By FT reporters
Published: June 18 2009 19:52 | Last updated: June 18 2009 19:52
One summer afternoon, two “Japanese” men in their 50s on a slow train from Italy to Switzerland said they had nothing to declare at the frontier point of Chiasso.
But in a false bottom of one of their suitcases, Italian customs officers and ministry of finance police discovered a staggering $134bn (€97bn, £82bn) in US Treasury bills.
Whether the men are really Japanese, as their passports declare, is unclear but Italian and US secret services working together soon concluded that the bills and accompanying bank documents were most probably counterfeit, the latest handiwork of the Italian Mafia.
Few details have been revealed beyond a June 4 statement by the Italian finance police announcing the seizure of 249 US Treasury bills, each of $500m, and 10 “Kennedy” bonds, used as intergovernment payments, of $1bn each. The men were apparently tailed by the Italian authorities.
The mystery deepened on Thursday as an Italian blog quoted Colonel Rodolfo Mecarelli of the Como provincial finance police as saying the two men had been released. The colonel and police headquarters in Rome both declined to respond to questions from the Financial Times.
“They are all fraudulent, it’s obvious. We don’t even have paper securities outstanding for that value,’’ said Mckayla Braden, senior adviser for public affairs at the Bureau of Public Debt at the US Treasury department. “This type of scam has been going on for years.’’
The Treasury has not issued physical Treasury bonds since the 1980s – they are handled electronically – though they still issue savings bonds in paper format.
In Washington a US Secret Service official said the agency, which is working with the Italian authorities, believed the bonds were fake.
Officials in Tokyo were nonplussed. Takeshi Akamatsu, a Japanese foreign ministry press secretary, said Italian authorities had confirmed that two men carrying Japanese passports had been questioned in the bond case but Tokyo had not been informed of their names or whereabouts.
“We don’t know where they are now,” Mr Akamatsu said.
Italian officials, while pointing out that hauls of counterfeit money and Treasury bills were not unusual, were stunned by the amount involved. Investigators are looking into the origin and destination of the fakes.
Italian prosecutors revealed last month that they had cracked a $1bn bond scam run by the Sicilian Mafia, with the alleged aid of corrupt officials in Venezuela’s central bank. Twenty people were arrested in four countries.
The fake bonds were to have been used as collateral to open credit lines with banks, Reuters news agency reported. The Venezuelan central bank denied the accusations.
By FT staff in Rome, Tokyo, New York and Washington
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from WHISTLEBLOWER - DETAILED RESPONSE TO THE "FED ALERT" POST re: TWO JAPANESE WITH U.S. BONDS
Posted By: hobie
Date: Wednesday, 17-Jun-2009 03:02:24
In Response To: HERE WE GO AGAIN!: FED ALERT ON THE TWO JAPANESE CARRYING 50s concealed the bonds, including 249 U.S.Treasury bonds ea (watcher51445) From Whistleblower - text quoted from the prior post is in blue, Whistleblower's response texts are in red:
=====
Dear Hobie,
REF: WHISTLEBLOWER, RESPONSE TO WATCHER 51445 RE:
HERE WE GO AGAIN!: FED ALERT ON THE TWO JAPANESE CARRYING 50s
Reference to the article posted by Watcher 51445, as below, dated 16th June 2009. I submit my response to this article, for posting, strictly for the purpose of explanation and clarification. I have copied over relevant sections of the article whereby my response is directly below each section.
HERE
WE GO AGAIN!: FED ALERT ON THE TWO JAPANESE CARRYING 50s
concealed
the bonds, including 249 U.S.Treasury bonds ea
Posted By: watcher51445 Send E-Mail
Date: Tuesday, 16-Jun-2009 10:20:24
http://www.rumormillnews.com/cgi-bin/for....
a). The Japanese
consulate general in Milan confirmed that the detention had taken place and said it was trying to confirm with Italian authorities whether the two were indeed Japanese nationals and their identities.
We already know the name of one person, a Mr Akihiko Yamaguchi (Courteous of a recent Fulford Posting), a former top Ministry of Finance Official in Japan, and claimed member of the Dragon Family. Born 23rd December 1954. Passport No: TF 4658848, Convicted of Fraud in relation to an unofficial and unauthorized issuance of Japanese 57 Series Bonds. Sentenced to 20 years in prison. Obviously recently released and up to his old tricks again.
The other Japanese person involved we believe to be Mr Mitsuyoshi Watanabe, an accomplice to Mr Yamaguchi in the Series 57 Bond Scam. Born 12th March 1948, Passport no TF 4688855.
There is another article posted on RMN regarding these two individuals which also shows copies of their passports etc. gained through intensive investigations and under-cover operations.
b). This is very significant news, because, as Michael Barnett writes in an email, one of the following must be true:
1. The Japanese are trying to secretly divest themselves of about 25% of their US debt. (They own about $600B in US debt.)
2. The Japanese are acting as Chinese or North Korean agents in trying to help them divest themselves of US debt in secret.
3. There is an enormous sum of counterfeit US debt out there and these guys are trying to sell some of it.
None of these cases bodes well for the US debt market.
These UST Bonds are in fact 1933/4 UST Historic Bonds, which are actually UST Debt Obligation Bonds owned by the International Treasury Controller / Global Debt Facility. There are Debt Obligations relating to the time of President Roosevelt when he refinanced America following the Great Depression of the 30’s, obviously stolen out of the Philippines.
At this juncture we can not state whether they are genuine or fake as that is the responsibility of one particular person in the US Treasury who will compare them to the Library Copy and the registration numbers as listed within the US Treasury.
If they are real and genuine then it doesn’t bode well for the USA because it is the USA that are legally liable and responsible on these. Yes, an unknown Debt of the USA, held secret from the people since issuance because they were actually printed in the Philippines (US Territory at the time) using Presses, Plates, Paper, Inks, Boxes, etc provided by the US Federal Reserve.
These are known as Federal Reserve Notes, Federal Reserve Bonds, American Dream Bonds, Wells Fargo
Bonds and Notes. No, they are not actually US Treasury Notes, as stated, although authorized by the US Treasury at the time. The boxes are marked with various identifications such as the US Seal, the US Treasury Seal, the US Federal Reserve Seal and names of Federal Reserve Banks as Chicago, New York. The boxes / Safes containing the Wells Fargo Notes are marked with “Wells Fargo Bank” normally.
If they are not genuine, of which there is a possibility, then they would have been printed illegally, at a far later date by Filipinos, using the Presses, Plates, Paper, Inks, Boxes, etc that were surplus and remained in the Philippines after the print run of the original and genuine Bonds had been completed. These can be legally classified as “Counterfeit” because they are actually Counterfeit of the original genuine ones. If there were no genuine ones they these could not even be classed as counterfeit because you can not counterfeit something that doesn’t exist.
The US have always denied these and will claim that they are fraudulent and fake, whether they are real of not, because they do not want the real truth as to what really happened in 33/34 to come out into the public arena.
c). Discovered 1930s Notes and Bonds
July 2005
The Federal Reserve is aware of several scams involving high denomination Federal Reserve notes and bonds, often in denominations of 100 million or 500 million dollars, dating back to the 1930s, usually 1934. In each of these schemes, fraudulent instruments are claimed to be part of a long-lost supply of recently discovered Federal Reserve notes or bonds.
Fraudsters often falsely claim that the purported Federal Reserve notes or bonds that they hold are somehow very special and are not known to the public because they are so secret. Fraudsters have attempted to sell these worthless instruments, or to redeem or exchange them at banks and other financial institutions, or to secure loans or obtain lines of credit using the fictitious instruments as collateral.
There are Federal Reserve Notes and Bonds despite the Fed’s denial above. Some are genuine and some are fraudulent and fake.
Refer section b) above for details.
As for the words “ Long Lost Supply” and “Recently Discovered”, which are both total misinformation. These are not “lost”, never have been and never will be as we are fully aware of where everything is deposited; and suddenly “found again”, and they are not a “Supply”. These are actually FRN’s and FRB’s dated 1933/34 issued as debt obligation certificates by the USA in exchange for credit from the Global Debt Facility following President Roosevelt’s refinancing of America.
They are legally owned by the Global Debt Facility (Combined International Collateral Accounts) which is legally owned by the International Treasury Controller. They are part of the International Assets of the Global Debt Facility.
d). Below we have provided images of various fraudulent Federal Reserve Notes or Bonds
Having viewed the samples of images shown I can clearly state that these are not fraudulent as claimed, but are in fact genuine US Debt Obligation Notes. However, that is actually besides the point because the US Fed and Treasury will definitely always classify these, or similar certificates, as Fraudulent Federal Reserve Bonds, whether they are genuine or not. It’s their policy (Lies and Deceit) and it will never change.
e). For more information about the legitimate Federal Reserve note denominations, visit the Bureau of Engraving and Printing's website, www.moneyfactory.com .
Legitimate Federal Reserve Notes as described by the Federal Reserve and as seen on www.moneyfactory.com are in fact Federal Reserve Currency Notes printed by the Federal Reserve in the past and present. These are totally different to the Federal Reserve Notes or Bonds as described, or applicable to the $134.5 Bill UST Bonds, which are Federal Reserve, or, Treasury, Debt Obligation Certificates of the USA.
Do not be misled by the general description (Federal Reserve Notes) used as there is a very big difference between Federal Reserve Notes and Federal Reserve/ Treasury Debt Obligation Certificates of the US, even though they carry similar general names / descriptions.
The description used “Federal Reserve Note” to describe these $134.5 Bill USd Bonds, is deceptive to say the least and provides for plausible deniability by the US
Federal Reserve / Treasury / even Government.
f). Private Placement Programs/High Yield Investment Programs July 2005
I trust that many of the Participants in all these so-called Programs who have never received one cent and are still waiting after 17 + years, read this and fully understand it.
What it actually states in 90% true. However there are real programs, very secret, by invitation only, and the collateral must be provided by the person / party entering the program. The collateral is carefully checked and verified through a series of bank to bank checks.
Anything other than that, is effectively a fraud, or an attempt to utilize collateral that may have been illegally gained, or, collateral that is stolen, or, collateral that can not be verified as to legitimacy or ownership, which will rarely get past the “starting Blocks” of a program.
People who participate by contributing (A few Hundred Dollars or a few Thousand Dollars) to Legal and Banking Costs incurred, may as well say “goodbye” to their money as “Programs” do not work in that manner or in the manner that has been described several times by others.
Where “Programs” are effectively “Trading Programs” then the above applies. Where “Programs” have been described incorrectly by others and have nothing at all to do with actual “Trading Programs” registered within the US Federal Reserve, then they may, or may not, be connected to Judicial Decisions based upon a quasi-government savings, or similar, operation and do not come under the above description.
f). DEAR VKD: ABOUT THOSE US BONDS: worth a
total of $134.5B HOW IT'S DONE BETWEEN NATIONS
It is not between Nations. It is between any one Nation and the International Treasury Controller. Many, of what would effectively be described as “Exotics” are Historical Bonds which are actually officially described as “Debt Obligation Certificates” of a Nation. The above $134.5 bill US Bonds are US Debt Obligation Certificates dated 1933 / 34, for which there are various series.
All Nations of the World are eligible, and indeed hold a legal right, to assistance from the Global Debt Facility (Combined International Collateral Accounts) so that they can develop, expand and modernize their economy to and for the benefit of both Nation and its People.
Unfortunately, this information has been withheld deliberately from the majority of Nations in the World, in favour of a few Nations only. Things are changing quite fast and should you require to know more, I would suggest you visit the web site www.unoitc.org for detailed information because the Washington Panel 2003 agreed to extend the coverage of the Collateral Accounts from being limited to “Sovereign Nations” to ‘Sovereign Nations and the commercial world”. The latter however needs the provision of specific facilities within any one Nation for it to be applied correctly and efficiently so that ultimately All the Nations and People of the World can benefit from same, which was the original concept, and indeed directives of the Nations of the World, from 1920 London Treaty, and the Bretton Woods Treaty 1945/46.
Who am I to be making such statements. I am a lawyer and was formerly 2 behind the International Treasury Controller, until my retirement. I have handled these certificates and spent many long periods in the Far East where these certificates, and many others, are deposited following their secretion under the 1920 London
Treaty, many years ago. I am disgusted as to how the World has been blinded by lies and deceit of specific Governments or their specific departments, to prevent genuine use of such certificates to assist many under-developed or emerging economies. I am disgusted with the amount of poverty in the world when there is absolutely no reason for it. I am disgusted as to how Taxpayers throughout the World are lied to and unaware of what their Government spend Tax Revenues on and for what devious political purposes. I am disgusted at all the denials and the truth being hidden from the people. I am disgusted at the corruption involved with the issues I have mentioned above, and more. I am disgusted as to how the criminal elements, at the top of society, always get away with their criminal acts because of their political or diplomatic immunity.
Furthermore, I am disgusted that the financial demise we are all in today need not have happened if the system and the Collateral Accounts had been used and operated correctly, as intended by the Nations of the World, since 1920 and 1945. I am disgusted because instead of the correct use and operation of both the system and the Collateral Accounts, the criminal element have used the system and Collateral Accounts for their own benefit on a continuous basis, depriving the world and its people of their legal rights and the benefits that would be obtained and visibly seen and experienced by all.
I am a person of principles, very strong principles.
Regards
Whistleblower.
*******************************************************************************
Written by Selwyn Duke
Thursday, 18 June 2009 01:35
http://www.jbs.org/jbs-news-feed/5012
On June 3, what appeared to be United States securities worth $134.5 billion were confiscated by Italy’s financial police at the Swiss border. Two weeks later, the mystery still remains. Are they authentic or counterfeit? What’s the story behind the story?
It sounds like the beginning of a Tom Clancy novel. Two men, alleged to be Japanese nationals, are traveling from Italy into Switzerland. Dressed like businessmen, they are carrying a briefcase. And in that briefcase is a secret compartment — containing $134.5 billion in U.S. securities.
Yes, that’s billion — with a “b.”
So began the saga of the bearer bonds, a truly fascinating story rife with inconsistencies. Initially, no one had much idea whether they were authentic or counterfeit. According to many observers, each of the two possibilities defied logic. First, as some in the German media believed, it didn’t make sense they could be counterfeit. After all, such securities generally aren’t negotiable by individuals, and at issue are 249 Federal Reserve bonds worth $500 million each, ten so-called “Kennedy” bonds and other U.S. government securities worth a billion dollars each. So it’s not as if you’d walk into your local sushi bar and order an avocado-roll appetizer with them. Moreover, how could you move them? No one will accept a half a billion dollar note without authenticating it first, opined commentators.
But the notion they were real didn’t seem too tenable, either. First, bearer bonds are like cash. If you lose them, that’s it; they’re gone, finished, and you’ll likely not recover your loss. Then, the U.S. Treasury ceased issuing these bonds in 1982, probably because, since they are like cash, they could be used to facilitate criminal enterprises. Additionally, these securities are issued only to large entities such as banks and governments, presenting the unlikely scenario that such an entity would risk transporting such an astronomical sum illegally via two apparently unarmed men. And because of this failure to declare the securities, it wasn’t just criminals the bonds’ owners had to worry about but also cops. Italy’s money-laundering laws entitle it to keep 40 percent of all undeclared cash and instruments in excess of 10,000 Euros, which in this case amounts to $53.8 billion. The Italians would be singing Funiculì, Funiculà all the way to Banca D’Italia.
There are also other inconsistencies: some news organs reported that the smugglers were arrested; others reported they weren’t. Then, the method of transport’s stupidity rivaled its riskiness, as the two well-attired Asian smugglers were traveling aboard a train largely used by Italian laborers, causing them to stick out like sore thumbs. Next, Bloomberg reported on the apparent fraudulent nature of the bonds on June 12, writing, “Such high denominations would not have existed in 1934, the purported issue date of the notes, Mecarelli [Colonel Rodolfo Mecarelli of the Italian financial police] said. Moreover, the ‘Kennedy’ classification of the bonds doesn’t appear to exist, he said.”
So, many had pointed out how unfathomable this was. How could counterfeiters professional enough to forge securities virtually indistinguishable from the real McCoy make bush-league blunders such as placing the wrong date on the bonds, creating a type that never existed and putting their Japanese GQ couriers on a train with rough-hewn laborers? Did they want to get caught? If so, why? And if the bonds were real, why would their owners take the risk of transporting them illegally? Was an entity secretly trying to dump U.S. debt? If so, since $134.5 billion would make that entity our government’s fourth-largest creditor, the implications for the dollar would be serious.
But, hold on, there’s a kicker — two kickers, actually. The $134.5 billion was the exact amount remaining in the TARP fund on March 30. Coincidence? And add to this the fact that this story — front-page pedigree be the bonds real or Memorex — has been virtually blacked out by the U.S. mainstream media. A fascinating picture, any which way you slice it.
Regardless, it now does appear the securities are fraudulent. Bloomberg reports:
“They’re clearly fakes,” Stephen Meyerhardt, a spokesman for the U.S. Bureau of the Public Debt in Washington, said yesterday. “That’s beyond the fact that the face value is far beyond what’s out there.”
. . . Meyerhardt said Treasury records show [that only] an estimated $105.4 million [some sources say billion] in bearer bonds have yet to be surrendered. Most matured more than five years ago, he said. The Treasury stopped issuing bearer bonds in 1982, Meyerhardt said.
This really isn’t surprising. While it’s understandable how many would assume that only an insane man would try to negotiate a forged $500 million note and only a more insane one would buy it, it has been done before. In fact, there was just such a case last year. The Dallas Morning News reported:
Federal authorities charged a Dallas woman in connection with a scam to sell billions of dollars in fraudulent Federal Reserve notes, including some with a face value of $500 million.
. . . "You would think the half billion dollar denomination would be a dead giveaway that these notes are fake, but people are nevertheless taken in," Jennifer Silliman, special agent in charge for ICE's office of investigations in Los Angeles, said in a written statement.
And just as in the Italian case, the notes here were dated 1934.
Additionally, the Federal Reserve issued a warning about these scams here in 2003, and in 2001 the BBC reported on a counterfeiting operation in the Philippines involving $2 trillion in U.S. bonds. So these scams do bear fruit. I guess you could say there’s a rich sucker born every minute, too.
The bush-league blunders aren’t surprising, either. I would remind you that the $125 million Mars Climate Orbiter was lost because of a failure to convert maneuvering data from English units into metric. Brilliant people are often undone by the simplest things.
Yet there’s still much mystery surrounding the bearer-bonds incident and many questions left unanswered. Most significantly, why does mainstream media choose to ignore one of the largest financial smuggling operations in the history of the world?
********************************************************************************
On June 8th, the Asia News reported the following story:
“Italy’s financial police (Guardia italiana di Finanza) has seized US bonds worth US 134.5 billion from two Japanese nationals at Chiasso (40 km from Milan) on the border between Italy and Switzerland. They include 249 US Federal Reserve bonds worth US$ 500 million each, plus ten Kennedy bonds and other US government securities worth a billion dollars each. Italian authorities have not yet determined whether they are real or fake, but if they are real the attempt to take them into Switzerland would be the largest financial smuggling operation in history; if they are fake, the matter would be even more mind-boggling because the quality of the counterfeit work is such that the fake bonds are undistinguishable from the real ones.”
************************************************************************************
Suitcase With $134 Billion Puts Dollar on Edge: William Pesek
Commentary by William Pesek
June 17 (Bloomberg) -- It’s a plot better suited for a John Le Carre novel.
Two Japanese men are detained in Italy after allegedly attempting to take $134 billion worth of U.S. bonds over the border into Switzerland. Details are maddeningly sketchy, so naturally the global rumor mill is kicking into high gear.
Are these would-be smugglers agents of Kim Jong Il stashing North Korea’s cash in a Swiss vault? Bagmen for Nigerian Internet scammers? Was the money meant for terrorists looking to buy nuclear warheads? Is Japan dumping its dollars secretly? Are the bonds real or counterfeit?
The implications of the securities being legitimate would be bigger than investors may realize. At a minimum, it would suggest that the U.S. risks losing control over its monetary supply on a massive scale.
The trillions of dollars of debt the U.S. will issue in the next couple of years needs buyers. Attracting them will require making sure that existing ones aren’t losing faith in the U.S.’s ability to control the dollar.
The dollar is, for better or worse, the core of our world economy and it’s best to keep it stable. News that’s more fitting for international spy novels than the financial pages won’t help that effort. It is incumbent upon the U.S. Treasury to get to the bottom of this tale and keep markets informed.
GDP Carriers
Think about it: These two guys were carrying the gross domestic product of New Zealand or enough for three Beijing Olympics. If economies were for sale, the men could buy Slovakia and Croatia and have plenty left over for Mongolia or Cambodia. Yes, they could have built vacation homes amidst Genghis Khan’s Gobi Desert or the famed Temples of Angkor. Bernard Madoff who?
These men carrying bonds concealed in the bottom of their luggage also would be the fourth-largest U.S. creditors. It makes you wonder if some of the time Treasury Secretary Timothy Geithner spends keeping the Chinese and Japanese invested in dollars should be devoted to well-financed men crossing the Italian-Swiss border.
This tale has gotten little attention in markets, perhaps because of the absurdity of our times. The last year has been a decidedly disorienting one for capitalists who once knew up from down, red from black and risk from reward. It almost fits with the surreal nature of today that a couple of travelers have more U.S. debt than Brazil in a suitcase and, well, that’s life.
Clancy Bestseller
You can almost picture Tom Clancy sitting in his study thinking: “Damn! Why didn’t I think of this yarn and novelize it years ago?” He could have sprinkled in a Chinese angle, a pinch of Russian intrigue, a dose of Pyongyang and a bit of Taiwan-Strait tension into the mix. Presto, a sure bestseller.
Daniel Craig may be thinking this is a great story on which to base the next James Bond flick. Perhaps Don Johnson could buy the rights to this tale. In 2002, the “Miami Vice” star was stopped by German customs officers as he was traveling in a car carrying credit notes and other securities worth as much as $8 billion. Now he could claim it was all, uh, research.
When I first heard of the $134 billion story, I was tempted to glance at my calendar to make sure it didn’t read April 1.
Let’s assume for a moment that these U.S. bonds are real. That would make a mockery of Japanese Finance Minister Kaoru Yosano’s “absolutely unshakable” confidence in the credibility of the U.S. dollar. Yosano would have some explaining to do about Japan’s $686 billion of U.S. debt if more of these suitcase capers come to light.
‘Kennedy Bonds’
Counterfeit $100 bills are one thing; two guys with undeclared bonds including 249 certificates worth $500 million and 10 “Kennedy bonds” of $1 billion each is quite another.
The bust could be a boon for Italy. If the securities are found to be genuine, the smugglers could be fined 40 percent of the total value for attempting to take them out of the country. Not a bad payday for a government grappling with a widening budget deficit and rebuilding the town of L’Aquila, which was destroyed by an earthquake in April.
It would be terrible news for the White House. Other than the U.S., China or Japan, no other nation could theoretically move those amounts. In the absence of clear explanations coming from the Treasury, conspiracy theories are filling the void.
On his blog, the Market Ticker, Karl Denninger wonders if the Treasury “has been surreptitiously issuing bonds to, say, Japan, as a means of financing deficits that someone didn’t want reported over the last, oh, say 10 or 20 years.” Adds Denninger: “Let’s hope we get those answers, and this isn’t one of those ‘funny things’ that just disappears into the night.”
This is still a story with far more questions than answers. It’s odd, though, that it’s not garnering more media attention. Interest is likely to grow. The last thing Geithner and Federal Reserve Chairman Ben Bernanke need right now is tens of billions more of U.S. bonds -- or even high-quality fake ones -- suddenly popping up around the globe.
(William Pesek is a Bloomberg News columnist. The opinions expressed are his own.)
To contact the writer of this column: William Pesek in Tokyo at wpesek@bloomberg.net
Last Updated: June 16, 2009 15:00 EDT
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