Saturday, October 20, 2012

The Miscreants’ Global Bust Out (Chapter 3): Michael Milken and the BCCI Criminal Enterprise

The Miscreants’ Global Bust Out (Chapter 3): Michael Milken and the BCCI Criminal Enterprise

Posted on 05 May 2011 by Mark Mitchell 
Tags: 650 Fifth Ave, Abbas Gokal, Alavi Foundation, Alfred Hartmann, Ali Nazerali, Antonio Commisso, BCCI, Capcom, Cecil Kirby, CenTrust, Charles Keating, Drexel Burnham, First Commerce Securities, Gokal, Iran, Irving Kott, ISI, Ivan Boesky, Lincoln Savings and Loan, Mafia, Mahfouz, Marc Rich, Michael Milken, Ndrangheta, organized crime, Pakistan, Saudi intelligence, Swaleh Naqvi, Vic Cotroni

This is Chapter 3 in a multi-chapter story…

The year was 1979, and the outsized profits derived from the OPEC oil embargo had fueled the rise of BCCI, whose massive criminal enterprise was now expanding its operations into the United States. Meanwhile, radical Islamists had just taken control of Iran, and a man named Ivan Boesky was about to fly to Tehran, where he planned to spend a year developing relationships with the new regime.

These seemingly unrelated events would have figured in the thoughts of a man named Irving Kott, who one day that year got into his car and started the engine. But Kott suddenly remembered that he forgot something in the house, and he jumped out of the car. Lucky for him, because that’s when a powerful bomb exploded, turning Kott’s car into giant fireball of mangled metal. Kott took some shrapnel, but he survived, and the first thing he did, according to some of his associates, was call his friend, Ali Nazerali.

Kott was livid – he wanted to know what the deal was with the car bomb. Ali Nazerali said he’d ask around. After a few hours, Nazerali called back and said the word on the street was that a hit man named Cecil Kirby planted the bomb, and Kirby worked for Canadian mob boss Vic Controni. It seemed Kott had run a stock scam with Controni, who was then one of North America’s biggest market manipulators, and Kott stole Controni’s share of the deal.

Later court filings revealed that Kirby (and Kott) had also done some work for Antonio Commisso, a.k.a. L’avvocatu, or The Lawyer – a Toronto boss of the Ndrangheta Mafia organization, also known as the Siderno Group, because it has its origins in Siderno, Italy. One way or another, Nazerali offered to patch things up with the Mafia – and he did a good job of it. Commisso ordered Kirby to lay off, and a couple of years later Kott, Nazerali and the Mafia were all in business together, running a brokerage called First Commerce Securities.

Nazerali had spent his formative years working in key positions for the powerful Gokal family of Pakistan. According to “False Profits” (one of the definitive books on the BCCI scandal), as of the early 1980s, the Gokals (who were closely intertwined with Pakistan’s intelligence services) controlled the Gulf Group, which was BCCI’s most important satellite company. The Gokals had also become the most important business partners of the Iranian regime, and served that regime as semi-official financial advisers, handling everything from budgets to the procurement of sophisticated weaponry.

Nazerali was also a blood relative of Swaleh Naqvi, the chief executive officer of BCCI, and through his relative and his dealings with the Gokals, he had come to be a trusted business associate of the Iranian regime and of BCCI’s other principals. He was especially close to Sheikh Mahfouz, the future Al Qaeda Golden Chain financier, but he also sealed business relationships with the ruling families of Abu Dhabi and Dubai. It was through Sheikh Mahfouz that Nazerali came to be an important business partner of Yasin al Qadi, the future “Specially Designated Global Terrorist.”

Nazerali dabbled in arms dealing, delivering weapons to war zones in Africa and to the mujahedeen in Afghanistan, but his primary line of business in the early 1980s was his Mafia brokerage, First Commerce Securities, which soon became an important component of the BCCI syndicate. The importance of First Commerce to BCCI was evidenced not only by Nazerali’s relationship to BCCI’s CEO, but also by the fact that the CEO dispatched his relative, Kazem Naqvi (who is also Nazerali’s relative), to visit First Commerce’s offices almost every day.

Meanwhile, according to “False Profits”, a number of First Commerce’s top executives were simultaneously employees of BCCI, or had worked for BCCI affiliates before joining the Kott-Nazerali operation. At least two of First Commerce’s top executives – Sinan Raouff and Walter Bonn – had previously worked, along with Nazerali, for the Gokal family in Pakistan. Raouff, who was not only a stock manipulator, but also an arms dealer, had previously worked for the Iraqi foreign ministry, and helped BCCI traffic weapons to both Iraq and Iran.

The Gokals brokered many of the weapons sales to Iran, laundering the money through BCCI, and skimming large amounts of the bank’s profits for themselves. The Gokal family patriarch, Abbas Gokal, would eventually be sentenced to 14 years in prison for his role in the BCCI scandal, and at his sentencing, the judge said that Gokal was among the most destructive criminals ever to be prosecuted. Gokal and his associates (including Sheikh Mahfouz, who paid a $200 million fine to settle charges for his role in the BCCI fraud) had, according to the judge, almost single-handedly “shattered the integrity” of the global financial system.

BCCI’s contribution to this destruction was accomplished with considerable help from Mafia-tied entities such as the Nazerali and Kott operation, First Commerce Securities, which is often referred to as “penny stock” brokerage, though that is to underestimate the extent to which it was involved not only in manipulating penny stocks, but also in undermining the broader markets.

One of First Commerce’s former business partners, himself an associate of the Mafia, says that the brokerage was a major player in the “death spiral” finance game, and that it took down many good companies. These were mostly small to mid-sized companies, but Nazerali and his associates would in later years move on to bigger prey.

* * * * * * * * *

Around the time that Nazerali opened First Commerce, Syed Ziauddin Ali Akbar, who had served as BCCI’s treasurer, formed Capcom Financial Services, a commodities futures and investment management firm. Akbar’s sister was married to Nazerali’s relative, Swaleh Naqvi, the chief executive officer of BCCI, and all of Capcom’s key shareholders were BCCI people. Soon, the firm, like First Commerce (and probably trading in concert with First Commerce), became one of BCCI’s most important affiliates.

Later, much of Capcom’s money would disappear into the hands of Saudi intelligence operatives who used the money to buy shares in and penetrate American communications companies, including Western Tele-Communications and American Telecommunications Corporation. A Congressional Subcommittee would later state that the purpose of this operation was probably to gain the capability to track communications in the United States.

Another purpose was to manipulate the companies’ stock prices, and the operation could not have succeeded without the full support and complicity of a man named Michael Milken, who was then the most powerful financial operator on Wall Street. Milken’s operation at the Beverly Hills offices of Drexel Burnham Lambert, which was, in the 1980s, one of the largest investment banks in America, brokered much of the trading conducted by BCCI’s Capcom unit. All told, according to Capcom’s former president, Milken’s operation transacted Capcom securities contracts worth more than $90 billion, an astounding sum at that time.

If you believe what you read in the press, Milken is a financial genius who revolutionized the markets for high-yield debt, also known as “junk bonds.” Most journalists refer to him as the “junk bond king” while noting with admiration that he is also a “prominent philanthropist.” Even the usually reliable Economist magazine published an article in September 2010 that hailed Milken as an “innovator” whose junk bond finance helped build some of America’s greatest companies.

It is true that Milken’s finance contributed to the growth a few major companies – Ted Turner’s CNN and Rupert Murdoch’s News Corp., for example – but Milken and his cronies destroyed far more companies than they built. Among the many corporations that they wiped out were a number of America’s biggest savings and loans companies – massive financial operations whose collapse triggered the famous savings and loan crisis that inflicted serious damage on the economy and cost American tax-payers billions of dollars.

As was later noted by the Federal Deposit Insurance Corp (one of the government agencies that cleaned up this mess), Milken and his closest associates “willfully, deliberately, and systematically plundered certain S&Ls.” And while Milken’s impressive public relations machine has successfully convinced America’s financial journalists to forget the past, it should be remembered that Milken was, in 1989, indicted on 99-counts of securities fraud, market manipulation, and insider trading. He was sentenced to ten years, two of which he served in a federal penitentiary. At the time, most people in America knew Milken as the greatest financial criminal ever to operate on Wall Street.

It is important to understand how the Milken criminal enterprise functioned, because some of the same tactics (and some of the same people) contributed to the financial collapse of 2008.

A principal feature of the Milken operation was a variation on what mobsters refer to as a “bust out.”

In the olden days, Mafia thugs would take over, say, the corner bar, load it up with debt, siphon out the cash, and declare bankruptcy. Milken elaborated on the “bust out” and brought it to the world of high finance. The best book on this is Ben Stein’s “License to Steal”, though Connie Bruck’s “The Predators’ Ball” describes Milken’s larger scheme as well.

The scheme worked as follows: Milken issued junk bonds to finance about a dozen of his closest associates, who used the finance to take over good companies. Under the direction of Milken’s cronies, the companies took on ever greater amounts of Milken’s junk bond debt. But rather than use the finance to grow the companies, the Milken cronies simply looted the companies of their cash.

To create the illusion that there was a liquid market for the junk bonds, the Milken cronies traded their bonds amongst each other at stair-stepping prices, in an illegal process known as “daisy-chaining.” As the government’s indictments of Milken made clear, this junk bond merry-go-round was conducted with Mafia-like secrecy – nobody other than Milken’s closest associates knew that the only buyers for the junk bonds were Milken’s other closest associates.

Meanwhile, Milken presided over a nationwide network of brokerages and fund managers who traded on inside information about these companies and manipulated their stock prices.

When the Milken junk bond cronies were done looting their companies, Milken would cut off access to credit and other traders in his network would attack the companies with waves of short selling. This sent the companies’ stock price spiraling downwards, so that even if the companies’ boards were to remove the Milken cronies, the company would be unable to raise finance from more reputable sources.

When the companies went bankrupt, Milken and the other short sellers would make a fortune. Other Milken cronies would make still more money by purchasing the companies’ assets at fire-sale prices in the bankruptcy proceedings. And then they would repeat the process all over again, assured that junk bond merry-go-round would supply a constant stream of lootable finance.

But, of course, this scheme eventually collapsed – and it must be stressed, the vast majority of the companies that Milken financed ultimately disappeared.

In later years, the “bust out” concept was refined into such schemes as the “death spiral” PIPEs finance that was pioneered with help from Al Qaeda Golden Chain member Shiekh Yamani’s Investcorp and other outfits. Always, the basic idea is to finance a company, load it with debt, and then take it down.

In the 1980s, Milken and his cronies orchestrated a number of bust outs in league with BCCI and its proprietors, including future Al Qaeda Golden Chain member Shiekh Mahfouz, who remained one of Milken’s closest associates until Sheikh Mahfouz’s death in 2009.

I need to be specific about what I mean by “closest associate.” Milken has thousands of associates and not all of them are bad. But the three dozen or so people who are his closest associates are, every one of them, criminals. These include the dozen or so people who benefited the most from his junk bond merry go-round; his former top employees at Drexel Burnham; and a select number of brokers and fund managers, many of them best known as short sellers.

One of the outfits that benefited the most from Milken’s junk bond merry-go-round and the subsequent bust outs was, as I mentioned, BCCI. For example, Milken’s junk bonds financed the take-over of a savings and loan called Centrust, which became a BCCI subsidiary. Centrust was eventually looted and destroyed, but not before it played a role in the larger panoply of BCCI crimes.

Another key participant in Milken junk bond “bust out” schemes was a monumental criminal named Charles Keating. With Milken’s finance, Keating seized control of the giant Lincoln Savings and Loan, and began looting the company with help from two BCCI big wigs – Alfred Hartmann (a BCCI board member and head of BCCI’s Swiss subsidiary, Banque de Commerce et de Placements), and Abbas Gokal (the BCCI conspirator, adivsor to the the Iranian regime, and Pakistani intelligence asset who had formerly employed Ali Nazerali).

Meanwhile, back at First Commerce Securities, Ali Nazerali and BCCI’s Kazem Naqvi were busy stuffing cash and checks into large sacks that they tossed into the back of a white van, and then drove to Schiphol Airport, where they loaded the sacks onto a private jet destined for Geneva. When the sacks of proceeds of various stock manipulation schemes arrived in Geneva, they were delivered to Milken crony Charles Keating’s partner in crime, Alfred Hartmann, who laundered the money through BCCI’s Swiss subsidiary, Banque de Commerce et de Placements.

Later, the Senate Foreign Relations Committee began investigating BCCI for its role in financing Pakistan’s nuclear program. In announcing the investigation, the Committee said that it intended to take close look at Keating’s relationships with the Gokal family.

While it is unclear what came out of that investigation, it is certain that BCCI did, in fact, play a major role in Pakistan’s nuclear profliferation efforts. The top two scientists for that program, Abdul Qadeer Khan (known as the “Father of the Islamic Bomb”) and Bashiruddin Mahmood, have since both met with Al Qaeda. Mahmood especially is believed to have shared nuclear know-how directly with Osama bin Laden.

Of course, this is not to suggest that Keating himself had anything to do with Al Qaeda, which had not yet been created , but he was definitely a major figure in the overall BCCI criminal enterprise. It is also certain that Lincoln and Savings and Loan was one of the biggest bust outs in history. When Keating was finished looting Lincoln and Savings, the multi-billion dollar financial institution was an empty husk. And by way of complicated foreign exchange transactions, much of Lincoln’s money was diverted to an outfit called TrendInvest, which was, in effect, another subsidiary of BCCI.

The Senate Foreign Relations Committee, meanwhile, investigated the business relationships between BCCI and another of Michael Milken’s closest associates, Marc Rich, who was (and is) the most powerful commodities trader in the world. In 1983, Rich had been indicted for illegally trading with Iran during the Iran hostage crisis. Key to Marc Rich’s transactions with Iran was the Gokal family and probably BCCI itself.

While Rich was illegally trading with Iran, his office was located in a New York building at 650 Fifth Avenue that was owned by the Alavi Foundation, which advertised itself as a charity. The FBI later discovered that the Alavi Foundation was not a charity – it was a front for the Iranian regime’s covert activities in the United States. In 2009, the Justice Department convicted the Alavi Foundation and its subsidiary, the Assa Corporation, which was a vast business enterprise, with espionage and funding Iran’s covert nuclear weapons program.

Also working out of the Alavi Foundation’s building in the 1980s was Ivan Boesky, the fellow who had spent a year in Tehran in the late 1970s. Boesky ran what was then one of the nation’s most powerful arbitrage funds (today it would be called a hedge fund), and quickly gained a reputation on the Street as a mysterious character who liked to operate in the shadows – a guy known to deliver suitcases full of cash to gorillas with handguns holstered on their hips. Boesky often told people that he had spent his time in Iran working as a CIA agent.

In 1989, when Boesky was indicted on multiple counts of stock manipulation and insider trading, prosecutors described in colorful detail his suitcases full of cash, but Boesky’s claims to have been working as a CIA agent in Iran were dubious to say the least.

Boesky is the most famous of Michael Milken’s criminal co-conspirators, and prosecutors made it clear that he was a key figure in the stock manipulation network that Milken ran in the 1980s. It is more than likely, as one of Boesky’s former business colleagues confirmed in an interview with Deep Capture, that Boesky (like Marc Rich, the Gokals, and the other BCCI figures in Milken’s network) had deep ties not to the CIA, but to one of America’s most dangerous foes – the regime in Iran.

There might, in fact, be something to be gleaned from the court documents that were made public during the prosecution of the Alavi Foundation, the Iranian outfit that owned the building where Boesky and Marc Rich kept their offices. The court documents describe how the Iranian agents who ran the Alavi Foundation and its subsidiary, the Assa Corporation, took their orders from Iranian diplomats, including the Iranian ambassador, assigned to United Nation’s mission in New York.

These are the same diplomats who helped direct the activities of Palestinian Islamic Jihad leader Sami al-Arian, who was among the more important figures in the SAAR Network of terrorist financiers that included some BCCI principals, such as the Al Qaeda Golden Chain member Shiekh Mahfouz. The court documents also describe notes found by the FBI in the files of the Alavi Foundation’s one-time director, Ali Ebrahami. The stream-of-consciousness notes are strange and hardly conclusive, but they nonetheless worth considering.

They say, in part, “Conspiracy…to tell the truth > lie > risk > Imam’s birthday gathering…urgent situation > talk > everything > Mafia…”

The word “Mafia” was italicized in the original.

After the word “Mafia,” Ebrahami wrote – “Duty.”

It is not clear to what Ebrahami was referring, but if Iranian agents (or, for that matter, Al Qaeda financiers, Pakistani intelligence assets, and Saudi spies such as those who traded with Milken) ever desired to carry out a “conspiracy” with the “Mafia”, there would certainly be an abundance of Mafia-tied financiers for them to contact. Indeed, they already have made contact with Mafia-tied financiers, many of whom are close associates of Michael Milken.

In upcoming installments, we will explore these contacts in detail. And we will see what this network might have had to do with the financial crisis of 2008. First, though, I must present evidence that the Milken network is, in fact, tied to organized crime, and that these relationships are by no means incidental.

Regular readers of Deep Capture will know that this point has been proved and proved again. But the Milken network’s ties to organized crime are deeper than what we have previously revealed. Indeed, as we will begin to see in the next chapter, it is not an exaggeration to say that Michael Milken’s closest associates were, more than anyone else, responsible for bringing La Cosa Nostra and the Russian Mafia to Wall Street.

Re: The Miscreants’ Global Bust-Out
Post by sandi66 on May 6, 2011, 7:30am

A little additional background ...


Glencore International AG

Privately held company
Industry : Raw materials / Merchant

Founded : 1974


Baar, Switzerland

Key people

Ivan Glasenberg, CEO
Steven Kalmin, CFO


US $ 144.9 billion (2010)[1]

Net income

US $ 3.799 billion (2010)

Total assets

US $ 79.8 billion (2010)


2,000 in marketing, 50,000 in industrial production through subsidiaries (2006)


Glencore International AG (management buy out of Marc Rich & Co AG) is a Swiss-based company, which is one of the world's largest suppliers of commodities and raw materials, and is also among the world's largest privately held companies.

In 2011, the company is reported to be planning an IPO. The scale and significance of the IPO compares to that of Goldman Sachs in 1999. The company's IPO may raise $9 to $11 billion at London and Hong Kong market and will be the world's biggest IPO this year.[2][3]

As of 2006, it was Europe's sixth-largest company in terms of turnover.[4] According to The Sunday Times,[5] the company had USD 10.9 billion in shareholders' equity at the end of 2006 and is completely owned by its management.

With production facilities around the world, Glencore supplies metals, minerals, crude oil, oil products, coal, natural gas and agricultural products to international customers in the automotive, power generation, steel production and food processing industries.

In 2006, the company had more than 50,000 employees across the world, both directly and in affiliated companies.


According to an Australian Public Radio report, "Glencore's history reads like a spy novel".[6] The company was founded as Marc Rich & Co. AG in 1974 by now-billionaire commodity trader Marc Rich, who was charged with tax evasion and illegal business dealings with Iran in the U.S., but pardoned by President Bill Clinton in 2001.[7] He was never brought before U.S. justice before his pardoning, therefore there was never a verdict on these charges.

In 1993 and 1994, after failing to control the zinc market, losing $172 million and nearly bankrupting the company, Rich was forced[8] [9] to sell his majority share in Marc Rich & Co. AG back to the company.[10] The enterprise, renamed Glencore, is now owned and run by Marc Rich's secretive inner-circle of "lieutenants", including founding Glencore CEO Willy Strothotte and present CEO Ivan Glasenberg.

In 2005, proceeds from an oil sale to Glencore were seized as fraudulent, in an investigation into corruption in the Republic of Congo.[11]

[edit] Dealings with "rogue states"

ABC Radio reported that Glencore "has been accused of illegal dealings with rogue states: apartheid South Africa, USSR, Iran, and Iraq under Saddam Hussein", and has a "history of busting UN embargoes to profit from corrupt or despotic regimes".[6] Specifically, Glencore was reported to have been named by the CIA to have paid $3,222,780 in illegal kickbacks to obtain oil in the course of the UN oil-for-food programme for Iraq. The company denied these charges, according to the CIA report quoted by ABC.[5][6]

[edit] Investments in Colombia

Moreover, Swiss public television (TSR) reported in 2006 that allegations of corruption and severe human rights violations were being raised against Glencore on account of the alleged conduct of its Colombian Cerrejón mining subsidiary. Local union president Francisco Ramirez was reported to have accused Cerrejón of forced expropriations and evacuations of entire villages in order to enable mine expansion, in complicity with Colombian authorities. According to TSR, a representative of the local Wayuu Indians also accused Colombian paramilitary and military units, including those charged with Cerrejón mining security, of forcibly driving the Wayuu off their land, in what she described as a "massacre".[12]

Glencore/Xtrata's "huge coal operation in Colombia, Prodeco, was fined a total of nearly $700,000 in 2009 for several environmental violations [running in earlier years], including waste disposal without a permit and producing coal without an environmental management plan."[9]

[edit] Investments in Bolivia

Through its Bolivian subsidiary, Sinchi Wayra (which it acquired in 2005), Glencore operates six businesses in Bolivia that mine and process tin, silver, gold and zinc.;[13][14] notable among these has been Empresa Metalurgica Vinto, reportedly the world's largest privately-run smelter complex, located in the department of Oruro, which was seized and nationalized by Bolivian President Evo Morales on February 9, 2007. At the time of the seizure there were no plans to compensate Glencore.[15]

[edit] Investments in Ecuador

"In Ecuador, the current government has tried to reduce the role played by middle men such as Glencore with state oil company Petroecuador" due to questions about transparency and follow-through, according to Fernando Villavicencio, a Quito-based oil sector analyst.[9]

[edit] Investments in Zambia

"[O]fficials in Zambia believe pollution from Glencore's Mopani mines is causing acid rain and health problems in an area where 5 million people live."[9]

[edit] Associations with mining companies

Glencore is also noted for its association with the publicly traded Xstrata mining group, also headquartered in the low-tax[9] Canton of Zug, Switzerland. Glencore is reported to serve as a marketing partner for Xstrata.[5][16] As of 2006, Glencore leaders Willy Strothotte and Ivan Glasenberg are on the board of Xstrata, which Strothotte chairs.[17] According to The Sunday Times in 2005, Glencore controlled 40% of Xstrata stock and has appointed the Xstrata CEO, Mick Davis.[5][18] In 2011, Reuters put the ownership stake at 34.4%, and said that the IPO being discussed would facilitate a full merger between the two companies. Alternatively, if a merger were not consummated, "a messy competitive battle" between the affiliated companies could ensue, the report speculated.[9] Relationships also exist with Century (44% economic ownership interest in Century Aluminum Co. (CENX)[3]) in the U.S.; Glencore partial subsidiary Minara Resources Ltd (AU:MRE), a 70.5% stake in one of Australia’s top three nickel producers[3]);[19]; and 8.8% in United Company Rusal (HK:486), the Russian aluminum giant that went public in 2010.[3]

In 1993 several managers of Glencore left the company to establish their own trading and marketing company, Trafigura.[citation needed] As physical commodities traders, along with Trafigura, Glencore's main rivals in 2011 were identified as Vitol and Cargill,[9] amongst a number of others.[20]

In a 2011 survey of Glencore, Reuters reviewed an example of its opportunistic, contrarian, well-funded investment approach -- focusing on equity participation, controlling interest, and working upstream from trading relationships:

The acquisition was the culmination of 18 months of deal-making in Congo... [including fighting off a counterbid by] former England cricketer Phil Edmonds.... [Starting i]n June 2007, Glencore and partner Dan Gertler, an Israeli mining magnate, paid 300 million pounds for a quarter-stake in mining company Nikanor, which was seeking to revive derelict copper mines next to Katanga [Mining (CA:KAT)'s properties]. That deal gave Glencore exclusive rights to sell all Nikanor's output -- an "offtake" agreement.... [Then, o]n Christmas Eve 2008, ... [having] lost 97 percent of its market value over the previous six months ... in the depths of the global financial crisis and ... running out of cash, Katanga accepted a lifeline it could not refuse. [Glencore] wanted control. For about $500 million in a convertible loan and rights issue, Katanga agreed to issue more than a billion new shares and hand what would become a stake of 74 percent to Glencore. ... [By early 2011], with copper prices regularly setting records above $10,000 a ton, Katanga's stock market value [had reached] nearly $3.2 billion.... [Since the Glencore acquisition], Katanga ... is reaping the benefit of the surging markets and its wealthy, powerful owner. After losing $108 million in 2009, it posted an annual profit of $265 million in 2010.[9]

In the course of the Congo events, Nikanor was merged into Katanga in late 2007 in a transaction valued at $3.3Bn.[21]

In May 2009, Glencore announced it would manage Brazilian bankrupted agricultural products company Agrenco [22]

In early 2011, the Reuters report included speculation that, after an IPO, Glencore could develop an interest in London/Kazach Eurasian Natural Resources Corporation.[9]

[edit] Prospective initial public offering

In early 2011, "[s]ources familiar with Glencore's plans say it may list 20 percent of the company, possibly split between the London Stock Exchange and Hong Kong. Such a listing could yield up to $16 billion and value the firm at as much as $60 billion."[9][3] At May 4, 2011 Glencore IPO will give a current valuation between $48 billion and $58 billion.[23]

A $2.2 billion convertible bond issued in December 2009 gave an indication of the possibility of an IPO. The convertibles pay a 5 percent annual interest rate until they mature in 2014. However, if by December 2012 Glencore has not gone public or merged with another company, bondholders can sell their bonds back to Glencore at a price which would give investors an annualized return of 20 percent -- "in line with the sort of returns you might expect from equities. This payment could take place from mid-2013, though Glencore will not be penalized if markets turn lower and an IPO is not attractive." Investors in the issue included energy-focused private equity firm First Reserve Corporation, Government of Singapore Investment Corporation (GIC), China's Zijin Mining Group Company, financier Nathaniel Rothschild plus U.S. fund managers BlackRock, Fidelity Investments and Capital Group.[9]

An IPO would entail substantial changes in the operations as well as in the public profile and posture of the company. As such, amongst other actions, it is "preparing a sustainability report to bring it into line with mining majors and using Finsbury, a public relations firm whose clients include Royal Dutch Shell and Rio Tinto, for strategic advice. Former Shell spokesman Simon Buerk has been taken on to reinforce in-house communications."[9]

[edit] Corporate assets

As of 2006 (updated 2011), assets fully or partly controlled by Glencore included:[24]

[edit] Production facilities





Employees ('06)

Glencore ownership ('11)

North America

Evergreen Aluminum


Washington, USA

10 (plant idle)

No interest indicated

Columbia Falls Aluminum Co.

Montana, USA


No interest indicated

Century Aluminum Company

HQ: Monterey, USA

44% economic interest (39% voting)




No interest indicated



No interest indicated

Sherwin Alumina

Texas, USA

550 ('11)


South America



Santa Marta (port) and Calenturitas (mine), Colombia


100% 1

Carbones de La Jagua (formerly Caribe)

La Jagua, Colombia


No interest indicated

Los Quenuales

Zinc, lead

Yauliyacu, Peru



Iscaycruz, Peru




Rosaura, Peru


No interest indicated

Sinchi Wayra

Zinc, lead, tin

5 mines, Oruro and Potosi regions, Bolivia



Aguilar mine/AR Zinc Group

Zinc, lead, sulphuric acid

North west of Argentina




Sunflower oil and meal

Crushing plants: Necochea, Daireaux, Villegas and Grainer; Argentina





Zinc, lead

Sardinia, Italy






No interest indicated

Kubikenborg Aluminium AB (Kubal)

Sundsvall, Sweden


No interest indicated

Aughinish Alumina




No interest indicated


Mopani Copper Mine







South Africa

1,500 ('11)



OAO Russneft


Oil fields across Russia


40-49% in joint interests w/OAO

Rostov on Don grain export elevator and wheat flour mill


Rostov on Don, Russia


No interest indicated









The Philippines




Murrin Murrin Joint Venture

Nickel, cobalt

Western Australia


82.3% (effective)

Cobar Copper Mine


Cobar, Central Western NSW, Australia



1 The Prodeco stake has been sold to XStrata as part of XStrata's 2009 rights issue. Glencore retains a 100% re-purchase option, it is expected to exercise this option in 2010;[25] 100%-owned by Glencore, per link in chart, April, 2011.

[edit] Other subsidiaries, participations and joint ventures




Glencore ownership


Xstrata plc


HQ: Zug, Switzerland

ca. 14%, controlling 40%[5] 34.5%

See also text above.

Minara Resources Ltd

HQ: Perth, Australia


Operates the Murrin Murrin project.


Coal mining

Guajira department, Colombia

33.3% up until Q2/2006

BHP Billiton plc, Anglo American plc and Xstrata plc each own 33.3%. In 2006, Xstrata acquired Glencore's share.[26] See also text above.


Aluminium, alumina



Announced merger / joint venture with RUSAL (66%) and SUAL Group (22%). World's largest aluminum and alumina producer with 110,000 employees in 17 countries.[27]

Katanga Mining Limited

Copper and cobalt

Democratic Republic of Congo


See also text above.


Marine fuels and clean fuels




3.^ a b c d e Lesova, Polya, "Commodities giant Glencore readies landmark IPO: Listing may value firm at $60 billion, give it cash for acquisitions", MarketWatch]], April 13, 2011 9:35 a.m. EDT. Retrieved 2011-04-13.
4.^ "Six Swiss companies make European Top 100". Swissinfo. October 18, 2006. Retrieved 2006-10-22.
5.^ a b c d e "Secretive Swiss trader links City to Iraq oil scam". London: The Sunday Times. September 25, 2005. Retrieved 2006-10-22.
6.^ a b c "Swiss link undermines Xstrata's bid for WMC". ABC Radio. February 11, 2005. Retrieved 2006-10-22.
7.^ Ammann, Daniel (2009). The King of Oil: The Secret Lives of Marc Rich. New York: St. Martin‘s Press. ISBN 0-312-57074-0.
8.^ Ammann, Daniel (2009). The King of Oil: The Secret Lives of Marc Rich. New York: St. Martin‘s Press. ISBN 0-312-57074-0.
9.^ a b c d e f g h i j k l Onstad, Eric, Laura MacInnis and Quentin Webb, "The biggest company you never heard of", Reuters, February 25, 2011 7:52am EST. Retrieved 2011-02-28.
10.^ "Glencore Buys Out Founder". New York Times. November 10, 1994. Retrieved 2006-10-22.
11.^ Allen-Mills, Tony (June 17, 2008). "Congo sapped of riches as Denis menaces Boulevard Saint-Germain". The Australian. Retrieved 2006-10-22.
12.^ "Paradis fiscal, enfer social" (in French). Télévision Suisse Romande. 29 June 2006. Retrieved 2006-10-22.
13.^ Glencore - Zinc, Copper and Lead
14.^ - The world's premier mining and mining investment website HOMEPAGE
15.^ "Bolivian troops seize key smelter". BBC News. February 9, 2007. Retrieved 2009-02-07.
16.^ "Die Erben des Marc Rich" (in German). WochenZeitung. December 13, 2001. Retrieved 2006-10-22.
17.^, List of non-executive directors, accessed 22 October 2006 Archived August 21, 2006 at the Wayback Machine.
18.^ See also, Investor disclosure, accessed 22 October 2006
19.^ "Glencore ist größtes Privatunternehmen Europas" (in German). Handelsblatt. 16 August 2005. Retrieved 2006-10-22.
20.^ "Glencore's trading rivals", Reuters fact box, February 25, 2011 2:42am EST. Retrieved 2011-04-14.
21.^ Pagnamenta, Robin, "Nikanor and Katanga Mining merge to create $3.3bn African giant", The [London] Times, November 7, 2007. Retrieved 2011-04-14.
22.^ "Glencore to run Brazil's Agrenco in restructuring", Reuters, May 27 2009.
24.^ This list may not be complete. Unless otherwise indicated, the source is:, Worldwide Operations[dead link], accessed October 23, 2006. To access details, click on the percentages. Each link checked on April 18, 2011; searched Glencore site by name; if no search results, then labelled "No interest indicated"; some updates of info, also. New Worldwide Operations page is here; all operations are in chart.
25.^ Glencore ahead on XStrata - Independent - accessed January 8, 2010
26.^ - About Us, accessed October 23, 2006
27.^ "ALUMINUM MERGER - Rusal, Sual, Glencore to create world leader". Canadian Mining Journal. October 15, 2006. Retrieved 2006-10-23.

[edit] Further reading
Ammann, Daniel (2009). The King of Oil: The Secret Lives of Marc Rich. New York: St. Martin‘s Press. ISBN 0-312-57074-0.

[edit] External links
Official website
A visual Relationship Map of Glencore executive board and stakeholders with their connections

Book on Marc Rich Details His Iran Oil Deals

October 15, 2009 

Marc Rich, the former fugitive oil trader long criticized for his business ties to nations like Iran, South Africa and Cuba, has acknowledged in a new book that his dealings with those nations were more extensive than previously disclosed.

In more than 30 hours of conversations with a Swiss journalist, Daniel Ammann, the usually tight-lipped Mr. Rich gave an extensive account of his oil trading from the 1970s through the 1990s. 

Those dealings, which straddled ideological lines from Ayatollah Khomeini’s Iran to Fidel Castro’s Cuba and from the apartheid regime of South Africa to the leftist Sandinista government in Nicaragua, are recounted in Mr. Ammann’s book, “The King of Oil: The Secret Lives of Marc Rich,” released this week by St. Martin’s Press.

In 1983, Mr. Rich was indicted by the United States on charges of tax evasion as well as trading with an enemy state, Iran. He fled the United States and became one of the nation’s most infamous fugitives over the next two decades.

Mr. Rich told the author that while on the run, he provided intelligence to American diplomats about Iran, the Soviet Union and other countries. He was granted a controversial pardon by President Bill Clinton on the last day of his presidency. 

In the interviews with Mr. Ammann, Mr. Rich claimed that South Africa was his largest and most important client. The author estimated that Mr. Rich earned over $2 billion trading with South Africa from 1979 to 1993. 

Mr. Rich also offered details about how much oil he bought from Iran — before and after the Islamic revolution — even as President Jimmy Carter imposed sanctions on the country after 53 Americans were taken hostage in November 1979. 

After the Iranian revolution, the national oil company continued to sell 40 million to 75 million barrels of oil a year to Mr. Rich’s company, abiding by previous agreements with the government of Shah Mohammad Reza Pahlavi. Mr. Rich continued to buy oil from Iran until 1994, when he sold his company.

“They respected the contracts,” Mr. Rich told Mr. Ammann. “We performed a service for them. We bought the oil, we handled the transport and we sold it. They couldn’t do it themselves, so we were able to do it.”

At the same time, Mr. Rich kept Iranian oil flowing to Israel even after the new government in Tehran severed diplomatic relations with Israel. 

From 1973 to 1993, Mr. Rich said he was Israel’s most important oil supplier, delivering 7 million to 15 million barrels a year. 

“Being Jewish, I didn’t mind helping Israel,” Mr. Rich is quoted as saying. “On the contrary.”

Mr. Ammann, the business editor at the Swiss weekly magazine Die Weltwoche, said Mr. Rich remained unapologetic, adding in an interview: “He showed no remorse whatsoever.” 

Throughout that period, Mr. Rich claims he provided valuable information to the State Department as well as the Mossad, Israel’s intelligence service.

“Its agents were in regular contact with the fugitive trader,” according to the book. “They wanted his opinions on various ‘key people in power’ in some of the politically sensitive countries where he did business,” especially Iran, Syria and Russia.

Mr. Ammann also recounts attempts to bring Mr. Rich to justice in the United States. After failing to secure an extradition from Swiss authorities, American agents unsuccessfully tried to kidnap Mr. Rich, according to the book. The author cites one plan, which was never carried out, that involved landing a helicopter in Zug to snatch Mr. Rich away. 

Asked why Mr. Rich had chosen to confide in him, Mr. Ammann said: “There is a funny word in German for this — altersmilder — which means the kindness of old age. Marc Rich is now 74, and maybe he realized that if he didn’t talk, no one would see his side of the story.”

Re: The Miscreants’ Global Bust-Out
Post by sandi66 on May 6, 2011, 7:42am

Marc Rich :

Marc Rich (born December 18, 1934) is an international commodities trader.[1] He was indicted in the United States on federal charges of illegally making oil deals with Iran during the late 1970s-early 1980s Iran hostage crisis and tax evasion. He was in Switzerland at the time of the indictment and has never returned to the U.S.

He subsequently received a presidential pardon from U.S. President Bill Clinton on January 20, 2001, Clinton's last day in office

Early life, marriage and career

Marcell David Reich was born in 1934 to a Jewish family in Antwerp, Belgium. His family emigrated to the United States in 1941 to escape the Nazis. Rich attended high school at the Rhodes Preparatory School in the Manhattan borough of New York City. He later attended New York University, in Manhattan, but dropped out after one semester to go work for Philipp Brothers (now known as Phibro LLC). He worked as a commodities trader for his father, who sought to build an American manufacturing fortune through burlap-sack production.

Mark Rich married Denise Eisenberg, a songwriter and an heiress to a New England shoe manufacturing fortune, in 1966. They divorced in 1996; she continues to use the name Denise Rich. They had three children, one of whom, Gabrielle Rich Aouad, predeceased her parents.[2][3]

He worked with Philipp Brothers, a dealer in metals, learning about the international raw materials markets and commercial trading with poor, third-world nations. One of his biggest market coups came during the 1973-1974 Arab oil embargo, when he used his Middle Eastern contacts to circumvent the embargo and buy crude oil from Iran and Iraq. After purchasing the crude for roughly US$12 per barrel, Rich doubled the price and sold it to supply-starved U.S. oil companies. In 1974 he and co-workers Pincus Greenand Joseph Zientek set up their own company.[citation needed]

Rich has been credited with having created the spot market for crude oil in the early 1970s, revolutionizing commodity trading.[4] His tutelage under Philipp Brothers afforded Rich opportunities to strike deals with various dictatorial régimes and embargoed nations, such as Iran, using a special relationship with Ayatollah Khomeini, the leader of the 1979 Iranian Revolution which saw the overthrow of Mohammad Reza Pahlavi, the Shah of Iran. Despite the American embargo, Iran would become Rich's most important supplier of crude oil for more than 15 years.[5] He earned billions selling oil for the Iranian ayatollahs.

His company, Marc Rich Real Estate GmbH, is involved in large developer projects (e.g., in Prague, Czech Republic).[6] Rich was also accused of being involved with the Bank of Credit and Commerce International.

[edit] Net worth

Forbes ranked Rich as the 242nd-richest American in 2006 with a net worth of US$1.5 billion.[1]

[edit] U.S. indictment and controversial pardon

In 1983 Rich and Green were indicted by then-U.S. Federal Prosecutor (and future mayor of New York City) Rudolph Giuliani, on illegal trading with Iran and charges of tax evasion. They were indicted while they were in Switzerland. The pair failed to return to the U.S. following the indictment, and were on the Federal Bureau of Investigation's Ten Most-Wanted Fugitives List for many years.

In 1989 the U.S. Justice Department ceased using statutes of the Racketeer Influenced and Corrupt Organizations Act in tax cases such as the one in which Rich and Green were indicted, and relied instead on civil lawsuits.[7] However, Marc Rich remained on page 1 of the Justice Department's Most Wanted International Fugitives.[8]

On January 20, 2001, hours before leaving office, Clinton granted Rich a presidential pardon. Because Rich's former wife had made large donations to the U.S. Democratic Party and the Clinton Library during Clinton's time in office, Clinton's critics alleged that Rich's pardon had been bought. Marc Rich had made substantial donations to Israeli charitable foundations. Clinton explained his decision by noting that similar situations were settled in civil, not criminal court, and cited clemency pleas from Israeli government officials, including then-Prime Minister Ehud Barak. Federal Prosecutor Mary Jo White was appointed to investigate. She stepped down before the investigation was finished and was replaced by James Comey. Comey was critical of Clinton's pardons and Eric Holder's pardon recommendation.[9]

As a condition to the pardon, it was made clear that Rich would drop all procedural defenses against any civil actions brought against him by the U.S. upon his return there. That condition was consistent with the position that his alleged wrongdoing warranted only civil penalties, not criminal punishment. As of November 2010, Rich has not returned to the U.S. During hearings after Rich's pardon, Lewis "Scooter" Libby, who had represented Rich from 1985 until the spring of 2000, denied that Rich had violated the tax laws but criticized him for trading with Iran at a time when that country was holding U.S. hostages.[10]

In his February 18, 2001, op-ed essay in The New York Times, Clinton (by then out of office) explained why he pardoned Rich, noting that U.S. tax professors Bernard Wolfman of the Harvard Law School and Martin Ginsburg of Georgetown University Law Center, concluded that no crime was committed, and that Rich's companies' tax-reporting position was reasonable.[7] In the same essay Clinton listed Libby as one of three "distinguished Republican lawyers" who supported Rich's pardon.

Clinton's pardon was also supported by the Spain's King Juan Carlos I.[citation needed] Speculation about another rationale for Rich's pardon involves his alleged involvement with the Israeli intelligence community.[11][12] Rich claims he provided valuable information to the Mossad, Israel’s intelligence service.[5]

[edit] Legacy

Glencore International AG and Trafigura AG, headquartered in Baar, Switzerland, are corporate successors to Marc Rich & Co AG.

[edit] Citizenship

Although Rich believed that he had relinquished his United States citizenship when he became a citizen of Spain, an appeals court ruled in 1991 that for purposes of U.S. law Rich remains a citizen and therefore is still subject to U.S. income taxes.[13] In order to renounce U.S. citizenship, a citizen must "appear in person before a U.S. consular or "diplomatic officer" outside the U.S. and "sign an oath of renunciation".[14] Today he holds Spanish and Israeli passports.[15]

[edit] Private life

After spending several years in Zug, Switzerland, Rich moved to Meggen, a city in the Canton of Lucerne, Switzerland, residing in a house called "La villa rose" (the pink villa) on the shores of Swiss Lake Lucerne, where he zealously guards his privacy. Rich also owns property in the ski resort of St. Moritz, Switzerland, and in Marbella, Spain. He is an important art collector and friends say he lives surrounded by Renoirs, Monets and Picassos.[16]

[edit] Awards

In May 2007 Rich received an honorary doctorate from Bar Ilan University, Ramat Gan, Israel, in recognition of his contribution to Israel and to the university's research programs.[17][18] He received the same honor from Ben-Gurion University of the Negev, Beersheba, Israel, on November 18, 2007.[19] The Chaim Sheba Medical Center at Tel Hashomer in suburban Tel-Aviv, Israel, honored Rich with the "Sheba Humanitarian Award 2008". Former recipients of this award include actor Michael Douglas, actress Elizabeth Taylor and former U.S. President Gerald R. Ford.[citation needed]

[edit] See also
Bank of Credit and Commerce International
Bill Clinton pardons controversy
List of people pardoned by Bill Clinton
The Rich Boys
Marc Rich &Co v Bishop Rock Marine Co Ltd [1996] AC 211

[edit] Notes

1.^ a b "The 400 Richest Americans - #242 Marc David Rich", Forbes, September 21, 2006
2.^ "Denise Rich", Notable Names Database
3.^ "Denise Rich", New York Social Diary
4.^ Ammann, Daniel (2009). The King of Oil: The Secret Lives of Marc Rich. New York: St. Martin‘s Press. ISBN 0-312-57074-0.
5.^ a b Ammann, Daniel. The King of Oil: The Secret Lives of Marc Rich. ISBN 0312570740.
6.^ "Former U.S. fugitive has local ties", Michael Mainville, The Prague Post, February 28, 2001
7.^ a b "My Reasons for the Pardons", W. J. Clinton, The New York Times, February 18, 2001
9.^ Letter from James Comey in respect of the nomination of Eric Holder to be Attorney General
10.^ CNN, Inside politics: "GOP lawyer: Facts 'misconstrued' in Rich case"
11.^ CNN Sunday Morning News, February 18, 2001: reporting by CNN correspondent Eileen O'Connor
12.^ "The real reason Bill Clinton pardoned Marc Rich", Joe Conason, Salon, January 16, 2009
13.^ Jessica Reaves (2001-02-13). "The Marc Rich Case: A Primer". Retrieved 2009-10-06.
14.^ U.S. Department of State: "Renunciation of U.S. Citizenship"
15.^ Reaves, Jessica (February 13, 2001). "The Marc Rich Case: A Primer". Time. Retrieved May 12, 2010.
16.^ "The Face of Scandal", Maureen Orth, Vanity Fair, June 2001
17.^ "Pardoned billionaire to get honorary degree from Bar-Ilan University", Haaretz, May 15, 2007
18.^ The Rich Foundations: "Marc Rich receives honorary doctorate"
19.^ News @ BGU Winter 2008, "Six Honored for Their Outstanding Accomplishments", April 11, 2008

[edit] References
Copetas, A Craig (1985). Metal Men: Marc Rich and the 10-Billion-Dollar Scam. New York: Putnam. ISBN 0-399-13078-0.
Ammann, Daniel (2009). The King of Oil: The Secret Lives of Marc Rich. New York: St. Martin‘s Press. ISBN 0-312-57074-0.
Lander, George (November 24 2008). "A Pardon to Remember". New York Times. Retrieved May 12, 2010. Detailed account leading up to the pardon.
Justice Undone: Clemency Decision in the Clinton White House, Report of the House Committee on Government Reform
"Marc Rich: Hero or villain?" - BBC News, Thursday, February 15, 2001
"The Rich Boys" - Businessweek
The businesses of Juan Carlos I (IBLNews) (Spanish)
Re: The Miscreants’ Global Bust-Out
Post by sandi66 on May 6, 2011, 7:48am

Wednesday, February 28, 2001

Former U.S. fugitive has local ties 
Marc Rich pardon at center of latest Clinton controversy

By Michael Mainville 

Two years ago, the founders of Real Estate Karlin -- now considered one of Prague's hottest real-estate development firms -- went trolling for foreign investors. Their search ended in Switzerland, where Marc Rich Real Estate agreed to become a 50 percent silent partner. 

But Rich, as anyone who's been following the American press knows, is no run-of-the-mill businessman -- he's a former high-profile fugitive from the United States and is now at the center of the latest controversy to engulf former President Bill Clinton. 

Clinton pardoned Rich during his final hours as president, 17 years after Rich fled the country to avoid prosecution on more than 50 charges of tax evasion, racketeering and illegal oil trading with Iran. 

But the director of Marc Rich Real Estate, Hans Jorg Brun, said he doubts the controversy surrounding Rich will have any impact on the company's success in Prague or anywhere else. 

"The case has been totally overblown," he said. "There's been a lot of false information with regard to what the case really is. 

"The accusations that you hear and read are all totally wrong. I think Mr. Rich has excellent lawyers and these lawyers, because of their history, had good access to the president," Brun said, referring to, among others, Jack Quinn, a former White House counsel who was one of Clinton's closest confidants and who Rich hired to orchestrate his pardon. "The president read the information he received, he evaluated and he came to, in my point of view, the correct conclusion." 

The pardon has ignited another controversy for the scandal-prone Clinton and is the subject of investigations by U.S. federal law enforcement agencies and two congressional panels. 

Clinton's opponents have accused him of granting the absolution because of more than $1 million in campaign and other contributions made by Rich's ex-wife, Denise Rich. In a recent New York Times opinion piece Clinton denied those charges, saying he pardoned Rich and his former business partner, Pincus Green, for "legal and foreign policy reasons" and because other oil companies that carried out similar transactions faced civil charges and not criminal ones.

In the nearly two decades since he left the U.S., the Belgian-born Rich has built a formidable financial empire from his base in Zug, Switzerland, and now has an estimated net worth of more than $1 billion. He first established a highly successful trading firm specializing in oil and mineral products, Glencore International AG, which he later sold. He set up shop again with the Marc Rich Group, another international trading firm that recently announced a merger with Swiss-based Crown Resources. The 66-year-old former fugitive has been ill and is said to be thinking about retirement. 

Rich, however, seems to have no interest in dumping the real estate arm of his financial empire, which has interests in Spain, Portugal, Germany and now the Czech Republic. 

In fact, Brun said the company is very excited about the market here. 

"We really believe in the country," Brun said. "The country presents an excellent opportunity because of its geographic location, because of the excellent economic history it had prior to communism and, obviously, because of the future outlook with respect to the [European Union]," which the country hopes to join when the 15-nation bloc accepts its next wave of new members in 2004. 

Brun said Marc Rich Real Estate got involved in the Prague market because the company was impressed by the plans of Real Estate Karlin's two directors, Charles Butler and Serge Borenstein. The two men co-founded the company in 1998 and have set their sights on transforming post-industrial Prague 8 into the city's hottest office-development center. 

Real Estate Karlin's two projects to date, Palac Karlin and Corso Karlin -- opened in early February -- have both reached more than 90 percent occupancy. The company has three more projects scheduled to begin this year. 

Both Borenstein and Butler were out of the country and could not be reached for comment. Real Estate Karlin's marketing manager, Milorad Miskovic, said no one else at the company would comment. 

But Rich's presence hasn't raised many eyebrows with officials here. 

Rene Samek, a spokesman for CzechInvest, a government body that works to attract foreign investment to the country, said the government doesn't monitor the activities of foreign companies operating here. Questions raised about a company or individual's business practices in another country are not considered relevant to whether they can do business in the Czech Republic. 

"Foreign companies do not need to seek the government's permission in order to invest here," except in a few specific industries, such as banking, insurance and arms manufacturing, according to Samek. "And the government does not monitor the activities of foreign companies here. That would be discriminatory." 

At the American Embassy, an official said they were unaware of Rich's recent business activities in Prague.
Re: The Miscreants’ Global Bust-Out
Post by sandi66 on May 6, 2011, 7:52am

Who are the 'Ndrangheta?

Wed August 15, 2007

BERLIN, Germany (CNN) -- Six Italian men were shot dead in the German city of Duisburg on Wednesday in an execution-style killing linked to a mafia feud.

Police remove a body from the scene.

Italian Interior Minister Giuliano Amato said the shootings appeared to be linked to a feud between two mafia clans in the southern region of Calabria, home to the 'Ndrangheta organized crime group.

Here are some key facts about the group:


-- The Calabrian "Honored Society", known as "'Ndrangheta", in the Calabria region of south Italy is the equivalent of the Sicilian Mafia.

-- 'Ndrangheta began as a defense network for impoverished rural peasants against aristocratic landlords. Members emigrated to Canada and the United States, and were discovered running an intimidation scheme in Pennsylvania mining towns in 1906.


-- They are known as "The Honored Society", Fibbia or Calabrian mafia. Instead of the pyramid structure of bosses used by other mafia, The 'Ndrangheta" uses families based on blood relationships, inter-marriages, or being a Godfather. Each group is named after their village, or after the family leader.


-- When Calabria began the process of industrialization and urbanization in the late 20th century, the 'Ndrangheta became interested in drug trafficking, weapons sales and public works and construction.


-- In 2004, authorities uncovered an international drugs trafficking network involving gangs in South America, Australia, and Europe. Drugs from Colombia were destined for countries such as Greece and Bulgaria.

-- Italian officials estimated at the time that 80 percent of Europe's cocaine had arrived from Colombia via Gioia Tauro's docks in Reggio Calabria.

-- Italian anti-organized crime agencies have estimated that the 'NDrangheta earns about $30 billion annually, mostly from illegal drugs, but also from ostensibly legal businesses such as construction, restaurants and supermarkets.

-- There are believed to be about 100 'Ndrangheta families in Calabria, who have become more successful than their Sicilian counterparts because their family ties are closer
Re: The Miscreants’ Global Bust-Out
Post by sandi66 on May 6, 2011, 7:55am

The 'Ndrangheta

The 'Ndrangheta (Italian pronunciation: [n̩ˈdraŋɡeta])[p] is a criminal organization in Italy, centered in Calabria. Despite not being as famous abroad as the Sicilian Cosa Nostra, and having been considered more rural compared to the Neapolitan Camorra and the Apulian Sacra Corona Unita, the 'Ndrangheta managed to become the most powerful crime syndicate of Italy in the late 1990s and early 2000s. While commonly lumped together with the Sicilian Mafia, the 'Ndrangheta operates independently from the Sicilians, though there is contact between the two due to the geographical closeness of Calabria and Sicily. A US diplomat estimated that the organization's drug trafficking, extortion and money laundering activities accounted for at least 3 per cent of Italy's GDP.[1]


[edit] Origin and etymology

Map of the province of Reggio Calabria 
In 1861 the prefect of Reggio Calabria already noticed the presence of so-called camorristi, a term used at the time since there was no formal name for the phenomenon in Calabria (the Camorra was the older and better known criminal organization in Naples).[2][3] Since the 1880s, there is ample evidence of 'Ndrangheta-type groups in police reports and sentences by local courts. At the time they were often being referred to as the picciotteria, onorata società (honoured society) or camorra and mafia.[4]

These secret societies in the areas of Calabria rich in olives and vines were distinct from the often anarchic forms of banditry and were organized hierarchically with a code of conduct that included omertà – the code of silence – according to a sentence from the court in Reggio Calabria in 1890. An 1897 sentence from the court in Palmi mentioned a written code of rules found in the village of Seminara based on honour, secrecy, violence, solidarity (often based on blood relationships) and mutual assistance.[5]

In the folk culture surrounding 'Ndrangheta in Calabria, references to the Spanish Garduña often appear. Aside from these references, however, there is nothing to substantiate a link between the two organizations. The name 'Ndrangheta derives from the Greek word andragathía (ἀνδραγαθία) for "heroism" and "virtue" or andragathos (ἀνδράγαϑος) a blend of andròs (man) and agathòs (good), meaning a courageous man. In many areas of Calabria the verb 'ndranghitiari, from the greek andragatizomai, means to engage in a defiant and valiant attitude.[6] The Griko language, an ancient Greek dialect, is spoken by people in Calabria.

[edit] Modern history

Until 1975, the 'Ndrangheta restricted their Italian operations to Calabria, mainly involved in extortion and blackmailing. Then a gang war started, killing 300 people. The prevailing faction began to kidnap rich people from northern Italy for ransom. It is believed that John Paul Getty III was one of their victims. The Second 'Ndrangheta war raged from 1985 to 1991. The bloody six-year war between the Condello-Imerti-Serraino-Rosmini clans and the De Stefano-Tegano-Libri-Latella clans left more than 600 deaths.[7][8] In the 1990s, the organization started to invest in the illegal international drug trade, mainly importing cocaine from Colombia.[9]

Francesco Fortugno, popular center-left politician and deputy president of the regional parliament, was openly killed by the 'Ndrangheta on 16 October 2005, in Locri. Demonstrations against the organization ensued, with youthful protesters carrying banderoles of "Ammazzateci tutti!"—"Kill us all!"[10] The government started a large-scale enforcement operation in Calabria and arrested numerous 'ndranghetisti including the murderers of Fortugno.[11]

In March 2006, the national anti-Mafia prosecutor announced the discovery of a narco submarine in Colombia; it was being constructed on behalf of the 'Ndrangheta for smuggling cocaine. [12]

The 'Ndrangheta has recently expanded its activities to Northern Italy, mainly to sell drugs and to invest in legitimate businesses which can be used for money laundering. The mayor of Buccinasco was threatened when he tried to halt these investments; in May 2007 twenty members of 'Ndrangheta were arrested in Milan.[11]

On 30 August 2007, hundreds of police raided the small town of San Luca, the focal point of the bitter San Luca feud between rival clans among the 'Ndrangheta. Over 30 men and women, linked to the killing of six Italian men in Germany, were arrested.[13]

In September 2009 'Ndrangheta was accused by a former member of the gang of sinking dozens of ships loaded with radioactive waste off the Italian coast and of shipping radioactive waste to developing countries for dumping.

[edit] Characteristics

Italian anti-organized crime agencies estimated in 2007 that the 'Ndrangheta has annual revenue of about € 35–40 billion (US$50–60 billion), which amounts to approximately 3.5% of the GDP of Italy.[9][11] This comes mostly from illegal drug trafficking, but also from ostensibly legal businesses such as construction, restaurants and supermarkets.[14] The 'Ndrangheta has a strong grip on the economy and governance in Calabria. According to a US Embassy cable, Calabria would be a failed state if it were not part of Italy. The 'Ndrangheta controls huge segments of its territory and economy, and accounts for at least three percent of Italy's GDP through drug trafficking, extortion, skimming of public contracts, and usury. Law enforcement is hampered by a lack of both human and financial resources.[15]

The principal difference with the Mafia is in recruitment methods. The 'Ndrangheta recruits members on the criterion of blood relationships resulting in an extraordinary cohesion within the family clan that presents a major obstacle to investigation. Sons of ‘ndranghetisti are expected to follow in their fathers' footsteps, and go through a grooming process in their youth to become giovani d’onore (boys of honor) before they eventually enter the ranks as uomini d’onore (men of honor). There are relatively few Calabrians who have opted out to become a pentito; at the end of 2002, there were 157 Calabrian witnesses in the state witness protection program.[16] Unlike the Sicilian Mafia in the early 1990s, they have scrupulously avoided a head-on confrontation with the Italian state.

Prosecution in Calabria is hindered by the fact that Italian judges and prosecutors who score highly in exams get to choose their posting; those who are forced to work in Calabria will usually request to be transferred right away.[9] With weak government presence and corrupt officials, few civilians are willing to speak out against the organization.

[edit] Organizational structure

Formulas from the code of the ‘Ndrangheta: The three handwritten pages describe the text for the speech held when a member is promoted to a higher ranking. The text reads awkwardly for a native speaker—it is composed in an uncertain Italian with many grammatical and orthographic mistakes.[16] 
Both the Sicilian Cosa Nostra and the 'Ndrangheta are loose confederations of about one hundred mafia groups, also called cosche or families, each of which claims sovereignty over a territory, usually a town or village, though without ever fully conquering and legitimizing its monopoly of violence.[17]

There are approximately 100 of these families, totaling between 4,000 and 5,000 members in Reggio Calabria.[14][18][19] Other estimates mention 6,000-7,000 men, worldwide there might be some 10,000 members.[9]

Most of the groups (86) operate in the Province of Reggio Calabria, although a portion of the recorded 70 criminal groups based in the Calabrian provinces Catanzaro and Cosenza also appears to be formally affiliated with the 'Ndrangheta.[20] The families are concentrated in poor villages in Calabria such as Platì, Locri, San Luca, Africo and Altomonte as well as the main city and provincial capital Reggio Calabria.[21] San Luca is considered to be the stronghold of the 'Ndrangheta. According to a former 'ndranghetista, "almost all the male inhabitants belong to the 'Ndrangheta, and the Sanctuary of Polsi has long been the meeting place of the affiliates."[22] Bosses from outside Calabria, from as far as Canada and Australia, regularly attend the meetings at the Sanctuary of Polsi.[20]

A 'Ndrangheta crime family is called a locale (place). A locale may have branches, called 'ndrina (plural: 'ndrine), in the districts of the same city, in neighbouring towns and villages, or even outside Calabria, in cities and towns in the industrial North of Italy in and around Turin and Milan. Sometimes sotto 'ndrine are established. These subunits enjoy a high degree of autonomy – they have a leader and independent staff. In some contexts the 'ndrine have become more powerful than the locale on which they formally depend.[22] Other observers maintain that the 'ndrina is the basic organizational unit. Each 'ndrina is "autonomous on its territory and no formal authority stands above the " 'ndrina boss", according to the Antimafia Commission. The 'ndrina is usually in control of a small town or a neighborhood. If more than one 'ndrina operates in the same town, they form a locale.[20]

Blood family and membership of the crime family overlap to a great extent within the 'Ndrangheta. By and large, the 'ndrine consist of men belonging to the same family lineage. Salvatore Boemi, Anti-mafia prosecutor in Reggio Calabria, told the Italian Antimafia Commission that "one becomes a member for the simple fact of being born in a mafia family," although other reasons might attract a young man to seek membership, and non-kin have also been admitted. Marriages help cement relations within each 'ndrina and to expand membership. As a result, a few blood families constitute each group, hence "a high number of people with the same last name often end up being prosecuted for membership of a given 'ndrina." Indeed, since there is no limit to the membership of a single unit, bosses try to maximize descendants.[20]

At the bottom of the chain of command are the picciotti d’onore or soldiers, who are expected to perform tasks with blind obedience until they are promoted to the next level of cammorista, where they will be granted command over their own group of soldiers. The next level is known as santista and higher still is the vangelista, upon which the up-and-coming gangster has to swear their dedication to a life of crime on the Bible. The quintino is the second highest level of command in a 'Ndrangheta clan, being made up of five privileged members of the crime family who report directly to the boss, the capobastone (head of command).[23]

[edit] Power structure

For many years, the power apparatus of the single families were the sole ruling bodies within the two associations, and they have remained the real centers of power even after superordinate bodies were created in the Cosa Nostra beginning in the 1950s (the Sicilian Mafia Commission) and in the 'Ndrangheta a superordinate body was created only in 1991 as the result of negotiations to end years of inter family violence.[17]

Unlike the Sicilian Mafia, the 'Ndrangheta managed to maintain a horizontal organizational structure up to the early 1990s, avoiding the establishment of a formal superordinate body. Information of several witnesses has undermined the myth of absolute autonomy of Calabrian crime families, however. At least since the end of the 19th century, stable mechanisms for coordination and dispute settlement were created. Contacts and meetings among the bosses of the locali were frequent.[24] A new investigation, which ended in July 2010 with an arrest of 305 'Ndrangheta members revealed that the 'ndrangheta was extremely "hierarchical, united and pyramidal," and not just clan-based as previously believed, as said by Italy's chief anti-mafia prosecutor Piero Grasso.[25]

At least since the 1950s, the chiefs of the 'Ndrangheta locali have met regularly near the Sanctuary of Our Lady of Polsi in the municipality of San Luca during the September Feast. These annual meetings, known as the crimine, have traditionally served as a forum to discuss future strategies and settle disputes among the locali. The assembly exercises weak supervisory powers over the activities of all 'Ndrangheta groups. Strong emphasis was placed on the temporary character of the position of the crimine boss. A new representative was elected at each meeting.[24] Far from being the "boss of the bosses," the capo crimine actually has comparatively little authority to interfere in family feuds or to control the level of interfamily violence.[20]

At these meetings, every boss "must give account of all the activities carried out during the year and of all the most important facts taking place in his territory such as kidnappings, homicides, etc."[24] The historical preeminence of the San Luca family is such that every new group or locale must obtain its authorization to operate and every group belonging to the 'Ndrangheta "still has to deposit a small percentage of illicit proceeds to the principale of San Luca in recognition of the latter’s primordial supremacy."[22]

Security concerns have led to the creation in the 'Ndrangheta of a secret society within the secret society: La Santa. Membership in the Santa is only known to other members. Contrary to the code, it allowed bosses to establish close connections with state representatives, even to the extent that some were affiliated with the Santa. These connections were often established through the Freemasonry, which the santisti - breaking another rule of the traditional code - were allowed to join.[17][26]

Since the end of the Second 'Ndrangheta war in 1991, the 'Ndrangheta is ruled by a collegial body or Commission, known as La Provincia. Its primary function is the settlement of inter-family disputes.[27]

[edit] Activities

According to Italian DIA (Direzione Investigativa Antimafia, Department of the Police of Italy against organized crime) and Guardia di Finanza (Italian Financial Police and Customs Police) the "'Ndrangheta is now one of the most powerful criminal organizations in the world."[citation needed] Economic activities of 'Ndrangheta include international cocaine and weapons smuggling, with Italian investigators estimating that 80% of Europe's cocaine passes through the Calabrian port of Gioia Tauro and is controlled by the 'Ndrangheta.[9] However, according to a report of the European Monitoring Centre for Drugs and Drug Addiction (EMCDDA) and Europol, the Iberian Peninsula is considered the main entry point for cocaine into Europe and a gateway to the European market.[28] The United Nations Office on Drugs and Crime (UNODC) estimated that in 2007 nearly ten times as much cocaine was intercepted in Spain (almost 38 MT) in comparison with Italy (almost 4 MT).[29]

'Ndrangeta groups and Sicilian Cosa Nostra groups sometimes act as joint ventures in cocaine trafficking enterprises.[30][31] Further activities include skimming money off large public work construction projects, money laundering and traditional crimes such as usury and extortion. 'Ndrangheta invests illegal profits in legal real estate and financial activities.

The business volume of the 'Ndrangheta is estimated at almost 44 billion euro in 2007, approximately 2.9% of Italy's GDP, according to Eurispes (European Institute of Political, Economic and Social Studies) in Italy. Drug trafficking is the most profitable activity with 62% of the total turnover.[32]

Total turnover of the 'Ndrangheta in 2007

Illicit activity


Drug trafficking

€ 27.240 billion

Commercial enterprise & public contracts 

€ 5.733 billion


€ 2.867 billion

Extortion & usury

€ 5.017 billion

Arms trafficking

€ 2.938 billion


€ 43.795 billion

[edit] Outside Italy

The 'Ndrangheta has had a remarkable ability to establish branches abroad, mainly through migration. The overlap of blood and mafia family seems to have helped the 'Ndrangheta expand beyond its traditional territory: "The familial bond has not only worked as a shield to protect secrets and enhance security, but also helped to maintain identity in the territory of origin and reproduce it in territories where the family has migrated". 'Ndrine are reported to be operating in northern Italy, Germany, Belgium, the Netherlands, France, Eastern Europe, the United States, Canada, and Australia.[20] One group of 'ndranghetistas discovered outside Italy was in Ontario, Canada, several decades ago. They were dubbed the Siderno Group by Canadian judges as most of its members hailed from Siderno.[33]

Magistrates in Calabria sounded the alarm a few years ago about the international scale of the 'Ndrangheta's operations. It is now believed to have surpassed the traditional axis between the Sicilian and American Cosa Nostra, to become the major importer of cocaine to Europe.[34] Outside Italy 'Ndrangheta operates in several countries, such as:
Argentina: In November 2006, a cocaine trafficking network was dismantled that operated in Argentina, Spain and Italy. The Argentinian police said the ‘Ndrangheta had roots in the country and shipped cocaine through Spain to Milan and Turin.[35]
Australia: Known by the name "The Honoured Society", The 'Ndrangheta controlled Italian-Australian organized crime all along the East Coast of Australia since the early 20th century. The 'Ndrangheta began in Australia in Queensland, where they continued their form of rural organized crime, especially in the fruit and vegetable industry. After the 1998–2006 Melbourne gangland killings which included the murder of 'Ndrangheta Godfather Frank Benvenuto. In 2008, the 'Ndrangheta were tied to the importation of 15 million ecstasy pills to Melbourne, at the time the world's largest ecstasy haul. The pills were hidden in a container-load of tomato cans from Calabria. Australian 'Ndrangheta boss Pasquale Barbaro was arrested. Pasquale Barbaro's father Francesco Barbaro was a boss throughout the 1970s and early 1980s until his retirement.[36]
Belgium: 'Ndrangheta clans purchased almost "an entire neighbourhood" in Brussels with laundered money originating from drug trafficking. On 5 March 2004, 47 people were arrested, accused of drug trafficking and money laundering to purchase real estate in Brussels for some 28 million euros. The activities extended to the Netherlands where large quantities of heroin and cocaine had been purchased by the Pesce-Bellocco clan from Rosarno and the Strangio clan from San Luca.[37][38]
Canada: In Canada, the 'Ndrangheta is believed to be involved in the smuggling of unlicensed tobacco products through ties with criminal elements in cross-border Native American tribes.[39] According to Alberto Cisterna of the Italian National Anti-Mafia Directorate, the ‘Ndrangheta has a heavy presence in Canada. "There is a massive number of their people in North America, especially in Toronto. And for two reasons. The first is linked to the banking system. Canada's banking system is very secretive; it does not allow investigation. So Canada is the ideal place to launder money. The second reason is to smuggle drugs." Like most organized crime, the 'Ndrangheta have found Canada a useful North American entry point given its porous ports and proximity to the United States.[40] A Canadian branch labelled the "Siderno Group" – because its members primarily came from the Ionian coastal town of Siderno in Calabria – is based in Canada at least since the 1950s. Siderno is also home to one of the 'Ndrangheta's biggest and most important clans, heavily involved in the global cocaine business and money laundering.[40] Antonio Commisso, the alleged leader of the Siderno group, is reported to lead efforts to import "...illicit arms, explosives and drugs..."[41] Elements of 'Ndrangheta have been reported to have been present in Hamilton, Canada as early as 1911.[42]
Colombia: 'Ndrangheta clans were closely associated with the AUC paramilitary groups led Salvatore Mancuso, a son of Italian immigrants; he surrendered to Álvaro Uribe's government to avoid extradition to the U.S.[43] According to Giuseppe Lumia of the Italian Parliamentary Antimafia Commission, 'Ndrangheta clans are actively involved in the production of cocaine.[44]
Germany: According to a study by the German foreign intelligence service, the Bundesnachrichtendienst (BND), 'Ndrangheta groups are using Germany to invest cash from drugs and weapons smuggling. Profits are invested in hotels, restaurants and houses, especially along the Baltic coast and in the eastern German states of Thuringia and Saxony.[45][46] Investigators believe that the mafia's bases in Germany are used primarily for clandestine financial transactions. In 1999, the state Office of Criminal Investigation in Stuttgart investigated an Italian from San Luca who had allegedly laundered millions through a local bank, the Sparkasse Ulm. The man claimed that he managed a profitable car dealership, and authorities were unable to prove that the business was not the source of his money. The Bundeskriminalamt (BKA) concluded – seven years ago – that "the activities of this 'Ndrangheta clan represent a multi-regional criminal phenomenon."[47] In 2009, a confidential report by the BKA said some 229 'Ndrangheta families were living in Germany, and were involved in gun-running, money laundering, drug- dealing, and racketeering, as well as legal businesses. Some 900 people were involved in criminal activity, and were also legal owners of hundreds of restaurants, as well as being major players in the property market in the former East. The most represented 'Ndrangheta family originated from the city of San Luca, with some 200 members in Germany.[48][49] A war between the two 'Ndrangheta clans Pelle-Romeo (Pelle-Vottari) and Strangio-Nirta from San Luca that had started in 1991 and resulted in several deaths spilled into Germany in 2007; six men were shot to death in front of an Italian restaurant in Duisburg on 15 August 2007.[50][51][52] (See San Luca feud.)
Netherlands: Sebastiano Strangio allegedly lived for 10 years in the Netherlands, where he managed his contacts with Colombian cocaine cartels. He was arrested in Amsterdam on 27 October 2005.[53][54][55] The seaports of Rotterdam and Amsterdam are used to import cocaine. The Giorgi, Nirta and Strangio clans from San Luca have a base in the Netherlands and Brussels (Belgium).[56]
Mexico - Working in conjunction with a Mexican drug cartel mercenary army known as Los Zetas in the drug trade.[57]
United States: The earliest evidence of 'Ndrangheta activity in the U.S. points to an intimidation scheme run by the syndicate in Pennsylvania mining towns; this scheme was unearthed in 1906.[58] Current 'Ndrangheta activities in America mainly involve drug trafficking, arms smuggling, and money laundering. It is known that the 'Ndrangheta branches in North America have been associating with the Italian-American organized crime. The Suraci family from Reggio Calabria has moved some of its operations to the U.S. The family was founded by Giuseppe Suraci who has been in the United States since 1962. His younger cousin, D'Agostino, runs the family in Calabria. This family is known to be extremely ruthless and violent when dealing with their enemies.[citation needed]

[edit] 'Ndrangheta in popular culture

Beginning in 2000, music producer Francesco Sbano released three CD compilations of Italian mafia folk songs over a five-year period.[59] Collectively known as La Musica della Mafia, these compilations consist mainly of songs written by 'Ndrangheta musicians, often sung in Calabrian and dealing with themes such as vengeance (Sangue chiama sangue), betrayal (I cunfirenti), justice within the 'Ndrangheta (Nun c’è perdono), and the ordeal of prison life (Canto di carcerato).[60]

[edit] See also
Sebastiano Pelle
List of 'ndrine
List of most wanted fugitives in Italy
Radioactive waste dumping by the 'Ndrangheta

[edit] References

[p] - The word 'Ndrangheta is pronounced "en-drahng-eh-ta" as respelled, although the first syllable is silent in Calabrian unless immediately preceded by a vowel.[9] 
1.^ US saw mafia-ridden Italian region as 'failed state,' according to WikiLeaks cable, The Canadian Press, January 13, 2011
2.^ (Italian) Relazione annuale sulla 'Ndrangheta, Italian Antimafia Commission, February 2008
3.^ Behan, The Camorra, pp. 9-10
4.^ Paoli, Mafia Brotherhoods, p. 36
5.^ Gratteri & Nicasso, Fratelli di sangue, pp. 23-28
6.^ Gratteri & Nicasso, Fratelli di sangue, p. 21
7.^ Godfather's arrest fuels fear of bloody conflict, The Observer, 24 February 2008
8.^ (Italian) Condello, leader pacato e spietato, La Repubblica, 19 February 2008
9.^ a b c d e f "Move over, Cosa Nostra." The Guardian, 8 June 2006.
10.^ (German) Im Schattenreich der Krake, Süddeutsche Zeitung, 3 February 2006.
11.^ a b c "Mafiosi move north to take over the shops and cafés of Milan." The Times, 5 May 2007.
12.^ Web Editor (28 March 2006). "Mafia drugs submarine seized". News From Italy. Italy Magazine. Archived from the original on 13 October 2007. Retrieved 3 February 2009.
13.^ Mafia suspects arrested in Italy, BBC News, 30 August 2007.
14.^ a b (French) "Six morts dans un règlement de comptes mafieux en Allemagne." Le Monde. 15 August 2007.
15.^ Can Calabria Be Saved?
16.^ a b "Crisis among the "Men of Honor." interview with Letizia Paoli, Max Planck Research, February 2004
17.^ a b c Review of: Paoli, Mafia Brotherhoods
18.^ Paoli, Mafia Brotherhoods, p. 32
19.^ (Italian)Relazione annuale, Commissione parlamentare d’inchiesta sul fenomeno della criminalità organizzata mafiosa o similare, 30 July 2003
20.^ a b c d e f Varese, Federico. "How Mafias Migrate: The Case of the 'Ndrangheta in Northern Italy." Law & Society Review. June 2006.
21.^ (Italian) "La pax della 'ndrangheta soffoca Reggio Calabria." La Repubblica. 25 April 2007.
22.^ a b c Paoli, Mafia Brotherhoods, p. 29
23.^ "The 'Ndrangheta Looms Large."
24.^ a b c Paoli. Mafia Brotherhoods, p. 59
26.^ Paoli, Mafia Brotherhoods, p. 116
27.^ Paoli, Mafia Brotherhoods, pp. 61-62
28.^ Cocaine: a European Union perspective in the global context, EMCDDA/ Europol, Lisbon, April 2010
29.^ World Drug Report 2009, UNODC, 2009
30.^ The Rothschilds of the Mafia on Aruba, by Tom Blickman, Transnational Organized Crime, Vol. 3, No. 2, Summer 1997
31.^ (Italian) Uno degli affari di Cosa Nostra e 'Ndrangheta insieme, Notiziario Droghe, 30 May 2005
32.^ (Italian) Il fatturato della ’Ndrangheta Holding: 2,9% del Pil nel 2007, 'Ndrangheta Holding Dossier 2008, Centro Documentazione Eurispes
33.^ Lamberti, Rob (11 February 2005). "Clans here for 50 years". Toronto Sun. Retrieved 7 April 2007.[dead link]
34.^ Close family ties and bitter blood feuds, The Guardian, 16 August 2007
35.^ (Spanish) Mafia calabresa: cae una red que traficaba droga desde Argentina, Clarín, 8 November 2006.
36.^ AFP lands 'world's biggest drug haul',, 8 August 2008
37.^ (Italian) "A Bruxelles un intero quartiere comprato dalla 'ndrangheta." La Repubblica. 5 March 2004.
38.^ (French) La mafia calabraise recycle à Bruxelles, La Libre Belgique, 6 March 2004.
39.^ Thompson, John C. (January 1994). "Sin-Tax Failure: The Market in Contraband Tobacco and Public Safety". The Mackenzie Institute. Retrieved 7 April 2007.
40.^ a b Why Italy's scariest Mob loves Canada, National Post, 24 November 2007
41.^ "Organized Crime in Canada: A Quarterly Summary". Nathanson Society. April to June, 2005. Archived from the original on 30 March 2007. Retrieved 7 April 2007.
42.^ Nicaso, Antonio (24 June 2001). "The twisted code of silence: Part 4 — Murder, extortion and drug dealing exemplified organized crime in Toronto". Corriere Canadese.
43.^ (Spanish) Tiene Italia indicios sobre presencia de cárteles mexicanos en Europa, El Universal, 15 April 2007
44.^ (Spanish) La mafia calabresa produce su cocaína en Colombia, El Universal (Caracas), 30 October 2007.
45.^ Italian Mafia Invests Millions in Germany, Deutsche Welle, 13 November 2006
46.^ (German) Mafia setzt sich in Deutschland fest, Berliner Zeitung, 11 November 2006
47.^ A Mafia Wake-Up Call, Der Spiegel, 20 August 2007
48.^ Report: Germany losing battle against Calabrian mafia, The Earth Times, 12 August 2009
49.^ (German) Italienische Mafia wird in Deutschland heimisch, Die Zeit, 12 August 2009
50.^ A mafia family feud spills over, BBC News Online, 16 August 2007
51.^ How the tentacles of the Calabrian Mafia spread from Italy, Times Online, 15 August 2007
52.^ Six Italians Killed in Duisburg, Spiegel Online, 15 August 2007
53.^ (Italian) 'Ndrangheta, preso ad Amsterdam il boss Sebastiano Strangio, La Repubblica, 28 October 2005
54.^ (Italian) 'Ndrangheta, estradato dall'Olanda il boss Sebastiano Strangio, La Repubblica, 27 March 2006
55.^ (Dutch) Maffiakillers Duisburg zijn hier, De Telegraaf, 19 August 2007
56.^ (Italian) Olanda, Paese-rifugio dei killer, Il Sole 24 Ore, 18 August 2007
57.^ (Spanish) Los Zetas toman el control por la ‘Forza’: Nicola Gratteri, Excelsior, October 12, 2008
58.^ Who are the 'Ndrangheta, Reuters, 15 August 2007
59.^ "Songs of the Criminal Life." NPR, 2 October 2002. Accessed 8 September 2009. Archived 10 September 2009.
60.^ Gerd Ribbeck. "". Archived from the original on 10 September 2009. Retrieved 8 September 2009.
Behan, Tom (1996). The Camorra, London: Routledge, ISBN 0-415-09987-0
(Italian) Gratteri, Nicola & Antonio Nicaso (2006). Fratelli di sangue, Cosenza: Pellegrini Editore, ISBN 88-8101-373-8
Paoli, Letizia (2003). Mafia Brotherhoods: Organized Crime, Italian Style, New York: Oxford University Press ISBN 0-19-515724-9 (Review by Klaus Von Lampe) (Review by Alexandra V. Orlova)
Varese, Federico. "How Mafias Migrate: The Case of the 'Ndrangheta in Northern Italy." Law & Society Review, June 2006.

[edit] External links
(Italian) Il fatturato della ’Ndrangheta Holding: 2,9% del Pil nel 2007, 'Ndrangheta Holding Dossier 2008, Centro Documentazione Eurispes
(Italian) DIA, with bi-annual reports on organized crime in Italy
(Italian) Italian Guardia di Finanza Website
Italian organized crime groups[dead link] (Abstracted from: The Global Mafia, The New World Order of Organized Crime)
(Italian) Ammazzateci tutti, anti-'Ndrangheta organization
(Italian) Relazione annuale sulla 'ndrangheta, Commissione parlamentare di inchiesta sul fenomeno della criminalità organizzata mafiosa o similare (Relatore: Francesco Forgione), February 2008'Ndrangheta
Re: The Miscreants’ Global Bust-Out
Post by sandi66 on May 6, 2011, 8:04am


By LARRY GURWINMonday, Dec. 09, 1996

For years, the securities industry in the U.S. and elsewhere has been host to fast-buck brokerage firms that have ridden the back of the bull market like so many parasites. Typically, they hype penny stocks in tiny companies that are all promise and no delivery and then close up shop when the market hiccups or the regulators catch on, leaving gullible investors to count their losses.

No one has been a better practitioner of the craft than Irving Kott, a sharp operator who has played a powerful, behind-the-scenes role at brokerage firms in his native Canada, Continental Europe, Britain and the U.S. In his biggest caper, Kott's brokerage customers lost as much as $400 million. His operations have been run out of a number of countries, but now he is back in the U.S., operating right under the noses of government regulators, including the Securities and Exchange Commission and the National Association of Securities Dealers (NASD).

Kott is a powerful figure behind the scenes at JB Oxford & Co., a small discount brokerage with big pretensions whose parent company, JB Oxford Holdings, has become a darling of a group of online investors, to the point that many of them have bought stock in the brokerage company. Hundreds of messages about the company, based in Beverly Hills, California, have been posted in America Online's Motley Fool electronic forum, which has been prominent in boosting prices of a number of issues. Last year the company's stock opened at $1 a share and shot up to nearly $4 in December, ending the year at $2. This year, despite a torrid market, the stock has not done as well as its online admirers might wish. At week's end it closed at $1.75.

Few of the mostly small investors who have put money into JB Oxford's stock know about Kott's ties to the firm, because his name appears nowhere in the company's SEC filings. Why? According to JB Oxford, Kott is nothing more than a consultant to the brokerage company. Kott too, in faxed communications with TIME, reiterated the company's official explanation. In reality, he wields so much influence that several former employees told TIME they regarded him as the de facto CEO. There have also been allegations--hotly denied by Oxford--that the firm is engaging in some of the same dubious practices that were employed by other Kott-related brokerages in the past. Stephen Rubenstein, Oxford's chairman and CEO, insists that despite Kott's association with the company, JB Oxford is a clean operation making an honest living in one of the hottest markets in history.

But making an honest living is not an Irving Kott hallmark. Although he claims Canadian residency, Kott spends much of his time in California and lives at a rented 4,000-sq.-ft. mansion in Beverly Hills with a swimming pool and tennis court that was once the home of Cary Grant. Officially, the tenant is Rhoda F. Kott, Irving's wife, and there's a reason: by claiming Canadian residency, Kott has been able to avoid being served with subpoenas at JB Oxford's headquarters. Until a few months ago, Oxford reimbursed Kott's consulting firm for the rent.

Kott gets around. In 1976 he was convicted of stock fraud in Ontario and fined Can$500,000--believed to be the largest personal fine in Canadian history up to that time. In 1979 he was sentenced to four years in prison in another case, a conviction that was overturned on appeal. By the '80s, he had set out for Europe to help run an Amsterdam-based company called First Commerce Securities, which became mired in scandal. The operation was a classic boiler room--a brokerage firm that used high-pressure sales tactics to push dubious securities. Telemarketers dialed for dollars around the clock to all points of the globe.

First Commerce's main product was stock of an outfit called DeVoe-Holbein International, a company that boasted a very interesting technology: one that could essentially extract gold and other valuable minerals from wastewater and seawater. It was a lure reminiscent of the medieval alchemists who claimed to be able to transform base metals into gold, with equally unimpressive results. Dutch authorities raided First Commerce in 1986 and forced it into bankruptcy the following year. Thousands of investors lost money, including many Americans living abroad.

Although Kott told TIME he was only a consultant to First Commerce, Dutch prosecutor Jan Koers says he found overwhelming evidence that Kott owned the company and played a major role in running it. He accused Kott of fraud, tax evasion and various other crimes. The criminal investigation stalled because Kott could not be extradited from Canada. Kott settled the case against him and other operators of the boiler room for about $4 million. This was pocket change in comparison with what First Commerce collected. Prosecutor Koers estimates that investors lost a bare minimum of $100 million. Jan van Apeldoorn, the bankruptcy receiver, believes the total damage was as high as $400 million. Having been made unwelcome in the Netherlands, Kott, together with some of his associates, continued to push highly speculative stocks using brokerage firms in other countries, including Britain, Luxembourg and the U.S. One such outlet was Greentree Securities, a now defunct New York City firm run by Kott's son Michael, an alumnus of First Commerce. (Another son, Ian, is a senior official of JB Oxford.)

JB Oxford Holdings used to be called RKS Financial Group, and it was the parent company of a sketchy brokerage firm called Reynolds Kendrick Stratton. In the spring of 1993, Kott helped arrange for a group of investors to acquire a controlling interest in the brokerage company, and Kott was hired as a consultant. Reynolds Kendrick Stratton aggressively promoted Kott-related stocks, notably shares of a NASDAQ-listed company called Hariston Corp.

For many years Hariston was a Kott plaything. Hariston's stock had been sold by First Commerce Securities. The company was once called Western Allenbee Oil & Gas and later renamed Convoy Capital. Whatever the label, Hariston bore an odd resemblance to First Commerce's main piece of merchandise, DeVoe-Holbein International. It too boasted technology that could squeeze minerals from water, and one of the same scientists was involved: Irving W. DeVoe, a Canadian professor who had co-founded DeVoe-Holbein. In the early 1990s, a Hariston unit announced a project to extract minerals from mining waters in Butte, Montana, and many local people who believed in the project bought stock. The scheme came to naught, as did much of the money invested. (In its current incarnation, Hariston is a computer software company.)

Reynolds Kendrick Stratton's practices touched off a spate of litigation by investors as well as a probe by the nasd, forcing the company to pay out settlements, arbitration awards and fines. A March 1994 expose in BusinessWeek highlighted Kott's "consulting" role and revealed that Kott and some of the investors he had helped bring into the brokerage company were major shareholders of Hariston.

Shortly after that story appeared, RKS announced that it was pulling out of the full-service brokerage business. RKS shut down Reynolds Kendrick Stratton, and a new brokerage firm took its place: JB Oxford & Co.

Unlike its predecessor, JB Oxford & Co. would be a discount stockbroker--essentially a passive order taker for customers who wanted to save money on commissions.

In the two years since then, JB Oxford has expanded aggressively, hiring dozens of stockbrokers and opening branch offices in New York City, Boston, Miami, Dallas and Basel, Switzerland. Customers have been solicited through television commercials on cnbc in the U.S. and nbc Super Channel, an English-language cable channel in Europe. An Asian marketing group runs ads in Japanese, Chinese and Korean newspapers in California, and there are plans to open offices in Hong Kong and Taipei. Oxford has also plunged into cyberspace with its own Internet site, enabling investors to trade online.

Oxford CEO Rubenstein insists that Oxford is "vastly different" from its predecessor, Reynolds Kendrick Stratton, "with new management, new personnel and an entirely different business focus. There is simply no comparison between the two firms." One thing hasn't changed, however: the Kott connection. Several major JB Oxford shareholders have been closely associated with Kott or with stocks pushed through Kott-connected boiler rooms. Felix Oeri, a Swiss financier who is Oxford's biggest stockholder, bought a large block of Hariston stock a few years ago after it was recommended to him by Kott. (Oeri says he's lost money on the stock.) Arabella, a Luxembourg company that is Oxford's second-ranking stockholder, is currently the controlling shareholder of Hariston.

"Kott was the key: he made the decisions," recalls a former employee. When asked whether Kott gave orders to Rubenstein, this source replied, "Definitely." Said another ex-employee: "Kott called the shots. Everyone made suggestions to him, but [I think] his word was the final one. Nothing went on without his knowledge." A former broker said flatly, "It's his place. He runs it, he makes the decisions, he does the hiring and firing."

Early this year, several Oxford branch managers and employees from various parts of the country held at least two meetings at Kott's Beverly Hills mansion. Rubenstein, according to a former employee, was at both meetings, but they were chaired by Kott. A source in the brokerage business says Kott has actually described himself as the "owner" of JB Oxford. When TIME asked Kott about his relationship with JB Oxford, he denied owning any stock and described himself as a consultant.

Rubenstein likewise rejects the notion that Kott is anything more than a consultant, and he adds that a two-year consulting agreement expired at the end of June and that Kott is now used only on an ad hoc basis. And yet Rubenstein's own comments about Kott make it clear that Kott has played a central role in the company, making him, at the very least, one of the two or three most important people there.

Kott not only has ties to several major shareholders, but he has also helped launch the discount-brokerage business, restructured the company's debt and supervised advertising and marketing. Until a few months ago, he spent 50% to 60% of his time at JB Oxford's headquarters--in an office that was larger than Rubenstein's own digs. (Although Rubinstein points out, "I have the corner office.")

Rubenstein's statements about Kott's office and the amount of time Kott spent there seem to contradict assertions that Oxford made in a civil case filed last year against Oxford, Kott and other defendants. After the plaintiffs tried to serve a summons on Kott at Oxford's offices, he and Oxford persuaded an appeals court judge to quash the summons. The main reasons: Kott had no office at JB Oxford, and he lived in Canada, not California. (Rubenstein says this isn't a contradiction because the office was provided to employees of Kott's consulting firm. Yet he acknowledges that the consulting-firm employee who occupied it was Irving Kott.)

The Kott connection may be disturbing, but does it matter to JB Oxford's clients? After all, Oxford portrays itself as little more than a passive order taker for customers who make their own investment decisions. In fact, Oxford customers can have their own "personal" brokers, and some of the brokers steer clients to specific stocks, especially stocks in which Oxford is a market maker, since the firm makes much bigger profits that way. (A market maker can sell out of its own inventory, rather than as a middleman between buyer and seller.) Brokers have every incentive to recommend such stocks because part of their compensation comes from the "spread"--the difference between the price paid by Oxford for the stock and the price charged to the customer. One of the stocks in which Oxford is a market maker is the controversial Hariston Corp.

Even if customers make their own decisions, there can be room for abuse. Former employees and customers say the firm sometimes overcharged for stocks through price-manipulation schemes. At least three disgruntled clients complained to state-securities regulators about such abuses; one of them claimed to have lost his life savings. Rubenstein, for his part, insists that Oxford's sales and trading practices are in line with industry standards and that there have been few customer complaints.

There's no question that Oxford brokers have recommended at least one speculative stock to their customers: Legacy Software. It's an obscure company in the Los Angeles area that develops edutainment software, and when it went public last May, JB Oxford arranged the deal. Edutainment is a promising area, but Legacy was in very poor financial shape. The tiny software developer had a record of losses, and its accountants said there was "a substantial doubt as to the company's ability to continue as a going concern." In plain English, Legacy was on the verge of bankruptcy.

Yet the deal was a major success for Legacy: the offer price of $6 a share gave the struggling software house a market capitalization of more than $14 million on a fully diluted basis. Perhaps the biggest winner was an obscure Monaco company called EBC Trust. Some months before the deal, EBC provided a loan to Legacy to keep it going, and is now one of the company's biggest single stockholders, with millions of dollars in paper profits.

Who's behind EBC? Legacy's prospectus states that EBC is owned by Monaco-based businessmen Michael Woolf and Richard MacLellan. TIME has learned that MacLellan is apparently no stranger to Irving Kott: the two men were co-defendants in a suit filed in California last year accusing them of having misappropriated shares of a Canadian company. (The suit was settled, and TIME has no evidence of wrongdoing by any of the defendants.)

Other co-defendants included Felix Oeri, Oxford's largest stockholder, and Financial Strategies International, a now defunct company that published a newsletter that often touted Kott-related stocks. (Oeri told TIME that he did not know he had been sued.) A former FSI employee, Ian Clay, worked for two Kott-connected boiler rooms in Europe. For the past two years, Clay has been working for JB Oxford.

It's likely that the most actively traded stock connected to Kott is not Legacy or even Hariston but JB Oxford Holdings. Trading volume has at times been extraordinarily high for a company of Oxford's size ($39.6 million in revenues last year); there were times last year when Oxford was one of the most actively traded stocks on nasdaq's Small-Cap market.

To date, JB Oxford has never seen fit to inform its shareholders of the key role Kott plays at the company. Although most of Oxford's customers and stockholders are in the dark, U.S. securities regulators have known for years that Kott is connected to JB Oxford. When regulators have looked into the matter, Oxford has assured them that Kott is nothing more than a consultant.

Long before arriving at JB Oxford, Kott ran other brokerage firms by operating through front men. Authorities weren't fooled. In his native Quebec, for instance, regulators yanked the license of one brokerage, L.J. Forget, citing Kott as the secret mastermind. Dutch authorities came to the same conclusion about First Commerce. Kott-related bucket shops have also been shut down in Britain and Luxembourg. In the U.S., by contrast, by calling himself a consultant, Kott has an ongoing license to work his stock-market alchemy.,9171,985660-1,00.html
Re: The Miscreants’ Global Bust-Out
Post by sandi66 on May 6, 2011, 8:12am


By Mark Sage, PA News 

Irish Foreign Minister Brian Cowen was tonight forced to admit that the Government had granted Irish citizenship to a brother-in-law of Osama bin Laden. 

Sheikh Khalid bin Mahfouz was given an Irish passport along with nine associates in 1990 by the then Prime Minister Charlie Haughey in "dubious" circumstances, the Irish Parliament heard. 

Sheikh Mahfouz went on to channel millions of dollars into bin Laden's network through front charities, it was claimed. 

When opposition Fine Gael foreign affairs spokesman Jim O'Keeffe raised the issue with Mr Cowen last week, the minister said no such citizenship was granted. 

But today, Mr Cowen was forced to apologise to the Dail (Irish Parliament) and explained that a misspelling by one of his officials had brought up wrong results on a computerised search. 

"I made a statement on Wednesday in good faith on the basis of information supplied to me by my officials. A more extensive search of the passport office records on the following day revealed that passports were issued to this group on December 8, 1990," Mr Cowen said. 

"All the passports expired on December 8, 2000, consequently the issue of revoking them, that was also raised by Deputy O'Keeffe, does not arise," he added. 

But Mr O'Keeffe tonight demanded that even though the passports had run out, the citizenship of Sheikh Mahfouz, whom he described as a "major international crook", should be revoked. 

"Evidence has been produced that Sheikh Mahfouz has been a major financial backer of the international terrorist network headed by his brother-in-law, Osama bin Laden," he said. 

"It is bad enough that the name of Ireland should be have been besmirched by granting citizenship to international crooks. It is totally unacceptable that we should issue passports, giving Irish citizenship to those who are associated with and financially supporting Osama bin Laden." 

Mr O'Keeffe told the chamber that Sheikh Mahfouz has channelled millions of dollars to bin Laden through the front organisations Islamic Relief and Blessed Relief. 

And he described the "dubious" circumstances in which the passports were granted. 

It has been claimed that Mr Haughey handed the passports to the Sheikh personally in a central Dublin hotel. 

The Moriarty Tribunal has been set up to probe allegations of a passports for sale scandal between 1989 and 1994. 

"What is clear at this stage is that in a matter of about three days between December 6 and 9, 1990, the applications were completed, naturalisation finalised and passports issued, despite the fact that the applicants did not comply with the requirements in relation to residency or production of evidence of good character." 

He added: "If Ireland is to have any credibility in the fight against international terrorism the Minister for Justice must immediately revoke the Irish citizenship granted in dubious circumstances." 

Mr Cowen said the reason for the error was that the search capabilities of the computer system were outdated and the misspelt name could not be picked up by the software unless a date of birth was given. 

The system is being upgraded.
Re: The Miscreants’ Global Bust-Out
Post by sandi66 on May 6, 2011, 8:20am

’’Bahrain: The Possible victory of blood’’.

by Shia News ÃÎÈÇÑ ÇáÔíÚÉ on Thursday, March 17, 2011 at 3:39am

The next step for the opposition will be to focus on the foreign occupation and the latest atrocities committed by the Bahraini and Saudi forces to ...

Ali Rizk

- "Foreign occupation of Bahrain" that is what members of the Bahraini opposition parties are saying is the new problem with the ruling Khalifa family of Bahrain. After being able to finally contact Sheikh Mohammad Ali Mahfouz who heads the Islamic Action society (one of the three main opposition parties) he made it clear that this latest clampdown on the protestors will not make the opposition parties or the protesters for that matter, back down from their demands. In fact Sheikh Mahfouz even hints that the next step for the opposition will be to focus on the foreign occupation and the latest atrocities committed by the Bahraini and Saudi forces (the Saudi forces constitute the huge bulk of the occupation forces) to further corner the ruling Monarchy in Manama.

In another strategy which Sheikh Mahfouz speaks about and which clearly intends to expose the Saudi role in all of this, he says that there will also be a focus on the disagreements amongst the Gulf Cooperation council members."Look at the Kuwaiti position" he says, "the Kuwaiti leadership has come out against the violence against the protesters and has even said it intends to send doctors and medical staff to attend to the wounded". (One gets the sense here that the opposition plans to present what is going on as a joint Bahraini Saudi royal family plan aimed at silencing significant percentages of populations throughout the Persian gulf who feel they are subject to marginalization and discrimination).

Sheikh Mahfouz also points out in a somewhat optimistic way to the resignations of sunni ministers and close advisors to the King following the latest atrocities. Another senior opposition figure Ibrahim Sharif who heads the secular "Democratic Action Society" says that what is happening is something expected and is "the price to pay for freedom". He also says that it is necessary for the uprising to continue in order for the ruling family to cede to more demands to the people."The more the people continue to protest and the more these images of violence against protesters is seen around the world the more the ruling family will be forced to make concession to the demands of the people and the opposition".

Put in another way the recent violence against protesters will backfire on the regime and the blood of the Bahraini civilians who were killed and wounded will actually serve to realize the demands of the people and maybe in a quicker process. In this regard Sharif points to how these images made the front pages and leading headlines of world media outlets and how this will oblige the world to pay more attention to the situation in Bahrain and to the legitimate demands of the people.

So in brief after speaking to the high ranking members of the Bahraini opposition one does get the sense that they are optimistic that things will turn out in their favor. However one also gets the sense that in order for this to happen the protesters must not give up and must continue with their uprising which after all aims nothing more than to end the political and economic hegemony of the ruling family, bring about a better economic situation for the people of Bahrain and bring about a system where all citizens are treated equally regardless of religious affiliation.
Re: The Miscreants’ Global Bust-Out
Post by sandi66 on May 6, 2011, 9:01am

Michael Milken

Michael Robert Milken (born July 4, 1946) is an American financier and philanthropist noted for his role in the development of the market for high-yield bonds (also called junk bonds) during the 1970s and 1980s, for his 1990 guilty plea to felony charges for violating US securities laws, and for his funding of medical research.[2]

Milken was indicted on 98 counts of racketeering and securities fraud in 1989 as the result of an insider trading investigation. After a plea bargain, he pled guilty to six securities and reporting violations but was never convicted of racketeering or insider trading. Milken was sentenced to ten years in prison and permanently barred from the securities industry by the Securities and Exchange Commission. After the presiding judge reduced his sentence for cooperating with testimony against his former colleagues and good behavior, he was released after less than two years.[3]

His critics cited him as the epitome of Wall Street greed during the 1980s, and nicknamed him the Junk Bond King. Supporters, like George Gilder in his book, Telecosm, note that "Milken was a key source of the organizational changes that have impelled economic growth over the last twenty years. Most striking was the productivity surge in capital, as Milken … and others took the vast sums trapped in old-line businesses and put them back into the markets."

Milken has also been engaged in philanthropic activities since the early 1980s. He is co-founder of the Milken Family Foundation, chairman of the Milken Institute, and founder of medical philanthropies funding research into melanoma, cancer and other life-threatening diseases. In a November 2004 cover article, Fortune magazine called him "The Man Who Changed Medicine" for his positive influence on medical research.[2]

Milken's compensation, while head of the high-yield bond department at Drexel Burnham Lambert in the late 1980s, exceeded $1 billion in a four-year period, a new record for US income at that time.[4] Drexel went bankrupt in 1990. With an estimated net worth of around $2 billion as of 2010, he is ranked by Forbes magazine as the 488th richest person in the world.[5] Much of that wealth comes from his success as a bond trader; he only had four losing months in 17 years of trading.[6]


Milken was born to a Jewish family in Encino, California.[7] He graduated from Birmingham High School, where his classmates included actresses Sally Field and Cindy Williams.

Milken is a 1968 University of California, Berkeley graduate with a B.S. with highest honors, and was elected Phi Beta Kappa and was a member of the Sigma Alpha Mu fraternity.[8] He received his MBA from the Wharton School at the University of Pennsylvania.

While at Wharton, he was influenced by credit studies authored by W. Braddock Hickman, a former president of the Federal Reserve Bank of Cleveland, who noted that a portfolio of non-investment grade bonds offered "risk-adjusted" returns greater than that of an investment grade portfolio.

[edit] Career

Through his Wharton professors, Milken landed a summer job at Drexel Harriman Ripley, an old-line investment bank, in 1969. After completing his MBA, he joined Drexel (by then known as Drexel Firestone) as director of low-grade bond research. He was also given some capital and permitted to trade. According to legend, he was so devoted to his work that he wore a miner's headlamp while commuting on the bus so that he could read company prospectuses.

Drexel merged with Burnham and Company in 1973 to form Drexel Burnham and Company, with Milken as one of the few prominent holdovers from the Drexel side of the merger. He persuaded his new boss, Tubby Burnham (a fellow Wharton alumnus), to let him start a high-yield bond trading department—an operation that soon earned a remarkable 100% return on investment.[6] By 1976, Milken's income at what was at the time Drexel Burnham Lambert was estimated at $5 million a year.

One weekend in 1978, Milken moved the high-yield bond operation to Century City in Los Angeles. The transition went so smoothly that many clients were unaware that the department had moved between Friday and Monday. Later, the operation moved to Beverly Hills at 9560 Wilshire Boulevard. On the fourth floor, he set up an X-shaped trading desk—designed to maximize his contact with traders and salesmen—from which he worked very long hours, invariably starting his day before 5 am Pacific (8 am Eastern, prior to the opening of the markets in New York). The department grew and, in 1986-87, moved up to the fifth floor, where there were eventually three of the famous X-shaped trading desks.

[edit] The high-yield market and the 1980s buyout boom

History of private equity
and venture capital

Early history
(Origins of modern private equity)

The 1980s
(LBO boom)

The 1990s
(LBO bust and the VC bubble)

The 2000s
(Dot-com bubble to the credit crunch)

v · d · e

See also: Private equity in the 1980s

By the mid-1980s, Milken's network of high-yield bond buyers (notably Fred Carr's Executive Life Insurance Company and Tom Spiegel's Columbia Savings & Loan) had reached a size which enabled him to raise large amounts of money very quickly. Both these buyers subsequently failed as a result of their junk bond investments. It was said, for example, that Milken raised $1 billion for MCI Communications, then an upstart provider of long-distance telephone services, in the space of one hour on the telephone. Cable TV companies like John Malone's Tele-Communications Inc., were also favorite clients, as were Ted Turner's maverick Turner Broadcasting, cellphone pioneer Craig McCaw, and casino entrepreneur Steve Wynn, and before long the CEOs and CFOs of many smaller and mid-sized companies previously limited to the slow and expensive private-placement market were making early-morning pilgrimages to Beverly Hills seeking to issue high-yield and/or convertible bonds through Drexel Burnham. Without question, many leading entrepreneurs of the 1980s owe their success at least partly to Milken's perception of this market opportunity. One of his favorite sayings: "There is no shortage of capital; there is only a shortage of management talent".

Milken was largely involved with kick-starting investments in Nevada, which for many years was the fastest-growing state in the U.S. Milken funded the gaming industry, newspapers and homebuilders, and among the companies he financed were MGM Mirage, Mandalay Resorts, Harrah's Entertainment and Park Place.

This money-raising ability also facilitated the activities of leveraged buyout (LBO) firms like Kohlberg Kravis Roberts and of so-called "greenmailers." Armed with a "highly confident letter" from Drexel (in which Drexel promised to get the necessary debt in time to fulfill the buyer's obligations), these firms and greenmailers were able to profit by merely threatening LBOs of large, blue-chip companies in which they had built up equity positions. Milken's task was perhaps made easier by the fact that the top-tier Wall St investment banks were unwilling to compete with him for fear of jeopardizing their longstanding and lucrative relationships with many of these blue-chip companies who were potentially his targets, although latterly companies like Salomon Brothers, Morgan Stanley and First Boston did enter the high-yield market. Notable buyouts financed by Drexel of companies previously thought invulnerable included Beatrice Companies and the cosmetics firm, Revlon.

Amongst his significant detractors have been Martin Fridson formerly of Merrill Lynch and author Ben Stein. Milken's high-yield "pioneer" status has proved dubious as studies show "original issue" high-yield issues were common during and after the Great Depression. Others such as Stanford Phelps, an early co-associate and rival at Drexel, have also contested his credit as pioneering the modern high-yield market. This is, however, quibbling, as Drexel was for all intents and purposes unchallenged as essentially the only underwriter and trader of high-yield bonds throughout almost the entire decade of the 1980s.

Despite his influence in the financial world (at least one source called him the most powerful American financier since J.P. Morgan),[9] Milken was an intensely private man who shunned publicity. Hence, citing the power behind the most aggressive firm on Wall Street, Drexel bankers often said "Michael says ..." to justify their tactics.[6]

[edit] Scandal

Dan Stone, a former Drexel executive, wrote in his book, April Fools, that Milken was under nearly-constant scrutiny from the Securities and Exchange Commission from 1979 onward due to unethical and sometimes illegal behavior in the high-yield department.[9] His own role in such behavior has been much debated. Stone claims that Milken viewed the securities laws, rules and regulations with a degree of contempt, feeling they hindered the free flow of trade. However, Stone said that while Milken condoned questionable and illegal acts by his colleagues, Milken himself personally followed the rules.[9] He often called Drexel's president and CEO, Fred Joseph—known for his strict view of the securities laws—with ethical questions.[6] On the other hand, several of the sources James B. Stewart used for Den of Thieves told him that Milken often tried to get a higher markup on trades than was permitted at the time.

Harvey A. Silverglate, a prominent defense attorney who has represented Milken during the appellate process, disputes that view in his book Three Felonies a Day: “Milken’s biggest problem was that some of his most ingenious but entirely lawful maneuvers were viewed, by those who initially did not understand them, as felonious, precisely because they were novel – and often extremely profitable.” [10]

[edit] Ivan Boesky and an intensifying investigation

The SEC inquiries never got beyond the investigation phase until 1986, when arbitrageur Ivan Boesky pleaded guilty to securities fraud as part of a larger insider trading investigation. As part of his plea, Boesky purported to implicate Milken in several illegal transactions, including insider trading, stock manipulation, fraud and stock parking (buying stocks for the benefit of another). This led to an SEC probe of Drexel, as well as a separate criminal probe by Rudy Giuliani, then United States Attorney for the Southern District of New York. Although both investigations were almost entirely focused on Milken's department, Milken refused to talk with Drexel (which launched its own internal investigation) except through his lawyers.[6][9]

For two years, Drexel insisted that nothing illegal occurred, even when the SEC formally sued Drexel in 1988. Later that year, Giuliani began seriously considering an indictment of Drexel under the powerful Racketeer Influenced and Corrupt Organizations Act, which he had previously used against organized crime. Drexel management immediately began plea bargain talks, concluding that no financial institution could survive a RICO indictment. However, talks collapsed on December 19 when Giuliani made several demands that Drexel found too harsh, including one that Milken leave the firm if indicted.[9]

Only a day later, however, Drexel lawyers discovered suspicious activity in one of the limited partnerships Milken set up to allow members of his department to make their own investments. That entity, MacPherson Partners, had acquired several warrants for the stock of Storer Broadcasting in 1985. At the time, Kohlberg Kravis Roberts was in the midst of a leveraged buyout of Storer, and Drexel was lead underwriter for the bonds being issued. One of Drexel's other clients bought several Storer warrants and sold them back to the high-yield bond department. The department in turn sold them to MacPherson. This partnership included Milken, other Drexel executives, and a few Drexel customers. However, it also included several managers of money funds who had worked with Milken in the past. It appeared that the money managers bought the warrants for themselves and didn't offer the same opportunity to the funds they managed.[9] Some of Milken's children also got warrants, according to Stewart, raising the appearance of Milken self-dealing.

However, the warrants to money managers were especially problematic. At the very least, Milken's actions were a serious breach of Drexel's internal regulations, and the money managers had breached their fiduciary duty to their clients. At worst, the warrants could have been construed as bribes to the money managers to influence decisions they made for their funds (and indeed, several money managers were eventually convicted on bribery charges). The discovery of MacPherson Partners—whose very existence had not been known to the public at the time—seriously eroded Milken's credibility with the board. On December 21, 1988, Drexel pleaded nolo contendere to six counts of stock parking and stock manipulation, and agreed that Milken had to leave the firm if indicted.[6][9]

[edit] Indictment and sentencing

In March 1989, a federal grand jury indicted Milken on 98 counts of racketeering and fraud. The indictment accused Milken of a litany of misconduct, including insider trading, the concealment of the real owner of a stock, a practice known as stock parking, tax evasion and numerous instances of repayment of illicit profits. The most intriguing charge was that Boesky paid Drexel $5.3 million in 1986 for Milken's share of profits from illegal trading. This payment was represented as a consulting fee to Drexel. Shortly afterward, Milken resigned from Drexel and formed his own firm, International Capital Access Group.[6][9]

This was one of the first times RICO was used against an individual with no ties to organized crime. Milken originally planned to fight the charges against him, hiring one of Ronald Reagan's former campaign aides, Linda Goodson Robinson (the wife of American Express president James Robinson) to launch a public relations campaign prior to the trial. Milken and other Drexel figures hired Edward Bennett Williams as their attorney. Williams was well known for representing Watergate figures as well as major Mafia figures including Frank Costello. After Williams died of cancer, Milken's handlers hired various other attorneys and his case became more difficult.

On April 24, 1990, Milken pleaded guilty to six counts of securities and tax violations.[5] Three of them involved dealings with Ivan Boesky to conceal the real owner of a stock.[10]
Aiding and abetting another person's failure to file an accurate 13d statement with the SEC since the schedule was not amended to reflect an understanding that any loss would be made up.
Sending confirmation slips through the mail that failed to disclose that a commission was included in the price.
Aiding and abetting another in filing inaccurate broker-dealer reports with the SEC.

Two other counts were related to tax evasion in transactions Milken carried out for a client of the firm, David Solomon, a fund manager.[10]
Selling stock without disclosure of an understanding that the purchaser would not lose money.
Agreeing to sell securities to a customer and to buy those securities back at a real loss to the customer, but with an understanding that he would try to find a future profitable transaction to make up for any losses.

The last count was for conspiracy to commit these five violations.

The estimated injury for all counts combined was by the judge's account $318,000 and by the US Probation Office's account $685,000.[11]

As part of his plea, Milken agreed to pay $200 million in fines. At the same time, he agreed to a settlement with the SEC in which he paid $400 million to investors who had been hurt by his actions. He also accepted a lifetime ban from any involvement in the securities industry. In a related civil lawsuit against Drexel he agreed to pay $500 million to Drexel's investors.[12][13] In total this means that he paid $1.1 billion for all lawsuits related to his actions while working at Drexel.

Critics of the government charge that the government indicted Milken's brother Lowell in order to put pressure on Milken to settle, a tactic condemned as unethical by some legal scholars. "I am troubled by - and other scholars are troubled by - the notion of putting relatives on the bargaining table," said Vivian Berger, a professor at Columbia University Law School, in a 1990 interview with the New York Times.[14] As part of the deal, the case against Lowell was dropped. Federal investigators also questioned some of Milken's relatives—including his aging grandfather—about their investments.[6]

At Milken's sentencing, Judge Kimba Wood told him:

You were willing to commit only crimes that were unlikely to be detected.... When a man of your power in the financial world... repeatedly conspires to violate, and violates, securities and tax business in order to achieve more power and wealth for himself... a significant prison term is required.[15]

Milken's sentence was later reduced to two years from ten; he served 22 months.[1]

[edit] Prostate cancer

In January 1993, Milken received the results of a PSA test from a routine medical exam. Because prostate cancer is relatively rare for men in their 40s Milken's doctor didn't recommend the PSA test, he asked for it. The results came back with a level of 24 which is extremely high. Milken repeated the PSA test twice and a subsequent biopsy revealed advanced prostate cancer which had spread to his lymph nodes. At that time, doctors considered prostate cancer that advanced to indicate that a man had less than 2 years to live. Milken opted for prostatectomy but a subsequent test showed that the cancer had already spread to his lymph nodes. Milken started hormone therapy to shut down production of testosterone. Hormone therapy cut his PSA over the course of several months to zero. He also opted to have radiation therapy. Subsequent scans showed the swelling in his lymph nodes had disappeared. Milken's cancer was in remission and still was in 2004 when he was profiled in Fortune.[2][16]

[edit] Philanthropic activities

This section needs additional citations for verification.
Please help improve this article by adding reliable references. Unsourced material may be challenged and removed. (January 2011)

In 1982, Milken and his brother Lowell founded the Milken Family Foundation to support medical research and education. Through the Milken Educator Awards (founded in 1985), the MFF has awarded a total of more than $60 million to more than 2,500 teachers. Among the other initiatives of the Milken Family Foundation are the:
Milken Institute, a non-profit, non-partisan economic think tank whose scholars publish research papers and conduct conferences on global and regional economies, human capital, demographics and capital markets. Each spring, the Institute hosts a Global Conference in Los Angeles;
Milken Scholars, a program provides outstanding high school graduates with a commitment of four years of college financial assistance, counseling, volunteer opportunities and preparation for graduate studies;
TAP: The System for Teacher and Student Advancement, a comprehensive research-based strategy to attract, develop, motivate and retain high quality teachers for America's schools;
Mike's Math Club, a curriculum enrichment program that shows students in inner-city elementary schools that math is not only useful, but entertaining;
Festival for Youth, a school-based community service program that engages students in yearlong service projects to help build vibrant communities; and the
Milken Family Foundation Epilepsy Research Awards Program, which funds research to understand and conquer epilepsy;
The Prostate Cancer Foundation works closely with Major League Baseball through its Home Run Challenge program to promote awareness of prostate cancer and raise money for medical research. Each season in the weeks leading up to Father's Day, Milken visits many ballparks and appears on TV and radio broadcasts during the games.

Upon his release from prison in 1993, Milken founded the Prostate Cancer Foundation for prostate cancer research. Milken himself was diagnosed with advanced prostate cancer in the same month he was released from the prison. His cancer is currently in remission.

In 2003, Milken launched the Washington, D.C.-based think tank called FasterCures, which seeks greater efficiency in researching all serious diseases. A key initiative of FasterCures is Biobank Central, which is advancing life sciences research in areas as diverse as autism, psoriasis and breast cancer.

The Melanoma Research Alliance (MRA) was launched in 2007 to support innovative translational studies that advance the diagnosis, staging and treatment of melanoma, the deadliest skin cancer.

Fortune magazine called him "The Man Who Changed Medicine" in a 2004 cover story on his philanthropy.[2]

[edit] Notes and references

1.^ a b Case Studies in Business Ethics Al Gini, Alexei M. Marcoux
2.^ a b c d Daniels, Cora (2004-11-29). "The Man Who Changed Medicine". Fortune (Time Inc.). Retrieved 2009-07-28.
3.^,9171,976246,00.html Time Magazine article on his early release from prison, dated August 17, 1992
4.^ Eichenwald, Kurt (April 3, 1989). "Wages Even Wall St. Can't Stomach". New York Times. "Surely no one in American history has earned anywhere near as much in a year as Mr. Milken."
5.^ a b "The World's Billionaires: #488 Michael Milken". 2010-10-03. Retrieved 2010-12-13.
6.^ a b c d e f g h Kornbluth, Jesse (1992). Highly Confident: The Crime and Punishment of Michael Milken. New York City: William Morrow and Company. ISBN 0688109373.
7.^ [1]
8.^ UC Berkeley Inter-Fraternity Council: Sigma Alpha Mu
9.^ a b c d e f g h Stone, Dan G. (1990). April Fools: An Insider's Account of the Rise and Collapse of Drexel Burnham. New York City: Donald I. Fine. ISBN 1556112289.
10.^ a b c Three Felonies A Day: How the Feds Target the Innocent, Encounter Books, 2009. Chapter Four: Following (or Harassing?) the Money
11.^ Moscow-Pullman Daily News, Feb 20, 1991. "Losses from Milken less than estimated"
12.^ New York Times, 1991-09-12, "Drexel Sues Milken, Seeking Repayment"
13.^ New York Times, 1992-02-18. "Milken to Pay $500 Million More In $1.3 Billion Drexel Settlement"
14.^ New York Times, May 6, 1990. "Tactics in Wall Street Cases Troubling Some Lawyers"
15.^ Stewart, James B (1992). Den of Thieves (reprint ed.). Simon and Schuster. p. 517. ISBN 067179227X.
16.^ Time, Jun. 24, 2001. "The Man's Cancer"

[edit] Further reading
Connie Bruck - The Predators' Ball : the inside story of Drexel Burnham and the rise of the junk bond raiders, New York: American Lawyer/Simon and Schuster, 1988, Penguin paperback (updated), 1989.
Fenton Bailey - "Fall From Grace: The Untold Story of Michael Milken", Carol Publishing Corporation (October 1992), ISBN 1559721359.
James B. Stewart - Den of Thieves, New York: Simon & Schuster, 1991, (ISBN 0-671-63802-5).
Ben Stein - A License to Steal: the Untold Story of Michael Milken and the Conspiracy to Bilk the Nation, Simon and Schuster, 1992
Daniel R. Fischel - Payback: the conspiracy to destroy Michael Milken and his financial revolution, New York, New York: HarperBusiness, 1995, (ISBN 0-88730-757-4).
Robert Sobel - Dangerous Dreamers: The Financial Innovators from Charles Merrill to Michael Milken' (1993), (ISBN 0-471-57734-0).
Michael Lewis. (1989). Liar's Poker: Rising through the Wreckage on Wall Street. New York: W.W. Norton. ISBN 0-393-02750-3.

No comments:

Post a Comment