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Authors Posts by Diana Jean Schemo

Diana Jean Schemo

Diana Jean Schemo
Diana Jean Schemo is co-founding executive editor of 100Reporters and an award-winning former foreign, national and cultural correspondent for The New York Times and the Baltimore Sun.

1209 North Orange Street, registered home of some 285,000 businesses in the U.S., many of them shell companies. / WIKIMEDIA COMMONS

In recent years, the U.S. government has taken unprecedented steps to crack down on bank secrecy abroad and to begin calling foreign kleptocrats to account.

In February, the Justice Department indicted Switzerland’s oldest private banking house, Wegelin & Co., on charges it hid some $1.2 billion in American assets, allowing account holders to avoid paying U.S. taxes.  A month later, amid unrelenting pressure from Washington, the Swiss parliament modified notoriously secretive banking laws.

But the aggressiveness of U.S. officials toward offshore tax shelters overlooks a problem closer to home: domestic tax havens. The secrecy laws in a handful of states, including Wyoming, Nevada and Delaware, rival those of countries with the worst reputations for harboring criminal assets and concealing the ill-gotten gains of corrupt officials, from Britain’s Cayman and Channel Islands to Belgium to Luxembourg.

Two pieces in this week’s New York Times, written by 100Reporters’ Leslie Wayne and Ken Silverstein, explore the problem and potential solutions.

As senior editor Leslie Wayne reported in Sunday’s Times, a single address in Delaware is the registered home to 285,000 businesses, including “giants like American Airlines, Apple, Bank of America, Berkshire Hathaway” and others. It was also home to Timohty S. Durham, “the Midwest Madoff,” convicted of swindling some 5,000 middle-class investors of $207 million. Viktor Bout, the convicted Russian arms dealer, incorporated his business in Delaware as well.

“Big corporations, small-time businesses, rogues, scoundrels and worse – all have turned up at Delaware addresses in hopes of minimizing taxes, skirting regulations, plying friendly courts or, when needed, covering their tracks,” Wayne writes. “Federal authorities worry that, in addition to the legitimate businesses flocking here, drug traffickers, embezzlers and money launderers are increasingly heading to Delaware, too. It’s easy to set up shell companies here, no questions asked.”

In an op-ed that ran in Tuesday’s Times, 100Reporters’ contributor Ken Silverstein noted that in Delaware and the other domestic U.S. tax havens, corporations are not required to provide the name of the “beneficial owner,” the person for whose benefit the shell company is being established.  That has made the U.S. the “top destination for corrupt politicians trying to set up shell companies to access the financial system,” Silverstein writes.

“Dictators and despots can therefore easily hide their assets: instead of buying property in their names, they instead will buy a mansion owned, for example, by a Panamanian trust controlled by a Bahamian corporation that’s run by a company registered in Lichtenstein.”

Justice Department officials will try to peel through those layers of secrecy as they go after the assets of Teodoro Obiang Nguema, son of the president of Equatorial Guinea. Obiang, who is also known as Teoadorin, managed to amass a fortune while on a modest government salary, splurging on an $80 million Paris mansion and one worth $30 million in Malibu, as well as a $38 million personal jet.

Silverstein notes that U.S. Senator Carl M. Levin, the Michigan Democrat, has repeatedly introduced bills that would force states to disclose the beneficial owners of companies they register to do business. The bill has faced unwavering opposition from the U.S. Chamber of Commerce, the American Bar Association, and, of course, the State of Delaware.

Diana Jean Schemo
Diana Jean Schemo is co-founding executive editor of 100Reporters and an award-winning former foreign, national and cultural correspondent for The New York Times and the Baltimore Sun.

U.S. Treasury Department names new targets of crackdown on Ayman Joumaa, whose money laundering and drug-running operations support Hezbollah, designated a terrorist group by the U.S. State Department. Here, Hezbollah soldiers with a picture of Imad Mughniyeh in 2011, when the group was believed to have threatened to assassinate Israeli diplomats in retaliation for Mughniyeh’s death in a 2008 car bombing. / REUTERS

U.S. officials announced a series of moves Wednesday aimed at stifling the flow of money through several groups accused of laundering funds for a major drug trafficking operation known as the Joumma network.

That network is in turn allegedly linked to Hezbollah, and the American government has accused it of using proceeds from cocaine trafficking in Columbia, in partnership with a Mexican cartel, to finance the Lebanese-based Hezbollah. The U.S. State Department counts Hezbollah, which is backed by Syria, as a terrorist organization.

Ayman Joumaa was indicted last year by a federal grand jury on numerous money laundering and drug trafficking charges tied to cocaine shipments from Columbia aimed at the U.S. market.

According to the Treasury Department, Joumaa’s organization allegedly “laundered proceeds from their illicit activities – as much as $200 million per month – through various channels, including bulk cash smuggling operations and Lebanese exchange houses.”

Sweep to Treasury Targets Major Money Laundering Network

One of the most prestigious public universities in the U.S. has reinstated its president after weeks of turmoil were sparked by her sudden, suspicious ouster.

Scores of faculty, students and alumni at the University of Virginia expressed outrage after the head of the school’s governing board engaged in secret, back-room dealings aimed at abruptly replacing the first-ever female president with someone considered more business-friendly. The university, as a public institution, is normally subject to the same open meeting requirements as other state agencies.

Star faculty members threatened to resign, and one, computer scientist William Wulf, actually did. The governor threatened to fire all 15 members of U-Va.’s entire board of visitors.  After two weeks, the U-Va. board voted Tuesday to bring back Teresa Sullivan as president.

As the Washington Post reports, the vote “completed a cycle of events that plunged the university into chaos, with 16 days of protests, no-confidence votes and talk of mass faculty defections.”

Sweep to U-Va. board unanimously reinstates Teresa Sullivan as president

Montreal mayor Gérald Tremblay doesn’t like being called crooked, and now he’s lashing out at the whistleblower who fingered him to a government inquiry investigating corruption in Quebec.

Tremblay is fuming over the whistleblower’s recent testimony and subsequent comments this week saying the mayor “can go to hell,” the Montreal Gazette reports.

Tremblay is demanding an apology from Jacques Duchesneau – a former city police chief who testified about wide-ranging corruption in Quebec. But Duchesneau appears to have no intention of backing down after his comments this week in the Canadian media criticizing the mayor.

In his sweeping testimony before the provincial inquiry, Duchesneau reportedly said that more than two-thirds of the money raised by Quebec’s political parties was obtained illegally.

Sweep to Tremblay will not seek legal redress

Diana Jean Schemo
Diana Jean Schemo is co-founding executive editor of 100Reporters and an award-winning former foreign, national and cultural correspondent for The New York Times and the Baltimore Sun.

A mural showing Mohammed Rashid, the late Palestinian leader Yasser Arafat's former financial adviser. The Palestinian Anti-Corruption Court convicted Rashid of embezzlement Thursday. / REUTERS

A Palestinian court has convicted Yasser Arafat’s former money handler of stealing some $33.5 million, money that international supporters had donated to better the lives of Palestinians on Arafat’s watch.

Mohammed Rashid, who ran the Palestine Investment Fund, was sentenced to 15 years in absentia and fined $15 million, the Associated Press has reported. Palestinian officials said they would seek to have Rashid’s assets frozen.

Rashid is believed to have business interests in four Middle Eastern countries and in Montenegro, the AP reported. Before his trial, Rashid had threatened to expose dirty secrets about Mahmoud Abbas, who succeeded Arafat as leader of the Palestinian Authority.

The Anti-Corruption Court in Ramallah convicted Rashid of embezzlement and money laundering. He left the Palestinian territories after Arafat’s death in 2004, and hid the money in a network of shell companies. While he has given media interviews, Rashid’s whereabouts are unknown.

Abbas set up the Anti-Corruption Court two years ago, in response to years of demands from the international community for greater transparency in the Palestinian territories.

Sweep to Arafat moneyman gets 15 years for corruption

In the end, “Bulletproof” was just the name of a boat. And Mr. Untouchable was just a book on board.

The owner of both, Kwame Brown, pleaded guilty Friday morning to felony bank fraud, two days after stepping down as chairman of the Washington, D.C. equivalent of the city council. He was expected to plead guilty later in the day to a second misdemeanor charge. He could face up to six months in prison for each.

Brown, 41, had the reputation of a young up-and-comer, with a towering love of speaking about himself–preferably in the third person. He earned the nickname “Fully Loaded” after ordering himself a well-tooled SUV on the taxpayer dime.

Brown faced double charges of making an illegal campaign expenditure in cash and bank fraud this week. His pleas Friday were part of an agreement with prosecutors.

Sadly, his case was not isolated.

Scandals involving the city government under DC Mayor Vincent Gray are spreading like kudzu. A month ago, two of Gray’s aides pleaded guilty to violations of campaign finance rules tied to Gray’s 2010 election–the subject of an intensifying federal investigation. The scrutiny began shortly after Gray’s victory, when after a former rival candidate, Sulaiman Brown (no relation to Kwame) told the Washington Post that Gray’s campaign had paid him to stay in the race and continue attacking the then-Mayor Adrian Fenty, who was running for reelection. Gray’s campaign, he said, also promised him a post-election job in the administration.

Earlier this year, Harry Thomas Jr., a council member, resigned under accusations he’d stolen $350,000 earmarked for youth sports and the arts.

As Elizabeth Flock reports in her U.S. News and World Report column, Washington Whispers, so fed up is the public that one former Justice Department intelligence analyst has posted an online counter, DCWithoutIndictment, to record how many days the district government has gone without an indictment. Current count: 1.

Sweep to Kwame Brown charged with misdemeanor count in 2008 campaign

In 2009, Florida’s then-Governor Charlie Crist convened a grand jury to investigate corruption in the state, after he’d had to fire 33 state employees over official wrongdoing in fewer than three years.

That didn’t just seem a like a lot of dishonesty. It was a lot of dishonesty.

Turns out that Florida, fourth in the country in population, is first in federal convictions for public corruption, according to Florida Integrity, a civic watchdog group.

The group studied federal Justice Department records for corruption-related convictions around the country, and found Florida first, with 781 convictions between 2000 and 2010. Next was California, a larger and far more populous state, with 753 convictions, Texas with 741 convictions and New York with 680 convictions.

In releasing the findings, the group called for greater transparency in local government, and broadening the legal authority of local officials to combat corruption.

Sweep to Florida leads country in corrupt convictions


Diana Jean Schemo
Diana Jean Schemo is co-founding executive editor of 100Reporters and an award-winning former foreign, national and cultural correspondent for The New York Times and the Baltimore Sun.

Gamal (rear) and Alaa Mubarak, sons of former Egyptian President Hosni Mubarak, walk after being sentenced in Cairo Saturday. / REUTERS

The sons of Egypt’s ousted president, Hosni Mubarak, acquitted on corruption charges Saturday, woke Sunday to discover they will face new charges of money laundering, prosecutors announced yesterday.

The judge’s decision not to impose the death penalty on the former president, and to clear his sons of corruption charges, prompted thousands of Egyptians to turn out in fiece protest across the country, despite searing heat. Just last year, Switzerland’s Illicit Gains Authority estimated the value of Mubarak family assets at $450 million, some $340 million of it held in Gamal and Alaa’s names.

Days before Saturday’s verdict, prosecutors slapped additional charges of insider trading on the brothers, estimating that they had illegally profited by some $331 million.

But the pile on of charges failed to appease widespread fury over the outcome.  “Egyptian Magician,” a blogger, wrote in Al Ahram online,  “How can they find him not guilty for corruption when people were saying he had $70 Billion? How can they find him not guilty of corruption when the British and Swiss find 100’s of millions of dollars in their bank accounts?” Egyptian Magician asked what hope Egypt had of recovering the money from foreign accounts with Saturday’s verdict, adding, “These people never governed Egypt, they were its oppressors and victimizers.”

The verdicts also exposed new political divisions as the country heads toward runoff elections for the presidency. On Tuesday, more protests were planned to demand that Ahmed Shafiq, a candidate who was Mubarak’s former prime minister, withdraw from the ballot.

Sweep to New charge against Mubarak’s sons as protests grow

President Salvia Kiir of South Sudan is calling on government officials to return stolen assets. / REUTERS
The president of South Sudan, struggling to build credibility for a young country already plagued with reports of massive stealing, has written a letter pleading with corrupt officials to turn back public funds they have pocketed illegally.

The Associated Press obtained a copy of the letter, in which South Sudan’s President Salvia Kiir calls on 75 government officials, some of them still in office, to turn back some $4 billion in stolen funds.

“We fought for freedom, justice and equality,” the president wrote. “Yet once we got to power, we forgot what we fought for and began to enrich ourselves at the expense of our people.”

After decades of civil war, South Sudan broke away from the north in a 2005 peace deal, and became the world’s newest country last year. But it has faced troubling levels of corruption in a country so young and so ravaged by famine and war. The country’s auditor general announced in January that $1.5 billion was missing from the 2005-2006 accounts alone.

So far, the president’s office said in a statement, South Sudan has recovered $60 million in pilfered funds, through deposits to a special account set up in Kenya to receive stolen assets.

For the moment, his office is offering to preserve the anonymity of officials who turn back money and to grant them amnesty from prosecution, but it is pledging tough new laws to combat government corruption in the future.

Sweep to S. Sudan asks govt officials to return stolen money

Anna Hazare, the Indian anti-corruption activist, joined forces with Baba Ramdev, one of India’s most popular yoga gurus, for a symbolic day-long hunger strike in New Delhi Sunday, demanding tougher government efforts to block corruption.

Hazare’s criticism of political officials last year had drawn accusations that he was meddling in partisan politics, but his movement showed no sign of backing down.

Ramdev called on the Prime Minister to clean house, The Times of India reported. He demanded that government officials bring back ill-gotten gains stashed abroad by August threatening what the paper described as “a fight to the end.”

Kiran Bedi, a police official dubbed “India’s supercop,” has also joined forces with Hazare’s movement, throwing her weight behind the move to pass a bill known as the Jan Lokpal, aimed at criminalizing corruption.  She, too, attended the Sunday fast.

Bedi spoke about the United Arab Emirates, which she had visited last week, telling the Delhi crowd, “There is no democracy in UAE. The hands of thieves are chopped off there. There is a fear of law.” If the Lokpal passes, she said, “wrongdoers will have the same fear.”

Sweep to PM needs to have a clean cabinet: Baba Ramdev

Diana Jean Schemo
Diana Jean Schemo is co-founding executive editor of 100Reporters and an award-winning former foreign, national and cultural correspondent for The New York Times and the Baltimore Sun.

Eurasian Natural Resources Corp. warned British authorities of suspected corruption behind its deal to purchase a major copper and cobalt mine in the Democratic Republic of Congo. / REUTERS

An international mining company that is coming under growing scrutiny for its business practices alerted a British government agency that its impending purchase of a major cobalt and copper mine in the Democratic Republic of Congo may have involved corruption, but anti-corruption authorities did nothing to block the deal, which soon went through.

As disclosed by 100Reporters last week, the mining firm — Eurasian Natural Resources Corporation – filed a Suspicious Activity Report to a British law enforcement agency two years ago. The report acknowledged multiple “red flags” indicating that an Israeli businessman who sold it the Kolwezi mine may have bribed Congolese officials when he originally obtained it.

Diana Jean Schemo
Diana Jean Schemo is co-founding executive editor of 100Reporters and an award-winning former foreign, national and cultural correspondent for The New York Times and the Baltimore Sun.

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