Friday, June 18, 2010

Swaps plan seen staying in Wall Street reform bill

Fed Chairman Ben Bernanke testifies to the House Budget Committee on Capitol Hill, June 9, 2010. REUTERS/Joshua Roberts

WASHINGTON (Reuters) - A sweeping overhaul of financial regulations will include a controversial plan to insulate banks from risky swap dealing, aides said on Thursday as lawmakers hammered out a final bill.

Politics

With final negotiations on the reform bill bogged down amid partisan bickering, Democrats who control the process neared consensus on an element that has drawn furious opposition from the Wall Street banks that could lose billions in profits.

The deal would require banks to isolate their swaps desks in separate affiliates, which would require the banks to raise new capital and deprive them of profits they get from dealing. But it would allow their parent holding companies to retain the value of the operations.

But negotiators remained at odds over another sticking point: whether banks should pay for their funerals before they happen or afterward.

The broadest overhaul of Wall Street rules since the 1930s would establish new consumer protections, crimp big banks' profits and saddle the industry with tighter regulations in a bid to avoid a repeat of the 2007-2009 financial crisis.

With congressional elections looming in November, Democrats aim to harness widespread anger at Wall Street and iron out by June 24 the remaining differences between bills already passed by the House of Representatives and the Senate.

That would give President Barack Obama an example for other world leaders to follow at a summit of leaders of the Group of 20 industrialized and developing economies in Toronto, which starts on June 26. Europe is aiming to tackle similar reforms, but the United States is far ahead.

On Thursday, the U.S. Federal Reserve won another battle to maintain its independence as lawmakers on the House-Senate panel dropped a plan to have the head of its New York division appointed by the U.S. president, rather than its board of directors.

However, they decided to prevent bankers on regional Fed bank boards from participating in the selection of their Fed bank chief.

The U.S. central bank, whose authority some lawmakers had wanted to rein in amid wide criticism for lax oversight before the crisis, will actually see its powers increase under the sweeping overhaul of financial regulation.

Lawmakers also agreed to set higher capital requirements on banks and financial firms, though they remained at odds on some elements of the proposal.

WHITE HOUSE STEPS IN

Separately, the White House intervened to weaken a provision that aims to give shareholders more say on how companies are governed, though the panel had yet to formally act.

Lawmakers hoped to resolve a central element of the bill that would give regulators clear authority to seize unstable financial firms before they threaten the economy in an effort to avoid a repeat of the recent crisis.

House lawmakers insisted on setting up a $150 billion fund to cover costs for liquidating troubled financial firms, paid for by firms with more than $50 billion in assets.

Senate negotiators rejected that proposal, insisting that costs should be covered by selling off the troubled firm's assets. Other firms would have to chip in if the asset sales did not cover the bill.

The banking industry does not want to pay any fees up front.

Democrats in both chambers agree that banks, not taxpayers, should foot the bill next time. They brushed aside Republican charges that the new process would encourage reckless behavior.

"Knowing that the funeral service, casket and plot are paid for does not make death any more compelling, at least not for a normal person," said Democratic Representative Luis Gutierrez.

During the last crisis, regulators persuaded Congress to authorize $700 billion in funding during the crisis to bail out Wall Street firms, spurring widespread voter anger.

Regulators did not take a consistent approach to troubled firms during the crisis. They provided $182 billion to bail out insurer American International Group while they let Lehman Brothers declare bankruptcy and steered investment banks Bear Stearns and Merrill Lynch into mergers with other firms.

House Democrats also plan to push for a requirement that large banks cannot be leveraged by more than a 15-to-1 ratio, and want to kill a proposal that would require secured creditors to accept some losses when a bank fails.

In negotiations so far, lawmakers have stopped short of their most aggressive proposals.

They dropped a proposal to examine the Fed's interest-rate decisions. They also postponed a plan that would have upended the credit-rating business by installing a clearinghouse between debt issuers and the agencies that rate their offerings.

The committee next week is scheduled to tackle consumer-protection plans and whether to limit fees on debit-card transactions, as well as the proposal on limiting risky trading.

Once a final bill is agreed, it must be approved by the full House and Senate before Obama can sign it into law.

(Additional reporting by Rachelle Younglai, Charles Abbott and Kim Dixon; editing by Leslie Adler and Mohammad Zargham)

Illinois Debt-Default Insurance Climbs to Record High (Update1)

June 17 (Bloomberg) -- The cost of insuring Illinois bonds against default rose to a record high as state lawmakers confront a $13 billion budget gap for the year starting July 1.

The price of a five-year credit-default swap to insure Illinois obligations rose 7 basis points to 309.1 basis points today, or $309,100 to protect $10 million of debt, from 302.2 basis points yesterday in New York, according to CMA DataVision, a data provider owned by CME Group Inc. The gain makes insuring bonds from the fifth-most populous state more expensive than covering debt from any other municipal issuer.

“If the spread is the widest, it says the problem is bigger than it’s ever been before,” said Peter Hayes, who oversees $106 billion of municipal bonds for New York-based BlackRock Inc. “It’s a reaction to the inability to pass a budget. We’ve seen a greater unwillingness from Illinois and the market is reacting to that.”

Legislators in Illinois passed a provisional $25.9 billion fiscal 2011 spending plan that’s about $13 billion short, and are resisting Governor Pat Quinn’s proposed $3.7 billion debt sale to make a pension payment and help close the gap. Lawmakers recessed last month without providing a way to cover the pension obligation and pay $4.5 billion in other bills.

Credit-swap costs for Illinois debt surpassed California’s, the largest U.S. municipal borrower, which saw its default- insurance contracts rise to 299.6 basis points from 298.7 basis points yesterday. A basis point is 0.01 percentage point.

Lowest Moody’s Ratings

Standard & Poor’s rates Illinois A+, two levels higher than California. Moody’s Investors Service values both at A1, the fifth-highest. The two states are the lowest-rated by Moody’s.

Illinois sold $300 million in taxable Build America Bonds to Citigroup Inc. today through a competitive offering. Debt maturing in 2035 priced to yield 7.1 percent, 297 basis points over the comparable-maturity Treasury. That is higher than the state’s $700 million negotiated Build America issue in April, when the 25-year debt priced 205 basis points above the benchmark government debt.

In a $300 million competitive offering in April, the debt yielded 210 basis points above Treasuries.

Moody’s and Fitch Ratings downgraded Illinois this month, citing the lack of political will to deal with budget issues.

“You can’t short regular cash municipal bonds, so the CDS market is the way” to bet against the securities, said BlackRock’s Hayes.

Alex Samuelson, a spokesman for New York-based Citigroup, declined to comment. Kelly Kraft, a spokeswoman for Quinn, wasn’t immediately reachable for comment about the Build America sale.

Strikes in China signal end to era of low-cost labour and cheap exports

China's rulers make statements supporting workers rights as series of high-profile strikes suggest economic turning point

Shoe sole in a factory in Jinjiang, China
Shoe sole in a factory in Jinjiang, China. Demographic and social changes have slowed the influx of low-cost labour from the countryside. Photograph: San Lang/EPA

The Chinese Communist party called on employers to raise salaries and improve training for workers today, as Toyota became the latest foreign firm to be hit by a wave of high-profile strikes.

The People's Daily, the mouthpiece of the ruling party, warned that the country's manufacturing model faced a turning point as demographic and social changes slowed the influx of low-cost labour from the countryside.

Coming a day after the premier, Wen Jiabao, made similar comments, the editorial suggests the authorities may be encouraging businesses to restructure the economy by putting less emphasis on cheap exports and more on higher-value goods and domestic consumption.

For most of the past 30 years, China's economic growth has been fuelled by low-cost migrant labour. This has helped raise national competitiveness, attract foreign investors and keep consumer prices lower across the world. But members of a new generation of migrants are less willing to endure hardship and many have successfully gone on strike to demand better conditions.

Without mentioning strikes, the People's Daily said China should adjust to a tighter labour market by improving skills, creating more service-sector jobs and giving workers more cash to spend. This echoed a speech a day earlier by Wen, who said a new generation of migrant workers should be given improved conditions .

"Your work is glorious and should be respected by society at large. Migrant workers should be cared for, protected and respected," he told workers at the construction site for the No 6 subway in the capital. "The government and the public should be treating young migrant workers like their own children."

According to labour activists, there have been numerous strikes in recent years, though few get reported in the media. Chang Kai, professor of labour relations and law at Renmin University, said the number had increased by 30% per year.

Their impact has grown as the "one-child" family planning policy starts to thin the bulge in the working-age population. This demographic change in the balance of labour supply and demand has added to improved worker organisation and greater activism at high-profile foreign firms.

Japanese firms have disproportionately been the focus of the reported strikes. The Toyoda Gosei car parts plant, in Tianjin, was shut down by a strike this week until the management promised to negotiate higher wages.

Three Honda plants in Guangdong have been affected, along with a Hyundai factory in Beijing and a Taiwanese rubber products manufacturer in Shanghai. According to Xinhua news agency, the fast food franchise KFC has conceded to a union demand for minimum monthly pay of 900 yuan (£90), up by 200 yuan.

In most cases, however, workers have organised outside the unions, which are seen as close to management and the party. This has sparked commentaries in local media urging unions to mediate more effectively between workers and employers.

Having seen how the Solidarity movement in Poland helped to overthrow a communist government that stopped representing its interests, China's leaders do not want to alienate the labour force. So far, there is no sign of any mass, nationwide protests. This week's statements of support for workers' rights suggest the politburo wants to keep on the right side of the activists.

More Than 90 Banks Miss TARP Payments

More than 90 U.S. banks and thrifts missed making a May 17 payment to the U.S. government under its main bank bailout program, signaling a rising number of lenders are struggling to meet their obligations.

The SNL Financial statistics show 91 banks missed their dividend payment under the Troubled Asset Relief Program.

The statistics, compiled by SNL Financial from U.S. Treasury data, showed 91 banks and thrifts skipped the May dividend payment under the Troubled Asset Relief Program, or TARP. It was the first missed payment for 23 of the banks; for the others, it was at least their second miss.

The number of banks missing their TARP payments rose for the third straight quarter. In February, 74 banks deferred their payments; 55 deferred last November.

SNL Financial's analysis found 20 banks have missed four or more payments since the program began in 2008, while eight banks have missed five payments.

Under the TARP program, the U.S. Treasury invested in preferred shares issued banks looking for funds. The banks were to make regular dividend payments to the Treasury, and have the right to repurchase the shares at some point in the future.

While many of the largest U.S. banks easily repaid billions in TARP aid, more than 600 smaller banks still hold $130 billion from the program, created at the height of the financial crisis.

In some cases, small banks are renegotiating the repayment terms. Midwest Banc Holdings [MBHI 0.019 --- UNCH (0) ], for example, agreed to swap $84.8 million in preferred shares issued under the TARP program in 2008 for $15.5 million in common shares. That would have meant an 80 percent loss for the government—and the U.S. taxpayer—on the initial investment. But the swap was contingent on the bank raising more private capital, which it failed to do. Regulators seized the bank in May.

The next quarterly TARP payments to the U.S. Treasury are due by August 16.

Copyright 2010 Reuters. Click for restrictions.

BP's Largest Shareholder says Oil Spill Good for the Economy

JP Morgan says that the Gulf oil spill will help the economy.

This is an odd thing to say, given that the spill is our modern dust bowl, which could very well deepen and prolong our economic woes.

What might explain such an odd statement?

Well, JPM is apparently BP's largest shareholder. So happy talk meant to drive BP's share prices higher can only help JPM.

Then again, maybe JPM's prop desk is making a fortune shorting BP, just like Goldman famously shorted the CDOs it was selling like hotcakes.

The Game that Goes On and On: A Swiss Bank, a President, and the Permanent Governement

Last August, the presidential press corps followed Barack Obama and his family to Martha's Vineyard for their brief vacation. The coverage focused on summery fare—a visit to an ice cream parlor, the books the president had brought along. Nearly everyone mentioned his few rounds of golf, including his swing, and the enthusiasm of onlookers. What caught my eye, though, was the makeup of his foursome. The president was joined by an old friend from Chicago; a young aide; and Robert Wolf, Chairman and CEO, UBS Group Americas. In a decidedly incurious piece, aNew York Times reporter made light of Wolf's presence:

"The president has told friends that to truly relax he prefers golfing with young aides...But he departed from that pattern Monday when he invited a top campaign contributor, Robert Wolf, president of UBS Investment Bank, to join him for 18 holes. Call it donor maintenance."

Wolf, however, is hardly—as the Times suggested— just another donor. For one thing, he is a leading figure in an industry that almost brought down the entire financial system—and then was the recipient of astonishing government largesse. UBS, along with other banks, benefited directly from the backdoor bailout of the insurance giant AIG.

But UBS stands alone in one rather formidable respect—it was the defendant in the largest offshore tax evasion case in U.S. history, accused of helping wealthy Americans hide their income in secret offshore accounts. To settle a massive investigation, UBS forked over $780 million to the US treasury. This settlement came shortly before Wolf rounded out Obama’s golfing party. Given this rather problematical situation, why then would the President choose UBS’s Wolf of all people for this honor?

Wolf declined a request for an interview about his relationship with the President, so it was not possible to pose that question to him. This hardly matters, though, for the story goes far beyond Wolf and UBS. It involves Republicans as well as Democrats, the Bush Administration as well as Obama’s. More importantly, behind the trivialized golf outing on Martha’s Vineyard, lie the interests that increasingly set the course for every administration. And that now game the system so well that the rest of us—wherever we live in the world—are kept fighting for the scraps.

Both Sides Now

When most people criticize those aspects of government that seem most impervious to the democratic process, they cite the permanency and perceived self-interest of the mandarins of the Washington bureaucracy. But when it comes to real power, an ability to come out ahead no matter which party is in power, it’s hard to top certain financial institutions.

UBS is very much a part of that permanent government. Though not a household name in the United States, UBS is a major player in the Beltway game. During the 2008 campaign, while Robert Wolf was courting Democratic hopeful Obama, his UBS cohort, former Senator Phil Gramm, was working the other side of the street. As chairman of the Senate Banking Committee in the 1990s, Gramm, a corporate-friendly Texas Republican, played a key role in the deregulation of the banking industry, an act so central to the nation’s financial collapse. Since 2002, Gramm has been UBS Americas’ vice chairman. In 2008, he was the leading economics adviser for Obama’s opponent, John McCain—and even touted as a possible treasury secretary in a McCain administration.

The bottom line: UBS hedged its bets, and so had an inside track no matter which party took the White House. Thus, when Obama won, it was Wolf who ascended. The new president named the banker-donor to his White House Economic Advisory Board.

The important machinations behind this accrual of influence rarely get attention in the frenzied hustle of the news cycle. One reason is that they do not seem like news at all, since they are essentially woven deeply into the fabric of politics and government, thus hidden in plain sight. Another is that they are dauntingly complex.

Some things are simple, though. Like the fact that a UBS executive is a dubious candidate to serve as an economic advisor to the president. For one thing, the company’s track record at the time of the election was distinctly underwhelming. UBS suffered major losses on subprime lending, and had to raise money from the Singapore government and other entities. As Slate’s money columnist Daniel Gross quipped back in 2008, “UBS used to stand for Union Bank of Switzerland. But perhaps it should stand for Untold Billions Squandered. Or Underwater Bi-Lingual Schleppers.” Furthermore, UBS’ stock lost nearly 70 percent of its value even before the recession really kicked in—making it the worst performing foreign bank operating here.

Given this damning set of facts, Wolf made both an odd choice as a presidential adviser and a peculiar pick for that intimate round of golf.

"Hide Funds Here"

Despite being the world’s biggest manager of private assets, UBS has stayed pretty much below the domestic radar. The Alpine quiet surrounding its activities was, however, quietly shattered in mid-2007, when an IRS audit of a US citizen led to a UBS banker who then revealed certain UBS practices that encouraged wealthy Americans to hide taxable income. UBS bankers had apparently used every trick in the book—including giving customers code names and assisting them with or providing them with untraceable pay phones, encrypted computers, fake trusts, document-shredding and even counter-surveillance training.

The feds did not move quickly on the revelations—but when they did, in good measure thanks to a kick from July 2008 Senate Permanent Subcommittee on Investigations hearings chaired by Senator Carl Levin and the report released in conjunction with the hearings, the UBS affair grew into the largest offshore tax evasion case in US history.

It is worth pointing out that one of three Senate co-sponsors of the Stop Tax Haven Abuse Act of 2007, introduced even before the UBS situation was known, was none other than a then-senator named…Barack Obama. The House sponsor was Rahm Emanuel—who would go on to be President Obama’s Chief of Staff. Another, weaker bill was proffered by Sen. Max Baucus of the Finance Committee—parts of which did just quietly become law as part of an employment stimulus bill signed by Obama in March, 2010, with the goal of capturing lost tax income as a way of financing job creation.

In any case, it has become increasingly clear that tax evasion is but a piece of a troubling larger picture. The states of New York, Texas and Massachusetts sued the bank in 2008, accusing it of misleading investors about risks in its auction-rate securities market. UBS executives dumped their own holdings when the supposedly safe investments took a nosedive, yet continued to recommend them to customers. In Puerto Rico, a Bloomberg News reporter found, UBS had created its own closed-loop system for generating profits —it advised the Commonwealth to issue bonds, marketed the bonds to investors through UBS mutual funds, and then loaned the mutual funds money so they could buy the bonds. As James Cox, a Duke law professor and expert on finance and law said at the time, “I’ve never seen such a blatant series of conflicts of interest.”

In a filing last June, New Hampshire's securities regulator charged UBS with "dishonest and unethical" practices in selling notes from the now-defunct Lehman Brothers, causing New Hampshire investors $2.5 million in losses. Wrote one securities lawyer on Forbes’ website: “UBS is going to have to account for why it continued to aggressively market Lehman notes to retail customers as highly conservative investments at the very same time its institutional side was facilitating transactions designed to mask Lehman's financial troubles.”

Further south, Brazilian police arrested officials of both UBS and the insurance giant AIG as part of a half-billion-dollar tax avoidance scheme, alleging that the companies used suspected black market money-changers to spirit the funds out of Brazil to Switzerland. At the time, the daily newspaper O Estado de Sao Paulo published a picture of a man in handcuffs, identified as a UBS executive, and reported that he told one of the arresting officers: "I'm not going to stay in custody. Anyone who has money in [Brazil] does not stay in custody." Things are not necessarily so different up north. The only company official sent to jail in the United States thus far in connection with the massive tax evasion case was, remarkably, the former employee who blew the whistle on the scheme in the first place.

An Attractive Fellow

The Obama-UBS relationship began on a December day in 2006. According to his calendar, the presidential hopeful was visiting New York City to speak at a fundraising dinner for children in poverty. Beforehand, though, he attended a much more exclusive gathering—in the midtown Manhattan conference room of billionaire George Soros—for a dozen wealthy figures eager to have a closer look at the prospect.

One attendee was UBS executive Robert Wolf. Then just 45, he had already been a major fundraiser for John Kerry’s 2004 presidential bid and for congressional Democrats in 2006. For 2008, he had initially backed a moderate, Mark Warner, the former governor of Virginia. But when Warner decided not to run, Wolf turned to Obama, liked what he saw, and signed on.

His motivation, Wolf told New York Magazine in 2007, was simple: “I’d like my children to soon see a president give a State of the Union address and have both parties applaud.” He praised Obama’s early opposition to the invasion of Iraq. And he told Business Week: “I found him to be unbelievably refreshing and smart and thoughtful.” Wolf soon became a top fundraiser. By the time of the New York article, he had already hosted two big cocktail parties, made a lot of calls, and brought in more than $500,000. It was through people like Wolf that Obama was able to match and then pass Hillary Clinton in fundraising for the primaries.

Another person who attended that exclusive session with Obama was a financier by the name of Hassan Nemazee. Nemazee’s story circles back to UBS, through his involvement with Harken Energy, an obscure but supremely well-connected company that UBS took an unusual interest in keeping afloat. In the process, it illustrates how byzantine and pervasive the new trans-partisan money world has become. The complexity helps explain why reporters so often shrug and move on. They should pause more often; within that complexity resides an important truth about American democracy.

The Clintons' Hot Money Man

Over the years, Hassan Nemazee had become, like Wolf, a major Democratic fundraiser and insider. More importantly, he was deep into the Clinton inner circle. So much so, that he and a partner used an investment firm they had recently acquired, Carret Asset Management, to provide a lucrative perch to Terry McAuliffe, the Clintons’ confidante and money man. (This was in the period between McAuliffe’s chairmanship of the Democratic National Committee and his chairmanship of Hillary Clinton’s presidential campaign.)

This indebted the Clintons further to Nemazee, who had been an avid supporter of Bill Clinton’s presidency and major donor to his defense fund during the Monica Lewinsky/impeachment saga. Nemazee for his part was rewarded with appointment as ambassador to Argentina—an offer that was withdrawn, however, when Forbes reported that he had improperly represented himself as a “Latino” in order to secure targeted bond business from the state of California.

As with UBS’s Wolf, Nemazee’s substantial fundraising soon begot true insider status. The campaign even asked Nemazee to publicly defend Ms. Clinton when another top donor, Norman Hsu, was arrested as an alleged swindler and campaign finance fraudster (Hsu was later convicted.)

Nemazee was frequently characterized as a “top foreign policy adviser” to Ms. Clinton. Probably his closest thing to real foreign policy credentials was the fact that his father was one of the richest men in Iran under the dictatorship of the Shah Reza Pahlavi, and a close ally of the deposed leader. At the time of the meeting to size up Obama in Soros’s office, Nemazee was simply window-shopping, as he remained committed to Hillary. But when Hillary dropped out of the race, Nemazee became a major Obama fundraiser. And once Hillary became Obama’s secretary of state, according to insiders, she pushed the administration to take a tougher line with Iran’s revolutionary Islamic government than Obama preferred. In so doing she renewed the appreciation of the retinue around the exiled Pahlavi faction, which still hopes to return to power one day, directly or indirectly.

Notwithstanding Nemazee’s largesse, both Clinton and Obama must have had second thoughts this past September, when the financier was arrested on charges of bank fraud. Since then, Nemazee has pled guilty to defrauding several banks over the course of a decade, through the use of false collateral documentation, to the tune of $292 million. In a brief flurry of coverage, Nemazee’s downfall was smirkily dismissed as just another day in the hothouse of Democratic corruption. The media has shown little further interest in Nemazee, and in what his arc signified.

This is unfortunate as it was not just a story about Democrats—or Republicans either, although they were involved. Rather it was the edge of an amoral iceberg that is essentially trans-partisan and that constantly exerts influence on presidents and would-be presidents of all stripes.

The outline of that larger reality becomes apparent when one traces Nemazee’s path back more than two decades. In that earlier epoch, we find Nemazee mixed up again with Soros and UBS and a would-be president. At that point the rising star was not Barack Obama, but George W. Bush.

Growing a Bush

For many years, Hassan Nemazee has been a business partner of, and shared offices with, a man named Alan Quasha. And both of them have been involved with a company called Harken Energy, a mysterious outfit with links to some of the world’s most powerful and odiferous regimes.

Harken, Nemazee, Quasha (and UBS) first came to my attention while I was researching my 2009 book, Family of Secrets, which is an investigative history of the rise of the Bush family and the special interests behind them. I was examining George W. Bush’s run of good fortune in the 1980s when his failed oil ventures repeatedly became golden as larger ventures scooped them up and increased his remuneration. Texas-based Harken Energy, the biggest of these, paid Bush more than he had ever earned, gave him a nice board position, and basically freed him up to move to Washington and work on his father’s 1988 White House race.

Just as Nemazee and Quasha would later take care of Hillary Clinton’s guy—McAuliffe—so he could concentrate on preparing for her campaign, years earlier they had supported George W. Bush while he helped develop strategy for his father’s campaign. In the process Harken took Bush, a man without much to show for himself as a businessman, and gave him the credibility and financial means with which to embark upon a political career—which he did soon thereafter.

Why had Harken adopted Bush? The few media organizations—Time and The Wall Street Journal among them— that looked into Harken concluded that something was fishy about the venture itself. The company’s structure and transactions were unnecessarily convoluted. It violated most of the rules of sound business practice yet somehow continued to exist despite the fact that it rarely made money for its public shareholders.

It was nigh impossible to figure out where the funding for Harken originated, beyond shell companies in offshore tax havens such as the Netherlands Antilles. But what it actually did was nothing short of astonishing. In 1986, the year George W. Bush entered the picture, Harken had total revenue of four million dollars. Three years later, thanks to a flurry of acquisitions and infinitely complicated transactions, revenue would exceed a billion dollars.

Notwithstanding its general precariousness and obscurity, Harken somehow managed to assemble backing from global superstars, ranging from the billionaire investor Soros (at one point the largest Harken shareholder), and Harvard University’s endowment, to interests tied to the Saudi elite, to then-Philippine dictator Ferdinand Marcos, and to the deposed Shah of Iran. In other words, this obscure company somehow was catnip to brutal and corrupt foreign leaders who had grown fabulously wealthy at the expense of their people—and who collaborated closely with the highest levels of the US military-intelligence-corporate establishment. (Soros’s role seems especially strange; he went on to become the leading single funder of efforts to deny President George W. Bush a second term.) UBS was among the banks that profited from this dubious funding.

UBS had taken a position in Harken at a moment when the company was on the shoals. Coincidentally or not, this also was when George W. Bush—son of vice president George H.W. Bush—was part of the corporate board. UBS’s role struck the Wall Street Journal as odd, in part because UBS was not known for investing in small American firms like Harken.

Facing regulatory difficulties over its investment in Harken, UBS ended up unloading its stock toAbdullah Taha Bakhsh, a Saudi tycoon with separate business ties to James Bath, a key Bush family operative who fronted for Saudi interests in Houston. Bakhsh was also a business partner with a Saudi royal family favorite labeled by the Federal Reserve as a “front man” for BCCI, or Bank of Credit and Commerce International. For those who have forgotten, BCCI was a criminal banking operation whose customers ranged from Western intelligence agencies to drug cartels and terrorist organizations.

Shortly before UBS helped bail out Harken, it had partnered with BCCI in a Geneva-based bank. BCCI was eventually shut down in raids commenced by the British government, after intense investigations by Senator John Kerry’s Foreign Relations terrorism subcommittee and the Manhattan DA. But evidence of its ties to the highest levels of the US government under Ronald Reagan and George H.W. Bush, extensively uncovered by investigators, was repeatedly rebuffed by superiors and by regulators. It is worth noting that the Treasury Department official responsible for scrutinizing BCCI’s affairs in the Reagan-Bush administration was assistant secretary for enforcement John M. Walker Jr.—who happened to be the cousin of George H.W. Bush. (Bushes have for generations been involved both in government and banking, with another close relative serving as a top official at Lehman Brothers before it precipitously failed. More on this topic, and on George H.W. Bush’s secret past in deep covert intelligence work, can be found in my book, Family of Secrets. )

Keep in mind that such is the business milieu of Nemazee and Quasha, who jumped with apparently little effort from the Bush to Clinton camps when the moment was opportune—and one of whom ended up a player in the Obama campaign.

Scenarios like this cause the mind to reel. Yet where Ferdinand Marcos, the Saudi royal family, and the Shah converge with the son of an American president, in a deal involving large amounts of money, it is not necessary to untangle all the spaghetti strands to sense that something is amiss. Why, to begin with, would a major international bank get involved with a shadowy operation such as Harken? Whatever the reasons, the bank clearly gained influence with a White House that had family connections to the company.

Clues may be found in 1986, which is when George W. Bush joined the Harken board. It also is the year that Harken’s chairman, Alan Quasha, hooked up with something called Rembrandt Group Holdings, a Swiss-based company headed by a South African billionaire, Anton Rupert. Rembrandt’s vast portfolio included tobacco, financial services, wines and spirits, gold and diamond mining and luxury goods. Soon after that, Rembrandt took over a small, closely-held Denver company, Frontier Oil. Frontier then announced an $ 85-million "revolving credit facility" with….. Union Bank of Switzerland. UBS again.

Few expect international bankers to be paragons of virtue, but the South African connection highlights a particularly unsavory side. This was revealed in a series of reports produced by a coalition of Swiss organizations pushing for reparations to post-apartheid South Africa and cancellation of that country’s debt to Switzerland. The group took particular interest in two South African-controlled companies that were established in Switzerland at the time of global economic sanctions against the apartheid regime – and one of these was Rembrandt.

According to one of the reports from Koordination Südliches Afrika, Swiss banks had played an important role “in financing the apartheid state and its corporations from the very beginning” and that “… the two Swiss banks UBS and CS Group have played a special role.”

UBS’s former chairman, Nikolaus Senn, actually had a medal bestowed on him for service to the white regime. When it became inevitable that apartheid would crumble, Senn nevertheless pronounced his doubts about giving blacks the franchise: “‘One man–one vote’ to me is not a world religion.”

The connections here are worth considering. In 1988, while George W. Bush advised his father’s presidential campaign and sat on Harken’s board, Harken chairman Alan Quasha joined the board of Richemont, a new Swiss-based company controlled by the same South African Rupert family that controlled Rembrandt. UBS’s Senn became Richemont’s chairman.

So George W. Bush was joining an obscure company whose constituent parts were tied to the white power structure in South Africa, and also to the evasion of sanctions against that regime via Switzerland. And UBS played a central role in the arrangement.

The South African regime was not the only one that got in on this money game. Ferdinand Marcos, the late dictator of the Philippines, whose kleptocratic rule was marked by savage human rights abuses and martial law, had a seat at the table too. The father of Alan Quasha, Harken’s chairman, was an American lawyer who lived most of his adult life in the Philippines, and represented clients tied to US intelligence. He remained an advocate of Marcos to the end.

Marcos also was moving billions pillaged from the Philippine and American people (via aid to that country) into Swiss accounts. In fact, Phil Kendrick, who sold Harken Energy to Alan Quasha, recalls having heard rumors back then that the money to buy him out came from Marcos himself. The Bushes and Marcos were famously friendly. As vice president, George HW Bush visited Marcos’s Philippines during its protracted martial law and declared that country, to considerable subsequent ridicule, a great and vibrant example. “We love you, sir, we love your adherence to democratic principles,” vice president Bush said on that 1981 trip. And Marcos’s widow Imelda would speak, elliptically, of how the elder Bush had given her husband advice on how to invest “his” fortune. Bush and Marcos even took lessons from the same golf instructor.

It’s all about access—and golf has long played a crucial role. Back in the 1950s, Senator Prescott Bush, father of HW and a powerful former banker himself, used to have unique access to President Eisenhower as his regular golf partner. By the time of Barack Obama’s little-studied invitation to Robert Wolf to round out his foursome, Wolf (and UBS), too, were already on the inside. Early in the Obama administration, Wolf had quietly been appointed to Obama’s Economic Advisory Board. The fact that UBS is now playing a role in the administration of a liberal democratic “reformer” illustrates just how trans-partisan money interests can be. Though the board has engendered little media notice besides an Associated Press piece that subtly tried to spark broader curiosity, its makeup alone deserves attention—for what it tells us about the group that had the ear of the President as he embarked upon his change agenda.

One of Wolf’s fellow board members is William H. Donaldson, an old friend of the Bush family who served on the board of the tobacco company Philip Morris for two decades. Donaldson headed the investment bank Donaldson, Lufkin & Jenrette, which looked after the financial affairs of George W. Bush over the years. Donaldson was one of the directors brought into Frontier Oil when it was taken over by the Quasha-Rembrandt-Bush-UBS group. President George W. Bush named Donaldson head of the Securities and Exchange Commission (SEC), where he served from 2001-2005. During that period, he presided over changes requested by investment banks that lessened regulation; among other things, the SEC chose to rely on the banks’ own computer models for risk assessments. "If anything goes wrong," said Harvey Goldschmid, another commissioner at the time, "it's going to be an awfully big mess."

And indeed it is.

The staff director for Obama’s Economic Advisory Board, who also serves as a member of the president’s powerful Council of Economic Advisers, is Austan Goolsbee, who along with Donaldson and Bush shared membership in the exclusive Yale secret society, Skull and Bones. Goolsbee has pretty much stayed out of the news, except for a brief scandal during the 2008 campaign when a Canadian government internal memo characterized Goolsbee as reassuring our Northern neighbors that Obama’s anti-NAFTA rhetoric was just that, “political positioning” that did not reflect the candidate’s real position on globalization.

***

People wonder why, year after year, promise after promise, so little seems to change in Washington. But it is usually left to academics and theoreticians to explain, somewhat abstractly and historically, how powerful institutions continue to influence the course of public affairs irrespective of who is in the White House and what party is in charge. Meanwhile, polls show that most Americans think that banks got a much better deal out of the Bush-Obama rescue-stimulus than the average Joe. And they’re right—but they don’t quite get the real story on how such deals come about.

Supporters of Barack Obama argue that reporting on his connections to the powerful “permanent government” can only impede his sincere efforts to reform health care, the financial industry and so on. But such revelations carry an important message: that American presidents, no matter how good their intentions, are inevitably enmeshed in a self-reinforcing web of interests and influences that permits the wealthy to shape our national destiny no matter who controls the government in Washington. Shining a light on the UBS-Obama link can serve as yet another warning beacon to anyone who underestimates the nature of the challenge facing American democracy. Figuring out how our world works—actually works —requires a skeptical eye and a willingness to follow the facts wherever they lead. After all, sometimes a good golf story is just a story about some guys playing golf. And sometimes it isn’t.

Research assistance: Isabel Gautschi


Global Research Articles by Russ Baker

Big freeze sets in as province shivers under snow blanket

HEAVY rainfall and snow across the Eastern Cape resulted in at least three serious accidents and forced the closure of several roads and passes yesterday.

Snow fell over most of the province, with heavy rain along the coast. Heavy falls were recorded in the Baviaanskloof, George mountains, Queenstown, Grahamstown, Cradock and Graaff-Reinet.

Arrive Alive said the Penhoek, Lootsberg, Wapadsberg and Barkly passes were all closed due to snow.The N9 between Graaff-Reinet and Middelburg and the R61 between Graaff-Reinet and Cradock were closed “to avoid accidents, but Penhoek and Barkly passes were reopened for traffic after the snow was cleared”.

Several people were injured on the R58 between Barkly East and Lady Grey when a minibus taxi overturned. A truck overturned on the N2 between Dutywa and Mthatha, while a car drove into the back of a truck in Graaff-Reinet.

Bitter cold and rain also lashed the Garden Route, leaving deep snow on the high peaks and forcing the closure of the Swartberg and Outeniqua passes.

In Graaff-Reinet, residents woke to a blanket of snow on the surrounding mountains as the mercury fell.

Farmers welcomed the snow, saying it would ensure moist ground until spring.

Lucy Dixon, who works on a cattle and horse farm, said she had never seen so much snow in the area. “Every mountain was covered, even the famous Spandau Kop.

“I heard some farmers say it has never snowed like this since 1977. We have had up to six inches of snowfall.”

Stock farmer James Kingwill said he had not seen so much for a long time. “It is good for farmers,” he added.

The Garden Route weather office warned of very cold conditions for Oudtshoorn, where the mercury is expected to hit -2°C.

George and Knysna municipal spokesmen refuted reports the weather had affected the travel arrangements of the Japanese, Danish and French World Cup soccer teams.

By afternoon, the road between George and Willowmore via Uniondale, as well as the Outeniqua Pass between Oudtshoorn and George, was re-opened. But the Swartberg Pass between Oudtshoorn and Prince Albert, and the Prince Alfred Pass between Knysna and Avontuur was closed.

SA Weather Service forecaster Garth Sampson said more icy conditions were expected.

More than 30mm of rain was recorded in some areas within 24 hours. In Port Elizabeth, 29mm was recorded in the morning. Uitenhage had 7mm, George 26mm, Grahamstown 22mm with snow, Graaff-Reinet 9mm with snow, Humansdorp 15mm and Kareedouw 34mm.

There was a 60% chance of coastal rain and showers today, spreading inland, but likely to clear from tomorrow.

Port Elizabeth temperatures forecast for tomorrow are 6°C to 17°C, Uitenhage 3°C-16°C, Plettenberg Bay 6°C-16°C, George 6°C-16°C and Graaff- Reinet -3°C to 14°C.

Nelson Mandela Bay spokesman Kupido Baron said heavy rain in the catchment areas had lifted dam levels, but there had not yet been enough to lift water restrictions. The municipality would issue a statement tomorrow after the rainwater had run into the supply dams.

US opposes ICC bid to make 'aggression' a crime under international law

The Obama administration has resisted efforts by the International Criminal Court to include 'aggression' as a crime, mainly because it could impact US military operations abroad.

Sudan's President Omar Hassan al-Bashir waves to supporters in Khartoum April 26, 2010. Bashir won Sudan's first open elections in 24 years in a result that confirms in office the only sitting head of state wanted by the International Criminal Court for war crimes.

Mohamed Nureldin/Reuters



Washington

The United States under the Obama administration has developed an increasingly close working relationship with the International Criminal Court in The Hague. But that growing engagement with a controversial institution of international law was unable to prevent the ICC from expanding the scope of its work to include the murky crime of “aggression,” a move the US had vehemently opposed.

At the 111-nation ICC’s first review conference that wrapped up last week in Kampala, Uganda, delegates decided to expand the international court’s purview to include the crime of aggression – a crime that only the US has successfully tried, in the post-World War II tribunals in Nuremburg and Tokyo.

State Department officials say the US, which is not a signatory to the ICC, was able to mitigate the drawbacks of such an expansion of the court’s reach, primarily by putting off any prosecution of the newest international crime until at least 2017.

But some critics say the US failure to stop the enshrining of “aggression” as an international crime demonstrates the limits of President Obama’s multilateralist vision – and sets the US on a collision course with the ICC when the issue comes up again later in the decade.

“The fact remains that the Obama administration’s vaunted ‘engagement’ strategy was only able to check the ICC’s move towards defining ‘aggression,’ not stop it entirely,” says Brett Schaefer, an expert in international institutions at the Heritage Foundation in Washington. “And it sets the US up for another battle in 2017 when the ICC’s advocates will make another push to activate the ICC’s jurisdiction over ‘aggression.’”

The US confirmed its new footing with the world’s first permanent court for trying war crimes and crimes against humanity, US officials say, although they acknowledge that the US did not get everything it wanted in Kampala. The Rome Statute establishing the ICC was finalized in 1998, but the court did not begin to function until 2002, when the minimum 60 countries ratified it.

US participation in the Kampala conference “reset US relations with the court from hostility to positive engagement,” says State Department legal adviser Harold Koh. He says the US focus at the review conference was on efforts to “strengthen justice on the ground” in countries so that eventually their judicial systems will be strong enough to take on the kinds of human-rights work the ICC addresses.

Mr. Koh says that focus was particularly well-received in Africa, “where there is a strong desire to have these cases tried at the national level.”

Some ICC critics have also noted that the court has only taken up two cases so far, both involving African countries – one involving the Democratic Republic of the Congo and Uganda, and the other regarding Sudan – and they dismiss the largely European-Union funded court as a colonial institution pressing Western interests.

But the US increasingly sees the value of the ICC, especially as it has tried cases that begged for international intervention.

“If it weren’t for the ICC [in cases like Sudan or Uganda] you would have had to set up a special tribunal,” says Stephen Rapp, the State Department’s coordinator for war crimes issues.

One of the main US concerns in seeing “aggression” added to the ICC’s jurisdiction was the impact it could potentially have on US military operations abroad. But Koh says the US successfully negotiated the “aggression” statute’s wording so that US forces won’t be susceptible to it.

“No US national can be prosecuted for ‘aggression’ while the US is not a signatory” to the ICC, he says.

'US conduct can elicit public revolt'

Iranian President Mahmoud Ahmadinejad says if US politicians allowed the American nation free access to government conduct, US citizens would rise against their outrageous policies.

President Ahmadinejad, who is touring Iran's western province of Chaharmahal and Bakhtiari with his cabinet and staff, criticized US policies on the global stage on Wednesday and warned officials in Washington about an imminent 'just' world order.

"If the US offered its citizens the right to freedom of information on world affairs, so that the American people could be fully informed of their leaders' support for Israeli atrocities as well as the crimes they have committed in Iraq and Afghanistan, the people would take effective measure against their statesmen," the Iranian president said.

He went on to emphasize that the US pursues an authoritarian foreign policy, noting that it only seeks to " squander" the entire world but is encounters Iran's opposition everywhere it goes.

President Ahmadinejad also censured official Washington for spearheading efforts to force the passage of the recent UN Security Council (UNSC) sanctions resolution against Iran.

"US politicians think they can isolate Iran with one resolution," the president scorned. He then challenged US official to travel to any part of the world along with an Iranian official so that they can factually see which country is indeed isolated, Iran or the US.

The remarks came as the United States moved firmly away from the Obama administration's pledges of diplomatic engagement with Iran while pushing through a new round of UNSC sanctions against Tehran.

As a result, the 15-member UN Security Council voted in favor of a fourth round of sanctions against Iran on June 9 under the pretext that Tehran sought nuclear weapons, despite repeated assurances from the International Atomic Energy Agency on non-diversion of Iran's nuclear materials.

Philly Fed Factory Activity Index Plummets in June

The survey, which covers factories in eastern Pennsylvania , southern New Jersey and Delaware , is seen as one of the first monthly indicators of the health of U.S. manufacturing leading up to the national report by the Institute for Supply Management, which is due next on July 1.

The Philadelphia Fed report follows a similar release on Monday that showed manufacturing growth in New York state increased slightly in June even as hiring slowed. This supported views the factory sector is recovering but the labor market remains in rough shape.

(Reporting by Burton Frierson; Editing by James Dalgleish)

Copyright 2010 Reuters News Service. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

NEW YORK (Reuters) - Factory activity growth plummeted in the Mid-Atlantic region in June, a survey showed on Thursday, adding to worries that the short and tepid U.S. economic recovery is now fizzling.

The Philadelphia Federal Reserve Bank said its business activity index dropped to 8.0 in June from May's 21.4.

Economists had expected a reading of 20.9, based on the results of a Reuters poll, which ranged from 10.0 to 24.0.

Any reading above zero indicates expansion in the region's manufacturing, so the factory sector there is still clinging to growth.

In jail for being in debt

You committed no crime, but an officer is knocking on your door. More Minnesotans are surprised to find themselves being locked up over debts.

As a sheriff's deputy dumped the contents of Joy Uhlmeyer's purse into a sealed bag, she begged to know why she had just been arrested while driving home to Richfield after an Easter visit with her elderly mother.

No one had an answer. Uhlmeyer spent a sleepless night in a frigid Anoka County holding cell, her hands tucked under her armpits for warmth. Then, handcuffed in a squad car, she was taken to downtown Minneapolis for booking. Finally, after 16 hours in limbo, jail officials fingerprinted Uhlmeyer and explained her offense -- missing a court hearing over an unpaid debt. "They have no right to do this to me," said the 57-year-old patient care advocate, her voice as soft as a whisper. "Not for a stupid credit card."

It's not a crime to owe money, and debtors' prisons were abolished in the United States in the 19th century. But people are routinely being thrown in jail for failing to pay debts. In Minnesota, which has some of the most creditor-friendly laws in the country, the use of arrest warrants against debtors has jumped 60 percent over the past four years, with 845 cases in 2009, a Star Tribune analysis of state court data has found.

Not every warrant results in an arrest, but in Minnesota many debtors spend up to 48 hours in cells with criminals. Consumer attorneys say such arrests are increasing in many states, including Arkansas, Arizona and Washington, driven by a bad economy, high consumer debt and a growing industry that buys bad debts and employs every means available to collect.

Whether a debtor is locked up depends largely on where the person lives, because enforcement is inconsistent from state to state, and even county to county.

In Illinois and southwest Indiana, some judges jail debtors for missing court-ordered debt payments. In extreme cases, people stay in jail until they raise a minimum payment. In January, a judge sentenced a Kenney, Ill., man "to indefinite incarceration" until he came up with $300 toward a lumber yard debt.

North Korea claims S. Korea, US fabricated ship sinking case

North Korean ambassador to the UN Sin Son Ho has firmly rejected charges that his country was responsible for the sinking of the South Korean warship Cheonan, in a press conference in New York on Tuesday (Wednesday, June 16 in Asia).

Ambassador Sin warned that Pyongyang would respond militarily to any Security Council condemnation over the sinking of the South Korea vessel, which Seoul blamed on North Korea.

Sin cast doubts on the credibility of international Joint Investigation Group, by South Korea branding its findings “a complete fabrication from A to Z”.

He declared that he wished to “further clarify” his country’s position on the sinking of the Cheonan.

He stressed that group’s findings were neither scientific nor objective, as claimed by both the South Korea and the United States.

Sin added that the material evidence they had presented raised many doubts even inside South Korea, and its ally US and around the world.

He said that the attribution of responsibility for the sinking to his country was a farce concocted by the US and the South Korea for political purposes.

“It is the [United States] that mostly benefited from the incident of the sinking of the Cheonan,” he charged.

He claimed that soon after the incident, the US had “hyped” the threat from the North Korea, finally making the Democratic Party of Japan yield in its aim to drive US forces out of Okinawa.

Ambassador also said the sinking had helped the US project a strong image before Congressional midterm elections later this year, and thus to justify its policy of “strategic patience”, designed to degrade the environment for international investment in the North Korea and thereby suffocate its economy.

Sin said his country had instead proposed to dispatch its own investigative group to the site of the incident as the only way to get to the truth.

“Only when all doubts are cleared and all truths are found evidently, can the case of the sinking of the Cheonan be resolved,” he stressed.

He added: “If the South Korean authorities have nothing to hide, there is no reason for them not to accept our inspection group for the verification of their investigation result.”

Sin also urged caution on the part of the Security Council.

The ambassador warned that if it formally debated the issue on the basis of Seoul’s unilateral “investigation result” but without verification by his country, it would mean that the Council was taking the side of one party to the exclusion of the other.

He claimed that his country was the victim and said such action by the Security Council would be contrary to the principles of sovereignty and equality, as enshrined in the UN Charter.

He warned that war could break out anytime on the Korean peninsula due to the “reckless military manouvres of South Korea for retaliation and punishment after the fabrication of the investigation result”.

Sin said: “The Security Council has been besmirched in February 2003 due to the former US Secretary of State Colin Powell’s lies about Iraq. If the Security Council is again deceived by another lie and tackles this case unfairly, thus failing to prevent any conflict on the Korean peninsula, the US and the Security Council shall bear the full responsibility for the subsequent consequences arising there from.”

The people and army of the North Korea would “smash our aggressors” mercilessly if provoked, despite the country’s oft-repeated desire to build a thriving and unified nation on the Korean peninsula, he added.

Sin reaffirmed his country’s insistence on sending it’s own team to carry out investigations, asserting that the Democratic People’s Republic of Korea (or North Korea) considered that a priority at present.

He said nuclear weapons were a “deterrent” and their use would be considered in respect of the present matter, when asked whether North Korea would also consider using nuclear weapons in reaction to any negative Security Council action.

South Korean envoy on Monday (Tuesday, June 15 in Asia) had urged the Security Council to take action against the North Korea after giving evidence on the incident.

"We identified the torpedo as a North Korean CHT02D on the basis of our recovered pieces of the torpedo," said Yoon Duk-Yong, a physics and material science expert at the Korea Advanced Institute of Science and Technology.

Security Council has called both sides "to refrain from any act that could escalate tension in the region" and to preserve peace and stability on the peninsula.

Gates Demands Congress OK War Funds by July 4

Speaking during a Senate Appropriation Defense Subcommittee hearing today, Secretary of Defense Robert Gates demanded that the $33 billion war funding bill be approved by Independence Day.

President Obama had promised that the emergency war funding bill passed last year would be his last one, and that future war expenses would be paid for with a record defense budget. This promise fell by the wayside, however, in the wake of December’s escalation pledge.

We begin to have to do stupid things if the supplemental is not passed by July 4,” Gates warned. Exactly what these would be and how we would be able to tell the difference from ordinary Pentagon strategy was not clear.

With doubts on the war growing, the Obama Administration is likely to face a rare battle with Congress over the expenses. The Pentagon has angrily dismissed Congressional doubts about the war, insisting things are going according to plan.

Southwest Finds Shipment of Heads on a Plane

A Southwest Airlines employee called police after finding human heads in a package set to be transported to a Fort Worth medical research company, the airline said.

"It wasn't labeled or packaged properly," said Ashley Rogers, a Southwest spokeswoman. "They called the local authorities."

The incident happened in Little Rock, Ark., last Wednesday, she said.

Little Rock police turned the package over to the county coroner, who questions where they came from and if they were properly obtained.

"We've come to the conclusion that there is a black market out there for human body parts for research or for whatever reason," said Pulaski County coroner Garland Camper. "We just want to make sure these specimens here aren't a part of that black market and underground trade."

The heads were being transported to the Fort Worth office of Medtronic, a leading medical research and technology company based in Minnesota.

Medtronic spokesman Brian Henry said it is common to ship body parts for medical education and research, but he said it is rare for a shipment to be seized.

"We expect our suppliers to follow proper procedures," he said.

Camper described the items as 40 to 60 human heads.

But Henry said they were "four full cranial specimens and 40 pairs of temporal bone ear blocks."

He identified the supplier as JLS Consulting of Wynne, Ark.

JLS's business license was revoked in December, according to the Arkansas Secretary of State's online database.

Company founder Janice Hepler did not return phone calls Wednesday. Her voice mail indicated it was full and no longer accepting messages.

But in an earlier interview with the Arkansas Democrat-Gazette, she blamed the problem on the private courier she had hired to transport the body parts.

"Nothing is wrong," the newspaper quoted her as saying. "We're providing the documentation."

But the coroner said the paperwork has "discrepancies."

Federal law generally prohibits the sale of human body parts, although suppliers can be reimbursed for expenses in cases of legitimate medical education or research.

"It is a lucrative business. There is money to be made," Camper said. "We're hoping that this isn't the case."