Clearstream

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Clearstream Banking S.A. (CB) is the clearing division based in Luxembourg, of Deutsche Börse.

It was created in January 2000 through the merger of Cedel International and Deutsche Börse Clearing, part of the Deutsche Börse Group, which owns the Frankfurt Stock Exchange. Cedel, established in 1971, specialized in clearance and settlement. In 1996 it obtained a bank license. In July 2002 Deutsche Börse purchased the remaining 50% of Clearstream International for €1.6 billion. Deutsche Börse's strategy is to be a vertical securities silo, providing facilities for the front and back ends of securities trading. By 2004 Clearstream contributed €114 million to Deutsche Börse's total Earnings Before Interest and Taxes (EBIT) of €452.6 million. It handled 50 million transactions, and was custodian of securities worth € 7,593 trillion.

In Révélation$ (2001), by investigative reporter Denis Robert and ex-Clearstream banker Ernest Backes, Clearstream was accused of being an international platform for money laundering and tax evasion via an illegal system of secret accounts (the "Clearstream Affair").

In Spring 2004, a "Second Clearstream Affair" began, which attracted more attention in 2006. Peripheral to the primary Clearstream Affair, it accused several French political figures, industrial leaders, and members of the secret services of maintaining secret accounts at Clearstream, which allegedly were used to transfer kickbacks in a France–Taiwan frigates scandal.

Contents 1 Accusations 2 Clearing 2.1 Eurodollars 2.2 "$1.5 trillion math errors" 2.3 Clearstream's dominant position 3 Daewoo shutdown inquiries 4 The Clearstream Affair 4.1 "The greatest financial scandal in Luxembourg" 4.2 Banco Ambrosiano scandal 4.3 Secret accounts and the workings of 21st century economics 4.4 A "black box" of Cedel 4.5 March 2000 French parliamentary report 4.6 Judicial investigations & libel lawsuits 4.7 Suspension & investigation of Clearstream's CEO 4.8 Refusal of the European Commission to open an investigation: 20 Minutes ' revelations 4.9 Clearstream's reply 4.10 Nadhmi Auchi, largest private share-holder of BNP Paribas bank 4.11 Bank Menatep 4.12 The Second Clearstream Affair 4.12.1 The Taiwan frigates scandal 4.12.2 Joël Bucher's testimony 4.12.3 Investigation of the anonymous denunciations 4.12.4 Lawsuits alleging defamation 5 Searches in 2007 5.1 The October surprise conspiracy 5.2 Bin Laden's Bahrain International Bank 5.3 Banks with accounts in Clearstream 6 Bibliography 7 References 8 See also 9 External links 9.1 Main sources 9.2 Media reports 9.2.1 In English 9.2.2 In French (Google transl. available) 9.2.3 Other languages 9.3 Others

[edit] Accusations

In 2001, investigative reporter Denis Robert and Ernest Backes, an executive at Cedel until May 1983, published a book, Revelation$^[1] in which they alleged Clearstream played a major part in the underground economy, was a main platform for money laundering for hundreds of banks, and "operated hundreds of confidential accounts for banks so they could move money undetected," according to Business Week.^[2]

Backes and Le Figaro were sued by Clearstream and found guilty of libel on March 29, 2004. However, all financial demands made by Clearstream were rejected by the judges, who considered the information revealed to be "serious and cross-checked, absent of any animosity, and expressed with caution," and the case was due to be heard in Appeals Court in 2006.

After the initiation of an investigation in Luxembourg, on suspicion of money laundering, tax evasion, and other fraud, Clearstream's CEO, André Lussi, resigned (See below). This enabled Deutsche Börse to purchase the remaining 50% of Clearstream International in July 2002. According to some, such as Business Week, Lussi had opposed such a takeover.

Following the July 2004 anonymous revelations about secret personal accounts, allegedly maintained by important French political figures, Volker Potthoff, a member of Deutsche Börse's board, was asked to conduct an audit and control mission regarding Clearstream.

A long-time officer of the German Stock Exchange (aka Deutsche Börse), Potthof was surprised by what he found in Luxembourg, and proposed more stringent measures concerning the CSD's customers and the control of accounts. However, Jeffrey Tessler, also a member of Deutsche Börse's board and the person there responsible for Clearstream, asked Pothoff to resign. Potthof departed in January 2006, and officially ceased his functions on June 30, 2006.^[3]

[edit] Clearing

Clearstream often has been described as a bank for banks, as it practices what is called financial clearing. Basically, its duty is to record transactions between the accounts of different banks, and use that data to calculate the relative financial positions of banks with regard to each other.

So a bank can just order a transaction between its own account and the other bank's account, in lieu of less secure methods such as carrying a case full of currency or securities around on the street; the bank merely transmits an order to Clearstream to credit/debit one of its own accounts and the other bank's account(s). This general system is in use between regular companies, governments, and banks around the world.

The purpose of Clearstream is to facilitate money movements around the world, particularly by handling the resolution of sales of European stocks and bonds, in which market Clearstream was a major player, with an estimated 40% market share until May 2004 - together with its competitor Euroclear, the two firms settle 70% of European transactions.^[4] Furthermore, in January 2006, Clearstream was the 18th largest employer in Luxembourg^[5]

Clearstream does not hold a monopoly in this market: Euroclear, owned by the market, and SWIFT are competitors. However, SWIFT mainly assures routing, while only Euroclear and Clearstream supply cross-border securities clearing and settlement services; Clearstream's quasi-monopoly is demonstrated by this European Union statement declaring that "Clearstream Banking AG is an unavoidable trader partner."^[6]

Euroclear was created by JP Morgan in 1968 in Brussels (Belgium). By the end of 2000, JP Morgan had extricated itself from Euroclear, but JP Morgan still is one of the 120 international banks which own shares in Euroclear. In 2000, Euroclear processed 145 million transactions, dealing with a total of 100,000 billion euros.^[7]

[edit] Eurodollars

Cedel (now Clearstream) and Euroclear were started to manage transfers of "eurodollars," U.S. currency kept in banks outside the United States. By the 1990s, the Federal Reserve estimated that about 2/3 of U.S. currency was held abroad as eurodollars.

Cedel and Euroclear later expanded into handling transfers of stock titles and other financial instruments. In 1975, several big Italian and German banks wanted to centralize their accounting, so other members of Cedel directly sent them transfers to the main branch.

"The Cedel council of administration — its board of directors — authorized banks with multiple subsidiaries not to put all their accounts on the published list. Backes and Gérard Soisson, then Cedel's general manager, set up a system of non-published accounts (...) Requests for non-published accounts came from some banks that were not eligible, but Soisson turned them down," writes Komisar.^[8]

[edit] "$1.5 trillion math errors"

Business Week said, in 2001, "Earlier this year, Clearstream, which handles the back-office paperwork for some 40% of European stock and bond trades, was found to have overstated its assets in custody by $1.5 trillion. (It has $6.5 trillion.) If Clearstream makes $1.5 trillion math errors, customers are understandably nervous—and some have moved to rival Euroclear."^[2] According to investigative journalist Lucy Komisar, Clearstream is audited by KPMG, one of the largest global accounting firms. KPMG declared that it found "no evidence" to support the allegations made by Denis Robert and Ernest Backes, although its report was not made public.

[edit] Clearstream's dominant position

On June 2, 2004, the European Commission found that "Clearstream Banking AG and its parent company Clearstream International SA (“Clearstream”) infringed competition rules by refusing to supply cross-border securities clearing and settlement services, and by applying discriminatory prices. The Commission’s investigation revealed that Clearstream refused to supply Euroclear Bank SA ('Euroclear Bank') with certain clearing and settlement services, and applied discriminatory prices to the detriment of this customer."

The decision states that "Clearstream refused to supply to Euroclear Bank clearing and settlement services for registered shares issued under German law," underlining the "dominant position" of Clearstream since it "is the only final custodian of German securities kept in collective safe custody, which is the only significant form of custody today for securities traded. New entry into this activity is unrealistic for the foreseeable future. Therefore, Clearstream is an unavoidable trading partner."

The Commission defined clearing and settlement as follows:

"Securities clearing and settlement are necessary steps for a securities trade to be completed.

Clearing is the process by which the contractual obligations of the buyer and the seller are established.

Settlement is the transfer of securities from the seller to the buyer and the transfer of funds from the buyer to the seller. (...)

Clearstream Banking AG is Germany's only Wertpapiersammelbank (Central Securities Depository).

"The Commission considered that during the reference period concerned, 1997 through 2001, Clearstream held a dominant position for providing cross-border clearing and settlement services to intermediaries situated in other Member States. The investigation therefore focused on a specific cross-border market and the decision does not set out findings that go beyond that relevant market."

The Commission underlined in a note that, "Central Securities Depositories hold securities and enable securities transactions to be processed through book entry. In its home country, the Central Securities Depository provides processing services for trades of those securities that it holds in final custody. It can also offer processing services as an intermediary in cross-border clearing and settlement, where the primary deposit of securities is in another country."^[6]

[edit] Daewoo shutdown inquiries

After Daewoo was split apart in 2000, Clearstream became the subject of two commissions of inquiry in Lorraine (France) conducted before the French parliament and European parliament.

[edit] The Clearstream Affair

[edit] "The greatest financial scandal in Luxembourg"

In 2001, co-authors Denis Robert and Ernest Backes released a book called "Révélation$," followed by Robert's "La Boîte Noire," describing what has been named the "greatest financial scandal in the Grand Duchy of Luxembourg."^[9] The little publicity their works received came only in the French media, and even there publicity was minimal. In a number of interviews, Denis Robert accused "Le Monde" of deliberately suppressing articles and reviews of his book, suggesting that financial links between "Le Monde" and Deutsche Börse (which now owns 100% of Clearstream's shares) were the cause of this censorship. Denis Robert described Clearstream as a huge money laundering and tax evasion machine, used by major banks, shell companies, and organized crime all over the world. Clearstream's alleged criminal activities used an automated system of unpublished accounts, revealed to Denis Robert by Ernest Backes and Régis Hempel, a vice president of Clearstream who, as a computer engineer, had helped set up the system in the 1970s.

[edit] Banco Ambrosiano scandal

Further information: Banco Ambrosiano

By 1980, Ernest Backes had become Cedel's #3, in charge of relations with clients, but he was fired in May 1983, allegedly because he "knew too much about the Ambrosiano scandal," one of Italy's major political scandals. Two months after his dismissal, Gérard Soisson was found dead in Corsica. The Banco Ambrosiano, allegedly involved in money-laundering for the Mafia and owned in majority by the Vatican Bank, collapsed in 1982. The bank "laundered drugs- and arms-trafficking money for the Italian and American Mafias, and in the 1980s it channeled Vatican money to the Contras in Nicaragua and to Solidarity in Poland", according to Komisar.

In 2005 the Italian justice system reopened its investigation of the murder of Roberto Calvi, Ambrosiano's chairman; it has requested the support of Ernest Backes, and will investigate Gerard Soisson's death, according to Komisar. Licio Gelli, headmaster of Propaganda Due masonic lodge (aka P2, it was involved in Gladio's "strategy of tension" starting from the 1969 Piazza Fontana bombing), and mafiosi Giuseppe Calo, are being prosecuted for the assassination of Roberto Calvi. Ernest Backes explained: "When Soisson died, the Ambrosiano affair wasn't yet known as a scandal. (After it was revealed) I realized that Soisson and I had been at the crossroads. We moved all those transactions known later in the scandal to Lima and other branches. Nobody even knew there was a Banco Ambrosiano branch in Lima and other South American countries."^[8]

[edit] Secret accounts and the workings of 21st century economics

Gérard Soisson, murdered in July 1983, was the person who authorized each non-published account, "which would be known only by some insiders, including the auditors and members of the council of administration." "With Soisson out of the way, there was nothing to stop the abuse of the system," wrote Lucy Komisar. Whereas Soisson had refused numerous requests to open non-published accounts (from such institutions as Chase Manhattan in New York, Chemical Bank of London and numerous subsidiaries of Citibank), Cedel opened hundreds of non-published accounts — all of them irregular — especially after the arrival of CEO André Lussi in 1990. No longer were they just sub-accounts of officially listed accounts, Backes charges. Some were for banks that were not subsidiaries or even official members of Cedel. At the start of 1995, Cedel had more than 2,200 published accounts. But in reality, according to documents obtained by Backes, Cedel that year managed more than 4,200 accounts," leading to an alleged total of "2,000 unpublished accounts in 1995."

Régis Hempel, vice president of Cedel, explained to the Paris Tribunal de Grande Instance how the system of unpublished accounts was generalized, allowing all sorts of illegal operations; Clearstream, during the lawsuit against Denis Robert for "defamation", did not deny it (See below). According to Hempel, some dormant accounts were activated for special transactions: "Such an account can be opened in the morning, used for a transaction, and closed to appear as delisted in the evening,", Backes explains. "Only the guy who gave the order to open it in the morning knows about the transaction. An investigator or auditor would not look at such an account because it doesn't appear on the accounts list."

Among the major companies with unpublished accounts, Backes discovered the Shell Petroleum Group and the Dutch agricultural firm Unilever, one of whose accounts was associated with Goldman Sachs. "By 2000," according to Backes, "Clearstream managed about 15,000 accounts (of which half were non-published) for 2,500 clients in 105 countries; most of the investment companies, banks and their subsidiaries are from Western Europe and the United States. Most of the new non-published accounts were in offshore tax havens. The banks with the most non-published accounts are Banque Internationale de Luxembourg (309), Citibank (271) and Barclays (200) (...) On the April 2000 Clearstream list, there are 37 Colombian accounts, of which only three are published."^[8] German multinational Siemens had four non-published accounts, while Crédit Lyonnais bank had 23 and Japanese Nomura 12.^[10]

Although an investigation of Clearstream was begun in France and Luxembourg, and a European Parliamentary report on money laundering denounced Luxembourg's financial activities, Clearstream continued to use unpublished accounts. According to Denis Robert, in 2001, a year before being bought back by Deutsche Börse, Clearstream managed 330,000 unpublished accounts.^[11]

This system of unpublished accounts made it possible to hide money for the purposes of money laundering, tax evasion, accounting manipulation, and fraud. It allegedly was used for such purposes by a large variety of banks, among them Columbian banks linked to the drug cartel, Bank Menatep involved in the "Kremlingate," and the French Credit Lyonnais involved in a major crash in the 1990s. The money from the Taiwan frigates scandal allegedly transited via Clearstream, as did the money from Elf oil company, two major financial scandals which shook France in the 1990s. Clearstream secret accounts also allegedly held part of the Argentine debt which led to the December 2001 riots. Numerous unpublished accounts were owned by Argentine companies and by Citibank, which managed a large part of Argentine funds.

Another revelation of Denis Robert's book is that, according to the May 9, 2001 op-ed by Bernard Bertossa, attorney general in Geneva, Benoît Dejemeppe, king's attorney in Brussels (procureur du roi), Eva Joly, investigative magistrate in Paris, Jean de Maillard, magistrate in Blois and Renaud van Ruymbeke, a judge in Paris, entitled "The 'black boxes' of financial globalization," is that:

"The chaos of financial flux is only an appearance. Of course, offshore banks and tax havens perfectly hide the points of arrival and of transit of dirty capital. It is even their reason of existence (raison d'être). Trying to find the illegal money flux in those offshore centers is hopelessly doomed... However, since capital from criminal origin pass in the same financial 'pipes' as other ones [legal funds], i.e. clearing and financial routage companies, they become vulnerable precisely during their transfer [in those clearing companies]."^[12]

In other words, all financial money flows, legal or illegal, have to pass through Clearstream or Euroclear; the system of unpublished accounts, of which a few (less than 10%) also were found at Euroclear, is the way illegal funds are metamorphosed into legal funds which can be used to buy any financial service. Michel Volle, economist and former INSEE administrator, has compared this financial system to famous historian Marc Bloch's description of predation in the Middle Ages, in his book Feudal Society (1961):

"I believe that the actual economy is composed by two types of relations: balanced exchanges, where both parties have the same power to refuse or accept the transaction; and predation, where one of the party is in the position to impose the transaction to the other party. Predation, compensated by charity, is the typical feudal relation (cf. Marc Bloch, The Feudal Society). Balanced exchange has been put in place with the industrial society at the beginning of the 18th century. Predation didn't disappear at this time - the mafia is a feudal organization - but it was in the industrial economy an archaïc remnant. But it is coming back with the automated and computerized economy which founds the actual technic system and in which risk and violence, both extreme, goes in pair (cf. my work "E-conomie" and also F.-X. Verschave, Noir Silence). Therefore, the economy has divided itself in two parts, one working under the balanced exchange regime, and the other under the predation regime. Shakespeare's heroes are coming back! The interface between these two parts is money-laundering, which allows the results of predation to enter the "normal" and legal circuit. Thereby, predators can acquire influence (controls of the media and, through them, governments), prestige, and honorability; thus bankers, politicians, and magistrates that the predators have bought may enjoy in complete tranquillity of the fruits of corruption... This, and not the First Employment Contract, should have provoqued the demonstrations! But, as you say, medias are what predators control the best".^[13]

[edit] A "black box" of Cedel

Ernest Backes also explained that a company named Cedel International, located in Geneva, had been inscribed in the Swiss register of commerce but not included in the books of the mother company, Cedel International in Luxembourg. "This non-consolidated 'branch,' whose president is Robert Douglass of New York, former private secretary of Governor Nelson Rockefeller, and vice chairman of the Chase Manhattan Corporation [now J.P. Morgan Chase], apparently had not raised too many questions for Swiss federal magistrates." Backes qualified this "black box" as "institutionalized tax evasion at highest level in world finance,", noting that tax evasion was even "more or less expressed in the objectives of the company as filed in the Swiss register of commerce." The "branch" has since "been resold to another Luxembourg holding company, with the people in the backyard remaining mostly the same."

[edit] March 2000 French parliamentary report

In March 2000, a parliamentary report by French deputies Arnaud Montebourg and Vincent Peillon, entitled "Parliamentary Report on the obstacles on the control and repression of financial criminal activity and of money-laundering in Europe," dedicated its whole third section to "Luxembourg's political dependency toward the financial sector: the Clearstream affair."^[14]

[edit] Judicial investigations & libel lawsuits

Following the publication of "Revelation$," the tribunal of Luxembourg opened up an investigation on February 26, 2001. The judge finally declared no proof of "systematic manipulations" had been found, but found evidence of accounting manipulation and tax evasion.^[15] However, the case was dropped on November 30th, 2004, due to the running of the statute of limitations. At the beginning of the 1990s, Luxembourg had no specific law prohibiting money laundering.

The Reuters dispatch describing the closing of the money laundering probe gave no reason for the dropping of the case, i.e. the statute of limitations. Reuters is dependent upon "Deutsche Börse," which now owns Clearstream, to supply its data feed to their subscribers. In addition to Clearstream, Deutsche Börse also owns the German Stock Exchange and Eurex "Termin" (futures) market. The Reuters cable also stated that Clearstream successfully sued Backes and French newspaper "Le Figaro" for libel on March 29, 2004, but deliberately failed to follow up the initial October 1, 2003 judgements (see below). Reuters quoted Deutsche Börse's Chairman Designate André Roelants as stating that "this announcement is very important as it closes once and for all this chapter.".^[16]

In 2003, the Paris Court rejected all of the finance company's requests (Clearstream was seeking damages of 500,000 Euros because of "defamation"), and condemned Clearstream to pay 3 500 Euros to Denis Robert.^[17] The magistrates decided that the Clearstream money laundering evidence was "serious and cross-checked, lacking in any animosity and expressed with caution".^[18] The suit is due to be examined by the Appeal Court in 2006.

Denis Robert also has been sued for defamation by other banks and companies incriminated by the book: 50+ different cases — among which Bank Menatep, Banque Générale du Luxembourg, etc., in which the author and his editor Laurent Beccaria were acquitted in all but two cases, and damages for both cases of one Euro were awarded. On January 27, 2006, once more Denis Robert was charged by a Luxembourg committing magistrate for defamation, slander, and insults.

A complaint was opened in March 2001 against Ernest Backes, and Denis Robert was included in it five years later: "I am very surprised of this accusation five years after the facts and of the energy which the Luxembourgian justice puts continuing to harass me while it was not at the end of the inquiry opened for money laundering, tax evasion and corruption against Clearstream", Robert said. An organization, "Freedom to inform," declared to Le Nouvel Observateur magazine that "By transforming the affair Robert in affair Frieden (Luxembourg Minister of Justice, of the Treasury and the Budget), every signature will be a civil act which protects the freedom of the media in Europe."^[19]

[edit] Suspension & investigation of Clearstream's CEO

On May 15, 2001, André Lussi was suspended from his CEO position at Clearstream, and on December 31, 2001, he departed the company on mutual agreement.^[20][21] In February 2004 an investigation was opened against him, on money laundering, fraud, and tax evasion charges.^[22][23] André Lussi was replaced by André Roelants, who had been at Dexia. After years of investigations, all allegations made against André Lussi turned out to be completely causeless and the lawsuits were abandoned by the courts.^[24]

[edit] Refusal of the European Commission to open an investigation: 20 Minutes ' revelations

Along with Ernest Backes, Denis Robert presented Revelation$ to the Capital Tax, Fiscal Systems and Globalization intergroup of the European Parliament in March 2001 and also to the French National Assembly. The European Commission did not react to the question raised by European MPs (MEP) Harlem Désir, Glyn Ford and Francis Wurtz, who asked the Commission to investigate the accusations made by the book and to ensure that the 10 June 1990 directive (91/308 EC) on control of financial establishment be applied in all member states in an effective way. Commissioner Frits Bolkestein observed that "the Commission has no reason to date to believe that the Luxembourg authorities do not apply it vigorously". The three MPs then issued a press statement demanding an investigation by the European Union of the correct application of the June 10, 1990 directive.^[12][23]

On April 26, 2006, 20 Minutes revealed that "in May 2005, MEP Paul Van Buitenen was shocked by Frits Bolkestein's presence on Menatep's international consultative council, a Russian banking establishment, and by his work for Shell, a British-Dutch petrol company, two firms 'maintaining secret accounts in Clearstream'... Van Buitenen, also Dutch, then asked for 'clarification' to the European Commission and the opening of a parliamentary investigation. The Commission's president, José Manuel Barroso, replied that these facts 'do not bring up any new question' and that it is not known 'if Menatep made contact with Bolkestein while he was in these positions'. No investigation therefore took place."

The free daily points out that "in 2001, it was Bolkestein himself who announced the Commission's refusal to open up a parliamentary investigation on Clearstream", following Harlem Désir's requests and accusations that Menatep had an "undeclared account" at Clearstream. Bolkestein refused to answer any questions by the newspaper, which recalls that Van Buitenen, former European public servant, had already revealed a vast corruption affair in 1999, which led to the resignation of the Commission presided by Jacques Santer (who has also been prime minister of Luxembourg) and the fall of Edith Cresson.^[25]

Furthermore, two Belgian Senators, Isabelle Durant and Jean Cornil, proposed a law in 2004 to create a national investigation commission charged with the investigation of the use of accounts in "clearing and routing firms" to commit fiscal frauds (tax evasion) and/or money-laundering^[26]

[edit] Clearstream's reply

In April 2006, while the second "Clearstream affair" was beginning to make French media headlines (See below), Clearstream filed a lawsuit against "John Doe," targeting this time the anonymous denunciations claiming that Nicolas Sarkozy and other French political personalities had secret accounts at Clearstream, which would have been used for hypothetical kickbacks. Former French Prime Minister Dominique de Villepin is reportedly under investigation for what may have been his involvement in spreading the false charges against the current French President Sarkozy.^[27]

Furthermore it answered questions of 20 Minutes in an interview, denying knowing anything about the various attempts to create European-level investigations commissions about its internal workings. It also denied "the existence of parallel accounts" and of "personal accounts" (in response, Denis Robert published a list of several personal accounts on his blog^[28]). However, the company did recognize that "a banking establishment may request an unpublished account, that is, an account only known by the establishments concerned by the transaction, control authorities, and the auditors of the firm". Clearstream also indicated that it had "spent 15 million euros on various audits without finding anything," Denis Robert's accusations.^[29]

[edit] Nadhmi Auchi, largest private share-holder of BNP Paribas bank

Iraqi-born Nadhmi Auchi, # 34 on the "Sunday Times Rich List 2004" (# 22 on the same list in 2005) and 13th richest man in Britain according to The Guardian, estimated to be worth $1 billion according to Forbes, also appeared to be a key figure in the implementation of the double accounting system.^[30]

Auchi was convicted of profiteering by the Paris Criminal Court, and received a 15-month suspended sentence, for his involvement in Elf's scandal, "the biggest fraud inquiry in Europe since the Second World War. Elf became a private bank for its executives who spent £200 million on political favours, mistresses, jewellery, fine art, villas and apartments".^[31] The "Guardian" noted that Nadhmi Auchi had helped Orascom (which owns Djezzy GSM), owned by Onsi Sawiris (worth $5.2 billion with his family according to Forbes^[32]), gain a contract to set up mobile phone networks in post-Saddam's Iraq. As owner of the General Mediterranean Holdings, Auchi is the largest private shareholder of BNP Paribas, which until 2001 managed the escrow account through which the money from the Oil-for-Food programme transited.

[edit] Bank Menatep

Further information: Bank Menatep

Bank Menatep, owned by Mikhail Khodorkovsky, was involved in the "Kremlingate", when $4.8 billion in IMF funds were diverted to various banks, including US banks.^[33] It opened up its non-published Cedel account #81 738 on May 15, 1997. "Menatep further violated the rules because many transfers were of cash, not for settlement of securities", writes Komisar. "For the three months in 1997 for which I hold microfiches, Backes says, only cash transfers were transferred through the Meanatep account. There were a lot of transfers between Menatep and the Bank of New York." Natasha Gurfinkel Kagalovsky, a former Bank of New York official and the wife of a Menatep vice-president, was accused of helping launder at least $7 billion from Russia, according to Komisar. US investigators have attempted to find out if some of the laundered money originated with Menatep.

On November 26, 2003, Backes and another ex-banker, Swiss citizen André Strebel, filed a criminal complaint with the Swiss attorney general against Khodorkovsky and his colleagues Platon Lebedev and Alexei Golubovich, accusing them of money-laundering and supporting a criminal organization. They requested an investigation and a search of records of the Swiss office of Menatep SA, Menatep Finances SA, Valmet. and of Bank Leu in Geneva, related to claims of fraud against the Russian company Avisma and money-laundering by Menatep in Switzerland. According to this complaint, Bank Menatep has been linked since its creation to the Russian oligarchy and criminal organizations, such as Khodorkovsky, Alexander Konanykhine and the Russian godfather Semion Mogilevich. "Even though Menatep officially failed in 1998, it oddly remained on the non-published list of Clearstream accounts for 2000", wrote Komisar. Clearstream's listings also present 36 other Russian accounts, most non-published.^[34]

In April 2006, Clearstream declared, to the French edition of 20 Minutes, that if "Menatep may have strange accounts, it wasn't closed because of money-laundering". It also claimed that it dealt with "banks accredited in their country of origin", but not with "establishments that are registered on the Financial Action Task Force on Money Laundering's black list".^[29]

[edit] The Second Clearstream Affair

The Second Clearstream affair began in July 2004, when anonymous denunciations sent to magistrate Renaud Van Ruymbeke accused various important French political figures of having received kickbacks related to the Taiwan frigates scandal, through secret personal accounts at Clearstream. Clearstream was again pointed out as having been a major platform for illegal financial transactions.

[edit] The Taiwan frigates scandal

In 1991, France sold six frigates to Taiwan, which led to more than five billion francs of kickbacks, with intermediary Andrew Wang as a major figure. The large amounts of these kickbacks made this affair one of the most important French political and financial scandals of the 1990s. The kickbacks were exposed after the 1993 murder of naval captain Yin Ching-Feng, who had written a report critical of the $2.8 billion purchase. Eight deaths have been linked to the affair, and 13 military officers and 15 arms dealers were sentenced by Taiwan courts to between 8 months and life in prison for bribery and for leaking military secrets.^[35][36] The money for these illegal percentage fees transited through Clearstream, according to Denis Robert.

[edit] Joël Bucher's testimony

Following the publication of "Revelation$", Joël Bucher, former deputy general director of the Taiwan branch of Société Générale (SG), wrote to Luxembourg prosecutor Carlos Zeyen, investigating Clearstream, to testify that SG used Clearstream to hide bribes and to launder money. "In the early 1990s, Bucher contends, Cedel was used to launder $350 million in illegal 'commissions' on a contract for the sale by Thomson-CSF, a French government arms company, of six French frigates to Taiwan. He said that the money, handled by a SG subsidiary, was paid as a registered securities transfer to a 'nominee' — a stand-in for the real beneficiary — and that Thomson (now known as Thales) didn't appear in the transaction except in the Cedel archives. He said SG used two non-published Cedel accounts."

[edit] Investigation of the anonymous denunciations

On May 3, 2004 and June 14, 2004, Renaud Van Ruymbeke and Dominique Talancé, the French magistrates in charge of the Taiwan frigates scandal, received two letters and a CD-ROM from an anonymous informant (called corbeau in French), detailing numbered bank accounts maintained at Clearstream and describing secret transfers of millions of dollars. Many personalities were named, including Alain Gomez, former director of Thomson-CSF (which since has become Thales), Andrew Wang, the Taiwanese intermediary of the frigates contract and one of Taiwan's key figures concerning arms contracts, Philippe Delmas, vice-president of EADS the European aeronautics consortium, and Nicolas Sarkozy, then minister of the Economy, Dominique Strauss-Kahn, Jean-Pierre Chevènement, and others. Members of the French secret services also were named.^[37]

Magistrate Van Ruymbeke opened another investigation, in July 2004. According to the denunciations, Andrew Wang passed on money to several very important French officials from 1999 to 2003, using Clearstream.^[38][39]

Colombian drug-dealers and a Russian oligarch also issued some of those payments, according to the corbeau.^[40] Andrew Wang allegedly received a high part of the illegal fees given during the selling of the six frigates. According to Luxembourg's public prosecutor, the investigation of Clearstream has not confirmed money-laundering suspicions concerning the Taiwan frigates and Bank Menatep, owned by Mikhail Khodorkovsky. However, Dominique de Talancé and Renaud Van Ruymbeke, the French magistrates in charge of the Taiwan frigates affair, made a demand for information in Clearstream's offices in Luxembourg.

But in January 2006, both magistrates declared the case closed, on the grounds that the corbeau 's list of Clearstream accounts owned by various political figures was a fraud. For example, the numbered Banca popolare di Sondrio Clearstream account, supposedly in the names of "Stéphane Bocsa" and "Paul de Nagy" — probable contender for the 2007 presidential election, Nicolas Sarkozy's full true name is "Nicolas Paul Stéphane Sarkozy de Nagy-Bocsa" — was not Sarkozy's personal account, but an account used by various persons, according to the declarations of the Banca popolare di Sondrio to Judge Ruymbeke.

The Italian bank asked the judge for a new subpoena concerning a specific person. However, the judges didn't bother, because, according to L'Express, the "investigation proves that all accounts designed by the 'corbeau' [were] falsely attributed to [important] personalities. Furthermore, the authors of this fraud [were] known, even though there exist no proofs allowing to prosecute them. But the mystery remains: have they acted alone, or under command? And why did they choose the town of Sondrio for the ghost account of Sarkozy?".^[41] The news article stated that the accounts were "falsely attributed", but did not deny their existence. The magistrates decided not to issue a subpoena personally targeting Nicolas Sarkozy to the Sondrio bank, offering no reasons to the press for not doing so.

[edit] Lawsuits alleging defamation

On September 3, 2004, the Paris parquet (public prosecutor) opened an investigation into charges of "defamation", following a complaint by Philippe Delmas, EADS' vice-president. Magistrates Jean-Marie d'Huy and Henri Pons are in charge of this new investigation concerning a peripheral aspect of the main Clearstream affair.

In December 2005, magistrate Van Ruymbeke, in charge of the Taiwan frigates Affair, showed that the listings had been modified to falsely accuse French political luminaries. The existence of unpublished secret accounts at Clearstream is not, however, questioned, but only the fact that the persons named by the anonymous informer maintained such accounts.

On January 31, 2006, Nicolas Sarkozy sued. A probable contender for the 2007 presidential election, Sarkozy is upset about allegations that he might be linked to the Taiwan frigates scandal via a foreign and secret account at Clearstream. He was followed quickly by other French political figures, including Dominique Strauss-Kahn on April 18, and Alain Madelin and Jean-Pierre Chevènement on April 19. EADS also filed a complaint on April 13, followed by Clearstream itself on April 20. Clearstream did not want to see its brand-name associated with the Taiwan frigates scandal, and clearly did not enjoy the sudden bad advertising it was receiving. The firm denied hosting any personal secret accounts, which in turn prompted Denis Robert to publish a list of personal accounts maintained by Clearstream (which did not include any of the political luminaries accused by the corbeau).^[29][28]

The magistrates then ordered an investigation of General Philippe Rondot, former member of the French Secret Service DGSE and the man who captured Carlos the Jackal in 1994,^[42] currently attached to the French Ministry of Defence, and to the DGSE headquarters (nicknamed la piscine, "the swimming pool", because of its former location). On March 28, 2006, in a declaration to the magistrates in charge of what became the "second Clearstream scandal", General Philippe Rondot directly accused Prime Minister Dominique de Villepin and President Jacques Chirac of having ordered the investigation of French politicians.^[43]

It is not the existence itself of the accounts, however, that has been proved false, nor the existence of personal accounts maintained by Clearstream, but the claim that they belonged to such important politicians.^[44]

On the other side of the political spectrum in France, the Socialist Party asked for the creation of a commission to investigate such mis-use of the intelligence services. On April 6, 2006, in a new demonstration of the independence of French judiciary power from the executive, Jean-Claude Marin, Paris' public prosecutor of the Republic (procureur de la République), sent a letter to Jean-Claude Magendie, the court's president and to Yves Bot, attorney-general, complaining about the attitudes of the investigative magistrates Henri Pons and Jean-Marie d'Huy. The Republic's public prosecutor complained that he wasn't told before hand of the location of the various investigations.^[45]

According to Philippe Rondot's testimony (20 pages), Prime Minister de Villepin ordered him on January 9, 2004, to conduct a confidential investigation of a list of secret personal accounts held at Clearstream. The list was given to him by Jean-Louis Gergorin, an executive vice-president of EADS European arms consortium, and allegedly a close friend of Villepin.

On April 28, 2006, Villepin denied having commissioned an investigation of Nicolas Sarkozy. He declared, to the conservative newspaper Figaro, that although he had demanded that Rondot carry out these investigations, he explicitly had limited the investigations to non-politicians. Villepin thus declared that he "never" had commissioned an investigation of Sarkozy, and that he always had "acted within the ambit of action defined by the President" to regularize international financial markets.

On the same day, President Jacques Chirac also denied having ordered an investigation of French politicians. It was the first time that the Elysée palace had expressed itself, regarding this Clearstream affair. Le Figaro noted, in the same article, the "very serious accusations against the executive" power that Rondot had made, quoting Le Monde: "According to Mr. Rondot, the future prime minister [Villepin] had asked him, following the instructions of the head-of-state [Chirac], to go beyond the limits fixed to his investigation by the office of Minister of Defense Michèle Alliot-Marie and examine the clues concerning politicians"^[46][47]

In this April 28, 2006 article, Le Figaro thus explained how the head of staff of Minister of Defense Michèle Alliot-Marie (called "MAM" by the Canard Enchaîné) had ordered "Philippe Rondot to investigate the veracity of the computerized listings of Clearstream account-holders". According to Rondot, the investigation at that time did not include any politicians.

These listings should not be confused with the other listings, sent to the French justice system during the spring of 2004 by the anonymous informer, which have been revealed by the secret services to have been fraudulent ^[48]

Prime Minister Dominique de Villepin's refutation of accusations against himself began as follows:

"The Prime minister wishes to make the following observations on the Taiwan Frigates Affair and on the Clearstream Affair. In the first place, the Taiwan Frigates Affair: as Minister of Foreign Affairs, and following the guidelines set by the President of the Republic regarding the Taiwan Frigates Affair, on January 9, 2004, I asked General Rondot to attempt to verify the credibility of rumors concerning the existence of international mafiosi networks and intermediaries which could threaten our national security or our interests. This meeting, in which Jean-Louis Gergorin participated, was an opportunity for us to address several international questions, in particular organized crime networks... The aim was not at all to investigate individuals, but networks and intermediaries... I acted within the framework defined by the President of the Republic, which aimed at regularizing the large international financial markets and at defending ourselves against any manipulation or destabilization of our economic interests... In the second place, there are these calumnious deununciations of the Clearstream Affair: the Affair took a new turn in Spring 2004, with the mention of political personalities, industrial leaders and people in government services among the names on a list of account-holders. As Interior Minister, it was my responsibility to ask that the DST [Direction de Surveillance du Territoire, a secret service] undertake verifications. The DST concluded that the authors of this manipulation offered nothing concrete or probative. I asked the director of the DST to notify the judicial authorities of the conclusions which had been given to me. To conclude here, I will make several personal observations: my first preoccupation is that justice be done to all individuals injustly involved in this affair who legitimately feel they have been injured — I said this yesterday to Nicolas Sarkozy. As Prime Minister, I am profoundly shocked by certain innuendos here, and by the shadow cast upon the State and the government services. I have no doubt that full light will be shed upon this affair by the investigations of our justice system." ^[49]

Villepin was under great pressure from various sides of the political spectrum in France to resign. The politicians named in the Spring 2004 listings, which have been described as a "manipulation", say they are furious, while Clearstream itself is upset to see its name quoted side-to-side with the very real Taiwan Frigates Scandal. It now appears that the Taiwan Frigates payments definitely passed through the Clearstream system of unpublished accounts, exactly as discovered years before by reporter Denis Robert.

Now the magistrates Pons and Huys, in charge of the investigations concerning the anonymous denunciations, have demanded the right to investigate magistrates Renaud Van Ruymbeke and Dominique de Talancé, who since 2001 have been in charge of the Taiwan Frigates Affair.

Le Figaro noted: "The approximatively 35 tomes of the case, concerning eventual kickbacks from the frigates market, are therefore officially connected to the Clearstream affair. If several judiciary sources take refuge in 'not understanding this approach', the two magistrates have from now on a considerable and unexpected content to feed their investigations. While magistrate van Ruymbeke is supposed to quit the financial pole [of investigation], in September to integrate the Parisian Appeal Court, Henri Pons and Jean-Marie d'Huy may immerse themselves in this case which bumps into the secret defense [or 'state secret']."^[50]

On the other hand, the April 28, 2006 Presidential communication stated:

"Since its very beginnings, the Presidency of the Republic has worked for the regularization of international financial markets and for the struggle against international criminal networks. It always has bequeathed this task to successive governments. Concerning the Clearstream affair, the President of the Republic categorically denies having asked for any investigation targeting political personalities whose names may have been mentioned." ^[51]

On April 30, 2006, Socialist Dominique Strauss-Kahn, also named in the manipulated listing, called the scandal a "type of French Watergate".^[52] Two days later, the May 2, 2006 edition of Le Figaro offered an interview of General Philippe Rondot in which he recanted his earlier testimony, declaring that: "My investigation was limited to former public servants of the DGSE [secret service] whose names had appeared on the Clearstream lists". The Clearstream affair had taken on such proportions that even TF1, the major French television channel, featured it at primetime 8H00 PM.^[53]

Defense Minister Michèle Alliot-Marie, whose office was searched by the police on April 13, as part of the investigations concerning the denunciations, has been suspected — in an April 26, 2006 article by L'Express — of having known of this affair since 2003 without informing Sarkozy. MAM formally denied these allegations, claiming that she didn't know anything about these listings until July 2004, when the press started talking about them.

But General Rondot's testimony, published on May 3, 2006 by Le Monde, contradicts this denial. Rondot claimed having met MAM at the end of April 2004 to warn her of the "political consequences" of such an affair. On May 4, MAM refuted Rondot's claims, emphasizing that his area of expertise "does not cover France itself". She acknowledged having met him on May 11, 2004 to discuss the named people belonging to the Ministry of Defense who were accused of having Clearstream accounts, but she declared that they had not talked about the political personalities. MAM claims that her position and the possibility that she might be named Prime Minister in case of Villepin's resignation explain the recent developments concerning her.^[54][55]

[edit] Searches in 2007

French magistrates sought to search the Canard enchaîné's offices in May 2007, after the election of Nicolas Sarkozy to the presidency. According to editing director Claude Angeli, the judges were looking for information on a "Rondot document" treating of alleged "Japanese accounts" of former President Jacques Chirac. The judges were not allowed access to the newspaper's offices, and Reporters Without Borders (RSF) protested against the search^[56]

[edit] The October surprise conspiracy

Main article: October surprise conspiracy

Ernest Backes also indicated in Révélation$ that he was in charge of the transfer of $7 million from Chase Manhattan Bank and Citibank, on January 16, 1980, to pay for the liberation of the American hostages held in Tehran's embassy (Iran). He gave copies of files that he asserted shed new light on the October surprise conspiracy to the French National Assembly.

[edit] Bin Laden's Bahrain International Bank

Bahrain International Bank, which has been suspected of moving Osama bin Laden's money, had an account number in Clearstream, according to records supplied by Ernest Backes.^[10]

[edit] Banks with accounts in Clearstream

• Bank of Credit and Commerce International, which, although officially closed in July 1991, continued to operate via Clearstream through unpublished accounts — as did Bank Menatep, involved in the "Kremlingate" (diversion of IMF funds), and owned by Mikhail Khodorkovsky
• Banque Générale du Luxembourg
• Carlyle Group^[57]
• Crédit Lyonnais, one of France's major financial crashes during the 1990s
• Société Générale
• Banco Ambrosiano, controlled by the Vatican Bank and involved in one of Italy's major financial and political scandals
• Bahrain International Bank, possible links to Osama Ben Laden
• Siemens (Published Accounts by Lucy Komisar)
• Numerous others; as Clearstream is an international clearing and settlement organization, most member companies and banks have published accounts. Dealing with Clearstream is entirely legal; accounts used for tax evasion or money laundering is not.

[edit] Bibliography

• Denis Robert, Ernest Backes: The silence of the money. The Clearstream scandal. (2002, ISBN 3-85842-546-X )
• Denis Robert, Ernest Backes: Révélation$ (Edition des Arènes, 2001, ISBN 2-912485-28-2)
• Denis Robert, Ernest Backes: Das Schweigen des Geldes. Der Clearstream-Skandal, Pendo Verlag Zurich (2002, ISBN 3-85842-546-X)
• Denis Robert, Ernest Backes: Revelaçoes sobre o mundo financeiro, Editorial Inquérito (Portugal)
• Denis Robert, Ernest Backes: Revelation$ (Japanese ed. Tokuma Shoten Co, Tokyo)
• Denis Robert, La Boîte noire (Editions des arènes, ISBN 2-912485-38-X )
• David Loader, Clearing, Settlement and Custody (operation management Series (Securities of institutes) (2002, ISBN 0-7506-5484-8 )
• David M. Weiss, Global Securities processing: The Markets, The Products (1997, ISBN 0-13-323965-9)
• Lucy Komisar, Explosive Revelation$
• Official March 2000 French Parliamentary Report on the obstacles on the control and repression of financial criminal activity and of money-laundering in Europe by French MPs Vincent Peillon and Arnaud Montebourg, third section on "Luxembourg's political dependency toward the financial sector: the Clearstream affair" (pp.83-111 on PDF version)

[edit] References

[edit] See also

• Argentine debt restructuring
• ATTAC
• Banco Ambrosiano scandal
• Kremlingate
• Underground economy

[edit] External links