Former Kroll investigator, William Brittain-Catlin's new book, Offshore: The Dark Side of the Global Economy, attempts to lay bare the wild-cat ways of offshore "boomtowns", such as Bermuda, the Caymans or the British Virgin Islands. And it's is not just shady cartels that operate via these unregluated locations. Major corporations also save a bundle by doing so, skirting regulations meant to reign in the very abuses that offshore banking facillitates.

While Catlin's book illustrates the links between these shady financial centers and some of the biggest recent corporate frauds his focus is ultimately conceptual rather than pragmatic. His target seems to be capitalism itself, using the offshore economy as evidence of its most rampant abuses, as this Detroit Free Press review illustrates:

Chilling expose` dives into murky waters

August 14, 2005
REVIEW BY JAMES PRESSLEY

William Brittain-Catlin, a former investigator for Kroll Associates Inc., nurses a dark vision of capitalism.

'Offshore' - THREE STARS out of four

By William Brittain-Catlin

Capital, as he describes it, is a protean beast, a "wild animal let out of a cage." The nation state has become "a servant of stateless capital," its citizens suppressed by the "controls of bourgeois capitalist society, in particular the work ethic."

Never mind his hyperventilating style. "Offshore: The Dark Side of the Global Economy" is a convincing description of a perverse world in which capitalism is a giant shell game, where mainstream multinationals shunt assets and liabilities around the globe to evade taxes, hide debt and buy political favor. The fall guys for this scam are shareholders, taxpayers and society at large.

"Offshore" has many strengths, offering a solid primer on how capital slithers in and out of brass-plate subsidiaries as companies ranging from GE and Wal-Mart seek to lower their taxes. The author chooses to bring offshore finance into focus through the lens of the Cayman Islands. The sun-soaked British dependency proves an effective setting for this dark drama, as Brittain-Catlin combines snippets of the Caymans' seagoing past (Columbus, turtles and Blackbeard the Pirate) with its role in the collapses of companies such as Enron Corp.

In lean prose, the author captures the convoluted story of U.S. energy trader Enron in 20 pages and boils the fraud at Italian food company Parmalat down to nine. The summations create crisp snapshots on how multinationals funnel profits offshore even as they milk governments onshore.

Enron, for example, used hundreds of Cayman subsidiaries to slash its U.S. taxes and hide losses. The Houston-based company also used its clout, including a friendly connection to President George W. Bush, to keep the government from regulating energy-derivatives trading, he says.

Enron combined offshore freedom with the kind of onshore protection that prompted government bailouts of Chrysler Corp. and the entire U.S. savings and loan sector. "The modus operandi for the corporation is to pass the cost of its losses onshore onto society and its taxpayers, while the corporation runs off with the profit and parks it offshore," Brittain-Catlin writes.

The same dichotomy lies at the heart of the success of Lakshmi Mittal, the author says. The Indian magnate created the world's biggest steel company -- with mills from Cleveland to Kazakhstan -- through offshore holding companies in tax havens such as the Netherlands Antilles. Yet he built Mittal Steel Co. with the help of politicians like U.K. Prime Minister Tony Blair and soft loans from the European Bank for Reconstruction and Development.

"Offshore" blames this mess on Western philosophy. Brittain-Catlin traces the roots to Immanuel Kant, who argued that the individual had absolute moral autonomy -- a vital bulwark against the utilitarianism of the age. Along the way, though, this freedom was subverted in the struggle against absolutism, the author argues. Political freedom suppressed individual rights, forcing us to conform with bourgeois mores. "What was billed as freedom in fact turns out to be a pretext for coercion," he says.

It doesn't take too much imagination to draw a line from the age-old urge for autonomy to a modern German's desire to protect himself from punitive taxation by dragging a suitcase full of cash to a bank in Luxembourg. Unfortunately, Brittain-Catlin muddies the argument with a sometimes-tortuous line of reasoning that leads from Greek mythology to the hypocrisy of the European bourgeoisie. Equally irritating is the author's failure to offer any solution. He challenges neocons and reformists alike, yet offers no answers of his own.

One thing is clear: Brittain-Catlin rejects the argument that there is a legitimate use for offshore finance. "A distinction cannot be made," he says, "between the use and abuse of offshore tax havens any more than it can be made between the light and dark side of the international financial system." That distinction, made routinely by bankers and accountants, has worn thin in our age of terrorism, money laundering and corporate fraud. Bankers may bristle at Brittain-Catlin's rhetoric; they cannot ignore his message.

The original review appears here. If you would like to hear the author speak about his book in his own words NPR has an interview with Catlin.

And if you are interested in regular updates from this sector, The Daily Caveat recommends Know Your Customer News, which offers daily updates, email newsletters and searchable databases relating to offshore incidents and intrigue.

-- MDT

Labels: Enron, Kroll, money laundering, Parmalat