USA CONFERENCE SPENDING
On the Home Front, a Battle Over Conference Spending
By Stephen Barr
Friday, August 4, 2006; Page D04
In times of war, something has to give.
The Senate yesterday approved an amendment sponsored by Sen. Tom Coburn (R-Okla.), who scours the federal budget for waste and mismanagement, that would cap spending on conferences by the Defense Department at $70 million in fiscal 2007.

Coburn said the Pentagon sent 36,000 military and civil service employees to 6,600 conferences worldwide last year at an average cost of $2,200 per person. "Of interest is that of those 6,600 conferences, 663 were held in Florida in the middle of the winter; 224 were held in Las Vegas, and 98 in Hawaii," he said.
Half the conferences, Coburn contended, could have been conducted through digital videoconferencing and saved money. "We're in a war. We're having trouble funding the war," he said.
Federal conferences, travel and bonuses are often assailed by critics of government spending as perks that are excessive or abused. Advocates for federal employees portray conferences and travel as important to the nation's trade and diplomacy and stress that some issues are better handled in person than through video links.
Coburn began questioning the government's spending on conferences in February when he chaired a Senate federal financial management subcommittee hearing. At the hearing, Coburn estimated the government has spent $1.4 billion since 2000 to underwrite and attend conferences. From 2000 to 2005, total federal conference spending increased 70 percent, he said.
Coburn's amendment would limit defense funding for domestic -- not international -- conferences and "doesn't tell them where they can go, who can go or anything else. It says they just won't spend more than $70 million," Coburn said.
The amendment was added to a multibillion-dollar defense spending bill over the objections of Sen. Ted Stevens (R-Alaska), the bill's manager. Stevens said that "$70 million is not a reasonable limitation," noting that the amendment would cover expenses related to conference programs, staff, travel and other conference matters.
But a move by Stevens to table the amendment lost on a 60 to 36 vote. The amendment was then accepted on a voice vote. The next test for Coburn's measure will come when House-Senate negotiators on defense spending meet in September. The House did not include a similar provision in its version of the bill.
One of the amendment's opponents, Sen. Daniel K. Akaka (D-Hawaii), said in a statement after the vote that "no federal employee should be discouraged from participating in a conference as long as there is a legitimate reason to do so. It's wrong to assume that a federal employee who attends a conference in Honolulu, for example, is wasting taxpayer dollars."
Akaka pointed out that Hawaii is the headquarters of U.S. Pacific Command, the country's largest unified command, and that the state is home to nearly 45,000 active-duty military personnel and nearly 25,000 civil service employees, including 16,500 Defense civilian workers.
A briefing paper prepared for Coburn's amendment said that the Defense Department spent more on conferences in 2005 than the departments of Agriculture, Commerce, Education, Energy, Housing and Urban Development, Labor, Transportation and Treasury and the Environmental Protection Agency combined.
The Pentagon will spend an estimated $77.8 million on conferences this year, the briefing paper said. Defense spending on conferences has increased most years since 2001, rising from $62.3 million that year to $79.2 million in 2005, the briefing paper said.
Among the meetings that received Pentagon support last year were the Armed Forces Bowling Conference in Orlando, the Bowling Managers Expo in Las Vegas, the Armed Forces Golf Conference in West Palm Beach, and the Craft and Hobby Association conference in Atlanta, according to the briefing paper.
Talk Shows

Serious transnational organized criminals are always on the alert for prospective places to hide and secure their proceeds. Offshore havens have been the harbour of choice for these criminals, as well as for businesspersons who evade taxes. Analysis of several case studies of grand-scale fraud, smaller scale frauds2 and other crimes concludes that there are many complex weaves of the social networks that facilitated these schemes.
Process of investigating offshore tax evasion and Money Laundering.
Morgenthau’s3 findings incisively demonstrated what is now common knowledge that serious transnational organized criminals are always on the alert for prospective places to hide and to secure their proceeds. Offshore havens have long been the harbour of choice for these criminals, as well as for legitimate business-persons who evade taxes Studies of such crimes use law enforcement intelligence files, court records, and other primary source documents. It is necessary to detail the many conspiracies and social networks so as to explain the enduring qualities of these fraudulent schemes and to illustrate the point that successful legal artifices exist to thwart investigators, regulators, and prosecutors.
Academics and other investigators find it very difficult to understand grand-scale organized offending.
Example one -Castle Bank in the Bahamas
Castle Bank & Trust was a notorious Bahamian bank. Castle Bank & Trust had two major shareholders who were secret directors. These two major shareholders were both attorneys. One was Helliwell, he was involved with the CIA, and was a well-known political lawyer serving as a key organizer for the Republican Party in Florida. The other major shareholder of Castle Bank was Kanter, an attorney educated at the University of Chicago.He was a teaching associate at the University of Indiana Law School, then worked at David Altman firm in Chicago, a firm which specialised in federal taxation, estate planning, wills, and trusts.
The Mercantile Bank
Castle Bank was formed in the Bahamas in 1964, and placed on the shelf for a few years, ready to be used at the appropriate time. The Castle Bank 1965 Annual Return showed some minor personnel changes, and showed a connection to the Mercantile Bank & Trust which owned one of the five shares of Castle stock.
In 1965, Paul Helliwell, attorney, became a mercantile director, making Castle Bank part of a Helliwell offshore banking complex. The complex included Bank of the Caribbean Ltd., registered in the Bahamas in 1963. Kanter and Helliwell used Mercantile to establish accounts for many of their associates. Mercantile Bank and Castle Bank ran parallel operations. This lasted until 1972 and then Mercantile Bank & Trust was in financial trouble. It was forced to move certain accounts out of Mercantile Bank and Trust and into Castle Bank to avoiding these monies going to creditors.. Morris Kleinman, a known organized criminal was the holder of one such account.
Taxation and Castle Bank
In 1972, the Internal Revenue began to investigate Allan George Palmer, a known manufacturer and distributor of illicit drugs; he held an account in Castle Bank. Several cheques that were drawn by Castle on an account it maintained at the American National Bank and Trust Company of Chicago were found in Palmer’s possession. IRS intelligence located the Castle account at American National and the signature card on file. There were nine names, including P. L. E. Helliwell and B. W. Kanter, attorneys.
It was the amount of money in the account that aroused attention to it. One $70,000 cashier’s cheque was issued to a Mr. Yale Cohen, a known gambler who received this $70,000 while he was the manager of the Stardust Casino in Las Vegas. There were many money transfers between Castle Bank and a Chicago investment firm. Intelligence thought that this was money laundering for Tony Accardo, an organised crime leader from Chicago.
The Kleinman material found in the Castle Bank investigation revealed his partnership in a company called Karat Inc., which operated the Stardust Casino. Kleinman’s attorneys were Kanter and Helliwell. This is an example of a complex network.
Share Frauds Kanter and Pace
Kanter’s dealt with Pace, known penny-share fraudster. Kanter created Walnut Capital Corporation in 1985 and in 1986,Walnut Capital Corporation loaned Pace the sum of $2 million in an arrangement which gave Walnut Capital Corporation the right to "designate half the directors of the company". At that same time the SEC had prosecuted Pace on charges of producing fraudulent statements and his sentence was suspended for 3 months. The following year he was charged with market manipulation and received a sentence suspended for 9 months after which he was expelled from the securities industry.
Later, Pace took secret control of several penny-share firms such as the Sterling Foster & Company , VTR Capital and Investors Associates. In 1998, Pace was indicted on the charge ‘masterminding a $100 million fraud’ and he later faced federal charges of being the principal player in a conspiracy with three brokerage firms, manipulating eleven companies and creating illicit gains of $200 million.
However, Pace continued to direct VTR Capital and VTR Capital . He was ordered to pay $300,000 in restitution and to pay interest to around 150 customers in 30 states of the US. In 1998, VTR Capital merged with IAR Securities and this merger created Fairchild Financial Group Inc. which merged with Olde Discount, a firm which was fined $1 million in 1999 by the Securities and Exchange Commission (SEC).
Another company that Pace directed was Dune Holdings, which promoted the shares of a complicated Kanter involving SportsTrac Inc. However NASDAQ denied its application for listing on the NASDAQ SmallCap Market. SportsTrac then became SportsTrac Systems, Inc., which appointed Fairchild Financial Group as its managing underwriter. Another part of this complex network.
American bank of Antigua
Bruce Rappaport, founder of the Inter-Maritime Bank, and Marvin Warner, former U.S. ambassador to Switzerland created a Panamanian holding company called Swiss American, which then formed two banks in Antigua. One was a local unit called Swiss American Bank of Antigua, the other was an offshore business called Swiss American National Bank Ltd. These two men also created the Antigua International Trust Ltd. and Kanter became a director.
Kanter then had a new vehicle for his complex financial transactions. Kantor established St. Johns Trust and made the beneficiaries members of his family. Next, he borrowed $700,000 from Swiss American Bank Ltd. and from Ulster Investments, Ltd., a company in which he was the major shareholder. St. Johns Trust was the owner of Ulster Investments. He then appointed Antigua International Trust Limited as the trustee for St. Johns, making the network even more complex.
The SEC began an investigation of Kanter’s tax-evading activities in 1997. Ulster Investments was created solely for the purchase of the unregistered common shares of Site Holdings, Inc. formerly Site-Based Media, Inc. and seven million shares were moved by Kanter to Hibbard, Brown&Co., a NewYork a broker-dealer, convicted of penny-share frauds. Hibbard, Brown & Co was expelled by the SEC.
United States v. Swiss American
The Swiss American Bank entities were used to launder drug money for Boston-area organized criminals who were subsequently charged with racketeering and money laundering.The principals charged were Murray, Cardone, and Fitzgerald. Fitzgerald had set up Halcyon Days Investments Ltd. in St.Lucia. Millions of dollars was sent by this route to banks in the Caribbean, including Swiss banks in Antigua and Anguilla. In 1994, Murray pleaded guilty to the money-laundering scheme.
The Swiss American Holding Company in Panama, and Inter Maritime Bank in Geneva were indicted with laundering $7 million for the Murrays’ drug operation4
Similar Frauds In The United Kingsdom
Stephen Jupe was sentenced to five years in prison for defrauding investors and creditors through his four million pounds yearly turnover of his investment scheme in bonded single malt whisky and champagne. He set up Securitised Syndicated Investments Ltd in 1992. It traded as Marshall Wineries, offering investments to the general public in young single malt scotch whiskey to be held in bond until maturity under his label Grandtully Single Malt Whisky. He also marketed investment opportunities in champagne. Jupe was the controller of the business. He devised the marketing strategy, he dealt with the whisky and the champagne suppliers, he hired and instructed the staff, and he controlled the finances. The activities of the company and the director’s use of company funds came under Department of Trade and Industry’s scrutiny and they closed down the business in November 1996. Jupe attempted to resurrect the business through the creation of a ‘phoenix’ company using a similar name so as to disguise from suppliers and clients that anything was wrong. Investors and creditors were the victims. Jupe was charged with fraudulent trading contrary to section 458 of the Companies Act 1985. Jupe was also charged with using a prohibited company name contrary to section 216(4) of the Insolvency Act 1986.
Other Professional Frauds
In the UK, beneficiaries have millions of pounds stolen from them, stolen by their solicitors. The Royal National Institute for the Blind, RNIB, have been a victim of probate fraud and they estimate that such fraud costs them £150 million each year. The principal of RNIB legal services said that the perpetrators tend to be very skilled . Probate fraud is often committed by solicitors and other legal advisors who are appointed to wind up an estate. They have access to all the deceased property and paperwork. There is no control over solicitors when they are drafting wills or administering estates. The means of deception are varied and frequently ingenious. They use means that include bogus wills, mythical credit-card invoices, and hidden bank accounts. For instance, Nicolas Furr and Paul Flint ran Legacies (Wills and Probate Services) in Brentwood, Essex. These two persons misapplied more than four million pounds in funds from the families of the recently deceased. They provided will-writing services and they administered estates.
In another case, a solicitor failed to mention the deceased person’s Swiss Bank Account worth £34,000.
Robinson Solicitors was a firm of solicitors in Cheltenham, UK, in which 29 members of Robinsons’ Solicitors were charged with fraud on the UK Legal Aid system. The conspirators of Robinsons Solicitors systematically defrauded the then Legal Aid Board, now the Legal Services Commission., by dishonestly claiming from the legal aid fund for work not in fact done.
In the case of Guinness plc v Saunders and another5 , Ward was the director of Guinness PLC, which had made a takeover bid for another company. MAC, a Jersey company, submitted an invoice for £5.2 million for services connected with the bid and this sum was duly paid. Guinness PLC applied for summary judgement to recover the £5.2 million unlawfully received by Thomas J.Ward. Ward admitted that the payment to MAC was received for and on behalf of Ward himself in return for his professional services in connection with the takeover bid. Guinness plc denied that such an agreement existed and even if it did, this was in breach of Ward’s duty as a director because it was undisclosed, thus breaching section 317 Companies Act 1985. There was no evidence provided to the court that such disclosure existed and Guinness plc won the case6
Implications
Studies of organized and white-collar crime have concluded with suggestions for more criminal prosecutions, more law enforcement resources generally directed at the threat of transnational crimes, more punitive sentences and greater use of technologies to identify and track threats and activities of transnational criminals.
However, common sense dictates that targeting the social networks will bring results in smashing these criminal networks of professionals.
Turn to the noteworthy case IRS v Jaffe [1974] when the Internal Revenue Service (IRS) put Operation Tradewinds into motion, the first serious undercover work in the Bahamas. The Tradewinds investigation shed light on why network analysis of this sort assists serious fraud investigation.
Operation Tradewinds targeted the corrupt U.S. lawyer who established and directed a bank and numerous low-profile companies in a foreign country and then used this set-up to commit money-laundering offences. Sophisticated money launderers who are lawyers are rarely picked up in general audits because they have skilfully hidden their interests and assets in an offshore tax haven. Only a continuing look at the actions of companies in places such as the Bahamas might reveal such sophisticated criminals.
Investigators of such sophisticated lawyer criminals have to know the company law, land registries workings and the significant legislation dealing with banks and trusts in every country where such money laundering is carried out.. Such intelligence would spot correlated activities such as those related to large-scale monetary manipulations, bank frauds involving subsidiary banks and companies involved in Company Law violations.
Conclusion
The gravity of financial crimes cannot be underestimated. The complex ties of perpetrators include attorneys, bankers, securities firms, organized criminals, politicians and sometimes corrupt police. One of the most important components of the serious crime is private banks established in offshore locations, set up by a law firm in which the principal partners arrange a series of trusts for themselves and their clients, some of whom are traditional organized criminals.
The primary purposes of such banks are tax evasion, money laundering, and financial frauds, false bankruptcies, and bribery schemes. Payoffs are often handled through an offshore bank. 7
Large-scale transnational crimes that have been studied seem to show extensive planning and coordination among numerous criminal entrepreneurs. Furthermore, intelligent professional individuals as these are mindful they may need one of the other parties to assist them in a future criminal endeavour, and also that authorities could be monitoring their activity, which is why these schemes require the talent possessed by lawyers and accountants, the corruption of authorities and the intimidation of witnesses. Tax evasion, fraud, and money laundering are their ‘fait accompli’.
Footnotes
1. A vessel which is sailing close to the wind will sail slower and runs the risk of being put about on the wrong tack by the slightest wind shift.
2. Which, were they not caught, would almost certainly lead to grand-scale frauds.
3. District Attorney Robert M Morgenthau
4. [Massachusetts v. Swiss American Bank, Ltd., Swiss American National Bank, Swiss American Holding Company S. A. of Panama, and Inter Maritime Bank, Geneva, 1997]
5. [1988] BCLC 43
6. Many other solicitors have been convicted in the United Kingdom. In the past ten years there have been the following solicitor convictions:- Rv Ian Macfarlane[2006]; R v Philip John Lewis [2006]; R v Richard Dawson [2006];
Rv Simon Rutledge [2006]; Rv Timothy Miles [2006]; R v Brian Dougan [2006]; Rv Stephen Puleston Williams [2006]; Rv Angela Baillie [2006]; R v Stephen Pulston [2006]; R v John Martin [2005]; Rv Michael Fielding [2005];
Rv Christopher Savage [2005]; R v Calum Blyth [2005]; Rv Nicholas Pounder [2005]; R v Philip Huxtable [2005];
Rv Carsten Iversen [2005]; R v Susan Davies [2005]; Rv Marylena Shuti [2005] ; R v Chris Christodoulides [2005]
R v John Ingram [2005]; Rv Ricardo Nardi [2005]; Rv David Andrew Gatherer [2005]; R v Ricardo Nardi [2005]
Rv Gary Beales [2005]; Rv Nicholas Pounder [2005]; Rv Christopher Savage [2005]; R v Donald Halling [2005]
R v Haydn James Dodge [2004]; R v Timothy Robinson [2004]; R v Richard Deighton [2004]; R v Douglas Allan [2004]; R v Gavin David McCartan [2004]; Rv Richard McAnulty [2004]; R v Rohan George Skea [2004];
R v Andrew Erskine [2004]; R v Michael Lee [2004]; R v Ricardo Nardi [2004]; R v Andrew Nicholls [2004]
R v John Greenwood [2004]; R v Peter Lyle Sharp [2004]; R v Michael Wilson-Smith, R v Peter Barnett, R v Ruperella [2004]; R v Harjit Sangha [2004]; R v Timothy Farrant [2004]; R v Jennifer Hampton [2004]
R v Paul Winter Morris [2004]; R v Jeremy Cave [2003]; R v Shirley Harrison [2003]; Rv Jill Radford [2003]
R v John Tate [2003]; R v Yasin Mohamed [2002]; R v Louis Glatt [2001]; R v Miles McNulty [2001]
R v Donald Pirie [2001]; R v Michael James Palmer [1999].
Not to mention those who were processed only via the Tribunal route and thereby quietly struck off the respective barrister and solicitors registers.
7. Journal of Contemporary Criminal Justice ,November 2002