Chapter 17 -  What You Need To Know About Real Estate & Terrorism Risk

Chapter 18 -  Solutions To New Regulatory Burdens and Risks
Case Study # 10 Inadequate Due Diligence
Case Study # 11  Be Careful When Banking Offshore
Case Study # 12  The Snitch Factor

Section Five - How To Build Safe Protected Wealth

Chapter 19 - New & Enhanced Post 9/11 Wealth Planning & Protection Techniques

Chapter 20 - How To Choose an Investment Or Wealth Planning Advisor 

Chapter 21 - The Swiss Inner Circle

Chapter 22 - Other Global Consultants, Publications & Organizations 

Section Six - You’ve Protected Your Wealth Now Restore Your Liberty 
 
Chapter 23 -  Back To The Articles: Restoring the Republic With the Swiss Confederation Institute     

Chapter 24 – FreedomFest: Where Free Minds Meet  

Chapter 25- Don't Delay: Start Today To Preserve Your Wealth & Liberty  

Chapter 26 - Are You Willing To Pay the High Price For Freedom?  

Case Studies  

Resource Guide  

About the Author  

THE SWISS Preserve SOLUTION
How To Preserve What Is Yours!  Ron Holland's politically incorrect guide to defending your wealth & liberty
from internal and external threats in our new 21st Century

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Case Studies

Case Study #1 Big Money Divorce

       Let me tell you a true story about a friend and client who was very successful financially, amassing a substantial net worth.  Like most people of high net worth, there were always those out to sue him for one reason or the other. He became somewhat concerned about one particular lawsuit so, against his lawyers advice, he placed a good portion of his wealth in his wife's name for safekeeping and asset protection.

       Sometime after the lawsuit threat disappeared, he received a knock at the door.  He was being served with divorce papers. He exclaimed, “I haven't seen my wife since breakfast this morning, but you must have the wrong house.” He closed the door laughing but soon found out that it wasn't a mistake. She had decided to keep the portion of the assets transferred to her name and then sued him for half of the rest. In addition, she went to the Internal Revenue Service and turned him in for some earlier indiscretions and omissions with the tax authorities. Who knows, she might even have requested the additional 15% IRS reward for ratting on her husband.'

"To live on loot appears to be no further removed from evil than to take the loot".  -- Leonard Read

Yes, the IRS will even pay snitches a percentage (up to 15%) of the confiscated assets or money due.  See IRS Form 211 Application for Reward for Original Information. Here is some of the small print on Form 211:

"This application is voluntary and the information requested enables us to determine and pay rewards. We use the information to record a claimant's reward as taxable income and to identify any tax outstanding (including taxes on a joint return filed with a spouse) against which the reward would first be applied." The form goes on to state, "I am applying for a reward, in accordance with the law and regulations, for original information furnished, which led to the detection of a violation of the internal revenue laws of the United States and the collection of taxes, penalties, and fines. I was not an employee of the Department of the Treasury at the time I came into possession of the information nor at the time I divulged it."

Case Study #2 Successful Entrapment

       I had a friend and client who married a seemingly nice lady who had several children from an earlier marriage. She was good to him, they enjoyed a happy marriage, and he even came to love her children as his own. She soon suggested that he adopt the children, which he gladly did. After he had officially adopted her children, she immediately left him, demanding half of his net worth and child support for the children. She won on both accounts and he was forced to pay an outrageous amount of child support until the children reached age 18, though he was nearly completely cut off from a relationship with them. Such is the "justice" of the American court system. 

Case Study #3 A Wife's Surprise

       Consider another investment client for whom I managed the substantial excess funds in his corporation’s account. One day he requested a check for a few hundred thousand dollars and of course we mailed it out. A few days later he called complaining about the drop in our personal service and attention to detail as he still had not received the check. I determined that the check had in fact been mailed out and went on about my work. About a week later, he called angry about our incompetence, as he still had not received the check and this money was desperately needed to meet some major bills due for his business.  I researched the situation and later found out that the check was endorsed and cashed by his wife, also an officer for the company. She apparently had deposited the check in her personal account, which she had every right to do as a corporate officer. When confronted with the "monkey business" she announced that she was leaving him. 

Case Study #4 Too Good To Be True

       A final example:  Don’t laugh - it's true.  A prospective client called me a few years ago with $560,000 to invest. As we talked it became apparent he was involved in a “FOREX Trade Program” and he was expecting around $13,000 per week as profits for his initial investment. I asked him how the program worked and he indicated that he legally couldn’t disclose this information because of confidentiality reasons, since he was privately invited to join the program. I then asked, “Well, how much did you invest?”  He indicated $700,000 or so I thought. I answered, “you won’t get rich quick with that kind of quick return” and he replied, “Mr. Holland, maybe you can’t earn this kind of return but I have been guaranteed a $560,000 return on my initial $700.00 (seven hundred dollars)investment over the next 40 weeks.” What a scam and what an idiot to believe it.

       This gentleman was well educated and my only response was “Don’t send them more money until you get your full $560,000.”  Many astute investors continue to fall for the Nigerian internet bank account or their new lottery winner scams. I have a Swiss investment advisor friend who recently was able to talk two wealthy clients out of flying to Europe to meet with a representative of the scam artists in order to claim their millions. Now you’re probably thinking, “What idiots!” but this kind of thing happens every day.  Successful people, businessmen, and even a former congressman (who is Chelsea Clinton's potential father-in-law) is in jail because of a Nigerian scam, so it is pretty easy to become a victim in these schemes.

       Again, none of us are totally immune to scams and rip-off artists. I have some simple advice on dealing with questionable “too good to be true” investments, tax reduction efforts, and asset protection and privacy programs. If it appears too good to be true, then you can bet your last dollar that it is. Never invest on a whim and if anyone attempts to create a sense of urgency regarding an investment opportunity, simply do not do it.  

Case Study  # 5 The Final Presidential Executive Order

Presidential Executive Orders are controversial because as previously mentioned,  they allow the President to make major decisions without the consent of Congress. For example, Executive Order # 6102 prohibited the hoarding of gold coins, gold bullion, and gold certificates & was used by Roosevelt to confiscate gold in 1933. I believe another terrorist attack could generate such a climate of fear, panic and public emergency.  This would result in a political over-reaction that could destroy many of our remaining personal, financial, religious & educational freedoms we value so highly in America today. Read the following case study and decide if this is possible, then protect yourself and forward this report to your friends to make them aware of the threat – while there is still time.   Note, this "what if" study is a worst case scenario, and although the timing of the study is during the Bush presidency, our goal is only to highlight the risk of the following controls in a public panic situation. We feel that the politicians of both major parties could incorporate at least some of these measures following the next Islamic terrorist attack.

       This case study outlines a chilling terrorist attack scenario in the future, when on 9/11/2007, a presumed domestic Moslem radical group carries out a series of successful attacks inside the US similar in scope to the July 7, 2005 London subway bombings. Learn why since the Feds refuse to ethnic profile those who threaten us.  Explore how an excessive political reaction inside the US could create a harsh regulatory environment that could destroy what is left of our civil liberties, the Bill of Rights, and the Constitution. You will discover how this could be used as a real or fabricated pretext to destroy your financial security, uproot your religious and educational freedoms, confiscate your gold, freeze your domestic bank savings (including mutual funds and investment portfolios), and raid your remaining cash holdings. The setting for this example is the day following the attack when the Final Presidential Executive Order, "protecting the public", allows the government to take total control of your wealth and liberties using the terrorism emergency as the excuse.

"They that can give up essential liberty to obtain a little temporary safety deserve neither liberty nor safety." -- Benjamin Franklin, Historical Review of Pennsylvania (1759)

Setting the Stage

       Since 9/11/2001, the American public has been forced to suffer through 5 years of broad-based and usually misdirected border and airport security measures, instead of targeting the individuals and groups that might actually be terrorists.  The government is unable to target certain factions and individuals due prohibitions against ethnic and racial profiling.  Now they are touting the benefits of Felony Frowning, read Lew Rockwell's "Your Evil Intent " 
www.lewrockwell.com/rockwell/evil-intent.html about the new emphasis on frowning when entering and leaving the United States.Americans have sacrificed our last constraints protecting financial and communications privacy, the Bill of Rights, and the Constitution, which have all been lost in the so-called “War on Terror”. Given the government’s broad actions to date, here we take the next logical step by projecting what could happen, given their past response, if there was another terrorist attack on U.S. soil.  While we do not believe the risk to be imminent nor the response possibly as extreme as played out in the following example, it Is best to be prepared for the worst.   

       We all know how Homeland Security and the TSA have been harassing American grandmothers, mothers with babies, my wife (A true story – Read "Meet My Wife Tami - A Domestic Terrorist” at www.lewrockwell.com/orig/holland5.html, and other innocent Americans as part of their effort to defend our nation from Islamic terrorists and al Qaeda operatives.  While I will not begin to question what groups were ultimately behind the horrendous 9/11 attack, suffice it to say that Moslems around the world are angry and antagonized by the foreign policy actions of the US. Even if Osama and Islamic terrorists were not behind 9/11, they jumped at the chance to take the credit for the attack. Today almost five years later, millions of additional Moslems have been radicalized and now see America as their ultimate enemy.

       Moslems are obviously the ethnic and religious group we should be screening and monitoring at our nation’s airports, but racial and ethnic profiling is not allowed in today’s crazy PC world. Hence, the entire flying population is inconvenienced and frustrated at this incompetent attempt to defend us from another terrorist attack, and what it turns into is a waste of both time and resources. Without ethnic profiling and the narrow targeting of protective efforts that might be necessary to defend America from terrorism, these tough measures applied to all Americans could destroy our wealth and personal freedoms, as well as our religious and educational freedoms.

The Scenario

       On Tuesday at noon during a normal lunch hour, 10 conventional explosive blasts hit 7 major metropolitan areas in the United States. In New York City, a large truck bomb went off in front of the New York Stock Exchange, doing extensive damage to the building, the floor of the NYSE, and computer and communications equipment. The Wall Street subway station was also bombed by a suicide bomber, resulting in heavy causalities.  A briefcase filled with explosives was left in a skyscraper elevator and detonated when the building was full of office workers preparing to go out for lunch.

       A few minutes away, a transfer truck filled with explosives was blown up in the Holland Tunnel, and the resulting blast killed hundreds trapped in the resulting traffic jam.  At the same time a jet leaving Orlando bound for Dallas exploded right after takeoff when it reached an altitude of 666 feet, apparently from a luggage bomb with an altitude trigger.  Suburban malls in Minneapolis and San Francisco, a casino in Las Vegas, and a five star hotel in Miami were also ripped apart by bombs, leaving many hundreds dead and wounded. Finally, a small explosion from within a safe deposit box in the vault of the Bank of America headquarters building in Charlotte went off.  Although no one was injured in this instance, other deposit boxes and their private contents were consumed in the small explosion.  Moreover, additional bombs went off in two other Bank of America buildings in Atlanta and Seattle, creating a sense of panic and disarray for the United States leading bank.

       A broad sense of public terror was increasing by the minute, making the situation and financial costs much worse. The American stock and bond markets were closed as investors remembered what happened after the 9/11 terrorist attack. Subways, planes, and high rise building elevators were almost empty as the public feared additional attacks. Malls and shopping centers, casinos, banks, and major hotels were strangely quiet as people stayed away in droves. The American economy was shutting down.

       By 6:00 PM, just in time for the 6:30 nightly new programs, the Bush Administration and the Homeland Security Department held a joint news conference announcing 20 suspects were already in custody. Most of the suspects were young radical Islamists who had recently graduated from Madrasah style Islamic schools in the targeted cities and several were home schooled. There also appears to be direct financial and religious links between the terrorists and Hezbollah and of course Iran and Syria.

       The President reported that a tip from Israeli intelligence had allowed the government to react quickly and forestall a planned second wave of attacks.  He thanked them for their efforts. More news emerges as files found on the personal computers of the deceased and detained alleged terrorists clearly show that the suspects had financed their operation with funds wired from outside the country and through large amounts of cash currency secretly kept in bank safe deposit boxes.

       The President then appealed to the public for their support and highlighted the need for them to stay calm during the emergency.  He announced that effective noon tomorrow EST, September 12, 2007, a Presidential Executive Order would be released in response to the attack that would safeguard the American public and protect our nation from another attack such as this. He affirmed that this kind of unwarranted attack against innocent civilians and our financial interests would never happen again.  He insisted that all the perpetrators, both domestic and foreign, as well as any conspiring organizations or governments, would be brought to justice.

       Finally, he placed the US armed forces on high alert and ordered a carrier task force, which happened to be standing by off the coast of Iran near the Straits of Hormuz, to prepare for action. In addition, he called for unity among the American people, and warned politicians and all facets of the media of the need to understand that America is now in a state of war with the terrorists. Any and all anti-American activities and other actions that might divide the American people, deny the seriousness of, or question the coming emergency actions, especially tomorrow’s Presidential Executive Order, will be prohibited for the duration of the terrorism emergency. Helen Thomas, a reporter sitting in the audience loudly questions whether the President would ask Congress to issue a Declaration of War.  She was immediately escorted from the press conference by the Secret Service.

The two enemies of the people are criminals and government, so let us tie the second down with the chains of the Constitution so the second will not become the legalized version of the first."-- Thomas Jefferson

The Executive Order

Office of the Press Secretary
September 12, 2007

Executive Order 13666 on Domestic Terrorism And Response to the 9/11/2007 Attack  Safeguarding the American public by blocking property and prohibiting money, cash, and gold transfers; public and educational propaganda with persons who commit, threaten to commit, or support terrorism.

By the authority vested in me as President in the Constitution and the laws of the United States of America, and in order to strengthen the efforts of the Department of Homeland Security, as well as all Federal, State, and local agencies, executive order 13666 is hereby ordered as follows:

Section 1. Establishment. The Secretary of Homeland Security (Secretary) shall immediately establish within the Department of Homeland Security (Department) a Domestic Terrorism Response Team (Task Force) to be named the Bush Executive Action Stopping Terrorism.

Section 2. Membership and Operation. (a) The Task Force shall be limited to the following members or employees, all of whom will be no lower than the Assistant Secretary level or its equivalent:

(i) the Secretary of Homeland Security, who shall serve as Chair; the Secretary of State; the Secretary of the Treasury; the Secretary of Defense; the Attorney General; the Secretary of Agriculture; the Secretary of Commerce;  the Secretary of Labor; the Secretary of Health and Human Services; the Secretary of Housing and Urban Development; the Secretary of Education; and) such other officers or employees of the Department of Homeland Security as the Secretary may from time to time designate; and such other officers of the United States as the Secretary may designate from time to time, with the concurrence of the respective heads of departments and agencies concerned.

Section 3. Functions. Consistent with applicable law, the Task Force shall:

(a) Provide direction to executive departments and agencies concerning the immediate emergency response required to protect and safeguard the nation and our financial infrastructure from internal and external terrorist attack.  Due to prohibitions against ethnic and racial profiling, this emergency Presidential Executive Order will cover all Americans equally without regard to religious, ethnic, racial or political views and beliefs. To this end, we immediately implement the following temporary emergency actions, federal legislation, regulations, and requirements to become effective at 12:00 Noon, tomorrow on September 13, 2007.

(b) The Safe Banking Act - every bank, including their personnel and customers, are threatened by the risk of future safe deposit box bombs.  Therefore, all bank and private safe deposit boxes are hereby sealed and closed for 60 days or longer until a complete inventory of every box in the nation is completed by approved bank personnel and the appropriate government agencies, to include but not limited to the Internal Revenue Service, the FBI and Homeland Security. All the contents are to be reviewed and an inventory prepared by the box owner of record and such approved bank and government personnel as the Department of Homeland Security deems as appropriate.

After the inventory is completed, all private records and legal documents may be retained and stored in the box, but the box holder may only utilize the same box in the future in conjunction with monitoring of contents by approved bank personnel. At the time of inventory, all currency, gold, precious metals, or collectibles exceeding $1,000 in fair market value will become the temporary property of the US Treasury until such time as the box holder shall provide records and cost basis of the purchase. The difference between cost and fair-market value will be immediately declared as income and taxed accordingly. Failure to show adequate records will also result in the immediate taxation and requirement of payment of income taxes on the deemed fair market value with a cost basis of zero.  

(c) The Gold and Currency Protection Act - in order to protect the American public from future terrorism incidents by limiting their ability to fund unlawful activities, the Gold and Currency Protection Act will prohibit the future ownership of gold, silver, and currency in amounts exceeding $1,000 without the filing and completion of new Treasury Disclosure Forms. Effective immediately, all cash transactions in the United States exceeding $500 are prohibited and punishable by fines and jail time not to exceed $5,000 and 3 years.

(d) The Terrorism Emergency Safe Currency and Debit Card Initiative - all existing United States currency now circulating in the United States and around the world will be withdrawn from circulation as legal tender within 5 business days and replaced with a new currency with superior counterfeiting safeguards. All private holdings of cash are to be surrendered and exchanged at your local bank for a "Terrorism Emergency Debit Card" within the next 5 business days.  Every transaction exceeding $1,000 must be accompanied by appropriate records, receipts and a paper trail. Any old currency held after the 5 day period will not be redeemed and will not be considered legal tender by the United States. No currency deposits or withdrawals will be allowed in existing bank accounts exceeding $1,000 for the duration of the terrorism emergency.

(e) The Financial Services Defense Act - all American investment markets, mutual funds, annuities etc. are frozen for the duration of the stock market closure due to the damage experienced by the terrorist attack on the New York Stock Exchange. This is a temporary closure but all commercial banks will remain open during the emergency in order to fulfill the safe deposit box and exchange of currency requirement mandated by this Presidential Executive Order. All future bank withdrawals, deposits, and debit and credit card purchases will be monitored and evaluated by the US Treasury for the protection of the citizens of the United States.

(f) The Funds Transfer Protection Act - all bank transfers exceeding $1,000 including bank wires, checks etc. going to or from outside the United States by private individuals are hereby prohibited without the completion of the new Treasury Disclosure Forms and approval by your local financial institution.

(g) The Terrorism Emergency Denial Act – The terrorism emergency denial regulations prohibit any and all anti-American activities and other actions that might divide the American people or deny the seriousness of the present situation.  Moreover, the government prohibits any protests over coming emergency actions like the Presidential Executive Order.  We also forbid the encouragement of our enemies during this terrorism emergency.  Effective immediately, all press publishing, reporting, and editorials-- including print, electronic, television, radio, all internet news and blog sites, and personal and private websites are hereby prohibited from denying or questioning the emergency or the government response until this terrorist emergency is declared over by the Department of Homeland Defense. The failure to follow these voluntary requirements and regulations may result in fines and or imprisonment.

(h) The Private School Protection Act - all private schools (including Christian schools) are hereby required to register their curriculum and materials with the Department of Homeland Security.  Furthermore, all classes and schools are subject to monitoring and review by the Department and subject to visits at any time in order to stop the spread of Islamic propaganda and the radicalizing of the American Moslem population. The registration and review will be equally applied on all public and private school at the high school and college level.

(i) The Homeschool Reorganization Act - all homeschooling is hereby prohibited effective Septemeber 12, 2007, for the duration of this emergency. All children from the 1st to the 12th grade are required to immediately register and attend the public or private school of their choice.

(j) The Citizens Homeland Protection, Illegal Immigration and Transaction Defense Act - effective immediately all citizens of the United States, 18 years old or older, are required to register to vote in their local precinct and requested to also register for the new voluntary "Lawful Citizen Transaction Card" which will be scanned at the entrance to every place of business, meeting event, and at such shopping areas and other citizen protection spot checks as the Department of Homeland Defense deems appropriate for the protection of the citizens of the United States. No financial transactions, purchases or sales will be allowed without a valid "Lawful Citizen Transaction Card" in order to end illegal immigration and the terrorist threat to the United States.

To further protect our nation, starting in 60 days, the public will be allowed to voluntarily request a safe and secure micro chip placement in the right forehand in lieu of the card which can then be monitored at each required location by new equipment that will scan the right hand of each citizen. These chips will include important blood type, vital statistics and will allow law enforcement to track the location at will of every lawful citizen in the United States in order to protect this nation. This action will curtail illegal immigration and discourage illegals and potential terrorists from being able to transact business in the United States.

(k) The Religious Tolerance & Defense Act - all religious symbols, clothing, jewelry, etc. as well as the dissemination of religious tracts and public missionary activity are hereby prohibited outside of church and religious institutions. All services, ordinances, and private ceremonies at religious institutions are subject to review and monitoring by appropriate Homeland Defense Department personnel.

By the authority vested in me as President by the Constitution and the laws of the United States of America, and in order to strengthen the efforts of the Department of Homeland Security and all Federal, State, and local agencies to help legal immigrants embrace the common core of American civic culture, learn our common language, and fully become Americans, it is hereby ordered as follows:

(l) This order shall be implemented consistent with applicable law and subject to the availability of appropriations.

(m) This order is intended to improve the internal management of the Federal Government. This order is not intended to create any right or benefit, substantive or procedural, enforceable at law or equity against the United States, its departments, agencies, entities, instrumentalities, officers, employees, agents, or any other person.

THE WHITE HOUSE,

September 12, 2007

Prologue

        And so on the following day, 9/13/2007, in a burst of patriotism and outrage at the death and carnage from the attack, the Senate voted 100 to 0 and Congress voted 434 to 1 in favor in a non-binding endorsement of the Presidential Executive Order. The people cheered and waved American flags, the opposition fell silent and our young men and women waited for the day when their Registration Acknowledgments were replaced with the draft cards and notices for the ongoing war in the Middle East.

       GOP Congressman Ron Paul from Texas, the lone dissenting 1 vote in opposition, packed up his desk, resigned from the Congress and went home to Texas where he was barred from writing and commenting publicly by the Bush Executive Action Stopping Terrorism and the Terrorism Emergency Denial Act.

       Accordingly, a long night of darkness fell over this former Republic and our remaining liberties. The Bush Executive Action Stopping Terrorism which became known by the initials, BEAST was enforced for the duration of the terrorist emergency. See (Revelations 13:16-18) for more information. Five years later, in the November 2012 Presidential Election, an elderly Ron Paul was elected President of the United States and the terrorism emergency and the BEAST was declared unconstitutional and The Final Presidential Executive Order # Executive Order 13666 was cancelled.

Recommendations & A Call To Action

       Of course this is just a story and we are obviously having a little fun with the "BEAST" acronym showing a worst case situation.  This scenario is meant to illustrate what could happen here in the United States. Still the PC prohibitions on ethnic profiling could result in these extreme kinds of government actions in the event of a real or contrived Islamic extremist terrorist attack on the United States. Unlike 9/11, there is nothing high tech about any of this. Although we use President Bush in the example simply because he will be President at the time of this story, I foresee few real differences in the foreign or domestic policy of either party, although this would more likely happen under a Democrat Party administration.

       My hope is that the Department of Homeland Security and the political establishment will engage in ethnic profiling against those people who hate America and our Middle East foreign policy. Second, I pray that as a nation, we will soon end our military actions in the Middle East, put the empire on hold, and once again follow a more balanced foreign policy.

       Hope and prayer is one thing, however, and I fully expect our nation to continue with the same foreign and domestic policies as before. For this reason I urge investors to consider diversifying their wealth and investment portfolios in safer offshore jurisdictions where the threat of another terrorist attack is small, and where their wealth is protected from the American government's possible response.

The Bottom Line

       If you have gold or large amounts of currency in your safe deposit box make sure you have records showing when the cash was withdrawn, and invoices for the gold and collectibles. You should also keep a copy of these records in your personal possession. As we saw following 9/11, US mutual funds, variable annuities, and investment portfolios become frozen if the markets are closed. Your rights and much of your wealth are at risk in the event of another major terrorist attack on American soil. Chances are our government's reaction to another attack will not be as extreme or irresponsible as I write in the story, but are you willing to take the chance with what you have worked so long and hard to acquire? Reduce your personal financial exposure to the Dollar and US investment markets now while you still have a chance.

Quoting George Washington, "Government is not reason, it is not eloquence, it is force; like fire, a troublesome servant and a fearful master. Never for a moment should it be left to irresponsible action." 

 

Case Study #6 - Terrorist Nightmare on Wall Street

"Past history and recent intelligence have shown that New York City,  a critical node of the U.S. economy, is clearly in the terrorist's crosshairs." - John Sudnik, Dirty Bomb Attack: Accessing New York City's Level of Prepardness From A First Responders Perspective. Naval Postgraduate School, Monterey, CA www.fas.org/irp/threat/sudnik.pdf

       Here is a short story describing a possible dirty bomb attack on Wall Street and how such an event might impact the U.S. economy and financial markets.  Let us hope this third Islamic terrorist attack on Wall Street will never happen, but remember 9/11 was the second terrorist attack against the World Trade Center Towers. Could both incidents have been an attempt to topple the World Trade Centers twin towers into the NYSE building?   As an investment professional and a close follower of the news and current events, I would not recommend that you bet your entire investment portfolio that this nightmare on Wall Street never happens.

       To set the stage we have three different types of investors in this scenario: First, there is Paul, a dentist in St. Paul, Minnesota.  Paul has his entire qualified retirement plan managed by a major investment firm in New York City. Second, there is John, an entrepreneur in New Jersey.  His business is located about thirty miles west of Manhattan.  John has half of his investments in U.S. global mutual funds and a U.S. variable annuity.  The rest of John's investments are in a global portfolio managed by a private bank in Geneva, Switzerland. Third, is a wealthy, pro-western Saudi businessman.  His investment portfolio is managed by a large international bank headquartered in Charlotte, North Carolina.

The event:

       An Islamic terrorist group managed to obtain enough radioactive materials and conventional explosives to construct a dirty bomb.  The explosives were strategically positioned in vacant warehouses in New Jersey just north of the Newark Airport and the detonation was timed to take place during a winter day when the winds were blowing east south east, carrying the radiation across the Hudson River area of New Jersey, on across lower Manhattan Island, and then on to Long Island.

       Another advantage of this particular wind direction was that the Wall Street emergency back up facilities, back office operations, and data storage centers were located in eastern New Jersey and western Long Island.  Terrorist cells, along with the American people had been told of these emergency locations and back up facilities following the 9/11 attack three years earlier in an attempt to ease investor concern and stop a possible market panic during the market closure. Of course, it did not take a rocket scientist to figure out that the hundreds of thousands of Wall Street workers would need the back up emergency facilities within easy commuting distance of Manhattan to make the system work.

      While the physical damage to the Newark warehouse district was quite extensive, the number of lives lost there was minimal. The problem began with the radiation, debris, and dust cloud which swept across a narrow but widening area beginning on the Hudson River, taking in the southern part of Manhattan including Wall Street and covering much of western Long Island.

       The resulting rioting and panic as the radiation cloud moved over Manhattan killed over 100,000 people, as millions of residents and commuters tried to flee.  This, however, was just the beginning of the problem.  After the panic had subsided came the radiation sickness and poisoning. The markets were immediately closed and the U.S. army cordoned off the entire area as millions of sick refugees were slowly decontaminated and allowed through the lines to be transported to emergency medical treatment facilities all across the United States. The tragedy and Wall Street holocaust, as it became known, resulted in the largest number of Jewish deaths since the Nazi holocaust - something that the terrorists had been calculating. 

       The terrorists hated America, Israel, and Saudi Arabia with almost equal intensity. Another component of their terrorist plan had been for selected supporters in Saudi Arabia within the banking and financial industry to spend hundreds of millions of dollars buying put options on the U.S. stock market in the days leading up to the attack. Their plan was not just to destroy the U.S. financial markets, but to also take down Saudi Arabia in the process. Even though they knew the tremendous profits from these market puts would be disallowed, their actions within the Saudi financial establishment had a more important goal: Making these investments also served to implicate the Saudi financial establishment and government which, when discovered, brought the full wrath of U.S. public opinion and the government down on Saudi Arabia. Every dollar of Saudi funds by individuals, banks, financial managers, and even the government invested in the U.S. markets were frozen and seized.  

       Immediately following the attack, all existing Presidential Emergency Orders were activated and all banks and investment markets were shut down. The press was forbidden to publicize or even discuss the amount of contamination to Wall Street and, more importantly, to the back up emergency centers. All they could say was that the investment markets are sound and closed on a temporary basis until we can get the employees back into New York City.  The media downplayed the damage to the facilities and all evidence of the rioting and massive panic that caused most of the initial causalities.  All freedom of speech, civil liberties, the Bill of Rights, Habeas corpus, and constitutional protections were suspended for the duration of the emergency.

       The problem the media did not tell investors was that the contamination of the area meant it had to be quarantined for a minimum of six months before clean up crews could make it safe for the financial service employees who survived to return to work.

       While the human toll from the terrorist attack was incalculable due to the delayed effects of the radiation poisoning, the financial toll was not. The American dollar lost 70% of its value during the six-month period compared to the Euro, the Yen and the Swiss Franc.  There was a brief one week solidarity closure of all world markets but eventually one at a time they started trading again. The U.S. markets remained closed as the 'temporary' one week delay stretched to 3 weeks, then 2 months, then finally 6 months.

       The foreign market panic finally subsided as investors outside the U.S. and American investors with funds outside the closed American markets picked up investments at very low prices.  It became apparent that America’s misfortune would throw all liquidity-starved U.S. companies and citizens into a depression far worse than the Great Depression of the 1930’s.  Although the banks opened back up after a month, there were severe limits on the amount of funds which could be withdrawn from checking or savings accounts. No U.S. stocks or bonds could be traded, as was the case for mutual funds, investment management accounts, and variable annuity portfolios.

       After six months, the U.S. markets opened again on a limited basis for a few hours each day but there was little interest with the Dow trading at around 1,000 and the NASDAQ was down to 120.  The minimal liquidity available in the U.S. and the Presidential Executive Orders allowing only 5% of a bank account, security or portfolio to be liquidated per month turned corporate America into a buying basement opportunity. Foreign investors and the few Americans with liquidity from investment accounts outside the closed U.S. markets purchased U.S. securities at a mere fraction of their values before the attack.

       Did the American economy recover?  Yes, but at a high price for investors.  Many of our corporations became foreign owned and controlled when they were picked up at stock prices for pennies on the dollar at the market reopening.  The real estate market crashed like everything else and we went through a period similar to what Russia went through after the fall of the former Soviet Union. Eventually, the extreme Presidential Executive Orders were moderated and America slowly returned to normalcy but investor confidence and portfolios were devastated. 

What happened to Paul, John, and the Saudi businessman?

       Paul, the dentist in St. Paul, Minnesota, had his entire qualified retirement plan managed by a major investment firm in New York City. It took Paul and his accountant years to prove what was in his retirement plan investments, since most of the records were destroyed in the panic, and the investment firm employees perished in the disaster. When the market finally reopened and the statements were again available, Paul ended up with about 5 cents on the dollar because many of his equity holdings had declared bankruptcy during the year following the attack.

      John, the entrepreneur with half of his investments in global mutual funds and a variable annuity and the rest in a managed global portfolio handled by a private bank in Geneva, Switzerland, was better off.  John heard the explosion and saw the cloud heading toward the Hudson River and Manhattan but the wind direction spared his area of the destruction and panic. All of his global mutual funds were headquartered in the Wall Street financial district so they, along with his variable annuity, were frozen during the six-month market closure.

       However, John did not know at the time that even though the funds were frozen, the underlying foreign securities kept trading and his portfolio actually increased about 30% when the U.S. markets started trading again. The 70% fall in the dollar that continued after the six months period actually helped restart the American economy. This translated into a 100% purchasing power gain in John's foreign funds. Although it took him 20 months to liquidate his U.S. investments at the 5% allowed each month, he eventually sold all at a profit.  The money managed by the private bank in Geneva, of course, continued being managed in non-U.S. investments and he was able to use the proceeds to purchase several quality properties in the distressed U.S. real estate market after the collapse. 

       The Saudi businessman with his investments managed by an international bank in Charlotte, North Carolina, was horrified at the attack but he and other Arab investors, regardless of their political persuasion, suffered the greatest financial losses from the terrorist attack. The American government froze most Arab government and individual private investments during the market closure and these assets were temporarily transferred to the American treasury until the real culprits behind the attack were apprehended and tried.  It has been five years now and the U.S. government has yet to release any of his U.S. investments even though his name has never appeared on a suspect list.  In the end, it really did not matter because Saudi Arabia and the other remaining moderate or pro-American nations all overthrew their existing governments and became militant Islamic republics, due to the Moslem world’s outrage at the American asset freeze and confiscation.

       This is a long case study but is important to think about if you share my concerns of a future attack. I do not have inside information or a crystal ball but this is what I think could possibly happen if Islamic terrorists are able to build and detonate a dirty bomb or weapon of mass destruction.

       Currently, I do not have a single dime invested in the American stock market because I believe the risk of another terrorist attack is too great.  Islamic terrorists have already twice targeted the Wall Street area of New York City.  If in the future they have the capacity to use a WMD, every investor in the U.S. markets could be left holding the bag and little else, since the American markets could be closed for six months or more depending on the technology damage, death toll in the financial industry, and degree of contamination.

       Have you considered the likely consequences for another terrorist attack against New York City and Wall Street?  Have you found yourself wondering why media reports constantly warn about the likelihood of an Islamic terrorist attack on a U.S. target with a weapon of mass destruction or “dirty bomb”, but there is never any speculation as to the possible target?  There are simple reasons.  First, we have no way to prevent such an attack.  It is just that simple.  Second, the government warning of a threat to the U.S. financial markets would generate a financial and market panic that could equal the effects of the actual terror attack.

       Obviously Washington and the financial establishment have decided it is best to treat the terrorist attack risk to Wall Street like every stock market collapse--as something that will never happen but always does. There will be no warning, no suggestion to diversify outside of New York Stock Exchange and NASDAQ securities, or out of mutual funds and variable annuity products in these investments.

       Will this horrible nightmare take place? I surely hope not, but I urge investors to take this scenario risk into consideration when reviewing how much of their portfolio is invested only in the U.S. dollar and Wall Street investment markets.

 

Case Study # 7 Contempt of Court

       Dr. John Doe worked in a specialized field of medicine. He sees many friends and colleagues constantly subjected to nuisances and, on occasion, threatening lawsuits. Following advice, he legally established an offshore asset protection trust that allowed for a credit/debit card when he needed to withdraw distributions.  John was later sued, and due to an unfair judge and corrupt legal system, he lost and a judgment was taken out against him.

       After the court had cleaned out all of his U.S. domiciled property and investments they then moved against his offshore asset protection trust. He and his lawyers used the usual asset protection trust defense but the judge just ruled him in contempt of court for not turning over the funds as requested, using the monthly and annual limit on the debit card withdrawal against the trust.  John refused to do roll over, knowing that his last remaining wealth available for his family and children’s education was in the trust and thus spent many months in jail for contempt. This destroyed his career, his health, and his marriage.

       A better solution:   One option to consider in a properly structured plan is to not provide for an option to access most of your protected funds, except during pre-established intervals when you might want to cancel or make a withdrawal.  The structure should also contain a duress clause to make sure you are not being forced to withdraw funds against your will during these pre-established withdrawal or cancellation periods. Few judges would be able to demand or enforce a contempt of court action against a person utilizing a structure with delayed and only pre-established withdrawal or cancellation options.

 

Case Study #8 Variable Annuity Loans

       John Doe invested $500,000 in a standard offshore fixed or variable annuity for asset protection. While this kind of investment, depending on the jurisdiction and product, can provide substantial protection from judgments and lawsuits, a loan provision can limit your wealth defense.  Here's why:

       Imagine that John is faced with an unwarranted lawsuit and loses the domestic case. Although the offshore jurisdiction provided iron clad asset protection to life insurance and annuity products, his home country judge could have cared less about foreign jurisdictional laws and legislation. The court demanded a copy of the annuity contract, saw the loan provision and immediately ordered John to borrow the proceeds out of the contract. If he refused he would be placed in contempt of court for failing to follow the court order.

       Both the judge and John lived in downtown New York City and they well understood the life threatening danger and risk of sexual attack sure to happen to him in the local jail.  John had no recourse but to agree to the judge’s court order and his offshore protected funds were lost.

       A Better Solution: Make sure if you have an annuity or life insurance product with an offshore insurance provider, that you make reference to the fact that under duress, the insurance company and/or properly structured trust will not allow for pledging of the policy, or where applicable, an internal loan provision will not be offered.

Case Study #9 Maximum Divorce Protection

       Mary has decided to leave her husband John for a younger woman and indicates they and the children will soon be relocating to the Cayman Islands. She has always been the major breadwinner while John became a stay at home dad caring for the home and children.  Mary has offered to split their home and U.S. assets 50/50 which would result in approximately $100,000 each in order to work out a fair and equitable settlement.

       Suffice it to say that John’s ego has taken a bad hit and he is really upset at this turn of events. John has always been a snooper around the house and discovered that Mary had been stashing legal, after-tax money for years in an offshore bank account and she has neither disclosed the foreign financial account nor paid taxes on the interest. There is one million dollars in the account and John knows their U.S. disclosed assets reduced by substantial debts only equals $200,000. Out of anger and need for money, John goes to the IRS with this information hoping for his possible 15% share of the reward.  You know the rest of the story. John gets the snitch money while Mary and the children become destitute because the $200,000 is eaten up by legal fees from lawyers representing both sides in the divorce.

       A Better Solution:  A different outcome would probably have resulted had Mary, regardless of her personal integrity and relationship failings, taken a new 21st century asset protection approach to the situation. Here's another scenario.

       First, using an insurance product rather than a bank account could have made all her offshore earnings tax-deferred. Second, the money came from after-tax earnings so there were no legal problems here as anyone can establish an offshore account. The account could have been an insurance product, which usually only requires the one time filing of a 1% excise tax form. Therefore, she would not have had regulatory or annual reporting problems with the account.

       Next, since the account had been established for years, the courts would probably have ruled no attempt at fraudulent conveyance, while John's lawyers would surely have demanded half of the tax-deferred account and might have won the case had they agreed to take it on a contingency basis. However, if the lawyer had really reviewed the situation, they probably would have demanded upfront fees due to Mary's iron clad asset protection plan.  But let’s assume the lawyer was just a nice guy and felt sorry for John’s treatment and that John won his case in court.

Case Study # 10 Inadequate Due Diligence

       Mr. John Doe lives in Atlanta, Georgia, and has been doing business with the offshore XYZ Bank for many years.  This bank has always provided him with excellent service and good performance. Of course, John follows all government required reporting and disclosure rules on his account and has religiously filed all the necessary forms since opening his account.

       One evening, CNN issues a news report stating that the U.S. authorities suspect that Sheik Mohammed, a major XYZ bank client, has been connected with terrorist activities in the Middle East. John remembers meeting this Sheik with the strange accent at an offshore investment conference a few years earlier, and occasionally he still receives some off color e-mails from him.  John assumes that this is none of his business, because after all, he is not involved with  Sheik and doubts the government is telling the truth in the first place.  As the bad publicity against the bank intensifies, John becomes concerned and finally decides to transfer his account to another institution. What might happen next? 

      John called his account manager and requested that his account, which was half invested in U.S. mutual funds, be liquidated in anticipation of a wire transfer to another bank. His first hint of a problem was when the banker apologized, indicating that the bank had been denied access to the U.S. financial markets because it had been named as a financial institution alleged to have facilitated transactions linked to a terrorist act.  John would have to wait considerably to transfer his account because under the post 9/11 terrorism national emergency, the federal government can designate any person or organization as a “terrorist” and without proof freeze their individual assets. 

            Panic began to set in when John realized that the U.S. mutual funds in his account were frozen and could not be liquidated as long as they were held in street name by the XYZ bank. But at least he could request a check from the cash balance in his account.  He immediately drove to downtown Atlanta and presented all of his domestic and foreign banking references, leaving out, of course, the XYZ bank.   He then completed the paperwork to open a new account at the prestigious Zurich-London Private Bank. He made an initial deposit into the new account of $50,000 from his local brokerage account. The XYZ bank had been good enough to fed-ex the check for his cash balance to his home address in suburban Atlanta and it promptly arrived the next day. He then took the check and deposited it into his new account.  He felt lucky to at least have half of his funds safe and out of the nightmare situation at XYZ Bank.

            The next morning, while driving to work, John received a call from his new banker informing him that his check would not clear from XYZ Bank. He then informed John that they had just received a phone call from the Financial Crimes Enforcement Network (FINCEN) asking about John’s relationship to the known terrorist Sheik Mohammed and his involvement with the XYZ terrorist bank. His new banker went on to inform him that John might be better off with his account at another bank. John was outraged and told his new banker that he would drop by and withdraw his initial deposit immediately. John was shocked to hear his banker reply, "I am sorry sir, your bank account here at Zurich-London Private Bank has been frozen due to your relationship with the known terrorist Sheik Mohammed."

            How did this happen?  John's e-mail address was on the Sheik’s confiscated computer. Therefore, he too was considered a terrorist suspect. 

            John now needed a drink, even this early in the morning, so he pulled into his favorite, though rarely used, 24 hour bar and had a couple of drinks. Feeling better, he handed the waitress his credit card and was waiting to sign the receipt when she returned saying his card was no good. This was the last straw. John called his local banker, a long-time golfing buddy, to ask what the heck was going on. He was kept on hold for 15 minutes until his friend finally answered with this shocking statement, "John, you were the last person I ever thought would be a traitor to our country. All of your accounts are frozen and, as for the house payment you owe us, it looks like this does not really matter because I hear the government is getting ready to seize your house, property, and automobiles."

            So what finally happened to poor John? After six months of numerous interviews with federal authorities and local police they indicated that he was free of all charges. It had actually all been a big mistake.  Sheik Mohammed, in fact, had merely been a high flying, heavy drinking guy out having some fun with the girls, dressed up as a Sheik on the financial conference circuit. He was wealthy with a substantial account at XYZ Bank but had no connection to terrorism.

            The federal authorities thanked John for his help and support during this time of terrorism and dropped him off at the closest bus stop.  But what price did John pay for "helping?"  He lost his job, his house and cars were repossessed for non-payment, all his bank accounts were frozen, and his offshore account had vanished in the bankruptcy of XYZ Bank.  What recourse did John have?  Could he sue the government or the agencies and employees who destroyed his life?   No!  The 9/11 Emergency Executive Order excluded the government and employees from all liability for actions such as this. 

            Is this a worse case scenario? Yes, but could it happen under the present environment in the United States?  Yes-- and this is another reason for investors to utilize highly respected offshore financial providers who also perform due diligence on clients, both for their protection and the protection of their clients.

            Improved bank due diligence would have meant this nightmare situation never would have happened.  First, although John might have been fooled into believing in the false identity of Sheik Mohammed, with extensive due diligence, XYZ Bank would have known exactly who the "Sheik" was.  Today, offshore financial institutions have the ability to vet clients and perform their due diligence by utilizing the data bases of the Homeland Security Act, credit reports, and other government resources to determine other agencies previously searching this data. They would have known the real identity, credit history, and everything necessary to immediately prove to a Washington fishing expedition who the Sheik really was. Second, if he had been a real Sheik and had been on any government watch, stop, or monitor list, the financial institution would have immediately ended the potential for any client relationship. Third, the XYZ Bank’s due diligence file would have also cleared John Doe of any relationship with terrorists.

            Thus, it is vitally important in this scary, post-9/11 world for detailed due diligence and client vetting.  It is crucial to protect both the financial institution and the client, as well as other clients that might get pulled into a nightmare situation as related above.  It is wrong for an American citizen to be forced to live in fear or something similar happening to them, but be prepared, because it could happen. 

Case Study #11 Be Careful When Banking Offshore

            John Doe has long maintained a legal and reportable offshore bank account in a small island jurisdiction for his import and export business. Over time, many new clients were referred to the bank from an offshore financial newsletter, which promised investment returns and tax benefits that far exceeded what John had lawfully received in his offshore account. 

            Suddenly the financial press, both in his home country and the local money center, was filled with stories of an investigation by U.S. and local regulators into charges of money laundering and tax evading structures by many of the clients recommended by the “offshore expert.”   Although the bank clients were supposedly protected by the tiny jurisdiction’s privacy and secrecy laws, the bank quickly caved in to the foreign authorities when management discovered the U.S. could take away their ability to liquidate American investments and transmit funds to or from the United States.  John’s name as a bank client came up on the list of accounts the bank privately submitted to the U.S. authorities under duress.  His name also appeared on a U.S. Treasury list of foreign financial account filings. John was in for close scrutiny and repeated audits, which resulted in much of his offshore account funds going to pay lawyer and accountant bills before he was finally cleared of all suspicion of illegal offshore activities.

            So you see how due diligence can work both ways. First of all, smart offshore clients should closely review and do their own personal due diligence on a financial institution from the perspective of a potential government regulator.  One should always consider the following questions when selecting a financial institution:

            -Does the financial institution and, more importantly, its representatives or referrers behave in an open and conservative manner following all the necessary marketing and disclosure regulations now required in our post-9/11 world?

            -Is the institution or their services promoted by questionable marketing and advertising entities, which elevate the profile and foreign regulatory risk toward the institution?  For example, if they over promise performance and advocate questionable tax benefits, they eventually will suffer regulatory problems which, as you can see from the above case study, can be passed on to you.

The solution is simple.  Deal with conservative, highly regulated offshore financial firms.

 

Case Study #12- The Snitch Factor

            John Doe, with the stockbrokerage firm of Churn'em & Burn'them has been dealing with a moderate sized client for a few years now.  John had convinced the client of his ability as a stock picker, and the client commissions have become a large portion of the stockbroker's annual income. The problem is that the account is now down to less than half of what it was, due to poor performance combined with high and frequent churning of the account.

            His client is now considering moving the account and has discussed his future plans with the John. At this point, the stockbroker, who we considered unstable to begin with, is outraged because he has always spent more than he makes in order to look successful to his clients. Now, stuck with payments on the big home in the suburbs and his children’s education, the broker becomes vindictive, blaming his client for his own mistakes. It will only take one phone call to compliance and a mention of his client complaining about taxes or offshore activities, to result in the client being audited and hounded by a regulatory agency.

            The fact that all of this is just a lie does not matter.  The wheels of injustice will cost the client much time, effort, and money before he is cleared of wrongdoing.  In actuality, most of the time you will never know when or if your banker or financial consultant indicates that you may be engaged in questionable activities. Note, they can be fined or imprisoned for not reporting suspicious activities, so you must assume the worst in America today.

            The only realistic solution to this risk is to have your investment funds and account outside the United States. There is not as much good news here as in some other situations.  The only way to decrease the risk of the above American rogue broker behavior is to choose your financial professional wisely if you must have a U.S. advisor. Second, work with professional advisors only on a fee basis, rather than a commissioned sales agent. The good news is that with most offshore asset protection strategies, at least your foreign financial affairs would be legal.  Therefore, you may be spared some time and money because the authorities would likely cut short their audit.

 

 

The Decline and Fall of the American Empire  http://www.lewrockwell.com/engelhardt/engelhardt277.html www.mtbi

 

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