2013-06-18T18:54:21-04:00 Diane Francis http://www.huffingtonpost.com/author/index.php?author=diane-francis Copyright 2008, HuffingtonPost.com, Inc. HuffingtonPost Blogger Feed for Diane Francis Good old fashioned elbow grease. tag:www.huffingtonpost.com,2013:/theblog//3.3442873 2013-06-14T18:18:36-04:00 2013-06-14T18:18:52-04:00

Diane Francis http://www.huffingtonpost.com/diane-francis/
Canada's patronage pit, the Senate, is a tempest in a teapot but is a demoralizing example of sticky fingers and managerial ineptitude when it comes to our hard-earned tax dollars.

I think that all those who were overpaid should resign and should also repay with enormous penalties and interest. This is what, after all, taxpayers must do if they have kept more money from the tax department than they deserve to keep. This approach could provide the added benefit that, if they refused to resign, some could be pushed over the financial brink thus triggering automatic expulsion from the Senate.

But this isn't the worst of it. Quebec and Ontario have three-ring circuses underway: federally over the Senate; provincially, over enormous misspending and municipally about some mayors.

The numbers of tax dollars squandered at the provincial levels is dramatically worse than the Senate shenanigans, but both are basically about the reality that many people get into public life, legitimately or by appointment, then squander funds or treat tax dollars cavalierly.

There's also a fourth ring to this circus: This year's ringmaster of the G8, UK Prime Minister David Cameron, is pushing for global reforms to crack down on tax cheats everywhere and Canada's being accused of balking and being a laggard in terms of tax crackdown efforts.

The G8 will learn about a template devised by the Organization for Economic Co-Operation and Development to globalize tax collection. This will include measures such as transparency, sanctions and sharing agreements between governments.

An estimated $32 trillion is hidden offshore, or two American-sized economies, socked away in numbered or secret accounts in a variety of dirty money capitals. And Canada is being accused of reluctance when it comes to getting information from its banks then sharing it with other governments.

According to a story in The Post this week, tax watchdog groups claim that Canada is resisting Cameron's efforts to force governments to exchange tax information about known cheats. He also wants governments to collect information from financial institutions about foreign-sourced income and give that information to the foreign countries where the income was made so they know about it and can tax it.

Currently, Canadian laws are lax. Offshore assets must be reported but the CRA doesn't pursue leads as aggressively as do the Europeans or Americans. There has been some movement but Cameron wants more. Under pressure, Ottawa set up a "swat" team to pursue offshore evaders, now requires reporting of offshore transactions of more than $10,000, offers modest whistleblower rewards and just announced that resource companies must report all payments to foreign governments. Resistance is due to the fact that the Canadian banks are a powerful lobby here but Canadians who pay taxes deserve better management of tax collection.

This week, Montreal hosted the International Economic Forum of the Americas, launched 19 years ago by academic and former cabinet minister Gil Remillard in partnership with Paul Desmarais Jr. of Power Corporation of Canada. The issue of tax cheating and money laundering came up repeatedly because it has become a priority of the G8 and G20, said OECD Secretary-General Angel Gurria in an interview at the Forum. He was the Governor of the Bank of Mexico. "This has become the big issue of the year," he said.
The reason is that the economic recovery is fragile and the burden of debt or taxation in developed countries is enormous following the 2008 meltdown and massive bailouts of banks and sovereign nations. In addition, an army of offshore tax avoidance professionals is punching holes in the tax collection efforts globally.
Tax leakage aside, the International Forum contained some good news. The U.S. will continue to grow at a respectable 2%: Europe will remain weak but the Euro will survive and Japan's aggressive monetary policy is a gamble that will hopefully work for the sake of the global economy.

"We all have a stake that they [the Japanese] succeed because it's such a big engine of the economy and has been in the repair shop for so long," suggested Gurria.

President of the Federal Reserve Bank in St. Louis, James Bullard, was upbeat about U.S. recovery and growth rates, said the course would be stayed in terms of monetary policy tied to jobless rates.
The central bankers from Spain and Portugal reported that they have each turned budget and trade deficits into surpluses. The Eurozone partners are building an architecture that will be sustainable, according to experts.

The biggest shift was the global energy outlook, with the rise of shale gas and oil. This is shifting the geopolitical tectonic plates in a profound way.

"Imagine, Israel and the United States will be self sufficient, Iraq won't be the next Saudi Arabia," said Gurria. Shale gas and oil undermines the power and influence of OPEC members and Russia.
Another positive development was that some parts of Africa prosper. The head of the West African Bank of Development, a common market and monetary union, has GDP growth averaging 6.5%, a doubling since 2009.

But environmental concerns overhung the assemblage. Washington's energy guru at the U.S. Department of State, Carlos Pascual, said exiting from fossil fuels was a priority. "We are at an extraordinary point [in history]. Natural gas [from shale] gives us an opportunity to bridge quickly to renewables. Gas is not an end point. Renewables are."

This is worrisome for Canada's energy future and means that, whether at home or abroad, leaders of the rest of the G8 and G20 face disruptions, politically and economically. And to boot, Canada has homegrown problems to fix from scandals to energy and governance incompetence. Worse yet, the solutions are neither handy nor, in some instances, available.

This article originally appeared in the Financial Post]]> tag:www.huffingtonpost.com,2013:/theblog//3.3402417 2013-06-07T17:21:38-04:00 2013-06-07T17:21:46-04:00

Diane Francis http://www.huffingtonpost.com/diane-francis/
In 2008 and in 2012, technology helped President Barack Obama team to out-fundraise, outspend and outvote the Republicans. In 2012, Obama won a landslide in American terms, or a 5% spread, proving that rich guys cannot buy elections down here despite the failure to properly limit campaign finance spending or make it transparent.

How did this happen?

The answer is varied. Policy and candidate must appeal to the public, but it also has to do with the people who attended the Personal Democracy Forum for two days in New York City this week. These are educated, liberal, technical experts who have harnessed their passion with technology in order to defeat established vested interests from the other side.

And the advantage goes to the nerds because they have the tools to measure and muster public opinion in order to bring about electoral outcomes. For instance, Nate Silver, a hero to this movement, was able to precisely forecast the elections held in 2012 with algorithms. The only contest he did not forecast was Indiana's where Obama captured a surprise victory.

This Forum is in its tenth year and was held at NYU, across from Washington Square - one of America's Tahrir Squares where hippies, women, gays, minorities, Occupy Wall Street protesters, anti-war activists, pro-marijuana groups and various other alternative causes have demonstrated for decades and made a difference.

The Personal Democracy movement sprouted from here, but has been rolled out nationally and globally with the aim of empowering populations who want to get a message across or want to eliminate elites. Now these activists aim to digitize governments to create transparency and efficiency wherever possible.

On the first day of the Forum, New York City held a press conference to unveil its Checkbook NYC or New York 2.0, project that will make the city's spending totally transparent by putting online in realtime its $70-billion spending, check by check. The new accountability is the direct result of the efforts and lobbying by this movement led by founders Andrew Rasiej and Micah Sifry. Their theme this year was "Think Bigger".

Both are internet activists, bloggers, speakers, authors and also co-founders of the Sunlight Foundation, a Washington-based non-profit dedicated to transparency in government and in campaign financing.

The Forum hosts events in other countries, designed to help disenfranchised populations, women, minorities, poor people and to help eliminate corruption. This two-day event involved 40 speakers, active in this "space". Among interesting highlights were: People and passion, based on accurate data, trumps big campaign budgets and gigantic media spends.

"We wanted to take down the Tea Party Ten and got five of them," said Becky Bond, political director with activist organization Credo Action. The Romney campaign spent $567 million that year and the "vast majority of that money didn't create the outcome of that election."

Credo spent $3 million and targeted Tea Partiers, mobilized thousands of volunteers who knocked on doors in targeted election areas and made personal phone calls. Half were defeated and one, Michele Bachmann, barely won her seat. She's since resigned because she faces a difficult battle next time.

-- Grassroots activism and NGOs are not helping their cause when they ignore the importance of metrics and measurements to benchmark their performances, said Taren Stinebrickner-Kauffman. She was the kick-off speaker and partner of Internet activist genius and pioneer, Aaron Swartz, who committed suicide in January. He was accused of copyright infringement and faced draconian legal costs and jail sentences that drove him into a deep depression.

His tragedy placed a slight damper on opening day events and Taren quoted the last paragraph of his last blog, about confronting reality to change it, as a theme for her warning to the movement and other not-for-profit causes.

She works for a group that scientifically measures outcomes of NGOs and questioned their capability. "We found only one non profit, in the world, that had compelling evidence that giving money to them was better than giving money directly," she said.

Research, conducted by the large labor organization, the AFL-CIO, also underscored that money did not influence voting decisions and that TV attack ads had no impact unless watched less than three days before an election.

She warned against supporting organizations that cannot prove effectiveness or indulging themselves in "vanity metrics" to raise funds or justify their existence. "It's better to measure, fail, admit and move on," she said.

-- Several speakers criticized Silicon Valley for lack of diversity and for selling out instead of creating goods and services that meet public or social needs. As tech guru Jeff Hammerbacher, who worked at Facebook, Google and others, has said: "The best minds of my generation are thinking about how to make people click ads...That sucks."

-- The sole Republican speaker, Cyrus Krohn, is working on rebranding his party, but admitted that his party must stop sending direct mail pamphlets, making robo-calls and spending money without doing research on how people really feel. The party's strategy was based on rearview mirror research and not real time, he added.

This Personal Democracy movement grew out of the Moveon.org effort, launched in 1998, that was able to harness the Internet for campaign finance in 2007 and raised $98 million with only 21 paid staff.

Harvard lecturer and activist, Nicco Mele (Shorenstein Center), spoke to urge individuals to move beyond fundraising to bringing about liberal policy outcomes and improve the operation of governments through online civic activism.

These influencers are a fascinating group that has become a liberal elite itself with enormous firepower. Many participants have launched commercially successful technologies, or speaking careers and many are committed to making "civic startups" profitable. They are committed to doing well by doing good and are a major force for change.

This article previously appeared in the Financial Post.]]> tag:www.huffingtonpost.com,2013:/theblog//3.3367594 2013-05-31T14:12:45-04:00 2013-06-03T03:50:06-04:00

Diane Francis http://www.huffingtonpost.com/diane-francis/
This conflict is confusing and involves many players and origins. But what sparked Syria's crisis was a peaceful protest on March 15, 2011 that was violently rebuffed by the regime. Months later, this has lit a regional conflagration, fuelling three more wars.

Each fight varies in terms of cause, intensity, possible outcomes and estimated duration so here is the playbook to help understand the headlines:

War #1: The Syrian civil war
Unlike Tunisia, Egypt, Libya and others who formed the Middle Eastern protest movement called Arab Spring to overthrow dictators and economic elites, Syria's protesters have suffered immediate and sustained belligerence. Early on, Syrian military brutality reduced protests to armed rebellions and more violence.

The crux of the crisis is that the vast majority of the population are Sunni Muslims controlled by a minority of 12 per cent who are members of Shi'ite Islam sect, the Alawites, headed by the Assad family. (In Iraq, the opposite mix existed with a Sunni minority headed by Saddam Hussein who brutally controlled the majority Shi'ite population.)

Syria's atrocities have splintered the rebellion and forced it underground. This led to the rise of competing rebel groups and opportunistic interlopers with other agendas. Lacking a Tahrir Square -- or a place to collaborate and bring world attention to their cause or leaders -- Syria's rebels have been divided and conquered. This has ruined the country's economy and society, displaced millions, sparked three more wars and made international action or consensus elusive.


War #2: The Middle East war of religion between Sunni and Shi'ite sects
The carve-up by the World War I allies in 1919 of the Turkish Empire into illegitimate monarchies or dictatorships sowed the seeds for Arab Spring. The imposition of artificial borders created nation-states that contained competing or irreconcilable ethic and religious groups.

The result is an undercurrent religious war reminiscent of the European wars of religion that lasted from roughly 1524 to 1750 following the Protestant Reformation and its rejection of the Catholic Church.

Those wars were not only based along religious grounds but sometimes economic or political (the overthrow of the Catholic Church's hegemony) and resulted in a redrawing of Europe's political map and huge numbers of refugees. This has afflicted the continent even in recent history during both World Wars, then in Ireland and the former aggregations of Yugoslavia and the Soviet Union.

War #3: The proxy war about energy
Syria is a battleground for a conflict between two wealthy energy nations: Russia with allies and Qatar, the world's largest LNG exporter with its allies.

Moscow has doubled-down in helping Syria in order to try and protect its natural gas monopoly in the European Union (where prices are four times higher than in North America). A large-scale conflagration in Syria for years will impede development of offshore natural gas reserves in the Levantine Basin (shared by Israel, Greek-Turkish Cyprus and Syria's client state Lebanon) that would flood by pipeline through Turkey destroying Russia's gas monopoly in the European Union. Russia offered a lucrative LNG deals to Israel and to the Greek portion of Cyprus.

This proxy war is not, as newspaper headlines bill it, a battle between Syria, Russia, Hezbollah and Iran against Israel, although Israel is involved in War #4. This is Russia with Syria (Lebanon) Iran versus Qatar, Turkey, Saudi Arabia, Kuwait and the European Union.

Syria's rebels have been funded by Qatar (with Kuwait and Saudi support). Interestingly, Qatar, who's people are the richest in the world per capita, hosts the biggest U.S. military presence in the region including a secret missile base and is partners with ExxonMobil to build massive LNG plants. They fight Russia for markets.

Turkey also owns part of the gas fields off the coast of the half of Cyprus it controls. Recently, Ankara threatened military action if drilling permits on its portion of the island continued to be issued by the government residing in the Greek portion to Russians, who controlled its economy until it went bust this year. And it has been dragged into the neighborhood War #4.

This week, the EU ended their embargo on arms sales to Syria's rebels this week, an action fiercely criticized by Russia.

War #4: The war within the war

Israel, Turkey, Lebanon, Jordan and others have been trying to protect themselves against the terrible spillover effects of the Syrian catastrophe and to avoid being dragged into the civil war itself. They are worried about refugees and weapons being used against them. For example, Israel launched airstrikes in Syria to stop arm smuggling into Lebanon.

Der Spiegel this week wrote an insightful piece explaining Israel's nuanced position in the region, not as a target but as a watchful regional player. "So far, Israel has tried to wage a war within the war, not against Assad's military machinery, but only against shipments of missiles and other high-tech weaponry from Syria to Hezbollah [in Lebanon]. The tacit understanding between the two enemies, the Assad dynasty and Israel, benefited both sides for decades. Proxy wars were waged in Lebanon. Even after the attack [airstrike by Israel] in early May, [Syria issued a tepid response and] the Israeli government made an effort to appease the Syrians, saying that its intention was not to bring down the regime but merely to stop arms from reaching Hezbollah."

Lebanon is also trying to play a nuanced game and this week its president asked Hezbollah to pull out of Syria to help the Assad regime amid concerns that Syria will completely destabilize and flood Lebanon with refugees. Hezbollah's leader then responded: "We want victory in Syria but call again for Lebanon to be left out of any confrontation. Let's preserve the neutrality of Lebanon."

The neighborhood rightly worries that Syria's civil war will become a full-blown Shia-Sunni religious war or full-blown proxy war that contaminates the region or brings in other big players.

The EU is starting to support the rebels while the U.S., China, Japan and others have stayed out on the basis that the only solution is a political one. Meanwhile Syria, regions cobbled together in 1922 by Europeans, is the tragic victim of unjust history, tyranny and now multiple wars even though it's nobody's prize.

*This article previously appeared in the Financial Post

]]> tag:www.huffingtonpost.com,2013:/theblog//3.3333819 2013-05-27T12:34:35-04:00 2013-05-27T12:35:04-04:00

Diane Francis http://www.huffingtonpost.com/diane-francis/ Underground Nation describing all the immoral tax avoidance going on in Canada from rich guys parking money offshore to welfare, health care, immigration, refugee and Workers Compensation rip-offs.

But the policy response was always the same: No crackdown and higher taxes to make up for losses, rooted in the myths that the vast majority of Canadians were honest and would always pay their taxes.

So the Financial Post commissioned a nationwide poll, promising confidentiality, asking Canadians if they cheated in one of the following ways: hiding income, paying cash to avoid sales taxes and/or taking undeserved entitlements. Preface to the poll was a promise of secrecy and the statement that over-taxation and under-supervision were perhaps greater immoralities.

The results were shocking and about 40 per cent of all respondents admitted to one or all three forms of cheating. Quebec and Atlantic Canada had the highest percentage of cheating, but the malady was pervasive, blamed mostly on overspending governments or on the fact that others were doing the same.

Since then, health care and other entitlements have been somewhat tightened up, but my guess is that income or sales tax cheating and aggressive avoidance, through a range of "legitimate" actions, has gotten dramatically worse. And still nothing changes.

But now the big nations -- the United States and the European Union with its tax havens -- are finally preparing to crack down on tax leakage as they struggle with debt and entitlement burdens and slow growth.

They have few choices: High profile tax evasion in Greece, Cyprus and Southern Europe has rattled the EU, as has Russia's no-tax enticement of Gerard Depardieu to its jurisdiction. Finally, steps are being taken to remove secrecy in financial centers such as Luxembourg, Ireland, Austria and even the Switzerland.

The United States is also realizing that its tough system is being eroded by international tax gamesmanship. This week, the CEO Tim Cook of America's Darling, Apple, was grilled by Congress on its clever tax avoidance schemes around the world and pilloried alongside Wall Street's greedy and parasitic sector. Britain attacked Google's and Amazon's tax games, too.

But shame won't do the job. Only an international tax regime, and rewriting of tax treaties that facilitate cheating, will.

To that end, the Organization of Economic Co-operation and Development (OECD) is preparing a template for international tax collection to eliminate loopholes and rein in evaders that will be presented this fall to the G20.

As my poll showed in Canada, cheating is rampant. Apple testimony revealed that the company, for tax purposes, was resident of no nation in order to take advantage of the best tax deal. This, by the way, is a well-worn technique used by tax avoiders for years. As I've written many times, one of Canada's biggest business empires, the Irving group of companies in New Brunswick, is "owned" by a series of family trusts in Bermuda where there are virtually no income taxes.

Similarly, Magna Corp. founder Frank Stronach and his family dodged Canadian taxes beginning in 1994 when he became a resident of Switzerland. But he still ran the company until recently and his daughter became a Tory then Liberal cabinet minister. He now wants to be Austria's head of state.

And yet he boasted to me about leaving in 1994: "Corporate income taxes in Switzerland are negotiable. The government sat down with me and said, 'You're our customer,' and that was its attitude."

The tone at the top has been dreadful here: former Prime Minister Paul Martin's family shipping business in Barbados has been sheltered from Canadian taxes due to a favorable tax treaty between the two governments.

While Canada has been a lost cause in terms of tax reforms, the international concern builds and may finally make a difference. What may help more than any development is that, given the questionable tax behavior of America's trio of digital superstars, the United States may even agree finally to international collaboration in tax matters rather than relying on its own system, now revealed to have become exceedingly porous when it comes to corporations.

(An estimated $2-trillion of retained profits are held in tax havens by American multinationals due to tax loopholes and inadequate tax treaties.)

The OECD hopes to eliminate the use of "hybrids", or structures that arbitrage between tax jurisdictions in order to find the lowest rates. And the organization has also led calls for censure and sanctions against known tax/secrecy havens in the Caribbean and elsewhere.

Even so, the problem remains: one person's smart tax planning is another's tax evasion or one country's banking system is another's legalized money laundering instrument. Britain is a case in point, morally indignant about taxes but a haven for foreign entities, corporations and manager of the Channel Islands.

But its Prime Minister, whose father ironically made a fortune setting up tax haven structures for the wealthy, has led the call for reforms and heads the G8 this year. He spearheads a move toward transparency, possibly the best weapon to shame or catch tax cheats.

Perhaps the time has finally come for the globalization and coordination of taxation policy. But it's long overdue.

In my 2008 book, Who Owns Canada, I asked four Canadian billionaires what they thought about those who make money in Canada, leave and never pay taxes again.

Late Toronto developer Fred Degasperis, an Italian immigrant, said "Anybody successful in Canada can take their money and live six months a year plus one day and steal the money from us? No way."

Drug store magnate Jean Coutu said: "I made my money here and I owe it to the Canadian people to spend, invest and pay taxes here."

Jack Daniels, a refugee from Poland who became a successful architect and developer, said: "I would never, ever dream of doing such a thing like going offshore. It's just not right to do this to our country and its future. It's just wrong. It's awful, in fact."

And the last word goes to Seymour Schulich, Canada's foremost philanthropist: "I think you owe allegiance to the place that gave you the opportunities. Americans [individuals] pay taxes no matter where the profit was made and that's the way it should be."

*This article previously appeared in the Financial Post]]> tag:www.huffingtonpost.com,2013:/theblog//3.3294371 2013-05-17T16:31:38-04:00 2013-05-17T17:18:48-04:00

Diane Francis http://www.huffingtonpost.com/diane-francis/
The Senate should be abolished, but remains the DNA of Ottawa which is why, despite the current and previous scandals, absolutely nothing changes and no one is held accountable.

For those who think Canada is a republic or a democracy, think again. This country is ruled more by the concept of privilege than of meritocracy, and the only remedy is to destroy the unacceptable portion of the governance model. Destruction is preferred because reform is impossible.

(This obstacle is why Prime Minister Stephen Harper a few months ago asked the Supreme Court to rule on: Quebec's assertion that its Senatorial entitlement is constitutionally guaranteed, that Quebec or the provinces must be consulted regarding reforms and whether the Senate can be abolished and, if so, how.)

In the meantime, the Senate won't alter course or structures, won't properly police its members and won't dissolve voluntarily.

The Senate represents Canada's major flaw: the perpetuation of Medieval monarchical rights and creation of a political aristocracy that answers to no one and, even when caught red-handed, can simply refuse to resign or even recant.

Canada's Senators are Canada's Lords and Ladies and, as such, are held to a lower standard than anyone else. Like nobles everywhere, they are immune from sanctions even when it comes to bad behaviour. They react arrogantly, as though they were "to the manner [or manor] born", and the rest of us can simply eat cake.

This is, needless to say, extremely debilitating in a so-called democracy.

Canadians, if they even care to read about such nonsense, are frustrated and tired about their Senate. I'm personally weary of Canadian Senators passing themselves off as legitimate lawmakers (or as elected Senators in the American or Australian sense) or of listening to debates and pundits pontificating and ranting.
The Senate does not have my respect and never has. I have followed its antics and appointments for years and know that each Senator is a patronage appointee, usually a party hack or fundraiser, who lives off the rest of us grandly without being required to do a lick of work. It's all based on the honour system from how much they contribute to what they claim in expenses.

Even worse, they are free to leverage their positions by receiving directors fees and stock options, speaking fees and consulting fees. They lobby, without having the restrictions attached to lobbyists, peddling inside information and access to decision makers for profit even though they are already paid out of the public purse.

They get expense accounts, and much more if they know how to game the system, in the form of appearance fees and expenses, to promote their political parties and candidates. Not to put a fine point on this, but this should be strictly forbidden because they are paid by all of Canada's taxpayers and should be meticulously non-partisan.

To boot, they can do all of this in secret. There are no detailed disclosure requirements about their earnings, clients, directorships, outside salaries, assignments, sweetheart loans, gifts, jobs for friends and other benefits many derive as a result of their "lofty" and privileged positions.

The Senate is a national disgrace because no self-respecting democracy should allow such an institution. Some nation-states, and most provinces, function without a second legislative branch. The Americans and the Australians rejected the British House of Lords model. Not Canada.

Generations of slavish anglophiles ripped off the House of Lords to create the Canadian Senate with similar perquisites: Both Lords and Senators retain residual rights to stand for election if they choose; they have dining [room] rights and occupy elevated positions that confer many entitlements including protection against dismissal, no matter how egregious the circumstances. Even jail sentences don't appear to be grounds for dismissal in the House of Lords, and Canada's not far behind.

Many Senators throughout history have been jailed, audited and expelled or embarrassed enough to quit. For instance, Brian Mulroney, one month before he left office, appointed a close friend, supporter and hotelier from the Ritz Carlton Hotel in Montreal to the Senate. He left after his poor attendance record was revealed along with others. Paul Martin Jr. awarded his friend and advisor, Francis Fox, to a Senate seat after Fox had been shamed years before into resigning as a Member of Parliament for forging the signature of his mistress's husband to help her get an abortion.

There are plenty of other examples, including the current Group of Four that are being audited.

But Ottawa, even left without a legitimate excuse for keeping the Senate, will do nothing unless the Supreme Court provides a green light and even then it's questionable. Canada has clung to its discredited paradigm of privilege thanks to Britain's colonial constitutionalizing. The only reform has been miniscule. Originally, Senators in Canada had to own property and were appointed for life. This changed in 1965 with a retirement age of 75 years.

But the pursuit of privilege has always amused, notably that prominent Canadians continue to claw, scrape and coerce their way into their Senate and even covet and obtain knighthoods and lordships from a declining and antiquated British system of vestigial titles.

Such anachronistic "accomplishments" are laughable to most Canadians, certainly to its immigrants like me and to the rest of the world. But until Canada reinvents itself, the Senators at the centre of scandals can and will continue to stonewall, sneer and scoff both rules and critics.

This leaves only one remedy at the moment. Prime Minister Harper has moral leverage and must privately, then publicly if necessary, ask his miscreants to resign from the Senate immediately. To do otherwise is unacceptable.

This originally ran in the Financial Post.

]]> tag:www.huffingtonpost.com,2013:/theblog//3.3255731 2013-05-13T00:00:12-04:00 2013-05-13T12:30:46-04:00

Diane Francis http://www.huffingtonpost.com/diane-francis/
But voters must hold their noses and re-elect the Liberals (who are actually Conservatives) because it's the only pro-development party on the ballot. The NDP, everywhere, is a coalition of vested interests, posing as a party with broad appeal, and without free enterprise smarts. Anywhere this party runs, voters must reject it out of hand.

This is no time to get even for the B.C. Liberal sales tax fiasco or to send a message to Ottawa. This is an unusually important vote for this province and for all Canadians. In fact, this is an "existential" moment for Canada.

If the NDP wins power in such a strategically important and rich jurisdiction such as this one -- a keystone within the Canadian resource economy -- B.C. voters will have chosen economic decline. This is as important as was Quebec's referendums and yet this has not been acknowledged in the lead up.

British Columbia and Vancouver (and Canada) would find itself, if anti-development attitudes become its governance model, bypassed in terms of future growth. New pipelines and railways carrying oil, commodities and freight can be, and will be, diverted through Seattle, eastward or up to Valdez if necessary. The world does not owe British Columbians a living, and the world isn't providing much of one for the province either at this point.

The province lists and economy is moribund.

Some talk about the future prospects of Vancouver's Hollywood North or Silicon Valley North, but these are myths. The place has only three sustainable economic upsides, apart from operating nursing homes for its disproportionately senior population: the development of energy resources, the development of mining resources and the expansion of its critical logistics role and sector. B.C. has the infrastructure and geographic good luck to be where imports and exports transit via pipelines, airlines, ships, rail and roads.

Vancouver's financial services head offices left with the closure of its stock exchange and the city has fewer head offices than Calgary with less business travel.

Instead of talking about how to maintain living standards, or improve them, much of this electioneering has been petty and a contest between which oil and natural gas pipeline proposals and which port enlargements are unacceptable. Political correctness here has become how to forestall or avert economic opportunities, not how to grab them with the least environmental impact and greatest public good.

The place is going from NIMBY, not in my backyard, to BANANA, build absolutely nothing anywhere near anyone. Politicians and other interest groups just pile on against any means of transporting the oil sands through the province. Next, one can expect, will be a pile on against the transport of wheat, potash, nickel, beef, soybeans and manufactured goods.
This has resulted in B.C. per capita incomes of $47,579 in 2011 versus Alberta or Saskatchewan's of plus $70,000 a year.

The NDP opposition's economic development model consists of turning the place into a gigantic, empty park populated only by those retirees who can afford to buy the most expensive real estate in North America. The Liberals, who should make a solid case, have stumbled and bumbled along.

But the economic issues at stake on May 14 are important to understand:

1. Energy in general, and Alberta's oil sands in particular, are the single most important cornerstone of the Canadian economy, bigger than autos, manufacturing, mining, forestry, tourism or financial services. Planeloads leave B.C. every day to take workers and suppliers to lucrative jobs in its oil sands.

Landlocked Alberta needs a pipeline or two to the Pacific coast, a railway to Valdez, or all of the above. If voters are worried about shoddy work, or Chinese oil tankers off the coast, then the debate should be about how government can insure against risks, not how to stop such projects. If voters are worried that Alberta is getting all the money, then government should insist on revenue sharing. If First Nations are upset their claims are still in limbo, then government should settle because trillions of dollars are at stake in economic activity.

2. B.C.'s biggest upside is natural gas reserves if they are monetized. To do so, requires the building of up to four pipelines, plants and port facilities to gather and liquefy the stuff for export around the world. The province could become the Norway of Canada and only a government solidly committed to making that happen should be elected. Mining must be a priority.

3. British Columbians must disavow themselves of any notion that there are alternatives, or that their beautiful scenery and tourism will become their growth story in future. Tourism has collapsed across Canada and, even if it could be kick-started, the sector is as energy-intensive as heavy industry. Cruise ships, ski lifts, fishing camps, over-heated hotels in Whistler, ferries, cars, buses, luxury private ships, rail links and fishing boats rely on gobs of Alberta oil.

4. B.C.'s biggest shadow export industry -- marijuana and other narcotics - is also in trouble. By 2002, its revenues were larger than forestry exports and grown to the point where Pentagon drones patrol the region in an attempt to interdict truckloads or planeloads of narcotics that take off from northern runways or from drug centers like Trail or Nelson.

(In 2006, the RCMP's "Drug Situation Report" estimated that marijuana production was between 1,399 and 3,498 metric tonnes. At $8 million per tonne street value today, that totals up to $27.98 billion, more than vehicle and auto parts exports in 2011.)

This industry faces disaster, not because of drones, but because the neighbors and customers - Washington and Oregon - voted in 2012 to legalize marijuana.

5. Retirement havens have been big business but this will disappear because of high taxation and excessive real estate prices in British Columbia. Property values, pushed artificially by hot money from Asia, are also why the number of head offices shrinks every year. Few can afford to relocate there.

That, in a nutshell, is the B.C. economic landscape and is why the May 14 election will not be a vote so much as a plebiscite on prosperity versus poverty.

Hopefully, the majority will vote Liberal and hopefully that party's leadership will stiffen its resolve, then take principled stands to create wealth for all and execute the process with integrity, efficiency, responsibility and smarts.

*This article previously appeared in the Financial Post

]]> tag:www.huffingtonpost.com,2013:/theblog//3.3210023 2013-05-03T17:10:20-04:00 2013-05-06T14:41:55-04:00

Diane Francis http://www.huffingtonpost.com/diane-francis/
She was, like most Madoff employees including his two sons, kept in the dark. The end came when the financial crash of 2008 led to redemption demands that could not be met and Madoff told his sons everything. They left their father after his confession to get legal advice and told the FBI what they had learned. I went to New York City in early 2010, as did others, to work with Eleanor and her talented producers, Derek Anderson and Victor Kubicek of The Halcyon Company.

The result is their engaging documentary called In God We Trust that premiered at the Tribeca Film Festival last month and at Toronto's Hot Docs this week.

Reviews have been favourable. Variety said: "Eleanor Squillari describes her devastation and shock upon learning that the biggest financial scam in U.S. history was perpetrated right under her very nose, embarking on a private crusade to aid the FBI investigation."

Eleanor lost her house and became unemployable. Madoff's two sons were impoverished and one, Mark, hung himself on the second anniversary of his father's arrest. The other, Andy, is seriously ill. But a handful of staff members made fortunes by spending their days on another floor of the office tower where they fabricated trading records and made massive payouts to certain persons.

The producers were drawn to the project after reading Eleanor's informative and apologetic piece in Vanity Fair. Her story is the narrative thread that unravels the complex scheme. Her cooperation with police was invaluable because she knew all the players and filed away certain documents, calendars, contact names and numbers even though Madoff had told her to destroy all information. It's obvious now why he issued such an unusual order, but the conscientious and unsuspecting Eleanor kept the info just in case her beloved boss would need it some day.

My role was to explain money laundering, global frauds and the personality of such masterminds. In one exchange with her, she told me that the 9/11 terrorist attacks, just blocks away from their offices in New York, left everyone reeling in the office that morning except Madoff. He ignored the television coverage and concerns of others and continued his meetings.

"But Madoff is more than just a sociopath," I wrote in 2009. "Too much of this story doesn't hang together and he was too functional in other aspects of his existence. That's why I think this may be more about money laundering and tax evasion than about fraud. Most don't realize that he pleaded guilty to money laundering too. If so, then some Madoff 'victims' may be perpetrators."

This turned out to be prescient and the documentary looks at some of the 19 Madoff investors who received billions in profits, sometimes making up to 900 per cent a year.

Laundering schemes works this way: Unsavory people, from drug cartels to gangsters or greedy tax evaders, are forced to keep their ill-gotten gains hidden from police or tax authorities in dirty money havens. In order to get out their money, so they can spend it, they hire people like Mr. Madoff to "clean" their cash. "The crooks pretend to give him millions to invest. He pretends to invest it," I wrote. "And he collects big fees for transferring to them 10 per cent (or 900 per cent) every year of their hidden capital. Laundering money is not for the faint of heart, by the way. These people are often very dangerous and may explain why some of Madoff's biggest feeder-intermediaries are known to police and another one actually disappeared from Vienna immediately after the gig was up."

There were also plenty of legitimate investors who lost everything, including Holocaust survivor and author Elie Wiesel along with many worthwhile charities. Some victims were in Canada too.

Interestingly, I found out that there was a similar scam in Palm Beach years ago and some of the same names appeared as "victims." Another suspicious aspect is that Madoff was selective about who could invest and an acquaintance of mine in New York City was turned down. "Trust me, you don't want to be part of this," he reportedly said.

Graphics in the film help explain money laundering as does a chilling voicemail threat to a U.S. banker from a European feeder fund that referenced Colombian drug dealers.

A trustee was hired by the Securities Investor Protection Corporation (SIPC) and the "Madoff Recovery Initiative" website says that recoveries and settlements total $9.334 billion; distributions and SIPC commitment $5.451 billions and fees paid total $701 million.

But the website said that of 16,519 claims made only 2,501 have been allowed. This is likely due to bogus claims, unsupportable claims as well as the fact that those persons who got the capital they put in through dividends, won't get their lump sum capital back unless all the money is someday recovered.

This seems unfair and the documentary appeals to the public to register their support for HR6695, proposed by House Representative Scott Garrett of New Jersey. SIPC, like the Canadian Investor Protection Fund, provides their stamp of approval to firms that pay small, annual fees. If a sizeable scam occurs, funds are inadequate. For instance, Madoff's firm paid $150 a year to get the SIPC stamp leaving investors to relt on the Securities and Exchange Commission.

"I do not believe these ordinary investors, who knew nothing about the fraud being perpetrated by Bernie Madoff, should be held to a higher standard than the federal government. After all, it was the Securities and Exchange Commission (SEC) that missed the Madoff fraud in the first place. Furthermore, the Internal Revenue Service (IRS) was happy to rely on these same statements to collect taxes from the reported profits," said legislative sponsor Garrett.

For Eleanor, this remains an ongoing cause and she has been lobbying for greater protections. "Nobody else supports this because Wall Street is against this," said Eleanor in an interview. "This is just wrong, when bankers got huge bailouts and small investors are cheated by this industry."

She is admirable. She too was a victim and her efforts have helped bring about some justice. She wrote to Madoff asking him to disclose all, but received no answer.

But thankfully, there has been a happy ending for her. She has remarried and moved to Florida where she can live in peace and where her children and grandchildren have been able to visit her regularly. She certainly deserves it.

This ran originally in the Financial Post.

]]> tag:www.huffingtonpost.com,2013:/theblog//3.3164336 2013-04-26T18:08:20-04:00 2013-04-26T18:08:29-04:00

Diane Francis http://www.huffingtonpost.com/diane-francis/ Some tried to get around these rules but it was impossible to plant a bogus story on the front page of an important newspaper. At the edges, there were shenanigans and one stock fraudster in the 1970s convinced a foreign newspaper to print bogus prices of Canadian stocks in order to lure investors into his fictitious companies. But the paper was inconsequential and only a feckless few were victimized.
But this week, on the heels of the Boston bombing, financial fraud and terrorism joined forces when a fake tweet from a hacked Associated Press account reported that Barack Obama had been injured due to explosions at the White House.
Within three minutes, the S&P500 collapsed by $130 billion and the Dow Jones lost 145 points. By then, the White House, Associated Press and Twitter exposed the fraud and by the end of the day markets recovered. But as the Economist wrote, "that [drop] understates the severity of the episode, since in many cases liquidity simply disappeared altogether."
It also underrates the threat in future. This was the first chilling example as to how cyber terrorism could bring down the financial system, or specific institutions or persons. Obviously, new safeguards must be put in place by legitimate media brands, regulators, new media outlets like Twitter, markets, corporations and governments.
Not coincidentally, the Twitter crash happened weeks after the Securities and Exchange Commission allowed companies to use Twitter or Facebook to report news. This, in turn, led to an announcement by Bloomberg and others it would transmit tweets to its clients. This, in hindsight, was the slippery slope.
Such permission must be reversed now because Twitter, Facebook and other social media do not validate, curate, control, lawyer or stand behind their Twitter litter. They are agnostic pipelines that are leaky, and allow anonymous sources to open accounts, post false information and hack into other accounts to do so. This is how Associated Press was violated.
This week's crash involves more than Twitter but once more illustrates a structural problem within markets. The fraud lasted only three minutes until recantations, but a future hack-attack on the Twitter accounts of two or more credible media outlets like Associated Press - that could not be recanted for hours or days -- could spark a downturn in stock, exchange or commodity markets that would cause untold damage.
The system remains vulnerable due to high frequency trading, or robots with algorithms. They scan news for words like "explosions" and act accordingly. This week's AP Tweet triggered an automatic sell-off. This would not have happened in the past because human beings, or experienced editors, in legitimate media outlets would have had time to evaluate the context or validity of the information.
Wall Street claims that the only reform necessary to avoid future Twitter crashes would be to devise more sophisticated algorithms that would look for multiple sources or confirmation. But terrorists and fraudsters will simply hack around such algorithms unless more measures are taken.
The terrorists who claimed responsibility for this - the Syrian Electronic Army - are being investigated. This unknown entity, favoring the repressive Assad regime in Damascus, also recently claimed responsibility for hacking into the BBC, NBC, CBS, NPR, Columbia University, Al Jazeera, Human Rights Watch and the head of FIFA, the world soccer organization. Its website supports for "the cause of the Syrian Arab people by armaments with science and knowledge against the campaigns led by the Arab media and Western on our Republic by broadcasting fabricated news about what is happening in Syria".
What's needed is a return to the good old days. What will speed this along would be laws that make any liable for financial damages who transmits, or loses money for others by trading without verification of information.
Another reform would be a return to the tenets of solid financial journalism from the pre-Internet days. These include a demand to provide multiple sources, curation, fact-checking and author credibility before publication anywhere.
Jacob Frenkel, former Securities and Exchange official, said on CNBC that restricting initial financial disclosures to public corporate websites and the SEC site would provide enough widespread information for investors. "A favoring of access information using various media that are available would make it fair for the SEC to retrench and back off its position [concerning allowing disclosure on Twitter or Facebook, etc.]," he said.
If that restricts the future profits of Twitter and Facebook and all the other sloppy sites so be it. Frenkel is correct. There should be one-stop shopping for credible information that affects markets directly from the sources itself, companies or governments. This means that investment information could still come via other outlets but there would be a means of double-checking information at the corporation or SEC. They would also have to erect impregnable firewalls.
Such changes will work. After all, markets were the wild west more than a generation ago and were cleaned for a while. Then, in the 1990s, a new generation of immorality swamped markets mostly due to credit default swaps that were issued without collateral and were rated questionably. This drove the world's financial system into bankruptcy in 2008.
Corrections have been made involving those practices, but the deregulation of dissemination is another mistake. Twitter and Facebook cannot curate or do what credible news organizations spend enormous amounts of money doing. To deputize them as disseminators represents the next big catastrophe waiting to unfold, aided and abetted by high frequency trading.
The dress rehearsal took place this week, thanks to terrorists, but the next one may be hackers who use corrupt multiple, credible sources with messages that create a panic among the robots who trade for financial gain or to sabotage the system.
What must be understood is what the Financial Times puts on the bottom of all its online stories to try to stop people using their content without payment: "High quality global journalism requires investment."
And the facts are that so does high quality free enterprise.

*This article originally appeared in the Financial Post.

]]> tag:www.huffingtonpost.com,2013:/theblog//3.3122132 2013-04-22T16:01:39-04:00 2013-04-22T17:38:58-04:00

Diane Francis http://www.huffingtonpost.com/diane-francis/
The Iron Lady certainly would have applauded Merkel's stance. She once famously told NPR in an interview: "I would hate a person to ask me a question, are you a quota woman or are you a merit woman? I would like (the assessment of) whatever I did to be that I got there because I was the right person for the job. It didn't matter as a man or a woman. I had the right qualities for the job, the right beliefs, the right principles. I wasn't a quota."

The fact that two of the most successful women in history oppose quotas should be reason enough to reconsider such policies. Norway requires that 40% of directors are female, Spain, 30% and the EU has proposed a 40% quota in all countries. Britain, Germany and others blocked that initiative this week.
Nations must encourage women to work and get ahead. But quotas miss the mark. It's true that females lag their male counterparts in terms of reaching the top but there are other ways to change this. By 2012, nine of the world's 190 heads of state were women; only 13 per cent of parliamentarians; only 15 per cent of top executive or board positions and only 20% of non-profits. These figures have not improved since 2002 and in some sectors and regions they are slipping.

Feminism is about equality and choices. And the unfortunate facts are that women who want to be successful must decide whether to have a family if they are ambitious and, if they do, how to juggle both. Both Thatcher and Merkel had husbands who encouraged and supported them.

And they, like other women in Canada and other enlightened countries, are lucky because workplaces have become gender-blind. Laws protect females in the private sector, and promotions and pay are usually based on the ability to make money for their organizations. Occasionally, predators and political gender-players litter the workplace, but when women are victimized there are legal remedies.

The real impediments are attitudes by, and around. Women must overcome family, social, cultural and gender factors that impede or inordinately influence and hold them back such as husbands, parents or other role models who are unsupportive; cultural or social sexism; backward teachers or religious leaders and harmful media, music, fashion or movie industry practices aimed at sexualizing them.

Sheryl Sandberg, Facebook COO and Director, wrote a book called "Lean In" that has generated controversy on this topic. Her thesis is that ambitious women must deal with their own shortcomings and must realize that if they want to get ahead they must put their career first and have a collaborative partner if they want to have a family. Women with children do three times as much childrearing as their husbands and twice as much house work. This means women work harder if they are working outside the home.
"There is no such thing as work-life balance. We all make trade offs every single day," she said in an interview with Oprah. "It's different and companies expect workers to always be available. Parenting has changed: Our mothers didn't organize play dates, but we rode our bikes. She didn't help me with my homework. Parenting is now more intense, harder."

This means that quotas are not effective, only changes in attitude and behavior are. She cites studies that show women systematically underestimate their own capabilities and men overestimate theirs. She also says figures show that 57% of males negotiate the salary for their first job and only 7% of women do. Women must be more assertive and confident and demanding.

Another psychological or cultural gap is that men attribute their success to themselves and women attribute theirs to others, or to external factors. She said at a lecture she gave at the TED Conference: "No one gets to the corner office sitting on the side and they don't get promoted if they don't understand their success."

Most deleterious is the fact that there is a positive correlation between success and likeability for men and a negative correlation for successful women. A Harvard case study revealed this. The professor distributed to two sets of students the biography of a hugely successful female venture capitalist in 2002. One group of students was told the VC's name was "Heidi" and another was told that the entrepreneur's name was "Howard."

They were surveyed after they read the case study. All students agreed that the VC was competent and admirable, but those who were told her name was "Heidi" said they would not want to work for her and those told it was "Howard" said they would.

Sandberg postulates that these attitudes must change and that it may be too late for the current generation. So women at the top and parents must be sensitive to challenges and must mentor those who are ambitious. In a blunt way, Margaret Thatcher's advice, for women and men, laid out the path for ambitious women: "If you set out to be liked, you will accomplish nothing" and she added "I do not know anyone who has gotten to the top without hard work. That is the recipe. It will not always get you to the top, but it will get you pretty near."]]> tag:www.huffingtonpost.com,2013:/theblog//3.3070223 2013-04-12T17:13:43-04:00 2013-06-12T05:12:01-04:00

Diane Francis http://www.huffingtonpost.com/diane-francis/
But that year, the tulip mania crashed when the Dutch succumbed to another panic due to the outbreak of bubonic plague and investors failed to show up at tulip auctions.

Bubbles occur all the time, along with financial inventions. The most recent, and controversial, launched in 2009: A virtual currency called Bitcoin that enabled holders to trade directly and to hide their assets from governments.

By 2013, Bitcoins had gone from zero to $266 but this week bounced around until they crashed at $60, causing one of its exchanges to halt trading to cool down for a few hours. The online phenomenon has been plagued by digital manipulators and volatility in pricing but these problems may eventually be ironed out.

If that happens, a virtual currency like Bitcoin -- free of hackers -- will attract millions around the world who have become worried about the fact that governments continue to ruin their currencies by racking up debts, printing money and taking draconian action against taxpayers.
In the past, the fearful have bought gold and driven up bullion prices to nearly $2,000 an ounce in recent history.

What's curious is that gold prices have ebbed, the Bitcoin is not a viable alternative and yet fears remain. Even worse is that the debt and currency contagion has spread and the world's four biggest economic entities -- the U.S., EU, China and Japan -- are printing and piling on debts with frightening speed.
So why isn't gold at $4,000 an ounce?

One bearish factor this week was Goldman Sachs's downgrade of its gold price forecast for the second time in weeks. Commenting that "conviction in holding gold is quickly waning," Goldman's forecast is an average of $1,545 an ounce in 2013 and $1,350 in 2014.

Gold bugs claim that a conspiracy exists to dampen gold's values. One of the theorists is Reaganomics guru Paul Craig Roberts, former Assistant Treasury Secretary.

This week he wrote: "Financial and economic Armageddon might be close at hand. The evidence for this conclusion is the concerted effort by the Federal Reserve and its dependent financial institutions to scare people away from gold and silver by driving down their prices. When gold hit $1,900, the Federal Reserve panicked because they realized with the dollar deteriorating so rapidly, compared to bullion prices, that soon it would also deteriorate its exchange value with other currencies. The Fed had to cap the price of gold and stop the rise."

It's certainly one explanation as to why gold is down given Eurozone, Japanese, American and now Chinese woes. But another is that speculators have been dumping gold ETFs and flooding into the US dollar, US equities and the US-dollar denominated bonds.

The yankee dollar has become a safe haven again.

As New York bond expert, Jeffrey Gundlach, said this week anyone predicting a bond market collapse is "dead wrong", according to website Business Insider. He also in a presentation in New York provided interesting facts and recommended that investors should buy natural gas and short Apple.

His information showed how the habits of American investors are unique and are driving market results: Of total financial assets in the U.S., 42% were in equities (more than double other countries); 16% in cash and deposits; 10% in bonds and 32% in insurance assets. (Insurance companies invest in treasuries and equities in safe jurisdictions).

To compare, in Japan the asset mix was 11% equities; 53% cash; 3% bonds; 28% insurance and 4% other, presumably gold. In Germany, the mix was 20% equities; 38% cash; 6% bonds; 33% insurance; 4% other, presumably gold.

He did not have Canada's holdings but they have traditionally been some where between the U.S. and Germany in terms of financial asset classes, as are Australia's.

So what this means is that there is lots of cash in the developed world outside the U.S. that is socked away in banks or in mattresses or gold or with insurance entities, that invest a lot in treasuries and S&P500 companies.

He also presented a slideshow that demonstrated the dependency of the stock market on The Fed's printing press. The S&P500 has moved directly in tandem with quantitative easing since 2009 and goes flat when it's absent. Likewise, the Nikkei has soared since the Bank of Japan copied The Fed.
Additionally, figures just published by the IMF show that emerging economies are dumping the Euro. Since 2011, some $90 billion has been placed elsewhere (presumably the US dollar) and their reserves collectively are 25% Euro versus 31% in 2009.

Those who have switched the U.S. dollar are staying and since 2008 the dollars in circulation have jumped 42% and stayed level. Most of this hoarding is by Europeans who buy US dollar bills and stash them in their mattresses or safety deposit boxes.

Cyprus, with its EU banking confiscation, accelerated this process. Europeans are staying in cash, but switching out of their currencies and buying some gold. Some have dabbled in the Bitcoin, mostly Russian, but the virtual currency is still immature.

It's all perplexing but the only certainty is that governments won't change. This means the best bet is to ride the market wave with everyone else but cash out for profits as soon as possible. Nothing continues forever, anymore than did capital gains in tulips, but at least you enjoy your Fed-driven gains by purchasing experiences, comforts or pleasures.

*This article previously appeared in the Financial Post]]> tag:www.huffingtonpost.com,2013:/theblog//3.3023216 2013-04-06T00:00:03-04:00 2013-06-05T05:12:01-04:00

Diane Francis http://www.huffingtonpost.com/diane-francis/
Taylor, who treated taxes like a nasty rash, created the world's first exclusive gated tax haven, Lyford Cay in the Bahamas in 1959. Residents included author Arthur Hailey, Sean Connery, Henry Ford II, Aga Khan IV, Prince Rainier, Stavros Niarchos and Sir John Templeton, to name a few.

Another tax dodge pioneer was K.C. Irving of New Brunswick who in 1972 moved to tax-free Bermuda and placed ownership of his empire into a series of Bermudian trusts that have never paid taxes to Canada.

Clearly, Taylor and Irving were ahead of their time, but their "business" model has been copied by an offshore industry of banks, lawyers, accountants and shadowy characters that span the globe. And with Tax Spring, as the rest of us pay to politicians an inordinately high portion of our incomes, evidence has come to light that the extent of tax avoidance has become bigger than the U.S. economy itself.

The leak of two million emails and other documents, mainly from the offshore haven of the British Virgin Islands (BVI) and Singapore, show the booming offshore trade. A former chief economist at McKinsey estimated the wealthy have stashed as much as US$32-trillion in secrecy havens, beyond the reach of courts, spouses, business partners, shareholders, regulators, tax collectors and police.

The International Center for Investigative Journalists in Washington, D.C. obtained the documents and published a list of rich and famous leaders and oligarchs. Claims are 450 Canadians are identified but the only one named at this point is Tony Merchant, husband of Liberal Senator Pana Merchant from Regina.

It's important to distinguish between tax avoidance, which is legal, and tax evasion, which is not. But tax-court filings, obtained by CBC News, show that on Merchant's income tax return for 1999, after he put $1.7-million into the offshore trust, he didn't tick off the box declaring ownership of more than $100,000 in "foreign property."

Relying on an honour system as Canada does is naïve and negligent. Rules should change and tighten.This should have been a political issue but has never been.

So the result is that most of New Brunswick is still owned by a series of tax-free Bermuda Trusts on behalf of the Irving family. It's why former Prime Minister Paul Martin's ship empire was based in Barbados, beyond taxation in Canada, and only a few of us dared to raise a fuss. Bronfman billions were allowed by the government to go to the U.S. tax free and tax loopholes have remained which allow millions to leave daily, with minimal taxation, as long as their Canadian owners "live" offshore for more than half the year.

Clearly, the Canada Revenue Agency has been underfunded and is to tax collection what the Blue Jays or Maple Leafs are to sports success. I've written about this for years, but in "Canada: sucker nation for tax cheats" in 2010 I pointed out that the CRA was defanged completely, doing nothing to obtain information from a whistleblower about tax cheats in Liechtenstein, contrary to actions taken by the Germans, Americans, Australians or others.

The whistleblower sold his info to tax collectors, but in 2008, in question and answer period in the House of Commons, Canada's government said it didn't pay for such information. But the other countries had already imposed jail sentences and huge fines.

In 2009, Canadian Senator Percy Downe found out, under Ottawa's Access to Information Act, that there was about $10-million in Liechtenstein bank accounts related to 106 Canadian citizens. "The CRA anticipates that it will reassess approximately $17-million in taxes, interest and penalties."

The Senator sent another request and in October 2010 discovered: Only 26 cases involving 68 individuals had been completed, including 20 residents of Canada who came forward under the Voluntary Disclosure Program; $5.2-million was assessed in back taxes and penalties; an undisclosed amount was unpaid due to appeals and that no one had been charged with tax evasion.

"Other countries lay tax fraud charges against individuals for having undeclared bank accounts in tax havens, but not Canada," he wrote to me.

This latest scandal claims there are 450 Canadians, along with oligarchs, thugs or corrupt dictators and monarchs, who may be hiding money offshore. Let's see what the CRA is empowered to do with this information. (At least the Tories in last month's federal budget promised to pay tipsters 15% if more than $100,000 is recovered and to keep track of offshore transfers involving $12,000 or more. But this may take years.)

Such reforms must be expedited and tax laws changed. The Organization for Economic Co-operation and Development has crusaded against offshore havens for years and the G-7 and G20 have issued countless manifestos against the practice without success. The only solution is to impose sanctions and travel restrictions on dirty money havens and to pursue, as ruthlessly as the IRS does, deposits belonging to corrupt dictators, drug cartels or tax deadbeats.

The banking crackdown in Cyprus closed a dirty money haven inside the EU, but the biggest culprit in the world is Britain with its channel islands, former island colonies and the city of London's industry of tax and banking experts that hide money anywhere for anyone. (In fact, Prime Minister David Cameron's father made the family fortune by setting up such offshore tax havens for wealthy people.)

Frankly, Canadians and others should adopt American tax laws where citizens are taxable irrespective of their residency. That's how Washington stopped its crooks and gangsters from setting up shop in the Bahamas decades ago and how it catches most of them now.

Meanwhile, Canada lets its richest go offshore; allows the economy of a province to be owned by Bermudian trusts; allows the family of a former prime minister to make a tax-free fortune offshore and then leaves the rest of us to pay the tab every Tax Spring.

This piece originally appeared in the Financial Post.




]]> tag:www.huffingtonpost.com,2013:/theblog//3.2984351 2013-04-01T08:02:10-04:00 2013-06-01T05:12:01-04:00

Diane Francis http://www.huffingtonpost.com/diane-francis/
Google became, in other words, the ubiquitous newspaper right under the noses of proprietors who should have charged.

But they didn't because most failed to understand that Google cannibalized their business model, capturing the eyeballs and advertisers and using them as bait.

Now the old media experiments with pay walls and new media products, but audiences have switched and new readers are addicted to free online content.

The only other fix would have been the creation of an iTunes for periodicals and newspapers, as the embattled music industry grabbed. That way readers would have paid to download stories or publications. Apple's Steven Jobs offered this rescue to newspaper publishers, but none were willing to share with him their subscriber lists.

It was the second fatal mistake and the genie's out of the bottle. But Google, and others, are not finished. They now stalk television and cable, their next prey and are beginning to make major moves to dis-intermediate both and provide video content directly to viewers.

The business model under attack is monopoly cable companies which make roughly $2,000 a year from the average cable subscriber. But this hegemony ended in 2009 when the technological Rubicon was breached and television signals became digital not analog.

Since then, US subscriptions began to decline as viewers bypassed cable and networks and went straight to the content providers via the Internet. And new forms of distribution have sprung up offering more for substantially less.

The younger generation has adopted the new reality first and online video programming is now readily available via devices such as X-box, Samsung's Smart TV, Sony Play Box or other web services. Popular television shows, movies and documentaries are available online as are major sporting events downloadable on a teenagers' computer or iPad or iPhone anywhere, anytime.

Some call this looming competition as the "Battle for the Living Room" and, additionally, a battle to build and own the coffee table remote device. The protagonists are Google, Apple, Netflix and Amazon.

Apple TV will be rolled out shortly with a new iPad and/or iPhone, possibly at the end of March, that will become the coffee table remote that finds channels or videos or games. Its added advantages to viewers will be an ability to pre-emptively skip commercials as well as to set up video conferencing or meetings.
Apple, as with its other products, will create devices that simplify the technology and applications as it has done for years.

Google, through Google Fiber, is experimenting in Kansas City with fiber-optic cable that provides Internet lines 100 times' faster than anywhere else and more viewing options for the same price as the local cable provider. Early estimates are that 90% of users there are buying all their content and Google plans to roll this out everywhere. Its users are able to obtain, record or store high definition TV instantly and watch these programs or events on their phones, tablets, computers or televisions.

Another entry is the world's biggest department and book store, Amazon. This giant has launched Amazon Instant Video.

As their website notes: "We have it all, anytime you want it: this week's newest movie releases, your must-watch TV shows, and classic favorites, all available right now. Plus, you can subscribe to current TV seasons, with new episodes available the day after they air. Our store offers instant streaming on Kindle Fire HD, as well iPad, PS3, Xbox, Wii, Wii U, Roku, on hundreds of TVs, set-top boxes, Blu-ray players, and on the Web. Plus, all of your videos are stored in Your Video Library, so you can access them anywhere you go."

Netflix is another distributor of cheap, online video. The company on its website boasts "no ads or commercials" and its subscribers can watch anything anytime for just a few dollars a month on many applicances from television sets to computers, Wii and Xbox. The company charges $7.99 a month and says it has roughly 33 million subscribers or $263 million monthly.

Netflix in a handful of years has become the largest provider of commercial streaming video programming in the world (YouTube owned by Google is bigger but its content is free and mostly amateur). But Netflix is a major reason why in 2012 more Americans watched more movies delivered via the Internet than on DVDs or Blu-Ray discs.

The company is also experimenting with its own unique content, a science fiction series, and has other projects in production. This means it wants to be a content provider as well as "pipeline" to on-demand content from around the world. This is because as consumers adopt to online streaming, the appetite for content grows.

This new delivery competition is seeking to grab the high "rents" charged by cable monopolies, and their network allies.

The new distributors can undercut these companies through more efficient transmission and by passing along the savings to consumers in the form of lower prices. Or that's the theory at least.

The appetite is enormous. New records are being set for online viewing. One blogger estimated that every second there are 46,296 YouTube videos being watched around the world.

A similar jump in demand for quality video, like Netflix, has also occurred and this will continue. The other giants are launching their new services and will do to video and films what Google did to greatly expanded demand for newspapers and other information sources by providing easy and free access via the Internet.
All of this means that, within the next decade or so, the cable guy and newspaper delivery guy will both disappear into the ether. The good news will be that information and entertainment will be cheaper and more plentiful for all.

The bad news will be those wed to traditional content providing will have to find new lines of work. But those commercial content providers, aligned with new delivery platforms, will proliferate and prosper in new ways.]]> tag:www.huffingtonpost.com,2013:/theblog//3.2935909 2013-03-25T00:16:56-04:00 2013-05-24T05:12:01-04:00

Diane Francis http://www.huffingtonpost.com/diane-francis/
Cyprus is the guy who owes a million and cannot pay, unlike Greece or Italy who were too big to fail and cut some slack. Cyprus, by contrast, is too small to bail. Its GDP is a mere 0.001% of the EU's GDP. This is why the EU and IMF, led by Germany, are pushing it around, demanding that before the country can get L10 billion, it must raise L5.8 billion by garnishing local bank accounts. Underlying this is the fact that if Cyprus leaves the EU and goes bust, it's no big deal.

The hardline is due to the electoral pressures faced by ChancellorAngela Merkel.

The subtext of this saga also involves Turkey in an unholy and coincidental alliance with Germany that has put Cyprus into a proverbial fiscal box.

Nicosia refused to garnishee its bank depositors, as proscribed by the lenders, and has scrambled since to find alternative ways to raise L5.8 billion. The EU and IMF are not budging and are unwilling to accept political IOUs for months as they did with Greece, which was
truly too big to go bust.

Cyprus' financial minister last week fled to Moscow for the money, to be secured by ownership in future natural gas production from Cyprus' vast offshore fields. That failed and now the government is scrambling to plunder its pension plans to raise the L5.8 billion.

But Moscow did not reject the plea. The gas was not available to pledge against loans because Turkey has a de facto veto over Cyprus' offshore. It controls the northern part of the island.

The south of Cyprus is the Republic of Cyprus and a member of the European Union and the North is the Turkish Republic of Northern Cyprus and a region of Turkey. People move freely across its border, but the south is in grave financial trouble, thanks to a real estate and banking bubble caused by dirty money deposits from Russians, while the north is on a sounder footing financially.

For several years, the two have fought over natural gas rights and drilling permits. This has made liens to lenders impossible, thus adding greatly to the Republic of Cyprus' fiscal woes.

But the Cypriots had to trek to Moscow because of fear of reprisals from the Russian depositors who face the prospect that 10% of their $31 billion in Cypriot banks may be confiscated as part of the bailout. Or worse.

Moscow's turndown places the island-nation between two knee-capping choices, one by international lenders and another by some very unsavory characters.

The lenders are also unwilling to bail out dirty money deposits in Cyprus, and are fed up with its non-existent banking standards.

Likewise, one American victim of Russian skullduggery has been outspoken in the media that the IMF (mostly financed by the US) should not be involved in bailing out out a dirty money haven like Cyprus.

William Browder, Hermitage Capital Management CEO, told CNBC this week that a bailout for Cyprus has become difficult because "no one wants to bail out a bunch of Russian criminals."

"About 10 years ago, Russia took over the Cypriot banking system," he said. "There's a tax treaty between the two countries, and as a result, Russian companies, Russian oligarchs keep their money in Cyprus and use Cyprus banks. Cyprus is essentially a part of Russia, not a part of Europe."

Another enforcer looming over Nicosia is Turkey which has recently threatened military action if drilling permits on the Turkish portion of the island continue to be issued by the government residing in the Greek portion.

"This resource belongs to two communities and the future of this resource can't be subject to the will of southern Cyprus alone. (We) may act against such initiatives if necessary," one of the Turkish officials told Reuters this week. "The exclusive use of this resource ... by southern Cyprus is out of question ... and unacceptable."

Germany's resolve has been further bolstered by the fact that post-war immigration from Turkey to Germany has been enormous and now 5% of Germans, or four million, hold dual citizenship because they have at least one Turkish parent. The Turks have prospered and many German actors, artists, athletes and politicians are of Turkish descent. They vote as a bloc and have influence. They side with Turkey not the Greek-Cypriots.

Germany is also captive to Russian natural gas and oil, with high prices. It also would not welcome a Russian takeover of Cypriot gas fields but would favor Turkey's involvement. This would diversify sources and the competition would lower prices throughout the European Union, now inordinately high because of Moscow's hegemony.

The natural gas issue is material. Between Cyprus, Lebanon and Israel is an estimated 122 trillion cubic feet of gas offshore. Enough has been discovered in Cypriot waters to cover 40% of the European Union's annual gas consumption.

Turkey escalated the contest for the gas this year when it warned energy companies they would lose access to its market if they negotiated drilling deals with the Republic of Cyprus.

So the Cyprus story is more than just another profligate nation begging for help. This mess may force the unification of this island, and tapping of its resources, at long last for the betterment of all its citizens. It may stop the takeover of a nation inside the EU by Russian bad guys.

Most importantly, this toughness represents the first international crackdown on the world's dirty money island havens. The Cypriots are the first to be punished and we can only hope the Caribbean will be next.

*This article previously appeared in the Financial Post]]> tag:www.huffingtonpost.com,2013:/theblog//3.2886469 2013-03-18T08:22:36-04:00 2013-05-18T05:12:01-04:00

Diane Francis http://www.huffingtonpost.com/diane-francis/
And it's little wonder. He is the newly elected CEO of the Vatican, a sovereign state, and faces the same crisis as does Washington or Brussels. His bureaucracy is beset by a nasty combination of fiscal constraints due to huge legal settlements, a major banking scandal, brand challenges, declining support, rogue operatives and warring factions.

Some of his followers avow he has an edge over other leaders because he has a pipeline into Divine wisdom. Unfortunately, that hasn't seemed to help most of his predecessors with the result today that the Catholic Church finds itself in the same quagmire as most of the world's nation-states, organizations and movements.

BLOG CONTINUES AFTER SLIDESHOW



The United States, despite a currency mantra of "In God We Trust," has also been forced to undergo serious soul-searching following its 2008 fiscal catastrophe. Reforms ensued and there is much cacophony and fear about the future.

However, despite the rhetoric, the country's fiscal situation is finally being addressed. But Washington's solution was not due to Divine inspiration, but because its President "belled the cat" in August 2011. That's when the debt ceiling crisis led all sides to agree to sweeping cuts, in defense and social programs equally, unless a deal could be negotiated by the end of 2012.

No grand bargain ensued so on March 1, 18 months later, mandated spending cuts began. This is labelled "sequestration" and, despite bleating and pleading and threats of economic Armageddon, this will be the only way to bypass the gridlocked American political system.

What's interesting is that both sides say they hate it and yet both sides do nothing about it except complain. This is because they secretly love it. Sequestration is the fiscal gift that keeps giving: cuts are mandated which means that the blame is diffused widely across both parties.

The stock market also loves sequestration. So does the U.S. dollar. Captains of industry love it. It's bullish for stocks, jobs and the economy. Sequestration is, in essence, the only grand bargain possible wherever consensus is impossible.

"The ideal policy would be not sequester, but a process by which statesmen aware of government's legitimate functions rationally debate and carefully identify the ways and means of providing for such functions, without violating rights, without imposing prejudicial taxation, without issuing unsound money, and without burdening the economy. Non-essential and improper government functions would be judiciously defunded and dismantled. But today we lack this ideal. A sequester is a second-best method: at least it slows an otherwise reckless and runaway spending rate," wrote Richard Salsman in Forbes Thursday. He is President of advisory firm InterMarket Forecasting Inc.

Mr. Salsman is not an apologist for national profligacy. However, he is opposed to the demonization of what's going on. Half of the cuts will come out of the Pentagon, not difficult because it is unwinding two expensive wars. The other half will not cut sacred cows such as Social Security and Medicare. They are not only exempt, but self-financing through separate payroll taxes. Those reforms will be separate.

"The sequester is none of what most people claim it is: it does not entail actual 'cuts' in spending, it does not affect spending 'across the board,' it is not 'automatic,' and it is not 'arbitrary.' Above all, sequester is not harmful to the economy," he added.

(The real solution for the United States is to prune its defense spending in half. This will be the job of the newly approved Secretary of Defense and the public is being softened up for this. Headlines about cyber security and hacking are setting the stage to replace America's over-sized traditional armed forces with cheaper cyber and intelligence forces.)

Salsman says sequestration is bullish and Washington's dissonance and delusion is also instructive. "The reality is that the fact that sequester has happened at all is positive if only because it exposes the absurdity of the apocalyptic warnings of opponents. Perhaps more people will come to realize that the minor spending-growth restraint entailed in the sequester not only entails no disaster, but is a positive development fully consistent with a steadily rising stock market and more robust job gains. Ideally, in time, they might even come to recognize that the bigger the cuts (in non-essentials), the better."

Clearly, governance, divine or secular, is daunting. The Internet exposes skullduggery and stupidity whether it involves sexual abuse of children by priests or exploitation of people as a result of subprime loansharking by Wall Street.

Even worse, institutions are unresponsive, fossilized and outdated.

The conclave of Catholic cardinals who elected their Pope this week did not announce their choice by email, text, twitter or press conference. They sent out smoke signals as they have done for centuries. Likewise, Congress and Parliaments have not changed much since their 18th century prototypes and remain crippled by paper burden, filibustering and gauntlets of bureaucrats or committees.

Through it all, however, progress inches along. The sequester is one example of doing the right thing cleverly. Another is Brussels' technique with its brinkmanship, overblown rhetoric, poisonous punditry, media spin or even Molotov cocktails. All serve to kick the can down the road and prevent a meltdown.

So, these days, all's well that simply ends. Ending well is not an option. The audiences are so diverse that no one will be happy with the ending. The new Pope faces a flock divided into hardliners and liberals who want decentralization, transparency and a softening of the church's stance on alternative lifestyles.

Both sets of believers are destined for disappointment, just as are the Republicans who believe America will only be great if its welfare state is dismantled or the Democrats who want to increase taxes on the rich and increase spending.

The only unanimity is that everyone wants to go to "Heaven," but they cannot agree on a definition and nobody is willing to die to get there.

This originally appeared in the Financial Post.]]> tag:www.huffingtonpost.com,2013:/theblog//3.2838626 2013-03-10T00:00:50-05:00 2013-05-09T05:12:01-04:00

Diane Francis http://www.huffingtonpost.com/diane-francis/
The economic importance of gender meritocracy was explained to me 20 years ago in an interview with Mexico's President Carlos Salinas de Gortari, who had a PhD in economics. He suddenly interrupted our conversation, got out of his chair and fetched a graph from his inner office. The document plotted the correlation, in dozens of countries, between the educational levels attained by females and each country's economic growth rates. The more education women had, the higher the economic growth rates and incomes over time.

"This budget is aimed at expanding public education to more Mexicans and also to increase the educational requirements," he said. "We believe that the little girls of Mexico will benefit the most from this budget, and that it will be the little girls of Mexico who will help to lift this country out of poverty."

According to UNICEF in 2009, Mexico's adult literacy rate had increased to first-world levels of 93 per cent with primary school attendance reaching a new peak of 98 per cent. Birthrates had fallen, thus raising family incomes, and soon the country's total economy to be as large as Canada's. Salinas had emulated the successes of the Asian Tigers and again demonstrated that education of females represented a significant competitive advantage.

March 8 was International Women's Day, an observance begun by the United Nations in 1975. Progress has been significant but 2012 marked an inflection point in terms of the "gender agenda."

High-profile atrocities against young women hoisted the issue to the top of newscasts and front pages. In October, a Taliban assassin tried to kill Pakistani teenager Malala for the "crime" of attending school, then in December a young woman was gang-raped and murdered in Delhi.

As UN Secretary-General Ban Ki-moon said in his statement on International Women's Day: "These atrocities, which rightly sparked global outrage, part of a much larger problem that pervades virtually every society and every realm of life."

Millions of women and girls are abused, neglected, enslaved or starved when their impoverished parents feed their brothers instead of them. There are pockets of female mistreatment in all countries. In January 2012, a Canadian jury found three members of an Afghan family guilty of drowning three teenage sisters and another woman in what the judge described as "cold-blooded, shameful murders" resulting from a "twisted concept of honor."

The case shook the country.

The year's events led Christine Lagarde, one of the world's most influential and powerful women, to step up to the cause. She has enjoyed a brilliant career as a lawyer in the U.S., cabinet minister in France and as Managing Director of the International Monetary Fund since 2011. Her keynote was dedicated to the two female victims in Pakistan and India, but her message was clear that gender equality was a demonstrable ingredient for economic growth and, reading between the lines, would be required to obtain loans from the IMF.

"Gender inclusion is critically important and too often neglected by policymakers," she told a plenary session of the World Economic Forum this year in Davos. "It is no longer acceptable to block women. Universal access to education is the unconditional starting point."

Last week, Pulitzer Prize winning authors Nicholas Kristof and Sheryl WuDunn inaugurated the Bluma Lecture series hosted by the Toronto Public Library Foundation. Both spoke movingly about the plight of most females worldwide, and about how they can be, and have been, helped.

Kristof used sweeping historical terms to make the point: "The 19th Century's moral challenge was about slavery, the 20th Century's was totalitarianism and the 21st Century's is about gender parity." The series was named after Bluma Appel who was an outspoken and beloved activist in Toronto who championed many causes.

Kristof and WuDunn co-authored the award winning book and documentary series Half the Sky about gender inequality. She has become an investment banker and he writes poignant and hard-hitting columns in the New York Times dealing with human rights abuses, human trafficking and social injustices around the world. The two, who are married, jointly won Pulitzer Prizes for their reportage on the student movement and Tienanmen Square protests of 1989. Then in 2006, Kristof won a second Prize for his coverage of the Darfur conflict.

They emphasized that improvements have been dramatic, but that more awareness and activities are needed to help millions more in dire straits. In the rich world, gains continue. In the US election, an unprecedented 181 women ran for Congress and in Canada, six out of the country's 13 Premiers are women: Alison Redford of Alberta; Pauline Marois of Quebec; Kathleen Wynne of Ontario; Christy Clark of BC; Kathy Dunderdale of Newfoundland and Labrador and Eva Aariak of Nunavut.

Internationally, the heads of three of the world's most dynamic economies and nation-states are Angela Merkel, Chancellor of Germany; Dimla Vana Linhares Rousseff, President of Brazil and Julia Gillard, Prime Minister of Australia. In total, females headed the governments of Argentina, Bermuda, Bosnia-Herzegovina, Costa Rica, Croatia, Finland, Guyana, Iceland, Ireland, Krgystan, Liberia, Lithuania, St. Martin, Slovakia as well as Trinidad Tobago.

In business, women continued to retain or reach heady heights such as Meg Whitman of Hewlett-Packard; Virginia Rometty of IBM; Patricia Woertz of Archer Daniels Midland; Indra Nooyi of PepsiCo; Angela Braly of WellPoint; Irene Rosenfeld of Kraft and Ellen Kullman of DuPont. And in 2012, one of the biggest pay packages in history went to Marissa Mayer, enticed from Google to become CEO of Yahoo at a reported $70 million over five years. And in sports, female athletes from several Muslim countries sent athletes to compete in the Olympics for the first time in history.

All in all, gains have outpaced slippage, thanks to advocates like Kristof, WuDunn, Lagarde, enlightened leaders and philanthropists like Bill and Melinda Gates. Perhaps one day, the education of the world's "little girls" will lift most people out of poverty.

*This article previously appeared in the Financial Post

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