The Devolution Is Here

Devo‘s first Melbourne performance in 25 years was ‘a dream come true’ cofounder Mark Mothersbaugh told the audience – in falsetto – as Booji Boy during the finale ‘Beautiful World’. Most of the audience were ‘less beautiful than their parents’ who had attended Devo‘s last show in 1983.  Australia was ‘relatively untouched then’ compared to the post-industrial decay in Devo’s hometown of Akron, Ohio.
 
The 90-minute setlist centered on Devo’s first three albums from 1978-82.  After opening with clips from Chuck Statler’s film In the Beginning Was the End: The Truth About De-Evolution (1975) the band played the MTV hits ‘Whip It’ and ‘Girl U Want’ early in the set.  Devo’s heavy rock arrangements became even more intense when they dispensed with the Korg keyboard at the front-of-stage and their trademark yellow radiation suits to reveal black t-shirts and shorts.  Session drummer Josh Freese kept a fast drum tempo, Bob Casale switched deftly between keyboards and rhythm guitar, Bob Mothersbaugh added lead guitar histrionics to ‘Uncontrollable Urge’, ‘Gut Feeling’ and the Rolling Stones cover ‘I Can’t Get No (Satisfaction)’, whilst Gerald Casale’s vocals on ‘Secret Agent Man’ highlighted the band’s humour.  The first encore ‘Freedom of Choice’ became a satire on Pax America: ‘If you want proof of devolution just look at the current White House’, Mark Mothersbraugh told fans.  For me, ‘Jocko Homo’ was the standout track with MIDI keyboard samples, jerky robotic stage moves, a wall of sound, and the audience singing the anthematic chorus.

I took away three lessons about innovation from Devo’s 2008 tour.

Devo’s expertise in art direction differentiates their live show from others: a Pop Art aesthetic now fused with New Wave nostalgia.  This sensibility may be why Brian Eno, Iggy Pop and David Bowie engaged in a bidding war to produce Devo’s first album Q: Are We Not Men? A: We Are Devo (1978).  It’s also why Virgin’s Richard Branson invited Devo to Jamaica in a ploy to sign John Lydon as their frontman, which Simon Reynolds recounts in Rip It Up And Start Again (Faber & Faber, London, 2005).  Branson perceived Devo as the New Wave heirs to the Sex Pistols‘ Situationist critique (p. 80-81).  This New Wave branding ensures Devo has a core fanbase and branding that resonates enough to sell plenty of red flowerpot hats 25 years later.  It’s also evident in the Australian support band Regurgitator‘s aesthetics and Band in a Bubble experiment, and the Primus theme for South Park.

Devo mania was however a New Wave subculture that did not go mainstream.  Despite MTV’s heavy rotation of ‘Whip It’ and ‘Girl U Want’ the network became the ‘Home
Shopping Network for record labels’ claims Mark Mothersbaugh, rather than maintain its avantgarde and experimental credentials (p. 349).  A mainstream audience would not understand Devo’s satirical parodies of Christian fundamentalist and 19th century eugenicist doctrines on human and cultural evolution nor its embrace of the Church of the Subgenius.  Devo by the mid-1980s was consigned to mid-level status on Enigma Records: what happens after a fad or mania fades away can be just as much a lesson as the subcultural tipping point.

The production company Mutato Muzika offers a synthesis of how to escape the half-lives of subcultural fads and the limits of mid-level success.  Mark & Bob Mothersbaugh and Bob Casale have refocused on composing advertising jingles, film and television scores.  Mutato provides a small team environment which composer John Enroth describes as a focus on pragmatic ‘craft’ with timeboxes for project delivery that are differentiated from the ‘art’ projects that members pursue elsewhere.  Mutato developed business models including corporate sponsors for songs and Apple iTunes release and distribution that are now ‘indie’ common practices.

As the next stage in devolution Mutato looks to be a sustainable business that can collaborate with the mainstream media yet is also centred on a personal aesthetic experience and philosophical outlook.

Ebook Textbooks & The Market for Lemons

The software consultant Ed Yourdon once warned US programmers in his book Decline and Fall of the American Programmer (1992) that they faced global hypercompetition.  This was a fashionable message in the turbulent early 1990s of industry deregulation, export tariffs, mega-mergers, downsizing and reengineering.  Spenglerian pessimism made Decline and Fall an IT bestseller as Eastern European and Russian computer programmers emerged as low cost competition with their US counterparts.  Now in Thomas Friedman‘s vision of a flatter world the Eastern European and Russian computer programmers have help from an unlikely source: electronic copies of IT textbooks.

Several barriers mean that US textbook publishers are cautious about embracing ebook versions.  Publishers fear the Napsterisation of ebooks on peer-to-peer networks.  There’s no standard ebook device although Amazon’s Kindle is the latest candidate.  There’s no standard ebook format: most use Adobe PDF, however when Acrobat 8 was released Adobe shifted its ebook functionality to a new Digital Reader that did not necessarily read a user’s existing ebook collection.  Potential customers do not have a utility function to necessarily favour ebooks over printed copies: publishers charge high prices for ebook versions that may contribute a higher contribution margin to profits but that give the customer little price differential compared with print counterparts.

The implementation of digital rights management (DRM) also leaves much to be desired: McGraw-Hill’s Primis uses a digital fingerprint on a hard-drive that voids an ebook even if reinstalled on a reformatted drive due to a virus, whilst Thomson’s Cengage Learning uses a time-sensitive model which gives the user access for one semester to an ebook with the full price of its exact print version.  Publishers are also slow to adjust cross-currency rates: Australian textbooks still cost $A120-$200 despite near parity between the Australian and US dollars.

Thus, it’s no surprise that ebook divisions remain small in multinational publishing conglomerates.  One exception is Harvard Business School Press which appears to have ditched Sealed Media’s DRM plugin for Adobe Acrobat after Oracle acquired SM in August 2006 and then had integration problems with information rights management.

These barriers suggest a failure in market design with analogies to George Akerlof‘s study of the used car market in his influential paper The Market for Lemons (1970).  Publishers counter that although there is a lack of ebook standards similar to Akerlof’s paper the economics of publishing provide a disincentive to lower prices.  They claim high fixed costs in printing, photography rights and licensing fees for the case studies taken from Businessweek, Fortune and The Wall Street Journal.  Author fees and promotional budgets to professional associations add variable costs –  however, Australian academics have a disincentive to publish textbooks compared with their US colleagues, as Australia’s Department of Education, Employment & Workplace Relations does not provide recognition points.

To survive US textbook publishers have turned to global market models with regional editions of popular texts (such as Asia-Pacific editions with local coauthors), and adopted the music industry’s business model of electronic and online content (similar to how record labels have released Dualdisc, DVD and collectors editions of albums).  However as Yourdon warned US programmers this may not be a business model with longterm sustainability.  MIT’s OpenCourseWare, Apple’s iTunesU and Scribd all provide free content that mirrors the generic content in most textbooks, although some differentiate via a problem-based approach.

Yourdon’s ‘challenger’ computer programmers now also have illegal BitTorrent sites such as The Pirate Bay, filehosting networks such as Rapidshare, and ebook sites including Avaxsphere.com and PDFCHM to choose from.  The last two provide solutions to Akerlof’s challenge in market design: they have an easier user interface, a broader (illegal) catalogue of ebook titles, and DRM-free files compared to Cengage Learning or McGraw-Hill.  Even business strategists are getting in on the act, as Clayton Christensen, Curtis Johnson & Michael Horn explore in Disrupting Class: How Disruptive Innovation Will Change the Way the World Learns (McGraw-Hill, New York, 2008).

There’s one textbook coauthor who came up with a unique solution to Akerlof’s dilemma in market design.  His Macroeconomics book coauthors Andrew Abel and Dean Croushore opted for the mod-cons from publisher Addison-Wesley: an online site and a one-semester ebook version as a bundle deal.  The textbook coauthor?

Federal Reserve Chairman Ben Bernanke.

Dealmaker With The Dead

Randy Nails‘ documentary Dead On: The Life and Cinema of George A. Romero (2008) screened as a ‘work in progress’ at the 2008 Melbourne International Film Festival.  The documentary charts Romero‘s evolution as a director and how his films are responsible for a 40-year-old ‘zombie economy’ worth over US$2 billion.

Three themes are central to Nails’ documentary: how psychopolitics such as Cold War nuclear fears and Vietnam War social activism influenced Romero’s personal vision, why Romero has fought to retain his independence against Hollywood studios, and how the zombie meme has in turn influenced contemporary ‘indie’ directors, subcultures, and musucians such as Glen Danzig and Rob Zombie.

The documentary begins with a nuclear fear montage: stark black-and-white footage of the Trinity nuclear test on 16th July 1945, ‘duck and cover’ safety drills and simulations of the impact on targeted cities.  From this dystopian beginning Nails explores Romero’s early work for the Pittsburgh-based company Latent Image which tapped the market for advertising and industrial films in the ‘go go’ 1960s.  Latent Image would be the nucleus for the team that produced the influential zombie film Night of the Living Dead (1968): Romero used handheld cameras to capture the feeling of newsreels on Vietnam War combat and civil rights protests.  Latent Image cofounders liken their production approach to jamming in jazz and small teams.  However after the follow-up There’s Always Vanilla (1971) the Latent Image team fell apart and Romero continued as an auteur to create films where the Cold War’s Mutually Assured Destruction is the backdrop to dark and apocalyptic forces which threaten to overwhelm individuals.

Latent Image’s DIY ethic was a formative experience for Romero.  He cites Martin (1977) as the film that captures best Romero’s work ethic and small team approach, with Diary of the Dead (2007) as a return to this independence.  Its cast believe Knightriders (1981) was his most personal film, which Romero explains is about the extremes and limits of personal ideologies, and that he was able to maintain a strong team despite the production difficulties due to his respectful way of dealing with the cast and crew (which Ed Harris and Dennis Hopper also attest to in Romero’s later films for major studios).  Romero and special effects wizard Ted Savini worked quickly on the location shoot in a shopping mall for Dawn of the Dead (1978) due to a 3-4 hour time limit: a precursor to the ‘sprints’ in agile software development.  Romero’s DIY approach and his ability to combine multiple roles (scriptwriter, cinematographer, director, producer, editor) appeals to John Landis, John Carpenter, John Waters, Kevin Smith, Robert Rodriguez and Danny Boyle, who Nails interviews.

Pigeonholed as a horror director Romero points out why many of his films have a satirical dimension that the Hollywood major studios often choose to ignore or minimise.  Jack’s Wife (1972) explored a neo-feminist vision of personal empowerment through Wicca symbolism, although the US distributor retitled the film as Hungry Wives to appeal to the softcore porn market.  The Crazies (1973) satirised military contingency planning to prevent a chemical warfare disaster.  Martin (1977) uses vampirism as a metaphor for industrial decline of Pittsburgh’s steel industry: Romero surmises people need vampires as a modern mythology to combat the ‘death of magic’ caused by downsizing and hypercompetitive globalisation.  Spurred on by giallo director Dario Argento, Romero overcomes his desire not to revisit zombie films by turning Dawn of the Dead (1978) into a satire on consumer lifestyles.  Day of the Dead (1985) and Land of the Dead (2005) respectively target the Reagan Administration’s revival of Cold War brinkmanship and nuclear fears, and the second Bush Administration’s widening social gap between the haves and have-nots.  Romero’s personal vision emerges collectively in this body of work as a concern with personal autonomy and class politics.

Why Romero despises Hollywood studios is illustrated through the many anecdotes about his production battles and mistakes.  Night of the Living Dead relied initially on 10 personal investors who lost their money when the film was released with the copyright symbol on its title credits rather than in the correct position, which immediately made NoTLD public domain.  Despite a successful lawsuit Latent Image lost money and the followup There’s Always Vanilla broke up several friendships.  Knightriders, Land of the Dead and Creepshow all had studio distribution problems.  During the preview screenings of Monkey Shines (1988) and The Dark Half (1993) the test audiences demanded the downbeat endings be changed, a Hollywood practice that reviewer Roger Ebert condemns.  The film studio Orion was almost bankrupt during The Dark Half and was unable to finance a score for the film’s third act, which led to director-producer tensions.  Bruiser (2000) was a straight to video release which Romero was relieved to complete.  In a lesson on ‘decision rights’ Romero worked on 8 redrafts over a two-year period for Resident Evil (2002) to ensure the film reflected the first two videogames, before he discovered that the studio executive did not have the decision-making power as he had claimed.  Whilst Romero admits to not being very good at business his criticisms of Hollywood are supported by illusionist Penn Jillette and writer Stephen King.

Despite the wealth of archival footage and interviews Nails’ ‘work in progress’ suffers from a nonlinear narrative.  I had just as much fun sitting just behind Romero and his daughter Tina in the cinema, watching him deal with zombie fans and autograph hunters.  Romero might not have the financial rewards of the ‘zombie economy’ he inadvertently created but Dead On has plenty of lessons on cultivating a personal vision and the mindlessness of the Hollywood zombies known as mid-level studio executives.

Investors’ Regret: Société Générale v Jérôme Kerviel

On 4th July 2008, The Banking Commission of France (BCF) fined Société Générale €403 million euros for the bank’s lack of internal controls in a €4.9 billion trading loss in January 2008.  SocGen blames ‘rogue trader’ Jérôme Kerviel for the loss after it discovered his trading positions on 18th January.  SocGen’s chairman Daniel Bouton also blamed Kerviel for the stockmarket’s 6% fall on 21st January 2008.

Kerviel counter-blames SocGen for its loss, fired his lawyers, and adopted an aggressive stance with a new legal team during a court hearing in France on 23rd July. SocGen had already suffered fallout from the revelations about Kerviel’s losses: Bouton made changes to senior management, and the French bank had to raise €5.5 billion euros to recapitalise, and prevent SocGen from becoming an M&A takeover target.SocGen’s ‘rogue trader’ claim against Kerviel recalls the fate of trader Nick Leeson whose speculation on derivatives and options markets led to the collapse of Baring’s Bank in 1995.  Leeson attempted to trade himself out of bad decisions through his knowledge of exotic options, his control of the settlements role, and his tactical deception using spreadsheet models and accounts with whited-out text that was invisible to others.  SocGen claims Kerviel used complex program trades with exchange traded funds and swaps for a similar tactical deception.  Leeson’s losses made Baring’s illiquid and in 1995 the English merchant bank was sold to ING for £1.

On the surface Leeson and Kerviel share enough similarities as a pair to warrant the ‘rogue trader’ label.  Both had knowledge of sophisticated financial instruments and markets.  Both used this knowledge to make substantial profits for their respective firms.  Both were in teams which faced rapid revenue growth but also with a lack of internal controls: Singapore for Leeson and Delta One for Kerviel.  Both used tactical deception in attempts to escape from adverse trade situations, caused by the misuse of financial instruments, dynamic disequilibriua in the markets, and cascade events.  In Leeson’s case, Japan’s Kobe earthquake on 17th January 1992 was also a Black Swan event.  Both Leeson and Kerviel have made counter-accusations that the banks’ senior management were scapegoating them for larger institutional losses.

One central difference between Leeson and Kerviel is that all game-players are now more aware of ‘rogue trader’ as a media narrative and symbol of financial villains.  Bloggers posted Kerviel’s resume online and registered his name as a website address.  Bouton quickly singled Kerviel out for blame before French authorities also charged Kerviel’s manager. Kerviel countered this with claims that SocGen’s senior management was happy with his trading and that the bank had broader problems with its risk management system.  Independent sites such as ReTheAuditors.com also discussed Kerviel’s case.

SocGen appointed a Special Committee to investigate Kerviel’s trades and to evaluate its corporate governance and risk management systems.  The Special Committee and General Inspection reports found problems with Kerviel which echo post-mortems on Leeson: no supervisor, an inexperienced new manager, problems with intraday positions and high-correlative markets, ignored red flags, and a lack of transparency between middle office and back office functions.  The bank also derisked its internal review by hiring PricewaterhouseCoopers to evaluate SocGen’s risk management systems.  The audit firm then derisked itself by de-scoping its report which PwC claims was based on SocGen’s internal documents and industry best practices.

Was this an exercise in ‘plausible deniability’?  Perhaps.  Did it interest book publishers? Yes, the entrepreneurial small press turned Kerviel’s case into several ‘quick books’ for micro audiences.  Did Kerviel create a new market?  Definately: at a university career fair in May 2008 a Gen Y consultant pitched to me that her Big 4 accounting firm could prevent future Leesons and Kerviels through the automatic control of access rights to critical IT systems.  I countered that whilst this solution would provide audit trails, it might not deal with the ‘human factors’ that allow failures such as Leeson and Kerviel to (re)occur.

CF’s fine signals some deeper problems in SocGen’s corporate governance and risk management systems.  Traders can use knowledge of complex derivatives, options and trading systems for tactical deception.  They may also perceive risk management as a separate function rather than an integral process, although this is changing after the 2007 subprime crisis.  Senior managers who keep changing their stories in a crisis may be stonewalling.  The pressure to make profits can mean that outcomes-based systems are manipulatable according to the outcomes demanded.  In Kerviel’s case managers ignored ‘red flags’ from the Eurex derivatives exchange.  Could Eurex have the independent power to bar traders who reach a high level of ‘red alerts’ in a given period?  What if Eurex took a solution from nuclear detente and have a ‘red phone’ line direct to SocGen’s internal auditors and external regulatory agencies?

Leeson and Kerviel are proof that traders always face the possibility of large losses from consistent market trades.  Fans of Oliver Stone’s film Wall Street (1987) and Michael Lewis’s memoir Liar’s Poker (W.W. Norton & Co., New York, 1989), which is mandatory reading in many MBA corporate finance classes, can overlook this market reality.

But equally overlooked is a more troubling problem: the differences in promotion pathways and work culture between compliance/legal/risk staff and traders who must live by their next deal regardless if the client blows up.  Gordon Gekko (Michael Douglas) recruits Bud Fox (Charlie Sheen) in Wall Street because Fox is ambitious, risk aware, and his working class roots give him a gritty edge.  Lewis suggests in Liar’s Poker that Salomon Brothers traders share a similar outlook.  SocGen’s managers promoted Kerviel to junior trader from a compliance role and SocGen’s lawyers now believes this risk management knowledge aided Kerviel’s tactical deception.  Described by friends as ‘honest, working class’ Kerviel might be Bud Fox without the ‘remorse of conscience’.

Are Financialistas Over Hedge Fund Chic?

You can blame George Soros for making hedge funds the dark horse of the irrationally exuberant 1990s.

As the public face of the Quantum Group of Funds, Soros gained notoriety for short selling the English pound in September 1992 and allegedly making $1 billion in profits.  Adam Curtis observes in his riveting documentary The Mayfair Set (BBC, 1999) that Soros’ victory signalled the first time that market speculators had beaten a country’s central bank.  In the aftermath Soros cultivated a master trader persona based on his personal ‘theory of reflexivity’ or how ‘participant’s bias’ can shape our actions in and perceptions of market events.  Hedge fund chic arose in Wall Street as investment banks rushed to found hedge funds, which use leverage and pooled capital to manage assets, derivatives and securities for an investor group.

Financialistas however are showing signs of buyers’ remorse as subprime turbulence brings an end to Soros-inspired hedge fund chic.  The high-profile collapse of Bear Stearns‘ two hedge funds in mid 2007 was only a precursor, Hedge Fund Research notes, of 170 liquidated in early 2008.  The survivors have adopted Soros’ global macro strategy which relies on computational finance and dynamical models of currencies, interest rates and other macroeconomic factors to achieve returns.

Global macro is a risky strategy for several reasons: it requires forecasting models of complex interactions, computing power and fund mangers with impeccable judgment for asset allocation.  In fact global macro deals with a specific risk class known as systemic risk that results from business cycles and macroeconomic movements, thus it cannot be diversified away.  Add funds’ massive leverage of pooled securities, industry secrecy, little government regulation and hypercompetition between different funds and managers, and an accurate calculation of risk-return is difficult.  These challenges overshadow the potential of applied research solutions, such as Fritz Zwicky‘s morphological analysis, a problem-solving method which deals with ‘multi-dimensional, non-quantifiable problems’ – relevant to the macroeconomic factors and systemic risk in global macro strategies.

Hedge fund chic faces several other problems.  As an investment category hedge funds have matured and their combination of high leverage and high management fees are unsuitable for many non-institutional investors.  Subprime fallout is triggering change in US financial and regulatory institutions which will inevitably lead to more rules and regulatory oversight of edge funds and managers.  Internally, hedge funds also need to separate managerial processes (principal management, portfolio execution) from financial reporting (mark to market book) and governance (board, corporate and policies & procedures).

Which means despite Soros’ alchemical touch hedge fund chic may now be a fad.

Henry Blodget’s ClusterStock

Former securities analyst Henry Blodget recently launched ClusterStock which provides daily news, commentary, and research analysis on the economy, energy, financial services, retailing and technology sectors.  ClusterStock’s parent company Silicon Alley Media appears to follow the Web 2.0 nanopublishing business model of Gawker Media‘s Nick Denton and Mahalo founder and entrepreneur Jason Calacanis.

In a 2008 last-minute submission to Australia’s Review of the National Innovation System I contended that market-based approaches may resolve some challenges in the organisational design and concept to cash/concept to market processes of R&D consortia and institutions.  ClusterStock provides an example for strategic implementation: coverage of market events by sector specialists, near real-time commentary on conference calls, and assumptions testing via reader/user feedback.  The public face provides an information filter and feedback loop in the incubation and idea generation phases of creative innovation.  R&D consortia could implement this web publishing model as a peristyle public face with separate internal processes for ‘commercial in confidence’ information and corporate/government partners.

For his side of the infamous dotcom era blow-up plus an insider’s critique of the investor ecosystem see Blodget’s informative consumer guide The Wall Street Self-Defense Manual (Atlas Books, New York, 2007) and Slate Magazine’s accompanying articles.

Subprime Winners: Rational Herds & Decision Researchers

US capital and derivatives markets in mid-2008 provide a real-time laboratory for behavioural finance analysts who want to understand the madness and wisdom of crowds.  The past week’s case studies include the implosion of the US bank IndyMac and the market volatility triggered by fears that Fannie Mae & Freddie Mac are highly exposed to liquidity risk.

As financial reporter Michael S. Rosenwald notes in The New York Times, these recent events appear to fit the behavioural finance hypothesis that individual investors who make fear-driven and risk-averse decisions can trigger pricing shifts as an aggregate rational herd.  Guillermo A. Calvo and Enrique Mendoza found in a 1997 paper that globalisation counteracts the emergence of rumour markets based on imperfect information and country-specific knowledge, although not in emerging markets due to uncertainties.

However the recent events have different conditions that set delimits on Calvo and Mendoza’s model: the United States is the epicentre of the bear market triggered by the 2007 subprime crisis, Fannie Mae and Freddie Mac have psychological primacy as major financial institutions with US Federal Government backing, and investment media firms such as Bloomberg and CNBC use globalisation to create de facto rumour markets amongst day-traders and others.

Readers interested in rational herds should also check out Christopher P. Chamley’s book Rational Herds: Economic Models of Social Learning (Cambridge University Press, Cambridge UK, 2004), excerpt here.

Decision researchers are the other early winners of the 2007 subprime crisis, due to the failure of many quantitative models to predict the Black Swan event.  Rosenwald mentions Harvard University’s new Bio-Behavioral Laboratory for Decision Science which conducts ‘conducts research on the mechanisms through which emotional and social factors influence judgment and decision making.’  He also refers to the Oregon-based nonprofit group Decision Research.  An Australian-based counterpart might be the Capital Markets CRC, an R&D consortia that focuses on ‘new technologies and improvements in market design’.

Investment analysts still have divergent opinions on recent events.  However the research agenda above prompts several new questions:  What happens to rational herds and rumour markets when bio-behavioural methods of decision-making are no longer ‘imperfect information’ but are widely understood and integrated into investment choices?  How will markets be redesigned to cope with this eventuality, and who will take on this responsibility?  What new financial instruments, markets and products will emerge generativity?

Leximancer’s Customer Insights & Social Media

Leximancer is data mining software that enables you to find statistically significant text patterns in unstructured data.  The software uses a collections/processing approach to gather a cohort of documents, specify filters and rules, run a batch process, and then displays a graphical concept map with causal and statistically significant relationships.  M&A, competitive intelligence, legal and market research teams may find this approach useful for document support.

University of Queensland researchers developed Leximancer, the UniQuest incubator commercialised it, and London’s Imprimatur Capital provided seed capital investment.  The team also recently launched a Customer Insight blog and portal which will explore Leximancer applications in customer experience, surveys and social media.  Its data analytics and statistics capabilities may make Leximancer the evidence-based management solution for those Technorati forecasters who suffer from optimism bias about keywords and the creation rate of new blogs.

Frank Lowy Named In US Investigation on Offshore Tax Havens

The New York Times reports that the US Senate Permament Subcommittee on Investigations named Australian property maven and philanthropist Frank Lowy in a 114-page Staff Report on how the investment bank UBS created offshore tax havens in Liechtenstein.  The report is part of a Permanent Subcommittee investigation on Tax Haven Banks and US Tax Compliance which held a hearing on 17th July 2008.

The Permanent Subcommittee’s press release claims that Lowy used Liechtenstein’s LGT Bank to ‘transfer companies and a foundation with a Delaware corporation to
help the Lowys hide their beneficial interest in a foundation with $68
million in assets.’  NYT reveals the foundation was Laperla based in Liechtenstein and used to funnel up to $US100 million.

The Sydney Morning Herald reports Lowy is cooperating with an Australian Taxation Office audit.  Lowy’s son Peter is rescheduled to appear at a Permanent Subcommittee hearing on 25th July.

The Australian Financial Review‘s forensic journalist Neil Chenoweth investigated Australian entrepreneurs with Swiss offshore tax havens in Packer’s Lunch (Allen & Unwin, Sydney, 2007).  For a broad international context also see my 2006 essay on anti-money laundering initiatives.

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