Blood Gold

Blood Gold

PressTV Interview with Peter Koenig

Transcript

Background

The Middle East Eye reports  there are no gold mines under Dubai’s sands with artisanal miners or children toiling away trying to strike gold. But there is the Dubai Gold Souk and refineries that vie with the largest global operations as the United Arab Emirates (UAE) strives to expand its position as a major gold hub.

In recent years, the UAE, with Dubai in particular, has established itself as one of the largest and fastest-growing marketplaces for the precious metal, with imports rising by 58 percent per annum to more than $27bn in 2018, according to data collated by the Observatory for Economic Complexity.

With no local gold to tap, unlike neighboring Saudi Arabia, the UAE has to import gold from wherever it can, whether it be legitimately, smuggled with no questions asked, sourced from conflict zones, or linked to organized crime.

Blood gold

The Sentry’s investigation (Sentry Investigations specialize in private and corporate investigations in the UK) found that 95 percent of gold officially exported from Central and East Africa, much of it mined in Sudan, South Sudan, the Central African Republic and the Democratic Republic of Congo, ends up in the Emirates.

Gold has become so important to Dubai’s economy that it is the emirate’s highest value external trade item, ahead of mobile phones, jeweler, petroleum products and diamonds, according to Dubai Customs.

And it is the UAE’s largest export after oil, exporting $17.7bn in 2019. Gold’s importance has only increased as Dubai’s oil reserves have dwindled and the UAE has tried to diversify its economy.

The Swiss connection

Dubai is not the only gold player with dirt, and even blood, on its hands.

“It is not just Dubai, it’s also Switzerland. The Swiss get large quantities of gold from Dubai. The Swiss say they are not getting gold from certain countries [connected to conflict gold], but instead from Dubai, yet the gold in Dubai is coming from these countries. Dubai is complicit, but Swiss hands are equally dirty as they can’t cut Dubai from the market,” said Lakshmi Kumar, policy director, at Global Financial Integrity (GFI) in Washington DC.

Switzerland is the world’s largest refiner, while [more than half] of all gold goes through the country at some point, according to anti-corruption group Global Witness. Switzerland’s trade is tied to the UK, which imports around a third of all gold.

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RT Question:
Gold has become such an important commodity for the UAE, that it is the largest export after oil, exporting $17.7bn in 2019. But there is the other side to this story. A report by the UK’s Home Office and Treasury earlier in December also named the UAE as a jurisdiction vulnerable to money laundering by criminal networks because of the ease with which gold and cash could be moved through the country. Is this the case?

PK Reply
First, International Gold Laundering is a gigantic Human Rights abuse, foremost because laundered gold stems from many countries in Africa and South America where massive child labor is practiced. Children not only are put at tremendous risk working in the mines, in narrow rickety underground tunnels that could collapse anytime, and often do – but they are also poisoned on a daily basis by chemicals used in extracting gold ore from the rock, notably cyanide and mercury – and others.

Second, Gold laundering is an international crime, because it illegal and it is mostly run by mafia type organizations – where killing and other type of violence, plus sexual abuse of women – forced prostitution – is a daily occurrence.

There should be an international law – enforceable – issued by the UN – and enforced by the International Criminal Court against anything to do with gold laundering. Infractions should be punished. And countries involved in gold laundering should be held responsible – put on a black list for illegal financial transactions and for facilitating human rights abuses.

The United Arab Emirates — has no gold, so all of the $17.7 billion of their gold exports is being imported and “washed” by re-exporting it mainly through the UK into Switzerland and other gold refining places, like India. With a worldwide production of about 3,500 tons, there are times when Switzerland imports more gold than the annual world production, most of it coming from the UK, for further refining or re-refining, for “better or double laundering” – erasing the gold’s origins.

From the refinery in Switzerland, it goes mostly into the banking system or is re-exported as “clean” gold coming from Switzerland. And its origins are no longer traceable.

Worldwide about 70% of all gold is refined in Switzerland.

Gold mine production totaled 3,531 tons in 2019, 1% lower than in 2018. About 70% of all gold, worldwide is refined in Switzerland. So, it is very likely that the UK, receiving gold from United Arab Emirates, re-exports the gold to Switzerland, for re-refining, for further export to, for ex. India. – Coming from Switzerland it has the “label” of being clean. How long will this reputation still last?

Metalor is the world’s largest gold refinery – established in Switzerland. And they are absolutely secretive, do not say where they buy their gold from, because the Swiss Government does not require the origin when gold enters Switzerland.

Once it is refined – the origin can no longer be determined, because gold does not have a DNA.

RT Question
The Sentry’s investigation found that 95 percent of gold officially exported from Central and East Africa, much of it mined in Sudan, South Sudan, the Central African Republic and the Democratic Republic of Congo, ends up in the emirate, through what’s known as blood gold: gold obtained through brutal mining practices and illicit profits, including the use of children, how do you see this?

PK Reply
Yes, this is absolutely true.

As mentioned already before – much of the gold from Africa / Central Africa, Ghana and South America, notably Peru, is blood gold. Of course, it passes through many hands before it lands in a refinery in the UK, Switzerland or elsewhere, and therefore is almost untraceable.

But, the company that buys the gold, like Metalor, they know exactly where the gold is coming from, but, as mentioned before, since the Swiss government does not require the importing company to divulge the origin of the gold – the human rights abuses will never come to light, or better – to justice.

It is estimated that up to 30% of all gold refined in Switzerland is considered blood gold. Imagine the suffering, disease, and even death – or delayed death through slow reacting chemicals like cyanite and mercury.

However, if there is no international law – a law that is enforced – that puts the criminals to justice – and put countries that facilitate gold laundering on an international list – for the world to see – and hold them accountable, with for example financial sanctions, little will change.

Peter Koenig is a geopolitical analyst and a former Senior Economist at the World Bank and the World Health Organization (WHO), where he has worked for over 30 years on water and environment around the world. He lectures at universities in the US, Europe and South America. He writes regularly for online journals and is the author of Implosion – An Economic Thriller about War, Environmental Destruction and Corporate Greed; and co-author of Cynthia McKinney’s book “When China Sneezes: From the Coronavirus Lockdown to the Global Politico-Economic Crisis” (Clarity Press – November 1, 2020)

Peter Koenig is a Research Associate of the Centre for Research on Globalization.

What Will Lula Do?

What Will Lula Do?

July 27, 2020

by Pepe Escobar – cross posted with Consortium News

A version of this article first appeared on The Asia Times.

Decades after the fact, a political earthquake that should be rocking Brazil is being met with thunderous silence.

What is now described as the Banestado leaks and CC5gate is straight out of vintage WikiLeaks: a list, published for the first time in full, naming names and detailing what is one of the biggest corruption and money laundering cases in the world for the past three decades.

This scandal allows for what Michel Foucault characterized as the archeology of knowledge. Without understanding these leaks, it’s impossible to place in the proper context the sophisticated Hybrid War unleashed by Washington on Brazil initially via NSA spying on President Dilma Roussef’s first term (2010-2014), all the way to the subsequent Car Wash corruption investigation that jailed former President Luiz Inácio Lula da Silva and opened the way for the election of neofascist patsy Jair Bolsonaro as president.

The scoop on this George-Orwell-does-Hybrid War plot belongs, once again, to independent media: the small website Duplo Expresso, led by a young, daring Bern-based international lawyer named Romulus Maya, which first published the list.

An epic, five-hour podcast brought together the three key protagonists who denounced the scandal in the first place, back in the late 1990s, and now are able to analyze it anew: then governor of Parana state, Roberto Requiao; federal prosecutor Celso Tres; and police superintendent, now retired, Jose Castilho Neto.

In an earlier podcast, Maya and anthropologist Piero Leirner, Brazil’s foremost analyst of Hybrid War, briefed me on the the myriad political intricacies of the leaks while we discussed geopolitics in the Global South.

The CC5 lists are herehere , and here . Let’s see what makes them so special.

The Mechanism

Brazil’s central bank in Brasilia. (Senado Federal, CC BY 2.0, Wikimedia Commons)

Way back in 1969, the Brazilian Central Bank created what was described as a “CC5 account” to facilitate foreign companies and executives to legally wire assets overseas. For many years the cash flow in these accounts was not significant. Then everything changed in the 1990s – with the emergence of a massive, complex criminal racket centered on money laundering.

The original Banco do Estado do Parana (Banestado) investigation started in 1997. Federal prosecutor Celso Tres was stunned to find that from 1991 to 1996 no less than $124 billion in Brazilian currency was wired overseas. Between 1991 and 2002 that ballooned to a whopping $219 billion – placing Banestado as one of the largest money laundering schemes in history.

Tres’ report led to a federal investigation focused in Foz do Iguacu in southern Brazil, strategically located right at the Tri-Border Area of Brazil, Argentina and Paraguay, where local banks were laundering vast amounts of funds through their CC5 accounts.

This is how it worked. U.S. dollar dealers in the black market, linked to bank and government employees, used a vast network of bank accounts under the name of unsuspecting ”smurfs” and phantom companies to launder illegal funds from public corruption, tax fraud and organized crime, mainly through the Banco do Estado do Parana branch in Foz do Iguacu. Hence it is called the Banestado case.

The federal investigation was going nowhere until 2001, when police superintendent Castilho ascertained that most of the funds were actually landing in accounts at the Banestado branch in New York. Castilho arrived in New York in January 2002 to turbo-charge the necessary international money tracking.

Through a court order, Castilho and his team reviewed 137 accounts at Banestado New York, tracking $14.9 billion. Though the CC5 accounts were meant only for foreigners to use, in quite a few cases, the beneficiaries had the same name of Brazilian politicians then serving in Congress, cabinet ministers and even former presidents.

After a month in New York, Castilho was back in Brazil carrying a hefty 400-page report. Yet, despite the overwhelming evidence, he was dropped out of the investigation, which was then put on hold for at least a year. When the new Lula government took power in early 2003, Castilho was back in business.

In April 2003, Castilho identified a particularly interesting Chase Manhattan account named “Tucano” – the nickname of the Partido da Social Democracia Brasileira (PSDB) led by former President Fernando Henrique Cardoso, who was in power before Lula and always kept very close ties to the Clinton and Blair political machines.

President Luiz Inácio Lula da Silva and wife Marisa Letícia, President Fernando Henrique Cardoso and wife Ruth Cardoso, Jan. 1, 2003 at Lula’s inauguration. (Marcello Casal Jr., Agência Brasil, CC BY 3.0, Wikimedia Commons)

Castilho was instrumental in setting up a parliamentary inquiry commission over the Banestado case. But again, this commission led nowhere – not even a vote on a final report. Most companies involved negotiated a deal with the Brazilian Internal Revenue Service and thus ended any possibility of legal action in regard to tax evasion.

Banestado Meets Car Wash

In a nutshell, the two largest political parties – Cardoso’s neoliberal PSDB and Lula’s Workers’ Party (which never really faced down imperial machinations and the Brazilian rentier class) actively buried an in-depth investigation. Moreover Lula, coming right after Cardoso, and mindful of preserving a minimum of governability, made a strategic decision to not investigate PSDB, or “Tucano,” corruption, including a slew of dodgy privatizations.

New York prosecutors duly prepared a special Banestado list for Castilho of what really mattered for a criminal prosecution to proceed:  the full circle of the money laundering scheme, with

(i) funds first illegally remitted out of Brazil using the CC5 accounts,

(ii) passing through the New York branches of the Brazilian banks involved,

(iii) reaching offshore bank accounts and trusts in tax havens (e.g., Cayman, Jersey, Switzerland) and then finally

(iv) going back to Brazil as – fully laundered – “foreign investment,” for the actual use and enjoyment of the final beneficiaries who first got the unaccounted-for money out of the country using the CC5 accounts.

But Brazilian Justice Minister Marcio Thomaz Bastos, appointed by Lula, then nixed it. As superintendent Castilho metaphorically put it,  “This, deliberately, prevented me from going back to Brazil with the murdered body.”

While Castilho never got hold of the critical list, at least two Brazilian congressmen, two senators and two federal prosecutors, who would later rise to fame as Car Wash investigation “stars,” Vladimir Aras and Carlos Fernando dos Santos Lima,  did get the list.

Why and how the list (let’s call it the “body bag”) never found its way into the criminal proceedings back in Brazil is an extra mystery wrapped up inside the enigma.

Meanwhile, there are “unconfirmed” reports (several sources would not go on record on this) that the list might have been used for outright extortion of the individuals, mostly billionaires, featured on it.

Extra sauce in the judicial sphere comes from the fact that the provincial judge in charge of burying the Banestado case was none other than Sergio Moro, the self-serving Elliot Ness figure who in the next decade would rise to superstar status as the capo di tutti i capi of the massive Car Wash investigation and subsequent justice minister under Bolsonaro. Moro ended up resigning and is now, de facto, already campaigning for president in 2022.

Sérgio Moro holding a press conference in September 2015. (Marcos Oliveira/Agência Senado, Wikimedia Commons)

Here is where we find the toxic Banestado-Car Wash connection. Considering what is already public domain about Moro’s modus operandi on Car Wash, as he altered names in documents with the single-minded objective of sending Lula to jail, the challenge now would be to prove how Moro “sold” non-convictions related to Banestado.  He has a very convenient legal out: no “body” was found (or formally brought back to criminal proceedings in Brazil), so no one could be found guilty of murder.

As we plunge into excruciating details, Banestado increasingly looks and feels like the Ariadne’s thread that may lead to the beginning of the destruction of Brazil’s sovereignty. It is a tale full of lessons to be learned by the whole Global South.

The Black Market Dollar King

Castilho, in that epic podcast, rang alarm bells when he referred to $17 million that had transited the Banestado branch in New York and then was sent, of all places, to Pakistan. Castilho and his team discovered that a few months after 9/11. He told me his investigators would dig it all up again and that a report exists indicating the origin of these funds.

This is the first time such information has surfaced – and the ramifications may be explosive. We’re talking about dodgy funds, arguably from drugs and weapons operations, leaving the Triple Border Area – Brazil, Argentina, Paraguay – which happens historically to be a top site for CIA and Mossad black ops.

Financing may have been provided by the so-called King of The Black Market Dollars, Dario Messer, via CC5 accounts. It’s no secret that black market operators at the Tri-Border Area are connected to cocaine trafficking via Paraguay – and also to evangelicals. That is the basis of what Maya, Leirner and I have already described as Cocaine Evangelistan.

View from the Argentine side of the Triple Border Area. (Wikimedia Commons)

Messer is an indispensable cog in the recycling mechanism inbuilt into drug trafficking. Money travels to fiscal paradises under imperial protection, is duly laundered, and gloriously resurrects on Wall Street and the City of London, with the extra bonus of the U.S. easing some of its current account deficit. Cue Wall Street’s “irrational exuberance.”

What really matters is free circulation of cocaine — hidden in the odd soya cargo, something that comes with the extra benefit of securing the well being of agro-business. That’s a mirror image of the CIA heroin ratline in Afghanistan I detailed here.

Most of all, politically, Messer is the notorious missing link to judge Moro. Even mainstream O Globo newspaper was forced to admit, last November, that Messer’s shadowy businesses were “monitored” nonstop for two decades by different U.S. agencies out of Asuncion and Ciudad del Este in Paraguay. Moro for his part is had very close relationships with the FBI, CIA and the Department of Justice.

Messer may be the joker in this convoluted plot. But then there’s the Maltese Falcon: There’s only one Maltese Falcon, as the John Huston classic immortalized it.  And it’s currently lying in a safe in Switzerland.

I’m referring to the original, official documents submitted by construction giant Odebrecht to the Car Wash investigation, which have been undisputedly “manipulated,” “allegedly” by the company itself, possibly in collusion with (then) Judge Moro and the prosecution team led by Deltan Dallagnol.

Roberto Requiao. (From his Twitter account)

This was done possibly for the purpose of incriminating Lula and persons close to him, but also – crucially – to delete individuals’ names who should never be brought to light, or justice.

The first serious political impact after the release of the Banestado leaks by Duplo Expresso is that Lula’s lawyers Cristiano and Valeska Zanin have finally requested Swiss authorities to hand over the originals.

Ex-Senator and former Governor Robert Requiao of Paraná state was the only Brazilian politician to publicly ask Lula, back in February, to go for the documents with the list in Switzerland. It is no surprise that Requiao was the first public figure in Brazil to now ask Lula to make all this content public once the former president gets hold of it.

The real, not adulterated Odebrecht list of people involved in corruption revealed by Duplo Expresso is crammed with big names – including the judiciary elite.

By comparing the two versions, Lula’s lawyers may finally be able to demonstrate the falsification of “evidence” that led to the jailing of Lula but also, among other developments, the exile of Ecuador’s former President Rafael Correa; the imprisonment of Correa’s vice president, Jorge Glas; the imprisonment of Peru’s former President Ollanta Humala and wife and, most dramatically, the suicide of Peru’s former two-time President Alan Garcia.

Peru’s Alan García, at left, in 2010 with Brazil’s Luiz Inácio Lula da Silva. (Ministerio de Relaciones Exteriores from Perú, CC BY-SA 2.0, Wikimedia Commons)

The Brazilian Patriot Act

The big political question now is not in fact to uncover the master manipulator who buried the Banestado scandal two decades ago.  Rather, as anthropologist Leirner details it, what matters most is that the leaked CC5 accounts focus on how the corrupted Brazilian bourgeoisie, with the help of their political and judicial partners, both national and foreign,  solidifies itself as a rentier class, while remaining submissive and kept in check by “secret,” imperial files.

The Banestado leaks and the CC5 accounts should be seen as a political opening for Lula to go for broke. This is all-out (Hybrid) War. Blinking is not an option. The geo-political and geo-economic project of destroying Brazilian sovereignty and turning it into an imperial sub-colony is winning – hands down.

A measure of the explosiveness of the Banestado leaks and CC5gate has been the reaction by assorted limited hangouts: a thundering silence that encompasses leftist parties and alternative, supposedly progressive media. Mainstream media, for whom judge Moro is a sacred cow, at best spins it as “old story,” “fake news” and even a “hoax.”

This image has an empty alt attribute; its file name is Odebrecht_s%C3%A3o_paulo-281x500.jpg
Odebrecht headquarters in São Paulo.
(Luiz Gonzaga da Silva Filho,

It’s now clear that creditors of the Brazilian state were, originally, debtors. Comparing different accounts, it’s possible to square the circle on Brazil’s legendary “fiscal imbalance” – exactly as this plague is brought up, once again, with the intent of decimating the assets of the ailing Brazilian state. Finance Minister Paulo Guedes, a neo-Pinochetist and Milton Friedman cheerleader, has already warned he’ll keep selling state companies like there’s no tomorrow.

Lula’s plan B would be to clinch some sort of deal that would bury the whole dossier — just like the original Banestado investigation was buried two decades ago — to preserve the leadership of the Workers’ Party as domesticated opposition, and without touching on the absolutely essential issue: how Finance Minister Guedes is selling out Brazil.

That would be the line favored by Fernando Haddad, who lost the presidential election to Bolsonaro in 2018: a sort of Brazilian Michelle Bachelet (Chile’s former president), an ashamed neoliberal sacrificing everything to have yet another shot at power possibly in 2026.

Were Plan B to happen it would galvanize the wrath of trade unions and social movements – the flesh and blood of Brazilian working classes that are on the verge of being totally decimated by neoliberalism on steroids with the toxic combination of the U.S.-inspired, Brazilian version of the Patriot Act, replete with military schemes to profit from “Cocaine Evangelistan”.

All this after Washington – successfully – nearly destroyed national champion Petrobras, an initial objective of the NSA spying. Zanin, Lula’s lawyer, also adds – maybe too late – that the “informal cooperation” between Washington and the Car Wash op was in fact illegal (according to decree number 3.810/2001).

What Will Lula Do?

Luiz Inácio Lula da Silva (Lula) sworn in as chief of staff by President Dilma Rousseff, March 17, 2016. (José Cruz, Agência Brasil, CC BY 3.0, Wikimedia Commons)

Included in the leaked list is Banestado “VIP list.” It includes the current president of the Supreme Electoral Tribunal, Supreme Court Justice Luis Roberto Barroso, bankers, media tycoons and industrialists. Car Wash prosecutor Deltan Dallagnol is very close to Barroso, the neoliberal Supreme Court justice in question.

The VIP list should be read as a road map of the money laundering practices of the Brazilian 0.01 percent  – roughly estimated to be 20,000 families who own the close to $1 trillion of Brazilian internal debt. A great deal of those funds had been recycled back to Brazil as “foreign investment” through the CC5 scheme back in the 1990s. And that’s exactly how Brazil’s internal debt exploded.

Still no one knows where the Banestado-enabled torrent of dodgy money actually landed. The “body bag” was never formally acknowledged to have been brought back from New York and never made its way into the criminal proceedings. Yet money laundering is still in progress – and thus the statute of limitation does not apply – so somebody, anybody would have to be thrown in the slammer. It doesn’t seem that will be the case anytime soon, though.

Meanwhile, enabled by the U.S. Deep State, transnational finance and local comprador elites, some in uniform and some in robes, the slow motion Hybrid War coup against Brazil keeps rambling on. And day by day inching closer to full spectrum dominance.

The key question is: what will Lula do about it?

Meng, Huawei and Canadian Law: Soap, Rinse and Dry-Laundered

By Harry Glasbeek

Global Research, June 25, 2020

The Bullet

Prologue

One of the graver risks for big-time criminals is that investigators will be able to identify them and their deeds by ‘following the money’. The criminals have to hide the proceeds of their crimes. This is done by depositing their monies into legitimate finance houses and businesses. It often requires some fancy book-keeping tricks and intricate transactions. This is called layering by the afficionados of this dark art. Once it is done, the criminals can draw on the accounts created and mix the ill-gotten gains with legally garnered capital. The term for this is ‘integration’ and it makes the investigators’ tasks much harder. The rotten fruit of crime will have been laundered.,

Extradition

For some time now, Hong Kong has seen massive street protests as many people want more of a say for themselves in governance and less of a say for Beijing. In the midst of the chaos, Hong Kong’s legislators proposed to ink an extradition agreement to which China would be the other signatory.

Extradition treaties are arrangements whereby a nation state agrees to return to its partner-nation to the treaty people alleged to have committed criminal acts against that other nation’s laws. It is meant to prevent alleged criminals from avoiding the consequences for their misconduct by escaping to another jurisdiction. When a request for extradition by a signatory to a treaty is received, a court there is to determine whether the application should succeed. It is not its task to question whether the person actually committed a crime. It merely has to determine whether it is the kind of crime which could lead to prosecution if the conduct had occurred in its jurisdiction. This gives the process its legitimacy because it gives effect to legal values shared by both parties to the extradition treaty. The court considering the request has no interest in whether the conduct actually amounted to a crime, either in the applicant nation or in its own. It assumes the facts as alleged by the applicant nation and then determines whether that conduct would amount to a violation of its own laws if it occurred in its jurisdiction.

It is, then, a judicial exercise which is purely formal. It does not make any findings about the issues between the applicant for extradition and the person resisting extradition.

Although this was the essential nature of the Hong Kong Bill, it met with fierce resistance: huge marches, physical fights in the legislature. The protests added fuel to the already widely burning fires of dissent and the Hong Kong government withdrew the Bill. In addition to the upheaval and violence in the streets, the government was likely somewhat influenced by the great show of support for the anti-Extradition Bill movement in countries such as the UK, the US and Canada. This anti-extradition stance by these nations seemed to sit uneasily alongside the fact that they had signed on to many similar extradition treaties themselves. But, they bought into the argument made by the Hong Kong dissidents. This was that, even though an extradition request made by China would be vetted by Hong Kong courts steeped in the principles and values of English common law, the proposed treaty would allow China to use extradition requests for crass political purposes, to help it chase down political opponents and agitators. It would lead to attacks on precious freedoms. Even though the proposed treaty ‘looked’ much like any other, it was likely to be used for unacceptable purposes. This sort of thing would never occur in the UK the US or Canada because, unlike China, they respected and lived by the Rule of Law.

The Lore and Lure of the Rule of Law

Canada’s legal system presents itself as embodying society’s shared values and norms. They are embodied in principles and the instrumental rules devised to give these fundamental principles life. This presupposes that the basic principles can be found and defined and that the rules will be appropriately fashioned and applied. The conventional view is that the judiciary is an independent institution and can be trusted to go about the finding of principles and the interpretation and application of rules in a non-partisan, in a non-political, manner.

Courts will treat all private individuals, whatever their social or economic circumstances, as legal equals whose disputes must be settled by the application of known, rational criteria. Rationality, of the legal kind, is to replace political and economic power, that is, irrational power.

The courts abide by generalizing principles and specific rules. The rules have to be spelled out clearly; citizens are to know of the existence of those rules; new rules should not apply retroactively. The principles and rules are to be applied even-handedly, regardless of status and class. The access to this justice system should be equally available to one and all. These are some of the ingredients of what is so often termed the Rule of Law. It is an attractive system because it suggests that everyone is subject to the same laws and requirements, that political or economic power is not allowed to deny anyone their entitlements or rights established in law. The UK, US and Canadian view is that it, or any equivalent, regime does not exist in China. But, while the idea of it certainly exists in our rather self-satisfied Anglo-American settings, its implementation may leave something to be desired.

While our courts are punctilious about following the procedural safeguards which make up the Rule of Law, they have an enormous amount of leeway when determining how substantive principles and rules are to be interpreted and applied. They are in a position to launder otherwise politically troubling, anti-liberal, anti-democratic, policies and decisions. What happens is a mixing of the adherence to procedural formalities which abjure bias and prejudice with the manipulation of substantive laws which incorporate bias and prejudice. The integrated outcome is analogous to the consequence of the criminals’ mixing suspect monies with legally acquired assets. It makes it hard to see whether there was a political wrong in the first place. It is a form of laundering, legalized laundering.1

The recent proceedings in Canada dealing with the US demand that the Chief Financial officer of Huawei, Meng Wanzhou, be extradited to the US brings some of this into the open. The Supreme Court of British Columbia ruled that Meng’s argument that there was no legal basis for extradition was rejected. Canada’s talking heads and chattering class sighed with relief. The self-proclaimed liberal Toronto Star’s editors welcomed and characterized the virtue of the decision: “Beijing must understand: out courts don’t serve the government… It’s called ‘rule of law,’ a concept foreign to China’s Communist Party and its mouthpieces.” Apart from their evident cold war genre chauvinism, the editors undoubtedly were glad to have any doubts about the Trudeau government’s and Canada’s allegiance to the Rule of Law stilled.

The recent embarrassment caused by the tawdry behaviour of almost every cog in the ruling class’s legal engine room during the SNC-Lavalin scandal which involved the government forcing its own Minister of Justice to resign because she wanted to act independently and deny a flagrantly wrongdoing corporation any kind of soft landing, now could be pushed aside as an uncharacteristic violation of Canada’s basic principles. To them, the Meng ruling signified that, once again, Canada was entitled to be smug, to assert that it was to be envied because of its stout adherence to an unalloyed good, the Rule of Law.

The Ruling in the Meng Case

It all began with a warrant issued by a New York court for Meng Wanzhou’s arrest in August 2018. She was not there. On December 1, 2018, after an extradition request from the US, Meng was arrested by Canadian authorities when she landed in Vancouver. On 28 January 2019, formal charges were laid by the US Department of Justice, accusing Meng’s employer, Huawei, of misrepresentations about its corporate organization which had enabled it to circumvent laws that imposed economic sanctions on Iran. Huawei was also charged with stealing technology and trade secrets from T-Mobile USA. Meng, the Chief Financial Officer of Huawei, was charged with fraud and conspiracy to commit fraud. Huawei pled not guilty to the charges of violating the Iran sanction provisions in a New York court and not guilty to the stealing charges in a Seattle court. After a number of preliminary legal skirmishes, the extradition hearings against Meng began in 2020. Associate Justice Holmes issued her ruling on 27 May, 2020. Law takes its time.

Meng had told HSBC officials who met with her in the back of a Hong Kong restaurant in 2013 that, despite the allegations in a newspaper article, Huawei had not made improper use of a closely associated firm, named Skycom Tech, to supply US materiel to Iran. The reason she had made this statement to HSBC, it was alleged, was that Huawei used HSBC as a banker when transacting business. If Huawei, as alleged, was implicated in violations of the Iran sanction laws, HSBC might well be held to be complicit in such crimes. The US alleged that Meng’s representations to HSBC constituted fraud under its law.

Meng Wanzhou argued that, for a case of fraud to be made out, in both the US and Canada, it was necessary for the prosecution to prove that the fraud materially contributed to a tangible loss. This could not be made out here. For Meng’s deception of HSBC to cause it a tangible loss in the US, it was necessary for US prosecutors to invoke the impact of another law, the Iranian sanction law. Without it there would not be any harm and, therefore, no fraud in the US. As Canada did not have any such sanction provisions in place, Meng’s deception would not have led to any tangible loss in Canada and there would have been no fraud committed in Canada. This argument that the basic requirement for extradition – mirroring laws – had not been met, was rejected by Associate Chief Justice Holmes.

She deployed standard legal reasoning that is, she looked for previous holdings and used the imprecisions she found in them and in the wording of the legislation she was interpreting. Holmes found that previous decisions had held that, in order to determine whether the conduct in the applicant jurisdiction created an offence, it was necessary to assess the essential nature of that conduct. That meant evaluating the foreign conduct in its context, in its legal environment. Meng argued that looking at the legal environment required taking a foreign law, one distinct from the laws being compared, into account, something which should not be done under the Extradition Law.

The presiding judge responded that only some aspects of the legal environment, constituted by that other law, had to be taken into account, not all of it. It was her job to say which aspects could be so used. Holmes admitted that she was going out on a limb because the distinction between looking at some aspects of a foreign law and taking the actual law into consideration is fraught, both as a matter of logic and of established law. She wrote that “the issue is at what level of abstraction… the essence … of the conduct is to be described… there is little authority or precisely what may be included in ‘imported legal environment’.”

Undeterred by the lack of any known criteria (remember the Rule of Law!), she used what she likely calls her common sense and what Meng’s supporters probably think was her unconscious bias. Associate Justice Holmes decided that, in this case, it was appropriate, when looking for the essential nature of the foreign conduct, to look at the effects of that US law, the Iran sanction law. As its effects made Meng’s deceiving conduct fraudulent in the US, and as deception is the core of fraud in Canada, the essential/contextualized nature of Meng’s conduct satisfied the essence of fraud as defined under Canada’s Criminal Code. Lawyers call this sort of finessing good lawyering; in the wider community it is seen as legal chicanery. Holmes ruled that Canada was free to extradite Meng.

Laundered

All that effort to put Wanzhou Meng’s fraud into legal context and not a scintilla of regard for the political, social and economic context of the case!

Everyone, literally everyone, knew what had led the US to charge Huawei and its CFO. It was to obtain bargaining chips in its fight with China. It was to persuade its citizens that it was right for the government to deny them access to cheaper goods and a better 5G system because China would abuse its growing economic influence and enhance its spying potential. It was to make China more pliable when the US demanded better trade terms and more protection for its intellectual property, etc. There was no attempt to hide any of this.

Did the Canadian government understand this? Of course. Did it feel it had to allow the US to use Canada’s supposedly neutral legal machinery to further its political project? Of course. Could the Canadian government have said “no” and simply turned a blind eye when Wanzhou Meng landed in Vancouver? Of course.

Was Associate Justice Holmes, at the very least, in a position to guess all of this? Of course.

The Supreme Court of British Columbia had the timelines of the saga before it. All the events that led to the fraud charges occurred years before the tug-of-war between the US and China turned into a full blown version of a new cold war. Meng’s alleged misrepresentations to HSBC occurred in August 2013, several months after Reuters had published its report on the links between Huawei and Skycom Tech. that supposedly led to Iran being supplied with US materiel.

It took five years for the US to charge Huawei and Meng. It took five years for its righteous indignation about Huawei’s and Meng’s violations to reach fever pitch. It took five years for the US to decide that a deception of one set of private entrepreneurs by other private entrepreneurs ( a garden variety event in an aggressive competitive milieu), a deception which took place in a far away jurisdiction, presented a danger to the integrity of the US justice system. That integrity had not been seen as severely threatened when the masters of the universe deceived millions of people during the subprime mortgage scandals, at least not sufficiently to charge any of the more senior perpetrators. None of this was of any concern to the Supreme Court of British Columbia. The court was only concerned with the narrowest of decontextualized legal issues before it. Its certainty that its only responsibility was to the Rule of Law signified to it that it should not be troubled by the possibility that it might be used as a pawn, by either the US or the Canadian government or both.

Nor was this lack of concern shaken by President Trump’s highly publicized statement to Reuters (the outfit which had written the report which started the ball rolling), made just after Wanzhou Meng was released on bail. Trump said that he would certainly intervene in her case “if I thought it necessary” to help forge a trade deal with China. Undoubtedly some people (especially lawyers) might think it right and proper for a court to ignore a blatant admission by a craven politician that the supposedly independent system of law of both the US and Canada was being used for partisan political purposes. After all, the statement had been made extrajudicially and had not been put before the court. While the judge might have known about the Trump intervention, much as she knew that the US and China were having a political tug-of-war and that Canada had been drawn into it, the wilful blindness demanded by the Rule of Law demanded that she make no reference to any off this knowledge.

This reasoning makes no sense to anyone not held in rapture by the Rule of Law fantasy. Immediately after Trump made his provocative statement, Trudeau realized that the public might draw the inference that Canada was just bowing to its Big Brother ally and permitting it to abuse the Canadian justice system. It evoked the notion that the US and Canada were just one country with two systems. He was forced to respond.

Trudeau issued the following statement: “Regardless of what goes on in other countries, Canada is and will always remain a country of the rule of law.” The message was clear: we, the elected government and its executive have nothing to do with any of this; we rule an independent country; we have an independent legal system and it makes these kinds of decisions. We respect this and abide by the results. When it comes to the extradition of Meng, we, the politicians, like Pontius Pilate, wash our hands off the whole mess. It has nothing to do with us. It is not a political matter.

This is why the editors of the Toronto Star and all other opinion moulders greeted the ruling in the Meng case with such acclaim. By ignoring all the real facts underlying the dispute, the court had given support to the Canadian government’s pretence that the Meng case had not raised questions about its participation in a complex set of political, economic and ideological controversies. Their role had been laundered. If the outcome suited the US in its struggle with China, this was incidental; Canada’s government had not pushed for such an outcome because it believed in the Rule of Law. These cheerleaders pointed out that, if Canada had interfered with the judiciary’s operations, it would certainly have pushed for a different result.

As it was, the judicial ruling could only strain relations between Canada and China, a most undesirable state of affairs as Canada hoped to have China release two Canadians accused of committing serious offences in China; more Canada had no interest in imperilling important trade relations with China, as the judicial ruling might well do. That is, the result may be a political win for Trump, but a loss for Trudeau, two Canadian citizens and, likely, some farmers and manufacturers if China uses its economic clout to punish Canada.

So viewed, the judicial outcome gives the impression that the government had not played any part in the decision-making. It should, therefore, not be held politically responsible for the consequences. The government had acted righteously, it had been true to the Rule of Law. Its conduct had been sanitized, laundered.

Of course this argument is not as strong if the judicial outcome is not seen as inimical to the government. What did Canada actually want? We can only guess. But it is to be remembered that the government did detain Wanzhou Meng; if it had not done so, the worst that would have happened is that the US might have been annoyed. Assuming, as it makes sense to do, that Canadian officials understood full well what the US was up to, the detention suggests, although it does not prove, that the government was not opposed to the obvious political and economic goals of the US. More strongly, it indicated that it was willing to support those goals. After all, it knew the risks it was taking. The headline in the Ottawa Citizen on 15 December, 2018, read: “Abelev: In the Huawei case, Trump has enlisted in a game Canada can’t win.”

Another glimpse of the Canadian government’s thinking is provided by Prime Minister’s request that John McCallum resign from his post as Ambassador to China after he had made public statements which indicated that he thought the case against Meng was trumped up and, therefore, should lead the government to reject the extradition request. This would help Canada in its negotiations with China which, in apparent retaliation, had jailed two Canadian citizens.

Implicit in McCallum’s intervention was a reference to a legal power that Canada has reserved for itself over extradition processes. The Minister for Justice can, at any moment after a request for extradition is received, abort the process. In Trudeau’s angry reaction to McCallum, he made no reference to this, pretending political interference with the judicial system was to be eschewed.2 While to some people, then, Trudeau’s publicized disapproval of McCallum’s views (and of similar ones by former Prime Minister Jean Chretien a little later), did dovetail with the claim that the government should not take a position on matters to be determined by a judge, it also suggested that the government would not object too much if the ruling went against Meng, regardless of what it might mean for Huawei, Meng and the prisoners. After all, the justification for the hands-off the justice system proffered by Trudeau should not have been given too much credence.

At that time a full-blown scandal was raging over the SNC-Lavalin affair. Trudeau was brazenly trying to get rid of an independent Minister of Justice precisely because she was thwarting his enactment of a law which was to apply retroactively (remember the Rule of Law!) to save a serial wrongdoing corporation. A curious symmetry weirdly surfaces. The Trudeau government was trying to give its rogue actor, SNC-Lavalin, the kind of gentle treatment the US had given HSBC by giving it access to a deferred prosecution agreement of the kind that the US had given that deviant bank.

There were many polluting particles in the ambient air as the Meng case was processed in the supposedly politically unpolluted atmosphere of law. Undoubtedly, Associate Justice Holmes did her best to blow all these toxic particles out of her mind, as all judges claim to do. But this does not mean that they did not influence her mind-set. We will never know. That is how laundering works: if the dirt which soiled the cloth is rinsed out, all that one is left with is clean cloth. Just what the government needed.

Epilogue

The legal processes have not ended. Meng may appeal the ruling on double criminality handed down by the Supreme Court of British Columbia, arguing the Holmes’ reading of how the essential nature of conduct in a foreign state was to be found was erroneous. Her lawyers do have some plausible arguments to proffer on this issue. Before that will take place, a hearing will be held into Meng’s allegation that, when she was detained in Vancouver, prior to being turned over to the RCMP, the border official obtained Meng’s telephone numbers and passwords and then passed these on to the RCMP. She was detained and questioned for three hours before she was told of her arrest. She claims her constitutional rights were violated and that the RCMP and Canada’s Border Services Agency acted, improperly, as US agents.

This is a claim that procedural safeguards essential to the proper operation of the Rule of Law had been breached. If successful it would make the arrest wrongful and mean that the committal process which led to Holmes’ ruling should be voided. The result of the adjudication on this action by Meng can also be the basis for an appeal. If all of it, the denial of proper process and the Supreme Court of British Columbia’s ruling on double criminality, are settled in favour of Canada, the extradition process can continue, although, as seen, the Minister for Justice can always set the whole thing aside.

There are many other hurdles to clear. The Trump Administration may be replaced, the Trudeau government (in a minority position) may fall before all this is over. It is also difficult to know what steps China will take and how this will influence political minds in Washington and Ottawa. These unknowns highlight how artificial it is to pretend that a request for extradition is a legal, non-political, struggle based on rational aseptic criteria.

To underscore this point, note that, on 4 June, 2020, the US State Department issued a threat. It will reassess its sharing of intelligence with Canada (a member of the so-called Five Eye intelligence network) if Canada chooses to let Huawei market its 5G technology in Canada. This makes it clear that the extradition case was never about a fraudulent misrepresentation to a ‘vulnerable’ foreign bank, but about furthering US efforts to ward-off the danger of an economic and political threat posed by China.

Law and its Rule of Law are convenient tools, no more no less. They should not be granted too much respect. Certainly they should not permit our governments to present themselves as unsullied, as if they have come out of the washing machine, smelling fragrantly.

And, oh yes, after its agreement with the US Department of Justice, HSBC had made much of its new approach and had spent money on better systems to inhibit wrongdoing. On 8 April, 2020, it was reported that HSBC had admitted it had engaged in money laundering in Australia. Maybe it does not require Huawei or Meng to engage in fraud to get HSBC to participate in criminality.

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Harry Glasbeek is a Professor Emeritus and Senior Scholar, Osgoode Hall Law School, York University. His latest books are Class Privilege: How law shelters shareholders and coddles capitalism (2017) and the follow-up, Capitalism: a crime story (2018) both published by Between the Lines, Toronto.

Notes

  1. ‘The legalization of politics’ is the name given by Harry Glasbeek and Michael Mandel, “The Legalization of Politics in Advanced Capitalism: The Canadian Charter of Rights and Freedoms” (1984), Socialist Studies, 2:84, and by Michael Mandel, The Charter of Rights and the Legalization of Politics in Canada, rev. ed., Toronto; Thompson Educational, 1994, to a process which removes class and history from political discourse and consciousness.
  2. As well, there is a rarely used law on the books, the Foreign Extra Territorial Measures Act, that the Attorney-General can deploy to repulse measures of a foreign state that are likely to significantly affect Canadian interests. This is the legislation used to allow Canada not to comply with the US sanctions on Cuba. Arguably, but not certainly, it could be used to block the extradition of Meng.

Featured image is from The BulletThe original source of this article is The BulletCopyright © Harry GlasbeekThe Bullet, 2020

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