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Inside a shadowy banking system that secretly moves trillions of dollars around the world.
With Bush’s new nukes, the world gets more dangerous.
The Failure of Brand USA
Why the Bush administration can't sell America abroad.
Learning from Enron
Will Washington ever get it?
It’s time to fight the Enronization of the media.
Dangerous Lives
Colombia’s generals finally have the war they want, but their country’s people pay the price.
Editorial
Steeling Home.
Sharon’s Lessons in Terror
War crimes tribunal for Cambodia proves elusive.
Polluters rewrite the Clean Water Act.
Indian Rights
American tribes take their case against Washington to international courts.
No Fun or Games
Chinese sweatshops churn out toys for the United States.
Intimidation Tactics
Neal Horsley: One mean anti-abortionist.
FILM: What Time Is It There?
The Cricket-Loving Marxist Dandy
BOOKS: C.L.R. James: A Life.
The Invisible Band
MUSIC: Gorillaz in our midst.
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March 15, 2002
Explosive Revelation$, part 2.
Backes found numerous discrepancies in the lists he obtained of the secret
accounts. For example, code No. 70287 on the published list belongs to Citibank
NA-Colombia AC in Nassau, and code No. 70292 is that of the Banco Internacional
de Colombia Nassau Ltd. But on the non-published list, the numbers both belong
to Banco Internacional de Colombia in Bogota. There’s no mention of Citibank.
Based on the published list, members may think they are dealing with two banks
in the Bahamas, one of which is a subsidiary of Citibank, but anything sent
to these establishments goes directly to the country of cocaine cartels. On
the April 2000 Clearstream list, there are 37 Colombian accounts, of which only
three are published. (Richard Howe, spokesman for Citicorp in New York, declined
repeated requests for comment. Cope declined to talk about any individual customers
or accounts, citing Luxembourg banking secrecy laws.) Clearstream’s dealings with Russian banks are another area of concern.
Menatep Bank, which had been bought in a rigged auction of Soviet assets and
has been linked to numerous international scams, opened its Cedel account (No.
81738) on May 15, 1997, after Lussi visited the bank’s president in Moscow
and invited him to use the system. It was a non-published account that didn’t
correspond to any published account, a breach of Clearstream’s rules. Menatep
further violated the rules because many transfers were of cash, not for settlement
of securities. “For the three months in 1997 for which I hold microfiches,”
Backes says, “only cash transfers were channeled through the Menatep account.” “There were a lot of transfers between Menatep and the Bank of New York,”
Backes adds. Natasha Gurfinkel Kagalovsky, a former Bank of New York official
and the wife of a Menatep vice president, stands accused of helping launder
at least $7 billion from Russia. U.S. investigators have attempted to find out
if some of the laundered money originated with Menatep, which they believed
had looted Russian assets. (The Justice Department declined to comment on the
investigation.) Even though Menatep officially failed in 1998, it oddly remained on the non-published
list of accounts for 2000. (Clearstream also lists 36 other Russian accounts,
more non-published than published.) Kathleen Hawk, a U.S. spokeswoman for Clearstream,
says that was “a mistake.” But Cope contradicts her: “Closed
accounts remain on our files and systems even though they’re non-active
because we don’t reuse numbers. We keep the records for many years so there
is no future confusion from reused numbers.” But Backes explains that there’s no systematic rule about delisting canceled
accounts. He found that “some that didn’t exist any longer were on
the list. Others were delisted when they didn’t exist. And still other
accounts were delisted, when we knew they existed, though the numbers no longer
appeared.” Régis Hempel, a computer programmer who worked for Clearstream, says
some dormant accounts were activated for special transactions. “Such an
account can be opened in the morning, used for a transaction, and closed to
appear as delisted in the evening,” Backes explains. “Only the guy
who gave the order to open it in the morning knows about the transaction. An
investigator or auditor would not look at such an account because it doesn’t
appear on the accounts list.” Hempel also claims that Clearstream erased the records of some transfers. In
testimony before the French National Assembly’s financial crimes committee
last year, he explained that a computer system had been developed to wipe out
the traces of transactions in non-published accounts. When a bank wanted to
carry out such a transaction, Hempel testified, it simply contacted a Cedel
staff person. “We made a ‘hard coding’ in the program and corrected
the instruction that was going to come,” he explained. “[An instruction
could be] a purchase, a sale, a movement of funds or a security. We made it
disappear, or we put it on another account. Then, when all was finished, we
put back the old program and removed the exception. It was not seen or known.” He said such requests came every two or three days.
Luxembourg sources say Zeyen was looking into how Menatep used the system and
also into improper ways André Lussi might have gained personally. In
January, a French judge took depositions about Menatep corruption. According
to Luxembourg journalist Marc Gerges, writing in the local newspaper Land,
the FBI and the German BKA are also interested in what might be revealed about
the role of Menatep in the diversion of IMF funds. Gerges says investigators
are also looking to implicate Lussi in suspected financial swindles conducted
through holding companies and trusts in the offshore financial havens of Guernsey
or Jersey. (Lussi could not be located; his attorney did not respond to phone
and e-mail requests for comment.) The publication of Révélation$ brought forward others
with stories about how Cedel/Clearstream had facilitated corruption. Joël
Bûcher, former deputy general director of the Taiwan branch of the bank
Société Générale, wrote Zeyen volunteering to testify
that SG used the clearinghouse to hide bribes and to launder money. In his deposition
for Zeyen—which is cited in Denis Robert’s new book on the Clearstream
saga, The Black Box—Bûcher said he had worked for the bank
for 20 years, but quit in 1995 out of disgust at its rampant money-laundering.
He said much of that occurred though a Luxembourg affiliate working through
non-published accounts at Cedel. “Cedel didn’t ask any questions about
the origin of funds that would have appeared suspect to any beginner,”
he told Robert. “[As a result] we directed our clientele with funds of
doubtful origin to Luxembourg.” In the early ’90s, Bûcher contends, Cedel was used to launder $350
million in illegal “commissions” on a contract for the sale by Thomson-CSF,
a French government arms company, of six French frigates to Taiwan. He said
that the money, handled by an SG subsidiary, was paid as a registered securities
transfer to a “nominee”—a stand-in for the real beneficiary—and
that Thomson (now known as Thales) didn’t appear in the transaction except
in the Cedel archives. The kickbacks were exposed after the 1993 murder of a naval captain named Yin
Ching-feng, who had written a critical report on the purchase and its inflated
$2.8 billion price. Bûcher told Taipei authorities that a third of the
kickbacks went to Taiwanese generals and politicians, while the rest was pocketed
by French officials. Taiwan courts sentenced 13 military officers and 15 arms
dealers to between eight months and life in prison for bribery and leaking military
secrets. In March, Bûcher will testify before a French court examining French
complicity. “SG is very much implicated,” he told In These Times.
“Taipei police searches found many records of transfers of commissions”
relating to the frigates and also to the sale of French Mirage fighter planes.
In New York, SG spokesman Jim Galvin denies that the bank had any involvement
in the arms deal. There has been no legal action by the Luxembourg prosecutor based on any of
his investigations. However, Clearstream Banking, Lussi and others have filed
10 lawsuits for libel in Luxembourg, France, Belgium and Switzerland against
Backes, Robert and their publisher, Les Arenes. The first case, Clearstream
v. Backes went to court in March in Luxembourg. Another case began its first
hearings in Paris a few days later. With no sense of irony, the liquidator of
Russia’s notorious Menatep Bank is also suing the authors and publishers
for damage to its reputation. (Mikhail Khodorkovsky, the Russian oligarch who
controlled Menatep, did not respond to a request for comment.)
Local officials’ attempts to defend financial secrecy are not surprising.
Luxembourg’s multi-billion-dollar financial sector brings in 35 percent
of GNP and gives the inhabitants a per capita income of more than $44,000, the
highest in the world. (Next on the list are Liechtenstein, Switzerland and Bermuda,
all money-laundering centers, with the United States fifth.) For years, local
officials have refused to provide bank information to other countries. But Luxembourg authorities have turned their sights on Backes. Using a March
2001 judicial order based on a complaint made by Lussi before he was fired,
police raided Backes’ house on September 19 in search of records. He says
they seized unimportant documents and diskettes; he keeps the microfiches outside
the country as “life insurance.” “The raid was organized to impress
[others] not to repeat what this dangerous guy Ernest Backes has done,”
he says. “Those who know me well know I am not at all impressed by such
a raid.” Lucy Komisar is a New York journalist who has spent the past five years
investigating the international offshore bank and corporate secrecy system.
To order a copy of Révélation$ (in French), visit www.arenes.fr.
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In These Times is committed to remaining fiercely independent, but we need your help. Donate now to make sure we can continue providing the original reporting, deep investigation, and strategic analysis needed in this moment. We're proud to be in this together.
y 2000, according to Backes, Clearstream managed about 15,000 accounts (of
which half were non-published) for 2,500 clients in 105 countries; most of the
investment companies, banks and their subsidiaries are from Western Europe and
the United States. Most of the new non-published accounts were in offshore tax
havens. The banks with the most non-published accounts are Banque Internationale
de Luxembourg (309), Citibank (271) and Barclays (200).
empel volunteered to help Luxembourg prosecutor Carlos Zeyen investigate Clearstream.
But Hempel says local authorities seem more interested in blocking an investigation
than in exercising oversight. Zeyen responded that the inquiry into Hempel’s
charges hadn’t produced any evidence and dismissed claims that Hempel had
been prevented from seeing relevant files as “rubbish.” In a July
2001 public statement, Zeyen said the investigation would continue.