Asset Protection BLOG - Mark Nestmann

We’re All Prisoners, Now

Forget no-fly lists. If Uncle Sam gets its way, beginning on Jan. 14, 2007, we’ll all be on no-fly lists, unless the government gives us permission to leave—or re-enter—the United States. 

The U.S. Department of Homeland Security (HSA) has proposed that all airlines, cruise lines—even fishing boats—be required to obtain clearance for each passenger they propose taking into or out of the United States.

It doesn’t matter if you have a U.S. passport—a “travel document” that now, absent a court order to the contrary, gives you a virtually unqualified right to enter or leave the United States, any time you want. When the DHS system comes into effect next January, if the agency says “no” to a clearance request, or doesn’t answer the request at all, you won’t be permitted to enter—or leave—the United States. 

Consider what might happen if you’re a U.S. passport holder on assignment in a country like Saudi Arabia. Your visa is about to expire, so you board your flight back to the United States. But wait! You can’t get on, because you don’t have permission from the HSA. Saudi immigration officials are on hand to escort you to a squalid detention center, where you and others who are now effectively “stateless persons” are detained, potentially indefinitely, until their immigration status is sorted out.

Why might the HSA deny you permission to leave—or enter—the United States? No one knows, because the entire clearance procedure would be an administrative determination made secretly, with no right of appeal. Naturally, the decision would be made without a warrant, without probable cause and without even any particular degree of suspicion. Basically, if the HSA decides it doesn’t like you, you’re a prisoner—either outside, or inside, the United States, whether or not you hold a U.S. passport. 

The U.S. Supreme Court has long recognized there is a constitutional right to travel internationally. Indeed, it has declared that the right to travel is "a virtually unconditional personal right." The United States has also signed treaties guaranteeing “freedom of travel.” So if these regulations do go into effect, you can expect a lengthy court battle, both nationally and internationally.

Think this can’t happen? Think again…it’s ALREADY happening. Earlier this year, HSA forbade airlines from transporting an 18-year-old a native-born U.S. citizen, back to the United States. The prohibition lasted nearly six months until it was finally lifted a few weeks ago. 

Nazi Germany and the Soviet Union are two countries in recent history that didn’t allow their citizens to travel abroad without permission. If these regulations go into effect, you can add the United States to this list.

For more information on this proposed regulation, see http://hasbrouck.org/IDP/IDP-APIS-comments.pdf.

Good News From Panama

The Sovereign Society has for years recommended Panama for its first-world infrastructure, its outstanding bank secrecy laws and most importantly its willingness to stand up to the USA and say “No.”

Still, Panama is highly dependent on revenues from its namesake canal to sustain its standard of living—by far the highest per capita in central America. And that’s why we were pleased to see that last week’s special election led to an overwhelming mandate from the people to authorize spending for further construction of a new set of locks for the nearly 100-year-old canal.

There’s nothing wrong with the original canal except that the size of its locks limit traffic and restrict the size of the ships that can pass through. Supertankers and other ships and other modern ships simply don’t fit. 

The expansion of the canal is an investment in Panama’s continued prosperity. And a prosperous Panama is one that will be able to continue to stand up to its gringo “Uncle” to the north.

The US Says it can Confiscate…Everything

Fifteen years ago, I came face-to-face with US “civil forfeiture” laws that permit police to seize your property, without accusing you of any crime.

In my case, I owned a rental property in Florida that my real estate agent had leased to some young people who allegedly were dealing drugs. When I learned of this, I kicked out the tenants.

But that wasn’t enough for local police, who showed up the next day. They told me that they would be pursuing a “civil forfeiture” claim against the house. And although the city never pursued their claim (I think because the value of the house had suffered so much from the activities of my tenants), the more I learned about civil forfeiture, the madder I got.

The legal theory behind civil forfeiture is that your property is somehow “guilty” of a crime. The government then accuses your property, not you, of that crime. And, if your property is found to have somehow been involved in or facilitated a crime, you can lose it. Because civil forfeiture is a civil procedure, none of the protections that would apply to a criminal defendant apply. Essentially, your property is “presumed guilty,” and if you can’t prove that it’s “innocent,” you can lose it.

Civil forfeiture is a gravy train for local police and the federal government. Each year, billions of dollars of assets are confiscated from owners who in many cases are never charged with any crime.

Now, the U.S. Treasury has announced that it has the power to confiscate “any financial instrument” under its civil forfeiture authority. Any time the government declares a state of emergency (such as the one that was declared after 9/11 and that’s still in effect), the Treasury says this authority is in place.

In other words, the government can confiscate, today, any document or paper that has intrinsic value or embodies monetary value. That would include stocks, bonds, bank accounts, mortgages and cash, just to name a few. And in case you thought the Treasury forgot about precious metals, it hasn’t: it says it can confiscate those as well.

I’m not going to dwell on the constitutional issues this breathtaking assertion raises; I’ll leave that to legal scholars to flesh out in the courts. What I will say is that statements like those made by the Treasury Department make it clear that at least in the eyes of the government, there is virtually nothing stopping the government from helping itself to your property once it declares a national emergency.

Something to think about…and another obvious incentive to get your assets out of the USA before Big Brother pounces on them!

To learn more about the government’s power to confiscate your assets, see http://www.nestmann.com/catalog/product_info.php?cPath=21&products_id=42. You can also read the Treasury Department’s letter for yourself (scroll down): http://news.goldseek.com/GATA/1124647043.php.

I serve as Treasurer for the non-profit organization Forfeiture Endangers American Rights (FEAR)—an excellent source of information if you’ve been a victim of civil forfeiture or want to support the fight against this odious legal procedure. See http://www.fear.org for more information.

Time to Renew Your Passport!

The US State Department is now rolling out passports equipped with radio frequency identification (RFID) chips, and expects that by the end of 2006, all newly issued US passports will contain such a chip.

Don’t wait until then to renew your passport—do it now, before it’s “chipped.” Here’s why:

The RFID chip in the “e-passport” stores your name, a digital photo, and other information in the passport. In the future, the State Department tells us, the chip might store fingerprints or digital visas from various countries.

I don’t have a problem with this aspect of the State Department’s e-passport initiative. But where I do have a problem is that the RFID chips can be read remotely. Just imagine: standing in an airport lounge or train station, your passport information might be read surreptitiously by terrorists or identity thieves.

Of course, the State Department says that it has taken all appropriate security measures to prevent unauthorized access. And it has implemented some of the suggestions it received from security experts, including equipping the chip with a shielded cover, making it much harder to read when the passport is closed. In addition, the information in the chip will be encrypted.

However, these measures leave a lot to be desired. The chip can still be read when the passport is open, so all a terrorist or identity thief needs to do is install a RFID reader in the vicinity of a hotel desk, bank teller, or anywhere else foreigners are routinely required to show their passports. The State Department insists the chip can only be read from a few inches away, but independent researchers have demonstrated they can be read from many feet away, and the technology for remote access is continually improving.

Other security flaws in e-passports have also been discovered. One researcher found that he could identify individual chips from the radio transmissions. In Germany, a computer hacker actually cloned an e-passport chip. And since passports are issued for a 10-year period, whatever security is built into the chip has to be effective for a full 10 years after it’s issued.

You can always stick your RFID equipped passport in the microwave to destroy the chip, it’s not clear that a passport with a deliberately damaged chip will be valid.

The State Department is willing to make millions of US citizens guinea pigs for a flawed technology, but you don’t need to be one of their test subjects. Renew your passport now.

Hope Your “Financial Plan” Is Better Than This

With the deteriorating economy, a collapse in real estate prices and the impending retirement of tens of millions of “baby boomers,” we may be reading more about people like Timothy J. Bowers in the future.

Bowers, who turns 63 in a few weeks, is an out-of-work former deliveryman for a drug wholesaler. He’ll be eligible to collect Social Security payments in three more years, but he needs a financial plan to tide him over until then.

And what’s that plan, you might ask? In Bowers’ case, it’s prison. Yes, prison.

To help make ends meet until he begins collecting Social Security, Bowers needed to find a way to obtain free food, shelter and clothing. He decided prison would suffice, so he walked to a bank and handed a teller a note demanding cash. The teller gave him US$80 and alerted police with a silent alarm.

Bowers calmly walked over to a bank guard, handed him the envelope, and told him he would wait for police to arrive. Which they did shortly thereafter, taking Bowers into custody. 

Last week, Bowers pled guilty to robbery, and asked the judge at his hearing to impose a three-year prison sentence. The judge told him: "It's unfortunate you feel this is the only way to deal with the situation."

That’s an understatement if I ever heard one. And while Bowers’ story is no doubt extreme, his experience underscores the importance of having a financial plan to securely fund your retirement.

That means saving significant sums of money, and not counting on Social Security or Medicare. Both of these government giveaways are technically bankrupt, it’s likely benefits will be paid with an increasing number of restrictions, means testing, etc. Nor is it likely that the benefits will keep up with inflation. And of course, your benefits will be paid in US dollars, a currency which over the next 20-30 years is very likely to depreciate significantly against other major currencies.

I can’t tell you how much you need to save. But it should be enough to pay out a secure income—perhaps 75% of what you need to live on while you’re working—until you’re at least 90-95 years old, perhaps a little more or less depending on your health. And a portion of it should be held offshore—outside the USA and outside the US dollar.

If you’re wondering how to approach offshore investing, The Sovereign Society will be holding an “offshore ABCs” conference in Puerto Vallerta, Mexico from Nov. 8-11, 2006. I’ll be one of the presenters, and I highly recommend you attend. To learn more, click on http://offshoreadvantageacademy.com.

What Have EU Bureaucrats Been Smoking?

The European Union is nothing if not persistent.

But I seriously doubt their grasp of reality, six years after EU bureaucrats, laboring in their ivory towers in Brussels, came up with a harebrained scheme called the “Savings Tax Directive.”

The idea was simple, but unworkable from the start. It was to impose a global information-exchange mechanism between tax authorities in order to insure that EU citizens were paying tax on their savings income.

The Brussel's bureaucrats, under the banner of "tax harmonization" (meaning high taxes for all), started by requiring all EU countries to automatically send information on all interest payments made to an individual who resides in another EU country. Three EU countries—Luxembourg, Austria and Belgium—have opted out of this system, choosing instead to impose a withholding tax of 15% on interest payments. The tax will increase to 35% by 2009.  

Switzerland and Liechtenstein also agreed to participate, but both insisted that they also be permitted to impose the withholding tax, rather than exchange information with tax authorities in other countries. 

The Directive, which came into effect earlier this year, has more holes in it than pound of Swiss cheese. Since it only covers interest payments, many investors have switched to dividend paying stocks. Other investors have formed business entities—which aren’t covered by the directory—to receive interest payments. Still others have made the sensible choice to invest outside of the EU—a wholly predictable consequence. 

In the first six months of the law's operation, Switzerland –raised only US$125 million in withholding taxes. Luxembourg collected less than half that amount, with other European countries participating in the withholding system collecting much less. Tax collectors in countries like Germany expressed shock at the disappointing results, having expected a windfall of billions of euros annually. But one wonders what EU decision makers and tax collectors were smoking to believe that such a flawed scheme would have any chance of success.

But that hasn’t stopped the EU from trying to impose their will on other countries. That hasn’t worked, either. Two years ago, the US—the world’s largest recipient of the world’s “flight capital”—firmly rejected the EU’s invitation to participate in the flawed savings directive. And just last week, Singapore and Hong Kong said “no” to the EU as well.

The EU says the problem is that there is too much “tax competition.” Hogwash. The problem is that several countries in the EU—among them France and Germany, the most vocal advocates of the Savings Tax Directive—have some of the world’s highest tax rates. It’s no wonder EU citizens are anxious to avoid paying them.

If the EU wants to combat capital flight out, the best decision it could make would be to scrap the Savings Directive and encourage its members to make their tax systems more competitive, with lower tax rates, much simpler reporting requirements and fewer exemptions. Fat chance this will happen, though, even though the Directive has now been proven to be a colossal failure.

More information on the Savings Tax Directive: http://www.lowtax.net/specials/std.html 

IRS Eases Up—a Little—on Expats

As someone who lived outside the US for more than two years, I gladly took advantage of one of the very few perks that the government provides expat Americans. 

I’m referring to the “Foreign Earned Income Exclusion” (FEIE) program, in which Congress, in its benevolence, permits US citizens living abroad to exclude up to $82,400 in earned income each year from foreign taxes ($164,800 for a married couple).

Of course, the FEIE doesn’t affect the foreign taxes US citizens working abroad must pay. Fortunately, most (though not all) of these taxes may be credited against US taxes. 

Now, the US Treasury has issued a notice that allows expats to exclude from their U.S. taxes more of the cost of housing in foreign locations where housing costs are higher than in the U.S. The change partially offsets the impact of an obscure provision in last year’s tax bill that for the first time imposed tax on housing, educational and other subsidies that are commonly provided by employers to US expats. Among those hit the hardest by the change are Americans working in places with high housing costs and low taxes, such as Switzerland. 

The FEIE is a poor substitute for the system in the vast majority of other countries, which for the most part simply removes citizens from the income tax rolls when they depart for a year or more. This sensible system is too much for the tax and spenders in the US Congress to bear, who believe they have the right to tax US citizens on their worldwide income, wherever they live. Even persons who are US citizens by an accident of birth (e.g., with a US mother or father, but born abroad) are supposed to file tax returns with the IRS!

Short of giving up US citizenship, the FEIE is the best choice Americans expats have to shield their foreign earnings from US taxes. For more information on how to use the FEIE, see http://www.irs.gov/businesses/small/international/article/0,,id=97130,00.html.

What are You Afraid of?

I’ve been living in Vienna the last few weeks, and will be here until the end of October. 

Every time I visit Austria, I’m struck by the lack of “paranoia” in the population. Part of this may just be a smug assurance that the socialist government will take care of their needs—there is virtually free health care for all, subsidized housing, subsidized education, guaranteed pensions etc.  (Although some are now asking where the money to pay for the promised benefits will come from in the future). 

Not to mention the human trait—very pronounced in Austria—of ignoring the world around you to focus on friends, family and work.

Yet, despite the omniscient presence of "nanny government," there is no feeling of “Big Brother” here. Yes, there are now closed circuit TV cameras in the U-Bahn (subway) station, and even in some of the subway cars).  I’ve also noticed a crackdown on “Schwarzfahrer” (literally, “black riders,” or people who try to ride public transit without paying).   More transit police are checking subways, trams and buses to make sure riders have paid the correct fare.  If not, a 60-euro fine is due on the spot.

Naturally, the Austrians complain about this, and some of the ones that I know ask me if it’s like this in America. 

I tell them that I don’t really worry about CCTV or random ticket checks in the USA. 

What I worry about, I tell them, is police armed with automatic weapons knocking down the door to my home in the middle of the night, and shooting everyone there if we even flinch.  Or civil forfeiture laws where the government simply seizes everything you own without accusing you of any crime, forcing you to prove your property “innocent” in order to recover it.

“That sounds like Nazi Germany,” one friend told me a few days ago.

Yes, it does. Frightening thought, isn’t it?

Your Cell Phone Can Betray You

Thanks to the HP scandal, we’ve all heard about "pretexting"—a private investigator, identity thief or government lackey contacts a cell phone operator and pretends to be you, to find out at what times and to whom you placed or received calls.

But “pretexting” is just the tip of the iceberg when it comes to threats to your privacy from cell phones. Here are some of the most common threats and some common-sense ideas to deal with them:

• Your cell phone is spying on you. The newest generation of cell phones are “location beacons.” Any time you switch the phone on, your physical location can be pinpointed within a few feet (in a metropolitan area). Outside a metropolitan area, your location can’t be pinpointed as precisely, but an investigator can still obtain a good idea of your movements. Protective strategy: use an anonymous, prepaid phone that can’t be traced to you.
• Your voice mail box is vulnerable. It is easy for someone to access your cell phone’s voice mail if you haven’t protected your mailbox with a password. All someone needs to know is your mobile phone number and one of several industry default PIN codes. Protective strategy: Use a PIN code (not your phone number or other easy-to-guess number) to protect your voice mail box.
• Incompletely deleted data can come back to haunt you. By now, many people realize that when you hit the “delete” button on a personal computer, the data isn’t necessarily gone—it’s just hidden. With the right software, the data can be recovered. It’s the same situation in a cell phone. Used phones with supposedly “deleted” data that you sell or give away can, in the right hands, surrender calling records, contact lists, SMS messages, etc. Protective strategy: Before disposing of your cell phone, remove its SIM card, if it has one. Also, follow the instructions at http://www.wirelessrecycling.com/home/data_eraser/default.asp to securely delete all personal data from your phone.
• Your cell phone can be bugged. If someone can gain access to your cell phone, they can insert a tiny bugging device that will allow them to read your SMS messages. Protective strategy: Keep your cell phone with you at all times, or in a secure location where no one else can have access to it. 

        For more protective strategies to protect your privacy, see http://www.isecureonline.com/reports/190SSWPP/E190GA19.

Governments Want Warrantless Access to ALL Your Telecom Data—and They’re Getting it

Quietly, very quietly, governments throughout the world are constructing a global surveillance infrastructure. Your financial transactions are already available for warrantless inspection by investigators in many countries (especially the U.S. and U.K.). Now world governments want to require Internet service providers (ISPs) and phone companies to keep data on every electronic message sent and phone call made for up to two years. 

The justification, as usual, is to more effectively fight the “War on Terrorism,” but there’s no reason why the stored data wouldn’t be open to any type of investigation, including drug crimes, tax fraud, or prosecutions of those deemed “enemies of the state.” And for reasons I’ll describe in a moment, hackers and identity thieves will have a field day once these requirements are in effect.

In the 25 countries of the European Union (EU), the Data Retention Directive (DRD) comes into effect in August 2007. It requires phone companies, ISPs, and firms such as Google, Yahoo and Skype, to store call traffic and location data for fixed and mobile telephones, text messages, Web browsing records and Internet e-mail and telephony records for six months to two years. Some EU governments are already proposing extending the retention time to five years.

More recently, US Attorney General Alberto Gonzales has been on the stump to promote the need for similar data retention laws in America. And he’ll probably get them. Moreover, under existing agreements, it will be possible for investigators in the EU to obtain US records, and vice-versa. 

In the EU, and most likely in the US as well, any business offering Internet access will need to comply with the data retention requirements—hotels, Internet cafés, public libraries, wireless hotspot operators, etc. Private companies with in-house networks area also are covered. 

For call data, phone companies will need to store the name of the registered owner of each phone, the numbers dialed, the length of a call and, for mobile phones, the location of the caller. For e-mail the information required includes the registered owner of the e-mail address and the e-mail addresses of their correspondents.

Police investigating terrorism and serious crime will have access to the commercial traffic logs of all phone calls, text messages, emails and instances of internet use by suspects. Because this data offers historic information, it allows your calling and e-mail patterns to be tracked over long periods of time. Regular numbers called and your network of contacts will be in plain sight.

E-mail providers that don’t require proof of identity, such as Yahoo! or Hotmail, would presumably have to begin requiring such proof in order to open an account. Pre-paid mobile phone services would presumably be banned as well unless proof of identity is provided.

It’s not at all clear about exactly who will be able to access this information, but if you look at the situation in the one country where similar laws are in effect—the UK—the record isn’t encouraging.

The UK’s Regulation of Investigatory Powers Act (RIPA) doesn’t provide for data retention, but gives police authority to require telecom service providers to give them whatever data they do retain. No search warrant or other legal authority is required to obtain the data—any police officer holding the rank of inspector or superintendent (depending on the type of data) can demand the data. 

While there is open debate in the EU over the Data Retention Directive, in the US, the silence is deafening. While the usual civil liberties advocates have objected, the mainstream press has played its usual sheepdog role of going along with anything the government advocates as improving “security.”

But will abolishing all Internet, email and telephone privacy really improve security? Surely real criminals and terrorists will figure out ways to bypass the surveillance. And the potential for misuse is breathtaking. 

For instance, the recent Hewlett-Packard “pretexting” scandal showed how easy it is for private investigators to obtain telephone records. With a law like what Attorney General Gonzales is proposing, not only telephone records, but e-mail records, Web browsing records, and much more, will be ripe for the plucking by private investigators and hackers. For identity thieves, it will be like shooting fish in a barrel.

And that’s just for starters. Once legislation like this is in effect, there’s nothing to stop the government from expanding the list of offenses under which the data may be accessed. Moreover, it’s not such a large step from demanding records of your electronic communications be available on demand to a government authority to demanding that other transactional records be similarly available. For instance, many stores have “shoppers’ cards” which permit the store to maintain a record of every product you purchase. If governments demand this data to fight the “War on Terrorism,” what’s to stop them from getting it?

What can you do to protect yourself from this web of surveillance being constructed around you? As long as it’s legal to do so, use telecom services that don’t require proof of identity: e-mail services like Yahoo! (although Hushmail is better), pre-paid telephone services, and encryption programs like PGP. Another service that offers significant protection to your online communications is Armorware. You can read more about it at http://armorware.directtrack.com/z/9/CD125.