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THE SOVEREIGN SOCIETY OFFSHORE A-LETTER
Your Link to Freedom, Privacy & Prosperity in the Offshore World
Friday, October 7, 2005 - Vol. 7 No. 203
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In This Issue:
* COMMENT: Undoing Due Process.
* OFFSHORE: Offshore Oprah. Croatia to Join EU. Geneva 2nd Best.
* WEALTH: Tzar Putin's Russia. Border Cash. South African Taxes.
* PRIVACY & RIGHTS: Pentagon Spies. FBI Eavesdropping. A UN Internet?
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COMMENT: Undoing Due Process.
Dear A-Letter Reader:
We talk about it a lot here -- that very old, and very important legal
concept -- due process of law.
For Americans it's guaranteed in the 5th Amendment that states "no
person shall be deprived of life, liberty, or property, without due
process of law." Fundamental to procedural due process is adequate
prior notice and an opportunity to be heard and defend those rights.
That includes a clear definition of what is, and what is not, a crime.
(Of course, these days in America virtually anything could be a crime,
especially if it pertains to financial activity).
We mention due process again as the trial of nine defendants in the
KPMG tax shelter case draws nigh in New York. These former KPMG partners
are charged with criminal conspiracy to evade taxes by selling what the
IRS claims are "abusive tax shelters." Oddly enough, no court of law has
ever ruled that the shelters in question are illegal. We have only the
IRS' jaundiced opinion that they are.
The way due process in tax law used to work had the IRS issue a warning
against a specific tax shelter, putting taxpayers on notice. The IRS
then took the taxpayer to court on the shelter issue, where he had a chance
to respond before a judge, who ruled on legality. In this case, the IRS
called in the prosecutors first without ever determining in a court of
law whether these so-called "abusive" shelters are legal or not.
The Wall Street Journal thinks the IRS may have taken this backdoor
prosecution route because it has been losing cases in Tax Court lately.
Last year we reported to you how the government froze $500 million in
assets at Xelan, a charitable trust set up for doctors in California,
alleging the trust was used for tax fraud. A US District Court threw
out the case, ruling the IRS didn't show that any court had ever held
that Xelan's activities were illegal under the tax code.
Now we have no special brief for KPMG or its ex-employees, but we do
have very serious concerns if federal prosecutors are permitted to accuse
and prosecute Americans for a conspiracy to promote a tax arrangement
that is legal until proven otherwise. If government has the unfettered
power to indict and try citizens for entering into agreements to do
legal acts bureaucrats don't like, none of us are safe.
The IRS has been engaged in a blatant, long-time attempt to blur the
valid distinction between proper tax 'avoidance' and illegal tax
"evasion." Since the US tax code is a complex morass, small wonder that
resourceful experts such as those at KPMG, try to interpret the Code to
favor their taxpayer clients rather then surrendering to the IRS.
The KPMG case is another nasty part of the highly aggressive IRS
campaign against anything it deems to be an "abusive tax shelter."
So aggressive, in fact, that the leading Washington, DC tax law firm,
Caplin & Drysdale, suggested that the IRS "objective is not to win in
court, but rather to create an in terrorem effect." (The phrase "in
terrorem" is Latin, meaning "so as to produce terror").
In other words, this respected law firm thinks that the IRS is engaged
in a form of tax terrorism, attempting to intimidate attorneys and tax
accountants into failing to give even legitimate tax avoidance advice.
The problem is that the IRS sees any and every attempt legally to avoid
taxes as tax evasion. What is "abused" are the enormous IRS
investigative powers backed by US Justice Dept. prosecutors.
A few years ago congressional hearings on the IRS exposed publicly what
many Americans knew already: the IRS too often conducts its affairs like
a financial Gestapo, running roughshod over citizens rights. The IRS
still views taxpayers as adversaries, assuming them guilty until they
can prove otherwise.
I guess it is just too much to expect that an administration that is
bogged down in an unending, losing war in Iraq, trillions in debt,
unable to meet emergencies at home and without respect abroad, could
concern itself with the due process of law that the Constitution
guarantees.
No doubt Ms. Justice Harriet Miers (who?) will take care of that. As the
President is wont to say: "Trust me."
That's the way it looks from here.
BOB BAUMAN, Editor
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COMMENT LINKS:
* KPMG in Wonderland. Wall Street Journal. (subs only)
LINK: http://online.wsj.com/article/SB112855539141761115.html
* KPMG Settlement Sends Shock waves through Accounting Industry
LINK: http://english.epochtimes.com/news/5-9-8/32086.html
* Due process of law
LINK: http://en.wikipedia.org/wiki/Due_process
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* FROM THE EDITOR'S DESK:
OFFSHORE:
* OFFSHORE OPRAH?
HAMILTON: TV superstar Oprah Winfrey reportedly has looked at a $25
million house in Bermuda as a possible offshore home. But local laws
against certain sales to foreigners may prevent the deal. If that
happens, Texan Ross Perot, NYC Mayor Michael Bloomberg and Italian PM
Silvio Burlesconi will have to do without her as a Bermuda neighbor.
* Oprah eyes home in Bermuda. LINK:
http://www.theroyalgazette.com/apps/pbcs.dll/article?AID=/20050930/MIDOCEAN/109300143
* Thinking about moving offshore yourself? Click here:
LINK: http://www.agora-inc.com/reports/190STHOW/W190FA10/
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* CROATIA MAY BE NEXT EU MEMBER STATE
The EU has begun accession talks with Croatia, a nation that already
offers an attractive combination of landscape, climate, history and
culture. Experts says infrastructural improvements that will come with
EU membership will make it even more attractive to foreign investors.
* EU's Croatia's Courtesy Cal. LINK:
http://www.forbes.com/2005/10/04/european-union-croatia-turkey-cx_1005oxford_eu.html
* Henley & Partners: Croatia - the Insiders Choice in Europe.
LINK: http://www.henleyglobal.com/croatia1.html
* More about Croatia: CIA Fact Book.
LINK: http://www.cia.gov/cia/publications/factbook/geos/hr.html
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* GENEVA SECOND BEST IN WORLD
Geneva is the 2nd best place in the world to live, says the Economist
Intelligence Unit. Vancouver took gold. Cities in Switzerland, Canada,
Australia and Austria are the most ideal destinations due to available
goods and services, low personal risk, effective infrastructure. LINK:
http://www.swissinfo.org/sen/swissinfo.html?siteSect=108&sid=6137629&cKey=1128495067000
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WEALTH:
* WELCOME TO TZAR PUTIN'S RUSSIA
MOSCOW: More prosecutors' raids on Yukos oil company offices and
lawyers; now Russian and foreign banks are targets. Russian police hit
major banks, companies with money laundering raids. LINKS:
http://www.signonsandiego.com/news/business/20051006-0519-russia-moneylaundering.html
http://news.moneycentral.msn.com/provider/providerarticle.asp?feed=FT&Date=20051005&ID=5169338
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* MONEY FLOWS SOUTH OF THE BORDER
$20 billion a year is sent between the US and Mexico and banks account
for only about 5% of that amount. Most goes through Western Union and
the like. US banks hope money transfers attract Hispanics. LINK:
http://www.washingtonpost.com/wp-dyn/content/article/2005/10/05/AR2005100502029.html
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* SOUTH AFRICAN TAX BONANZA
JOHANNESBURG: A strong economy is boosting South African individual and
corporate tax returns. A booming real estate market helps.
LINK: http://www.tax-news.com/asp/story/story_open.asp?storyname=21353
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PRIVACY & RIGHTS:
* PENTAGON MILITARY DOMESTIC SPIES PROPOSED
WASHINGTON: Pentagon intelligence operatives would be allowed to collect
information from US citizens without revealing their status as military
spies under a bill approved by a Senate committee. LINK:
http://www.latimes.com/news/printedition/asection/la-na-spy1oct01,1,4206130.story
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* OOPS! A BUG ON THE LINE: FBI IS LISTENING (BY MISTAKE)!
FBI could not say whether people are notified that their phone calls
were mistakenly intercepted or whether wrongly tapped telephone numbers
were deleted from bureau records. LINK:
http://www.sfgate.com/cgi-bin/article.cgi?file=/news/archive/2005/09/30/national/w134758D95.DTL
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* UN, EU ATTEMPT TO TAKE OVER THE INTERNET
Now controlled by the US government that created it, the EU and its
allies want to turn over control of the worldwide web to the UN. LINK:
http://technology.guardian.co.uk/weekly/story/0,16376,1585288,00.html
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THE SOVEREIGN SOCIETY OFFSHORE A-LETTER.
* Bob Bauman, Editor * Daniel Aponte, Jr. Editorial Asst.
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