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No question, the US today is not a safe place to invest in – nor even to visit. Beside the danger posed by the government, recent statistics reveal that the chances of being assaulted in a big city are roughly the same as a front line soldier being shot in World War П. In New York City, Washington DC, and Los Angeles, armed robbery is so common that a well dressed tourist walking alone has a better than even chance of being assaulted and seriously injured. Violent crime is more than 20 times as common in Big City America than it is in Europe. Strange when we also learn that 20 times more people (on a per capita basis) are in American jails than are in European jails. Perhaps the wrong people are being incarcerated in America.
We are not saying that if you visit the US you’ll be assaulted during a drug crazed hold-up or by drug-crazed government officials. But a small percentage of foreign investors will share the rate of the two individuals in the above horror stories. If your accounts are not confiscated however, the odds are probably better than 50-50 that there will be some fairly serious tax or regulatory problems with any substantial investments held in your own name. For instance, in the event of death, a large tax (55 per cent in recent years) is due, even from foreigners who may never have set foot in the country. The legal and other costs of “administering an estate” or simply getting it paid over to the rightful owner will be about another 10 per cent if everything goes smoothly. This legalized theft from the unwary has been the law of the land for years.

Your heirs or a joint holder of a bank account or securities portfolio may thus get an unpleasant surprise, ending up with 35 per cent on the dollar when they try to close out an account or sell your real estate. The inheritance/estate tax problem at least, is overcome by simply keeping assets in a company name, or as suggested at the outset, dealing through a foreign bank so that your name, ownership (and the fact of your death), never appears on a US computer.
Now that constitutional protections against arbitrary seizures or confiscations without notices or hearings have been removed by court decisions, the US is certainly as treacherous a place as any third world dictatorship. It may be more treacherous than most. Why? Because in tiic third world (and much of the First and Second World as well) most problems can bo settled with an appropriate gift or tribute paid to the proper official. While corruption is not desirable, it is in many ways preferable to be able to make a pay-off; a quick financial settlement. Lawyers in such places know there are standard charges for such things. Then you can get on with life and business.
In the United States, once caught in the grind wheels of bureaucracy, one can face endless hassles and often end up in jail. The system, like that of the former Communist Bureaucracy often seems capricious in choosing its victims. But there is a pattern. It is this pattern we are now warning you about. In the US, prosecutors admit that they often choose their defendants on the basis of nationality, notoriety, wealth or social standing. These factors are more decisive, it appears, than whether the defendant did anything to hurt anyone. In many cases, the criteria for what is known as “selective prosecution” is simply how easy it will be to grab assets or get a criminal conviction from a jury already prejudiced against foreigners.
How much publicity or career advancement opportunity will making a seizure or winning a conviction in a given case provide? Guilt or innocence is often not even a factor to be considered. As such, a wealthy foreigner with investments in the US is a wonderful target not only for the criminals on the street, but also for the criminals in the government suites. Sometimes, because of personal concerns the foreigner will not “cause trouble” by reclaiming assets taken from him. And if he is foolish enough to come into the states to protect his financial interests, he can become a scapegoat, prosecuted and convicted, thus becoming another statistic to show how effective the government is in bringing outsiders to their knees. Most Americans – the silent majority – have a strong prejudice against foreigners with strange names, strange accents and non-white skin colors. Even Blacks and Hispanics who have become part of the bureaucracy often share these prejudices. They consider themselves white and Anglo and are called by their more ethnic brothers “Oreos”. An “Oreo” is a type of mass produced cookie that is “Black or brown on the outside, and white on the inside.” Thus it is not unusual for a prosecutor (a member of a minority group himself) to pander to the most base racial and anti foreigner prejudices that are to be found within the hearts and minds of the typical juror. These jurors, like judges, seem to relish the power to take away the money or freedom of a person “different” from themselves. In their normal lives they may not really be the middle class, white, patriotic, flag waving, ecology-saviors that they perceive themselves to be. But they will vote that way against you. Foreigners in the US, beware. You are the most likely candidate for asset stripping.


In another case, a non-US woman from Santo Domingo who had never lived in the US except for short vacation trips owned a Florida condominium, plus bank accounts and securities on deposit in the US.
The value was “only” half a million dollars, but this was the widow’s entire life-savings. Because another person (a complete stranger) with her relatively common surname was involved in a tax dispute with the US, all of her personal assets were seized (once again without notice or court hearing) to satisfy a US claim against this stranger. Upon receiving the standard form letter, she protested the seizure by her own letter to the Treasury, but was told once again by form letter, that she had only a very short time to hire a lawyer in the US. Preliminary inquiries indicated she’d then have to appear personally at a trial in a US District Court in Miami, Florida to prove beyond a shadow of doubt that she had no connection with the accused offender.
It is always difficult or impossible to prove a negative, but the widow Garcia decided she had no alternative but to go to Florida, hire an American lawyer and try to recover her money and apartment. When she explained her need for a visa (to make her claim) for travel to the US, permission to visit the US for this purpose was denied. This happened at the US Consulate in her own country where she had applied for the usual six months visa.
The horror story got worse from that point onwards. She entered the US illegally via Puerto Rico where she made the standard arrangements favored by Dominicans, by acquiring local (Puerto Rican) driver’s license as her US identification. She then flew to Miami and spent her last assets on a retainer for an expensive Florida lawyer. He did nothing. Without money to make her condo and mortgage payments, her property went into foreclosure and was irrevocably lost. After three months of running up hotel bills and waiting for the attorney to file a legal action within the required period, she complained. Within days (suspecting that her own lawyer had turned her in), she was arrested and quickly sentenced to a year and a day in prison for carrying fraudulently obtained identification papers and illegal entry into the US. The date for filing a claim now having passed, her assets were irrevocably lost.

Does it get worse still? You bet! While in jail, just before her release date, she was further charged with being part of a drug importing conspiracy with the stranger (we’ll call him “Garcia”) she had never met nor heard of. She was told that her ‘drug tainted Garcia assets* were gone forever. Unless she waived all further claims against the US, she was told by the Department of Justice prosecutor that she would be given a forty year sentence for drug trafficking. Now without any funds at all, she was advised by her free public defender lawyer to plead guilty to drug trafficking. Mrs Garcia initially refused, but the deal eventually made was this. If she would make a plea bargain for a ten year suspended sentence, at the end of her year in prison, she could accept deportation to her home country. Anxious to get back home, and with a best-case scenario of being held in a very unpleasant county jail for several months while her trial was pending, she decided to go for the “deal” and get sent back home at US government expense. The downside was a drug conviction, but she felt that this would not be a problem back in the Dominican Republic. Her plan was to try and live a quiet life with her daughter who was willing to take her in.
Ultimately, she was deported to her home country as agreed in the plea bargain. Upon arrival, she didn’t expect what happened next. Instead of being allowed to stay at the home of her daughter as planned, as a convicted and admitted drug-dealer, she was promptly jailed upon arrival back in the Dominican Republic. There was no need for a trial there because under treaty arrangements, deported and convicted drug dealers serve their US imposed sentences in the Dominican Republic. So much for trusting the US Department of Justice and her lawyer who failed to mention this little detail. She spent the following two years in a very unpleasant jail in her own country. There she remains with eight years to go. The Santo Domingo government receives grant money from the US to keep her and several hundred others like her incarcerated. In a letter to me, the widow Garcia stated that “I never had the slightest involvement in drug dealing, nor any remote interest in illegal drugs of any kind. There was no evidence of any kind, nor any testimony against me. I never had a trial for anything except the illegal entry charge. I wouldn’t have made any illegal entry if they hadn’t confiscated my money and given me only a few months to make a claim in person. The only connection I needed to get into all this trouble is that I have the same name, Garcia, as a shadowy figure who may or may not be involved in this drug business.
Nobody seems to know anything about him except that he had the same last name. The government tried to make him out to be my husband or son, but I have no son, and my husband died twenty years ago – long before the drug thing ever became a big deal. As to the other Garcia: his money was also confiscated, but he never made any claim. This name is the most common name in any Spanish speaking country. I am sure that everyone involved in my case knows that there is no connection between me and this other Garcia, but it doesn’t matter to them. It is not like in the movies where a prosecutor admits a mistake to free an innocent person. The contrary is true. The more wrong they are, the more vigorously they defend the position that the accused was “properly sentenced after being found guilty as charged.”
The widow continued: “This whole story is like a bad dream, but I assure you it is real. I have written letters to Amnesty International and have tried everything to clear myself, and get free but the answer is always, ‘You probably wouldn’t have pleaded guilty if you hadn’t been involved in something illegal.’ I suppose because I am not being tortured and am not a political figure, no one except my family knows or cares about me. Truth is, had I not pleaded guilty, the US could and would have framed me for some new crime anyway. They can always get other inmates to lie about something in return for money or more likely, a sentence reduction. To accuse the US government of such tactics may sound far-fetched to someone who has never been in their meat grinder, but I assure you that justice in the US courts or prison system is not something one can count on. There is a bureaucratic need to convict people and to keep them incarcerated for long periods. Innocence or guilt doesn’t seem to matter much.
In my US Federal prison, I saw examples and heard too many stories of bogus secondary charges being brought at the expiration of the first prison term. I had a real fear of spending my entire life in a foreign jail. Nobody really cares about you and my relatives had a very tough time getting dispensation for a three day visa to visit me (in prison, during my trial) from Santo Domingo. The expense of such trips is something they can’t really afford. 1 figured 1 would be in a better situation in my home country where people knew I was not a criminal. I just wanted to go home and live a quiet life. But this was not to be.
The US has so much money to fight their drug war, they convict many innocent people like me who then become statistics representing their ‘success’ in interdicting this traffic. Then with their wealth and immense influence abroad, they can continue to make life miserable for people like me. I feel that US pressure alone is keeping me in jail here. My money was legally earned and saved as a result of my deceased husband’s auto-parts business. The original investments in the US were made by him because we wanted a safe place to keep our savings due to dangers from an often arbitrary government here at home in Santo Domingo. We were also informed in writing by the local US Embassy that we would always be given a visa to spend up to six months a year in our vacation home in Florida. Had I suspected that what happened to me was a possibility, I wouldn’t have touched any investment in the US with a barge pole. Now all my retirement savings money is lost and I am still in jail with little hope of getting out before I die. I am not saying that everyone in jail is an innocent angel, but I have met quite a few people in the States who, like me, do not belong in jails. To be in this situation is not a pleasant ending for a 59-year-old widow and grandmother. I might have killed myself, but regular family visits and my Christian faith and prayer has sustained me.”
Xenophobic Big Brother. It is well known that most countries, while welcoming foreign investors, do not want foreigners to stay around too long nor to own local property. The US was always different, passing out unlimited visit visas and encouraging foreign investors to buy land, farms, real estate and local businesses. Legal protections against seizures and confiscations were given to foreigners on the same basis as if they were locals. Special laws like the Edge Act in banking, even gave foreigners an edge, as it were. Foreigners got bank secrecy denied to locals, and for many years there was no reporting on foreign accounts nor withholding of taxes on interest due foreigners. The drug war and other modem concerns, gave the government excuses to withdraw all former asset protection from both locals and foreigners. New treaties mandate that the US reports interest paid to foreigners to their own governments. Assets of local citizens or foreigners can be frozen, sold or seized quite easily.
To confiscate US property, some snot-nosed teenager from an obscure agency merely has to scribble that he suspects a boat, plane or car; a house or bank account is “possibly involved in” environmental offenses, organized crime, tax fraud, insider trading, drug dealing, money laundering, or a long list of offenses. The property is then taken out of the control of the owner. The burden then shifts to the owner to prove he is clean as the driven snow. The record of recoveries in such cases is dismal, from the point of view of the foreign investor. Often, a civil court appearance by an accused, is used as an opportunity to gather evidence or file criminal charges. As a result, the US is now a treacherous place to do business, to invest, or even to visit as a tourist. Xenophobia is such that the ownership of local property or businesses is made untenable by the selective enforcement of measures against foreigners. Japan bashing is the current fad. Japanese and Asian investors face many restrictions in the form of laws enforced against them, but not others. Local politicians score points by railing against foreigners. In most cases, such problems are not simply bribe demands as they are in say, third world countries. They are institutionalized Xenophobia that can only be cured by the foreigner being “punished,” Attempts to buy off the tormentors in the US may only cause more problems.
We know from personal experience that crime and corruption exist everywhere. In places like Mexico, Brazil and the Philippines one faces a real danger of armed robbery and even greater danger of false accusations by bribe-seeking corrupt police or customs officials. However, up until recently the only major governments that were essentially legalized thug rule were the Communists. There, restrictions on freedom of personal travel and economic activities were enforced for their own sake. With the disintegration of the Communists, the last remaining superpower has in many ways, become the successor in terms of making life miserable for its people without any discernible or logical reason. Far too many activities are banned, and far too many people are jailed just for the sake of expanding bureaucratic power. Indeed, the closest thing to the fictional Big Brother government portrayed in the excellent fiction of George Orwell 1984, is now that of the United States.


One of our own clients, last year, merely wanted to close out his account at the US’s largest stock broker. The reason for the requested closure and requested transfer of funds to an account abroad was that he was unhappy being in dollar assets. He had also made a minor complaint to the Zurich office branch manager about the poor servicing of some orders for his account. Over two million dollars in assets were in his own name with this broker. When the money never arrived at his Cayman account, the client inquired and was told that the US Treasury had seized the money (without any notice or court hearings) due to his “unusual activity.”

The only thing unusual was that he wanted to cash in his chips. This fact was reported to the Treasury. The client was informed by a computer-generated government form letter that he could recover it only by bringing a lawsuit, and appearing personally in the US courts. His claim for recovery had to be within a rather short, prescribed period. As he was an Italian and these assets were a big secret from his own government and from his spouse as well, he could not risk the exposure. He kissed his assets goodbye. “It is not a pleasant experience to have two million dollars confiscated!” he wrote us.


Any bank deposits or brokerage transactions (stocks and bond holdings) if made at all, should be made via banks in neutral countries. By investing under the umbrella of a powerful organization with leverage, you protect your privacy better and reduce the risks of personal involvement in a light that could have disastrous consequences. In other words, we say that no US property, stocks or bank accounts should ever be held in your own private name. Not under any circumstances!

There are many reasons for this. The horror story at the end of this section is probably not the worst case, but it is the most scary of many similar tales we have heard and documented. But this is why you should be wary of US investments:
The US regularly seizes or freezes foreign (as well as domestically) owned assets for a host of arbitrary reasons:
Although such incidents are occasionally reported in the press, the extent of US contempt for the sanctity of private property is not generally known nor understood. It is a surprise to this writer that any person should, under the present circumstances, ever invest a penny in the US. For instance, during every conflict or diplomatic crisis, one of the first things the US does is to order the seizure of private assets. We are talking about privately owned American assets held in the names of citizens of countries involved in disputes with the US. Technically, these assets may eventually be recovered after the conflicts are resolved. But making a recovery often involves years of litigation, personal exposure, personal appearances in court, vast expenses, and often bureaucratic denials that the seizure ever took place or that the assets ever existed.
Assets seized in 1941 were still being held by the Alien Property office thirty years after World War II ended. Some privately owned assets taken from (presumably anti-Communist) Cuban based capitalists in retaliation for Castro’s seizures have never been returned. Another danger, totally unrecognized by foreigners, are the “Unclaimed Property & Escheat Laws.” Under these rules, mere inactivity for a period sometimes as short as two years results in property being taken over by the state and no longer earning interest! Administrative hearings, proofs submitted by a lawyer and formal hearings are needed to reclaim the funds. Fees of u third to half of the amounts involved are common. Many foreigners have deposited a nest egg in an American bank only to find that their money wus taken and used to fund an obscure “too good” project.
If you wish to trade in securities, or make a deposit in an American financial institution, you may do so through (and in the name of) most European or Asian banks. An “offshore financial center” bank or nominee is the fiduciary of choice for these transactions. The services of such an intermediate are not free, but the one-quarter of 1 per cent per year. Suppose you in¬advisedly held an account at an American brokerage in your own name. Unwittingly depositing more than $200 in cash to such an account (even at a foreign branch office) could result in the entire account being seized by US authorities for “money laundering”. It is then not possible to do any trading for many years while your account is frozen and your case wends its way through administrative and judicial proceedings and appeals. You may be kept in positions you happened to be in at the time of the freeze. Or, if your assets are sold, your account is converted into non-interest bearing cash dollar deposit with the Treasurer of the US. This cashing-in process happens when the government elects a forced liquidation of your assets. There is no recourse for your attorney’s fees, lost interest or investment losses; even if you do recover the funds. Remember, this all happens regularly when a foreign based investor with a US account violates any one of a myriad of highly technical rules. Even with an American lawyer on retainer, it is possible to get into serious trouble. In fact, much trouble is caused by bad advice from lawyers! In some cases, unless your US asset is in the multi-million dollar range, the inflation adjusted value of frozen assets will not even begin to cover the attorney’s fees expended in the recovery.
Consider the absurdity of many seizures of private property. Scenario: The Mexican or French government confiscates certain American owned assets. The American government retaliates by seizing all private assets of French or Mexican nationals in the US. Such a scenario is common and ordinary. It matters not at all that the citizen who owns the seized property or bank accounts may be personally opposed to the regime the US is having problems with. A few years ago private Iranian owned assets in the US were ordered seized when a group of Iranian militants seized the US Embassy staff as hostages. The militants were leftists and Moslem fundamentalist followers of the Ayatollah. The punished Iranians with the US investments were generally supporters of America’s pal, the ousted Shah.
Kuwaiti private assets were seized in the States and in the UK during the Gulf War. These were the people the US was pledged to help! After Cory Aquino was placed in power by the American maneuvering, many Filipinos with US investments found their property seized by American Treasury Agents. Reason? Alleged connections with the Marcos regime. As Marcos was for a while, the darling and staunch ally of Washington, what Filipino could predict that anyone who profited from a government contract would be considered a criminal in the US.
Seizures and confiscations in the US now run into billions of dollars each year! Almost any pretext will do to activate a new bureaucracy existing only to grab “enemy” assets.
Only the enemy is not usually the enemy – it is more often an innocent and powerless victim. We recall reading the autobiography of a German-Jewish teenager who was shipped to boarding school in England during the Hitler era. In England he was not permitted to finish the schooling that had been prepaid for him, but was interned as an enemy alien for the duration of die war. As we have noted elsewhere, the number one enemy of human beings is not disease, but rather governments. It is they who cause more misery, suffering and premature deaths than any other factor. Some governments are worse than others, but the US is rapidly taking the lead in institutionalized, legalized crime against humanity. This occurs because of the criminalization of many activities formerly considered the normal exercise of freedom. American jails overflow with individuals who under any civilized international norms could not be considered criminals. But here, for the moment, we are more concerned with the civil aspects – the possibility that you will lose only your assets if they are held in your own name in the US. As you will see from our examples, there are unfortunately, few areas of activity that don’t involve the possibility of being jailed. Criminal law penalties have recently been injected into many activities previously considered purely civil matters. The difference between civil penalties and criminal penalties is great. If you lose a civil case, you pay damages. Where government is involved, civil damages usually involve back taxes and relatively reasonable fines. Where criminal charges are made, you may lose your freedom and all your assets may be confiscated. As criminal cases are easier to win and offer more “fun” for prosecutors, few civil cases remain purely civil these days.
To enforce new laws on insider trading, drug dealing, and money laundering, many substantial investor accounts are seized every day. The only requirement seems to be that there be “unusual activities.” These “unusual activities” are, of course, classed as crimes. As a result, every foreign owned account is at risk. Stockbrokers and bankers are required to report (upon pain of criminal penalties for themselves) any “unusual activity” to the US Treasury on special forms. Upon receipt of such reports, accounts are often frozen.
What is “unusual?” No one knows. Depositing cash (even if only the price of a good lunch) is one “unusual” factor, often leading to vast problems. But almost anything could be considered unusual. “Unusual” exists, like beauty, in the eyes of the beholder! As a result, seizures in the US tend to be quite arbitrary. Unless a celebrity is involved, the vast majority of individual cases are not reported in the press. But hundreds occur every day. Like cancer, such problems do not always hit the other guy.


A typical fund/investment manager at a bank puts together a model portfolio where he has say, 20 per cent in dollars, 30 per cent in Yen, etc. Then the dollars are divided up into demand deposits, bonds and stock and the same with other basic currency groups. The main object of the investment manager is to do what everybody else does. By following the crowd he can’t be criticized if something goes wrong.

The second goal is to generate as many commissions for his employer as he can without being accused of churning by a client.
Where does the “smart money” go? It does not go to the typical fund or investment manager at a bank unless pure low interest preservation is wanted.
Our own personal feelings are that there are far too many variables to be able to go where the mythical “smart money” is. The fact is we personally know all kinds of people whom one would think were “smart money” and they make all kinds of horrible mistakes on their personal investments. They make their money on sure things like underwriting and company takeovers, or whatever their business is. I doubt if there is or ever has been anyone in the world who made a really sizeable fortune on just TRADING. Unless of course he had a pipeline to insider information – which it is illegal to trade upon.
Sure, there are lucky people who keep throwing sevens on the corner outs at the crap table. But they are rare and they never make as much as the guy who owns the casino.
We have yet to meet the reader who made serious money by picking out consistently winning stocks or currencies. Playing the markets is nothing more than a crap shoot. Of course, with AAA investments or conservative stock portfolios you can usually “preserve” your capital – which is about all we expect to do. Passive investments (stocks, bonds, currencies) are what you have to have, after all you don’t want the hassles of an active business anymore!
But you can’t expect to make the same return as you got by buying some land with 5 per cent down and putting a spec house on it with borrowed money. When a friend of ours did that, he could make US $25,000 on an investment of zero (or less than zero if he borrowed enough). With State laws like those of California insulating you from personal liability on real estate loans, it can even be done completely without risk. But there are always hassles and the need to put time into “deals”. Once you have had enough of deals, it is an unrealistic expectation that you can make a consistent 50 per cent a year on your money.

NOBODY DOES. The historic real return on capital over inflation is more like 2-3 per cent per year.
Sometimes you can see something obvious like we saw the decline of the Tokyo stock market coming for 3 years before it happened. But timing to take advantage of the obvious is impossible to get right consistently. If we had followed our instincts and sold short Nippon Telephone when it was issued at a p/e ratio of 300, we would have lost our shirts. Because it went up! We would have had to cover our short sales. When our predictions finally came true, we wouldn’t have made enough just to cover our loss of interest. In the stock market, if you want a profit, the answer is to take a course in the Graham & Dodd Fundamentals. Then wait patiently for a buying opportunity (crash) and buy and hold a stock until the market value catches up with the true value – even if it takes ten years.
Our sure bet is some choice real estate in places like East Berlin, Germany, Prague, Budapest. Prices are now 20 per cent of nearby countries and you can get a good return on rents. The risk isn’t great and you can probably get mortgages to cover most of the risk. Why don’t we do it? Frankly we don’t want the hassle of dealing with tenants who don’t pay, frozen pipes, insurance claims, etc. We have enough money to meet our simple needs for such things as travelling anywhere we want to go, getting massaged regularly, eating anywhere and living in a pretty nice place. So why should we get into doing administration work on projects to make more money? And above all, with real estate, you spend half your time screwing around with bureaucrats. Its a living, but if you can get along without becoming part of the system, who needs the aggro?