at whether Stanford provided false historical return data that bolstered its performance, this person said.

Now what would they be thinking? Surely they couldn’t think someone so recently sponsoring international cricket could be doing something wrong deep in the outfield, could they? Maybe they’re just Madoff.

Hat tip to Chris Hopkins.

Why we need a Green New Deal

Economics 4 Responses »

Feb 172009

This graph shows why we need a Green New Deal:

Try arguing with it.

UN calls for the Green New Deal

Economics 1 Response »

Feb 172009

Reuters has reported:

World leaders meeting in London in April should kick-start a “Green New Deal” to fight climate change and revive the crippled global economy on a sustainable basis, a major U.N. environment meeting was told on Monday.

High on the agenda for more than 100 environment ministers gathered in Kenya this week will be how to draw attention to “green” issues amid job losses and worldwide financial turmoil.

Oh yes.

But remember what the Green New Deal is. It calls for:

- Massive investment in renewable energy and wider environmental transformation in the UK, leading to,
- The creation of thousands of new green collar jobs
- Reining in reckless aspects of the finance sector – but making low-cost capital available to fund the UK’s green economic shift
- Building a new alliance between environmentalists, industry, agriculture, and unions to put the interests of the real economy ahead of those of footloose finance

It recognises that:

The global economy is facing a ‘triple crunch’: a combination of a credit-fuelled financial crisis, accelerating climate change and soaring energy prices underpinned by encroaching peak oil. It is increasingly clear that these three overlapping events threaten to develop into a perfect storm, the like of which has not been seen since the Great Depression, with potentially devastating consequences.

And it calls for:

- a bold new vision for a low-carbon energy system that will include making ‘every building a power station’.
- the creation and training of a ‘carbon army’ of workers to provide the human resources for a vast environmental reconstruction programme.
- the establishment of new savings media to pay for the transition to a low-carbon economy.
- more realistic fossil fuel prices.
- minimising corporate tax evasion by clamping down on tax havens and by promoting better corporate financial reporting.

- re-regulating the domestic financial system.
- breaking up the discredited financial institutions.

This is an ambitious agenda. It’s what we need. It’s precisely the sort of thing our treasury seems determined to block.

Why?

Disclosure: I am a member of the Green New Deal group

Word reaches me that there’s just one problem left for global economic reform

Economics 2 Responses »

Feb 172009

Rumours are coming back from the G7 meeting at the weekend. Well placed rumours.

These suggest there is just one obstacle left in the path of global economic reform. One country alone that is saying ‘no’ to all the necessary changes to create transparency, enhance regulation, crack open the tax havens and ensure that there is international cooperation to build a better future.

Yes, you’ve guessed it; it’s the UK.

Staggering isn’t it? Brown and his team are so wedded to finance that they alone are still putting its needs above those of the rest of us on this planet.

It comes to something when I have to ask myself if the Tories could be this bad.

It’s sad that I have to conclude that the likely answer to that is ‘yes’.

This is the UK’s current gift to the world: London, the last bastion of the Washington consensus.

Conflicts of interest are destroying our economies

Economics, Ireland, PWC 3 Responses »

Feb 162009

There’s a classic in the Irish Times this morning:

IT IS probably unfair to pick just one example of the conflicts that are rife among the people advising the Government on the recapitalisation, so let’s pick two.

The most obvious one being PricewaterhouseCoopers. They are the auditors to Bank of Ireland who are desperately trying to avoid being taken over by the State. At the same time they were hired by the Financial Regulator to asses the quality of the banks’ loans books, the bottom line being will the Government have to take them over.

Equally, Arthur Cox are advising the Minister for Finance while at the same time they are the lawyers for Bank of Ireland.

The stock response from professional firms is that such conflicts are unavoidable and they have robust rules for dealing with them which fundamentally rely on the integrity of the individuals involved. Quite so. Unfortunately, even though this may be the case, it can lead to bad decisions and poor advice.

How can PwC really take a view as to whether there is something systemically wrong with the way Irish banks are run without having to confront the possibly that there is something systemically wrong with PwC who audit one of the big two?

Equally, how can Arthur Cox advise the Minister that Bank of Ireland may have done something it should not have, without having to deal with the possibility that it was Arthur Cox that gave them the advice they could do it?

It may also seem a bit beside the point – given the scale of the banking crisis – to focus on conflicts of interest among professional advisers, but the failure of the Minister for Finance and the Financial Regulator to see the problem inherent in hiring Arthur Cox and PwC indicates a much bigger problem which is part of the reason we are in this mess.

How did PWC think they could do this? It seems to breach every possible code of ethics and accountant might have. They deserve to be drummed out of their Institutes for this.

Why did the Irish government not notice the massive conflicts of interest in here?

Why do they think those who helped create this mess, failed to signal this mess was coming, and gave these people a clean bill of health in the past can now get them out of this mess?

Why? Because our societies are riddled by a cronyism that is destroying wealth faster than anyone can create it. That is why.

It’s why we in the UK had Sir James Crosby, who drove HBOS onto the rocks through reckless mortgage lending, telling the government how to solve the problem of mortgage lending.

It’s why we had Sir Derek Wanless who helped wreck Northern Rock telling us how to reform the NHS.

And it’s why some in government believe the Big 4 know the answer to everything.

They don’t.

But there’s a lesson to be learned. If these people not only did not know the answers, but helped destroy the value we had now is the time to listen to the other voices. Those who have delivered in the NHS (an organisation almost universally believed to deliver well by its users). It’s time to listen to those who criticised the solutions the bankers offered. It’s time to appoint successful head teachers to run banks. It’s time for people who have run major NGOs to tell commerce how to get things right. It’s time for trade unionists to appear in board rooms.

Unthinkable? Surely much, much less than thinking that the Big 4 and the bankers now know the answers.

Hat tip to Dennis Howlett

My del.icio.us bookmarks for February 16th

Delicious 2 Responses »

Feb 162009

These are my links for February 16th:

Tax Justice Network: Guest blogger: Rudolf Elmer, whistleblower – How to do offshore, if you must
And it applies onshore too
Debtonation » Blog Archive » The Mysterious Mr. Keynes – Keynes is no longer taught at Cambridge
Is it a surprise we're in a mess?
FT.com / UK – Non-executive directors receive hefty pay increases – I can live with this – if they do their job
But are they?
FT.com / Companies / Financials – Private equity code for Europe – Forget it
Regulation please

The IASB model of accounting has failed

Accounting 1 Response »

Feb 162009

The International Accounting Standards Board says that:

The objective of general purpose financial reporting is to provide financial information about the reporting entity that is useful to present and potential equity investors, lenders, and other creditors in making decisions in their capacity as capital providers.

But the FT reports this morning that:

Meanwhile, the Association of British Insurers, the industry trade body, has continued to complain about a lack of transparency from many companies, especially those backed by private equity. “Often credit insurers are simply not given enough data about the business to make a decision on risk management,” an official said.

Which says to me, in no uncertain terms, that the reporting model is broken.

The IASB is an architect of the financial crisis. It has failed to deliver meaningful information. The time for useful information has arrived.

Let’s start with country-by-country reporting.