Goldman’s Asset Arm Takes Big Hit On Venezuelan Bond Bloodbath

The fallout from the Venezuelan bond restructuring has claimed a major victim in Goldman Sachs Asset Management, or rather some of the “muppets” who trusted Goldman to invest their money. However, the route which led Goldman to losing a chunk of client money wasn’t just a case of bad judgement, being riddled with the usual mixture of greed, questionable ethics and government intervention. As we detailed in “Goldman Accused Of Funding Maduro’s Dictatorship”.

Goldman controversially purchased $2.8 billion of 2022 bonds in May 2017 in the state-owned oil producer PDVSA, for about $865 million – or about 31 cents on the dollar. This prompted Julio Borges, President of the National Assembly and head of Venezuela’s opposition, to accuse Goldman of “aiding and abetting the country’s dictatorial regime.” Borges threatened that any future democratic government would not recognise or pay on the bonds. In true Goldman fashion, however, the deal was just too lucrative to pass up, or so it seemed at the time, as Goldman paid a then 30% discount to other Venezuelan bonds with a similar maturity.

 

Goldman’s ”defence” was that it did not buy the bonds directly from PDVSA, consequently it did not transfer funds directly to the Venezuelan regime.

To make matters worse, when the Trump White House extended sanctions against Venezuela over the Summer, including a ban on trading Venezuelan debt, Goldman’s bonds were mysteriously exempt. As we argued here.

“the logic is that if Goldman was forced to liquidate the bonds, or worse was stuck holding them as Venezuela went bankrupt, it would take a huge hit on the nearly $3 billion notional position. As such, Goldman's advisors to Trump made it quite clear that any sanctions against Venezuela would have to be Goldman Sachs revenue neutral first and foremost. That's precisely what happened.”

We have to acknowledge, however, that the next comment of ours was only half correct.

“Of course, Venezuela's default is just a matter of time, but it won't take place before Goldman dumps its bond holdings to some unwitting retail investor or some German widows and orphans.”

It turns out that Goldman had only dumped part of its holdings prior to the expected default, and is sitting on a sizeable loss, as the FT explains.

Ricardo Penfold, a senior portfolio manager at Goldman Sachs Asset Management, earlier this year swooped on a big slice of a bond issued by PDVSA, Venezuela’s state oil company, people familiar with the matter say. Mr Penfold paid $865m for bonds with a face value of $2.8bn — a price of just under 31 cents on the dollar — reflecting the elevated risks of a default even at the time. While GSAM has since sold off chunks of the bond, it was still listed as the single biggest overall owner of the PDVSA bond maturing in 2022, with a face value holding of $1.3bn at the end of the third quarter. But with Thursday’s announcement that Venezuela would seek to restructure all its foreign bonds, the bond is now trading at 25 cents on the dollar, down from 29 cents at the start of last week. That would translate into a paper loss of $54m in just five days if GSAM has not reduced its stake since the end of the third quarter…

 

GSAM is listed as the single biggest overall owner of PDVSA debts, according to Bloomberg data based on fund filings, with $1.8bn of face value holdings.

 

A Goldman spokesman said: “We are monitoring this situation closely.” The summer deal was particularly controversial, attracting condemnation from the Venezuelan opposition and US senator Marco Rubio, because it in effect constituted a cash infusion for the increasingly autocratic government led by Nicolás Maduro. GSAM bought the bond via an intermediary, but it was sold by the central bank.

As we said, and other analysts agree, Goldman should have seen it coming. From the FT article.

Many investors who had been betting that Venezuela would manage to avoid defaulting are nursing losses. Venezuelan bonds suffered a drubbing in the wake of Mr Maduro announcing plans to restructure the country’s $89bn debt pile. “This has been a well-telegraphed train wreck,” said Robert Koenigsberger, head of Gramercy, an emerging markets-focused asset manager.

 

“There are reasons to expect that prices will go even lower from here.” GSAM and other big Venezuelan bond investors — such as Fidelity, T Rowe Price and Ashmore — could still end up making money from their Venezuelan bond purchases, as analysts expect the ultimate “recovery value” on Venezuelan debt to be higher than where the bonds are trading at now.

While the article suggests the possibility of a more favourable exit for Goldman in due course, the restructuring of Venezuelan debt is not going to be a “plain vanilla” variety. Indeed, it might be more complicated than any previous sovereign debt restructuring. The irony for Goldman, as the FT explains, is that the extension of sanctions by the US Government will make it much harder for the bank to recover its losses.

Venezuela’s plans to restructure its debts are riddled with complications. The mess of bonds issued by the country and PDVSA are hard to disentangle, and oil exports — the country’s sole financial lifeline — are vulnerable to seizures from litigious creditors. However, the biggest wrinkle is the US government’s sanctions on Venezuela, unveiled in August after the GSAM deal. In practice, they prohibit any US institutions from involvement in any Venezuelan debt restructuring.

 

“Sanctions will prevent a conventional exchange offer,” said Lee Buchheit, a senior partner at Cleary Gottlieb, who has represented a series of countries when they restructure their debts. “It’s really not clear what Maduro has in mind, or whether he even has anything in mind."

 

Venezuela owes about $750m in bond arrears and is facing a further $965m of interest payments over November and December, calculates Patrick Esteruelas, global head of research at Emso Asset Management. If Caracas has run out of money — and Russia or China decline to extend more loans to Venezuela — it will have to default. But as long as US sanctions remain in place, this will push Venezuela into financial purgatory of a protracted, unresolvable debt default. “In a world where you can’t pay and you can’t restructure, all you can do is default,” Mr Koenigsberger said. “Even without the sanction, this would have been an exceptionally tough debt restructuring. It will now be exponentially harder than anything we have seen before. And I don’t think that is priced in yet.”

It will be tragically amusing to watch what extraordinary measures the heavily Goldman-influenced White House takes to bail the bank out of its latest predicament.

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Trump Wanted Japan’s “Samurai Warriors” To Shoot Down North Korean Missiles: Report

Ahead of Trump’s visit to Asia, there were understandable concerns that a diplomatic snafu was imminent. Those concerns were partially justified after a report from Japan Times according to which Trump said Japan should have shot down the North Korean missiles that flew over the country before landing in the Pacific Ocean earlier this year. The Japanese publications cited sources who claim that Trump questioned Japan’s decision not to shoot down the missiles when he met or spoke by phone with leaders from Southeast Asian countries over recent months to discuss how to respond to the threats from North Korea.

After North Korea launched ballistic missile tests on both August 29 and September 15 which flew over Hokkaido and landed in the Pacific Ocean, Trump was reportedly confused: “The U.S. president said he could not understand why a country of samurai warriors did not shoot down the missiles“, the sources said.

As Japan Times adds, “the Self-Defense Forces did not try to intercept the missiles, with the government saying the SDF had monitored the rockets from launch and judged they would not land on Japanese territory”

Furthermore, the altitude and speed of the missiles would have made it very difficult to destroy them in flight, while failure would have been embarrassing for Japan and encouraging to North Korea. Defense Ministry officials confirmed this view and said there were also legal issues to clear.

Had Japan shot down the missile, it could have faced serious ramifications, such as a military response from North Korea as The Hill correctly observes. Trying and failing to shoot down the missile also could have had consequences.  Shortly after the August test by North Korea, a U.S. warship successfully shot down a medium-range ballistic missile in a test launch off the coast of Hawaii.

Separately, during his speech upon arriving in Japan, Trump provoked more diplomatic squirming when he delivered a not-so-veiled threat to North Korea leader Kim Jong-un, which however some interpreted as an unpleasant reminder of Japan’s militant past, when he warned the world, namely dictators, not to underestimate “America’s resolve” in a speech at Yokota Air Base on Sunday. Trump touted American military strength in a speech at the United States Air Force base near Tokyo in the first leg of his Asian tour.

“No one, no dictator, no regime, and no nation should underestimate ever American resolve,” the president said. “Every once in a while in the past they underestimated us. It was not pleasant for them. Was it? It was not pleasant.” The warning to North Korea, which some Japanese analysts saw as a not so thinly veiled reference to Japan actions in World War II can be heard 10:40 into the clip below:

“We will never yield. Never waiver, and never falter in defense of our people, our freedom, and our great American flag” Trump continued. “We dominate the sky. We dominate the sea. We dominate the land and space. Not merely because we have the best equipment, which we do, and by the way, a lot of it is coming in. You saw the budget. That’s a lot different than the past. A lot of beautiful brand new equipment is coming in. And nobody makes it like they make it in the United States. Nobody,” Trump told troops in an airplane hangar.  “As long as I am president, the servicemen and women who defend our nation will have the equipment, the resources, and the funding they need to secure our homeland, to respond to our enemies quickly and decisively, and when necessary, to fight, to overpower, and to always, always, always win,” Trump promised.

* * *

Still, despite the potential diplomatic flaps, the meeting between Trump and Abe passed largely without a glitch, with Japan’s Prime Minister lavishing Trump with a welcome reserved for formal state guests during his visit to Japan, looking to use hospitality to highlight close ties with its powerful ally.

According to the Nikkei, Abe and his wife Akie on Sunday treated Trump and first lady Melania to a dinner featuring Ise lobster and wagyu beef at a high-end teppanyaki, or table grilling, restaurant in Tokyo’s ritzy Ginza district. This was the first of four meals the leaders will eat together in just two days. Trump also kicked off his visit with a round of golf with Abe and Japanese professional player Hideki Matsuyama.

The president is also slated to meet with the prime minister at the State Guest House, and a meeting with Emperor Akihito is on the agenda as well.

Trump is in Japan for an official working visit, which ranks behind state and official visits in terms of formality. Tokyo decided against the state guest designation given that this is just one leg in a longer tour of Asia, a senior Foreign Ministry official said.

State visits in Japan are customarily limited to just one or two per year, with only one a decade from any given country. Japan just received a state guest from the U.S. in April 2014 — then-President Barack Obama. But Trump is receiving treatment on a par with a state guest. “It’s pretty unusual for the prime minister to give a guest such constant attention — even the U.S. president,” a Japanese government source observed. Abe joined Obama for two dinners during the 2014 trip, but the two ate lunch separately.

A top Foreign Ministry official noted the contrast between Obama’s “businesslike” visit and the treatment offered to Trump. “Showing Trump hospitality is the main focus this time,” the official said. Tokyo hopes to showcase the strong U.S.-Japan alliance to not only Asia — amid mounting tensions with North Korea — but the international community as a whole.

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Eric Peters: “The Next Market Cleanse Will Be Sharp, Deep, Fast And Feel Like The End Of The World”

The latest weekend note by Eric Peters, CIO of One River Asset Management, is his latest masterpiece in lyrical, stream of consciousness, financial analysis, and can be broadly divided into to broad parts: his latest take on financial markets analyzing the build up of disequilibrium which eventually culminates with discrete “flushes” that reset the system; how bold investors inevitably give up on financial sense and logic long (or just) before said flush takes place, and what this upcoming Minsky Moment could mean for the future. We have excerpted from this section in the current note, as for the remainder of his weekend observations – which deal with tectonic macro and geopolitical shifts – we will follow up in a subsequent post.

Anecdote: “The most common example is a ball sitting atop a hill,” she said, polished accent, hint of condescension. “Locally stable, but one nudge and it’s all over.”

 

 

She drove terribly fast, discussing Minsky Moments; the idea that persistent stability breeds instability. “Naturally each cycle is different in key respects, and that’s because you’re far better at preventing past problems from recurring than new ones from arising.”

 

I smiled, amused, insulted. “Despite knowing this all too well, you humans remain inexplicably fixated on the rearview mirror. And this blinds you to all manner of hazards ahead.”

 

She initiated a few perfect turns of the Tesla, dodging a squirrel or two, tumbling, unhurt. “The source of instability in this cycle is your dissatisfaction with ultra-low bond yields.” $8trln of sovereign debt carries a negative yield, still our central bankers buy. “You should logically respond to this historic rise in valuations across asset classes with a reduction in your expectations for future returns.” I nodded. “But instead you respond with indignation.”

 

So I explained to her that without robust growth and a compounding stream of uninterrupted 7.5% returns, our entitlement systems will implode. They probably will anyway. And lacking the stomach for an honest accounting of this predicament, we prefer to pretend it doesn’t exist.

 

“Is this humor or sarcasm?” she asked. “Both,” I answered. “Fascinating, anyhow, you then demand that we algorithms produce mathematically impossible returns. So we apply leverage, which makes nearly anything possible, even at valuations that are 99th percentile in all of human history. The more leverage we apply, the more stable your system appears. The flatter your hilltop.

 

Naturally, we ensure that today’s leverage looks different from yesterday’s disaster, recognizing your powerful aversion to repeating recent mistakes.” And I stared out the window, lost in thought, fall’s kaleidoscope whizzing by.

Surrender:

“The giant miss in this cycle has been the duration of financial repression,” he said. The Bank of England had just hiked rates for the first time in a decade. Doubling them to 0.50%. Faced with an inflation rate of 3% and 5yr/5yr inflation swaps priced at 3.4%, the BOE estimated just two more 25bp interest rate hikes in the coming 3yrs. 10yr government bonds yield 1.26%. For years, every incremental increase in inflation expectations has led to lower real yields. “Financial repression has been so beaten into investors that they appear to have given up.”

Equilibrium:

Long lasting adjustments occur when large imbalances need to be cured,” said my favorite strategist. “They require decisive policies, without which you can become trapped.” He turned to Tokyo. “70% of Japanese corporates pay no taxes because of the loss-carry-forward from 30yrs ago.” Policy makers never allowed the 1989 collapse to properly cleanse. “This is incredibly inefficient and the government knows exactly what to do.” But no one has the will. “So you end up with this perpetual ho hum outcome, lifted and lowered by the global cycle.” 

 

“This is where Japan finds itself today,” continued the same strategist. “A cyclical upswing and a renewed excitement about Abenomics, but not much changes until they really address the structural issues.” Only Japanese banks are really cheap; trading at 50% of book.

 

But banks have no loan demand for as far as the eye can see. And the firms that could borrow, invest, and create disruption by wiping out inefficient supply chains are prevented from doing so by government policy to forestall the cleanse of something that happened 30yrs ago.”

Flush:

“We have few big structural imbalances in the US,” he said. “Admittedly there are large generational imbalances but these won’t be cured today.” Entitlements, pensions, states, and municipalities are tomorrow’s problem. “US imbalances are really just financial.” The bank and residential real estate flush from our last crisis has left both in better balance. Student loans are a problem, but not systemic. Same for auto loans.

 

“But we’ve had this financial engineering cycle of buybacks, ETFs, passive strategies, leveraged quant investing, crowding.”

 

“The thing about flushing the excesses of financial engineering is that it can happen quickly,” he continued. “You saw that happen in 1987 for instance. And like then, it need not have a massive impact on the economy.”

 

For financial engineering to take down an economy, its unwind needs to devastate large balance sheets. And it’s not clear where that would happen today.

 

“The next cleanse will be sharp, deep, fast, and will feel like the end of the world, but it won’t be. It’ll slow economic growth for sure, but 18mths later we’ll be back near the highs.”

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Paradise Papers: Massive New Leak Exposes Tax-Haven Secrets, Links Wilbur Ross To Russia

One year after the Panama Papers revealed billions in assets are held in offshore "tax haven" accounts by some of the world's most powerful and wealthy individuals, on Sunday a huge new leak of financial documents disclosed by the International Consortium of Investigative Journalists (ICIJ) – a global network that won the Pulitzer Prize this year for its work on the Panama Papers – and its 94 media partners has revealed how the powerful and ultra-wealthy, including the Queen's private estate, secretly invest vast amounts of cash in offshore tax havens. Of particular interest for the US media will be the discovery that Donald Trump's commerce secretary, Wilbur Ross, is shown to have a stake in a firm dealing with Russians sanctioned by the US, including Vladimir Putin's immediate family, which Ross failed to clearly disclose prior to his confirmation.

The leak, dubbed the Paradise Papers, contains 13.4 million documents, mostly from the Bermuda-based offshore finance law firm, Appleby, has been investigated by 95 media groups, with the findings released today.  The records expand on the revelations from the leak of offshore documents that spawned the 2016 Panama Papers investigation. The new files shine a light on a different cast of underexplored island havens, including some with cleaner reputations and higher price tags, such as the Cayman Islands and Bermuda.

The year-long investigation exposes offshore interest and activities of more than 120 politicians and world leaders. That includes ties between Russia and U.S President Donald Trump’s billionaire commerce secretary Wilbur Ross. It also highlights the offshore activities of another 12 Trump allies.

 

The Paradise Papers' key findings summarized:

  • Reveals offshore interests and activities of more than 120 politicians and world leaders, including Queen Elizabeth II, and 13 advisers, major donors and members of U.S. President Donald J. Trump
  • Exposes the tax engineering of more than 100 multinational corporations, including Apple, Nike and Botox-maker Allergan
  • Reveals tax haven shopping sprees by multinational companies in Africa and Asia that use shell companies in Mauritius and Singapore to reduce taxes
  • Shines a light on secretive deals and hidden companies connected to Glencore, the world’s largest commodity trader, and provides detailed accounts of the company’s negotiations in the Democratic Republic of the Congo for valuable mineral resources
  • Provides details of how owners of jets and yachts, including royalty and sports stars, used Isle of Man tax-avoidance structures

That said, as the BBC admits, "the vast majority of the transactions involve no legal wrongdoing."

The BBC reports that as with last year's Panama Papers leak, the documents were obtained by the German newspaper Süddeutsche Zeitung, which called in the International Consortium of Investigative Journalists (ICIJ) to oversee the investigation. Sunday's revelations form only a small part of a week of disclosures that will expose the tax and financial affairs of some of the hundreds of people and companies named in the data.

The most detailed revelations emerge in decades of corporate records from the white-shoe offshore law firm Appleby and corporate services provider Estera, two businesses that operated together under the Appleby name until Estera became independent in 2016. At least 31,000 of the individual and corporate clients included in Appleby’s records are U.S. citizens or have U.S. addresses, more than from any other country. Appleby also counted clients from the United Kingdom, China and Canada among its biggest sources of business.

Nearly 7 million records from Appleby and affiliates cover the period from 1950 to 2016 and include emails, billion-dollar loan agreements and bank statements involving at least 25,000 entities connected to people in 180 countries. Appleby is a member of the “Offshore Magic Circle,” an informal clique of the planet’s leading offshore law practices. The firm was founded Bermuda and has offices in Hong Kong, Shanghai, the British Virgin Islands, the Cayman Islands and other offshore centers. Appleby has a well-guarded 100-year reputation and has avoided public scrapes through a mixture of discretion and expensive client monitoring.

Appleby, for example, is one link in a chain of offshore actors who helped sports stars, Russian oligarchs and government officials to purchase jets, yachts and other luxury items. The offshore experts helped Arkady and Boris Rotenberg, two Russian billionaires and childhood friends of President Putin, buy jets worth more than $20 million in 2013. U.S authorities blacklisted the Rotenbergs in 2014 for their support of “Putin’s pet projects” and for having banked “high price contracts” through the Russian government. Appleby cut its ties with the brothers but, in one case, received approval from the Isle of Man government nearly two years after sanctions were imposed to disburse fees to keep one of the brothers’ companies on the business register. The Rotenbergs did not reply to Süddeutsche Zeitung’s requests for comment. Clients prize Appleby for its expertise, efficiency and global network of professionals. Its peers repeatedly crown it Offshore Law Firm of the Year.

But decades of private documents also show that even one of the offshore industry’s brightest stars has hidden shortcomings: accepting questionable clients and failing to monitor multimillion-dollar money flows.

The leaked files also include documents from government business registries in some of the world’s most secretive corporate havens in the Caribbean, the Pacific and Europe, such as Antigua and Barbuda, the Cook Islands and Malta. One-fifth of the world’s busiest secrecy jurisdictions are represented in these databases.

* * *

Many of the stories focus on how politicians, multinationals, celebrities and high-net-worth individuals use complex structures of trusts, foundations and shell companies to protect their cash from tax officials or hide their dealings behind a veil of secrecy.  In the United States, the the Appleby files show how Ross, Trump’s commerce secretary, has used a chain of Cayman Islands entities to maintain a financial stake in Navigator Holdings, a shipping company whose top clients include the Kremlin-linked energy firm Sibur. Among Sibur’s key owners are Kirill Shamalov, Putin’s son-in-law, and Gennady Timchenko, a billionaire the U.S. government sanctioned in 2014 because of his links to Putin. Sibur is a major customer of Navigator, paying the company more than $23 million in 2016. When he joined Trump’s Cabinet, Ross divested his interests in 80 companies. But he kept stakes in nine companies, including the four that connect him to Navigator and its Russian clients. These revelations come against a backdrop of growing concerns about hidden Russian involvement in U.S. political affairs.

Among the key stories being released on Sunday are:

  • Wilbur Ross, Trump's commerce secretary, shares business interests with Vladimir Putin’s immediate family, and he failed to clearly disclose those interests when he was being confirmed for his cabinet position
  • About £10m ($13m) of the Queen's private money was invested offshore
  • Justin Trudeau's close adviser, Stephen Bronfman, helped move huge sums offshore
  • A key aide of Canada's PM has been linked to offshore schemes that may have cost the nation millions of dollars in taxes, threatening to embarrass Justin Trudeau, who has campaigned to shut tax havens
  • Lord Ashcroft, a former Conservative party deputy chairman and a significant donor, may have ignored rules around how his offshore investments were managed. Other papers suggest he retained his non-dom status while in the House of Lords, despite reports he had become a permanent tax resident in the UK

How is the Queen involved?

The BBC reports that the Paradise Papers show that about £10m ($13m) of the Queen's private money was invested offshore. It was put into funds in the Cayman Islands and Bermuda by the Duchy of Lancaster, which provides the Queen with an income and handles investments for her £500m private estate. There is nothing illegal in the investments and no suggestion that the Queen is not paying tax, but questions may be asked about whether the monarch should be investing in offshore finance. There were small investments in the rent-to-buy retailer BrightHouse, which has been accused of exploiting the poor, and the Threshers chain of off-licences, which later went bust owing £17.5m in tax and costing almost 6,000 people their jobs.

The Duchy said it was not involved in decisions made by funds and there is no suggestion the Queen had any knowledge of the specific investments made on her behalf. The Duchy has in the past said it gives "ongoing consideration regarding any of its acts or omissions that could adversely impact the reputation" of the Queen, who it says takes "a keen interest" in the estate.

The records show that as of 2007, the queen’s private estate invested in a Cayman Islands fund that in turn invested in a private equity company that controlled BrightHouse, a U.K. rent-to-own firm criticized by consumer watchdogs and members of Parliament for selling household goods to cash-strapped Britons on payment plans with interest rates as high as 99.9 percent.

Wilbur Ross' Russian connection

Of bigger impact to the US news cycle will be the revelation that Trump's commerce secretary, Wilbur Ross has retained an interest in a shipping company, Navigator Holdings, which earns millions of dollars a year transporting oil and gas for a Russian energy firm whose shareholders include Vladimir Putin's son-in-law and two men subject to US sanctions.

The leaked files showed a chain of companies and partnerships in the Cayman Islands through which Ross has retained his financial stake in Navigator.

As NBC details, Ross — a billionaire industrialist — retains an interest in a shipping company, Navigator Holdings, that was partially owned by his former investment company. One of Navigator’s most important business relationships is with a Russian energy firm controlled, in turn, by Putin’s son-in-law and other members of the Russian president’s inner circle.

In Ross’s case, the documents give a far fuller picture of his finances than the filings he submitted to the government on Jan. 15 as part of his confirmation process. On that date, Ross, President-elect Donald Trump’s choice for commerce secretary, submitted a letter to the designated ethics official at the department, explaining steps he was taking to avoid all conflicts of interest. That explanation was vital to his confirmation, because Ross held financial interests in hundreds of companies across dozens of sectors, many of which could be affected by his decisions as commerce secretary. Any one of them could represent a potential conflict of interest, which is why the disclosures, by law, are supposed to be thorough.

“The information that he provided on that form is just a start. It is incomplete,” said Kathleen Clark, an expert on government ethics at Washington University in St. Louis. “I have no reason to believe that he violated the law of disclosure, but in order … for the Commerce Department to understand, you’d have to have more information than what is listed on that form.”

 

Ross, through a Commerce Department spokesperson, issued a statement saying that he recuses himself as secretary from any matters regarding transoceanic shipping, and said he works closely with ethics officials in the department “to ensure the highest ethical standards.”

 

The statement said Ross “has been generally supportive of the Administration’s sanctions of Russian” business entities. But the statement did not address the question of whether he informed Congress or the Commerce Department that he was retaining an interest in companies that have close Russian ties.

In his submission letter to the government, Ross pledged to cut ties with more than 80 financial entities in which he has interests.

However, NBC News claims that the documents seen by the news organization along with a careful examination of filings with the Securities and Exchange Commission, "tell a different story than the one Ross told at his confirmation. Ross divested most of his holdings, but did not reveal to the government the full details of the holdings he kept."

In his letter to the ethics official of the Commerce Department, Ross created two lists: those entities and interests he planned to get rid of and those he intended to keep. The second list consisted of nine entities, four of which were Cayman Islands companies represented and managed by the Appleby law firm, which specializes in creating complex offshore holdings for wealthy clients and businesses. The Wilbur Ross Group is one of the firm’s biggest clients, according to the leaked documents, connected to more than 60 offshore holdings.

The four holdings on the list of assets that Ross held onto were valued by him on the form as between $2.05 million and $10.1 million. These four, in turn, are linked through ownership chains to two other entities, WLR Recovery Fund IV DSS AIV L.P. and WLR Recovery Fund V DSS AIV L.P., which were listed in Ross’ financial disclosure prior to confirmation, but were not among the assets he declared he would retain. According to an SEC filing, those entities hold 17.5 million shares in Navigator, which constitutes control of nearly one-third of the shipping firm.

The value of Ross’ investment could change substantially by the time the funds that hold Navigator shares wind up – and holds a significant upside. If the funds performs well enough, the general partnerships in which he is invested stand to receive 20 percent of the entire funds’ profits. In addition, Ross has reported billions in assets to Forbes magazine that did not appear on his government disclosure forms, which he later told the magazine he had placed in trusts that benefit his family members.

Ross started investing in Navigator in 2011, when WL Ross & Co. acquired a 19.4 percent stake, and his firm was granted two seats on Navigator’s board, one of which Ross filled himself early the next year. A few months later, with a bankruptcy court judge’s approval, WL Ross acquired a block of shares from the bankrupt financial services firm Lehman Brothers, becoming Navigator’s majority shareholder. In November 2013, Navigator went public. Shares that WL Ross had bought for about $8 each were put on the market at $19. Afterward Ross bragged at a conference for shipping investors that the investment had been “a home run.” Ross stepped down from Navigator’s board in November 2014 after he became vice chairman of the struggling Bank of Cyprus, which was well known for its dealings with Russian oligarchs. His Navigator board seat was taken by Wendy Teramoto, managing director and partner of WL Ross & Co., who left in 2017 to become Ross’ chief of staff at the Commerce Department.

“The disclosure requirements weren’t written with Wilbur Ross in mind,” said Kathleen Clark, “and I don’t think adequately provide the public or a government ethics official with an understanding of the wide variety of financial interests that he has.”

 

“You look at all of these names,” Clark said, referring to the financial entities, “and they actually look like a code. And what we actually have to do is find — in a sense — a code that decrypts what these names mean and what these companies actually do.”

She added the way the companies were listed was deliberately vague. “I would say this gives the appearance of transparency,” she said, referring to Ross’s disclosure documents. “It’s sort of fake transparency in a sense.”

The complexity of the offshore structures adds legal and reputational distance and obscures the full extent of Ross’s business relationships even as it allows him to profit from them, according to tax and ethics experts consulted by ICIJ.

The Office of Government Ethics, which is responsible for executive branch oversight, approved Ross’s arrangement, and it was left almost entirely unchallenged by the Senate.

Sen. Richard Blumenthal, D-Conn., said members of Congress who were part of Ross’ confirmation hearings were under the impression that Ross had divested all of his interests in Navigator. Furthermore, he said, they were unaware of Navigator’s close ties to Russia.

“I am astonished and appalled because I feel misled,” said Blumenthal. “Our committee was misled, the American people were misled by the concealment of those companies.” Blumenthal said he will call for the inspector general of the Commerce Department to launch an investigation.

A look at Navigator’s annual reports reveal an apparent conflict of interest. Navigator’s second-largest client is SIBUR, the Russian petrochemical giant. According to Navigator’s 2017 SEC filing, SIBUR was listed among its top five clients, based on total revenue for the previous two years. In 2016, Navigator’s annual reports show SIBUR brought in $23.2 million in revenue and another $28.7 million the following year. The business relationship has been so profitable that in January, around the time Ross was being vetted for his Cabinet position, Navigator held a naming ceremony for two state-of-the-art tankers on long-term leases to SIBUR.

One of the owners of SIBUR is Gennady Timchenko, a Russian billionaire on the Treasury Department’s sanctions list. He has been barred from entering the U.S. since 2014 because authorities consider him a Specially Designated National, or SDN, who is considered by Treasury to be a member “of the Russian leadership’s inner circle.”  The Treasury Department statement said that Timchenko’s activities in the energy sector “have been directly linked to Putin” and that Putin had investments with a company previously owned by Timchenko, as well as access to the company’s funds.

Daniel Fried, who was the State Department sanctions coordinator under President Barack Obama, said the connection to Timchenko’s interests should have raised alarm bells. “I would think that any reputable American businessman, much less a Cabinet-level official, would want to have absolutely no relationship — direct, indirect — … with anybody of the character and reputation of Gennady Timchenko,” Fried said. “I just don’t get it.”

Another major SIBUR shareholder is Leonid Mikhelson, who, like Timchenko, has close ties to the Kremlin. One of his companies, Novatek, Russia’s second-largest natural gas producer, was placed on the Treasury’s sanctions list in 2014.

Included in the Appleby documents are details of an internal discussion that resulted in the law firm dropping Mikhelson as a client in 2014, over concerns regarding his financial affiliations. “I would say to anybody who asked,” said Fried, “treat SDNs as radioactive. Stay away from them.

A third shareholder of SIBUR – and deputy chairman of the board – is Kirill Shamalov, husband of Vladimir Putin’s daughter, Katerina Tikhonova. After the wedding, Shamalov’s meteoric rise to wealth led him to own as much as 21.3 percent of SIBUR’s stock until April, when he sold off around 17 percent for a reported $2 billion.

“It’s a new generation which is currently being prepared and groomed… to inherit whatever power and wealth Putin's team has accumulated over the past years,” said Vladimir Milov, a former deputy energy minister in Putin’s government who is now working with the opposition. Milov also said companies like SIBUR are often the way sanctioned Kremlin insiders have to keep doing business despite restrictions. 

 

The Commerce Department statement said Ross never met Timchenko, Mikhelson, or Shamalov. It said he was not on the board of Navigator in March 2011 when the ships in question were acquired, and said Sibur was not under U.S. sanctions now or in 2012 when the charter agreement with Navigator was signed. The statement said Ross was on the board of Navigator from 2012 to 2014, and that no funds managed by his company ever owned a majority of Navigator’s shares.

Fried said he has no doubt of the connections between SIBUR and the Kremlin. “If any senior official of the U.S. government, much less a Cabinet secretary … had any business dealings with sanctioned individuals, direct or indirect,” he said, “I would be appalled.”

The news comes at a time when every relationship between the Trump administration and Russia is closely scrutinized: Richard Painter, the chief White House ethics lawyer during the George W. Bush administration, said there needs to a close examination of whether Ross’ testimony to the Senate violated perjury laws. Painter also said Ross must recuse himself from all Russia-related matters because of the SIBUR connection.

“Secretary Ross cannot participate in any discussion or decision-making or recommendation about sanctions imposed on Russia or on Russian nationals when he owns a company that is doing business with Russian nationals who are either under sanctions or who could come under sanctions in any future sanctions regime,” Painter said. “That would be a criminal offense for him to participate in any such matter.”

On Nov. 30, 2016, hours after being nominated as commerce secretary, Ross celebrated at Gramercy Tavern, an upscale Manhattan restaurant, an event hosted by Navigator Holdings. According to Bloomberg Businessweek, he and Butters arrived early at the chandeliered private room and had a conversation. “Your interest is aligned to mine,” Butters recalled Ross saying, according to Bloomberg. “The U.S. economy will grow, and Navigator will be a beneficiary.”

Butters told Bloomberg that as other guests arrived and tucked into sherry-sauce sea bass and pear buckle, they took turns congratulating Ross. “It was like – we have a chance now,” Butters told Bloomberg. “We have a chance to make some differences.”

(Much more on Ross' questionable business dealings can be found here)

* * *

In the ICIJ report, the consortium has put together the following infographic revealing what it calls "The Influencers", or 13 Trump advisers, donors and cabinet members:

U.S. President Donald Trump vowed to fight the power of global elites and told voters he would put "America First." But surrounding Trump are a number of close associates who have used offshore tax havens to conduct business. Scroll through their offshore stories

* * *

The Paradise Papers also show  Stephen Bronfman, Canadian Prime Minister Trudeau’s adviser and close friend, teamed up with Liberal Party stalwart Leo Kolber and Kolber’s son to quietly move millions of dollars to a Cayman trust. They reveal that Bronfman was involved in the movement of millions of dollars to offshore havens. Stephen Bronfman, heir to the Seagram fortune, who was instrumental in Trudeau’s successful bid for the leadership of the Canadian Liberal party in 2013 and the premiership two years later, engaged through his family investment business in a complex web of entities in the US, Israel and the Cayman Islands. Multimillion-dollar cashflows between the three jurisdictions might legally have avoided taxes in the US, Canada and Israel.

The leaked documents unveil a close relationship between two wealthy families who collaborated to shift millions of dollars to the Cayman Islands. On one side were the Bronfman family, inheritors of the Seagram distillery fortune in Montreal. On the other side was the Cayman Islands-based trust of Leo Kolber, a former Canadian senator and powerhouse within the Liberal party Trudeau now leads.

* * *

Other royals and politicians with newly disclosed offshore ties include Queen Noor of Jordan, who was listed as the beneficiary of two trusts on the island of Jersey, including one that held her sprawling British estate; Sam Kutesa, Uganda’s foreign minister and a former U.N. General Assembly president, who set up an offshore trust in the Seychelles to manage his personal wealth; Brazil’s finance minister, Henrique de Campos Meirelles, who created a foundation in Bermuda “for charitable purposes”; and Antanas Guoga, a Lithuanian member of the European Parliament and professional poker player, who held a stake in an Isle of Man company whose other shareholders included a gambling mogul who settled a fraud lawsuit in the United States.

In addition to disclosures about politicians and corporations, the files reveal details about the financial lives of the rich and famous – and the unknown. They include Microsoft co-founder Paul Allen’s yacht and submarines, eBay founder Pierre Omidyar’s Cayman Island investment vehicle, and music star Madonna’s shares in a medical supplies company. Pop singer and social justice activist Bono – listed under his full name, Paul Hewson – owned shares in a company registered in Malta that invested in shopping center in Lithuania, company records show. Other clients listed their occupations as dog groomer, plumber and wakeboard instructor.

Madonna and Allen did not reply to requests for comment. Omidyar, whose Omidyar Network donates to ICIJ, discloses his investment to tax authorities, a spokeswoman said. Bono was a “passive, minority investor” in the Malta company that closed down in 2015, a spokeswoman said.

* * *

Glencore

One of Appleby’s top corporate clients was Glencore PLC, the world’s largest commodity trader. The files contain decades of deals, emails and multimillion-dollar loans to bankroll ventures in Russia, Latin America, Africa and Australia. Glencore was such an important client that it once had its own room within Appleby’s offices in Bermuda.

Company board meeting minutes document how Glencore representatives leaned on Daniel Gertler, an Israeli businessman with high-level friends in the Democratic Republic of the Congo, to help seal a deal for a valuable copper mine. Glencore lent millions to a company, widely believed to belong to Gertler, described in a U.S. Department of Justice inquiry as a conduit for bribes. Gertler and Glencore were not named in the case.

Glencore said its background checks on Gertler were “extensive and thorough.” The Justice Department investigation “does not constitute evidence of anything against Mr. Gertler,” his lawyers said, adding that he “rejects absolutely any allegations of wrongdoing or criminality by him.” No loans were used improperly or for inappropriate purposes, Gertler’s lawyers said.

(Much more on Glencore here)

* * *

A full list of the politicians implicated in the Paradise Papers can be found here.

* * *

Summarizing much of the data contained in the Paradise Papers, is the following brief primer from the BBC revealing "how to hide your cash in 5 easy steps":

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Live Feed: Witnesses Say 15 People Are “Down” After Gunman Opens Fire In Texas Church

Update: NBC News now reporting that several people have been killed in today's shooting.

 

The FBI is also reportedly responding to the incident. Police haven't said how many people have been shot, but the number could be more than 20. The shooter reportedly fired more than 20 rounds from a semiautomatic weapon.

* * *

In an incident that authorities are describing as a "mass casualty situation," between 12 and 15 people have reportedly been shot at First Baptist Church in Sutherland Springs, Texas, a small community south east of San Antonio. The people were presumably attending a Sunday church service when a gunman opened fire. Few details are available. The gunman is still "active" according to the latest police reports.

Here's a live feed from the scene courtesy of local ABC affiliate KSAT 12:

Unconfirmed reports on social media claim that more than a dozen people have been injured during the shooting, though it is not clear yet how serious their injuries are. Kens5 Eye Witness News claims that a two-year-old is among the shooting victims. Neighbors are reporting that a gunman entered the church and opened fire before taking off in a vehicle.
 

 

Police say the suspect is dead, and that children were reportedly among the victims.

 


 

Multiple agencies were responding and medical helicopters were dispatched. Check back for more details.

 

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Paul Manafort’s Lawyer Explains Why His Client Has Three Passports

Paul Manafort and Rick Gates must be growing anxious after spending the last week cooped up in their lavish, multimillion-dollar homes. And in the spirit of regaining his client’s liberty  – at least until such time as court proceedings against them are ready to proceed – Paul Manafort’s lawyer, Kevin Downing, has filed a motion to modify Manafort’s terms of release that would, among other things, allow him to travel to Washington DC, Florida, New York State and Virginia, though he would still be forbidden from leaving the country.

The filing was released Saturday ahead of a pretrial hearing set for Monday, where US District Judge Amy Berman Jackson will rule on the request. Right now, Manafort and Gates must check in with law enforcement daily by phone, and are only allowed to leave for court appearances, to meet lawyers, for medical emergencies and for religious observance.

Prosecutors and officials from pre-trial services have said Manafort is a flight risk because of his extensive ties abroad, and have asked for special monitoring. Manafort has already surrendered all three of his passports, which his lawyer argues were all obtained legally and for legitimate business purposes.

In public remarks made following Manafort’s arraignment, his lawyer, Kevin Downing, maintained that Manafort worked for a  pro-European Union campaign for the Ukrainians, where he sought to further the cause of democracy and to help the Ukrainians come closer to the US and to the EU. Those activities ended in 2014, he said, two years before Manafort joined the Trump campaign.

Downing added that he found it “ridiculous” that the Manafort’s use of offshore accounts amount to a scheme to conceal funds from the US government, while also furnishing an explanation for why Manafort has three US passports – all of which were obtained legally.

Along these travel-related lines, much has been made of Mr. Manafort’s possession of three different passports. (See Government Memorandum at 12, n.5). While some reports have painted this as though Mr. Manafort is akin to a 68-year-old “Jason Bourne” character, the facts are much more mundane. Mr. Manafort possessed a passport, the type of which is generally held by most U.S. citizens. He also possessed a second passport to submit with visa applications to certain foreign countries. (The process for obtaining a visa can sometimes be lengthy and U.S. citizens who travel abroad frequently are no doubt familiar with this circumstance.) The third U.S. passport was applied for and obtained by Mr. Manafort only after he lost his primary passport. Months later, Mr. Manafort found that passport and contacted his passport services agency to advise them, and the U.S. State Department, with respect to the same.

Downing pointed out several inconsistencies in the government’s case to help justify his client’s release that could be read as a primer for his defense strategy.

The parties disagree as to the weight of the evidence outlined against Mr. Manafort. Although the Indictment reads like a criminal tax case, there are no Title 26 (Internal Revenue Code) counts in the charging document.

While Manafort was initially released on an unsecured bail of $10 million, he has offered to pledge a mix of properties and life insurance policies to secure his release. His lawyer proposes that Manafort’s family members will sign sureties to help secure his release. Manafort will agree not to apply for any new travel documents such as passports or travel cards. The assets Manafort is offering to pledge have a combined value of $12.5 million.

  • East 5th Avenue, New York, NY (approximate net asset value $3 million); Baxter Street, New York, NY (approximate net asset value $3.5 million).
  • St. James Drive, Palm Beach Gardens, FL (approximate net asset value $1.5 million.
  • A combination of life insurance policies held in trust and/or in his or his wife’s name (approximate net asset value $4.5 million).

Manafort will also refrain from traveling overseas, and report to the Pretrial Services Agency by telephone once per week.He also will agree not to take any loans against the properties being pledged toward his bond.

Read the whole indictment below:

11 4 17 Manafort Motion to Modify Conditions by zerohedge on Scribd


 

 

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New FOIA Documents Reveal FBI Scramble To Preserve Records In Uranium One Scandal

Submitted by iBankCoin.com

An internet researcher has uncovered what appears to be proof that the FBI was investigating the Uranium One deal back in 2015 – months after the Peter Schweizer book Clinton Cash exposed the scheme, along with an article in the New York Times which laid out allegations of criminal malfeasance by the Clintons, their charitable foundation, and several associates.

Twitter user Katica (@GOPPollAnalyst) – who notably discovered Hillary Clinton’s IT guy ‘Stonetear’ asking Reddit users how to strip Clinton’s name from archived emails – discovered several Preservation and Records requests sent by an FBI special agent to various agencies involved in the approval of the Uranium One deal on August 28th, 2015, as first published by The Conservative Treehouse. Katica found the requests buried in an FBI file released via the Freedom of Information Act (FOIA).

Revealing Timeline

While the Clinton email investigation was launched in March of 2015 after it was revealed that Secretary of State Hillary Clinton used a personal server and non-approved email accounts to conduct government business, reports from August, 2015 revealed that the FBI investigation was actually a criminal probe – though most assumed it was simply covering Clinton’s mishandling of classified information and not the content of her emails.

What Katica discovered is that weeks after the criminal probe began, the FBI sent notices to every agency involved in the Uranium One approval process to preserve records.

This is huge… 

The agencies which received the request included the Nuclear Regulatory Commission, the U.S. Dept. of Treasury, the Office of Director of National Intelligence (ODNI James Clapper), The National Counter Terrorism Center, and the U.S. Department of Energy (DOE).

Five days after the initial request, the same FBI agent sent another round of notifications to the same agencies, adding the National Security Agency (NSA) and the U.S. Secret Service (USSS).

The next day, September 3rd, 2015three more agencies were added to the preservation request: The CIA, the Defense Intelligence Agency (DIA) and the Department of Defense (DOD)

At this point, every single member of the Committee on Foreign Investment in the United States (CFIUS) which signed off on the Uranium One deal was served with a notice to preserve records. 

As The Conservative Treehouse notes:

It would be intellectually dishonest not to see the very likely attachment of the special agent’s action.  That is to say an FBI probe originating as an outcome of information retrieved in parallel to the timing of the “criminal probe” of Secretary of State Hillary Clinton’s email use.

 

The sequence of events highlights a criminal probe starting [early August 2015], followed by notifications to the “Uranium One” CFIUS participants [late August 2015].

 

If you consider the larger Clinton timeline; along with the FBI special agent requests from identified participants; and overlay the Nuclear Regulatory Commission as the leading entity surrounding the probe elements; and the fact that the CFIUS participants were the recipients of the retention requests;  well, it’s just too coincidental to think this is unrelated to the Uranium One deal and the more alarming implications.

FBI Mole 

Let’s not forget a bombshell report from The Hill two weeks ago which revealed that as early as 2009, the FBI – led by Robert Mueller at the time, had a mole in the Russian uranium industry, and that the agency had evidence that “Russian nuclear officials had routed millions of dollars to the U.S. designed to benefit former President Bill Clinton’s charitable foundation during the time Secretary of State Hillary Clinton served on a government body that provided a favorable decision to Moscow” – a deal which would grant the Kremlin control over 20 percent of America’s uranium supply. 

The mole was forced to sign an iron-clad non-disclosure agreement (NDA) which threatened criminal penalties for revealing information, even to Congress. After a request was made by Reps Ron DeSantis (R-FL) and Chuck Grassley (R-IA) calling for the Justice department to invalidate the NDA, the gag order was lifted, and the FBI informant was authorized to speak with congress.

Tony Podesta and Uranium One

While one-time Trump campaign manager Paul Manafort turned himself in to the FBI a week ago on charges of money laundering, let’s not forget what a former Podesta Group executive interviewed by Special Counsel Robert Mueller told Tucker Carlson Tonight: the FBI probe is now focusing on people in Washington who have worked as de-facto operatives on behalf of Russian government and business. To that end, he had quite a bit to say about his former boss Tony and his relationship to the Uranium One deal.

  • In late 2013 or early 2014, Tony Podesta and a representative for the Clinton Foundation met to discuss how to help Uranium One – the Russian owned company that controls 20 percent of American Uranium Production – and whose board members gave over $100 million to the Clinton Foundation.
  • In 2013, John Podesta recommended that Tony hire David Adams, Hillary Clinton’s chief adviser at the State Department, giving them a “direct liaison” between the group’s Russian clients and Hillary Clinton’s State Department.
  • “Tony Podesta was basically part of the Clinton Foundation.”

As far as the current state of the FBI investigation, “They are more focused on facilitators of Russian influence in this country than they are on election collusion,” Carlson’s source told Fox.

Tying it together – previous reports of Federal investigations into the Clinton Foundation: 

Katica’s FOIA discovery corroborates a New York Times report from November 1, 2016, which asserts that an FBI investigation was kicked off based on revelations of pay-for-play in the book “Clinton Cash” written by Peter Schweizer:

The investigation, based in New York, had not developed much evidence and was based mostly on information that had surfaced in news stories and the book “Clinton Cash,” according to several law enforcement officials briefed on the case.

 

The book asserted that foreign entities gave money to former President Bill Clinton and the Clinton Foundation, and in return received favors from the State Department when Mrs. Clinton was secretary of state. Mrs. Clinton has adamantly denied those claims. -NYT

The Wall St. Journal also reported last October that five FBI field offices were investigating the Clinton Foundation; New York, Los Angeles, Washington, Little Rock and  Miami, and “were collecting information about the Clinton Foundation to see if there was evidence of financial crimes or influence-peddling, according to people familiar with the matter.”

The FBI field office in New York had done the most work on the Clinton Foundation case and received help from the FBI field office in Little Rock, the people familiar with the matter said. –WSJ

And in November, as tweeted by Wikileaks and reported on by the Dallas Observer, the Clinton Foundation has been under investigation by the IRS since July of 2016, after 64 GOP members of Congress received letters urging them to push for an investigation. The investigation has been notably held at the Dallas IRS office – far away from Washington.

The Earle Cabell Federal Building in downtown Dallas is an all purpose office complex, a bastion of federal bureaucracy located at 1100 Commerce St. Most people come for a passport or to get business done in front of a federal judge. But inside, a quiet review is underway that has direct ties to the raging presidential election: The local branch of the IRS’ Tax Exempt and Government Entities Division is reviewing the tax status of the Bill, Hillary and Chelsea Clinton Foundation.

So – while the FBI investigation into Hillary Clinton was sold as a simple matter of mishandling of classified material, we now have proof that the FBI set their sights on the Uranium One scandal weeks after they began looking into Hillary Clinton’s emails. We also know that five FBI field offices and the IRS have been investigating the Clinton Foundation on accusations of pay-to-play and other criminal acts. 

Bets on who’s indicted next?

Flashback to October 27, 2016

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Washington Stomps On Civil Liberty

Authored by Paul Craig Roberts,

The insouciant American electorate is so inattentive that it routinely elects enemies of civil liberty to represent the public in Congress. Last Wednesday Rep. Adam Schiff (D, CA), Rep. Trey Gowdy ( R, SC), Sen. Dianne Feinstein (D, CA), Sen. Mark Warner (D, VA), Rep. Jackie Speier (D, CA), Sen. Tom Cotton (R , AR ), and Rep. Joaquin Castro (D, TX) tried to intimidate executives from Facebook, Twitter, and Google into blocking all digital dissent to the anti-Trump/Russian line taken by the DNC and military/secrurity complex and to serve as spy agencies for the CIA.

Two of the above – Gowdy and Cotton – are Republicans who have aligned themselves with the attack on Russia and Republican President Trump. What unites the members of the two parties is that they want a police state. Jackie Speier demands to know from Google why Google hasn’t “shut down RT on YouTube.” Joaquin Castro wants messages linked to Russia turned over to the US government. Trey Gowdy wants false statements blocked, which would mean that the entire print and TV media in the US would be shut down along with Congress, John Brennan, Robert Mueller, and James Comey. Gowdy does not know that the First Amendment guarantees free speech and leaves it up to the public to decide what is true and what is false.

You tell me.

What kind of insouciant people are capable of electing representatives who do not respect the Bill of Rights?

Is a country whose government does not respect its own Constitution a democracy? Is such a country an exceptional, indispensable country?

Or is it a completely corrupt entity whose government no longer has the slightest allegience to the Bill of Rights and the US Constitution?

What is the quality of an electorate that sends those with a police state mentality to represent them in the government that has power over them?

Are we witnessing the destruction of democracy by the electorate?

Is the failure of the American people staring us in the face?

Are you amazed that it is the executives of Facebook, Twitter, and Google, and not the members of Congress who have sworn to uphold the Constitution of the United States, who point out to US Representatives and Senators that their demands for censorship and spying are unconstitutional?

What is the liberal/progressive/left, which believes that good resides in government and evil in the private sector, to make of this?

Is the hatred of dissent so great that nothing else is important?

Here is a report on Wednesday’s hearings by the House and Senate Intelligence (sic) committees on “extremist” views (via Global Research's Andre Damon)…

Lawmakers Demand Tech Companies Censor Journalists and Conduct Mass Surveillance

Wednesday’s hearings by the House and Senate Intelligence committees on “extremist” political views served as the occasion for members of Congress to urge technology companies to flagrantly violate the US Constitution by censoring political speech, carrying out mass surveillance, and muzzling journalists in pursuit of the government’s geopolitical aims.

The hearings revolved around allegations, promoted ceaselessly in recent months by the intelligence agencies, leading figures within the Democratic Party, and newspapers such as the New York Times, that social opposition to the political establishment results from “fake news” promoted by Russia.

As Democratic Congressman Adam Schiff put it, “Russia” promoted “discord in the US by inflaming passions on a range of divisive issues” and sought to “mobilize real Americans to sign online petitions and join rallies and protests.”

The basic problem, however, as Schiff put it, is “not just foreign.” The algorithms used by Facebook and Twitter have the “consequence of widening divisions among our society.” Schiff complained:

“What ends up percolating to the top of our feeds tends to be things we were looking for,” as opposed to US government propaganda disseminated by the establishment media, which he referred to as “true information.”

Congressman Adam Schiff

In line with Schiff’s assessment, members of Congress who participated in the hearings spent the bulk of their time demanding that the companies censor such “fake” news, which they equated with the writings of exiled journalist Julian Assange and other political dissidents.

It is a testament to the decay of American democracy that it was left to the representatives of Facebook and Twitter, who have been broadly accused of violating users’ privacy for their own financial gain, to inform members of Congress about the ABC of constitutional law.

In an exchange that embodied the total contempt for freedom of speech that pervades the ruling elite, South Carolina Representative Trey Gowdy demanded that Facebook and Twitter block their users from making inaccurate statements about the current day of the week.

“Can I ‘say today is Thursday’,” the South Carolinian demanded. “What are you going to do with that?” Gowdy asked which constitutional amendment protects the right of people to make such statements, totally oblivious that almost all false statements are protected under the First Amendment.

Colin Stretch, Facebook’s general counsel, fighting back a skeptical smile, replied:

“There is Supreme Court precedent on that…”

Facebook General Counsel Colin Stretch

Gowdy, befuddled, demanded: “On which side?” Stretch answered:

“That it is, in most cases, protected.” He continued: “On Facebook, our job is not to decide whether content is true or false.”

Although the representatives of the technology companies largely played along with the narrative of “Russian meddling” in American politics, their resistance to the most flagrant censorship demanded by the government piqued the ire of the senators leading the witch-hunt.

“I don’t think you get it,” fumed Senator Dianne Feinstein, who said the past year had seen “a cataclysmic change” in American politics. This is “the beginning of cyber warfare,” she declared, and technology companies “have to really take a look at that and what role you play.”

Senator Mark Warner, for his part, complained that his accusations had been “frankly blown off by the leaderships of your companies and dismissed.”

Earlier this month, Google removed Russia Today (RT), a Russian-sponsored TV station and online news outlet that reports stories largely censored by the mainstream press, from its list of “preferred” channels on YouTube. Feinstein took issue with Google’s statement that it revoked RT’s status as a preferred channel for non-political reasons, and demanded to know why Google had not acted against RT earlier.

Google’s general counsel Kent Walker replied:

“We have carefully reviewed the content of RT to see that it complies with the policies that we have against hate speech, violence, etc. So far, we have not found violations.”

California Democratic representative Jackie Speier asserted that RT “seeks to influence politics and fuel discontent in the United States.” She asked:

“Why have you not shut down RT on YouTube? … It’s a propaganda machine, Mr. Walker, the intelligence community says it’s an arm of one of our adversaries.”

The clashes continued. Senator Tom Cotton demanded to know why Twitter refused to turn its platform over to the CIA in order to conduct mass surveillance. He asked:

“Do you see an equivalency between the Central Intelligence Agency and the Russian intelligence services?”

Sean Edgett, Twitter’s general counsel, replied:

“We’re not offering our service for surveillance to any government.”

Cotton likewise demanded that Twitter censor WikiLeaks’ editor Assange.

“The current director of the CIA, Mike Pompeo, as well as this committee, has labeled WikiLeaks a non-state hostile intelligence service who aids hostile foreign powers like the Kremlin,” he said. “Yet, to my knowledge, Twitter still allows him to operate uninhibited.”

Receiving a reply from Twitter general counsel Edgett that the company applies its policies “without bias,” Cotton retorted:

“Is it biased to side with America over our adversaries?”

In yet another incitement for technology companies to violate the Constitution, this time the Fourth Amendment, which prohibits unreasonable searches and seizures, Texas Democratic Congressman Joaquin Castro asked:

“Are you also intending to turn over to the committee any kind of direct messages” on accounts suspected of being linked to Russia?

When Edgett pushed back that this would be possible only through legal channels, Castro responded:

“Certainly you’re not making the argument that a Russian account, a fakely created account, has some protection of privacy here.”

Edgett replied:

“Some users may end up being fake. Others will be real.”

The most surprising element of the hearings, however, was the extent to which Walker, Google’s general counsel, sought to separate Google’s search tools from the social networks operated by Facebook and Twitter when it comes to “fake news.”

In reference to a question regarding fake news, Walker interjected:

“I think there’s a distinction between say Google search, whose goal is to provide accurate, relevant, comprehensive information and social network concerns,” such as those related to Twitter and Facebook. “We think the heart and soul of the products is to try to provide useful and, to the extent we can, accurate information to users.”

This was in addition to his prepared testimony, where he noted:

“At Google News, we use fact check labels to spot fake news. At Google search, we have updated our quality guidelines and evaluations to help surface more authoritative content from the web.”

Based on the stated goal of fighting “fake news,” Google has implemented sweeping changes to its search algorithm that has led search traffic to 13 leading left-wing, progressive and anti-war sites to plunge 55 percent. Search traffic from Google to the World Socialist Web Site has fallen by 74 percent, and the site has been blocked from Google News.

Wednesday’s testimony makes clear the political motives behind Google’s actions. Rather than seeking, as it publicly claims, to provide “true” and “authentic” content, Google is acting as the proxy of the US government and its agencies to muzzle its critics and political opponents.

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Donna Brazile Says Clinton Campaign Officials Made Her Feel Like “Patsey The Slave”

The Democratic Party's nominal support for "identity politics" has once again been exposed as little more than hollow virtue-signaling…

By now, it’s become clear that the Democratic party establishment installed Donna Brazile has the head of the DNC expecting her to be an obedient stooge who would turn a blind eye to the endemic corruption and mismanagement inside America’s oldest major political party. Unfortunately for them, Brazile had no intention of keeping quiet when she discovered that Obama’s negligence had left the party in debt, effectively allowing the Clinton to play a deciding role in doling out resources, setting strategy and myriad other issues.

A year after Trump’s upset victory over Clinton poleaxed the Washington establishment and smug Democratic elitists who felt it was their candidate’s god-given right to effortlessly slide into office despite being one of the most unpopular major-party candidates in recent memory, Brazile is speaking out in a new book, excerpts from which have been published in Politico and the Washington Post.

In one detail printed today by WaPo, Brazile recounts how Clinton’s top aides repeatedly disrespected and demeaned her, which she equated to being treated like a slave.

Brazile alleges that Clinton’s top aides routinely disrespected her and put the DNC on a “starvation diet,” depriving it of funding for voter turnout operations.

 

As one of her party’s most prominent black strategists, Brazile also recounts fiery disagreements with Clinton’s staffers — including a conference call in which she told three senior campaign officials, Charlie Baker, Marlon

 

Marshall and Dennis Cheng, that she was being treated like a slave.

 

“I’m not Patsey the slave,” Brazile recalls telling them, a reference to the character played by Lupita Nyong’o in the film, “12 Years a Slave.” “Y’all keep whipping me and whipping me and you never give me any money or any way to do my damn job. I am not going to be your whipping girl!”

Over the past two days, Brazile has revealed how former DNC Chairwoman Debbie Wasserman Schultz effectively ceded control of the party to the Clinton campaign, which looted funds from state party organizations and restricted the money flowing into the DNC after agreeing to pay off most of its debt.

She also revealed that she considered replacing Clinton with Joe Biden after she collapsed during a ceremony at the 9/11 memorial. But most shockingly of all, she said that she feared for her life after the murder of DNC staffer Seth Rich, which she feared may have been planned by nefarious elements from within the party.

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Is The U.S. Navy Being Truthful With Its Report On Recent Crash Incidents?

Authored by Duance Norman via Free Market Shooter blog,

Recently, Free Market Shooter (as well as the US Navy) questioned the cause of a string of crashes involving Navy destroyers and cruisers… all occurring this year:

Recently, the US military, unable to come up with a cause for the incidents, began investigating something else – “compromised computer systems”:

 

The military is examining whether compromised computer systems were responsible for one of two U.S. Navy destroyer collisions with merchant vessels that occurred in recent months, Vice Admiral Jan Tighe, the deputy chief of naval operations for information warfare, said on Thursday.

 

Naval investigators are scrambling to determine the causes of the mishaps, including whether hackers infiltrated the computer systems of the USS John S. McCain ahead of the collision on Aug. 21, Tighe said during an appearance at the Center for Strategic and International Studies in Washington.

 

The presumption that has been made is that these vessels are being hacked, China is the responsible party, given the proximity of the vessel crashes to the nation, as well as recent incidents where the US and China have butted heads.  But it is worth asking; are these vessels being hacked?  More importantly, if they are being hacked, who is hacking the vessels, and why?

However, this author did not discount other possible causes for the incidents, including complacent Navy sailors…

It is also worth noting that US Navy vessels do not broadcast an AIS signal (which can be seen on www.marinetraffic.com) with their respective position, like nearly all other vessels, due to obvious security/defense reasons. You almost never hear news of large commercial ships crashing into each other, which is due not just to AIS, but due to the fact that they actively try to broadcast their position by other means, such as running lights.

 

Which brings in the possibility of simple human error from US Navy operators as being the cause of these crashes.  Could it be that simple complacency and/or lack of proper training has resulted in these incidents? Given the professionalism of our military, that seems unlikely, but it wouldn’t be the first (and almost certainly won’t be the last) time it has happened.

…a theme which was commonly brought up in responses to this article after it was posted on The Burning Platform:

  • Here’s a more likely scenario – its driven and manned by a bunch of incompetent sailors, who very well may have gotten there through some kind of affirmative action nonsense, or social promotion, where pople get qualifications on things they aren’t competent enough to handle because no CO wants to get accused of racism or sexism for failing a black/women/whatever person on the oral board for underway watches. I’ve never been in the Navy, but I’ve seen it, many times. People given way more responsiblity that they are competent to handle, and you just sit back and wait for them to do something stupid, while hoping no one gets hurt. Also, they are probably spending more time doing mandated training on SJW type nonsense than learning how to sail their boat.
  • Never attribute something to highly complex malice when it can easily be contributed to stupidity and/or incompetence. Thats how Occam would slice it.
  • A complete breakdown in seafaring culture, from top to bottom. The lookouts either failed or had their reports ignored. The radarmen failed to kep track. The bridge lookouts failed, the officer of the deck failed, and the C/O failed by not ensuring that he had competent people at every position. His C/O failed because he knew that the ship captain was incapable of taut management, and likely knew that many of the junior officers and petty officers were untrained and incompetent.
  • A complete failure of culture. God help them if they become hard targets in a shooting engagement.
  • I’ve worked on vessels in the oil field my whole life and have seen the decline in discipline and accountability. With so many wireless devices it’s almost impossible to keep people focused on their task. If they would disconnect the internet from these vessels and keel hull a few of the captains most of the problem would go away.
  • Hacking, GPS spoofing, etc are all things that should be investigated. However IMO they are unlikely. What seems more likely to me is there is a breakdown of operational discipline.
  • However this was brought on is open for much debate. A large factor that I think contributes, is the shift away from the military from being an instrument of death to our enemies to a global force for good and social engineering experiments.

And in the case of the USS Fitzgerald and USS John S. McCain, the Navy has ruled that incompetence was indeed the cause of the incidents:

The collision between Fitzgerald and Crystal was avoidable and resulted from an accumulation of smaller errors over time, ultimately resulting in a lack of adherence to sound navigational practices. Specifically, Fitzgerald’s watch teams disregarded established norms of basic contact management and, more importantly, leadership failed to adhere to well-established protocols put in place to prevent collisions. In addition, the ship’s triad was absent during an evolution where their experience, guidance and example would have greatly benefited the ship.

 

The collision between John S. McCain and Alnic MC was also avoidable and resulted primarily from complacency, over-confidence and lack of procedural compliance. A major contributing factor to the collision was sub-standard level of knowledge regarding the operation of the ship control console. In particular, McCain’s commanding officer disregarded recommendations from his executive officer, navigator and senior watch officer to set sea and anchor watch teams in a timely fashion to ensure the safe and effective operation of the ship. With regard to procedures, no one on the Bridge watch team, to include the commanding officer and executive officer, were properly trained on how to correctly operate the ship control console during a steering casualty.

Is the Navy being truthful in its assessment of these incidents?  More than likely, yes.  But it should be acknowledged that the Navy could be “covering up” another cause of the incident, which could be anything from the aforementioned hacking, to problems with the Navy’s Aegis system, as was previously stated on Free Market Shooter:

A far more likely scenario is that there is a problem with the Aegis system and/or other navigation systems on US naval vessels. The US Navy, known to cover up all sorts of problems in the past, would have every reason to mask the true reason behind these collisions if they are tied to a defective weapons system. Notably, the unreliable nature of the US ground-based interceptor program under questionable test conditions has led many to believe that the system is just another failed defense project sucking up billions of taxpayer dollars.  It is not far-fetched to believe that one of our deployed systems is operating with a serious defect that has been swept under the rug by the DoD.

It is also worth acknowledging that if hacking indeed was to blame, the Navy would not acknowledge it publicly.  If hacking was the culprit, the Navy would not want the enemy to know that it had isolated the issue and corrected it, allowing the enemy to go along in the belief that they could continue to compromise Navy vessels.

However, in the cases of all of these US Navy crashes, the simplest explanation is likely the correct one, and the simplest explanation is the one that the Navy provided – a complete breakdown in seafaring culture.  Still, it has to be acknowledged that the Navy could be covering for a far larger problem. 

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