A friend in Tomsk

Events yesterday, with the news that Russian may have been behind the leaked climate-change emails from the UEA, seem to support the interesting argument by Evgeny Morozov I discussed in my last post.
(photo of Tomline from Mail on Sunday).

Morozov suggests that  the commonly held belief that the internet has put power into the hands of  activists and democracy supporters, so they can therefore make their voices heard and influence events, is an illusion..

As he points out, protests are very easy to organise and launch from the Internet, but because it's done so openly on sites like Twitter,  it's also much easier to monitor - and control.   Morozov illustrates this with the recent Iranian protests.  Activists used Twitter to get a lot of young people out on the streets -  but the authorities now know who those people are.

And in any case, with the increasing availability and use of data mining, can any activist be sure the authorities are not reading their emails or decrypting their internet traffic, how ever well they try to hide their tracks?

It doesn't require much sophistication to obtain a password of one Facebook user,  and from that link on to his other social internet connections. The Iranian authorities were well aware that Twitter and Facebook members were behind the 'green revolution' in which thousands of American Twitterers coloured their profile pictures green in sympathy with the democracy lovers out on the streets.

But  the fact that the Iranian authorities now have proof that foreigners are interfering in their country's affairs, isn't going to help the home grown young activists much, is it?

The Daily Mail yesterday suggested that the hacked emails from the University of East Anglia were released to the world via a tiny internet server in Tomsk.

The server, Tomcity, and its parent company Tomline, offer an internet security business to prevent hacking and bugs.  Other division of the firm are involved in laying the cable which provides high-speed internet access to companies in the Siberian city.  The server is believed to be used mainly by Tomsk State University, one of the leading academic institutions in Russia, and other scientific institutes.

.In 2002 Tomsk students reportedly launched a 'denial of service' attack on a portal whose site material reporting on Chechnya angered the Russian authorities. It was said that they had been used by the Russian secret service, FSB, to shut down the website - an accusation which can be plausibly denied by the government, of course.

Whatever?  As far as I'm concerned, in this instance I'm all in favour of the hackers.   The climate change issue is a bandwagon, and we're all entitled to know both sides of the argument.  So anyone who enables us to get more information about something which will inevitably involve all of us paying even more taxes, is to be congratulated.

So Professor Ross McKitrick doesn't agree with Professor Jones - so what?  It's a free country, McKitrick is entitled to disagree and have his views considered - not dismissed out of hand as 'garbage by Jones, who tried to stop his work being published.

Of course, there's more to this story, but it's early hours Monday now, so more on this later.Except to quote from Tom Lehrer, a very funny and clever academic American satirist and singer, who once had a famous number involving Tomsk which begins:

I have a friend in Minsk,
Who has a friend in Pinsk,
Whose friend in Omsk,
Has friend in Tomsk   . . .. .

and ends:
To Tomsk, to Omsk,
To Pinsk, to Minsk,
To me the news will run . .. .

So more news on this will run on this site later - and meanwhile you can pick up Lehrer on You Tube, singing about his friend in Tomsk called Lobachevsky.

(And look out for Evgeny Morozov's book on the internet and democracy, due out in 2010 - he's a very interesting writer).

Power and the Internet

In a week in which Murdoch took on Google and  Mandelson took on Murdoch,  I thought I'd have a look at one of the key sources of power in the world,  the Internet, with its ability to give everyone a public voice.  At first glance it looks as though the individual, however lowly, can now join up with similarly minded others and really begin to change the world.

But is that, in fact, just a comforting illusion to allow people to believe they are  gaining control?

The conventional view is that in this new world of the world wide web governments are bound to lose control, being eventually forced to cede it  to angry, freedom loving,  energetic young netizens, spreading their own agendas on their blogs and social networks. 

Big names go along with that view. Nicholas Negroponte, author of the seminal text, Being Digital,  sees modern technology leading to the the future decline of the nation state.  Many agree with him, believing that by using the power of the Internet, networks of activists can gradually take over and do for the power of the establishment.

But some  people see it differently. Evgeny Morozov, Fellow of Georgetown University, for instance, writing for Forbes, takes a more wary view point - and makes a very sound case for it.

It's true that on the surface, it looks as though we are at the beginning of people power.  In the recent past, we've seen,  for instance,  how a network of social netizens can whip up a storm against a journalist writing about the death of a boy band singer ie: Jan Moir and Stephen Gateley - or get together a concerted attack by the many on the one solitary voice who accused an actor of being boring on Twitter ie. Stephen Fry. In both case, the mob was whipped up very efficiently.  

But this has nothing to do with real power, it's an emotional storm in a very small teacup.

As Morozov points out, because a group can be  pulled together very quickly on line, to express virtuous outrage about pop stars and actors, climate change, poverty, the war in Irqa etc. so can more heavyweight groups be pulled together. ie: networks of religious fanatics: ultra nationalists: and internet adept groups from Latin America.  He points out how warring Mexican gangs are big on You Tube,  touting their latest guns and upload graphic videos of the beheading  of their enemies. The internet is not just in the hands of harmless well meaning do-gooders.   The net is there for saints and sinners alike.

History shows it is usually unwise to underestimate the power of the establishment to adapt to new challenges. Morozov points out that authoritarian states have shown a capacity to embrace new technology very efficiently. He cites the propaganda films of Leni Riefenstahl in Nazi Germany, or the brain washing radio broadcasts in the old Soviet Union.

And the establishment learns fast, and has access to some of the best advisers.  Clever young geeks can work for governments of many different persuasions.  Some of them hack for fun, but some talent will sell itself to the highest bidder, and that bidder may be an authoritarian government. Most powerful governments, like China,  have moved on from the crude model of controlling online discussions by censorship and filtering. The Chinese soon realised that didn't work when everyone had access to publishing on line with blogs, twitter, my Space etc.

So what did China do? They created a decentralized, 20,000-person-strong group of what is known as the 50-cent party, members of which get 50 cents for each comment they post -  they identify sensitive online discussions and try to hijack the conversation in directions supportive of the government. 

Examples like the above are what Morosov  calls the Spinternet. Every government does it differently.

The Russians outsource to new media start-ups, who then create social networks and blogs that promote a pro-Kremlin ideology.  The Russian parliament has been discussing a 'Blogger's Chamber' that would invite famous bloggers (obviously those taking the party line) to set their own standard of what can and cannot be discussed. A good example here of the apparent ceding of state power that, in reality, simply reinforces the establishment's control over the Russian internet.

The Nigerian government has been reported to be constructing an 'anti-blogging project' that would fund hundreds of pro-government voices, paying them in cybercafe vouchers,  to counter the influence of oppositional bloggers.

In Iran, the clerics have  Qom-based blogging workshops, to control much of the online discourse about religious issues.  And the Iranian authorities have already singled out Facebook and Twitter as sources of the 'color revolution' that got thousands of American twitterers coloring their profile picture green in sympathy for the freedom seeking activists in Iran.

The examples above, given by Morozov,  concern authoritarian states.  But it would be naive to assume that our democracy-loving states are not doing exactly the same thing. 

So maybe the future does not look that rosy for the little man at his laptop trying to organise a movement for some noble cause he believes in.  Perhaps Big Brother is even now peering over his shoulder and assessing whether he needs to be reined in. One can only hope that he is also peering over the shoulders of the bad boys who are planning more destructive things - and let us hope he believes with absolute surety that he can distinguish between the the good and the bad.

But hang on,  that's just what authoritarian states believe they can do, isn't it?

What a moral morass this whole field is!

 Evgeny Morozov is contributing editor to Foreign Policy, blogs, and is Yahoo Fellow at Georgetown University for the study of diplomacy.
He has a book coming out next year, published by Public Affairs, about the Internet and Democracy, and I'll certainly be at Amazon on publication day ordering a copy.

Birkenfeld billions

Je Reviens - unfortunately sometimes life and work just get in the way of blogging - so let's just blame my recent silence on 'Events, dear boy, events.'

So, back to business, to find that the wonderful UBS/Birkenfeld story has moved into even more interesting territory, as Brad the whistleblower bites back.  I've long thought there was endless money to be made out of this saga and that Bradley Birkenfeld would come out of prison, write a best selling book, then Hollywood would come along and make a great film out of the whole thing.

Who to play Birkenfeld?  That's a tricky one - depending on whether you view him as  hero, or  villain. Tom Cruise for either, perhaps?

Anyway, to update: The New York Times is reporting that Brad Birkenfeld and his lawyers are hoping to use a new federal whistleblower law to claim a multibillion-dollar reward from the American Government.

Birkenfeld, who begins his prison term in January, is being represented by the executive director of the National Whistleblowers Center, Stephen M. Kohn. It was Mr Kohn who sucessfully represented Linda Tripp when she helped to expose the Monica Lewinsky scandal in the Clinton years.

According to the NY Times, Mr Kohn says, 'We are seeking at least several billion dollars.' (Big thinking here, does no-one think in terms of millions anymore?)
Legal experts say the odds in their favour are pretty good.

Brad Birkenfeld pleaded guilty in June 2008 to conspiring to defraud the US government, but - surprise, surprise -  in spite of that, whistleblowing experts think he has a persuasive case to make a claim.

A spokesman at Phillip & Cohen, a law firm that specializes in large whistle-blower claims,  is reported as saying 'It was very useful information from inside UBS that Mr Birkenfeld provided. The law is pretty clear on this."

Mr Kohn stands to reap a fortune if Bradley Birkenfeld wins.

I have to 'fess up here and say I have nothing but admiration for this display of chutzpah. Can't blame Birkenfeld for trying and if he and Kohn bring this off they deserve a standing ovation. But now that Birkenfeld himself has opened the gates to an absolute onslaught on tax havens, when they get their billions where will they put them?

Off shore account, anyone . . .

The Blackberry Five safe and well, thanks to City Critters and the fats cats at Goldman Sachs

Because it's Sunday and  it's nice to post good news ocasionally,  I couldn't resist following up my earlier New York/Goldman Sachs kitten story,  with this great photo of the five abandoned kittens - who were finally rescued by the lovely people at City Critters, with a little help from their friends at Goldman Sachs, who paid for the little critters' medical checks and helped place them in good homes.

The kittens were rescued by http://www.citycritters.org/ - a small animal rescue group in New York, staffed with voluntary help by people who all have fulltime day jobs as well. They mainly work with the many cats living rough in the city -  and some dogs, too.

They're a great organisation, and do a lot of good.  If you're interested, live in New York, or just like cats, visit their website, where you can also make donations for the animals.

The charming photo is courtesy of someone - (sorry, don't have your name) - posting a comment and photo in Downtown Express, the newspaper who was covering the story.

I used to live in New York on the corner of Bleeker and have many happy memories of catching the No 10 bus almost outside the apartment, and heading up town for yet another wonderful New York kinda day.

Diamonds in toothpaste and hissy fits - an everyday tale of whistle blowing

In this piece I'm assembling the facts as I see them, about the origins of the row between the Swiss Bank UBS and the US income tax people at IRS.

It falls neatly into a story of both wealth and power.  In this case the wealth of the invidual,  set against the power of Government bodies and commercial organisations.  Plus here we have an added element in the mix, the power of one very disgruntled whistle blower.

In 2001, Igor Olenicoff, a multi-millionaire real estate mogul living in California, flew to Switzerland to meet Bradley Birkenfeld. (Birkenfeld is on the left of the photo - from the Daily Telegraph).

This was to prove a very unlucky meeting for Mr Olenicoff, and for many others, and it proved to be the starting pistol that begun the present IRS blitz on off shore companies and so-called tax havens. And nearly brought down one of the great banks of the world, UBS, the Swiss bank specialising in wealth management.

Birkenfeld, now 44, had lived in Switzerland for 13 years, working as a financial adviser to the rich. Since 2001 he has been a director with UBS, living the charmed life of a highly paid expert in tax affairs. He had a million-dollar house under the Matterhorn in Zermatt and an apartment in Geneva and drove a 50,000 dollar BMW.

Birkenfeld looked after important clients for UBS's private bank, catering for US citizens with offshore accounts. Earlier, Birkenfeld had worked for Barclays Bank in Geneva and Mr Olenicoff had been one of his clients. When he left Barclays to become a director at UBS, Birkenfeld took Mr Olenicoff with him. Mr Olenicoff was his biggest client.

Using offshore accounts is not illegal for United States taxpayers, but hiding income in so-called undeclared accounts is. Switzerland does not consider tax evasion a crime, and using undeclared accounts is legal there.

Mr Olenicoff had approached Birkenfeld in good faith, believing, as any of us would, that he was dealing with a decent and trustworthy professional man, representing one of the great banks of the world. He naturally assumed that everything he said would be in confidence as he was talking to a man whose profession was advising on offshore banking. No doubt, Mr Olenicoff was paying a lot of money for the privilege of Birkenfeld's discretion and advice. It seems to me he was betrayed, in the most treacherous manner, by an individual who was himself doing exactly what he was condemning his client for doing.  The hypocrisy of Birkenfeld's behaviour is staggering - not to speak of his stupidity in thinking he could get away with it.

Birkenfeld took Mr Olenicoff's money, gave him advice, helped him move possibly hundreds of millions of dollars from the Bahamas to Switzerland, smuggled several hundred thousands worth of diamonds into the States, hidden in a tube of toothpaste -

- and then sold both his long term client and his ex-employers (who had kept him in luxury for years) straight down the river and into the hands of the IRS, the American tax authorities. The IRS, who didn't see this one coming, took a little time before they realised that their whistleblower, the apparent hero who was claiming virtuously to be so shocked when he found out what UBS was doing that it was his moral duty to tell on them, was hiding the fact that he himself had been doing exactly the same thing.

That's why, unusually for a whistleblower, he's just go 40 months in a state penitentiary, instead of the praise he might have got.

And the whole tacky story seems to have had its roots in little more than a hissy fit by Birkenfeld when he got a less than favourable annual report from UBS, and a smaller bonus than he was expecting. He flounced out of UBS and into the hands of the taxmen, taking his unsuspecting client with him.

Shakespeare talks of how 'one may smile, and smile, and be a villain.'
Well, for 40 months at least, I suspect Birkenfeld won't be doing much smiling.

And by the way, the client who trusted him got a suspended sentence, paid back some $50 million, and was fined $3,500. Maybe, like me, the court had considerable sympathy for Igor Olenicoff.

EVEN GOLDMAN SACHS CAN GET IT WRONG

The downside of being rich and successful  is that you have to be ultra careful of your image.

There are certain  groups it's safest not to get involved with.    Animal lovers, for instance - and, particularly, cat lovers:  steer well away from anything to do with fluffy, pretty, helpless little kittens. Put one foot wrong, and these people will mark you out, tell all their pals, and start a campaign against you - modern technology makes it frighteningly easy to do.
(This great photo is thanks to flickr via Marissa Cap)

Goldman Sachs quite accidentally became  involved with a bunch of kittens. Seems their intentions were good - but  they took their eye off the catnip ball. And look what happened.

In New York, Rich Brotman  runs an animal rescue service called City Critters.

In August, he found a litter of five abandoned kittens on a construction site on which Goldman Sachs are building their new HQ.  The youngsters were nicknamed Blackberries because of their dark coats.

Rich Brotman took the baby moggies home and approached Goldman S about help for paying  the medical costs involved in making sure the animals were in good health. He also asked GS to canvas their employees, to see if anyone would like to adopt  the the little fellows.  Goldman Sachs were pleased to help.

However, it wasn't long before things were going rapidly downhill for the company.

In October a  local New York paper claimed that promised money for the veterinary bills had not been forthcoming - and, insult to injury, the kittens had been brutally abandoned as no-one had given them homes.

In no time at all, this story was all over the internet, the blogosphere was in uproar, and Goldman Sachs wereThe Great Satan and marked with the number of the Beast, 666.  None of it was helped by the fact the company  had just announced  $3.2billion quarterly profits. All that cash floating around - and  5 little kittens abandoned to their fate.  Oh, dear!

Except, it turned out it was all a big understanding,  as the Goldman Sachs boys belatedly leapt into action to point out. All the bills had been paid - the delay had not been on their side, they had been waiting to be billed by the vet.  And all the kittens had found good homes, two of them going to a friend of the Goldman Sachs lawyer. And, they added plaintively,  they would never be unkind to kittens.

Goldman S should learn from this.  Their public image is not good at the moment, and when that happens, people will pounce on anything that seems to confirm that.  It's obvious what happened here.  To GS it was a minor incident, they agreed to do something about the kittens, and they did.  Bills  take time to come in, and get processed by whatever the section of their accounts dept is that deals with homeless kittens. Their mistake was in not keeping in touch and explaining things.

It could have been such a great tale to improve their image.  They messed up.  Maybe they should realise that a good PR department is worth just as much as their uber-clever money men. A shake up of their PR people, perhaps?

Goldman Sachs and The Dumb God

I quote below two excerpts I rather liked from John Arlidge's long interview in the Sunday Times on 8 November with the Chairman and CEO of Goldman Sachs, Lloyd Blankfein.

But before that, in view of the publicity that has been given to a careless passing reference to God towards the end of the interview, (and which has occasioned a number of lunatic fringe contributions in the comments column) , I thought I'd start with one of my own favourites quotes. It comes from Ben Johnson's comedy,  Volpone.  Here is Volpone, the old fox himself , speaking as he gazes lovingly on his gold:

"Riches, the dumb god, that givest all men tongues,

That canst do nought, and yet mak'st men do all things;

The price of soul; even hell, with thee to boot,

Is made worth heaven"

First said in 1606, Johnson's words are as accurate today as they were then. Money still enables you to do all things . . .

So here are two short excerpts from John Arlidge's interview with Lloyd Blankfein. 

Blankfein, acknowledging the public dislike of the banks these days, says:

"I know I could slit my wrists and people would cheer."  But then, he slowly begins to argue the case for modern banking. "We’re very important," he says, abandoning self-flagellation. "We help companies to grow by helping them to raise capital. Companies that grow create wealth. This, in turn, allows people to have jobs that create more growth and more wealth. It’s a virtuous cycle." To drive home his point, he makes a remarkably bold claim. "We have a social purpose."

Later, Arlidge discusses why Goldman Sachs came out of the sub prime mortgage debacle better than other banks.  He points up the fanatical attention to detail that characterises the company, and explains:

"Take the sub-prime mortgage sector, the ticking toxic debt bomb that detonated the economic crisis. One year before bad home loans brought down Lehman and Bear Stearns, forced shotgun marriages of Merrill Lynch to Bank of America and HBOS to Lloyds, and made Royal Bank of Scotland a national joke, Goldman’s daily valuations revealed it had suffered modest losses in its mortgage holdings for just over a week. At most banks, the losses might have gone unnoticed or been dismissed as a rounding error, but Goldman convened a meeting of senior bankers to try to find out what was going on. Even though the housing and mortgage markets were still buoyant, the bank did not like what it saw and began reducing its exposure. When the credit crunch hit, its losses in the mortgage sector were only $1.7 billion, lower than any other big investment bank. UBS lost $58 billion."

Note the final sentence. How are the mighty fallen?  $58 billion down the drain - God in Heaven, what were UBS doing?  Whatever possessed them to get into such murky waters when their whole raison d'etre is asset and wealth management

As for the apparent quote from Blankfein, 'I'm just a banker doing God's work,"  -  for goodness sake lighten up, you people, it was a joke!

The Taxmen, The Bank and The Rat

Getting together this piece about the IRS/UBS row over tax -  triggered by the treachery of one Bradley Birkenfeld, left, a man who makes Judas Iscariot look like a Saint -  it seemed to me that in essence the whole thing comes down to two words: Freedom or Tyranny.

Those are dramatic words,  but this latest attack on the personal money of the

individual is a pretty dramatic affair.

In the violent slugfest between the IRS, the tax collecting arm of the United States Government, and the Swiss Bank UBS, specialising in wealth and asset management,  we seem to be seeing a clear attempt by one side, aided and abbetted by the OECD,  to do away with the long accepted distinction between tax avoidance and tax evasion - to the detriment of every one of us, rich or not.

Bear with me, because this is the boring bit where we have to define our terms.

In any civilised country,  two elements of the tax system have always been recognised - Tax Avoidance and Tax Evasion.

Tax Avoidance is legal. Tax Evasion is not.

To put it simply, Tax Avoidance is me exercising my god given right to hang on to my hard earned money and not hand over unreasonably large chunks of it to a bunch of greedy politicians.

Tax avoidance is the legal exploitation of the tax system, to try and reduce the amount of tax that is payable by means that are within the law, while at the same time - and this is the relevant bit to the present row - making full disclosure of income to the tax authorities.

Examples of tax avoidance are, for instance, using tax deductions, changing ones business structure through incorporation, or establishing an offshore company in a tax haven.

Tax Evasion, however, involves deliberate efforts by individuals, or firms etc, to evade the legitimate payment of taxes by illegal means.
This usually means taxpayers deliberately misrepresenting or concealing the true state of their affairs, and includes dishonest tax reporting, such as underdeclaring income, profits or gains - or overstating deductions.

So, Evasion is naughty. Avoidance is good,  because in a free country money belongs to the people who produce and earn it.

Of course, anybody in their right mind knows a certain level of tax is necessary - a portion of the wealth produced by the population must be given up to pay for the public good - for a decent health service, decent education, a trustworthy system of justice, national defence et al.

But why should we give the government an unlimited claim on our money to use as they see fit? And for what? Corporate bail outs, pet projects, foreign aid - the list goes on and on.

That's why this particular battle makes me nervous.  Not because I'm rich. I'm not - though one day, in a good old capitalist society, I might be.  And then I will want talented people around who will come to my aid and protect me from the grasping hands of my government.

Is there something a touch malevolent about the IRS relentless pursuit of UBS and it's clients?   A sort of old fashioned socialist desire to punish  people for having money? 

Yes, I do know that in this difficult financial landscape, all Governments are scratching round to find every and any source from which they can raise revenue.

And I am not saying the wealthy are perfect - but tell me who is? 

Mr Timothy F Geitner is the Secretary of the Treasury, the American equivalent of the UK's  Chancellor of the Exchequer.  I guess that makes him the boss of the IRS boys.

Do the words 'without sin' and 'casting the first stone' ring a bell, anyone?

more to come -including who are the OECD, and what's in it for them?

With A Little Help From My Friends . . .

Any blog centred on the wealthy and powerful is bound to spend time discussing the answer to the eternal question about money:
                       When you've finally got it, where do you put it, and who are your friends?

This year has seen probably the most vicious and sustained attack ever on the two institutions who provide the answer to that question -- Tax Havens and Offshore Banking.

I am of course referring to the long running bout of fisticuffs between the American tax authority, IRS, and the investment bank UBS -  sparked off by the rodent-like Mr Bradley Birkenfeld.

But before I embark on this sorry affair - with it's still strangely uncertain ending - I'll try to define the terms in play here. I'm going back to basics to talk about Tax Havens and Offshore Accounts.  For those of you who are not enchanted by money, this may be a bit tedious, so it might be an idea to leave now and go and do something more interesting.

Meanwhile,  off we go, beginning with -  What exactly is a Tax Haven?

The FT Lexicon defines a tax haven as:
"A country with little or no taxation that offers foreign individuals or corporations residency so that they can avoid tax at home."

Expanding somewhat on that, The Economist tends to use Geoffrey Powell's explanation. Powell is the former economic adviser to Jersey and he says:
“ What identifies an area as a tax haven is the existence of a composite tax structure established deliberately to take advantage of, and exploit, a world wide demand for opportunities to engage in tax avoidance.”

In a report in December 2008 the US Government Accountability Office expanded even further and said the following were indications of a tax haven:

nil or nominal taxes
*lack of effective exchange of tax information with foreign tax authorities
lack of transparency in the operation of legislative, legal or administrative provisions.
no requirement for a substantive local presence
self promotion as an offshore financial center

*note this one particularly, because it's the one that really got the goat of the IRS, and fuelled their thuggish bullying of UBS (as you can tell, I'm nothing if not impartial in this story!).

 UBS is the Union Bank of Switzerland, a premier global financial services firm offering wealth management, investment banking and asset management.  As they say on their website:

UBS is one of the world's leading financial firms. And we operate in two locations. Everywhere and right next to you.

Unfortunately, everywhere included America and right next to included Mr Igor Olenicoff, a multi-millionaire real estate mogul living in California,  who was unlucky enough to innocently seek the help of one Bradley Birkenfeld, an employee of UBS.

But I'm jumping ahead.  Before that, one more definition - offshore banking. The growth of tax havens is primarily due to the considerable growth of offshore banking, and this expansion is due to the globalization of the world's businesses.

So, what is offshore banking?
An offshore company is a business entity organized outside the primary jurisdiction of its home country. It locates all or some of its business operations in offshore havens, to take advantage of the low tax incentives they offer.
Offshore companies are regulated by their foreign tax havens, though it's fair to say that offshore companies operate in a pretty loose regulatory environment.
A company frequently incorporates in an overseas juridiction to avoid the extremely high taxation which they are paying in their home country.
An offshore company will be protected by the laws of their new domicile and obviously the laws enacted by these tax havens will be advantageous to the interests of the relocating company. For example, if you are trying to sue a company domiciled in the Cayman Islands, you would have to sue this company in the Cayman Islands where this company is chartered and incorporated. The laws in the Caymans are more considerate toward the interest of these companies than those, say,  of the United States.

Some countries, such as the United States, have increasingly sought measures to regulate offshore companies which also operate in the United States. Some new laws have barred offshore companies from retaining employees in their offshore jurisdictions. There are also new regulations on the kinds of business operations which these companies could move to the offshore locations.  Some countries have started to enact new measures aimed at making it illegal for companies to conduct business in the low-tax havens.

But there are big guns on both sides of this divide and the story aint over yet.

Next time, the battle in detail between the taxmen and the defenders of the rights of an individual to protect his own money.  At this stage in the battle, it looks as though the taxman is winning - but nothing in the world of high finance is ever quite what it seems . . .

Private and Public Knowledge.

Before I post a piece on Tax Havens and Offshore companies,  this is a little prologue.

As I state in the heading of this blog, I make no moral judgements. Moral judgements easily become absolutes, and I'm nervous of absolutes.

All the information in the Sark piece is in the the public domain for the whole world to read. In fact, I stumbled across it quite accidentally.  One of the great bonuses for a writer is the amount of information one acquires unexpectedly on the internet when searching for something completely different. I was actually searching for more detailed architectural information on Fort Brecqou, (which I absolutely love, and three cheers to the twins for conceiving and creating such a glorious building - and for those of you who are scathing about it, treat yourself to a good book on architecture and see what the experts say).

(I've posted photos of the castle on the two previous posts, so here for a change is the landing stage at Brecqhou - one of Ningaloo's excellent photos on Flickr. It's a bit small because my  system for some reason wouldn't enlarge it.  The notice board reads 'Private Island, No Mooring or Landing").




When I came across this stuff about the Larkers, I was intrigued. Especially as it fits in with a point I make over and over again.  In all matters in life, unless you're actively marketing a product, a low profile is a good thing.  If I was renting myself out as a company director I would,  unlike some people, make very sure I knew the people I was getting into bed with, and what business they were in.  But, even if it were all above board,  if I discovered that the information about what I was doing was on line, I would feel uneasy.

 Especially at this present  time when, because of the Birkenfeld case and the tricky footwork of the OECD on tax havens, a lot of very sharp eyes are on the world of offshore companies.

The fact of present-day life is that almost any information can be acquired within minutes by someone sitting at home with a computer and an on-line connection. And any of it can be transmitted in a matter of minutes to the whole world.

I'm afaid times they are a-changing, Sark  . . .

But moving on from this outpost of a bygone age, my next piece is going to be about the Birkenfeld/UBS storm and the OECD.

But let's remember one thing before any further discussion of tax havens and offshore companies - these are not illegal.  Rules may vary from country to country, but the concept of tax havens and offshore companies is not illegal.

In this supposedly free Western world, we are still at liberty to try and protect our own hard earned cash from the greedy incompetent hands of our politicians (and in the UK, we now know the high moral ground  on which these noble men stand!) But that protection is under fierce attack.  I, in my miniscule way, would like to offer a defence of freedom. 

More to follow . . .

Sark, Larks - and tax havens

I suppose one of the considerations for choosing Brecqhou on which to build a great house is that Sark, of which Brecqhou is a sort of fiefdom (though the Barclays are changing all that; after all, when you've paid 2.3 million pounds for an island you are nobody's fiefdom!) - has no income tax.  There's not a person in the world who doesn't want to own property and be resident in a place which has no taxes, me included. But I'm not sure I would have wanted close proximity to Sark.

In fact, Sark not only has no income tax, but no capital gains or inheritance taxes. There is no VAT and many businesses can be run without having to register for or charge it.  And  Sark has no company register.

The tax free status of Sark led, inevitably, to the jauntily called Sark Lark, though this is just another name for the old company-director-for-hire game. But times have changed.  The Barclay brothers acknowledge that, and, along with the British Government, of which Sark is a Crown Dependency, take a dim view of the Larkers.

Sark has a population of about 600, and at one point it was said that most of the adult population was involved in the business of directorships.  A resident of Sark, for instance, offers himself as a company director to some mysterious off shore company about which he knows nothing and for which he has no responsibility. This company pays no tax and is not required to declare its true ownership.  This arrangement can be lucrative, with directors' fees ranging from one to two hundred pounds, upward to tens of thousands of pounds. 

Naturally, the would-be-director, having a high opinion of human nature, assumes the company he is linking up with is highly respectable.  Nobody willingly wants their name associated with a bunch of money launderers involved in all manner of skullduggery.

However, greed is part of human nature and let's be honest about this, we all like money.  This sort of set up looks very appealing. And the odd directorship or two is doing no-one any harm, is it?  But, when it gets to the point where people might, for instance be company director of 700 companies, or perhaps have a couple of dozen phone lines running into their house,  or maybe, even, regularly have letters addressed to 200 different companies rolling through the letter box - then that is raising the bar, somewhat. And shortening the odds on trouble. I have to say, people playing this game are a lot bolder than me.

All it needs is for just one of a person's multitude of companies to crash land publicly, and in no time at all the boys in blue are coming up the  garden path closely followed by several dozen hacks and the paparazzi, and that person's  photo is spread all over the newspapers alongside assorted crooks and conmen, and life is looking pretty ugly. And it wouldn't do much for the reputation of of the Bailiwick of Guernsey and the reputation of the Channel Islands generally.

Once upon a more innocent time, this sort of larking about was fun.  But these days, with drugs lords and arms kings moving money around the world one step ahead of the authorities, and Bin Laden and his band of romantically garbed young men out and about fundraising successfully for their cause,  none of this looks quite so clever, or safe.

Sark, though independent, is also part of the Bailiwick of Guernsey and in 2000 the Bailiwick introduced the Fiduciaries Law, which looked as though it would bring the Sark Lark to an end.  But it's clear that hasn't happened.

The Barclays object to the practice.  So would I, in their position. And even in my lowly position, I object. This is a dangerous climate at the moment for anybody who wants the right to hold on to their own hard-earned money and find somewhere safe to put it.  We are in the midst of a concerted attack on the whole concept of off shore funds and tax havens, by both the OECD in Europe and, in America, by the IRS tenacious pursuit of the Swiss bank UBS. 

There are black and white lists of tax havens that are acceptable or not, as the case may be. And on the whole it is better not to be on the black list. It's always better not to draw attention to yourself. Sark's behaviour unfairly draws unwelcome attention to the Channel Islands, which run their affairs in a perfectly orderly manner.  Like most so-called tax havens, the Channel Islands have reciprocal Tax arrangements with the UK and most other countries in the world. Sark has no such arrangement.

Some years ago my favourite high IQ guru,  Lord Mandelson, was speaking in Guernsey.  He was asked about the European attitude to the Channel Islands.  He gave his usual wise advice. He said they were not really on the EU's radar screen and advised that they should 'remain unintroduced.' Exactly. Keep a low profile. Sark could spoil all that with its unsubtle greed.  It's a quaint little feudal system which looks increasingly out of touch with the real world

Next post is going to be about where we are at present in relation to the fight back by the off shore world, against the present attack on its belief in its right to some measure of privacy to protect itself and those it shelters.

TWINS, FAIRY TALE CASTLES AND MYSTERIOIUS ISLANDS

This is Fort Brecqhou, the mysterious Folly of the Barclay Brothers.  (And this great photo is from Weydonia on Wikepedia.)

I think this fairy tale castle, a stunning combination of Gothic castle and grand palace, built on Brecqhou,  a rocky island in the Atlantic measuring 200 acres (under half a mile),  definitely counts as a first rate modern folly, a flight of fancy brought to life by the whim of two rich men.

It cost the Barclays Brothers 2.3million pounds to buy Brecqhou island and a further 90million, so it is said, to build this wonderful cloud capped tower of a palace. But as with all magic castles, mystery hovers over it and leaves me wondering . . .

I have a passion for islands, and in many ways the Barclays boys, David and Frederick,  have bought exactly the sort of island I would go for.  They didn't  do the boring conventional thing and buy in a hot climate, in the Caribbean like Branson, or the Bahamas like Depp, or off Madeira like Spielberg.  They bought in the Northern clime, in the cold Atlantic.  OK, so Brecqhou is one of the Channel Islands and it's washed by the warm waters of the Gulf Stream. But in winter it's still a mighty chilly place.

But that's what I love about it - imagine it in deep mid-winter, heavy dark clouds looming over its battlements, stormy seas beating around the shoreline, howling wind and rain battering the sturdy modern windows, and inside all  the warmth and comforts of the 21st century.  The kitchen stocked with goodies from Harrods (or better still, Selfridges) food department, great wines in the cellar and chrystal champagne chilling in the huge freezers. How deliciously cosy is that!  Especially for those of us who secretly harbour the Gothic tendency!

But despite my huge affection for the twins for creating something I would love to own and live in, I'm left wondering - why Brecqhou?  Why that particular island?  In many ways, it's not an ideal choice.

The Brothers, Sir David and Sir Frederick Barclay, twins born 10 minutes apart, have bought, run and sold businesses in property, hotels, shipping, leisure, gas and oil and the motor industry, turning over billions of pounds in their extraordinary careers.  Plus turning many millions over to charity.

Not bad for boys who grew up in a family of 10 children, a family which their travelling salesman father brought down from Scotland in the 1930s during the great Depression, as he looked for work.  The twins grew up in a house on the wrong side of the railway tracks in Kensington, West London, which they shared with several other families.Then, in 1947, when the twins were 13, their father died after a routine operation.

At 16 the brothers left school and begun their working life in the accounts department of GEC. But not for long. They left pdq  to set up a painting and decorating business - and the rest, as the cliche goes, is legend - though I would say it's tenacity, brains, talent and a lot of hard work.

Once upon a time, a young David took his mother to tea at the Ritz in London.  He told her that one day he would own the hotel.  And now he does.  And among many other possessions, he and his brother own The Telegraph stable of publications.

The brothers give huge sums to charity, donating £11m to Great Ormond Street Hospital in one year, and handing £3m to Alder Hey children's hospital in Liverpool in another. They were deservedly knighted for services to charity in 2000.

Journos sometimes refer to the Barclays as the Brothers Grimm - a bit unfair, this. Presumably it's because the brothers highly value their privacy. But surely the cleverest of the rich do try and adopt a low profile? There's enough free floating envy and hatred directed at the rich at the best of times, especially in the UK. Blinging it about and shouting how clever you are is never a smart move.

So you don't buy an island unless you want  privacy -  to choose the people you want to be with,  to do your own thing , and just to be yourself, and for a brief moment retreat to the comfort of your own little world.

But strangely, as this photo below shows, Brecqhou is not a very private island.  It is extremely close to another, rather bigger island, Sark. This is a shot of Brecqhou taken from Sark. A strong swimmer could probably make it across the divide between the two islands. (many thanks and credit to lostajy on flickr for this atmospheric photo).

       
David and Frederick Barclay bought Brecqhou in 1993.  As the photo shows, it is separated from Sark by an extremely narrow sound, Le Goulliot Passage, which is traversed frequently by yachts in summer and fishboats all year. So there's a lot of sea traffic constantly in close proximity to Brecqhou all the year round.  There are cameras around the the island's perimeter and there are Bond-style rumours of patrolling guards, possibly armed.  Well, why not? It's a dangerous old world out there.

The island is 20 miles off Normandy and has its own water and electricity supply. General supplies are ferried in by boats, led by the Brecqhou Warrior.

The castle or fort was designed by Charles's fav architect, Terry Quinlan, who did Poundbury, the POW's experimental village in Dorset.
According to the entry in the excellent DiCamillo Companion website on architecture, Fort Brecqhou is the largest house build in Britain in the last 200 years. The entry then goes on:
"The house is a granite-clad castle on a quadrangular plan, built in the castellated Gothic style, complete with circular turrets at the 4 corners. It features giant twisted chimneys of the style developed during the reign of Henry VIII (this chimney style is unique to English architecture). The island was purchased by the Barclay brothers in 1993 for £2.3 million, with the cost of building the house, gardens, and outbuildings estimated at £90 million."

Truly,  Brecqhou is a magnificent honey coloured cliff top fortress.  Mock Gothic with towers, spires, gilded turrets, battlements, and a moat.
Within its thick walls is a Banqueting room 80 meters long, with gold leaf ceiling. And I'm told there's a  hand painted ceiling in the Library inspired by the Sistine Chapel in Rome.
The walls are 3 ft thick granite.
There are 2 swimming pools and a helicopter pad.
There are outbuildings and cottages for the family, and presumably the staff, in the grounds.
And, predictably, rumour says there's an underground nuclear bunker.
Building was finished in 1996 after some 90,000 tons of materials were carried in by boat.

But the island is very close to its neighbour, Sark.  Too close for comfort,  perhaps? And Sark's curious 'house rules'  impinge on Brecqhou. Sark believes in primogeniture, (an exclusive right of inheritance belonging to the eldest son). Has Sark not heard of rights for women and the feminist movement? The  Barclays, like all reasonable people, want to be able to leave their money to their children as they wish. They took the island to the European Court of Human Rights and won, when the Court ruled against Sark's law of primogeniture.

So why did the twins buy Brecqhou, and not some other island unemcumbered by the feudal habits of their neighbour, in whose fiefdom they actually are?

But what could be better could also be worse. Cars are forbidden on Sark. And the big cheese on the island is referred to as the Seigneur - droit de seigneur and all that! Come on, it does rather bring up visions of lowly peasants doffing their caps to the High and Mighty. Definitely not for me. Though recently, thanks to Dave and Fred, his power has been curtailed.
 But,  Ah Ha, hang on a minute. Hey, There's no income tax!
So not everything is bad about little Sark.  

And then there's the famous, or infamous or according to your view, 'Sark Lark'

But let's leave the 'Sark Lark' for the next post.  Personally I think it's all rather jolly,  but then I'm a great believer in the freedom of the individual . . .

The Follies of the Rich

One of the great things about the rich is that they can be as eccentric as they like, because they have the cash, and status, to  indulge their wildest fantasies and fancies. Traditionally, the rich have always been great creators of Follies - the word Folly here being used in the sense of light-heartedness, not in the sense of something ill-advised.  Indeed, the UK is said to have more architectural follies than anywhere else in the world.

Classically, Follies are buildings that have no practical purpose and are there purely for ornamentation. Follies began as decorative additions on the great estates of the late 16th and early 17th centuries and became hugely  popular in the couple of centuries which followed.  Some great estates already had picturesque ruins of monastic houses, for instance, but others lacked any such genuine and atmospheric buildings. So, the fake romantic and theatrical eye catchers begun to appear in the grounds of the big houses.

Below are a couple of examples of traditional follies - both from the grounds of Stowe in Buckinghamshire, courtesy the National Trust. On the left is the Temple of Venus and on the right the deliciously quirky triangular Gothic Temple - both serving no purpose except to please and amuse.

However, some Follies did have a practical use, as in the hunting tower at Chatsworth, shown below.

In the modern world, I guess we could say that Roman Abramovich's Eclipse - the biggest yacht in the world, as we all know - is an example of the Folly of a rich man. It is a magnificent feat of design and construction.  But it's not a Folly I would have fancied. (see my earlier post about hubris).

I'm going to talk about another Folly, created by a couple of rich men, which is much more to my personal taste - but not until tomorrow,  as the witching hour has long since come and gone.

So, tomorrow, let's have a look at the fairy tale residence of the Brothers Grimm - the wild and romantic Fort Brecqhou.

(for anyone interested in modern follies, see The Folly Fancier on my blog list, it's a great blog).

The richest man in the world - or not, as the case may be

In 2008 Forbes placed Warren Buffett as the richest man in the world.  Current opinion appears to place Bill Gates in that position, with Buffett coming in second.

Buffett, now in  his late seventies, has just given 37 billion dollars to the Bill and Melinda Gates Charitable Foundation.

As he is currently in the news because of the very good recent interview with Evan Davis, I thought I'd give him a brief mention.  Brief, because it's very rare for me to find a man of great wealth as excruciatingly boring as I find Buffett.  He's a rich version of a dull man from the suburbs of Omaha, Nebraska, who appears to have been driven from his early youth to acquire huge sums of money, without seeming to know what to do with it when he got it. And when he gives it away, as my second para shows, he doesn't give it to a personal cause of his own, but to other people who do know what to do with it.  For some reason, he seems to be regarded as a bit of a saint.

Buffett's profession is investments,  that's all he does; he does it brilliantly, but it's all he does. He doesn't make, produce or create anything, except money.

Bill Gates, on the other hand, changed the world. That's why his photo is up here and not Buffett's.

(This great shot of Gates, all youth and geekiness, is from the seattleworld blog site.)

There's a good piece by Jeremy Warner in the Telegraph about the Davis/Buffett interview. As Warner points out,  Buffett says he doesn't like the greed fuelled ways of Wall Street, but, as a little research shows,  he still invests in the Wall Street big beasts such as Salomon Brothers and Goldman Sachs.  Buffett says he thinks derivatives are  'financial weapons of mass destruction", yet it's clear that over the past year he has in bought extensively in these markets.

Buffett very nearly run into trouble with the regulators over sharp practices in his insurance subsiduary General Re, wholly owned by Berkshire Hathaway, Buffett's holding company.  One unnamed associate said that "with a history as complex as Buffett's, there's bound to be an indictment in there somewhere".

In the Evans interview, Buffett reprised his often expressed view that the rich should pay higher taxes and not grumble about it.  He doesn't seem to acknowledge that the basic objection, of rich and poor alike, is not to the concept of taxes - most people agree on the need to fund things like the health services, education etc. - but to having large chunks of their hard earned money taken off them by incompetent politicians who've never worked in a real job in their lives, and have no idea of how to handle the money efficiently when they get it.

Buffett also believes in not leaving money to his three children. That about sums up Warren Buffett to me.  The man from Omaha is just not my kind of rich man.

Next post will be about two rather different rich men. They're not currently in the news, but I'm going to do a piece on them anyway - because I'm really rather taken with them.

Egghead Central or the Hadron Collider at Cern

Temporarily branching off at a rather sharp angle, this post was sparked off by an article in The Times a couple of days ago on the troubles at the CERN accelerator in Switzerland. 

As an experimental outfit Cern and its Hadron collider is phenomenally expensive to run, requires a huge input of wealth, and has been running for years.  And it has, potentially,  awe-inspiring power to change our world.

So, we have my two favourite words, wealth and power.

Without falling into conspiracy-theory-land, this article led me to ask - whose is the ultimate controlling hand or hands behind Cern?  Where does the power lie to control and, maybe, manipulate, Cern?  

We know it is a joint exercise with many European countries involved, all of whom contribute varying sums to it:  we know there are observers from other countries:  and in-put by scientists from just about every country in the world.

We know Cern, is big and impressive. Left is an aerial photograph (courtesy of the Cern website) of the 17 or so miles of tunnel through which the experiments are conducted.  This concrete lined tunnel runs underground for 17 miles, at varying depths of 50 - 175 metres, beneath the Franco-Swiss border near Geneva.

  In trying to answer my own question, the only information I find at a brief gallop through the web deals almost exclusively with the science side of Cern, basically physicists doing their own thing.  There are the rash of more imaginative sites, with their talk of fascinating things such as ULF (ultra low frequencies) and UHF (ultra high frequencies) used to control weather, and the human system itself (that is scary.)   But however accurate or inaccurate, these sites are still science based.   It's all good stuff, but it's not what this post is about.  This post is about people, and specifically people who wield power. We don't want to wander off into Dan Brown territory.

(Not that I have anything against Dan Brown, you understand. Respect to any writer who can sell as many copies as Danny boy can - and keep their private life moderately private.)

But back to my basic point.  Cern is an organisation which needs huge sums of money to survive, and has the potential to wield real power. It's funded and run by a large,  diffused group of people and countries, of whom most members are non scientists and probably do not fully understand what is going on. 

In any organisation run by groups and committees,who are loosely joined and consist of many disparate interests, there tends somewhere in that set up to be a power base.  It may not be obvious.  It may be quite small. But with such huge sums of money invested, and possible world changing technology involved, surely Cern is not solely in the hands of uninformed politicians and physicists playing their wonderful, glittering games. 

Who takes the ultimate decisions as to which experiment gets the most money?   Who has the power to suggest or veto whatever is decided on?  Where and who are the people, (as opposed to the scientists) the big names, who have control over Cern? 

Am I missing something here?  Am I asking a naive question, perhaps? 

It's just that  I have observed that within every big impressive project involving lots of money and the capacity to influence the way things are, there is always a small group of ambitious, clever men, anxious to get a handle on the goodies.

Well, it's late, and before I lose my credibility entirely, and descend into the script of a Bond movie, I will close down for the night, but leave one question open:


Are there lurkers in the shadows behind the big Daddy Hadron Collider? 

Cherchez le pouvoir . . .

introducing Oleg Deripaska

The reason for the delay in putting up this post is that the story of Oleg Deripaska is a hugely complex one, and indeed his present position is very complicated. He has large borrowing debts, and is also embroiled in several legal disputes, at least one already going through the courts. He has enemies.

But let's start with the official background.  Deripaska is the head of the largest producer of aluminium and alumina in the world, Rusal.  Below is an excerpt from his company's website:

"Having raised his initial capital by trading in metals, Oleg Deripaska acquired shares in the Sayanogorsk Aluminium Smelter and became its Director General in 1994. In 1997, Mr. Deripaska initiated the creation of the Sibirsky Aluminium Group, which was Russia’s first vertically integrated industrial group. It brought together Russian leading aluminium and alloys producers and three years after its inception the Sibirsky Aluminium Group became one of the world's top ten producers of aluminum products. The Sibirsky Aluminium Group was renamed Basic Element in 2001.

In 2000-2003, Mr. Deripaska was Director General of Russian Aluminium (RUSAL), which was set up as a result of the combination of aluminium smelters and alumina refineries of the Sibirsky Aluminium Group and the Sibneft oil company. In 2007, RUSAL, the SUAL Group and alumina assets of Glencore International AG merged to create United Company RUSAL, the world's largest aluminium and alumina producer. Oleg Deripaska became Head of the United company in 2009."


This cool professional description of Deripaska's rise conveys nothing of  his climb out of  poverty and obscurity  to fight his way through a virtually lawless world of great danger - in which his life was frequently on the line - to finally survive and emerge one of the wealthiest and most  powerful men in Russia.

Deripaska's life story so far is the stuff of a great book - a page-turning thriller that, turned into a work of fiction, would look just that, fiction.  But it all happened. Frederick Forsyth, Ken Follet, Robert Harris,  Jeffrey Archer, where are you?

Oleg Deripaska is, in some ways, the most interesting of the Russian oligarchs.  The majority of them, generally speaking, are essentially money men.  Deripaska is an intellectual.  But an intellectual who rose to become, at one point, the richest man in Russia - tho' he's slipped a bit in the present financial climate.

He was born in  1968 and  grew up in a small rural village in  southern Russia with his widowed mother, and sometimes his grandparents when his mother, a clever woman and herself an engineer, was working in another city.  He graduated with honors in physics from Moscow State University in 1993, and in 1996 he got an economics degree from the Plekhanov Russian Academy of Economics.

But he soon saw that theoretical physics was not going to get him very far in the chaotic world of post Communist Russia. He tried his hand as a metal trader. And it was under the tumultuous reign of Boris Yeltsin that Deripaska begun his abrupt, and some say violent,  rise to wealth and power. Though in the chaotic conditions of a society in meltdown, it's clear that anyone who did  not defend themselves violently would simply not come out alive.

Among all the battles for control of state assets in 1990s, none were more violent and bloody than the so-called "aluminum wars" when organized-crime gangs hired by competing interests assassinated dozens of people, in the fight to control the smelters of the aluminium industry.   Executives, politicians and reporters were run over, shot, had their throats cut or died in mysterious air crashes. The worst fighting was said to be around the Krasnoyarsk plant in Siberia. They called it the "Wild East". Out of this bloodbath of corpses and bits of body parts, Deripaska emerged the winner. Maybe because he was a lot brighter than the physical heavies battling around him,  kept a very cool head, and held his nerve.

Deripaska himself says he owes his success to a lot of hard work. He certainly owes much of his success to great courage, boldness and brains.  One of his business associates is quoted as saying many people underestimated Deripaska. "He is one of the most intelligent people you've ever met,' he says, "and it's matched by ambition."

Early on, Deripaska understood that success in this new Russia would come from a mixture of  force, poltical influence and personal connnections. In 2001, he married Yeltsin's granddaughter.  He is very close to Putin, they go ski-ing together. Though rumour says there has been a little coolness of late - though it's possible that is just for public show.

And in 2004, Deripaska became pals with Lord Mandelson and the heir to the Rothschild dynasty, Nat, both of whom holidayed on his yacht.

Lord Mandelson himself has denied that, as the EU Trade commissioner, he gave trade concessions of up to £50m. a year to Russia's then richest man.  During his commissionership, there have been two cuts in EU aluminium import tariffs which have benefited Rusal by tens of millions of pounds a year.

  But these are complicated areas of negotiation and as David O’Sullivan, the European Commission’s director-general of European trade, has said: “Decisions regarding these cases have been taken in full transparency and are firmly rooted in EU law and in the interests of EU companies."

Balzac had a word for it

"Behind every great fortune lies a great crime."

That phrase is often attributed to Balzac, but in fact what Balzac actually said was:

"Le secret des grandes fortunes sans cause apparente est un crime oubli, parce qu'il a t proprement fait."

which, translated, is:

"The secret of a great success for which you are at a loss to account, is a crime that has never been found out, because it has been properly executed."

This might perhaps be applied to many rich men or woman, of course.  But it's particularly linked with sudden and dramatic acquisition of great wealth.  The modern-day example of this is the rise of the Russian oligarchs.

But surely, when great wealth is acquired in situations where the laws of the country have broken down and anarchy reigns,  the normal laws of polite civilised liberal behaviour cannot really be applied.  For instance, it's easy to criticise from an expensive  property in liberal old Hampstead,  and take that greatly favoured piece of real estate known as 'the moral high ground', when you have legitimately earned your money from one of the noble professions, and/or most likely inherited some of it, too.   For such people it must be difficult to put themselves in the place of men with no professional background, no family with money, with nothing in fact but their brains, who started off from zero in the violent and chaotic conditions of post Communist Russia.

Lev Cherney, brother of Michael, another successful man we will meet later, who came up the hard way,  said to my mind perfectly reasonably:

"Very often the most likely to succeed in these stormy oceans are not the picture-perfect, clean-shaved, deep-tanned, well-built and fashionably attired yachtsmen under the immaculate white sails - but unpleasant-looking ugly skippers in command of a pirate ship."
He added: "One should not be appalled. These are the laws of intial capital acquisition, applicable everywhere."

Note the last sentence.  "These are the laws of intial capital acquisition, applicable everywhere."

In other words, he agrees with Balzac.

So, next post, let's look at a striking example of someone who has soared close to the sun from a standing start  - and ask, will he yet burn his wings?  I'm talking, of course,  about that well known friend of Nat Rothschild and  Lord Mandelson, the  aluminum King himself, Oleg Deripaska.

More next time . . .

the power behind the throne

The aim in writing this blog is to post daily (or as near that as possible, work allowing)) on the world of the wealthy and powerful.

In the news currently, is this man:
         
he isn't wealthy in the sense of the Russian oligarchs or the Rothschilds with their untold billions,  though he is certainly not poor. But he is a classic example of power - how to get it, how to hold it, how to wield it, and how to come back bigger and better when you temporarily lose it.

                                                                                             

Yes, we meet again  the brilliant and mysterious Lord Mandelson, Baron of Hartlepool and Foy - known to his glamorous friends, and many enemies, as The Dark Lord, Mandy - or, so rumour says, to Rupert Murdoch as starfucker.

Mandy was one of the architects of New Labour and officially the King of Spin. He was Labour's campaign manager in 1997 when the party returned to power with a phenomenal majority, after 15 years in the wilderness. And that was the beginning of Mandy's rise to power, for he had backed Tony Blair for the No 1 job at No 10.

The combination of Mandelson and Blair made Mandelson.  Every power-behind-the-throne merchant needs a good 'man up front', and Tony was the perfect partner.

Tony was friendly and likeable where Mandy was menacing: Tony was warm and emotional where Mandy was cool and calculating: Tony was 'a pretty straight sort of guy' as he would label himself, where Mandy was a complex and secretive character. Mandy was media savvy, ruthless in his dealings with the press, Tony was the photogenic, spell-binding speaker with the great smile. The dark and the light. The Ying and theYang. A marriage made in heaven.

There were a couple of slip-ups - The Dark Lord has always had a tendency to recklessness - but even the slip-ups turned out well because with Tony's support, Mandy became European Trade Commissioner, and that job gives its holder access to real power on the world stage.

How Mandy  used it, and how it elevated him into the circles where true power exists, we'll talk about in my next post.

At the moment, back in London, Mandy has become almost overnight not only a member of the House of Lords, but the UK's Secretary of State, Secretary of State for Business, Innovation and Skills, President of the Board of Trade and Lord President of the Council.  All this without even being an elected as an MP.  How about that for style?

But what need has he of all these names and titles?  He is, in fact, the top man  of the UK, the Prime Minister in everything but name, the power behind the power that rests in the occupant of No 10 Downing Street.

- or, as history might say, Lord Mandelson is the alter rex, the other King.

Yes, Lord Mandelson understands power, he knows where it lives, he has a feel for it and is comfortable around it.  And though he has many enemies, powerful people like and appreciate him.  And that's important.  Brilliance is not enough. The right people have to like you. 

Of course, those who don't like him use adjectives such as complex, vengeful, dangerous; they talk of his combination of suave charm and icy menace.

But the people who like him see clearly his strengths -  his steadiness in a crisis, his ability to communicate a sense of purpose, his sense of humour and his refusal to despair.

We last met him a few posts back, wheeling and dealing in Montenegro with two particularly powerful people who like him, Nat Rothschild and Oleg Deripaska. 

Oleg Deripaska - now there's a man of power.  Let's take a look at Oleg and the Mandelson connection next time.  

But it's the witching hour in London so  that's all for tonight.

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Roman, Eclipse and hubris

Abramovich's Eclipse, the biggest yacht ever built.

Something worries me about Roman and his Eclipse and I hear from afar the faint sound of distant warning bells. I'm a great fan of Abramovich, and I hope I'm wrong. But he is truly tempting fate.

The Greeks had a word for it - as always. The word was 'hubris'.

The dictionary meaning is - excessive pride: presumption: arrogance: insolence.

To the ancient Greeks in their world, it meant you were putting yourself on an equal footing with the Gods. You were saying to them, 'look how rich I am, and how powerful, and how big - as big and rich and powerful as you'.

The Greek Gods, a querulous and nasty tempered bunch at the best of times, took a very dim view of this sort of behaviour and always took their revenge on any such display of cheek and chutzpah.

For instance, Bellophoron was a great hero and slayer of monsters and his most famous deed was to kill the infamous chimera , a fire-breathing monster which had been terrorizing the countryside and taking many lives.

Seeing how all his predecessors had met horrible deaths when approaching the monster from the ground, Bellophoron, a very bright boy, decided the only way to succeed in dispatching the chimera was from the air.

He turned to Athena, one of the great Goddesses, and prayed in her temple all night, whereupon Athena, impressed with such a show of faith, gave Bellophoron the magical Pegasus, a winged horse. So, flying high above the fiery blasts coming out of the chimera's three mouths, our hero did for the chimera, to much acclaim and praise from all and sundry.

That was the problem. Success went to his head and he became positively triumphalist, thinking himself as good as anyone, and better than most, and figuring he belonged right up there with the Gods. So, taking his magic horse, he flew straight out of this world and up, up and away in the direction of Mount Olympus, the home of the Gods.

Unfortunately, they saw him coming - well, you would, wouldn't you, when a intruder hoves in sight on a flying horse. So gossip says Zeus, the top God, sent a buzzing fly to distract and irritate Bellerophon and he fell from Pegasus back into the world below. From that day forward, injured,  and cursed by the Gods, Bellerophon, wandered alone, devouring his own soul and avoiding the paths of men until he died.

Greek legends are full of stories of brave, beautiful, gorgeous young men, heros and winners all of them - who tempted Fate, or drew to themselves the attention of some jealous God.

Of course, we're all so civilised now we don't believe in Gods, or Fate, or whatever you call whatever is out there watching our escapades.

But if you look around the world, you'll see that hubris is still a recognisable factor in many a modern hero's downfall.

I'm surprised and disappointed in Abramovich. For a long time he was famous for keeping a low profile. It worked. It was a smart thing to do. Now he really has raised his head above the parapet. And it worries me that there are a lot of envious people out there who will have him in their sights.

more on the fabulous Eclipse

photo courtesy of the Daily Mail.

As promised, more details on Eclipse - the yacht to end all yachts.  Owned by the amazing Roman Abramovich:

Eclipse, which has said to have more than doubled in cost to £724 million, glided out of Hamburg a week or so ago on its maiden voyage.  It will be put through its paces over 10 days. under the watchful eye of 150 engineers and maritime experts.

Eclipse has 2 helipads, 2 swimming pools - the biggest doubles up as a dance floor when drained - and 6ft-wide cinema screens in 24 guest cabins.

The master suite has a retractable roof, so its owner can sleep under the stars.

With piracy on the high seas becoming a problem, Eclipse has a hull and windows able to withstand a missile attack.  And just in case, it has a mini-sub for emergency get-aways.

 It will also be fitted with a missile defence system. What can I say but 'Wow'.

Roman is due to take delivery of Eclipse on December 22 - and what a Christmas present that will be!

The definitive size of Eclipse cannot be confirmed owing to a confidentiality clause, but a spokesman for the shipyard says "It will be the largest private yacht of all time.'  Rumour says it is 557 ft.

(The current record for a large yacht is held by - surprise, surprise - Dubai, in the shape of a 524 foot vessel owned by Sheikh Mohammed bin Rashin al-Maktoum, the prime minister of the United Arab Emirates.)

Abramovich also own the world's biggest private jet, a Boeing 767 nicknamed 'The Bandit'.

Eclipse is likely to need a crew of at least 60 people, said to include a security team of former veterans of the French Foreign Legion.

The most unusual feature of Eclipse is the anti-paparazzi shield.  Infrared lasers detect the electronic light sensors in nearby cameras.  When it detects such a device, it fires a focused beam of light at the camera, disrupting its ability to record an image.

More, and somewhat less frivolous, comments on all this to come on my next post.