Monday, April 30, 2012


The losses from the $1.2bn Ponzi scheme perpetrated by convicted attorney, Scott Rothstein, has resulted in a number of lawsuits by investors, alleging that third parties facilitated the massive fraud. One lawsuit*, filed against Toronto-Dominion Bank, a/k/a TD Bank, resulted in a jury verdict of $67m. Rothstein told the investors that they were purchasing, a a deep discount, payments due on structured settlements for sexual harassment and employee discrimination cases that were already settled. These cases did not exist. Rothstein is presently serving a 50-year sentence** for his crimes.

 The evidence reportedly showed:

(1) That bank officers met with investors and vouched for Rothstein.
(2) That they told investors that they had dealt with Rothstein for years.
(3) That the officers voiced for the safety of their investments.
(4) That the officers told investors that their funds were held in the banks for their specific benefit.
(4) That the officers stated that the funds were in a "locked" account, meaning that they could not be withdrawn by Rothstein or any other party.

Though this case is presently on appeal, there is some disturbing information about the conduct of pretrial discovery, and fingers are pointing at the bank, and its former law firm.

(A) At trial, former counsel for the bank, and a bank officer, indicated to the Court that a document that a key document that had been requested by the Plaintiff did not exist. The bank later admitted that this was not true, and its then attorneys apparently terminated the partner at the firm who was involved in the matter. The bank has changed law firms.
(B) A document that showed the Rothstein law firm was considered "High Risk" by the bank's compliance department was allegedly altered to delete the reference to high risk status. High risk account status apparently requires Enhanced Due Diligence at the bank, at it reportedly was not performed.
(C) The Plaintiff's counsel alleged that the bank, and its lawyers, acted in bad faith, that critical documents were buried, documents were produced in non-searchable fashion, attachments were deliberately mixed up in emails, and documents were produced late.

The Court has scheduled a hearing in May on the motions to show cause why the bank and its former law firm should not be held in contempt. We shall report on the outcome.
*Coquina Investments vs. Toronto-Dominion Bank and Scott W Rothstein,  Case No.: 10-cv-60786 -MGC (SD FL). 
**United States vs. Rothstein,  Case No.: 09-cr-60331-JIC (SD FL).

Sunday, April 29, 2012


We all think we know the story of convicted Colombian Ponzi schemer David Murcia Guzmán, the"Madoff of Colombia." A thirty year sentence was imposed upon him in Colombia, and he was then extradited and convicted in the United States, for his prepaid debit-card scheme, DMG. The backstory, however, is much more sinister than what has appeared in the mainstream press. It raises a number of legal issues, all connected to systemic corruption in Panama.

Upon his arrest in Panama, all of Guzmán's Panama real estate, and personal property, was seized by the Government of Panama. You can see some of the luxury cars in the photograph above. Whilst there is not a complete list available to the public, these items were known to have been seized:

(1)  Fifteen luxury automobiles, including 3 Lamborghinis, 2 Maseratis, one Ferrari, and one Hummer.
(2)  Ten motorcycles.
(3)  One $2m yacht.
(4)  One house and two condominiums.
(5)  Bank accounts, amounts and locations unknown.

Guzmán was later charged with money laundering in Panama, but these charges were later reported as dismissed in 2010. The allegations were that DMG was laundering drug profits for The Valle de Norte Cartel and the FARC.

Other allegations later surfaced linking Guzmán to the Colombian Paramilitaries, the Autodefensas (AUC). Why the case was dismissed, in light of the Colombian and American convictions, is unclear, but judicial corruption in Panama is widespread, and Guzmán had access to millions stolen in the Ponzi scheme. Were bribes paid ? We cannot say, but something is definitely wrong here..

The seized property has never been returned, notwithstanding efforts by Guzmán's attorneys over the past few years, to recover it through the courts. The chances of recovery appear slim, especially since a subsequent criminal charge of Illegal Money Collection was filed fifteen months after the crime allegedly occurred, action that some legal authorities believe was filed too late under Panamanian law.

Additionally, Guzmán reportedly delivered $800,000 to President Martinelli's supermarket chain, to be used to create debit cards for customers. This money has never been accounted for. Was Guzmán's connection to Martinelli* the reason that his Panama case was dismissed ?

Where are all of Guzmán's assets ? Inasmuch as the money laundering charges were dismissed two years ago, the law requires that it all be returned. Some of the automobiles were auctioned off, and others have been reportedly been seen on Panama's roads, being driven by some of the country;s ministers. There needs to be an accounting of the cash, the real estate, and the personal property.

Guzmán is believed to be cooperating with US law enforcement agencies, in an effort to render what is referred to as "Substantial Assistance."Whether this results in an investigation of senior Panamanian government officials is unknown, but the question remains: who has Guzmán's millions, who profited from the sale of his real estate ( yes, he owned corporations with Bearer Shares), who is driving all those luxury sports cars, and where does Martinelli figure in all this corruption ?

                                         Guzmán being extradited; will he get the last laugh ?
*Are you Banking any Companies Linked to Martinelli ?

Saturday, April 28, 2012


Readers who have seen my prior articles* on the lawsuit against Atlantic Rim Funding Corp., for recovery of a $600,000 deposit, have been visiting this website regularly, looking for an update. A new filing in the case has served to disclose the status of the lawsuit. The case, styled  In re: Land Conservancy of Elkins Park. Inc., vs. Dean Kennedy, Atlantic Rim Funding Corp.**, was filed when Atlantic Rim failed to fund a loan last year, and then defaulted on the promised return of the deposit in July, 2011.

Atlantic Rim Funding has generated a lot of controversy, as clients have accused it of being an Advance Fee scheme, and a Ponzi scheme, where the 10% deposits of clients are used to repay earlier clients, all of whom reportedly have never received promised funding on multi-million dollar loans. There have been no verified cases of funding, and some clients have reported receiving only a portion of their six figure deposits back. Most of Atlantic Rim's corporate clients were thus placed in dire straits, and the failure to recover their deposits became a severe blow, if not fatal, to their struggling businesses.

The current filing in the instant case, captioned Combined Motion of Land Conservancy of Elkins Park, Inc. for Expedited Consideration, Shortened Time and Limited Notice, to Compel Discovery pursuant to Federal Rules of Bankruptcy Procedure, and for Sanctions, for failing to comply with Discovery Obligations,  states:

(1) Even though a default was set aside by the Court, neither Kennedy nor Atlantic Rim has ever filed an Answer to the Complaint, nor have they complied with their discovery obligations, nor appear for noticed deposition. No responsible corporation or principal acts this way, though white collar criminals often flout court orders in civil cases, though they usually engage a lawyer after their arrest, to bond them out of jail.

(2) Atlantic Rim Funding still owes the Plaintiff $240,000, more than one year after it was due to be repaid, and more than four months after the Court ordered it.

(3) It appears that that missing $240,000 was used to satisfy earlier clients of Atlantic Rim, this proving that it is a Ponzi scheme, in the classic sense of the term.

(4) The Court has set a hearing on the discovery motions, and motion for sanctions.

                                                         Charles Ponzi: prison photograph

Will the Plaintiff corporation ever recover the full amount of its deposit, that same deposit that Atlantic Rim Funding assured their client was safe in a lawyer's trust account ? It is doubtful; perhaps if Restitution is made a part of a criminal judgment against Dean Kennedy it might eventually be returned, but I will not hold my breath. I will update my readers further, as the case develops.

The moral of this case: Never, never advance large fees, or deposits, or escrow payments, for any loan or extension of credit. Reputable lenders and brokers take their fees and costs out of the loan proceeds. Anyone else is either a hustler, or worse, a criminal, who is bleeding those who are desperate for funding.
*Lawsuit says Atlantic Rim Funding is a Ponzi Scheme
  Federal Judge Comments on Atlantic Rim
** Case No.: 12-007 (ED PA). This is an Adversary Proceeding filed within a Federal Bankruptcy case, Chapter 11, Case No.: 10-19522 (ELF).

Friday, April 27, 2012


Whilst it is important to note that the Charles Taylor *case represents the first conviction of a sitting head of state for Crimes against Humanity** since the Second World War, compliance officers can also use the case to illustrate to their staff the importance of identification of Politically Exposed Persons, or PEPs.

His son, Charles Taylor, Jr. a/k/a Chuckie Taylor a/k/a Charles McArther Emmanuel a/k/a Roy Belfast, Jr., was more than just a son; he was the leader of his father's Anti-Terrorist Unit (ATU), also known as the "Demon Forces," for which he is presently serving a sentence of 97 years, for torture and murder.

the children of PEPs are not always innocent pawns, into whose bank accounts corrupt PEP parents deposit money. Sometimes they can be monsters in their own right. This case illustrates the principle that a compliance officer should never neglect to perform a due diligence enquiry for offspring of a PEP, for sometimes there's more there than meets the eye.

* The Special Court for Sierra Leone website has the opinion of the court:
** Aiding And Abetting War Crimes & Crimes against Humanity:  Murder, Rape, Pillaging, use of child soldiers; Taylor gave the RUL and AFRC rebels: (1) Arms and ammunition (2) military personnel (3) Operational support, and (4) Moral support.


Whilst Panama awaits the imminent indictment, in Italy, of its president, Ricardo Alberto Martinelli Berrocal, compliance officers in Panama, and elsewhere, might be well advised to ascertain whether their bank has any exposure to reputation risk, or even criminal charges, due to business relationships with him or his controlled companies.

The routes that illicit bribes and kickbacks took, from foreign companies seeking to do business with the Republic of Panama, has not been made public yet, but it would be prudent to know early on whether any of these funds transited your bank or money service business. Notification of any positive findings, to government regulatory authorities, may be required by law, and you would, of course, want to engage outside bank counsel forthwith.

The president reportedly holds a large interest in Global Bank, and is a director of at least one hundred Panamanian companies. His son, Ricardo Alberto Martinelli Linares, is a director at Global Bank, and is also known to be a director at 18 companies.

                                                Martinelli Linares, Consul for Australia in Panama.

There are a number of companies known to be either publicly listed subsidiaries, affiliates owned by third parties who are partners with Martinelli, or directly linked to the president through financial transactions. Whilst I do not have a comprehensive list of these entities, I have been able to identify the following:


The identities of individuals linked to these corporations, and illegal activities that they are suspected of participating in, will be revealed in a future article. Readers who have not seen my previous article, can access it here*.

An additional complicating factor is the reported relationship between the president and the twice-convicted fraudster and money money launderer, the Colombian, David Eduardo Helmut Murcia Guzmán, who is presently serving a nine year sentence in a Federal Prison in the United States. Guzmán's role in the Black Market Peso Exchange in Panama and Colombia, his reputed use of companies controlled by Martinelli, and the current holder of a missing portion of Guzmán's criminal profits, are all issues reportedly under investigation. Guzmán is believed to be cooperating with US law enforcement agencies.

More to follow; stay tuned.
*Bearer Shares Fraudsters fleece Foreigners in Panama


Buried in the Chinese corruption scandal du jour  was a cute trick used by Chinese PEPs to fool Western compliance officers seeking to confirm, or rule out, possible PEP status. The individual, whose true surname identifies him in China as the brother of an extremely powerful government official, alters his name for Hong Kong and overseas, in a unique manner.

The PEPs secret: he gives his name in Cantonese, rather than Mandarin Chinese, outside China. Unless compliance officers at your bank read both languages, and are also trained linguists, I seriously doubt that you will make this individual under his true name, and as a PEP.

                                                      Area where Cantonese is spoken.

Frankly, any high net-worth Chinese national, from the Peoples' Republic, who comes in the door, seeking to open and maintain a large account, should not be accepted without Enhanced Due Diligence, conducted by an individual fluent in Chinese, and able to make enquiries inside China, to verify the customer's identity. Watch yourself here.

Frankly, I am still extremely unhappy with last year's disclosure, that some major American universities allow the children of high-ranking Chinese PEPs to register under an alias. They may want to spare the students harassment from democracy groups on campus, but they are doing banks a major disservice. If a compliance officer, at account opening, cannot identify a student as a PEP, whose father is a millionaire due to corrupt actions in China, he will not flag the account for future deposits. That means that, six months later, the PEP may move illicit funds into his child's account undetected.

Thursday, April 26, 2012


Readers who have expressed a desire to better understand the South China Sea dispute, watch closely. This is the map that the Peoples' Republic asserts documents its historic claim to the whole of the South China Sea. It is a 1947 map that depicted the Republic of China, at a time when it still controlled the mainland. Look carefully at the small map in the lower right-hand corner; it shows all of the South China Sea as Chinese territory.

The ROC had pre-war claims to the islands, all of which were then occupied by the Empire of Japan. History majors may know that, pursuant to the Treaty of Taipei, Japan abandoned any claims it had to Taiwan, as well as the Paracel and Spratley Islands. The ROC reentered the islands after 1945, but abandoned them when the government was removed to Taipei. Since then, the islands have been been claimed by a half dozen countries with colourable claims, mainly due to the recently-discovered abundance of natural resources.

Now, compare and contrast this with an official statement, made earlier this year by a spokesman from the Chinese Foreign Ministry:

" No country, including China, has claimed sovereignty over the entire South China Sea." [emphasis added].

Is China truly adopting a more moderate stance over its claims to the region, or is this simply a public relations ploy. Given the obvious manipulation of Chinese public opinion through appeals to patriotism and nationalism,  don't look for China to concede anything in the short term. This means strained relations with its neighbors, potential trouble in the maritime sea lanes that transit the region, and  increased country risk for all nations that border the South China Sea. Wars have started over less.

We will continue to monitor the situation, and advise our readers on any future incidents of note.


A half dozen people have been accused of money laundering in Venezuela,  according to media reports. Why, you ask, in a country where drug money laundering, and payments to the FARC, the ELN, and several other assorted designated global terrorist organisations, constitutes business as usual, do they even bother with such a charade ?

 Here's why:

 Because all the accused have been labeled as members of the Venezuelan Opposition.  Remember gentlemen, there's an election coming up this Fall in Venezuela.  Irrespective of their guilt or innocence, for we do not know whether they are guilty, or merely political scapegoats, the Venezuelan criminal justice system, where most defendants who are not Chavistas are convicted after a quick telephone call from government, is now being artfully employed for purely political purposes.

For those of you who are not following events in Caracas, several former Venezuelan bankers, all of whom fled the country, rather than be at the mercy of the regime, all had bogus criminal charges filed against them after they moved to the United States, and Interpol arrest warrants issued thereafter. Many of these "fugitives" have had their Interpol Notices quashed as being purely political in nature, and without any factual basis. Some of them were, you guessed it, members of the Opposition.

Therefore, whilst there may be a germ of truth in these money laundering charges brought in Venezuela, branding them members of the Opposition, is just politics as usual for the Chavez Government.

Wednesday, April 25, 2012


The Office of Foreign Assets Control has published its latest Civil Penalties Enforcement Information*. it settled allegations of violations of the Iranian Transaction Regulations committee by a Colorado medical equipment company. The total penalty was $126,000 .

The company apparently exported medical equipment to Dubai, and reportedly knew or should have had reason to know that the goods were going to be transshipped to Iran, to a firm that had an exclusive distributor agreement with the US company. The US company. Apparently, the company failed to provide documents in response to an OFAC administrative subpoena.

There were aggravating circumstances:

(1) The company's management was directly involved in willful and reckless conduct.
(2) The company deliberately concealed the fact that the goods were destined for Iran.
(3) The company failed to fully cooperate with the investigation.
(4) The violation was not voluntarily reported to OFAC.

Though the value of the medical supplies illegally exported was only $6700, but the size of the OFAC penalty reflected that the violation constituted an egregious case.The company had no compliance programme. if it had, a compliance officer might have pointed out that medical supplies and devices can often qualify for an OFAC license.

Treasury continues to follow a hard-line enforcement policy with respect to Iran sanctions violations. In this case, it was certainly justified.
* Enforcement Information for April 25, 2012 .


The United States Court of Appeal for the Second Circuit, where convicted arms trafficker Viktor Bout's attorney has filed a Notice of Appeal of his District Court case*, has entered an order that may result in the immediate dismissal of his appeal.

The Court entered an order ruling that the appeal will be dismissed "effective April 30" if the appellant (Bout) either pays the filing fees, or moves to be declared in forma pauperis, meaning indigent and unable to pay for his appeal.

I question why this has not yet been done. Is his lawyer not intending to represent Bout in the appeal ? He may have filed the Notice of Appeal, for a limited purpose, just to preserve his client's rights. I cannot believe that Bout would knowingly allow his appeal to lapse like this.
                                                     Bout's attorney, Albert Dayan.

*Viktor Bout vs. United States of America,  Case No.: 12-1487 (2nd Cir. 2012).

Tuesday, April 24, 2012


A reader recently noted the regulatory slap on Citigroup's wrists for client monitoring failures in foreign Remote Deposit Captures (RDC)*. If I was still in the money laundering business, I assure you that I would be facilitating transnational money laundering through judicious use of RDC.  I hope and trust that there are already policies and procedures in place to prevent these little schemes:

(1) If the overseas clients can send scanned cheques in directly, how can the bank protect itself from clients sending in scanned-in financial instruments from other countries, particularly those where the narco-clients earn their money ? Using a proxy server, one can masquerade the national origin of such emails; the onshore bank, which may be checking the addresses, will be fooled. I might smuggle cheques to a jurisdiction where I enjoy a degree of immunity from prosecution, or extradition, and operate freely there, out of the reach of law enforcement.

(2) Assuming that the onshore bank requires that the foreign bank itself send in the scanned cheques, imaginative money launderers could use deceptively similar addresses, or bribe corrupt foreign bankers to allow the launderers to use their emails, or even their bank facilities, to move drug profits back onshore for investment purposes.

Remote Deposit Capture, in my humble opinion, should NOT be used by foreign clients to make deposits from afar. There are just too many ways they can use RDC to move criminal proceeds. Besides giving money launderers a free pass into your bank, it makes the early detection of counterfeit cheques much more unlikely. I know that "Cheque 21," as we refer to it in the United States, was designed to speed clearing times, and it does, but at a cost, and that cost is increased opportunity for financial crime.
*Aren't you Road-Testing your AML Programme ?

Monday, April 23, 2012


There are reports that an Indictment will issue soon in Italy, against Panama's President, Ricardo Alberto Martinelli Berrocal,  as well as his son, Ricardo Martinelli Linares. We have previously discussed* the ongoing investigation being conducted by Italian authorities, alleging that bribes and kickbacks were paid to Martinelli, in connection with major military sales and construction projects in Panama by Italian companies, including one owned by the state. Martinelli, it is alleged, was to receive a free helicopter for approving a government contract for six.

The President of Panama is a dual national of Italy, where his father emigrated from, and the Republic of Panama. His extradition may prove problematic. There are indications that the United States has already begun to distance itself from Martinelli, and to support the Vice President of Panama.
President of Panama linked to Bribes and Kickbacks in Military Purchasing scandal

Sunday, April 22, 2012


If you closely followed the saga of the US Government's efforts to extradite Viktor Bout from Thailand, you will recall that there was a second case, a new Indictment, unsealed after the Thai Court rejected the American request for extradition. Why is this case being ignored ?

 That case, styled United States vs. Viktor Bout and Richard Ammar Chichakli,** charged:

(1) Conspiracy to Violate the International Emergency Economic Powers Act (IEEPA); alleging all the arms shipments to African nations and regimes under United Nations and/or US OFAC sanctions.

(2) Money Laundering Conspiracy; international wire transfers in and out of the United States in connection with sanctioned entities, including attempted purchases for aircraft.

(3) Wire Fraud; use of modes of international communication in operations in violation of sanctions.

(4) Wire Fraud Conspiracy.

I know, US law prohibits the government from prosecuting Bout for anything other than the case for which he was extradited, meaning that this case, as to Bout, cannot move forward, but what about his codefendant, alleged by the government to be Bout's Chief Financial Officer, Richard Ammar Chichakli.

Chichakli, who is alleged to be a "close associate of Viktor Bout ... assisting in the operations and financial management of Bout's network of companies." If the government can prove that Chichakli was Bout's money launderer, why is there no public effort to secure his extradition from Russia, where he has reportedly taken refuge, and where he is available to the media.

If Chichakli was Bout's primary money launderer, and he facilitated aircraft purchases, arms shipments to sanctioned organisations in Africa, the Middle East and Asia, and handled payments for the "Lord of War," then he should be sharing Bout's cell.
*Case No. 09-cr-01002-WHP (SD NY).
**Read the Indictment here.


Reports abound that more than than one thousand real estate frauds have been committed  in the Republic of Panama in the past three years. Most of the victims are from the European Union, the United States and Canada, and they share one thing in common : the fraudsters who exploited them utilised corporations with bearer shares to accomplish their criminal objectives. here's how it works:

(1) A purchaser of real estate is advised, by his broker, attorney or other professional, to take title in the name of a corporation, whether for purposes of secrecy, for tax avoidance, or to avoid disclosure of his or her assets overseas.

(2) A Panamanian corporation is selected by the client's advisor; this company has bearer shares, which possess what I regard as two fatal flaws. The name of the owner of such shares never appears anywhere on the certificate, and they are the property of whomever has physical possession. Furthermore, there is no registry maintained with corporate records identifying shareholders by name.

(3) To obtain the necessary bank loan to purchase the realty, the client executes a security agreement, or escrow agreement, or some other contractual obligation, all of which serve to use the shares as collateral for the loan. Sometimes the documents operate to transfer ownership of the shares to the financial institution that is the lender.

(4) Now its interesting; the fraudster, with the collusion of a corrupt (and well paid) Notary Public, forges the purchaser's signature on a document, which is notarized in the total physical absence of the purported signer (the client) and title is immediately transferred over to the fraudster.

(5) the client closes on the purchase, takes possession, begins to make monthly mortgage payments, only to learn months later that an unknown party has legal and equitable title, and is seeking to take possession; It becomes a nightmare, which only gets worse.

(6) The client retains a Panamanian attorney, who seeks civil, and in some cases, criminal, relief, only to find out that the local judiciary is corrupt, and that a bribe was probably paid to a judge to sit on the case indefinitely. The fraudster may warn the client that he is connected to the President of Panama (which may be true), that the client will never succeed in court, and that he actually may be arrested if he pursues his claim. Reports that business partners of the president are committing these fraudulent acts
have circulated throughout Panama City.

(7) The client is caught between the proverbial rock and a hard place: he is legally obligated on the mortgage, but he is no longer the owner, and he may even been evicted from the premises, by the authorities, acting on behalf of the new "owner," who may try a number of ploys, including forcing his former client to pay "rent" on the real estate, which, in addition to the mortgage payments, may be too  much for client to bear. He returns to his country, and the fraudster then sells the real estate, or looks for another victim, whom he may try to sell the same realty to, and perpetrate his next bearer share fraud.

(8) This type of fraud has exploded in Panama during the past three years, and nobody in government appears to want to stop it.

Conservative estimates of the amount lost to fraud during the past three years exceed US$400m.  The moral of the story:

(A) Never form a corporation whose shares are properly identified as to owner, and are duly registered in the names of its owners in the company's books and records. Know the possible pitfalls of investing in a foreign jurisdiction, especially for residential purposes.

(B) Do not borrow from a financial institution who you have checked out through proper due diligence. It may be a party of organized fraud.

(C) Get the best lawyer that you can afford, and ensure that you can redress grievances adequately in the forum country, should they arise. Be very aware of the level of corruption before you invest.

This is the first installment in a series of articles detailing financial crime in the Republic of Panama. There will be more.


The attention that we having been giving to increased regional risk* in the South China Sea, between the Philippines, China and Vietnam, may now give way to increased tensions in the East China Sea, between Japan and China. The Governor of Tokyo has announced that its metropolitan government intends to purchase the Senkaku Islands** from a private Japanese owner, who is presently renting most of the island group to Japan; One other island appears to be solely in Japanese hands.

 Sovereignty over this territory is disputed between Japan and China. Japan acquired the islands in 1895, after the Sino-Japanese War,  but in 1945 they came under US Government post-war administration of the Ryuku Islands. Senkaku was turned over to Japan in 1971, after the United States withdrew.

China claims that the Treaty of San Francisco, which ended the Second World War, and which ended Japanese claims to all territories save the Home Islands and minor dependencies,  extinguished Japan's rights to the Senkakus. Japan claims it exercised sovereignty over the islands before 1895, and that therefore they are exempt from the provisions of the treaty.

 in 2010, a major diplomatic incident arose between the two countries when a Chinese fishing trawler was involved in a collision with a Japanese Coast Guard ship in the area of the islands. The Chinese crew was detained, and China lodged a protest over the incident. The captain and crew of the Chinese vessel were subsequently released without charges, but the incident damaged Sino-Japanese relations, and resulted in the termination, by China, of cultural exchanges.

Obviously, this news about Japan's intended purchase of the island group, which will obviously appear to China that Japan is looking to bolster its territorial claim, will spark a response. Whether diplomatic relations between the countries will suffer is not known, but looking at China's 2012 moves in the South China Sea, it is reasonable to expect that China will respond. Country risk observers please take note that Regional Risk may increase.

*Standoff on South China Sea could raise Regional Risk
** Also known as the Pinnacle Islands, they are known as the Diaoyu islands in China.

Saturday, April 21, 2012


Readers who have questioned the accuracy of my statements that the rule of law no longer exists in Venezuela now have positive proof that this is true. Supreme Court Justice Eladio Ramón Aponte Aponte has defected to the United States, and in interviews that he gave in Miami to local media, confimed the bitter truth: criminal cases are directly manipulated by senior officials in the Chavez regime. Aponte was flown to the United States from Costa Rica, where he had taken refuge after a major drug trafficker, Walid Makled, linked him to senior leaders involved in drug trafficking.

Here is a brief summary of the statements made in his televised interview:

(1)  Aponte, as Supreme Court judge with responsibility for the criminal courts, was the direct supervisor of all criminal cases in the country. He received direct orders, from Venezuelan President Hugo Chavez Frias, to "manipulate judicial proceedings" resulting in convictions of opponents of the regime, literally eliminating the rule of law.

(2) Other senior Venezuelan officials, including General Henry Rangel Silva, the Minister of Defence, and Major General Hugo Carvajal, then the head of the Military Intelligence Directorate (DIM), also gave him orders to fix cases. Both of these officials have been named as Specially Designated Narcotics Trafficking Kingpins (SDNTK) by the US Department of the Treasury, Office of Foreign Assets Control (OFAC), due to their ties to drug trafficking with the designated Colombian terrorist group, the Revolutionary Armed Force of Colombia, the FARC.

(3) All political prisoners incarcerated in Venezuela's prisons and jails are there due to orders of Hugo Chavez, demanding that they be imprisoned indefinitely, without trial or due process.

(4) Aponte, who asserts that he has irrefutable evidence of  drug trafficking by senior Venezuelan military officers and high-ranking government leaders, says that he was told to use his powers to release military officers caught in the act with drugs, and to actually safeguard drug shipments in transit through Venezuela.

(5) Drug traffickers who are arrested are often ordered released, due to the fact that their criminal activities have the approval of government officials and colonels and generals in the Venezuelan military. Remember, when Makled was first arrested, in Colombia, he gave an interview to US media, where he stated that dozens of senior Venezuelan National Guard officers were involved in drug trafficking, and in taking bribes to allow such activities to continue unhindered.

According to Venezuelan media, a Venezuelan general who reportedly also was planning to defect to the United States, Gen. Wilmer Antonio Moreno, was assassinated this week.

Therefore, international bankers and businessmen who have financial exposure in Venezuela will not only fail to get justice in Venezuela, should they pursue a civil claim in the court system against businessmen who are allied with the government, you could also suffer arrest and indefinite imprisonment on spurious charges, especially if you are doing business with individuals who oppose the regime. Bottom line, anyone who does not classify Venezuela as extremely high risk, for country risk purposes, is fooling only themselves.

Friday, April 20, 2012


Iran's President Ahmadinejad's recent visit to the disputed Persian Gulf island Abu Musa, and saber rattling by Iranian General Admad Reza Pourdastan have resulted in increased tensions between the two countries, and country risk for the UAE may have increased as a result. The general made a number of bellicose statements this week in connection with the Iranian claim.

                                                                General Pourdastan

The UAE has recalled its ambassador to Iran, and cancelled an exhibition soccer match between the two countries. The UAE is a member of the Gulf Cooperation Council (GCC),  which is a regional security organisation, and which includes Saudi Arabia.

From a geopolitical viewpoint, Abu Musa lies to the south of the main ship channel west of the Strait of Hormuz. Two other islands, Greater Tunb and Lesser Tunb, which are also is dispute, are wholly within the sea lane. All these islands were occupied by Iran in 1971, but the UAE continues to maintain a claim.

Increasing tensions in the Persian Gulf at a time when rumours of a possible bombing of Iran's illegal nuclear facilities are already raising regional risk may result in major increases in country risk for Iran.

                                                                    Abu Musa

Thursday, April 19, 2012


The Court of Appeals for the District of Columbia Circuit has noticed the MEK's pending Petition for Writ of Mandamus for Oral Argument on 8 May, 2012. The People's Mojahedin Organisation of Iran, more commonly known as the MEK, is seeking that the Court order Secretary of State, Hillary Clinton, to either:

 (1) Revoke the Foreign Terrorist Organisation (FTO) designation in force against the MEK; or
 (2) Order the Secretary to act within thirty days on the removal of the FTO designation.

The Department of State position is that the "Court should decline to displace the authority of the Secretary of State," who does have the decision-making power over sanctioned entities. Thus far, she has declined to act on the MEK's request to have the designated removed.

We have previously discussed the merits of the case, which can be found here*. Inasmuch as this is a case of great public interest, we shall be monitoring the pleadings, and report back to our readers on all developments as they occur.
*US Opposes Court Interference in MEK Terrorist Designation


258,000 Rounds of assault rifle ammunition was seized, headed south, at the Bridge of the Americas, on the US-Mexico border this week. This ammunition is illegal to purchase in Mexico; it is deemed only for military use.


A major witness in an Italian corruption investigation has charged that President Ricardo Martinelli, and other unnamed Panamanian officials, received "profits and sums of cash" in connection with the purchase of military equipment for Panama. The Italian defence contractor named in the investigation, Finmeccanica, has denied having "paid or promised bribes" in either cash, or property, to Panamanian officials. Some reports say that Martinelli was to receive a free helicopter, for approving a Panamanian government purchase of six helicopters, and nineteen radar units.

This information was reportedly obtained from a transcript of the interrogation, in a Naples prison, of the individual who paid the Panamanian officials.

In addition, there are allegations that bribes were paid to Martinelli for approving the purchase of four modular prisons. The primary witness is also implicated in a blackmail scheme involving Italian Prime Minister Silvio Berlusconi.