Nation Topics - Banking Predatory Lending | The Nation

Bush Sr. and others open doors for the Carlyle Group.

You have to hand it to George Bush the senior for hustle. Back in 1998, he took at least $80,000 in stock from Global Crossing in return for speaking for the company in Tokyo.

The Bush Administration is blocking efforts to rein in offshore banking.

Citigroup proclaims that its "private bankers act as financial architects,
designing and coordinating insightful solutions for individual client needs,
with an emphasis on personalized, confidential service." That is so colorless.
It might better boast, "We set up shell companies, secret trusts and bank
accounts, and we dispatch anonymous wire transfers so you can launder drug
money, hide stolen assets, embezzle, defraud, cheat on your taxes, avoid court
judgments, pay and receive bribes, and loot your country." It could solicit
testimonials from former clients, including sons of late Nigerian dictator Sani
Abacha; Asif Ali Zardari, husband of Benazir Bhutto, former prime minister of
Pakistan; El Hadj Omar Bongo, the corrupt president of Gabon; deposed
Paraguayan dictator Alfredo Stroessner; and Raul Salinas, jailed brother of the
ex-president of Mexico. All stole and laundered millions using Citibank
(Citigroup's previous incarnation) private accounts.

One lesser-known client, Carlos Hank Rhon of Mexico, has been the object of
a suit by the Federal Reserve to ban him from the US banking business. Hank
belongs to a powerful Mexican clan whose holdings include banks, investment
firms, transportation companies and real estate. Hank bought an interest in
Laredo National Bank in Texas in 1990. Six years later, when he wanted to merge
Laredo with Brownsville's Mercantile Bank, the Fed found that Citibank had
helped him use offshore shell companies in the British Virgin Islands to gain
control of his bank by hiding secret partners and engaging in self-dealing, in
violation of US law. One of the offshore companies was managed by shell
companies that were subsidiaries of Cititrust, owned by Citibank.

The Fed says that in 1993, Hank's father, Carlos Hank González, met
with his Citibank private banker, Amy Elliott, and said he wanted to buy a $20
million share of the bank with payment from Citibank accounts of his offshore
companies, done in a way that hid his involvement. Citibank granted him $20
million in loans and sent the money to his son Hank Rhon's personal account at
Citibank New York and to an investment account in Citibank London in the name
of another offshore company.

Citigroup spokesman Richard Howe said, "We always cooperate fully with
authorities in investigations, but we do not discuss the details of any
individual's account."

At press time, there were reports that Hank had negotiated a settlement
with the Fed, which the parties declined to confirm.

Thefts from other countries pale in relation to the looting of Russia, with
the indispensable assistance of the "Offshornaya Zona." The 1995 "loans for
shares" scheme transferred state ownership of privatized industries worth
billions of dollars to companies whose offshore registrations hid true owners.
More billions were stolen around the time of the August 1998 crash.

Insider banks knew about the coming devaluation and shipped billions in
assets as "loans" to offshore companies. The banks' statements show that their
loan portfolios grew after the date when they got loans from the Russian
Central Bank, which were supposed to stave off default. After the crash, it was
revealed that the top borrowers in all the big bankrupt banks were offshore.
For example, the five largest creditors of Rossiisky Credit were shell
companies registered in Nauru and in the Caribbean. As the debtors' ownerships
were secret, they could easily "disappear." Stuck with "uncollectable" loans
and "no assets," the banks announced their own bankruptcies. Swiss officials
are investigating leads that some of the $4.8 billion International Monetary
Fund tranche to Russia was moved by banks to accounts offshore before the 1998
crash.

The biggest current scam is being effected by a secretly owned Russian
company called Itera, which is using offshore shells in Curaçao and
elsewhere to gobble up the assets of Gazprom, the national gas company, which
is 38 percent owned by the government. Itera's owners are widely believed to be
Gazprom managers, their relatives and Viktor Chernomyrdin, former chairman of
Gazprom's board of directors and prime minister during much of the
privatization. Gazprom, which projected nearly $16 billion in revenues for
2000, uses Itera as its marketing agent and has been selling it gas fields at
cut-rate prices. Its 1999 annual report did not account for sales of 13 percent
of production. As its taxes supply a quarter of government revenues, this is a
devastating loss. Itera has a Florida office, which has been used to register
other Florida companies, making it a vehicle for investment in the US economy.

Even as Chase Manhattan prepares to take over J.P. Morgan, the bank's past is returning to haunt it. Recently revealed documents show that Chase, which was already known to have helped the Nazis, aided slavery here at home as two of its predecessor banks worked with an insurance company to insure slave owners against loss. Chase is, as far as can be determined, the first company whose forerunners have been identified as aiding both the perpetrators of the destruction of the Jews in Europe and those who enslaved Africans and their descendants in America.

Chase currently faces a class-action lawsuit filed in the United States by Holocaust survivors and victims' relatives who say their assets were frozen by Chase during World War II. Chase seized bank accounts and safe-deposit boxes from Jewish customers in France and did not return or properly account for them after the war, according to Kenneth McCallion, a lead attorney in the suit. In addition, a Treasury Department report declassified a few years ago concludes that Chase's Paris branch served as a banker for the Third Reich. J.P. Morgan, whose Paris office also worked closely with the Germans, is named in the lawsuit as well.

About a hundred years earlier, two US banks that were later taken over by Chase were described in an 1852 information circular as servicers of insurance policies issued on the lives of slaves. Titled "A Method by Which Slave Owners May Be Protected From Loss," the circular, put out by the National Loan Fund Life Assurance Company of London, describes, among others, The Merchants Bank and The Leather Manufacturers Bank, both of New York, as having the legal authority "to accept risks, adjust and pay claims." The Merchants Bank merged in 1920 with The Bank of the Manhattan Company, which in turn merged with Chase in 1955, according to the New York State Banking Department and Chase's website. The Leather Manufacturers Bank merged with The Mechanics National Bank in 1904, which then merged with Chase in 1926.

Deadria Farmer-Paellmann, the lawyer whose research earlier this year forced the Aetna Insurance Company to make a public apology for writing slave insurance policies, uncovered the documents exposing Chase. These revelations are certain to bolster the growing movement for slavery reparations.

The presidents of the two banks are listed on the circular as members of the New York board of directors of the London insurance company. The circular names medical examiners in Virginia, North Carolina and Washington, DC, who were authorized to examine slaves and also offers details about the insurance policies. For example: "A Slave aged 30 years can be insured for $500, for a year, for $11.25; and if he dies, the owner, although deprived of the revenue of his labour...will still not be unrecompensed for his loss; for there will still remain to him--not his Slave--but the $500 which constituted his value...." While it has still to be determined whether the two banks actually serviced any policies for slave owners, the existence of the circular proves that the banks actively sought and were part of such business.

Jim Finn, a Chase spokesperson, said that his organization needs more time to study the circular and related materials before he could comment. Farmer-Paellmann, who is continuing her research, said, "My hope is that if archival records show that policies were written, then Chase will apologize for helping to maintain that crime against humanity and pay restitution into a trust fund to benefit heirs of Africans enslaved in America."

In early September Chase agreed to permit an investigator who had probed Swiss banks for their Holocaust-era activities to review its records to determine how Chase had helped the Nazis. Chase should immediately open its archives to slavery researchers as well. Only then will a full record be available to determine what reparations, if any, should be paid.