Asset Protection BLOG - Mark Nestmann

Government Stings: Don't Get Stung

Could you be arrested for stomping your foot in a restroom?  Prosecuted for accepting "hot money?"  Or imprisoned for clicking your mouse on a hyperlink that pops up in your Internet browser?

If you live in the United States, the answer is yes.  Welcome to the world of government stings. 

Former Sen. Larry Craig (R-Idaho) is only one of the most familiar victims of a government sting.  Last year, Craig visited a men's room at the Minneapolis-St. Paul airport.  There, according to the report of an undercover male police officer, he stomped his foot, rubbed his fingers together, and made other gestures that supposedly indicated he wanted to have sex with the officer. 

That was sufficient evidence for the officer to arrest Craig for disorderly conduct and "peeping."  Not long afterward, Craig resigned from the Senate.

How else might you become lured into an undercover sting operation?  Lots of ways.  Take money laundering, for instance. 

Let's say you work in a bank.  One day, an undercover officer approaches you and says he needs to take care of some "hot money."  The implication is that the funds were generated illegally.  If you accept the money--or even permit the officer to put it in a safety deposit box--you could be convicted of money laundering.

You don't need to know where the money came from.  All you need to know is that it came from, or was represented by an undercover investigator to come from, some form of illegal activity.   That makes undercover laundering sting operations a lucrative source of criminal convictions. 

What's more, all property "involved in" a laundering offense is subject to civil or criminal forfeiture.  Since the bulk of forfeited monies generally remain with whatever agency seized them, the incentives for abusive stings are immense.

A textbook example was the 1999 conviction of Esperanza de Saad, a South Florida banker who was the target of a money-laundering sting.  In setting aside his conviction, a judge ruled that an undercover informant who testified against de Saad never represented that the funds he was seeking to "launder" were the proceeds of illegal activity.

Increasingly, government stings occur in cyberspace.  Click on the wrong hyperlink, and you could go to jail.

Undercover FBI agents now routinely post links in online discussion forums, social networking Websites, and elsewhere purporting to depict minors having sex.  If you click on the link, and the FBI can trace your Internet connection, you can expect arrest, prosecution, and imprisonment for attempted possession of child pornography.

That's what happened to Roderick Vosburgh, a doctoral student at Temple University.  Vosburgh allegedly clicked on a FBI hyperlink that pointed to child porn videos.  Vosburgh, who has no prior criminal record, now faces a 10-year prison sentence.  Upon his release, he must register as a sex offender.

Some may defend government stings aimed against persons who might be predisposed to download child pornography as necessary to protect children from sexual predators.  But here's the scary part: using the same logic and legal reasoning, the FBI could send billions of unsolicited spam emails advertising illegal drugs, weapons of mass destruction, or anything else that's illegal.  Respond to the e-mail message in any way, and you just might be in for an extended visit at Club Fed.

How can you protect yourself?  Don't stomp your foot in a men's public restroom.  Don't accept or otherwise deal with money that has a dubious origin.  And be very, very careful of where you surf on the Internet. 

For hundreds more suggestions on how to protect your privacy and property, click here.

Copyright © 2008 by Mark Nestmann

The US Declares War on Iran (Part III)

Part I: America's Financial "Nuclear Attack" on Iran
Part II: The North Korean example

What could go wrong with America's effort to isolate Iran from the global finance system? 

Lots.  Soaring oil prices and a further slump in the U.S. dollar are the likely results of this policy. 

Iran's Revolutionary Guards have made detailed plans to close the strategically vital Strait of Hormuz if Iran is attacked militarily.  Through this strait between the Gulf of Oman and the Persian Gulf flows about 20% of global oil production; around 16 million barrels every day. 

America's attack on Iran's financial system is no less real, and just as devastating, as a military attack.  If the financial sanctions I described in the first two parts of this article begin to have a serious effect on Iran's economy, could Iran close the Strait of Hormuz?  It almost certainly could, although it remains to be seen if it will.

If the strait is closed, for whatever reason, oil prices will soar.  Some experts predict oil could reach US$200/barrel. 

Since oil is priced in U.S. dollars, those higher prices will be felt most in the United States.  That would be a catastrophe for the already reeling U.S. economy.  But the pain would be felt worldwide, leading to political pressure on the United States to reverse its sanctions.

Even if Iran doesn't to the Strait of Hormuz, severing its international banking relationships will disrupt transport and payment for the 2.5 million barrels it exports daily.  That's about 3% of global oil production.  That will put further upward pressure on oil prices.

It will also put downward pressure on the U.S. dollar.  Since oil is priced in dollars, oil prices and the dollar have a nearly perfect negative correlation: as oil prices rise, the dollar usually falls in value.  If oil prices go to $200/barrel, the dollar will almost certainly fall beyond its all-time lows of a few weeks ago.

Another threat to the dollar is that the global financial system is beginning to insulate itself against further declines in its value.  Many countries in Asia and the Mideast are selling their reserves of dollars and replacing them with foreign currencies and gold.  There are serious discussions of pricing oil in euros, or even gold. 

When the United States applies financial sanctions that make it more difficult to deal in dollars, it only exacerbates this trend.  Despite the apparent cooperation of Europe, Japan, and China in enforcing financial sanctions against Iran, this unity may not last long, particularly if oil prices soar toward US$200/barrel. 

Under the USA PATRIOT Act, the U.S. Treasury has the authority to confiscate the U.S. correspondent accounts of foreign banks.  If it begins confiscating the correspondent accounts not just of Iranian banks, but of foreign banks that deal with Iran, some banks may try to disconnect from the U.S. banking system altogether. 

That's a tall order, since the U.S. dollar still serves as the world's "reserve currency."  But it may be possible using clearing systems in other currencies or even with an electronic version of the Malaysian gold dinar.  (Former Malaysian Prime Minister Tun Dr Mahathir Mohamad has proposed that Islamic countries use the gold dinar as an alternative to the U.S. dollar in global trade and for reserves in central banks.)

The U.S. dollar has rebounded from its all-time lows of a few weeks ago.  But it's still on a precipice.  Blowback from America's declaration of financial war on Iran is only one more act that could launch it over the cliff.

Copyright © 2008 by Mark Nestmann

The US Declares War on Iran (Part II)

In yesterday's blog, I described how on March 20, the United States launched the financial equivalent of a nuclear attack on Iran.  Through the Treasury Department's financial intelligence unit, FinCEN, the Bush administration warned the world's banks that they do business with Iran at their financial peril.

FinCEN accuses all of Iran's banks, including the central bank, as constituting a risk to the international financial system, with no exceptions.

The nuclear analogy is not an overstatement.  To understand why, consider the experience of North Korea, which FinCEN blacklisted in September 2005.  Iran may be about to get the same treatment.

In North Korea's case, FinCEN published a "finding" alleging that its government used Banco Delta Asia (BDA), a small bank in Macau, to launder profits from drug trafficking and counterfeiting.  This put the world on notice that FinCEN could begin freezing the U.S. "correspondent accounts" of any bank dealing with BDA.  This draconian sanction is authorized in Section 311 of the USA PATRIOT Act and essentially prevents blacklisted banks from dealing in U.S. dollars. 

BDA customers reacted predictably: they withdrew assets in droves.  This forced BDA to freeze North Korean funds on deposit.  Subsequently, banks worldwide began terminating business relationships with North Korean clients.

From the Bush administration's viewpoint, the strategy worked.  North Korea became increasingly isolated from the global financial system.  That gave the United States enough leverage to force North Korea to shut down its nuclear industry, which had produced at least one crude atomic bomb  In 2007, North Korea signed two agreements promising to dismantle its nuclear weapons program.  It is now doing so, under U.S. supervision.

It appears that the Bush administration, acting through FinCEN, will follow a similar strategy with Iran.  If FinCEN issues a "finding" like the one it published on North Korea, the U.S. Treasury can begin grabbing the U.S. assets of Iranian banks, or of any bank doing business with Iran.  All Treasury needs to do so is to prevail in a secret civil forfeiture hearing in which the targeted bank has no right to participate.

The two banks named in the U.N. order—Bank Melli and Bank Saderat—Iran's two largest banks, will probably be the first ones blacklisted.  Iran's central bank, Bank Markazi, is also a likely target.  Whatever "special measures" the Bush administration decides to apply will be posted on FinCEN's Web site.   

The Bush administration's intentions are clear.  It intends to shut down Iran's international banking links until the country ends its own nuclear program, which is clearly more ambitious than the one now being dismantled in North Korea. 

To make the sanctions even more effective, the administration is trying to convince Germany, Japan, and China—three of Iran's key trading partners—to enforce them as well.  It's counting on banks in those countries, and others to be named later, to essentially cut off all financial relations with Iran.

If it works, count on seeing this strategy applied against other countries with which the United States has diplomatic disputes.  Indeed, it's a key part of presidential candidate John McCain's proposed international relations policy, as described in a recent issue of the influential journal Foreign Affairs.

Carrying out an undeclared financial war against Iran is not a risk-free strategy for the United States.  Find out why in tomorrow's blog entry.   

Copyright © 2008 by Mark Nestmann

The U.S. Declares War on Iran (Part I)

No, there haven't been any nuclear missiles launched, at least not yet.  No mobilization of U.S. forces on Iran's border   But on March 20, the United States launched the equivalent of an invasion of Iran, in the world of global finance. 

On that date, the Financial Crimes Enforcement Network (FinCEN), issued a "financial advisory" dealing with Iran.  FinCEN, a little-known bureau within the US Treasury Department warned the world's banks that if they do business with Iran, they do so at their financial peril.

But the FinCEN advisory was no less an act of war, albeit undeclared, than an outright invasion of Iranian territory.  In its advisory, FinCEN states that the entire Iranian banking system—including the Iranian central bank—represents an imminent risk to the international financial system. 

FinCEN bases this assessment in part on a highly creative interpretation of United Nations Security Council Resolution (UNSC) 1803 (passed on March 3, 2008).  In case you missed it, CR 1803 calls on member states "to exercise vigilance over the activities of financial institutions in their territories with all banks domiciled in Iran, and their branches and subsidiaries abroad."

But the coup-de-grâce for Iran came courtesy of another obscure agency, this one housed in Paris within the spacious bowels of the Organization for Economic Cooperation and Development (OECD).  This agency's name is the Financial Action Task Force (FATF).  On February 28, it issued a statement reiterating its concern about continuing deficiencies in Iran's anti-money laundering and terrorist financing laws. 

CR 1803 and the FATF's mild rebuke are a far cry from stating the Iranian banking system is a clear and present danger to the world economy, as FinCEN now states.  But that threat assessment is now official U.S. policy.

And if a bank with substantial connections to the United States carries out the transactions, they risk retaliation under the draconian sanctions authorized in Section 311 of the USA PATRIOT Act.  Section 311 allows the United States to freeze the U.S. assets of any foreign bank deemed to have correspondent banking or other substantial relationships with specific banks FinCEN identifies. 

What happens next?  We need look no further than the experience of North Korea, which FinCEN listed as an imminent threat to the global financial system in September 2005.   I'll discuss that experience and the possible outcomes of FinCEN's declaration of financial war on Iran in tomorrow's blog.

For a detailed analysis of the U.S. and global regime of financial sanctions against Iran and North Korea, see http://japanfocus.org/products/details/2707.

Copyright © 2008 by Mark Nestmann

Even Elliot Spitzer's No Match for the "Bank Secrecy Act"

Talk about comeuppance.  New York governor Elliot Spitzer, the poster boy for ethics on Wall Street and elsewhere in the financial markets now finds his political career in ruins.  And it's all because of an almost-unknown law: the Bank Secrecy Act.

The so-called "Sheriff of Wall Street" made the mistake of withdrawing large amounts of cash from his bank account and trying to prevent the bank from reporting the withdrawal to the U.S. Treasury.  That apparently set alarm bells off in the bank's software used to identify "suspicious transactions" in customer accounts. 

The bank turned the information over to the IRS.  An investigation began, which included wiretaps of Elliot's phone calls, including a series of conversations setting up liaisons with high-priced call girls. 

And a few weeks later, The New York Times revealed that Spitzer had paid a prostitute US$4,300 in cash for her services.  Apparently, Spitzer had at least seven liaisons with women from the agency over six months, and paid more than US$15,000.

In cash.  And that's what led to the problem.  The Bank Secrecy Act requires that banks report the withdrawal of more than US$10,000 to the U.S. Treasury.  The form used is called a "Currency Transaction Report" or CTR.

Elliot apparently realized that any cash withdrawal over US$10,000 led to a CTR filing requirements.  But, he may not have realized is that any effort to avoid this filing requirement by breaking up a series of related cash transactions into smaller amounts is a federal crime called "structuring." 

If Elliot is prosecuted for structuring, he could face a five-year prison sentence and a US$250,000 fine.  He could also lose every dime in the account from which he structured the funds, under the law's severe civil forfeiture sanctions.  But most likely, he'll receive a fine for the offense, but no prison time. 

In most structuring investigations, the problem is knowing what transactions are "related."  Are a series of 12 withdrawals of US$900 (which collectively exceed US$10,000) related?  Bank Secrecy Act regulations don't address this possibility, or any of an infinite number of other possibilities.  But in Elliot's case, it was clear that the withdrawals had a common purpose: to funnel money to a front company for the prostitution agency.

Elliot's sad story should be an object lesson.  Laws that prohibit you from withdrawing your lawfully earned money in any way you please from your bank account without notifying the U.S. Treasury may be unfair.  But, they are enforced, as Elliot learned to his dismay.

Copyright © 2008 by Mark Nestmann

Uncle Sam Doesn't Want Anyone to Visit Cuba

One of the best-kept secrets in America's arsenal of financial sanctions is the U.S. Treasury Department's Terrorist Watch List.  It's maintained by the Treasury's Office of Foreign Assets Control (OFAC) to enforce economic and trade sanctions against more than a dozen countries.  (I wrote about this list here.)

One of those countries is Cuba. Under a series of executive orders and laws enacted by Congress, it's illegal for a U.S. citizen to travel to Cuba, without a "license" issued by OFAC.  It's also illegal for a U.S. company to do business with Cuba without a license, except in narrowly defined circumstance. 

However, these laws and regulations have no legal effect in other countries.  If someone, say, in Spain, wants to travel to Cuba, there's no violation of U.S. law, since the United States has no jurisdiction over Spain.

Only, it does, according to OFAC.  In October, OFAC shut down 80 Web sites owned by a British travel agent named Steve Marshall who sells vacations to Europeans.  One of the places to which Marshall offers vacations is Cuba. 

This was justified, according to OFAC, because Marshall's company "had helped Americans evade restrictions on travel to Cuba" and was "a generator of resources that the Cuban regime uses to oppress its people."

Marshall says he didn't market Cuban vacations to Americans, "because they can't travel there, anyway."  But his real mistake was using a U.S.-based domain name registrar for his Web sites.  This gave OFAC the ability to contact the registrar, eNom, and order the company to pull the plug on Marshall's Web sites.  Given the fact that failure to comply with OFAC regulations can be punished with a 30-year prison sentence, a US$5 million criminal fine, or a civil penalty of up to US$1 million, eNom quickly complied.

Fortunately, Marshall was able to re-register his Web sites with a European registrar, although he had to rename most of them with the suffix ".net" rather than ".com." 

But there's a larger issue at stake.  OFAC shut down Marshall's business without warning, without a hearing, resulting in hundreds of thousands of dollars of lost revenues.  Not exactly the "American way" we read about in civics textbooks.

However, it could have been worse.  If Marshall had established a U.S. bank account, or maintained any other asset in the United States, the U.S. bank or custodian would have been obliged to freeze it—and turn the proceeds over to OFAC. 

Are you on the OFAC terrorist watchlist?  You can find out for yourself by visiting OFAC's list of "specially designated nationals" here.

If you're on the list, though, don't count on getting off anytime soon.  That's because the only way to get off is to ask OFAC to remove you from the list.  This is an administrative determination—you have no right to a court hearing to determine if you should have been put there in the first place.

In other words, the same bureaucrat who put you on the watch list in the first place may be the one who you ask to take you off of it.  Good luck…

(For more information on emergency financial controls administered by OFAC and other government agencies, click here.)

Copyright © 2008 by Mark Nestmann

Keep Your Hands off My Gold! [Part II]

In yesterday's blog entry, I described the legal precedent for the U.S. government to again confiscate privately held gold and silver, as it did in 1933.

What are the best ways to protect yourself against such an event? 

One of the most important precautions is to not keep precious metals in a U.S. safety deposit box.  President Roosevelt ordered all safety deposit boxes sealed when he issued his March 9, 1933 gold confiscation order.  My grandparents couldn't retrieve their holdings from their safety deposit box until government thugs had rifled through it.

Also, beware of investing in U.S.-based exchange traded gold funds.  In the event of a second gold confiscation, Treasury agents would clean out any U.S. vaults these services used almost before the ink was dry on the emergency order.

Some coin dealers claim that numismatic (collector) coins would be exempt from any future government confiscation of gold and silver.  This claim is based on the terms of Roosevelt's 1933 emergency order, which specifically exempted "coins having recognized special value to collectors of rare and unusual coins." 

Some firms say that premiums of at least 15% over the spot price of bullion magically turn coins "numismatic."  This notion is based on a proposed federal regulation issued in 1984, but never adopted.  Other dealers claim that coins 100 years or older are automatically converted to numismatic status. 

It's beyond me why anyone takes these claims seriously.  Why would a government that stole its citizens' property in 1933 be consistent when it does so again?

Nothing obliges the federal government to pay by the same set of "rules" it imposed 75 years go.  Nothing obliges the federal government to honor the terms of a proposed regulation issued a quarter century ago.  And naturally, those rules can change at any time. 

However, should such an exemption again come into existence, U.S. law (which could naturally be swept away by legislative or executive fiat) does stipulate which specific coins are "numismatic."  The 1985 legislation that authorized production of the coins now known as gold and silver Eagles stipulates that these coins are to be considered "numismatic items."   

Therefore, if you believe that numismatic coins would be exempt from a future gold (or silver) confiscation, you should consider purchasing the only coins specifically defined in U.S. law as "numismatic."

In addition to gold and silver Eagles, keep some gold and silver bullion outside the United States, preferably in a safety deposit box or a private vault.  That way, if a second confiscation occurs, your holdings won't be immediately affected—although I suspect you'd still be required to comply with the order.

Copyright © by Mark Nestmann

Keep Your Hands Off My Gold! [Part I]

Not many Americans are still living who remember the day that President Franklin D. Roosevelt declared that the "hoarding" of gold and silver bullion by "subjects of the United States" constituted a "serious emergency."

To be exact, the date was March 9, 1933.  And what to do in a serious emergency involving "hoarding" of gold and silver?  Confiscate the offending "hoards," naturally. 

To be fair, Roosevelt only ordered the partial confiscation of gold and silver bullion.  When "subjects of the United States" (which included my grandparents) turned in their bullion, they received U.S. dollars in return, at the official price of US$20.67/ounce.  Once the operation was reasonably complete, the confiscatory part occurred: the government unilaterally revalued gold at US$35/ounce. 

The revaluation was possible because this operation occurred in the days before currencies traded on the open market.  Currencies were fixed in value, generally in terms of specific weights of silver and gold.  The U.S. dollar, for instance, had an official value of US$20.67/ounce, set in 1834, until Roosevelt devalued it 40% in 1933.

The question I'm often asked is, "could gold (and silver) confiscation happen again?"  And, if so, "what can I do about it?"

The answer to the first question is, "yes, definitely."  The legal authority Roosevelt used to confiscate your parents' or grandparents' gold and silver—the "Trading with the Enemy Act"—remains on the books.  Indeed, in a remarkable letter written in 2005, the Treasury Department claimed that it had the power to confiscate gold, silver—and everything else.  (Click here for details).

What might lead to a second gold and silver confiscation?  President Roosevelt's issued his 1933 emergency order when the U.S. dollar was still backed by gold.  At that time, both individual citizens and foreign central banks could exchange U.S. dollars for gold.  Today, no holder of U.S. dollars is legally entitled to exchange their dollars for gold at the U.S. Treasury.  Indeed, only a small minority of U.S. citizens own precious metals in any form. 

However, if a day ever comes where foreign countries demand that the U.S. Treasury pay its debts in gold—not in U.S. dollars—a second confiscation could occur.  I don't see a second confiscation as particularly likely, simply because so few Americans own any gold or silver bullion.  The takings would likely be so slim it simply wouldn't be worth the effort.   

Answering the second question is a lot harder.  Tune in tomorrow for my thoughts on this matter.

Copyright © 2008 by Mark Nestmann

USA Quietly Expands Draconian Emergency Powers Law

After the events of Sept. 11, 2001, the U.S. government quickly imposed economic sanctions against its "enemies" throughout the world.

The most important law it used for this purpose is a little-known statute called the International Emergency Economic Powers Act (IEEPA).  President Bush has used it on numerous occasions; in particular, to add names to a "terrorist watchlist" maintained by an obscure Treasury Department bureaucracy called the Office of Foreign Assets Control (OFAC).  The watchlist is over 250 pages long and includes more than 6,000 names.

If you live or do business in the United States, you're supposed to check this watchlist before you conduct any type of business with anyone.  If you fail to do so, you become subject to the civil and criminal provisions of the IEEPA.   There is no minimum threshold.  If you sell a glass of lemonade to someone on this watchlist, you've violated the law.

And the penalties for such violations just increased—substantially.  On October 16, 2007, President Bush signed into law the International Emergency Economic Powers Enhancement Act.  This law increases civil penalties for IEEPA violations from US$50,000 to US$250,000 per violation, or up to twice the amount of the violating transaction.  It also increases criminal penalties to US$1 million per violation.  The maximum prison term of 20 years per IEEPA violation remains unchanged.

The law applies retroactively, which means that alleged violations that occurred prior to Oct. 16, 2007 are subject to the higher penalties. 

IEEPA also contains draconian civil forfeiture provisions. 

"Ordinary" civil forfeiture is bad enough.  Based on the flimsiest imaginable evidence (perhaps provided by a "confidential informant"), police can seize your bank accounts, security accounts, your vehicle—even your home—if your property is allegedly purchased with, connected to, or "facilitates" any one of more than 300 crimes.

In an ordinary civil forfeiture, the government—eventually—is supposed to prove its case before a judge.  But in an IEEPA civil forfeiture, the government seizes your assets administratively, without a court hearing.  If you want it back, you must prove that your property isn't subject to confiscation.  And you don't make your case before a court, but an OFAC tribunal.

OFAC's decision is final.  You have no right to appeal its decision in court.  After all, it's a "national emergency," so the government's determination must be correct…right?

Well, it may be right…or not.  Numerous examples exist of the United States accusing someone of being a terrorist or terrorist sympathizer, and then changing its mind.  And don't forget that the definition of an "enemy" can change at the drop of a hat.  Saddam Hussein was an important American ally until 1991, when he instantly became an "enemy of the state." 

IEEPA's provisions cut through any asset protection device in existence, whether it's an offshore trust, offshore LLC, etc.  However, numerous countries have been reluctant to enforce IEEPA forders due to the perceived lack of due process. 

I hope that no one reading this blog ever come face-to-face with an IEEPA prosecution or forfeiture.  But if you do, any assets you have in the United States will be subject to the unreviewable discretion of unaccountable bureaucrats at the U.S. Treasury Department. 

I can't think of a better argument to relocate whatever assets you can offshore—the sooner, the better.

Copyright © 2007 by Mark Nestmann

Feds Shut Down Precious Metal Backed Alternative Currency

Yesterday, Nov. 14, federal agents raided the offices of "Liberty Dollar" in Evansville, Indiana, and confiscated all its property and equipment.

The Liberty Dollar is a privately circulating currency backed by gold and silver.  There are various forms of Liberty Dollars, but the most popular one is a one-ounce round silver medallion.

Liberty Dollars are produced by the National Organization for the Repeal of the Federal Reserve Act and the Internal Revenue Code (NORFED).  Led by economist Bernard Nothaus, NORFED has long been a thorn in the side of the federal government. 

And now, the feds are getting their revenge.

There is little question that the production, sale, and possession of Liberty Dollars are legal.  Indeed, in 1999, the Treasury Department's legal team reviewed the Liberty Dollar.  Claudia Dickens, spokeswoman for the U.S. Treasury Department's Bureau of Engraving and Printing, said:

"There's nothing illegal about this.  As long as it doesn't say legal tender there's nothing wrong with it."

That, apparently, is the rub.  "Legal tender," in essence, means that a particular form of money must be accepted for all debts. 

NORFED has never claimed that Liberty Dollars are legal tender.  However, in recent years, the company built up a network of "Liberty merchants" who accept Liberty Dollars in exchange for goods and services.  And since the U.S. Department of Justice says that federal legal tender laws prohibit the use of privately circulated gold or silver coins intended for use as money, that may have been what led to yesterday's raid on NORFED. 

Pursuant to U.S. civil forfeiture laws, the feds seized everything NORFED owns.  All their gold.  All their silver.  All their platinum.  All their bank accounts.  All their cash.  All their computers.  Even the dies for minting the coins they produce.

Uncle Sam doesn't want any competition in the money business.  All forms of currency deemed legal tender by the feds—Federal Reserve Notes and coins produced by the U.S. Mint—are all totally debased.  They're backed only by the American dream, and not by gold, silver, or any other commodity.  The 30% decline in the international value of the U.S. dollar in recent years is only the most visible sign of this debasement.

Today's raid will hardly end the hunger of Americans to possess "real money."  But it may well spell the end of NORFED. 

Fortunately, there are many other ways to purchase gold and silver.  U.S. gold and silver eagles, produced by the U.S. mint, are unquestionably legal to buy and sell.  If you don't want to take physical possession of precious metals, you can purchase them through organizations such as GoldMoney or the Perth Mint Certificate program.

Just don't make any claim that real money backed by gold or silver is legal tender for any debt.  Otherwise, the feds might shut you down, too.

Copyright © 2007 by Mark Nestmann

Yes, You are a Criminal

If you live or do business in the United States, you're almost certainly a criminal, even if you don't know it.

In New Jersey, you can be arrested for driving by your own home.  In Florida, a man was sentenced to six years in prison for carrying cash.  In Pennsylvania, a woman faces prison for yelling obscenities at her clogged toilet. And under federal law, you can be imprisoned for withdrawing lawfully-earned currency from your own bank account. 

The common thread of these stories is criminalization: the conversion of conduct that was once merely socially stigmatized or subject to fines or other civil sanctions into a criminal offense.

Are you abusive, or does your spouse or partner say that you are?  Domestic violence laws in New Jersey and numerous other states mandate the arrest of a male based on recommendations from a social worker.  The social worker may recommend a man's detention for spousal abuse based on a woman's testimony alone.  Driving by your own home can be grounds for a criminal complaint. 

Who hasn't ever carried cash in their wallet?  In Florida, it's a criminal offense to do so: a court sentenced a man to six years in jail for the crime of possessing a cocaine-contaminated dollar bill.  An appellate court ordered the man released only after local newspapers revealed that the overwhelming majority of currency circulating in the state was tainted with narcotics residues.

Do you become frustrated because your appliances at home don't operate properly?  In Pennsylvania, a woman who allegedly shouted profanities at her overflowing toilet within earshot of a neighbor faces up to 90 days in jail. 

Have you ever withdrawn cash from a US bank account?  Better be careful, because if you withdraw more than US$10,000 in a series of "related" transactions, you may be guilty of a federal crime called structuring, and face a prison sentence of five years, a US$250,000 fine, and confiscation of the entire bank account under civil forfeiture laws.

Are you a terrorist?  You may not think that you are, but under the USA PATRIOT Act and other federal laws, practically all forms of domestic protest could be considered "terrorism."  Once the government classifies you as a terrorist, it can seize and ultimately forfeit everything you own, whether or not those assets are connected to terrorism.  Then, under the Military Commissions Act, it can detain you indefinitely, without ever charging you with a crime.

These examples merely scratch the surface of the overwhelming trend of criminalization.  The trend won't be reversed until we convince lawmakers that criminal sanctions aren't necessarily the best way to deal with moral, social, or political problems and disputes. 

In the meantime, the only way to protect yourself is to ask, before engaging in even the most seemingly innocent activity or transaction: "is there any way I might get arrested for this?"  The answer may not always be obvious, but a little research online or at a law library may at least shed light on the potential for criminal liability. 

Copyright © 2007 by Mark Nestmann

Now Your Property is Presumed Guilty in Canada

For years, I've warned about the dangers of civil forfeiture laws that permit police to seize your property, without accusing you of any crime. 

The legal theory behind civil forfeiture is that your property is somehow “guilty” of a crime.  Prosecutors accuse your property, not you, of that crime.  And, if your property is found to have somehow been involved in or facilitated a crime, you 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.

In the United States, 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.  The proceeds of the forfeiture need not be disbursed to the alleged "victims" of the crime your property supposedly was involved in.  Instead, police get to keep it.  This sets up an insidious bounty hunter mentality where instead of focusing on preventing crime, law enforcement agencies focus on seizing the richest, legally undefended assets they can find.

The attractions of a legal procedure like civil forfeiture to law enforcement agencies are obvious.  And because of the "success" of civil forfeiture laws in the United States, other countries are bringing them into effect.

Case in point: Canada.  In Ontario, a civil forfeiture law enacted in 2001 to be used against "organized crime" permits the province to seize assets if it can show on the balance of probabilities the assets were acquired directly or indirectly “in whole or in part” as a result of any illegal activity.  Now that the law has been upheld by the Ontario Court of Appeal, the attorney general of Ontario predicts “exponential growth” in the use of the seizure powers.

Only, the law isn't being used against organized crime. Instead, it's mostly been used to confiscate "grow houses" where marijuana is cultivated.  In numerous cases, the owner of the house has claimed not to be aware of the illegal activity.  But innocence is no defense in a civil forfeiture, as the Court of Appeal decision held that the Canadian Charter of Rights—which guarantees that a person is innocent until proven guilty—doesn't protect property rights.

A recent report from the Ontario attorney general’s office states that C$3.6 million in property has been seized in the past four years in 170 proceedings.  Nearly C$1 million of these funds have been transferred to municipal police forces.  And based on these results, lawmakers in five other provinces have introduced similar legislation. 

If you live or do business in Canada—particularly if you own rental property—the proliferation of civil forfeiture laws should be a grave concern.  Policing for profit is a burgeoning enterprise in Ontario, and may soon be a reality in most other provinces as well. 

How can you protect yourself?  The easiest strategy is simply to keep your property heavily mortgaged.  If there's little or no equity in the property, police have very little incentive to seize it.  It's also a good idea to periodically inspect your property to make sure your tenants aren't using it illegally.  Ontario law is typical in this regard: you may enter a leased residence you own if you give your tenant 24 hours written notice of entry.

Learn dozens more strategies to protect your property from "legal theft"—click here.

Copyright © 2007 by Mark Nestmann

Court Reigns in Pre-Trial Forfeiture of "Substitute Assets"

I've long criticized state and federal civil forfeiture laws, which permit police to seize your property without ever charging you with a crime, much less convicting you of one.

Based on the flimsiest imaginable evidence (perhaps provided by a "confidential informant"), police can seize your bank accounts, security accounts, your vehicle—even your home—if it's allegedly purchased with, connected to or "facilitates" any one of more than 300 crimes.

That's bad enough.  But there's an even more onerous type of forfeiture—one s brought against your property in connection with a criminal proceeding.  Because you must be convicted of a criminal offense in order for the forfeiture to be finalized, it's called criminal forfeiture.

As with a civil forfeiture, in a criminal forfeiture, it's possible to seize property prior to a conviction.  Unless you can prove the property won't ultimately be forfeitable, the property is not available for your use.  If that means you can't pay living expenses or hire defense counsel—well, too bad!  In 1989, the Supreme Court ruled that pre-trial restraint of assets that could have been used to pay an attorney did not violate a defendant's constitutional right to an attorney.

However, in a criminal forfeiture, if the property to be forfeited isn't available (perhaps it's stashed in an offshore trust), the court can order the forfeiture of substitute untainted property.  Some prosecutors have combined the ability to freeze assets prior to trial with the ability to seize substitute, untainted assets, to seize virtually all of a defendant's assets before a trial began.  If you're the defendant, this can leave you virtually penniless and unable to defend yourself except using a court-appointed attorney, who may not be familiar with the many nuances and "legal fictions" of forfeiture law. 

While the courts don't generally uphold this tactic, it persists, mainly because it puts the government in a much stronger negotiating position.  Now yet another federal court has ruled that the government may not restrain “substitute assets” prior to a criminal conviction and order of forfeiture. 

Dana Jarvis and 20 other co-defendants were indicted in a drug trafficking case.  Prosecutors tried to restrain real estate Jarvis purchased before the alleged conspiracy ever took place by filing a notice of lis pendens, which alerts a potential purchaser or lender that the property’s title is in question.  Since the real estate was clearly not associated with the conspiracy, however, the 10th U.S. Circuit Court of Appeals ruled August 28 that the government couldn't restrain it.

This is a small, but important legal victory in the war against unjust forfeitures.  You should have a right to use whatever property you have that's not criminally derived to defend yourself if the government accuses you of a crime.  The 10th Circuit's ruling upholds this right, and joins five other Circuits holding that prosecutors may not restrain “substitute assets” prior to a criminal conviction and order of forfeiture.

To learn more about U.S. civil and criminal forfeiture law, and how to make certain your property doesn't come under attack, click here.

Copyright © 2007 by Mark Nestmann

If You Oppose the War in Iraq, You Could Lose Your Property

On July 17, President Bush signed a little-known executive order that gives him the kind of legal authority tyrants like Hitler and Stalin used to keep their populations in utter subjection. It essentially outlaws all opposition to the Bush administration's Iraq war policy.

If you breach this order's draconian provisions, you could lose your property.  All your property: your house, your car, your retirement account, your bank accounts, and anything else the government can get its hands on.  Indeed, the government can render you homeless—all based on a secret determination by the Treasury Department that you have no right to contest in court.

The order authorizes the Treasury Department to confiscate the assets of anyone connected to the Iraq insurgency.  Not just the assets directly connected to the insurgency, but “all property and interests in property.” It also authorizes confiscating the property of anyone who indirectly threatens the peace or stability of Iraq, or who undermines efforts to promote economic reconstruction and political reform.

If you oppose the Iraq war, support an organization opposed to the Iraq war, or oppose any aspect of the reconstruction effort in Iraq, you could lose everything. Even contributing to a charity that is involved in direct relief efforts for Iraqi refugees could trigger forfeiture of your property, because the executive order expressly prohibits donations of "food, clothing, and medicine intended to be used to relieve human suffering."  There is no requirement that you even have to know that your assistance is going to a banned person or group before your assets are confiscated!

Certainly, political protest against the Iraq war could be construed as "threatening peace and stability" in Iraq.  Opposing the corrupt Iraqi operations of companies like Haliburton, which have ripped off U.S. taxpayers for billions of dollars in botched and bloated reconstruction contracts, could undoubtedly be viewed as undermining the country's "economic reconstruction." 

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Anti-war groups such as the "Raging Grannies," which are already under FBI surveillance would appear to be squarely in the sights of the order.  So would anyone who contributes to this organization, or who becomes a member of it.  Certainly, any politician who opposes the Bush policy in Iraq could have his or her assets seized.

How can this authority be legal—or constitutional? 

For more than 200 years, U.S. courts have given the president almost unlimited executive authority in wartime.  More recently, this authority has been expanded to encompass times of declared emergencies. 

The United States has been under a declared state of national emergency since shortly after Sept. 11, 2001.  And, under the authority of an obscure law called the International Emergency Economic Powers Act (IEEPA), the president may exercise controls over international economic transactions during any period of declared national emergency.  The law also authorizes property confiscation in what is essentially a supercharged version of civil forfeiture.

In an IEEPA civil forfeiture, such as those that may occur under the new executive order, you have no right to a court hearing.  Instead, to contest the forfeiture, you must appeal to the Treasury Department's Office of Foreign Assets Control (OFAC).  The decisions of OFAC, which can be and are often based on secret evidence that can't be disclosed due to national security concerns, can't be appealed. 

You might think, rightly, that this procedure is unconstitutional.  However, the Supreme Court disagrees.  In 2004, it refused to review a lower court decision upholding this draconian procedure.

Will the Treasury Department begin confiscating the property of the Raging Grannies, the Red Cross—or Barack Obama, for that matter—once this order comes into effect August 17?  Probably not—but it could.  That's a frightening prospect, and one that is almost guaranteed to place a chilling effect on critics of the Bush administration's Iraq policy. 

Now that the government has ended any semblance of obedience to the U.S. Constitution, it's more important than ever to establish your offshore nest egg.  It's unlikely that most foreign countries would cooperate in the enforcement of civil forfeitures under this executive order, particularly if they target otherwise lawful activities or charitable contributions, and occur without any accompanying criminal proceeding.  That means assets you have overseas—particularly in an asset protected form such as an offshore trust or offshore variable annuity—may well survive an IEEPA civil forfeiture order.   

Click here to learn more about "government by emergency"—and how you can protect your privacy and wealth from those who want to take it away—even the government.

Copyright © 2007 by Mark Nestmann

Treasury Watchlist Shuts Down Lives

Doing business with someone on a watchlist maintained by an obscure Treasury Department bureau could land you in the slammer for up to 30 years. Not to mention subjecting you to a US$5 million criminal fine, or a civil penalty of up to US$1 million per incident.

Any property "involved in" a transaction with someone on the watchlist t can be frozen. If your assets are frozen, you must apply for a "license" (exemption) to recover them. It can take Treasury Department years to process a claim.

Welcome to the secret world of the Treasury's Office of Foreign Assets Control (OFAC). Its watchlist of suspected terrorists, narcotics traffickers, and other “specially designated nationals" contains more than 6,000 names. (You can download the 250-page list from OFAC's Web site at http://www.ustreas.gov/ofac.)

Those 6,000 names are just the beginning. OFAC also administers and enforces economic and trade sanctions against more than a dozen countries, under executive orders declared under Presidential wartime and national emergency powers, as well as specific legislation.

Deal with any targeted person, entity or country, and you face similar sanctions. Nor is there any threshold; in theory, selling a glass of lemonade to someone on the list could land you in jail for 30 years. The government's refusal to limit the application of OFAC sanctions to specific industries or transactions makes this conclusion inescapable.

Of course, the penalties aren't generally this harsh. For instance, just last month, Guidant Corporation of Indiana paid OFAC US$277,017.00 in a civil settlement because it allegedly sold medical equipment that wound up in Iraq and Iran, in violation of OFAC regulations.

Not wanting to subject themselves to draconian penalties, businesses nationwide are racing to install "OFAC compliance software" to screen scheduled transactions against OFAC targets. Since the software often flags partial name matches, you could still be identified as a potential terrorist, based on your first, middle, or last name.

As a result, an increasing number of people—predominantly men with names like "Hassan" or "Mohammed" are being denied the opportunity to open a bank account, obtain health insurance, buy a home, rent an apartment, or find a new job.

A Sacramento resident whose first and middle names are "Mohammed" and "Ali" found this out the hard way. He contacted a local Western Union agent to collect a $50 funds transfer. For three days, Western Union told him that it couldn't find the record. Then, an employee told him he couldn't get the money because he “had a Muslim name.” While Mr. Ali finally got his money, his first and middle names remain on the OFAC watchlist, so there's no guarantee his ordeal won't be repeated again and again.

Like the other U.S. government watchlists I've written about, this one OFAC administers is basically useless. One screening of 6 million names in a health insurance company's database against the OFAC list resulted in 6,000 false positive matches—and not one real match.

If OFAC's watchlist isn't effective at identifying suspect terrorists, what is it good for? I suspect one thing it's effective at is to keep people with names like "Mohammed" out of the United States, and to encourage them to leave if they're already here. And perhaps, at it's root, that's what the watchlist is really designed to do.

(For more information on emergency financial controls administered by OFAC and other government agencies, click here.)

Copyright © 2007 by Mark Nestmann

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.