Bloomberg reports that Italian police ask sec to authenticate seized US treasuries.
(emphasis mine) [my comment]
Italian Police Ask SEC to Authenticate Seized U.S. Treasuries
By Sonia Sirletti and John Glover
June 12 (Bloomberg) -- Italy's financial police said they asked the U.S. Securities and Exchange Commission to authenticate U.S. government bonds found in the false bottom of a suitcase carried by two Japanese travelers attempting to cross into Switzerland.
The bonds, with a face value of more than $134 billion, are probably forgeries, Colonel Rodolfo Mecarelli of the Guardia di Finanza in Como, Italy, said today. If the notes are genuine, the pair would be the U.S. government's fourth-biggest creditor, ahead of the U.K. with $128 billion of U.S. debt and just behind Russia, which is owed $138 billion.
The seized notes include 249 securities with a face value of $500 million each and 10 additional bonds with a value of more than $1 billion, the police force said on its Web site. Such high denominations would not have existed in 1934, the purported issue date of the notes, Mecarelli said. Moreover, the "Kennedy" classification of the bonds doesn't appear to exist, he said.
The bonds were seized in Chiasso, Italy [right next the free port in Chiasso, Switzerland]. Mecarelli said he expects a determination from the SEC "within a few days."
My reaction: This is a fascinating story. I wonder what the SEC will come up with.
1) Italy's financial police have asked the SEC to authenticate U.S. government $134 billion confiscated US bonds
2) If the notes are genuine, the pair would be the U.S. government's fourth-biggest creditor, ahead of the U.K. with $128 billion of U.S. debt and just behind Russia, which is owed $138 billion.
3) The bonds were seized in Chiasso, Italy, which is right next the free port in Chiasso, Switzerland.
Conclusion: whether they are genuine or fake, the confiscated US bonds were no doubt heading to a Swiss "free port". These places are a legal "no man's land", located in Switzerland but not officially on Swiss soil (like embassies).
Swiss Free Ports are a legal "no man's land"
Swiss free ports zones, normally based around airports, operate outside of Swiss government control. Goods entering such zones are not registered or taxed, are not reflected in Swiss import statistics, and are sent to other locations without export duties. While free port zones are part of Swiss territory, they operate outside of Swiss customs control.
Swiss free ports enjoy a level of freedom that others don't. For example, European Union free ports are subordinate to the customs authorities. As such, they have to keep a detailed inventory of all the goods passing through their hands. That is not the case in Switzerland, where goods can be warehoused for an indefinite period of time.
Most trading in Swiss free ports happens anonymously via 3rd parties. Buyers can examine (and bring experts to verify) goods being sold, but rarely are there any direct interactions between buyers and sellers. Since free ports are not transparent, they may hide illegal activities, such as forged paintings and counterfeit securities. These fake goods must be of high enough quality to fool experts.
The four big Swiss free ports are Zurich, Basel, Geneva, and Chiasso.
To summarize, what makes Swiss free ports attractive:
1) Goods are ready to be shipped anywhere in the world and don't need to clear Swiss customs before leaving the country
2) Indefinite storage in location outside the jurisdiction of any sovereign nation.
3) Anonymity afforded
4) Avoid/defer taxes because of special legal status.
Swiss Free Ports are like Aladdin's Cave of Wonders
Because of their special legal status, these free ports are used to store all types of expensive and exotic (sometimes illegal) goods, including art, gold, weapons, wines, stock certificates and other securities, etc... Swiss free ports are the number one place for auctioning jewellery, accounting for 60 percent of the world market. Large quantities of art works from all time periods have also been imported/smuggled into these free ports. They are also used to store large quantities of gold/silver, by investors afraid of confiscation.
My mother has been to Geneva's port franc several times to authenticate the art stored there (she is an art restorer). She described to me what the free port was like from her experience:
1) A client asked me to authenticate a painting in Geneva's free port. First, I entered a guarded parking lot. I then went to a front office and signed in with an elegantly dressed guard. They lead me to a room elegantly furnished with carpets and velvet on walls. There was an empty velvet covered easel. They sit you in an arm chair then go get the painting. In this case, it was a "Van Gogh" self portrait newly "discovered". Everything looked right, the paint, the canvas the stretcher the brush strokes. But the person I was dealing with said she could not obtain permission for the painting to be taken out to be X-rayed. Nor could I take paint samples. Under black light the paint looked right, not glowing bleu like fresh paint. To make me feel she dealt in authentic works of art she got permission for me to visit on two other days vaults that were filled with authentic 18th century French furniture and paintings. I advised the client not to buy the painting.
2) Another client took me to see a vault there filled with 19th century and early 20th century Russian paintings that had been just smuggled out of Russian - this was in the late 1980s just as communism was crumbling.
3) Another client asked me to restore some Rubens and other old master paintings that were kept there. They had been taken out of Spain just before a new law was passed that would tax the wealthy on their valuable art works.
As you can see, these places are filled with very rare and valuable works of art, as well as some extremely high quality forgeries. Whether real or fake, Confiscated Us Bonds were undoubtedly heading to Chiasso's free port, to be sold anonymously to private investors.
Even if these bonds are counterfeit, they still present a major problem for the US. High-quality fraudulent treasury bonds measured in the hundreds of billions is the last thing the US needs to deal with right now, as it is already struggling to find lenders to finance the government's record deficit spending. These fake/real bonds also do nothing to inspire confidence in the dollar at a time when investors around the world are worried about its worth.