Tax Fraud

With Tim Cook being fried on Capitol Hill, it is perhaps ironic that the issue of taxes is front-and-center in the European parliament today. However, as usual, the always-willing-to-tell-the-truth Nigel Farage points out the gross hypocrisy of a political elite calling for higher taxes (on the wealthy and more broadly in peripheral nations) when the reality is that the higher-ups in the European parliament have their marginal tax rates capped at 12%. Of course, none of that matters because stocks are rising and interest rates are falling; but perhaps the 60% of Greek youth or 57% of Spanish youth, as we discussed here, might be intrigued at the new normal idea of 'fair share' in Europe.

In the absence of major data releases, the focal point of the week for markets becomes the release of the minutes of the May FOMC meeting. The most notable change in the statement was the inclusion of the new language: “the Committee is prepared to increase or reduce the pace of its purchases to maintain appropriate policy accommodation as the outlook for the labor market or inflation changes.” In the May meeting minutes, the market will be looking for any clarification of the motivation behind this change as well as any evidence that the committee members may be becoming less comfortable with the unemployment rate threshold or more specific about tapering timelines and dates.

As Europe jerks from one political debacle to another, the French (mired in the PR disaster of Cahuzac - a tax tzar guilty of tax fraud) have decided forced honesty is the only policy left if they are ever to regain any credibility. From the Commission for Financial Transparacency, below is the full list of all French ministers assets - from cars and property to stocks and bonds.

“I need to hire more people, but the government won’t let me”

Back in December we reported that "Deutsche Bank Hid $12 Billion In Losses To Avoid A Government Bail-Out" in which we wrote "that Europe's most important and significant bank, Deutsche Bank, hid $12 billion in losses during the financial crisis, helping the bank avoid a government bail-out, according to three former bank employees who filed complaints to US regulators. US regulators, whose chief of enforcement currently was none other than the General Counsel of Deutsche Bank at the time." Our somewhat cynical conclusion at the time was that "since every bank in the world is forced to lie, cheat and mismark its own balance sheets every single day... this may just be completely ignored." Perhaps we were a little bit premature because as the FT reports, "The Bundesbank has launched an investigation into claims that Deutsche Bank hid billions of dollars of losses on credit derivatives during the financial crisis, according to people familiar with the situation." That said, we still stand by our conclusion from four months ago: this, too, theatrical distraction will come and go and nothing at all will change.

When wondering why AAPL disappoints once more on its next earnings release, please pull a Bill Gross and look in the mirror, dear broke consumer, because it is your fault. At least that is the spin by the CEO of France Telecom, who says that iPhone sales are now being threatened by, drumroll please, "frugal buyers." That's right: in France "frugal" is now a dirty word. Not socialism, not 75% taxes, not budget ministers charged with rooting out tax fraud and lying about their Swiss bank accounts, not movie legends who can't wait to get Russian passports - it's "frugality" that is at fault. Because how dare French consumers not load up on cheap, government subsidized credit card debt and splurge like good old Americans who can't wait to pledge their shotguns as collateral for clunkers, and who haven't paid their mortgage in years courtesy of pervasive debt forgiveness for deadbeats, spending on iCrap instead? The France Telecom CEO demands answers now!

Everyone learned a lesson from Cyprus, painful ones. German politicians learned a lesson too: that it worked!

At this point, there is literally not one single reason to invest a cent in Europe. Banks are lying about their balance sheets. Politicians are lying about citizen’s rights. The Central Bank is lying about everything…

Jerome Cahuzac, the French "budget minister" who was tasked with rooting out tax fraud by his socialist "75% tax or the capitalist pigs win" overlord, and who resigned two weeks ago to avoid "hindering" an investigation into allegations he had a secret Swiss account, all the while maintaining his innocence, has just been exposed as the latest lying Eurocrat politician.

FORMER FRENCH BUDGET MINISTER SAYS LIED ABOUT BANK ACCOUNT, HAD THE FOREIGN BANK ACCOUNT FOR ABOUT 20 YEARS
EX-FRENCH BUDGET MINISTER SAYS HAD EU600,000 IN FOREIGN ACCOUNT
EX-FRENCH BUDGET MINISTER APOLOGIZES TO HOLLANDE, AYRAULT

In other words: just another politician. But that's ok: it got serious - he could have gone to jail or been fired in disgrace, so naturally he had to lie.

While everyone awaits in stunned silence to see what Citadel, GETCO and of course the NY Fed will do with stocks in the aftermath of the shocking Cypriot decision, which nobody has any idea how to respond to because as Europe made it very clear ahead of the vote, there is no "Plan B", here is some comic interlude. The name Jerome Cahuzac should be familiar to our readers: he is the French Budget minister who had been tasked with battling tax fraud. Well, technically it is not is but was: moments ago Monsieur Cahuzac resigned, for the same reason he had been investigated several months ago. Namely, having an "undisclosed" Swiss bank account. Minister in charge of battling tax fraud... resigns for having a secret Swiss account. We'll let that sink in for a bit before we go back to that other farce in the eastern Mediterranean.

It is no secret that one of the main reasons why Italy's former PM, and resurgent soon to be member of government, Silvio Berlusconi, is so adamant to be in parliament, is simply to obtain the immunity he would need to stay out of prison as a result of countless lawsuits which he has valiantly fought, and lost. As of this morning, a rather convenient time for sure just as Italy is preparing to create a coalition government, Silvio has one more lawsuit he will need to appeal, and evade in Parliament, following news that he was convicted in a 2006 wiretapping scandal, and will have to serve a one year prison sentence. Will he serve even one day? Of course not - the appeals process alone will take at least several years, and when that runs out, well, the 76 year old Silvio is a billionaire, and will have ample opportunity to spend his money to buy himself enough freedom to last him until the end of his life.

A microcosm of what's wrong with the French economy (while the chopping block is being moved to the center)

And so the surreal criminal saga of former Illinois Congressman Jesse Jackson Jr. has ended. Jackson, 47, a prominent Chicagoan son of the civil-rights leader of the same name for the handful of people who are unaware, was a national co-chairman of President Barack Obama’s 2008 campaign and an advocate of traditional Democratic Party constituencies. He disappeared in June, and it was later revealed that he was being treated at the Mayo Clinic for bipolar disorder and gastrointestinal issues, although now it appears kleptomania may have been one of the afflictions treated too. He returned to his Washington home in September but went back to the clinic the next month. As Bloomberg summarizes, "he pushed to maintain government support for the poor, including welfare, assistance for heating bills and the Head Start early education program." He certainly was very generous with other people's money. So generous, in fact, that hours ago he was charged with "misusing", also known as stealing, some $750,000 in campaign funds for purchases including a $43,350 gold Rolex watch, $5,150 for fur capes and parkas, $10,000 worth of "children's furniture", Michael Jackson and Bruce Lee memorabilia and much more.

With a week to go until the Italian elections, things are getting a little odd to say the least. The somewhat scandal prone Berlusconi, who self-declared himself leading in the polls just recently, has come out swinging in defense of his fellow business leaders' ethical egressions. The Bunga party banner-man defends bribery, "These are not crimes," he notes, as The FT reports, "bribes are a phenomenon that exists and it’s useless to deny the existence of these necessary situations..." This apparently on the heels of the Finmeccanica CEO's Indian helicopter deal bribes and Monte Paschi's derivative debacle. It would appear his argument lies somewhere betweeen, 'if everyone's doing it - then it's ok', and 'everyone's been doing it forever so why stop now?' One Italian paper, though, disgusted at the state of their nation, describes the entire political and elite establishment of 'guilty inertia' - calling for an end to what Berlusconi appears to be saying is corrupt business-as-usual. And yet we are to trust these technocrats when they say 'crisis over', all is well, recovery is here?

A German pope may be vacating the Vatican but a German lawyer is about to head its bank, an institution some say is as important if not more, and whose shady dealing some say may have been the reason for the pope premature departure. Per Reuters, "The Vatican appointed German lawyer Ernst von Freyberg to be the new president of its bank on Friday, filling a post left vacant since May when the previous head was ousted from the scandal-tainted institution. The appointment was made by a commission of cardinals and approved by Pope Benedict and is likely to be one of his last major decisions before he resigns at the end of the month. The Vatican has been trying to shed a reputation for a lack of financial transparency at the bank, officially known as the Institute for Works of Religion (IOR), but has been dogged by scandals for decades." And no, apparently he does not work for Goldman.