http://ftrsummary.blogspot.com/2005/11/ftr-531-interview-with-lucy-komisar.html
FTR #531 Interview with Lucy Komisar about Offshore
Recorded October 30, 2005
http://spitfirelist.com/?p=157

Featuring the brilliant investigative journalist Lucy Komisar,
this program highlights the use of "Offshore" entities to
evade taxes, maximize corporate profits and finance a
variety of criminal enterprises. Much of the first
side of the program consists of analysis and
discussion of insurance giant AIG and its
prolific use of "offshore" scams.
In addition to presenting AIG's pioneering
devlopment of "captive" reinsurance companies
to launder profits and evade taxes,
the program highlights AIG's use of
Coral Reinsurance for a variety of
illegal gambits. It should be noted
that AIG's illegal operations have
been aided by a number of powerful
and influential people. Much of the
second side of the program consists
of review of the pivotally important
Clearstream network, and its use by
intelligence agencies, corporations,
criminal syndicates and
terrorist organizations.

Program Highlights Include:
A working definition of "Offshore;"
the links of AIG to the intelligence community;
assistance given to AIG's scams by luminaries
such as Henry Kissinger and former Secretary of
the Treasury Richard Rubin; Clearstream's use
of unregistered accounts; the role of the
Clearstream network in the Banco Ambrosiano,
October Surprise and BCCI scandals; the role
of the Clearstream network in the financing
of Al Qaeda and 9/11; the role of the Clearstream
network in the machinations of the Russian criminal
networks of Mikhail Khordokovsky; discussion of
the "Bermuda Inversion" gambit; discussion of
"Transfer Pricing;" discussion of an organization
formed by Lucy Komisar that is working to
eliminate corporate tax evasion through the
use of "offshore."

1. In this return appearance by the formidable
Lucy Komisar, we begin the discussion of "Offshore"
with a functional definition:

"DAVE: 'Define 'Offshore' for us, Lucy.'

LUCY: 'Offshore financial centers are, mostly,
confidential and parallel financial systems
segregated from the traditional banking structure
of the jurisdiction and restricted to non-residents.
There are more than 4000 offshore banks thought to
exist in about 70 offshore jurisdictions.
They lack the regulation and supervision of
banks found in developed onshore jurisdictions.
In many OFCs, a bank can be formed, registered
and its ownership placed in the hands of nominee
directors via the Internet. There are few, if any,
disclosure requirements, bank transactions are
free of exchange and interest rate restrictions,
there are minimal or no capital reserve requirements,
and transactions are mostly tax-free. Some OFCs
permit the licensing and registration of 'shell banks'
that exist only on paper and do not have a
physical presence. They generally have legal
frameworks designed to obscure the identity of
the beneficial owner. Some OFCs offer the ability
to form and manage secretly a variety of
international business companies (IBCs), trusts,
investment funds and insurance companies, many with
nominee - that is front -directors, nominee
officeholders and nominee shareholders.'

2. Much of the program focuses on the scandals
surrounding the insurance giant AIG. We begin
with an introductory discussion of this
enormous corporation and its position in the
corporate landscape.

"DAVE: 'Now, let's turn to the subject of
insurance giant AIG, the focal point of two
of your Alternet articles. Tell us about the
company's size and importance in the industry
and the corporate landscape in general.'

'LUCY: 'AIG is the world's second largest
financial conglomerate and the largest
underwriter of commercial and industrial
insurance. In 2003, AIG reported net income
of $10 billion. It has $648 billion in assets,
a market value of $195 billion, $77 billion in
sales and $6.5 billion in annual profits.
It has operations in 130 countries and nearly
77,000 employees. It ranks third on Forbes'
list of the world's biggest companies, after
Citigroup, and General Electric."

(Note that the material on AIG was drawn from
Lucy Komsar's two articles written for AlterNet:
"The Fall of a Titan" by Lucy Komisar; AlterNet;
3/17/2005; "Take the Money and Run Offshore"
by Lucy Komisar; AlterNet.)

3. AIG and its CEO Maurice ["Hank"] Greenberg
are very closely related with the
intelligence community.

"DAVE' 'Tell us about AIG chief Maurice [Hank] Greenberg,
and his relationship to the intelligence community.'

'LUCY: 'The American International Group at its origins
was linked to the OSS (Office of Strategic Services)
the forerunner of the CIA.
It grew from the Asia Life/C. V. Starr companies
founded by Cornelius Starr who started his insurance
empire in Shanghai in 1919, the first westerner to
market insurance in China. Starr served with the OSS
during World War II, and the Starr Corporation,
located in the same building as the OSS in New York,
provided intelligence on shipping, manufacturing and
industrial bombing targets in Asia and Germany.
When Casey became CIA director in the Reagan
Administration, he wanted Greenberg to be his deputy,
but Greenberg decided to stay with AIG. After the
Ames scandal, Sen. Spector floated his name as a
replacement of Woolsey, but the job went to Tenet.'"
(Idem.)

4. AIG features a number of luminaries on its
board of directors and international
advisory boards:

"DAVE: 'Tell us about some of the prominent
people on the board of directors and international
advisory boards of AIG.'

LUCY: 'Henry Kissinger chairs AIG's
International Advisory Board. Its board of
directors includes William S. Cohen,
Former United States Secretary of Defense
and Senator, Caria A. Hills, Former United
States Trade Representative,
Richard C. Holbrooke, Former United States
Ambassador to the United Nations.'' (Idem.)

5. AIG's illegal and/or unethical stratagems
feature a pioneering use of "captives."

"DAVE: 'Let's turn to the subject of what AIG does.
What are 'captives' and how does AIG use them?'

LUCY: 'A captive is an insurance company that
is owned by the company it insures - and has
that company as its only client. Reinsurance
is insurance that an insurance company buys
so that if it has to pay out a claim, it doesn't
take all the risk. I discovered and reported on
a case where AIG used a reinsurance company
secretly owned by its client's CEO to help him
evade taxes, and by the way, to increase AIG
profits in a way that cheated the client's
stockholders. I wrote about the case on Alternet,
but it has not been reported in the corporate press.
Victor Posner, who died in 2002, was a crook known
as the original 'corporate raider,' famed for
engineering hostile takeovers of companies and
looting them. He had a history of corrupt dealings.
He owned a Delaware factory called NVF that made
Vulcan rubber. NVF had a workers compensation policy
with an AIG company, which reinsured it with
Chesapeake, a reinsurance company based in Bermuda,
an offshore center. It turned out that Chesapeake
was owned by Posner. In the early 90s, a Delaware
insurance investigator discovered that NVF was
paying twice the market rate to AIG for the insurance.
The transaction meant all the parties came out
ahead: AIG would keep a portion of the inflated
NVF premium before sending the rest to Chesapeake,
which meant AIG would have a higher commission.
Posner would write off the entire amount as a
business expense and enjoy the extra cash in
Bermuda, tax free. A former Delaware insurance
regulator told me, 'This was not an isolated
case with Vulcan. AIG did that a lot.' He said,
'AIG helped companies set up offshore captive
reinsurance companies. AIG would then overcharge
on insurance and pay reinsurance premiums to the
captives, giving the captive owners tax-free
offshore income.' However, the Delaware
Insurance Department took no action against
the insurer. When I gave AIG the details of
this scam, company spokesman Andrew Silver
told me, 'We don't have any comment on that.'
AIG declares on its website that it 'pioneered
the formation of captives almost 60 years ago,'
and it offers management facilities to run the
captives in offshore Barbados, Bermuda,
Cayman Islands, Gibraltar, Guernsey, Isle of Man,
and Luxembourg - all places where corporate and
accounting records are secret and taxes minimal
or nonexistent.'' (Idem.)

6. AIG also used offshore insurance interests
to move debt off its books, thereby making the
company appear to be more profitable than it
actually was. Of course, this did nothing to
damage the price of its stock.

"DAVE: 'What else did [does] AIG engage in
that was illegal?'

LUCY: 'In the late 90s, four state insurance
departments New York, Delaware, Pennsylvania
and California were aware that AIG was moving
debt off its books via the use of an offshore
insurance company it secretly set up and
controlled. But despite clear evidence of
wrongdoing, no sanctions were ordered.
State laws require insurance companies to
keep a certain amount of capital available
to pay out claims. If they have reinsurance,
that amount can drop. The reinsurer, of
course, has to be an independent company;
the risk isn't reduced if it's just moved
to another division of the same company.'"
(Idem.)

7. The program turns to the subject of
AIG's Coral Re gambit, and the considerable
assistance provided by investment firm
Goldman Sachs to the furtherance of this
scam: "'In the mid-80s, two of AIG's reinsurers
failed. AIG now was going to show unacceptably
high levels of debt on its books from claims
it would now have to pay out itself.
So Hank Greenberg decided to set up Coral Re,
a reinsurance company, to move his bad debts
off AIG books. It set up a shell company in
Barbados, where capital requirements and
regulation was minimal compared to the U.S.,
where American regulators couldn't readily
discover AIG's involvement and where, as an
added incentive, it could move money out of
reach of U.S. taxes. The scam company was
arranged with the help of Goldman Sachs then
headed by Robert Rubin, who would become
President Clinton's Treasury Secretary and
is now chairman of the executive committee
of Citigroup. It got some high-level corporate
executives to front for this supposedly
independent company. But I have a confidential
memorandum by Goldman Sachs which told why the
company was formed. 'AIG's interest in
creating the company is to create a reinsurance
facility which will permit its U.S. companies
to write more U.S. premiums. For a U.S.-domiciled
company, a high level of surplus is required to
support insurance premiums in accordance with
U.S. statutory requirements. The statutory
requirements in Barbados are less restrictive.'
The people who got this memo were corporate
executives who, in exchange for their names,
were offered a guaranteed return of $25,125
in the first year and $45,225 each subsequent
year. They didn't have to put up any money:
they got financing from Sanwa Bank of Chicago
secured by the Coral Re shares, a guarantee
of enough dividends from Coral Re to cover
the interest, and agreement they could hand
off the shares and debt whenever they chose.
Who got this no-lose so-called investment?
They included serving or former chairmen of
Reynolds Metals; Kraft; Itel, Mennen Company;
Morton Thiokol. The Arkansas Finance and
Development Authority, headed by a man who
went to work in the Clinton White House,
became lead investor, although state law
banned it from buying stocks. Clinton was
then governor of Arkansas. He would make
Rubin his Treasury Secretary. The new company
was not a legitimately independent business.
For investors, there was no money at risk;
the board of directors never made a decision;
and Coral Re had no office of its own but was
managed by American International Management,
a subsidiary of none other than AIG.
Eventually, the scheme unraveled.
In 1992, Delaware examiners smelled a rat,
AIG initially refused to provide Coral Re
documents to the examiners, and it took
them a couple of years to nail the connection.
When AIG finally supplied Coral Re's financial
papers, the regulator was incredulous.
He told me, 'The books were definitely cooked.'
But the cowardly regulators in Delaware,
Pennsylvania, New York and California, though
they agreed in 1996 that AIG owned Coral Re
and that there was no transfer of risk, did
not act to punish AIG, just told it to stop
using Coral Re. If Coral Re was an AIG affiliate,
it would have to pay taxes on its income.
If it was 'independent,' that money came tax-free.
But the IRS didn't have the guts to go after
them, either. AIG spokesman Andrew Silver simply
denied the validity of what all the insurance
commissions found. He told me that 'AIG was not
involved in the offer and sale of Coral Re's shares.
That was done by Goldman Sachs, which approached
potential investors with which it had relationships.
AIG did not control or have an equity interest
in Coral Re.' That of course it completely untrue.
Goldman Sachs failed to respond to inquiries about
its role in setting up Coral Re. In May this
year (2005), New York State Attorney General
Eliot Spitzer filed suit against AIG and Greenberg,
charging a pattern of fraud through the use
of 'sham transactions' that bolstered the
conglomerate's financial statements." (Idem.)
[CONTINUED] http://spitfirelist.com/?p=157
http://ftrsummary.blogspot.com/2005/11/ftr-531-interview-with-lucy-komisar.html