Oct 052017
 

By James Petras, 99GetSmart

where-billionaires-come-from-cartoon

America has the greatest inequalities, highest mortality rate, most regressive taxes, and largest public subsidies for bankers and billionaires of any developed capitalist country.

In this essay we will discuss the socio-economic roots of inequalities and the relation between the concentration of wealth and the downward mobility of the working and salaried classes.

How the Billionaires become Billionaires

One of the most likely sources of billionaire wealth is through tax evasion in all of its guises and forms.

Contrary to the propaganda pushed by the business press, between 67% and 72% percent of corporations had zero tax liabilities after credits and exemptions … while their workers and employees paid between 25 – 30% in taxes. The rate for the minority of corporations, which paid any tax, was 14%.

According to the US Internal Revenue Service, billionaire tax evasion amounts to $458 billion dollars in lost public revenues every year – almost a trillion dollars every two years by this conservative estimate.

The largest US corporations sheltered over $2.5 trillion dollars in overseas tax havens where they paid no taxes or single digit tax rates.

Meanwhile US corporations in crisis received over $14.4 trillion dollars (Bloomberg claimed 12.8 trillion) in public bailout money, split between the US Treasury and the Federal Reserve, mostly from US tax payers, who are overwhelmingly workers, employees and pensioners.

The recipient bankers invested their interest-free or low interest US bailout funds and earned billions in profits, most resulting from mortgage foreclosures of working class households.

Through favorable legal rulings and illegal foreclosures, the bankers evicted 9.3 million families. Over 20 million individuals lost their properties, often due to illegal or fraudulent debts.

A small number of the financial swindlers, including executives from Wall Street’s leading banks (Goldman Sachs, J. P. Morgan etc), paid fines – but no one went to prison for the gargantuan fraud that drove millions of Americans into misery.

There are other swindler bankers, like the current Secretary of Treasury Steve Mnuchin, who enriched themselves by illegally foreclosing on thousands of homeowners in California. Some were tried; all were exonerated, thanks to the influence of Democratic political leaders during the Obama years.

Silicon Valley and its innovative billionaires have found novel way to avoid taxes using overseas tax havens and domestic tax write-offs. They increase their wealth and corporate profits by paying their local manual and service workers poverty level wages. Silicon Valley executives ‘earn’ a thousand times more than their production workers..

Class inequalities are further reinforced by ethnic divisions. White, Chinese and Indian multi-millionaires exploit Afro-American, Latin American, Vietnamese and Filipino workers.

Billionaires in the commercial conglomerates, like Walmart, exploit workers by paying poverty wages and providing few, if any, benefits. Walmart earns $16 billion dollar a year in profits by paying its workers between $10 and $13 an hour and relying on state and federal assistance to provide services to the families of its impoverished workers through Medicaid and food stamps. Amazon plutocrat Jeff Bezos exploits workers by paying $12.50 an hour while he has accumulated over $80 billion dollars in profits. UPS CEO David Albany takes $11 million a year by exploiting workers at $11 an hour. Federal Express CEO, Fred Smith gets $16 million and pays workers $11 an hour.

Inequality is not a result of ‘technology’ and ‘education’-  contemporary euphemisms for the ruling class cult of superiority – as liberals and conservative economists and journalists like to claim. Inequalities are a result of low wages, based on big profits, financial swindles, multi-trillion dollar public handouts and multi-billion-dollar tax evasion. The ruling class has mastered the ‘technology’ of exploiting the state, through its pillage of the treasury, and the working class. Capitalist exploitation of low paid production workers provides additional billions for the ‘philanthropic’ billionaire family foundations to polish their public image – using another tax avoidance gimmick – self-glorifying ‘donations’.

Workers pay disproportional taxes for education, health, social and public services and subsidies for billionaires.

Billionaires in the arms industry and security/mercenary conglomerates receive over $700 billion dollars from the federal budget, while over 100 million US workers lack adequate health care and their children are warehoused in deteriorating schools.

Workers and Bosses: Mortality Rates

Billionaires and multi-millionaires and their families enjoy longer and healthier lives than their workers. They have no need for health insurance policies or public hospitals. CEO’s live on average ten years longer than a worker and enjoy twenty years more of healthy and pain-free lives.

Private, exclusive clinics and top medical care include the most advanced treatment and safe and proven medication which allow billionaires and their family members to live longer and healthier lives. The quality of their medical care and the qualifications of their medical providers present a stark contrast to the health care apartheid that characterizes the rest of the United States.

Workers are treated and mistreated by the health system: They have inadequate and often incompetent medical treatment, cursory examinations by inexperienced medical assistants and end up victims of the widespread over-prescription of highly addictive narcotics and other medications. Over-prescription of narcotics by incompetent ‘providers’ has significantly contributed to the rise in premature deaths among workers, spiraling cases of opiate overdose, disability due to addiction and descent into poverty and homelessness. These irresponsible practices have made additional billions of dollars in profits for the insurance corporate elite, who can cut their pensions and health care liabilities as injured, disabled and addicted workers drop out of the system or die.

The shortened life expectancy for workers and their family members is celebrated on Wall Street and in the financial press. Over 560,000 workers were killed by opioids between 1999-2015 contributing to the decline in life expectancy for working age wage and salary earners and reduced pension liabilities for Wall Street and the Social Security Administration.

Inequalities are cumulative, inter-generational and multi-sectorial.

Billionaire families, their children and grandchildren, inherit and invest billions. They have privileged access to the most prestigious schools and medical facilities, and conveniently fall in love with equally privileged, well-connected mates to join their fortunes and form even greater financial empires. Their wealth buys favorable, even fawning, mass media coverage and the services of the most influential lawyers and accountants to cover their swindles and tax evasion.

Billionaires hire innovators and sweat shop MBA managers to devise more ways to slash wages, increase productivity and ensure that inequalities widen even further. Billionaires do not have to be the brightest or most innovative people: Such individuals can simply be bought or imported on the ‘free market’ and discarded at will.

Billionaires have bought out or formed joint ventures with each other, creating interlocking directorates. Banks, IT, factories, warehouses, food and appliance, pharmaceuticals and hospitals are linked directly to political elites who slither through doors of rotating appointments within the IMF, the World Bank, Treasury, Wall Street banks and prestigious law firms.

Consequences of Inequalities

First and foremost, billionaires and their political, legal and corporate associates dominate the political parties. They designate the leaders and key appointees, thus ensuring that budgets and policies will increase their profits, erode social benefits for the masses and weaken the political power of popular organizations.

Secondly, the burden of the economic crisis is shifted on to the workers who are fired and later re-hired as part-time, contingent labor. Public bailouts, provided by the taxpayer, are channeled to the billionaires under the doctrine that Wall Street banks are too big to fail and workers are too weak to defend their wages, jobs and living standards.

Billionaires buy political elites, who appoint the World Bank and IMF officials tasked with instituting policies to freeze or reduce wages, slash corporate and public health care obligations and increase profits by privatizing public enterprises and facilitating corporate relocation to low wage, low tax countries.

As a result, wage and salary workers are less organized and less influential; they work longer and for less pay, suffer greater workplace insecurity and injuries – physical and mental – fall into decline and disability, drop out of the system, die earlier and poorer, and, in the process, provide unimaginable profits for the billionaire class. Even their addiction and deaths provide opportunities for huge profit – as the Sackler Family, manufacturers of Oxycontin, can attest.

The billionaires and their political acolytes argue that deeper regressive taxation would increase investments and jobs. The data speaks otherwise. The bulk of repatriated profits are directed to buy back stock to increase dividends for investors; they are not invested in the productive economy. Lower taxes and greater profits for conglomerates means more buy-outs and greater outflows to low wage countries. In real terms taxes are already less than half the headline rate and are a major factor heightening the concentration of income and power – both cause and effect.

Corporate elites, the billionaires in the Silicon Valley-Wall Street global complex are relatively satisfied that their cherished inequalities are guaranteed and expanding under the Demo-Republican Presidents- as the ‘good times’ roll on.

Away from the ‘billionaire elite’, the ‘outsiders’ – domestic capitalists – clamor for greater public investment in infrastructure to expand the domestic economy, lower taxes to increase profits, and state subsidies to increase the training of the labor force while reducing funds for health care and public education. They are oblivious to the contradiction.

In other words, the capitalist class as a whole, globalist and domestic alike, pursues the same regressive policies, promoting inequalities while struggling over shares of the profits.

One hundred and fifty million wage and salaried taxpayers are excluded from the political and social decisions that directly affect their income, employment, rates of taxation, and political representation.

They understand, or at least experience, how the class system works. Most workers know about the injustice of the fake ‘free trade’ agreements and regressive tax regime, which weighs heavy on the majority of wage and salary earners.

However, worker hostility and despair is directed against ‘immigrants’ and against the ‘liberals’ who have backed the import of cheap skilled and semi-skilled labor under the guise of ‘freedom’. This ‘politically correct’ image of imported labor covers up a policy, which has served to lower wages, benefits and living standards for American workers, whether they are in technology, construction or production. Rich conservatives, on the other hand, oppose immigration under the guise of ‘law and order’ and to lower social expenditures – despite that fact that they all use imported nannies, tutors, nurses, doctors and gardeners to service their families. Their servants can always be deported when convenient.

The pro and anti-immigrant issue avoids the root cause for the economic exploitation and social degradation of the working class – the billionaire owners operating in alliance with the political elite.

In order to reverse the regressive tax practices and tax evasion, the low wage cycle and the spiraling death rates resulting from narcotics and other preventable causes, which profit insurance companies and pharmaceutical billionaires, class alliances need to be forged linking workers, consumers, pensioners, students, the disabled, the foreclosed homeowners, evicted tenants, debtors, the under-employed and immigrants as a unified political force.

Sooner said than done, but never tried!  Everything and everyone is at stake: life, health and happiness.

May 032013
 

By Iddhis Bing, 99GetSmart

Jerome Cahuzac, May 2012. Photo: Lionel Bonaventure

Jerome Cahuzac, May 2012. Photo: Lionel Bonaventure

“What bothers me is that I still have an account open with UBS… The only way to close it is to go there? With an account open there I’m fucked, since UBS is not necessarily the most hidden of banks. It stinks. Is any sort of proxy possible?…Above all, so that the holdings somehow stay at UBS and can be managed from here. It’s a word game pure and simple.”

Jerome Cahuzac was, until March 19, Budget Minister in François Hollande’s socialist government, in charge of the enforcement of tax laws during a time of fiscal crisis and high unemployment.

Regarded as one of the more effective ministers in the new government, Cahuzac lost little time before lowering the boom. He grilled members of the new administration about their finances, pointedly asking Marylise Lebranchu if there wasn’t a zero missing from her husband’s tax declaration, and in September 2012, announced a 19.6% levy on plastic surgery, an industry with powerful clients which may have felt untouchable, not least because Cahuzac is a plastic surgeon.

On December 5, 2012, the Mediapart website published the recording transcribed above, claiming it was Cahuzac’s voice speaking to a third party about a secret Swiss bank account.1

Despite his ardent denials over the next three months – first that the voice was not his, and later that the account had been closed in 2010 – Cahuzac’s position became untenable. He resigned his post and made a public apology.

Such are the twists and turns of fate that, in November, 2012, Cahuzac announced a crackdown on tax fraud and on April 2 of this year appeared before anti-corruption judges Renaud Van Ruymbeke and Roger Le Loire to face charges of concealing his UBS account (« blanchiment de fraude fiscale »).

Undeclared income transferred to a second country – in this case, Switzerland – in order to avoid taxes in the person’s home country – in this case, France – was and is a crime. As such, the actions Cahuzac confessed to on the phone tape are but a miniscule yet revealing part of the worldwide tax avoidance game which was detailed in the Invisible Money series on this site. The scandal in France is still in its initial stages. Deniability has now been exhausted. More bankers will come under pressure from prosecutors and more information about other tax evaders will leak out.

Cahuzac was able to hold on for more than three months because of support from within the Hollande regime. Pierre Moscovici, Minister of the Economy, cleared Cahuzac of wrong doing on February 5 and publicly embraced him in the Assembly, while Prime Minister Jean-Marc Ayrault stated he had “total confidence” in his Budget Secretary. The position taken by the Socialist government raises many questions about both the veracity of their public statements as well as their competence. People in France, from different parts of the political spectrum, find the assertion that they didn’t know about Cahuzac’s hidden holdings after early December to be stretching credulity past the breaking point.

Part of President François Hollande’s response was the swift passage of the bill requiring his ministers to register their holdings in the public record. They are now available on-line; the entire country can see how much each minister is worth. While not exactly a millionaire’s club, it comes close. Hollande has spent a good deal of his time since Cahuzac’s resignation on trade trips, to Morocco and last week, China.

On April 2, Cahuzac made a public statement to the effect that he had been “trapped in a spiral of lies and went astray,” and that his UBS account, some 600,000 Euros, had not been added to in a dozen years, was closed in 2010 and the monies would be returned to France. With his rugged good looks and forthright manner it was a splendid “modified, limited hang-out,” to steal a phrase from Richard Nixon.

Reality has continued to spiral out of control since then, with more information becoming public. There remain many problems with Cahuzac’s account.

This article, although it breaks no new ground, attempts to review important aspects of the story for English-speaking readers. L’Affaire Cahuzac is much more than the story of a fallen minister: it’s an x-ray of the French class system in which one can observe how one gets ahead these days. Cahuzac’s contacts and alliances among politicians and Important People are legion as are his friendships with those behind the scene.

Tax evasion has become a way of life for those in the upper strata of society, in France as in other countries. People do what they think they can get away with, and Cahuzac’s case provides but one example of how it’s done. French newspapers speak of the “scandals doubtless to come.”

“Shit, Jerome, you’ve got a few contradictions!”

Jerome Cahuzac, 60 years old, has used the rural department of Lot et Garonne as his political base for years. Until March of this year he represented it in the National Assembly. (French law allows politicians to hold multiple positions at the same time; for a few days after he resigned his ministry he publicly toyed with the idea of keeping his elected post.)

Trained as a surgeon, he began his medical career as a cardiologist before changing, in the early ’90s, to the lucrative profession of plastic surgery, where he specialized in hair transplants.

From 1988 to 1991, he worked for the government under Minister of Social Affairs Claude Evin, on policy relating to cigarettes and alcohol as well as pharmacology and medicines. In 1993, while maintaining his plastic surgery practice, he set up Conseil Cahuzac, where he acted as a “purely technical advisor” to the pharmaceutical laboratories. At the Conseil, he worked closely with Daniel Vial, the lobbyist’s lobbyist, the man who knows everyone in the “Paris that counts.”

A member of the Socialist Party since 1977, he first ran for the National Assembly in the Lot et Garonne in 1997, picking up other offices such as regional Counsellor General and Mayor of Villeneuve-sur-Lot along the way. A rebarbative critic of the Sarkozy government’s handling of finances and debt, he was also known as the “hairsplitter” in his position as the president of the Assembly’s Commission of Finances. (In short, make a lot of noise but do little, as Edouard Perrin learned when he tried to interest the Assembly in his findings on tax evasion.) He has, at various times, either worked for or taken Michel Rocard, Lionel Jospin, Dominique Strauss Kahn and François Hollande as his mentors.

He is known to frequent the Cercle de l’Union interalliée, and is a member of the Grand Orient de France, whose ruling counsel has now asked for his suspension.

In 2000, he made the now-fatal phone recording. In June of 2008, Remy Garnier, a pol from the Lot et Garonne, tried to interest Eric Woerth of the UMP (Sarkozy’s party) in allegations that Cahuzac had a Swiss bank account. No takers. Likewise, the far-right National Front has been suspiciously quiet throughout a debacle that should play to their benefit, saying only that they believe in the presumption of innocence. In 2007, Cahuzac was found guilty of paying a Filipina maid 250 Euros a month for 40 hours work off the books. He paid a fine and later helped the woman become legal in France.

So much for the Official Story, which raises a few questions of its own.2 Let’s look at a little more closely at Jerome Cahuzac’s other life.

Although he joined the Socialist Party in 1977, he has maintained long-standing connections to the right and far right through personal relationships. Jean-Pierre Emié is a close friend of thirty four years. Emié has ties to GUD, a far-right student union and was, until 2004, counsellor to the National Front for Paris and its suburbs. It was Emié who introduced Cahuzac to Philippe Peninque, the lawyer who opened Cahuzac’s UBS account. (Peninque and Emié share an office on Rue Marbeuf.) Peninque, a militant ideologue in GUD during his student days, is one of Marine le Pen’s “shadow advisors.”

Gilles August, Cahuzac’s lawyer until earlier this month (April, 2013), is a former member of UNI, a conservative student union. Manuel Valls, Minister of Security in the Hollande government, celebrated his 50th birthday at August’s house last summer, in company with Cahuzac and numerous stars from the firmament: singers Patrick Bruel and Nolwenn Leroy, the Marseille real estate mogul Marc Pietri, TV producer Michel Drucker… Cahuzac is a militant sportif, and one of his bike partners is (or was) Patrick Sayer of Eurazeo Investment Bank, a member of the CAC40, the upper crust of the French Bourse.

Among the many clients at Cahuzac’s plastic surgery practice were former GUD militants, Philippe Peninque, Stephane Fouks of Havas Worldwide Marketing, Socialist Party leader François Patriat, as well as, by Cahuzac’s admission, one Hervé Dreyfus.

Jerome Cahuzac’s younger brother, Antoine, worked at CCF (Crédit Commercial de France) from 1985 to 1988, and again from 1994 to 2000 in a variety of different capacities before taking a senior position at HSBC Bank France.

None of this is grist for the conspiracy mill but it does establish just how deep and wide ranging Cahuzac’s contacts are within French society. When Jean-Pierre Emié complained to Cahuzac that, “Shit, Jerome, you’ve got a lot of contradictions, you’ve got robbery and delinquence in Villeneuve and you support Socialist immigration and security policy!” Cahuzac did not seize on the particulars but replied, like the song says, on a whole other level: “Who doesn’t have contradictions? You, Jean-Pierre, you don’t have any contradictions?” Cahuzac once characterised himself as a “maquisard,” a resistance fighter; a man capable of many disguises and identities. In his case, the war being fought is entirely on behalf of the career of one Jerome Cahuzac.

Reyl & Co.

If Jerome Cahuzac is the fuse that lit the scandal, the dynamite – at least the first stick of dynamite to explode – is definitely the private investment bank Reyl & Co. Or as one of Mediapart’s sources put it, “If there’s one den of thieves that has as its clients French show biz personalities, captains of industry and politicians, it’s Reyl.” 3

The history of Reyl closely parallels what we might call The Golden Age of Tax Evasion, with an explosive growth of revenue in the first decade of this century when cheating on taxes reached the level of a national sport.

Reyl & Co. was founded by Dominique Reyl in 1978 as a private management company in Geneva. For twenty years or so it was indistinguishable from dozens of other financial “boutiques.” With increased pressure from the European Union on big banks like UBS, the unregulated, extremely discreet Reyl & Co. came into its own, converting into a full-fledged bank in 2010. Its modus operandi is to advise clients how they might conceal their money behind unnamed accounts or fictive organizations, giving them the ability to disavow holdings at one of the large banks.

A massive sum of money left Switzerland in 2010, the year Jerome Cahuzac “closed” his account. New regulations had come into effect: the Swiss had agreed to furnish information about certain kinds of accounts to the EU. His money did not come back to France; it moved to Singapore, where along with Hong Kong, Reyl had established subsidiaries. From Singapore it moved “off-shore,” to fiscal paradises with names like Wind Charm Corporation, Fame Eagle Corporation, Oceania City International Inc., Sunny Ridge Group Limited, Jade Green Investments Limited, Moonlite Overseas LTD. in the Seychelles – all Reyl subsidiaries. To add yet another layer of secrecy, these transaction are carried out by middlemen like Swiss-Asia Holding Ltd., so that nothing can be traced back to Reyl or its clients.4

Further questions regarding Cahuzac’s accounts are raised by my sources in the banking industry. In his confession the ex-Budget Minister employed the figure of 600,000 Euros to describe his holdings in Switzerland. This is obviously a very strict definition. 600,000 – barely enough, as one joker commented, to buy a modest apartment in Paris – is the kind of figure held in a individual’s name, while a significantly larger amount is hidden behind the bank’s firewall. Is Jerome Cahuzac the beneficiary, either directly or indirectly, of other non-declared accounts in Switzerland? Did he only confess to the one account that could be traced back to him?

Second, Singapore law makes it impossible for non-residents to transfer money into their banks in amounts less than 1,000,000 Euros. If Cahuzac’s Swiss account was closed in 2010, and the money transferred to Singapore, as he has confessed, exactly how much was transferred? This second line of inquiry obviously casts doubt on the veracity of Cahuzac’s “confession” as to just how much money he had in Switzerland in the first place.

Who is the man on the other end of the phone line in that call from 2000? Who was Cahuzac speaking to? Obviously an intimate, at least financially. We may never know for certain but one thing we do know: undeclared money traveling from France to Switzerland does not travel by check or wire or any other traceable route. It crosses the border by suitcase or van. And for that the services of a porter are required. A discreet porter who knows how to keep quiet.

Enter Hervé Dreyfus, according to Le Temps Dominque Reyl’s half-brother, a man who is a senior partner at both Reyl & Co. and Raymond James Asset Management International (“managers for private clientele”) in Paris – an off-shore specialist. A man with a myriad of contacts, who knows how to lay low: there are few photos of him in circulation. A man Jerome Cahuzac claims he met only once – in his office, for a “transplant consultation.” They must have had a lot to talk about: Dreyfus is, or was, as bald as an egg.

If what Cahuzac says is true, Dreyfus, who has advised Nicholas Sarkozy’s ex-wife Cecilia among many others, is one of the few important people in France he doesn’t know.

Dreyfus and Cahuzac’s younger brother Antoine both worked at Credit Commercial de France in the 1990s, where Dreyfus was responsible for “portfolio management for non-resident private citizens” (according to his biography on the Raymond James site) and both men worked in European markets. It’s hard to imagine the two men not knowing each other.

Mediapart and Antoine Peillon, author of The 600 Billion Missing in France, have named Dreyfus as Reyl’s “delivery man for French affairs.” Mediapart went further: on December 10, 2012 the site flatly stated that Dreyfus is Cahuzac’s money manager. Neither Dreyfus nor the younger Cahuzac have spoken publicly since the scandal broke.

This is just the beginning. More names with secret accounts in Switzerland and elsewhere are sure to follow. The French are incensed: Gerard Depardieu at least had the grace to leave the country rather than pay. The other rich stay home, complain endlessly about taxes and hide the loot elsewhere. Cahuzac’s slow motion striptease, a little bit of truth at a time, gave them three extra months to move the money around. It will be interesting to see who flees across the border or to the prosecutor first, Jerome Cahuzac or Hervé Dreyfus. Or, to use a homely metaphor, who serves whom on a platter.

Iddhis Bing

Paris

April 30, 2013

Footnotes

1 The phone conversation was inadvertantly recorded in 2000 by Michel Gonelle, Cahuzac’s rival in the 2001 municipal elections in Villeneuve-sur-Lot (Lot-et-Garonne), on his phone machine. Cahuzac, having spoken to Gonelle, believed he had terminated the call when he began a second conversation about his private finances. Gonelle, for whom the tape was a “heavy weight” he carried for 12 years, furnished the recording to Mediapart in 2012.

2 Questions are now being asked about his privileged relationship with the pharmaceutical companies and whether it affected his work for the government in 1988-1991 and, given his access to health officials, afterward; what exactly was the nature of the “purely technical advice” he gave to Big Pharma at his consulting agency – did it amount to government access?; whether it’s true that many of his hair transplants were done off the books. Finally, what is the real extent of his wealth, and how was it acquired?

3 « S’il y a bien une officine qui avait comme clients français des personnalités du show-biz, des grands capitaines d’industrie, et des hommes politiques, c’est Reyl. » Unnamed sources can say whatever they like. Unlike the average rumor mongers, Mediapart’s sources in L’Affaire Cahuzac have been proven right. Believe what you like.

4 Swiss-Asia is a “booking platform” operating between banks and financial management companies in different countries. Its on-line prospectus says, “Swiss-Asia Holding Pte. Ltd. operates from the core of its investment universe, where proximity and access to investment opportunities make it possible to produce superior returns with a pro-active and efficient risk monitoring. While Swiss-Asia’s mission is to build a sustainable “East meets West” style of Asset Management out of Singapore and Hong Kong, its dedicated team strives itself to provide High Net Worth Individuals, Financial Institutions and Corporate clients with the best-in-class asset-management, advisory and execution services.” Which reads like it was written on Ecstasy on the sundeck of a yacht passing through the Straits of Malacca.

Plenty more Bing here: