As soon as a president officially declares that a specific country, regime, political party, or small innocuous object on the edge of a galaxy is an enemy, OFAC springs into action. According to the OFAC Web site,

“The Office of Foreign Assets Control (OFAC) of the US Department of the Treasury administers and enforces economic and trade sanctions based on U.S. foreign policy and national security goals against targeted foreign countries and regimes, terrorists, international narcotics traffickers, those engaged in activities related to the proliferation of weapons of mass destruction, and other threats to the national security, foreign policy or economy of the United States. OFAC acts under Presidential national emergency powers, as well as authority granted by specific legislation, to impose controls on transactions and freeze assets under US jurisdiction. Many of the sanctions are based on United Nations and other international mandates, are multilateral in scope, and involve close cooperation with allied governments.”

Yes, and that explains why OFAC has declared war on what is surely the gravest threat that faces the United States today—Cuban cigars.  OFAC has now thoughtfully reminded us that it’s illegal to import Cuban cigars into the United States. That’s been true for 50 years now, ever since President Kennedy declared a trade embargo against Cuba. Kennedy was no dummy, either—he sent out aides to purchase a stockpile of more than 1,000 Cuban cigars the day before the embargo went into effect, Feb. 6, 1961.

In any event, OFAC has released guidance to the effect that,

“The number of attempted importations of Cuban cigars into the United States is rising and because dealing in such cigars may lead to Treasury enforcement actions, the public should be aware of — and make every effort to observe — the prohibitions which are in effect…. It is also illegal for U.S. persons to buy, sell, trade, or otherwise engage in transactions involving illegally-imported Cuban cigars. The penalties for doing so include, in addition to confiscation of the cigars, civil fines of up to $55,000 per violation and in appropriate cases, criminal prosecution which may result in higher fines and/or imprisonment.”

So, let’s say that you’re a U.S. citizen vacationing in, say, Mexico. You come across a tobacco shop that sells Cuban cigars. After asking the owner for his recommendation, you pick out two cigars and pay for them. You have no intention of importing them into the United States, but instead plan to smoke them over the next few hours over a shot or two of Tequila.

Well, well. You’re in a heap of trouble, boy!

According to OFAC,

“The question is often asked whether U.S. citizens or permanent resident aliens … may legally purchase Cuban origin goods, including tobacco and alcohol products, in a third country for personal use outside the United States. The answer is no…The prohibition extends to cigars manufactured in Cuba and sold in a third country and to cigars manufactured in a third country from tobacco grown in Cuba.”

In other words, your Cuban cigar smoke break outside the United States could subject you to a $55,000 fine, plus possible criminal penalties.

If you think this is ridiculous, you’re not alone. But, it is the law. Just keep your mouth shut about smoking Cuban cigars, imbibing North Korean oysters, or drinking Iranian wine when you return to the United States.

And, if you’re tired of dealing with petty tyrants enforcing obsolete and unnecessary laws, consider the example of my friend and colleague P.T. Freeman. P.T., a former U.S. citizen, is now a citizen of the Commonwealth of Dominica. He can (and does) legally purchase and smoke cigars from any country he wishes, including Cuba.

More fundamentally, he’s no longer subject to U.S. jurisdiction. That means he has no longer has any obligation to pay U.S. tax on his worldwide income. It also means that he’s not subject to the plethora of police-state legislation imposed to fight America’s many enemies. Nor will he be drafted for military service in some future undeclared war.

Expatriation–following P.T.’s example– is the only way that a U.S. citizen can legally stop paying taxes. Or smoke a Cuban cigar, for that matter, at least legally. Expatriation is a big decision, because it requires that you obtain a second citizenship and passport, and subsequently give up your U.S. citizenship and passport. You must also be prepared to live permanently outside the United States, although it’s almost always possible to come back for visits.

The Nestmann Group, Ltd. can help with the entire process—from acquisition of a second passport to booking an appointment at a suitable consulate to formally end U.S. citizenship. Contact us today to set up a consultation.

Copyright © 2012 by Mark Nestmann

P.S. If you’d like to hear P.T. Freeman speak about his life as an expatriate, tune in on Friday afternoons at 16.00 EDT to his show on the Overseas Radio Network. I’m his interview guest this week, and we’ll be discussing second passports, expatriation, and many other topics. Don’t miss it!

America has been at war my entire life. In the wake of World War II, the United States waged a massive war in Korea and subsequently in Vietnam. This was followed in the 1980s by smaller invasions of Grenada and Panama, and in the 1990s and 2000s, major wars in Iraq and Afghanistan.

In my youth, the Soviet Union was the enemy. We were indoctrinated to believe that America was the target of Russian missiles that intended to wipe out major industrial centers, including my hometown of Charleston, W.Va. At school, we practiced “duck and cover” maneuvers that would supposedly shield us from the shockwave of a nuclear explosion.

The Birth of the Military-Industrial Complex

What force drives our continuous state of war? In 1961, President Dwight D. Eisenhower warned in his farewell address that a “military-industrial complex” was acquiring national influence that could cause a fundamental shift in the way the United States was governed. He warned of “destroying from within that which you are trying to protect from without.”

The military-industrial complex that Eisenhower deplored comes into being during every war, but until World War II was largely disbanded at the end of each conflict. But since the United States never fully demobilized after 1945, the military-industrial complex has continued to expand ever since.

Eisenhower, and before him the first U.S. president, George Washington, warned that maintaining a standing military during peacetime was a dangerous precedent. The existence of these forces militarizes the underlying society, converting it into a permanent wartime footing. Over the last 70 years, a political constituency for war has been built in every U.S. state to supply the military with economic and political clout in communities across the entire country. Even more important are the changes in customs and laws that ignite suspicion against those perceived as enemies.

To maintain the military-industrial complex, those who profit from it must continuously identify and vilify new enemies. This is the job not just of the military, but also of industries that profit from military spending. Think tanks advocating military solutions are created, and congressional representatives bought and paid for by these industries are elected. The propaganda techniques these advocates of military force use were perfected by the Nazis, and are designed to indoctrinate a specific belief system into the population through repetition. The mainstream media mindlessly parrots the propaganda. Eventually, as in Nazi Germany, the propaganda is accepted as truth with its underlying assumptions seldom questioned.

When the Soviet Union fell in 1989, a brief opportunity existed to demobilize. But instead, a new enemy was found: terrorism. This was a brilliant yet cynical formulation, because terrorism is a tactic, not a nation or government. Terrorism can no more be defeated than can jealousy, greed, or gluttony. The conflation of a War on Terror with the military-industrial complex paves the way for permanent war.

War also conditions the population to living under a continuous state of  emergency. After the attacks of 9/11/01, President George W. Bush declared a national emergency which remains in effect today. President Obama or his successors could end this national emergency anytime, thereby removing the legal backing for anti-terrorist initiatives such as eavesdropping on all U.S. electronic communications and the assassination of U.S. citizens. Ending the national emergency would also help justify repeal of police-state legislation, such as the USA Patriot Act.

Obstacles to Peace

Demilitarization is a hard sell. Even though the wars in Afghanistan and Iraq have cost America more than $3 trillion, we have become conditioned to the assertion that demobilization simply isn’t viable. Proponents of the War on Terror warn that demilitarization will inevitably lead to terrorist attacks on U.S. interests both in the United States and abroad. They also warn that it will lead to the rise of militant Islamic states throughout the Mideast, Asia, and Africa that are fundamentally hostile to the United States.

These claims are preposterous in the face of the facts, but they are seldom examined critically. Osama bin Laden, the architect of the 9/11/01 attacks, is dead. The organization he led, Al Qaeda—the primary target of the War on Terror—is irrelevant to the changes now transforming the Arab world. Islamist dominated parties now openly compete in elections in many countries, thus breaking fundamentally with Al Qaeda’s core belief that sovereignty belongs to God, not to the people.

But even if demilitarization doesn’t lead to a network of fundamentalist Islamic states targeting the United States for destruction, it also means bringing home hundreds of thousands of American soldiers stationed abroad. They will return to the USA just as hundreds of thousands of defense industry jobs disappear as the military shrinks to peacetime levels. The potential for social chaos in this situation is obvious.

The conventional solution to this problem is for more government control over the economy. Adherents to the Keynesian economic school advocate large scale public works and the expansion of social security programs in a demobilization to create jobs and cushion the economic impact for those not able to find them. In theory, revenues otherwise used for war could be diverted for this purpose, but to finance our most recent wars, our overseers haven’t raised taxes. Instead, they’ve borrowed trillions of dollars to fight them. Any monies the government diverts into a peacetime economy must be borrowed as well.

Fortunately, there’s no need to borrow additional trillions to expand public works and social security following demobilization. Once the United States ends its permanent state of national emergency, America could enjoy a peacetime economic boom. But the only way that demobilization won’t lead to economic depression is to create a domestic economic and political framework that favors investment and entrepreneurship. End the emergency, simplify taxes, rules and regulations, and Adam Smith’s invisible hand will emerge to create new investments and jobs.

Freedom Works: The Example of West Germany

For a real world example of how this could work, we need to look no further than Germany following its catastrophic defeat in World War II . The entire country’s industrial production had been bombed out of existence, as had its major cities. Germany was partitioned into two countries, East and West.

In the East, the Soviet Union maintained a massive military presence, and imposed a police state along with rigid controls over the economy. East Germany became a Soviet-style centrally planned economy, with fundamental economic decisions made administratively, rather than by the market. Instead of providing products or services based on consumer demand, those administering the planned economy set forth economic policies and then directed farms and factories to produce the planned goods and services. The outcome was predictable. While East Germany gradually recovered after World War II, it did so very slowly. The planned economy resulted in massive misallocation of resources. Millions of East Germans fled to West Germany or other European countries, leading to a labor shortage and continuing economic stagnation.

West Germany took a different course, in large part due to the efforts of Ludwig Erhard. He was an economist who became a consultant for the U.S. military administration following Germany’s defeat. With a PhD in economics, Erhard was influenced by the writings of Ludwig von Mises and other followers of the “Austrian School” of economic thought. The U.S. military appointed Erhard chairman of a commission preparing for postwar economic reform. In 1948, he became Economic Director for what was to become West Germany. While his American overseers no doubt expected that he would follow a similar economic course to East Germany, Erhard shocked them by abolishing price controls and production limitations at the same moment the Allies introduced a new German currency, the Deutschmark.

These reforms were an immediate success. The end of price and production controls made investment in West Germany far more attractive. Currency reform and the abolition of exchange controls converted the Deutschmark into a respected store of value. Billions of dollars of investment flowed into West Germany, along with millions of skilled workers from East Germany. This led to what is now known as the Wirtschaftswunder (economic miracle) of the 1950s and 1960s when West Germany arose from a defeated state with a devastated infrastructure to become the world’s third largest economy.

The example of West Germany demonstrates that even starting with an economy and industrial infrastructure devastated by war, a trusted currency and lower regulatory barriers can lead to great prosperity. That’s a lesson we should all remember as we strive to build a constituency for a transition away from a war economy.

How can we do so? The success of Ron Paul in the Republican primaries is a promising beginning. For decades, Paul has consistently followed an anti-war agenda, and it’s finally gaining some traction. If it continues, we can eventually reach a “tipping point” where demobilization becomes an accepted subject for serious political debate. The German Wirtschaftswunder proves that demobilization can equate to enormous economic prosperity—but only if America creates the conditions to make that occur.

Copyright © 2012 by Mark Nestmann

(This article was previously published in Freedom’s Phoenix Magazine.)

P.T. was born in the USA, but obtained citizenship and passport from the Commonwealth of Dominica, and subsequently gave up his U.S. citizenship and passport. I don’t know of anyone else more qualified to discuss the real-world experiences of an actual expatriate than P.T.

I’ve attached links below to archives of P.T.’s show, which you can download free, with our complements. Each show is about 50 minutes long.

Here’s a preview of each show:

• Jan. 13. P.T. and I discussed the “nuts and bolts” of moving assets offshore, the USA Patriot Act and its implications, the loss of freedom and privacy in the United States, and the odious legal practice of civil forfeiture. Click here to listen.
• Jan. 20.P.T. and I discussed the reasons and mechanics of obtaining a second passport, and giving up U.S. citizenship, drawing upon P.T.’s personal experiences. Click here to listen.
• Jan. 27. P.T. and I discussed the soaring numbers of U.S. citizens who are giving up U.S. citizenship, the mechanics of traveling on a passport from the Commonwealth of Dominica, why there is very little if any downside for a U.S. citizen to have second citizenship, the loss of travel privacy for those traveling on a U.S. passport, visiting Cuba and other “forbidden countries” using a Dominican passport, obtaining visas on arrival, and comparing the passports of St. Kitts and Nevis to the Commonwealth of Dominica. Click here to listen.
• Feb. 3. P.T. and I discussed the advantages of a Commonwealth passport with respect to obtaining U.K. residence and work visa, the possibility of additional economic citizenship programs coming into being in 2012, investor visas, using cellular phones abroad, and the mechanics of giving up U.S. citizenship. Click here to listen.
• Feb 10. P.T. and international tax attorney Tom Ferneau (president of Tarsus Trust Co., a licensed trust company on the island of Nevis) discuss asset protection, the mechanics of international business companies (IBCs), and how easy it is to subpoena U.S. tax returns. Tom also covered the advantages of Nevis limited liability companies, the difficulty of honoring foreign judgements in Nevis and the frustration of plaintiff’s attorneys in their inability to penetrate the Nevis LLC. Click here to listen.

On Friday, Feb. 17, P.T. will interview L. Burke Files, a long-time friend and business associate. Burke is an international expert on due diligence and the author of Due Diligence for the Financial Professional. Burke also serves as editor of the Aegis Journal. In his 20-year career, Burke has investigated frauds ranging from tens of thousands of dollars to over $800 million  As a fraud recovery expert, Burke has presented at conferences sponsored by the Association of Certified Fraud Examiners, Association of Financial Professionals, Offshore Alert, and East/West Security. You can count on this live interview for some amazing  stories drawn from Burke’s long experience as a due diligence professional.

Listen to P.T. and Burke live Friday, Feb. 17 at 16.00 (4pm) EST. If you’re not already a member of the Overseas Radio Network, click here.

Copyright (c) 2012 by Mark Nestmann

In 2013, the current $5.12 million exemption for estate taxes will revert to the 2002 threshold of $1 million. Should your estate exceed this value, your heirs will pay estate tax at a top rate of 55%—up from today’s 35%.

In Part I, I described some simple planning techniques you can use to reduce your heir’s possible estate tax burden. If you have a larger estate, here are some other options to consider:

1. Life insurance enjoys uniquely preferential tax treatment under U.S. law. One significant advantage is that if the death benefit is paid directly to your beneficiaries, they need not pay estate tax on the proceeds. It’s not very sexy, but a simple term life insurance policy can provide the liquidity your beneficiaries need to pay estate taxes. That way, your beneficiaries won’t need to sell possibly illiquid assets in your estate to pay estate tax. If you’re married, consider a “second to die” policy that pays out once both you and your spouse are deceased.

Let’s say you’re 60 years old and want to purchase a $1 million term life insurance policy, in the expectation of an estate tax bill of $1 million or less. If you’re in good health, you can purchase a 10-year level premium life insurance contract for approximately $400/month. A second-to-die policy will have a somewhat lower premium.

2. Advanced gifting techniques. I discussed some simple gifting techniques in Part I. However, you can gain significantly greater leverage for gifts to your loved ones by the creative use of “valuation discounts.” This concept allows you to discount a gift for gift tax purposes by 25%, sometimes more. A gifting strategy utilizing valuation discounts can greatly increase the effective value of the lifetime gift tax ceiling (currently $5 million, slated to go down to $1 million in 2013).

Here’s an example. You and your spouse plan to leave $15 million of a larger estate to your heirs, but don’t want to subject yourself to gift taxes. You create a limited liability company (domestic or foreign) owned 100% by you and your spouse (50% for each of you). Next, you fund the LLC with a total of $15 million in the form of cash, securities, or other property to your heirs in the form of minority interests of the LLC.

Finally, you and your spouse make lifetime gifts to your heirs of the assets you contributed to the LLC in the form of minority interests in the LLC. You can generally discount the value of such gifts for gift tax purposes from 10% to 50%, although 25%-30% is a typical adjustment. In this example, if you can justify a valuation discount of 33% or higher on these gifts, you will owe no gift tax. Nor will heirs owe estate tax, since the assets are now out of your estate.

Valuation discounts exist because it’s often not possible to sell partnership interests—particularly minority interests—for the full value of the assets they contain. Minority interests aren’t readily marketable, and the recipient has no real control over them. The IRS has fought valuation discounts tooth and nail, but the courts have, with some exceptions, generally upheld them as reflecting market reality. Warning: Don’t assume you can take these discounts without professional advice, including the use of an expert independent, arm’s-length valuation appraiser.

3. Valuation discounts on steroids. In 2009, Nevada created a new type of LLC called a “Restricted Entity” (RE-LLC). Under its provisions, you can create a restriction on liquidating the assets in a RE-LLC for up to 10 years. Such a restriction on distributions justifies even larger valuation discounts for gifts of minority membership interests.

How much larger? The professionals I’ve spoken with in Nevada believe a 50% or even greater valuation discount is justified for a minority interest in a securities portfolio held in a RE-LLC which is subject to the full 10-year investment restriction. Minority interests in less liquid assets (e.g., a closely held business or real estate) might qualify for even larger discounts.

Incidentally, the RE-LLC should also provide robust asset protection for those assets within the entity. Nevada has excellent asset protection provisions written into its LLC laws. Of course, there’s no guarantee that courts outside Nevada would respect Nevada law. But if the RE-LLC’s assets are in Nevada, any effort to enforce a judgment against a member of the LLC by seizing the assets in the LLC would have to be enforced under Nevada law. It seems likely that the RE-LLC’s restriction on distributions would likely be respected.

If you think the RE-LLC might be suitable for your estate planning and/or asset protection needs, contact The Nestmann Group, Ltd. We’d be happy to discuss this strategy with you and help you decide if it’s appropriate for your unique needs.

Copyright © 2012 by Mark Nestmann

In 2001, Congress radically retooled federal wealth transfer tax laws. The amendments raised the estate tax and lifetime gift exemption amounts, lowered the top estate tax rate, and eliminated the estate tax all together for 2010. At the end of 2010, Congress created a temporary “unified” gift and estate tax exemption of $5 million. Adjusted for inflation, the 2012 exemption is $5.12 million. (I’ll explain “unified” in a moment.)

But in 2013, estate taxes will revert to the 2002 threshold of $1 million. And should your estate exceed this value, your heirs will pay estate tax at a top rate of 55%—up from today’s 35%. And, don’t forget that for estate tax valuation purposes, your assets must be valued at their “highest and best use.” That’s the use that would produce the highest value for your property, regardless of how you currently use it.

It’s not uncommon for a family faced with a high estate tax valuation for real estate or a closely held family business to be forced to sell the business to pay the tax. If the value of the property falls in the months after your death, your heirs may wind up with an estate tax bill higher than the amount they inherited! While provisions exist in the Tax Code to reduce estate tax or spread out payment over time for family-owned farms and closely-held businesses, this is a poor substitute for advance planning to reduce avoid estate tax altogether.

The bottom line: if your estate exceeds $1 million, you’ll want to consider some ways to reduce your estate tax liability before Jan. 1, 2013.

Transfer Taxes 101

To ensure the bulk of your estate passes intact to your heirs or other beneficiaries, U.S. taxpayers and their professional advisors must consider three separate (but related) “transfer taxes.”

1. Estate tax. The $5.12 million exemption for 2012 doubles if you’re married and you do some basic estate planning.

2. Gift tax. For 2012, there is also a $5.12 million gift tax exemption. You can make gifts of up to $5.12 million during your lifetime to anyone you choose, with no gift tax liability. Again, if you’re married, the exemptions effectively double. However, for 2012, the gift and estate tax is “unified.” That means such “lifetime gifts” count against your estate tax exemption, dollar for dollar. You pay gift tax up to 35% on lifetime gifts you make that exceed $5 million.

In 2013, the gift tax exemption goes down to $1 million, with a top rate of 55% on gifts larger than that amount. It’s not quite as bad as it seems, because the gift tax and estate tax will no longer be unified; you’ll have a $1 million exemption for each.

Fortunately, you can make gifts to anyone up to $13,000 annually without using up any portion of this exemption. For example, if you’re married with four children and two grandchildren, you and your spouse can jointly gift each of your children and grandchildren 2 x $13,000 = $26,000 annually, or a total of $156,000 without counting toward the lifetime exemption.

3. Generation-skipping transfer tax (GSTT). This tax targets transfers that skip generations, since the assets won’t be included in the estate of the skipped generation. Every U.S. taxpayer has a lifetime GSTT exemption of $5.12 million. The GSTT is also unified with the estate tax, which means that gifts to your grandchildren that exceed $13,000 annually count against your estate tax exclusion.

In 2013, the GSTT reverts back to its level in 2001, $1 million, adjusted for inflation. I estimate the exemption will be approximately $1.4 million.

Planning Strategies for Avoiding Estate Tax

If you don’t plan on dying in 2012 to avoid estate tax, there are other options! Here are two simple ideas to consider:

• Marital bypass trust. If you’re married, this simple trust (sometimes referred to as an “A-B trust”) can double your estate tax exemption. You can also incorporate a marital bypass provision into an offshore trust formed in any suitable offshore jurisdiction. That way, you’ll obtain state-of-the-art asset protection for your wealth, and double the estate tax threshold.

•  Lifetime gifts. Since you have a $5.12 million gift tax exemption until the end of 2012, why not use it? If you own assets that have substantially fallen in value in the last year or two, consider gifting them to your loved ones now, before values recover. Just don’t forget about the unified estate/gift tax exemption. Every dollar you gift above $13,000 per recipient per year counts against your estate tax exemption. In addition, unlike property received through inheritance, property received as a gift doesn’t benefit from a “step-up” in basis. The recipient of the gift must eventually pay capital gains tax on the difference between the selling price and the price at which you acquired the property. With inherited property, the acquisition price “steps up” to its value at your death. In addition, there is a  drafting error in the 2010 law that temporarily increased the unified estate and gift tax exemption to $5 million. This error could result in higher estate taxes for your heirs if you make lifetime gifts larger than whatever lower estate tax exemption is eventually imposed. However, this drafting error will hopefully be corrected.

In my next post, I’ll describe some more advanced techniques to avoid estate taxes. They’re especially important to consider if you have a large estate.

Copyright © 2012 by Mark Nestmann

On my flight into Dominica, I sat beside a friendly gentleman from Iceland. I asked him if there was a connection between Iceland and Dominica. The answer he gave me was quite interesting, and very favorable for the long-term interests of Dominica.

Iceland is one of the world’s most seismically active countries. Geysers, hot springs, and volcanoes are common. (The volcanic eruption that shut down northern European airspace a couple of years back comes to mind.)

Dominica is also seismically active. It has nine volcanoes packed into its 290- square mile area, and one of the only two boiling lakes in the world. There is obviously immense potential for geothermal energy.

Like many island jurisdictions, Dominica must import nearly all of its energy, mostly in the form of refined oil and gasoline. Energy costs are rising, and the government has responded by exploring the potential for harnessing the island’s immense geothermal potential. Drilling recently commenced at the Roseau Valley Geothermal Project.

Outside experts brought in by the government estimate that once drilling is complete, 10-15 megawatts of power equivalent can be tapped almost immediately. This is sufficient capacity to supply electrical power for most of the island. Should this be successful, the government plans to construct a larger 120 MW plant, electricity from which will be transmitted to neighboring islands.

For a project of this magnitude to succeed, expert advice is essential. And it turns out that my fellow passenger works for a geothermal company in Iceland that is helping to develop the Roseau Valley project. His company believes there is immense opportunity for the exploitation of geothermal resources here in Dominica.

The government of Dominica firmly supports this project. If it’s successful, the benefits to Dominica will be immense. Not only will Dominica become energy self-sufficient, but energy exports will bring in much needed foreign capital.

You can become part of the action in the Commonwealth of Dominica by acquiring economic citizenship here, as I have. The application process takes 6-9 months, and costs around $100,000 for a single applicant.

Contact the Nestmann Group, Ltd. for more information. We can help.

Copyright (c) 2012 by Mark Nestmann

One promise candidate Obama did follow through on was to “shut down offshore tax havens.” While he hasn’t succeeded in doing so, the FATCA law his administration pushed through Congress in 2010 is likely to cut off most access to international financial services by U.S. citizens or permanent residents. (Click here for my most recent post on FATCA).

Now, the offshore financial sector has once again become a campaign issue. This summer, the Republican Party will select a candidate to oppose Obama’s re-election in November. And Republican opponents to front-runner Mitt Romney portray him as someone who (boo, hiss) ruthlessly uses international financial centers at the expense of American workers and taxpayers. For instance, in a series of attack ads run by supporters of former Speaker of the House Newt Gringrich equates Romney’s offshore dealings with the loss of thousands of U.S. jobs.

Outside of politics, Romney headed up a private equity firm, Bain Capital. And it is the offshore dealings of Bain that have drawn so much criticism. However, it’s understandable why Bain uses international financial centers in its business. Basically, it’s to shield foreign investors in Bain’s private equity deals from paying U.S. taxes for their investments in U.S. companies. There’s nothing at all illegal about this arrangement, but it makes for a great mudslinging opportunity.

Nor does this arrangement cost the U.S. economy jobs. Quite the contrary. Foreign investors put millions of dollars at Bain’s disposal to make investments in U.S. companies, which in turn employ U.S. workers. Why is this bad?

In any event, I think the fireworks have only started over this issue. If Romney is nominated, count on incumbent Obama to attack the Republican candidate for his involvement in “notorious” offshore tax havens. Obama will point to FATCA as evidence of his commitment to force U.S. citizens and residents “evading tax” in said “notorious offshore tax havens.” Of course, he’ll ignore the fact that prominent Democrats routinely utilize tax havens for business and investment purposes, including as Bill Clinton, John Kerry, John Edwards, and Robert Rubin.

Incidentally, while I think Romney will get the Republican nomination, I don’t support him for other reasons, which mainly relate to foreign policy and civil liberties. Romney opposes any significant reduction in the size of the U.S. military. He also wants to use U.S. military power to achieve U.S. foreign policy objectives, such as attacking Iran to prevent that country from developing nuclear weapons.

On the civil liberties front, Romney proposes wiretapping mosques to help fight the War on Terror. And then there are these gems from Mitt:

“I hear from time to time people say, hey, wait a second, we have civil liberties we have to worry about. But don’t forget the most important civil liberty I expect from my government is my right to be kept alive, and that’s what we’re going to have to do.”

And this:

“Conservatives believe in providing constitutional rights to our citizens, not to enemy combatants like Khalid Sheikh Mohammed. Not on our watch. A conversation with a would-be suicide bomber will not begin with the words, “‘You have the right to remain silent.’”

Still, if Mitt is elected, we might see his administration slightly relaxing the burdens of implementing the FATCA law, along with long-overdue reforms to the U.S. Tax Code. But I’m not holding my breath.

Copyright © 2012 by Mark Nestmann

You can apply to come to the United Kingdom in this category if you can show that:

• You are a Commonwealth citizen;
• You are aged 17 or over;
• You are able to work and you plan to work in the UK; and
• You can adequately support and accommodate yourself and your dependents without help from public funds.

You must also show that at least one of your grandparents was born:

• In the United Kingdom (including the Channel Islands and the Isle of Man); or
• Before 31 March 1922 in what is now the Republic of Ireland; or
• On a British-registered ship or aircraft.

You can claim ancestry if your relationship to the relevant grandparent is in the legitimate or illegitimate line.

You cannot claim U.K. ancestry through step-parents, but you can apply if you or your parent (through whom you are claiming ancestry) are adopted. You must show evidence of the legal adoption with your application form.

If you do not meet these requirements, you must apply under another work-based immigration routes to live and work in the United Kingdom.

After a minimum of five years residence in the United Kingdom (three years if you are married to or a civil partner of a British citizen), you can apply for U.K. citizenship and passport. Since the United Kingdom is a member of the European Union, with a U.K. passport, you can live or work in any of the other 26 EU member states. A U.K. passport is also a superb travel document with visa-free entry to more than 160 countries.

Anyone born or naturalized in a member of the British Commonwealth meets the first requirement of the Ancestry Visa rules. More than 50 nations are Commonwealth members. In two of them, the Commonwealth of Dominica and the Federation of St. Kitts & Nevis, it’s possible to obtain economic citizenship and passport through a donation or investment. The total time required to complete the process and obtain your Commonwealth passport is generally 4-8 months. Total costs for Dominica for a single applicant come to around $100,000; for St. Kitts & Nevis, it’s a minimum of $280,000.

If you would like to work in the United Kingdom with a visa that provides a path to U.K. citizenship, your ancestry qualifies you for the U.K. Ancestry Visa, but you don’t have a Commonwealth passport, The Nestmann Group, Ltd. can help you obtain citizenship and passport from Dominica or St. Kitts & Nevis. Contact us today for a consultation.

Copyright (c) 2012 by Mark Nestmann

We seem to be very conscious of e-mail security, but are often oblivious to the security of the “snail mail” we receive at our homes and offices. Recently, in our role as consultants in the due diligence arena, we were asked a series of questions relating to personal and corporate snail mail security. The answers bear repeating for a wider audience.

Q. What type of mail security do we need?

A. Each company will have its own requirements. If your company regularly handles payments through the mail with a significant volume of payments arriving via postal mail or courier, a lock box service is often a sensible investment, both for security and efficiency.

For smaller companies, I strongly recommend that all mail go to a post office box, not a private mailbox. Post office boxes are securely constructed and often continuously monitored by CCTV. However, private mailboxes (e.g., from the UPS Store) offer a street address for delivery of packages via courier, and may be more practical but not as secure as private mailbox. Private mailboxes should be securely constructed of heavy gauge steel and accessible only to employees of the mailbox company.

Q. How can one segregate mail streams?

A. Mail drops and drawers can be used to segregate the mail according the wishes and needs of the company. However it’s segregated, mail in significant volume should be picked up by a trusted employee or delivered by postal services in bulk, ending up in a secure location. If that location is at a company facility, it should be segregated from the remainder of that facility. Mail may be received, but should never be kept or even exposed, at a loading dock.

Once in the secure location, the mail can be delivered to the proper department. The mail can be pre-coded by agreement, such as adding to the address of certain locations or functions by adding additional addressing information such as Station A, Building 14, or to the attention of a specific employee. These codes should not interfere with regular postal addressing.

Q. How should junk mail be dealt with?

A. All physical mail should be treated as one would treat e-mail. It should be kept free from the prying eyes and the letter openers of others. Junk mail often originates from companies offering credit cards or financial services. If such mail winds up in the wrong hands, it can lead to identity theft. Yes, even junk mail has value!

Unsecured mail streams are vulnerable to industrial espionage without opening up a single envelope or parcel and with nearly zero risk of detection. Think of the unopened mail as the cleaner version of dumpster diving, but without the leftover food bits. You just need to look at the envelope to make conclusions about the company and the receiver. For example, an envelope containing a credit card will never have any identification on the envelope other that a post office box address. But, with a minor amount of research, you can link the address to the credit card issuer.

Mail stream analysis can also reveal the identity of a company’s clients, the nature of the relationship, the names and addresses of key suppliers, etc. It is also possible to decode a Pittney Bowes franking stamp to identify the sender and the physical address where the franked item originated.

Now imagine what about what you can learn about a company if one you can open their mail!

Q. How can I tell if the mail has been tampered with?

A. Look for smudged ink, as many letters are now printed with jet ink printers. The inks will bleed if the paper is treated with chemicals or water (steam) to pen open the envelope and read the contents. Also examine the corners of the envelope for small tears. They may indicate that a tool was inserted to either spool the contents for removal from the envelope or that a small scope was inserted to read the document while still in the envelope.

Many correspondents will tape over the corners of an envelope to prevent tampering. However, someone who tampers with an untaped envelope may also tape it to conceal the tampering. For high security mailings, wax seals may be employed to prevent tampering and authenticate the sender as well as security envelops and tamper evident tape and seals. But yet, that too draws attention…

Q. How can I be more proactive to discover mail stream tampering?

A. Have a letter sent to you, at the address of your choice, on a regular basis. Record the number of days it takes to arrive. If you see an increase in the numbers of days it takes for the test letter to arrive, on a consistent basis, this may indicate tampering or the monitoring of your mail stream, as the mailed items must be diverted for at least a few hours for fiddling purposes. Diversion may result in the mailed items missing the cutoff times for sorting and delivery for a day or more.

Some other ideas:

• Include in your own correspondence a small sheet of rice paper inside the envelope. Rice paper turns to goo when it gets moist, such as in from steam when trying open steam open a glued envelope.
• Add chemical dots to the paper and envelope that react to the different types of solvents used such as some of the dry cleaning solvents.
• Use inks that react to heat, such as lemon juice that turns brown when heated.
• Consider sending to yourself regularly a package that contains a mobile tracking device such as a cell phone, thus allowing you to follow your package from the time of mailing to the time of delivery.

As always, specific recommendations for action depend upon specific fact patterns. If competitors of your business can gain a competitive advantage through surveillance of your snail mail, you’ll want to act proactively to prevent such surveillance.

Copyright © 2012 by L. Burke Files. Reprinted by permission from the February 2012 issue of the Aegis Journal.

Burke Files is a long-time friend and business associate. He is an international expert on due diligence and the author of Due Diligence for the Financial Professional. Burke also serves as editor of the Aegis Journal. In his 20-year career, Burke has investigated frauds ranging from tens of thousands of dollars to over 800 million dollars. As a fraud recovery expert, Burke has presented at conferences sponsored by the Association of Certified Fraud Examiners, Association of Financial Professionals, Offshore Alert, and East/West Security. Burke is also the principal of Tarsus Trust Company, a licensed trust company in Nevis, British West Indies. You may reach him c/o Financial Examinations & Evaluations, Inc., P.O. Box 27346, Tempe, AZ 85285. Tel.: +1 (480) 838-1728. Fax: +1(480) 491-9439.

Jim is my”go-to” guy when I have questions about the arcane world of U.S. international tax laws and regulations. He understands the rules relating to controlled foreign corporations (CFCs), passive foreign investment companies (PFICs), the foreign earned income exclusion (FEIE), tax treaties, expatriation, and much more. Jim also recently opened an office in Vienna for his international tax preparation and planning firm, The Esquire Group. The office is set up to provide full-service U.S. tax preparation services for non-resident U.S. citizens and businesses.

James C. Sexton, Jr., LLM

To reserve your place at Jim’s lecture, or to inquire about tax preparation and compliance services in Vienna, e-mail service@esqtax.com.

Jim will deliver his lecture at:

Expat Center Vienna
Schmerlingplatz 3, 1010 Vienna

Wednesday, February 15th, 2012
Entrance: 17.45
Presentation begins: 18.00