TWO JAPANESE CITIZENS CARRYING $134 BILLION WORTH OF UNDECLARED, POSSIBLY COUNTERFEIT U.S. BONDS DETAINED IN ITALY WHILE TRYING TO ENTER SWITZERLAND; ITALIAN AUTHORITIES ARE TRYING TO DETERMINE IF THE BONDS ARE AUTHENTIC

June 11th, 2009

UPDATE: 11: New York Times Finally Reports That the Japanese Men Were Released

This article contradicts itself.

“…Although the Guardia di Finanza suspected the bonds were false…” STOP.

The Japanese men should then be in custody.

Let’s continue:

Italian law does not call for the criminal arrest of persons found to be taking funds without permission to another country. It might have been another matter if the police had determined immediately that the bonds were false.

Let’s boil this down:

“…Although the Guardia di Finanza suspected the bonds were false…” the Japanese men, “were released after being stopped.”

Now, get this: The men were held for many hours or days before being released. How do we know? Look at this:

“The men were questioned, but not arrested,” said Naoki Oyakawa, an official at the Japanese consulate in Milan, which contacted judicial officials in Como after reading about the seizure in the Italian papers.

The Japanese consulate learned of the incident from reporting in the Italian media. How long had the men not been under arrest at that point? Then, an official at the Japanese consulate in Milan contacted officials in Como. The Japanese men were released.

In summary:

Japanese men detained – Italian authorities suspect fake bonds – Japanese men should have been placed under arrest pending investigation – But instead, Italian authorities are contacted by someone at the Japanese consulate in Milan – Japanese men released.

I don’t know if this is what happened, but this is what it sounds like to me: Diplomatic Immunity:

Diplomatic immunity is a form of legal immunity and a policy held between governments, which ensures that diplomats are given safe passage and are considered not susceptible to lawsuit or prosecution under the host country’s laws (although they can be expelled).

Via: New York Times:

Ever since two middle-aged men with Japanese passports were caught in Italy this month trying to smuggle a purported $134.5 billion in United States government bearer bonds into Switzerland, the Internet has been abuzz with theories.

Was the Japanese government, or some other creditor nation, secretly trying to dump Treasury bonds to drive down the value of the dollar? Had the Italian mafia stolen the equivalent of 1 percent of the American gross domestic product, using the paper, which supposedly was instantly convertible into cash, to run a giant scam?

Adding spice was the whole Bond — James Bond — aspect of the tale. A crowded customs checkpoint near the Alps; two men traveling on a local train, professing that they had nothing to declare; and a false-bottom suitcase containing United States government bonds made out in stratospheric denominations.

In all, the Italian financial police and customs guards confiscated 249 paper bonds, each supposedly worth $500 million, and 10 bonds with a face value of $1 billion each.

Too bad the bonds were fake.

“The whole thing is a total fraud,” Stephen Meyerhardt, a spokesman for the Treasury Department, said Thursday. “They don’t look anything like real securities, which in any case were never issued in any of those denominations.”

The highest denomination ever issued by the Treasury Department was $10,000, he said. The Italian financial police claimed some of the paper was “Kennedy bonds” from the 1930s, but no such bonds ever existed. And the total of Treasury bearer bonds still outstanding is a mere $105 million; the Treasury has been issuing bonds in electronic form since 1986.

But none of this has stopped the rumor mill from grinding away. After reports of the seizure began to trickle out of Italy, the blogosphere sprang into action, the ponderings fueled by suspicions that the mainstream media was willfully ignoring the tale.

The story took on greater life after Italian authorities — who have refused to talk about the scandal — declined to declare the bonds fakes until they were examined by Washington. After all, although the Guardia di Finanza suspected the bonds were false, if they were not, the Italian treasury stood to profit from a law that permits the government to pocket up to 40 percent of the total value of cash or securities smuggled into the country over the legal export limit, which is 10,000 euros.

Repeated telephone calls to the prosecutors’ office in Como, Italy, that is handling the investigation were not returned.

Darrin Blackford, a spokesman for the United States Secret Service, which was contacted by the Italian financial police and the prosecutor’s office to determine the “legitimacy of the seized financial instruments,” said that his agency had verified the bonds were “fictitious instruments and were never issued by the United States government.”

Col. Rodolfo Mecarelli, the provincial commander of the financial police in Como, said the investigations were focused on “understanding who these men were and where they were from.”

Or where they might have been going. “Switzerland may not have been their final destination,” he said in a recent interview. “They could have taken a plane anywhere.”

Also unknown are the whereabouts of the two men, who were released after being stopped in early June. Italian law does not call for the criminal arrest of persons found to be taking funds without permission to another country. It might have been another matter if the police had determined immediately that the bonds were false.

“The men were questioned, but not arrested,” said Naoki Oyakawa, an official at the Japanese consulate in Milan, which contacted judicial officials in Como after reading about the seizure in the Italian papers.

He said the two men had valid Japanese passports, but he would not elaborate further on their identities. “We don’t know where they are now,” he said. “We have had no contact with the two men. They have not asked us for our help.”

What the bonds were for remains unclear. “It’s not the sort of thing that you can just go into a bank and convert,” said Colonel Mecarelli. “But they may have been useful to guarantee business deals among people who don’t use cash.”

Agencies that deal with financial crimes, including Europol, declined to comment while the Italian investigation was still under way.

The Treasury Department says it is stumped, too.

“I can’t speak to the motives of the person or persons who tried to do this,” Mr. Meyerhardt said. “I would guess that they were trying to find someone foolish enough to buy the securities for real money.”

—End Update—

UPDATE 10: ACCORDING TO MAINICHI SHIMBUN NEWS, THE JAPANESE MEN HAVE BEEN RELEASED BY THE ITALIAN AUTHORITIES; THEIR WHEREABOUTS ARE UNKNOWN

Financial Times Alphaville and Joe Weisenthal on Clusterstock linked to a 16 June 2009 article in the Japanese language publication, Mainichi Shimbun, that indicated that the Japanese men involved with this bond situation have been released by the Italian authorities without being charged with any crime.

I requested Japanese to English translations from Cryptogon readers. I received four independent translations. They all contain essentially the same information, the main point being that, YES, the Japanese men were released by the Italian authorities. According to the information below, because the men were not caught using the fake bonds in the commission of fraud, even though the bonds were fake, the men were released without charge.

Let that sink in for a moment…

Oh sure. Get caught trying to enter Switzerland with a load of fake bonds and see if you walk out of jail several days later. I wouldn’t count on it, but these Japanese guys had a get-out-of-jail free card, and now they’re gone.

This story continues to fester and mutate. I’ll keep an eye on it.

Many thanks to Cryptogon readers GB, K, T and P. GB and P produced the cleanest English translations of the Mainichi Shimbun article. I will post those below.

GB’s translation:

Italy: Are the 13 trillion yen worth of bonds forgeries? Two Japanese held on suspicion of smuggling are released without penalty

[Como (northern Italy)] Two Japanese men on June 3 were detained by Italian authorities trying to carry a total of 134 billion dollars (approx. 13 trillion yen) worth of U.S. bonds from Italy into Switzerland. By June 15 investigative work by the Mainichi Shinbun determined that the bonds were likely to be forgeries. And it turns out that in early April of this year there was another incident of seized bonds that appeared to involve Japanese. Seeing that there is systematic involvement including Japanese behind these successive cases of forged bonds of “colossal value,” Italian Financial Police and the Como Public Prosecutor’s Office are investigating.

The Como PPO is currently liaising with the American Embassy in Rome to look into the seized bonds. According to the concerned persons, it is highly likely that the U.S. bonds and Kennedy bonds that the two persons were in possession of do not exist in denominations of such high value and such dates of issue. By Italian law, if the bonds were genuine, the two persons would be subject to a massive fine for failure to declare the export of the bonds; in the case of forged bonds, however, if the bonds are not used or displayed, no punishment is applicable. So the two detained men were released after questioning. Apparently the Japan Consulate General in Milan does not know the current whereabouts of the two men.

In the incident of April this year, an Italian man tried to carry forged Japanese treasury bonds worth a total of 20 billion dollars into Switzerland, on the request of a Japanese person. The bonds were seized by the Italian Financial Police.

Mainich Shinbun June 16, 2009. Tokyo evening edition

P’s translation:

Italy: The 13 trillion Yen in bonds are fakes? The 2 Japanese held for attempting to smuggle them out have been released without charge

Como (Northern Italy). In March of this year, the Italian authorities took into custody two Japanese nationals for trying to bring from Italy into Switzerland U.S. securities certificates worth $134 billion (about 13 trillion yen) in total. By the 15th the Mainichi Newspaper had ascertained that there was a high possibility these certificates were forgeries. In addition, we have confirmation of another case from early April wherein a Japanese national was allegedly involved with other forged securities seized by authorities. The Italian financial police and the Como public prosecutor’s office have successively opened investigations into whether lurking behind these fradulent certificates priced at vast sums the activities of Japanese nationals is being organized at a higher level.

The same public prosecutor’s office investigated the seized securities in co-operation with the American embassy in Rome. According to those involved, in all likelihood the U.S. treasury bonds and Kennedy bonds that the two were carrying are not real. By Italian law, the two would have been charged with failing to declare the bonds upon importation and subjected to enormous fines had the bonds been real, but because the bonds were fakes and they neither attempted to execute or present them to anyone, they cannot be charged and were released after questioning. The Japanese consulate-general in Milan stated that they do not know the whereabouts of the two released from custody.

As for the incident from early April, the Swiss financial police had seized forged Japanese treasury bonds with a face value of $20 billion, which an Italian man had tried to bring into Switzerland at the behest of a Japanese person.

—End Update—

UPDATE 9: “Kennedy Bonds” Included Images of the Space Shuttle

Woops.

Via: Reuters:

A purported $134 billion in U.S. government bearer bond certificates seized by police near the Italian-Swiss border are fake, the U.S. Treasury said on Friday.

“Based on the photograph we’ve seen online, they are clearly fake. And not even good fakes,” said Stephen Meyerhardt, a spokesman for the Treasury’s Bureau of the Public Debt.

He added that there is only $105 million in Treasury bearer bond securities outstanding, so the $134 billion amount seized far exceeds the universe of outstanding securites.

The Treasury’s determination confirmed the suspicions of Italy’s Guardia di Finanza, or tax police, who seized the bond documents in early June from two Japanese nationals at the Chiasso rail station in northern Italy, close to the border with Switzerland.

The bonds comprised 249 “Federal Reserve” bonds of $500 million nominal value each and 10 “Bond Kennedy” with a $1 billion nominal value, the tax police said June 4 in a statement.

A senior tax police officer said Italian authorities also were checking whether the two travelers’ Japanese documents are genuine.

In the last two years, Italian authorities have seized some $800 million of U.S. bonds in the Como area in northern Italy.

Meyerhardt said U.S. government investigators believe that the seized bond forgeries were made using commercial photo enhancement software to alter the image of a $100 bill to increase the amount into millions or billions and add what appear to be interest coupons.

Another U.S. official said the seized bonds were purported to be issued during the Kennedy administration in the early 1960s, but the certificates showed a picture of a space shuttle on it — a spacecraft that first flew in 1981. Some of the bonds were purportedly issued in a $500 billion denomination that never existed.

The official, who spoke on background because he was not authorized to discuss specifics of the case, said that scam artists, rather than trying to exchange fake bearer bonds directly for cash, will sometimes try to use them as fraudulent collateral for loans.

The Treasury frequently uncovers scams involving bearer and other securities issued in the 1930s and 1940s. Images of some of these counterfeit bonds appear on a Treasury website aimed at combating fraud, here .

The U.S. Secret Service, which polices counterfeiting of U.S. currency, is assisting Italian authorities in tracing the source of the fake bonds, said Ed Donovan, a spokesman for the agency.

The forgery determination came a day after the Treasury warned U.S. banks against the potential for increased currency counterfeiting activity and large cash transactions by North Korea in an effort to evade U.N. sanctions aimed at cutting off financing for Pyongyang’s nuclear weapons and missile programs.

—End Update—

UPDATE 8: The Mafia Did It?

Well, that’s convenient…

Something weird is happening because nobody seems to be able to say:

1. The names of the suspects

2. The nationality of the suspects

3. Oh yeah, where are the suspects now?

Remember, the initial press release from the Italian authorities emerged on 4 June.

On one level, yes, it’s fraud. But on another level: What is it about fake bonds and Switzerland? This is a persistent theme.

Via: Financial Times:

One summer afternoon, two “Japanese” men in their 50s on a slow train from Italy to Switzerland said they had nothing to declare at the frontier point of Chiasso.

But in a false bottom of one of their suitcases, Italian customs officers and ministry of finance police discovered a staggering $134bn (€97bn, £82bn) in US Treasury bills.

Whether the men are really Japanese, as their passports declare, is unclear but Italian and US secret services working together soon concluded that the bills and accompanying bank documents were most probably counterfeit, the latest handiwork of the Italian Mafia.

Few details have been revealed beyond a June 4 statement by the Italian finance police announcing the seizure of 249 US Treasury bills, each of $500m, and 10 “Kennedy” bonds, used as intergovernment payments, of $1bn each. The men were apparently tailed by the Italian authorities.

The mystery deepened on Thursday as an Italian blog quoted Colonel Rodolfo Mecarelli of the Como provincial finance police as saying the two men had been released. The colonel and police headquarters in Rome both declined to respond to questions from the Financial Times.

“They are all fraudulent, it’s obvious. We don’t even have paper securities outstanding for that value,’’ said Mckayla Braden, senior adviser for public affairs at the Bureau of Public Debt at the US Treasury department. “This type of scam has been going on for years.’’

The Treasury has not issued physical Treasury bonds since the 1980s – they are handled electronically – though they still issue savings bonds in paper format.

In Washington a US Secret Service official said the agency, which is working with the Italian authorities, believed the bonds were fake.

Officials in Tokyo were nonplussed. Takeshi Akamatsu, a Japanese foreign ministry press secretary, said Italian authorities had confirmed that two men carrying Japanese passports had been questioned in the bond case but Tokyo had not been informed of their names or whereabouts.

“We don’t know where they are now,” Mr Akamatsu said.

Italian officials, while pointing out that hauls of counterfeit money and Treasury bills were not unusual, were stunned by the amount involved. Investigators are looking into the origin and destination of the fakes.

Italian prosecutors revealed last month that they had cracked a $1bn bond scam run by the Sicilian Mafia, with the alleged aid of corrupt officials in Venezuela’s central bank. Twenty people were arrested in four countries.

The fake bonds were to have been used as collateral to open credit lines with banks, Reuters news agency reported. The Venezuelan central bank denied the accusations.

—End Update—

UPDATE 7: U.S. Says Treasury Bonds Seized in Italy Are ‘Clearly Fakes’

I made the correct call five days ago, but here’s confirmation.

Via: Bloomberg:

U.S. government bonds found in the false bottom of a suitcase carried by two Japanese travelers attempting to cross into Switzerland are fake, a Treasury spokesman said.

“They’re clearly fakes,” Stephen Meyerhardt, a spokesman for the U.S. Bureau of the Public Debt in Washington, said yesterday. “That’s beyond the fact that the face value is far beyond what’s out there.”

Italy’s financial police last week said they asked the U.S. Securities and Exchange Commission to authenticate the seized bonds, with a face value of more than $134 billion. Colonel Rodolfo Mecarelli of the Guardia di Finanza in Como, Italy, said the securities, seized in Chiasso, Italy, were probably forgeries.

Meyerhardt said Treasury records show an estimated $105.4 billion in bearer bonds have yet to be surrendered. Most matured more than five years ago, he said. The Treasury stopped issuing bearer bonds in 1982, Meyerhardt said.

Had the notes been genuine, the pair would have been 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.

According to the Italian authorities, the seized notes included 249 securities with a face value of $500 million each and 10 additional bonds with a value of more than $1 billion, as well as securities purported to be “Kennedy” bonds. Meyerhardt said no such securities exist.

Nowadays, Treasury securities are issued electronically. The U.S. started converting all of its marketable debt from paper to electronic form in the 1980s.

—End Update—

UPDATE 6: Documents Show Issue Date of 1934: This Is Fraud

According to Bloomberg, the purported securities were issued in 1934:

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. Mecarelli said he expects a determination from the SEC “within a few days.”

1934… 1934… It was registering faintly in the back of my brain somewhere. But why?

I posted about a similar scam in 2005. (You know that you’ve been running a blog for a long time when you go looking for information and find it on your own site from four years back, but forgot that you posted it in the first place.)

Since the original Philippine Star article is long gone, I’ll bring it forward from my archives:

$3-trillion fake federal bank notes seized from 2 Britons
By Evelyn Macairan
The Philippine Star 04/22/2005

The National Bureau of Investigation (NBI) announced yesterday the arrest of two British nationals who were caught in possession of $3-trillion fake US federal bank notes in an entrapment operation.

Charges of forgery and illegal possession of bank notes were filed against Paul Edward John Flavell and Sam Beany, both residents of the CEO Apartments located on Jupiter street, Makati City.

Manuel Eduarte, head agent of the NBI Anti-Graft Division said charges against the suspects were filed before the Makati City Prosecutor’s Office last April 15. The two were granted temporary liberty after they each posted P16,000 bail last Tuesday.

However, NBI Director Reynaldo Wycoco said he has coordinated with the Bureau of Immigration and requested that the two suspects be included in its watchlist.

Two of their alleged cohorts, also British nationals, have yet to be apprehended by lawmen. They were identified as Zeki Mehmet Bayram and Peter Wittkamp.

The NBI recovered from Flavell and Beany a metal scroll and fake US federal bank reserves totaling $3 trillion, which were contained in an iron chest.

There were 13 boxes in the chest, each containing 50 reserve notes that amounted to $1 billion.

Eduarte said the notes were definite forgeries since the biggest amount the US government came out with was in the denomination of $10,000.

The counterfeit bonds were supposedly manufactured in 1934.

In a report submitted by the NBI-AGD to Wycoco, international courier company DHL Philippines informed their unit last April 14 that suspects Flavell and Beany were about to ship a cargo of fake US federal reserves to Zurich, Switzerland. They paid P53,967.24 as shipment fee.

Eduarte’s agents confirmed that the suspects went to the DHL office located at Pasong Tamo street in Makati City.

The two suspects allegedly paid the shipment fee and were asked to open the iron chest for inspection. Upon seeing that the contents were similar to the items they seized from a previous operation, the NBI agents accosted them.

There have been several like this over the years. See:

Customs Displays Phony 1930s Cash, Bonds:

They stink. Literally and figuratively.

Moldy bonds and bills that con artists used to try to bilk seniors were on display in downtown San Diego yesterday, the loot from two recent seizures by federal fraud cops.

The bonds and bills are dated 1934 and bear incredible denominations – $500,000, $100 million, $500 million – and portraits of former President Ulysses S. Grant and one-time Treasury Secretary Salmon P. Chase.

One set was seized last month in a San Diego-bound Federal Express shipment from the Philippines, agents said. The moldy bonds were hidden among pages of a photo album.

Four other sets were turned over this summer by a lawyer who said he got them from an El Cajon man indicted in Indiana on fraud charges, said Daniel Burke, who heads a fraud task force with U.S. Immigration and Customs Enforcement.

“Absent the story, absent the sales pitch, a normal person should believe they’re bogus,” he said.

Oh, the story.

That’s the key to understanding how crooks use these documents.

In both of these cases, they told potential victims that the bonds recently were recovered by Filipino tribes from a 1930s-era, CIA-owned DC-10 airplane that crashed, killing all aboard, Burke said.

The U.S. government was sending the bonds in a secret effort to help the Chinese government, the story goes. Only people with connections can cash the bonds, and investors can buy in for a few thousand dollars, getting three to five times their money back.

And, because of the secrecy, the government will deny their authenticity.

A little common sense reveals the lie behind the story. DC-10 jets didn’t exist in the 1930s. Or the CIA. And the U.S. government never printed bonds or money in such amounts.

“People don’t use their common sense,” Burke said.

There are other clues. ZIP codes – printed on some of the bonds – didn’t exist in 1934, and Grant appears on $50 bills, not $500 million.

Chase appears on a $10,000 bill used exclusively by banks that is no longer in production.

The largest currency ever printed by the United States was for $100,000, again used only by banks. The $100 bill is the largest made today.

Forensic scientists haven’t examined the bonds and bills displayed yesterday but have determined that similar documents were produced on computer printers within the past 10 years, he said.

Tricksters tried to make them look old by getting them wet and moldy.

“All part of the scam,” said Michael Unzueta, acting special agent in charge of the San Diego office of Immigration and Customs Enforcement.

No local victims have been identified and no arrests have been made directly related to the bonds and bills displayed yesterday, the agents said, requesting victims call authorities.

Burke, who investigated a case involving bogus bonds while working in Denver several years ago, said cheats target senior citizens with fat retirement accounts.

The Denver case, which involved a sting operation, fell apart because the sellers eventually offered the bonds as “historical documents” not guaranteed by the federal government. Jurors couldn’t agree that a crime had taken place.

In the local cases, the San Diego man who was to receive the album with the hidden bonds has agreed to cooperate with authorities and has not been arrested, Burke said.

Orin Aune, the El Cajon man who authorities say gave the lawyer four boxes with the other bonds, is being prosecuted in Indiana on fraud charges in a case involving bogus $100 million bills.

According to the indictment, Aune passed himself off as the sultanate to Sula and North Borneo and the deputy minister of finance for the non-existent country. He also took part in a conference call with a potential investor.

Federal officials say they get calls about the bonds most frequently from the Far East and cite three convictions in the United States in cases involving the fake bonds.

They also note a 2002 appeals court decision in a lawsuit by the holders of some of the bonds against the Federal Reserve Bank of Chicago, which refused to cash the bonds.

Justices called the claims “preposterous,” noting the national debt in 1934 was $28 billion, and say the reason few scammers have been prosecuted is “because no one could possibly be deceived by such obvious nonsense.”

U.S. Bond Scammer Jailed for Six Years:

A former Scotland Yard scientist who tried to perpetrate the world’s biggest fraud by authenticating $US2.5 trillion ($3.53 trillion) worth of fake US Treasury bonds has been jailed for six years.

Graham Halksworth, 69, claimed that the bonds had been secretly issued by the US government in 1934 to help nationalists undermine the communist revolution in China.

But, he said, the aircraft carrying them had crashed in the Philippines, where local tribesmen had discovered the 22 cases stamped with the American golden eagle and kept them for over 60 years.

Halksworth said a tribal elder had given them to Michael Slamaj, a former soldier in Yugoslavia, and they were brought to the vaults of a London bank.

This yarn was as untrue as it was colourful, Steven Perian, prosecuting, told a jury at Snaresbrook Crown Court in east London, which last month convicted both men of conspiracy to defraud.

He described Halksworth, from Mossley, Greater Manchester, as “an expert who has turned dishonest” out of greed.

Halksworth, who had been a leading fingerprint expert at Scotland Yard, was paid £60,000 ($144,000) to authenticate the bonds, redeemable for US gold.

But when two men tried to pass off $US25 million worth of the bonds at a Toronto bank in 2001, a Mountie noticed the bonds bore the word “dollar” instead of “dollars”.

Police raided the London bank vault and discovered the other bonds in boxes made of modern plastic, unknown at the time of the alleged plane crash.

Experts in America and Canada also found that the bonds – with a face value far more than the entire global gold stock – had been printed with an ink jet printer that had not been invented when the bonds were allegedly produced.

Zip codes were also used, even though they were not introduced until 1963.

Members of the conspiracy had intended to use the bonds around the world as a means of obtaining “enormous” sums in credit.

When confronted, Halksworth insisted that the bonds were genuine.

He accused the US government of lying about their authenticity because it could not afford to honour them.

But Mounties and FBI agents told the court that the bonds were fakes and had never been issued by the US authorities.

Jailing the scientist, Judge William Birtles told him:

“You were an essential part of the conspiracy. Your motivation could only have been one of greed and your reward was not to be just a fee for the authentication that you made.”

The judge said even though both men were incompetent conspirators, “the potential loss to a financial institution was enormous”.

Ok, so we know that there’s a long running scam out there involving fake bonds, but why does Switzerland keep coming up? Why are multiple scammers attempting to move fake bonds to Switzerland?

Hmm. Maybe the Bank for International Settlements needs new wallpaper?

For more on bond related fraud, see the U.S. Treasury: Frauds, Phonies, & Scams.

—End Update—

UPDATE 5: Spiegel Online Is Now Covering the Story

No new information is presented.

Via: Spiegel Online:

It is either the biggest smuggling operation in history — or a fraud of equally impressive proportions. Italian customs officials stopped two men at the Swiss border carrying bonds worth $134 billion (95.8 billion euros).

UPDATE 4: Japan Probes Report Two Seized With Undeclared Bonds

Yesterday, I emailed two Bloomberg reporters who cover bonds, asking them, simply, “Where’s the so-called financial press on this one?” I included a link to this compilation of information on Cryptogon. I didn’t expect a response and I didn’t get one, but at least Bloomberg is finally covering this story. The reporters on the piece below aren’t the reporters I emailed yesterday.

This article raises an extremely interesting question:

ARE THE MEN ACTUALLY JAPANESE?

Folks, whatever happens, don’t let this story disappear. Keep the heat on.

Via: Bloomberg:

Japan is investigating reports two of its citizens were detained in Italy after allegedly attempting to take $134 billion worth of U.S. bonds over the border into Switzerland.

“Italian authorities are in the midst of the investigation, and haven’t yet confirmed the details, including whether they are Japanese citizens or not,” Takeshi Akamatsu, a spokesman for the Ministry of Foreign Affairs, said by telephone today in Tokyo. “Our consulate in Milan is continuing efforts to confirm the reports.”

An official at the Consulate General of Japan in Milan, who only gave his name as Ikeda, said it still hasn’t been confirmed that the individuals are Japanese. “We are in contact with the Italian Financial Police and the Italian Public Prosecutor’s Office,” Ikeda said by phone today.

The Asahi newspaper reported today Italian police found bond certificates concealed in the bottom of luggage the two individuals were carrying on a train that stopped in Chiasso, near the Swiss border, on June 3.

The undeclared bonds included 249 certificates worth $500 million each, the Asahi said, citing Italian authorities. The case was reported earlier in Italian newspapers Il Giornale and La Repubblica and by the Ansa news agency.

If the securities are found to be genuine, the individuals could be fined 40 percent of the total value for attempting to take them out of the country without declaring them, the Asahi said.

The Italian embassy in Tokyo was unable to confirm the Asahi report.

—End Update—

UPDATE 3: Yosano Says Japan’s Trust in Treasuries ‘Unshakable’

Oh sure. Tell me another one.

Via: Bloomberg:

Japanese Finance Minister Kaoru Yosano said his government is confident about the outlook for U.S. Treasuries, signaling the second-biggest foreign holder of the securities will keep buying them amid record sales.

“We have complete trust in the fact that the U.S. views its strong-dollar policy as fundamental,” Yosano, 70, said in an interview in Tokyo on June 10 before attending a Group of Eight meeting of finance ministers starting today in Italy. “So our trust in U.S. Treasuries is absolutely unshakable.”

—End Update—

UPDATE 2: Picture of Seized Bonds

Via: adnkronos.com:


U.S. Treasury documents confiscated by Italian authorities

—End Update—

UPDATE 1: English Translation of Press Release Issued by the Guardia Italiana di Finanza (Italian Financial Police) on 4 June 2009

I received two different translations and a third offer to do a translation. (Thank you, CL, A and V.) The two translations I received were similar, so I’m going to post them both here. Here is CL’s translation:

Impounded at Chiasso [place] USA securities for 96 billion euros.

249 bonds of the Federal Reserve of the United States, each with nominal value of 500 million dollars, as well as 10 Kennedy bonds each of 1 billion dollars in value, hidden in the double bootom of a suit case, for a total of a good 134 billion dollars, equal to more than 96 billion euros.

This is how much was sequestered [don’t know legal implication of this term] at the internation railway station in Chiasso, at the Swiss-Italian border, functionaries of the Territorial Operational Section of Chiasso, in collaboration with soldiers/members of the Financial Police [Guardia di Finanzia] of Ponte Chiasso, during the checking of bags aimed at stopping the illegal trafficing of capital.

The amount was in the possession of to fifty year old Japanese men who had arrived at the Chiasso railway station on a train coming from Italy and who, when checked by customs, had stated that they had nothing to declare.

Instead an accurate check of the bags facilitated the discovery of the American securities, hidden in the bottom of the suitcase, in a closed section separated from the part of the bag containing personal items.

Apart from the securities the Japanese men were carrying a considerable sum of original bank documents.

Investigations are underway to establish the identity and the origin of both the bonds and the bank documents that have also been impounded. If the securities are authentic, based on regulations in place, the penalty applicable to the possessors [of the bonds] could reach 38 billion euros, equivalent to 40% of the sum in excess of the acceptable baggage allowance of 10 thousand euro.

Here’s A’s translation:

249 Federal Reserve Bonds for 500 million dollars of nominal value each, plus 10 Kennedy bonds of 1 billion dollars each was found in the hidden bottom of a suitcase for a total of 134 billion dollars, or around 96 billion euro.

That’s what has been confiscated during some checks for illicit capital traffic by operatives of Sezione Operativa Territoriale di Chiasso in the Chiasso train station, on the boundary between Italy and Switzerland, in collaboration with Guardia di Finanza del Gruppo di Ponte Chiasso.

The bonds where carried by two Japanese people in their fifties that got off in the Chiasso train station from a train coming from Italy. At customs they declared nothing of value.

An accurate search of their luggage showed up the bonds, well hidden in a special compartment of their suitcases, behind their personal effects.

In addition to the bonds the two Japanese were carrying a large amount of original banking documentation.

Investigations are underway for the bonds and the documents, which also have been confiscated, to understand their authenticity and origin. If the titles would be authentic, the administrative sanction applicable would amount 38 billion euro, equivalent to 40% of the exceeding of the maximum allowed amount of 10.000€.

—End Update—

There is a news blackout on this story. Please nail this one to the foreheads of the mainstream financial press until they cover it.

I am requesting an accurate English translation of the press release that was issued by the Guardia Italiana di Finanza (Italian Financial Police) on 4 June 2009 about this incident. If you have the ability to provide all of us with an accurate English translation of this press release, please contact me. Here is a machine translation of the press release.

Lagavulin submitted this Asia News Italy to the Cryptogon Subreddit two days ago. Here is the full text:

06/08/2009 15:18
ASIA – ITALY
US government securities seized from Japanese nationals, not clear whether real or fake Bonds worth US$ 134.5 billion are seized. This is the largest financial smuggling case in history. But are they real? Concern over ‘funny money’ or counterfeit securities is spreading in Asia. The international press is silent.

Milan (AsiaNews) – Italy’s financial police (Guardia italiana di Finanza) has seized US bonds worth US 134.5 billion from two Japanese nationals at Chiasso (40 km from Milan) on the border between Italy and Switzerland. They include 249 US Federal Reserve bonds worth US$ 500 million each, plus ten Kennedy bonds and other US government securities worth a billion dollar each.

Italian authorities have not yet determined whether they are real or fake, but if they are real the attempt to take them into Switzerland would be the largest financial smuggling operation in history; if they are fake, the matter would be even more mind-boggling because the quality of the counterfeit work is such that the fake bonds are undistinguishable from the real ones.

What caught the policemen’s attention were the billion dollar securities. Such a large denomination is not available in regular financial and banking markets. Only states handle such amounts of money.

The question now is who could or would counterfeit or smuggle these non-negotiable bonds.

In order to stop money laundering Italian law sets a ceiling of 10,000 euros per person for importing or exporting money without declaring it. The penalty for violating the law is 40 per cent of the money seized.

If the certificates were real, for Italy it would be like hitting the jackpot. The fine alone would amount to US$ 38 billion, five times the estimated cost of rebuilding quake-devastated Abruzzi region. It would help Italy’s eliminate its public deficit.

If the certificates are fakes the two Japanese nationals could get a very lengthy jail sentence for fraud.

As soon as the seizure was made the US Embassy in Rome was informed. Italian and US secret services were called in to assist the Italian financial police.

Some important international financial newspapers had already reported on the existence of ‘funny money’ circulating on parallel, i.e. unofficial, financial markets.

For AsiaNews a few points need considering:

1. When it comes to Italy the world press has tended to focus on Italian Prime Minister Berlusconi’s personal problems rather than on stories like the bonds smuggling affair which has been front page on Italian newspapers.

2. The fear of counterfeit bonds and securities has spread across Asia with the result that real securities are also considered with suspicion.

3. During the Second World War several countries at war printed and put in circulation perfectly counterfeit enemy money. It is also historically established that some central banks, like the Bank of Italy 65 years ago, issued the same securities twice (identical registered number and code). This way they could print more money with legal tender than they officially declared. The main difference though is that 65 years ago the world was involved in a bloody war, which is not the case today.

I was not able to find ANY English language translation of this story until today.

This is from Kyodo News Service, reposted on Japan Today:

2 Japanese carrying $134 bil worth of U.S. bonds detained in Italy

Thursday 11th June, 06:18 AM JST

ROME —

Two Japanese nationals were detained by Italian financial police last week after trying to enter Switzerland with $134 billion worth of undeclared U.S. bonds, mostly Treasury bonds, an Italian daily said Wednesday. The Japanese consulate general in Milan confirmed that the detention had taken place and said it was trying to confirm with Italian authorities whether the two were indeed Japanese nationals and their identities.

According to the report in il Giornale, two unidentified Japanese in their 50s concealed the bonds, including 249 U.S. Treasury bonds each worth $500 million, in a suitcase with a false bottom that was searched by the Italian authorities June 3 when they were in Chiasso, at the border with Switzerland, about 50 kilometers north of Milan. The daily did not say on what charges they have been detained, but the two may have been detained on suspicion of attempting to take a large amount of securities out of Italy without declaring it because the paper said they had not declared the bonds.

Here is the Italian language press release from Guardia Italiana di Finanza (Italian Financial Police) on 4 June 2009:

Sequestrati a Chiasso titoli USA per novantasei miliardi di euro
Milano, 4 giu. (Adnkronos)

Duecentoquarantanove bond della Federal Reserve statunitense, del valore nominale di 500 mln di dollari ciascuno, piu’ 10 bond Kennedy da 1 mld di dollari ciascuno, occultati nel doppio fondo di una valigia, per un totale di ben 134 mld di dollari, pari a oltre 96 mld di euro.

E’ quanto hanno sequestrato alla stazione ferroviaria internazionale di Chiasso, al confine tra Svizzera e Italia, funzionari della Sezione Operativa Territoriale di Chiasso, in collaborazione con i militari della Guardia di Finanza del Gruppo di Ponte Chiasso, nel corso dei controlli volti al contrasto del traffico illecito di capitali.

I valori erano posseduti da due cinquantenni giapponesi scesi alla stazione ferroviaria di Chiasso da un treno proveniente dall’Italia che, al momento del controllo doganale, hanno sostenuto di non avere nulla da dichiarare.

Un’accurata verifica dei bagagli ha consentito invece di trovare i titoli Usa, occultati sul fondo di una valigia, in uno scomparto chiuso e separato da quello contenente gli indumenti personali.

Oltre ai titoli, i due giapponesi trasportavano una cospicua documentazione bancaria in originale.

Per i bond e la documentazione che li accompagnava, anch’essa sottoposta a sequestro, sono in corso indagini volte a stabilirne autenticita’ e provenienza. Qualora i titoli risultassero autentici, in base alla vigente normativa, la sanzione amministrativa applicabile ai possessori potrebbe raggiungere i 38 miliardi di euro, pari al 40% della somma eccedente la franchigia ammessa di 10mila euro.

Research Credit: Lagavulin, LB, CL, and A

5 Responses to “TWO JAPANESE CITIZENS CARRYING $134 BILLION WORTH OF UNDECLARED, POSSIBLY COUNTERFEIT U.S. BONDS DETAINED IN ITALY WHILE TRYING TO ENTER SWITZERLAND; ITALIAN AUTHORITIES ARE TRYING TO DETERMINE IF THE BONDS ARE AUTHENTIC”

  1. lagavulin Says:

    Wow, this is actually starting to look like fraud of some kind, if not outright counterfeiting.

    Pair this with reports that the Italian government is largely Mob-controlled anymore, and it makes me wonder who else is involved in this transaction…

  2. Seattle Shortbus Says:

    Is this related to a notice published by The Fed in November 2007?

    I’ve had bing translate the text on this page http://mercatoliberonews.blogs.....iganti.htm to confirm it was reporting on the $134B smuggling story, which does appear to be the case.

    There is .pdf attachment found on the page http://etleboro.com/documents/copy-title.pdf, but I am unable to tell if the documents are supposed to be directly related to the Japanese smugglers.

    However, the documents reference two names. One is Yohannes Riyadi, and the other is Teo Hui Kiat.

    A quick google search turns up a result for the former on the New York Fed’s page of banking scams http://www.newyorkfed.org/banking/frscams.html (no real useful results for Teo Hui Kiat).

    Full text here:
    The Federal Reserve is aware of a fraudulent scam involving individuals using the names Yohannes Riyadi and/or Wilfredo Saurin, or persons claiming to be representatives of these two men. In a typical version of this scam, Mr. Riyadi and/or his delegates falsely claim that they have on deposit with the Federal Reserve Bank of New York several U.S. Treasury Checks issued to Mr. Riyadi amounting to billions of dollars.

    The Federal Reserve Bank of New York has been contacted by several brokers and financial institutions worldwide inquiring about the validity of this fraudulent account documentation, which is being offered as collateral for lines of credit or other types of asset based financing. The fraudulent scheme includes multiple documents which purport to have the signatures of various Federal Reserve officials, including Chairman Ben Bernanke.

    In some instances, individuals involved in this fraudulent scheme claim to have met with Federal Reserve officials and claim to have verified that the alleged account is in order. We have also learned that the fraud may include the purchase of certain documents by the introducing brokers.

    If you have information regarding this fraud please contact either Robert Amenta, Special Investigator at the Federal Reserve Bank of New York, or Erik Rosenblatt, Senior Special Agent at the Department of Homeland Security, Immigration and Customs Enforcement.

  3. pookie Says:

    Japan secretly trying to divest out of their US debt?

    http://www.lewrockwell.com/blo.....27232.html

  4. Seattle Shortbus Says:

    An interesting coincidence pointed out in an updated asian times article–on March 30th, the WSJ and other news outlets reported that TARP had $134.5 Billion remaining.

    http://online.wsj.com/article/.....66241.html

    I honestly believe this is a coincidence, but a striking one for sure.

  5. tochigi Says:

    the two translations are good. especially P’s.
    btw, the by-line is Akio Fujiwara.
    a google search reveals that he is a reporter at Mainichi Shimbun’s Rome Bureau.

    the Japanese authorities do not want to say anything. that means it is highly unlikely to be North Korean agents involved. if it were, the Japanese govt would be all over it.
    so, it sounds like they were Japanese and they were duped by “someone” into this ridiculous smuggling. it reminds me of the kind of thing Nigerian spammer scammers are known for.
    anyway, for some reason, the Japanese and Italian authorities would be embarrassed if the world were to find out who was duped and who did the duping. that’s your angle, now play with it…

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