Tax Research UK

FT.com / UK / Business - BAE pays $400m to end corruption case .

It’s been reported this afternoon that:

The arms maker BAE Systems is to pay more than $400m in penalties to settle bribery allegations in a groundbreaking transatlantic settlement of Britain’s biggest and most politically contentious corporate corruption case.

The company will pay the vast bulk of the fines in the US, while it will hand over £30m in the UK and plead guilty to a minor Companies Act accounting record offence.

As the FT note:

The agreement is bound to provoke sharp debate – particularly in the UK – about whether BAE is being punished sufficiently, given the size and scope of the corruption allegations against it.

In a statement BAE said it regretted the incidents and accepted full responsibility for what it described as the “shortcomings”.

Some shortcomings, and the sad truth is nothing has been done to stop this by creating systemic change.

Richard Murphy Corruption

FT.com / Companies / Financial Services - UK fraud losses rise to a high of £2.1bn.

BDO have monitored recorded fraud loss since 2003. It’s reached a new high, according to them, of £2.1bn.

As they say:

The statistics significantly under-report actual losses to fraud because they include only those cases publicly reported to authorities. More than 90 per cent of the losses investigated by BDO and other forensic accounting firms are never prosecuted. Many companies prefer to handle problems such as employee theft, accounting misdeeds and kickback payments privately or via civil litigation.

Management fraud, in which senior executives issue misleading financial statements, was the single largest category of fraud, accounting for 24 per cent of total losses.

As some of us have said, chaps don’t like prosecuting chaps for msi-stating accounts. That’s just not what you do.

But the chaps at BDO are also guilty of turning a blind eye to fraud. Tax evasion is fraud. My current estimate of annual tax evasion in the UK is £70 billion per annum.

I can’t help but ask why BDO appear to ignore every single penny of it when calculating their fraud stats? Is de-frauding the state somehow acceptable and not worthy of the name but defrauding business is serious?

I’d like to know their reasoning.

Richard Murphy Accounting, Corruption

FT.com / Africa - Corruption probe into sale of Ghana oil block .

The FT reports:

US and Ghanaian authorities are investigating corruption allegations involving a Texas oil company and the local partner that helped it secure control of the Ghanaian oil block that yielded one of Africa’s biggest recent discoveries.

The case risks complicating efforts by Texas company Kosmos to sell its stake in the Jubilee oil field to ExxonMobil in a deal valued at $4bn. Kosmos, which denies any wrongdoing, is owned by US private equity groups Blackstone and Warburg Pincus.

According to people close to the investigation, Ghana is preparing to file criminal charges against EO, a company set up by two political allies of John Kufuor, former president, whose party lost tense elections a year ago. The US justice department is also understood to be probing the relationship between EO and Kosmos, although the department on Thursday declined to confirm or deny this.

Duke Amaniampong, a California-based lawyer working for the Ghanaian investigation told the Financial Times that Ghana’s attorney-general had accumulated “enough evidence of criminal culpability to bring charges against the EO group and its directors”.

The charges would include “causing a financial loss to the state, money laundering and making false declarations to public agencies”, said a person in the attorney-general’s office.

I don’t know the rights and wrongs concerning these allegations.

I do know that transparency in Extractive Industries deals is vital.

And I do know that full transparency about the beneficial ownership, real management and financial performance of companies, where ever registered, is also vital if corruption is to be prevented.

Which is precisely what the New Haven Declaration is all about.

Richard Murphy Corruption, Development

Global Financial Integrity (GFI) released today a statement — dubbed the New Haven Declaration — which debuts a new partnership between humans rights and financial transparency advocacy groups.  Today’s announcement follows a meeting of prominent human rights and financial transparency organizations at Yale University in early December, 2009.  The groups discussed the link between illicit financial practices, secrecy in global finance and their adverse impact on human rights.

"The links between human rights and financial transparency are undeniable," said GFI Director Raymond Baker.  "An estimated $1 trillion is siphoned out of poor countries annually.  Further, some 18 million people die each year from causes stemming from economic deprivation.  Of these, ten million are children under the age of five who die from diseases for which vaccines are available."

"The New Haven Declaration makes clear that the solution to these interconnected problems lies in increased transparency and accountability in the global financial system," said Baker.

Signed by such groups as Amnesty International, Human Rights Watch, Oxfam, Global Financial Integrity, the Center for Applied Philosophy and Public Ethics, the Open Society Institute Justice Initiative, Tax Justice Network, and the National Council of Churches, the following statement "represents a vanguard partnership in human rights, economic development, global poverty alleviation, and global financial accountability," said Baker.

The statement and list of signatories follows:

New Haven Declaration On Human Rights and Financial Integrity

Human rights and international financial integrity are intimately linked.  Where poverty is pervasive, civil, political, and economic rights often go unrealized.  Today, large outflows of illicit money - many times larger than all development assistance - greatly aggravate poverty and oppression in many developing countries.

Illicit money leaves poorer countries through a global shadow financial system comprising tax havens, secrecy jurisdictions, disguised corporations, anonymous trust accounts, fake foundations, trade mispricing, and money-laundering techniques. Much of this money is permanently shifted into western economies.

Reducing these illicit outflows requires greater transparency and integrity in the global financial system. Achieving this is a prerequisite to creating an economic framework that is open, accountable, fair, and beneficial for all.

We call upon the United Nations, the G8, G20, WTO, IMF, World Bank, and other international fora, as well as on national governments, world leaders, faith groups and civil society organizations to recognize the linkage between human rights and financial transparency. We further call for decisive steps to ensure that developing countries can retain their resources for sustainable growth and poverty alleviation, which they must achieve if the human rights of all people are to be realized.

The undersigned individuals and organizations shall be working together in the coming months to pursue this agenda and look to add additional voices to this effort.

Amnesty International
Human Rights Watch
Oxfam
Global Financial Integrity
Center for Applied Philosophy and Public Ethics
Open Society Institute Justice Initiative
Asia Initiatives
Task Force on Financial Integrity and Economic Development
Tax Justice Network
Christian Aid
National Council of Churches
Harrington Investments, Inc.
Asociación Civil por la Igualdad y la Justicia
Thomas Pogge, Yale University
Robert Hockett, Cornell University
Frank Pasquale, Seton Hall

I have now added my name to that list.

Click here to read Raymond Baker, Thomas Pogge, and Arvind Ganesan’s op-ed in the Huffington Post introducing the New Haven Declaration.

Richard Murphy Corruption, Development, Secrecy jurisdictions, Tax Havens

Feds probe financier Allen Stanford’s links to lawmakers | Houston & Texas News | Chron.com - Houston Chronicle.

Good investigative journalism on display here - well worth the read. But the message is this:

The Justice Department is investigating millions of dollars Allen Stanford and his staff contributed to lawmakers over the past decade to determine if the banker received special favors from politicians while building his spectacular offshore bank in Antigua.

Records show Stanford also doled out $5 million on lobbying since 2001, setting up his own Washington firm last year with expensive furnishings and artwork — the money plundered from his customers’ accounts.

Over the years, he took on battles to protect his banking network while fending off regulators.

In 2001, he pressed successfully to kill a bill that would have exposed the flow of millions into his secretive offshore bank in Antigua.

The next year, he helped block legislation that would have drawn more government scrutiny to his bank.

[W]hen a bill was created to compel offshore bankers to reveal the sources of money flowing into their banks, Stanford jumped into the fight to kill it.

The measure would have forced Stanford — who was moving millions illegally through his Miami trust office — to open his books to federal regulators.

“He wanted the complete freedom to move money offshore without any threat,” said Jack Blum, a lawyer who testified before Congress supporting the legislation. “He was cheerleading for the offshore tax havens.”

Please don’t tell me legislatures aren’t captured by corrupt offshore money. The evidence is that they can be.

Richard Murphy Corruption, Tax Havens, USA

Europe unites to deplore Swiss ban on minarets - Times Online .

The Swiss and European establishment united today in deploring yesterday’s decision by Swiss voters to outlaw the construction of minarets but conservative leaders warned that the referendum showed genuine fear over Islam on the continent.

Swiss officials, media and business leaders voiced shame over a vote that they say will stigmatise the country’s 400,000 Muslims and stain Switzerland’s name in the Muslim world. In contrast, hard right leaders in France, Austria, Italy and the Netherlands hailed what they depicted as a triumph for the people against the elite.

The hard right and a secrecy jurisdiction acting in concert: no surprise there.

Secrecy jurisdictions are captured states that are used to promote the hard right.

There will be howls of protest - but let’s be clear. Apart from this very obvious abuse of the human rights of Moslems who should be allowed to worship as they please, secrecy jurisdictions do something much more sinister: they deliberately ensure that what little wealth the poorest of the world might be entitled to in the world’s developing countries is systematically transferred to the world’s wealthiest countries for the benefit of the wealthiest in those wealthiest countries.

This is an abuse as bad as slavery.

And the right say that this is about liberty. No it isn’t: it is only about abuse. There is no other explanation.

Richard Murphy Corruption, Secrecy jurisdictions, Switzerland, Tax Havens