Saturday, September 26, 2009

The Nemazee Nemesis Grows...

Not good news for a major Democratic Party fund raiser..,

Manhattan U.S. Attorney Charges Colorado Man as Accomplice of Hassan Nemazee in Bank Fraud Ponzi Scheme

PREET BHARARA, the United States Attorney for the Southern District of New York, and JOSEPH M. DEMAREST, JR., the Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation ("FBI"), announced the arrest today of SHAHIN KASHANCHI in connection with a scheme to defraud Citibank, N.A. ("Citibank") and HSBC Bank USA, N.A. ("HSBC"). According to the Complaint filed in Manhattan federal court and other documents:

KASHANCHI is the brother-in-law of HASSAN NEMAZEE, who was arrested on August 25, 2009, and subsequently indicted for defrauding Citibank, HSBC, and Bank of America, N.A., of more than $290 million in loan proceeds. NEMAZEE's scheme depended on his use of fraudulent documents, including phony account statements and phony correspondence bearing forged signatures. These fraudulent documents were designed, in substance and in part, to convince the various banks to whom he submitted the documents that NEMAZEE had assets totaling hundreds of millions of dollars and that he had placed many millions of dollars of United States Treasury securities in certain specified accounts as collateral for the loans from the various banks.

In fact, neither those collateral accounts nor the hundreds of millions of dollars in claimed assets existed. As alleged in the Nemazee Indictment, NEMAZEE made partial repayments on his borrowings from Bank of America with proceeds of his fraud on Citibank, made partial repayment on his borrowing from Citibank with proceeds of his fraud on Bank of America, and repaid Citibank $74.9 million with proceeds of his fraud on HSBC.

Many of the fraudulent documents submitted by NEMAZEE to Citibank and HSBC were created by SHAHIN KASHANCHI, in consultation with NEMAZEE. Indeed, based on e-mail traffic between KASHANCHI and NEMAZEE summarized in the Complaint, KASHANCHI was regularly producing what KASHANCHI referred to as the "normal quarterly statements" for one of the non-existent collateral accounts, among other things. KASHANCHI would simply create phony account statements designed to look like real account statements, but bearing account numbers for accounts that did not exist and reflecting balances that purported to establish NEMAZEE's great wealth.

For example, on April 15, 2009, KASHANCHI sent by email to NEMAZEE a fake account statement for a non-existent account, reflecting that the account held $621,914,043 worth of United States Treasury securities and cash in the amount of $3,976,543. NEMAZEE in turn submitted this account statement to Citibank.

Similarly, in connection with NEMAZEE's efforts to obtain money from HSBC, on July 21, 2009, KASHANCHI sent NEMAZEE an e-mail in which KASHANCHI stated that he was sending "the new HN [Hassan Nemazee] Collateral + HSBC account." Attached to that e-mail was a fake account statement for an account which NEMAZEE had represented to HSBC held over $125 million in United States Treasury securities that had been pledged as collateral for the line of credit from HSBC. The phony account statement bore the indication "Hassan Nemazee Collateral + HSBC," and KASHANCHI's file-name for the phony account statement was "Hassan's Statement Collateral + HSBC 200908."

KASCHANCHI also assisted NEMAZEE in NEMAZEE's submission of fraudulent correspondence to banks. For example, on August 11, 2009, representatives of Citibank told NEMAZEE that he needed to produce written verification of his collateral for the Citibank loans, which collateral was purportedly being held in an account at Pershing LLC. The Citibank represntatives specified that the verification would have to be "an original letter on Pershing stationary [sic] signed by an authorized representative of Pershing." On August 13, NEMAZEE and KASCHANCHI exchanged e-mails arranging to talk the next day. On August 14, KASCHANCHI sent NEMAZEE an e-mail in which KASHANCHI stated in part: "Here is a try. Looks good from my end. . . . Compare it to an original if you have it." Attached to that email was a piece of fake Pershing letterhead stationery, listing as Pershing's address and telephone number an address and telephone number associated with a Manhattan-based "virtual office" that NEMAZEE himself had established and bearing the name of an actual Pershing LLC employee. As a result, in the event anyone made an effort to contact that Pershing representative, they would in fact be contacting a telephone number assigned to NEMAZEE himself, and not any financial institution. Later that same day, KASCHANCHI sent NEMAZEE two different versions of the same phony stationery.

On August 19, 2009, a representative of Citibank received a letter, on the phony letterhead stationery, purportedly signed by the Pershing LLC employee and verifying that NEMAZEE's collateral account had "U.S. Treasury Securities totaling $85,853,751.00 as of 8/17/09 that are held in custody by Pershing LLC as collateral for the benefit of Citibank." In reality, there was no such account, there was no such collateral, and the signature was a forgery.

KASAHANCHI, 46, currently resides in Telluride, Colorado. He is charged with two counts of bank fraud, each of which carries a maximum prison term of 30 years and a maximum fine of $1,000,000 or twice the gain or loss resulting from the crime.

KASHANCHI is expected to be presented later today in federal court in Grand Junction, Colorado, before United States Magistrate Judge GUDRUN RICE.

Mr. BHARARA praised the investigative work of the FBI. Mr. BHARARA said that the investigation is continuing.

Assistant United States Attorneys JOHN M. HILLEBRECHT and DANIEL W. LEVY are in charge of the prosecution.

The charge and allegations contained in the Complaint are merely accusations, and the defendant is presumed innocent unless and until proven guilty.


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Gut Bombs? A Terrifying Prospect

A very disturbing report from my friend Frank Gardner at the BBC. 


BBC News | Fears over 'internal' terror bomb
By Frank Gardner
BBC security correspondent

Security and intelligence experts are deeply worried by a new development in suicide bombing, the BBC has learned.

It has emerged that an al-Qaeda bomber who died last month while trying to blow up a Saudi prince in Jeddah had hidden the explosives inside his body.

Only the attacker died, but it is feared that the new development could be copied by others.

Experts say it could have implications for airport security, rendering traditional metal detectors "useless".

Last month's bombing left people wondering how one of the most wanted al-Qaeda operatives in Saudi Arabia could get so close to the prince in charge of counter-terrorism that he was able to blow himself up in the same room.

Western forensic investigators think they have the answer, and it is worrying them profoundly.

Peter Neuman of Kings College London says the case will be studied intensively, and that there are "tremendous implications for airport security with the potential of making it even more complicated to get on to your plane".

"If it really is true that the metal detectors couldn't detect this person's hidden explosive device, that would mean that the metal detectors as they currently exist in airports are pretty much useless," he said.

The bomber was a Saudi al-Qaeda fugitive who said he wanted to give himself up to the prince in person.

The prince took him at his word and gave him safe passage to his palace.

But there, once he got next to his target, the bomb inside him was detonated.

Miraculously the prince survived with minor injuries, but footage emerging this week shows a sizeable crater in the concrete floor and the bomber's body blown in half.

It is believed the force of the blast went downwards which is why only the bomber died.



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Thursday, September 24, 2009

Zazi: Looking more like a Snafu...

September 24, 2009

New York Police Official in Terror Unit Is Removed

The New York Police Department has removed a senior official from one of its two sometimes competing antiterrorism units, after it played a role in disrupting a sensitive federal terrorism investigation, current and former police officials said on Wednesday. He was replaced by a top official from the other unit.

The investigation was disrupted two weeks ago when detectives from one of the units, the Intelligence Division, sought assistance from a Queens imam who then alerted the central suspect in the case to the inquiry.

The transfers, which removed one official from the Intelligence Division and replaced him with another from the Counterterrorism Bureau, came in recent days amid intense activity in the case. Federal agents and police detectives have been hunting through New York City and other places for operatives in a suspected Qaeda bomb plot...

The effort to enlist the imam and its impact have come after a long history of tensions and rivalry between the police and the F.B.I. And while relations between the two agencies have improved, the creation of the Counterterrorism Bureau and the expansion of the Intelligence Division after the attack of Sept. 11, 2001, brought new tensions, with a rivalry between the two antiterrorism units.

While the investigation’s disruption upset some officials in Washington, as the inquiry progressed they said they had come to view the issue as an unfortunate, if unintentional, misstep.

The official transferred out of the Intelligence Division, Deputy Inspector Paul Ciorra, was the intelligence collection coordinator. He has been moved to the Trial Division, which oversees administrative hearings for police officers accused of misconduct. His union leader, Roy T. Richter, noted that the shift would not have been made if he had been transferred for disciplinary reasons.

One former government official with knowledge of the matter said there was no indication that the deputy inspector had done anything wrong and that the decision to approach the imam had been made at the highest levels of the Intelligence Division. The unit is led by David Cohen, a former top C.I.A. official. The former official said the deputy inspector was moved to absorb the blame.

Inspector Ciorra, who declined to comment about the transfer, was praised by police colleagues, and by officers in the New York Army National Guard, in which he serves as a major....(more)

The Zazi Case: Disruption or Snafu? Or Both?

New York-Denver Terror Investigation Widens
Wed, 23 Sep 2009

The investigation into a possible bomb plot involving three men in New York and Denver is reportedly widening to include at least a half-dozen individuals in the U.S., Pakistan and elsewhere. Meanwhile, federal counterterrorism authorities have alerted local police around the country about terrorists’ efforts to attack entertainment centers, hotels and stadiums. To discuss how best to secure a large American city like New York, and whether local and federal authorities are working together effectively, is Chris Dickey , Middle East regional editor for Newsweek and author of " Securing the City: Inside America’s Best Counterterror Force — The NYPD ." We also speak to Lydia Khalil , a former counterterrorism analyst at the NYPD. She’s currently a fellow at the Council on Foreign Relations.

http://mediasearch.wnyc.org/m/26547364/new-york-denver-terror-investigation-widens.htm

Saturday, September 19, 2009

(BN) HSBC Says It Was Victim of $75 Million Fraud by Fundraiser Hassan Nemazee

Since domestic scandal almost always trumps foreign dilemmas in the minds of pundits and voters, this could be the Obama administration's biggest Iranian problem.
Bloomberg News, sent from my iPhone.

HSBC Says It Was Victim of $75 Million Hassan Nemazee Fraud

Sept. 19 (Bloomberg) -- HSBC Holdings Plc said it is a victim of a $75 million fraud by Hassan Nemazee, a top fundraiser for President Barack Obama and Hillary Clinton who was arrested last month for defrauding Citigroup Inc.

The U.S. unit of HSBC, the world's third-largest bank by market value, filed a $75 million fraud lawsuit against Nemazee in New York State Supreme Court in Manhattan. The Sept. 2 suit came a week after Nemazee was arrested by the Federal Bureau of Investigation for cheating Citigroup out of $74 million.

According to U.S. prosecutors, Nemazee, 59, repaid $74 million he stole from Citigroup by tricking another bank to lend him the money on Aug. 24. That came a day after Nemazee was questioned by the FBI about the alleged Citigroup scam and the day before he was arrested. Prosecutors didn't identify the second bank in an account that corresponds to the allegations in the complaint by HSBC Bank USA.

"On Aug. 24, Nemazee drew down $75 million of his available $100 million in credit from HSBC," the London-based bank said in its fraud and breach-of-contract complaint. "Later that day, Citibank, which sometime prior to Aug. 23, 2009, began to cooperate with federal law enforcement officials concerning Nemazee's activities, accepted a wire transfer from Nemazee repaying Nemazee's loan to Citibank, which at that time amounted to more than $74 million."

Juanita Gutierrez, an HSBC spokeswoman, confirmed in an e-mail yesterday that the bank sued Nemazee. She declined to comment on whether the bank is the same one identified in court papers by prosecutors.

Yusill Scribner, a spokeswoman for U.S. Attorney Preet Bharara in Manhattan, declined to comment.

House Arrest

Nemazee, the chairman of Nemazee Capital Corp., is under house arrest in his $20 million Manhattan apartment on a $25 million bond. He hasn't entered a formal response to the criminal charges. His lawyer, Paul Shechtman, didn't immediately return a call seeking comment yesterday.

The financier was one of the leading fundraisers for the Democratic Party. In the 2008 presidential campaign, Nemazee raised at least $100,000 for Clinton, according to the Washington watchdog group Public Citizen. Nemazee brought in at least $500,000 for Obama after he defeated Clinton in the primary campaign, according to Public Citizen. Clinton is now secretary of state.

Nemazee also raised money for Massachusetts Senator John Kerry during his 2004 run for the presidency as well as for Senate Democrats.

Fake Documents

In the criminal case, Nemazee is accused of using phony documents to trick Citigroup's Citibank unit into lending him as much as $74 million by telling the bank he held accounts with hundreds of millions of dollars that could serve as collateral. Documents submitted by Nemazee cited accounts that either never existed or had been closed years before, prosecutors said.

On Sept. 1, Manhattan federal prosecutors said in a letter to a judge that Nemazee used the same scheme to defraud the second bank.

HSBC said in its complaint that documents it received from Nemazee on Aug. 24 pledging collateral were fakes. The bank said one of the documents claimed Pershing LLC held an account on Nemazee's behalf with $89 million in U.S. Treasury Notes.

"The account application for the Pershing collateral account furnished by Nemazee is a sham," HSBC said in its complaint.

Nemazee submitted the same document to Citigroup, prosecutors allege.

Third Bank

In their Sept. 1 letter to the judge, prosecutors also said Nemazee lied in documents submitted to a third bank, which they didn't identify. Nemazee received a line of credit of more than $100 million from that bank, prosecutors said.

Prosecutors have frozen Nemazee's accounts at JPMorgan Chase & Co. and Bank of America Corp., another defense lawyer, Marc Mukasey, wrote in an Aug. 31 letter to a judge.

Nemazee Capital, established in 1987, invests in health care, media, oil and natural gas and other industries, according to the firm's Web site. The firm claimed to have more than $3 billion under management, according to a July press release.

Citigroup isn't named as a defendant in the HSBC lawsuit.

The state lawsuit is HSBC Bank USA v. Nemazee, 09-602735, Supreme Court, New York (Manhattan). The criminal case is U.S. v. Nemazee, 09-mj-1927, U.S. District Court, Southern District of New York (Manhattan).

To contact the reporters on this story: David Glovin in New York federal court at dglovin@bloomberg.net Kambiz Foroohar in New York at kforoohar@bloomberg.net .

Find out more about Bloomberg for iPhone: http://bbiphone.bloomberg.com/iphone


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Friday, September 18, 2009

Shadowland: Kaddafi, Qadhafi, Gaddafi -- He's Still the Comeback Kid

An earlier iteration of Kaddafi.

Muammar Kaddafi, Statesman

The Libyan may look like the Michael Jackson of global politics, but his political talent sets an example for other leaders and petro-players.

Wednesday, September 16, 2009

"Securing the City" in India

The penultimate paragraph from a long column about the Indian Home Minister's recent trip to the USA by K.P. Nayer in The Telegraph (Calcutta):

....Pakistan, contrary to television hyperbole, was only part of Chidambaram’s agenda in the US. As part of his thorough preparations for the visit, Chidambaram read Securing the City: Inside America’s Best Counter terror Force — the NYPD (acronym for the New York Police Department). It is a new book written by Christopher Dickey, the Paris bureau chief of Newsweek, who wanted to investigate how the NYPD had kept New Yorkers safe since September 11, 2001. After reading the book, Chidambaram decided to craft his own programme in New York, unlike most Indian ministers. He asked for meetings with the FBI-led Joint Terror Task Force, the NYPD and the agencies involved in protecting New York’s mass transport system. In Washington, he similarly insisted on a personal tour of the National Counter-Terrorism Centre: his idea is to create a centre in New Delhi that mirrors the talent and capacity of the one in Washington in being able to deal with threats to India....

http://www.telegraphindia.com/1090916/jsp/opinion/story_11497173.jsp

Monday, September 14, 2009

British National Archives: WWII Video and Audio

I find this kind of historical record irresistible. But it is more than a little disturbing to see that no attention is paid in the video to the human toll inflicted on the German people. Operation Chastise indeed, while in Britain you had Operation Pied Piper. - C.D.

The Dam Busters, Catalogue reference: AIR 27/839

The Dam Busters - video

Published date: Thu, 10 Sep 2009 11:00:00 GMT

‘The Dam Busters’ tells the story of 617 Squadron and its daring and extremely difficult mission, which went on to become one of the most famous episodes of the Second World War.

Author: The National Archives Duration: 04:22

Play The Hope and Glory video Download The Dam Busters video

FCO roof spotters overlooking Whitehall

Hope and Glory - video

Published date: Thu, 03 Sep 2009 11:00:00 GMT

‘Hope and Glory’ tells the story of a young boy growing up in London during the Second World War. The film explores two themes that greatly affected the Home Front during the war, the Blitz and evacuation.

Author: The National Archives Duration: 04:12

Play The Hope and Glory video Download The Hope and Glory video

You may also be interested in these audio podcasts:
Kripo photographs and index cards showing the four escapers murdered by Kiel Gestapo - Catalogue reference: WO 235/431

The Great Escape: you've seen the film, now hear the truth - audio

Published date: Fri, 15 May 2009 12:00:00 GMT

During the night of 24 March 1944, 76 airmen escaped from the Prisoner of War camp Stalag Luft III. Only three made it home and, of the remainder, 50 were murdered on Hitler's orders. This talk will explain what actually happened in the so-called Great Escape, one of the Second World War's most infamous incidents.

Author: Alan Bowgen Duration: 52:42

Play The Great Escape: you've seen the film, now hear the truth podcast - Opens new browser window Download The Great Escape: you've seen the film, now hear the truth Podcast

Original artwork of the Resistance Movement - Catalogue reference: INF 3/1811

The Special Operations Executive, the French Resistance and the D-Day landings - audio

Published date: Thu, 14 Aug 2008 07:00:00 GMT

This talk looks at the results and effectiveness of the British Special Operations Executive, or SEO, and the French Resistance in supporting the Second World War D-Day landings.

Author: Neil Cobbett Duration: 1:01:26

Video: The NYPD 8 Years After 9/11

NY1's Lily Jamali filed this brief video report and text article on how the NYPD has reinvented itself since the attack on New York: http://ny1.com/Default.aspx?ArID=105563

... The department has strengthened its working relationships with regional and federal law enforcement groups as well as with private security companies. The NYPD also has about a dozen detectives stationed overseas, to build relationships and gather information about terrorist activity.

Budget cuts, however, are forcing the department to make hard choices. Headcount in the department is expected to drop to fewer than 35,000 by next year, which is around 6,000 fewer than around the time of the attacks.

"The department is doing a lot more effectively with fewer resources. The question is, how long is that sustainable?" said Former NYPD Counterterrorism Chief John Colgan.

"As there are fewer police on the beat, fewer cops on the ground, you run the risk of a rise in crime. And as that happens, you have a lot more people worried about what happens to them when they step out of their apartment buildings than having counterterrorism officials in Mumbai," said Christopher Dickey, author of "Securing the City."...(more)



Lydia Khalil at the Council on Foreign Relations also published this run-down on the developments in the NYPD, most of which overlaps with the reporting in "Securing the City," although there is no attribution:http://www.cfr.org/publication/20174/is_new_york_a_counterterrorism_model.html

War Zones: Rising Risks, Declining Rewards

This lively and sometimes contentious panel discussion of the changing environment for correspondents covering war zones took place September 9, during events marking the 60th anniversary of the Edward R. Murrow Fellowship at the Council on Foreign Relations in New York. Participants included Christiane Amanpour, Kim Barker, Mohamad Bazzi, Kathy Gannon and Christopher Dickey. The link includes a full-length video and a full transcript: http://www.cfr.org/publication/20165


For those with the interest and the time, the other panels were equally interesting. Margaret Warner's rundown is available on her PBS blog.

And this is the home page for the event, with biographies of participants and a video of the conversation among heads of the news divisions at NBC, CBS, ABC and CNN. (Fox, for some reason, chose not to participate): http://www.cfr.org/about/fellowships/murrow_fellowship.html


Free Maziar Bahari!

From The New York Times:

September 12, 2009
Op-Ed Contributor

Our Reporter, Ahmadinejad’s Prisoner

THEY came early in the morning, about seven o’clock. In Tehran on Sunday, June 21, at his 83-year-old mother’s home, agents of the Iranian government seized Maziar Bahari. As his mother looked on, Mr. Bahari — a 42-year-old Newsweek journalist and documentary filmmaker who has been accredited by the Iranian authorities for over a decade — was arrested and taken to Evin prison, where we believe he is being held in isolation. He has not been allowed to see a lawyer, nor has he been formally charged. He is awaiting the birth of his first child.

Mr. Bahari, a dual Canadian-Iranian citizen, has found himself an unwilling player in a frightened regime’s attempt to explain away the demonstrations that took place after Iran’s contested June 12 presidential elections. The government tries to justify these kinds of arrests by asserting that the Western news media were helping to drive the unrest in hopes of fomenting a “velvet revolution.”

Mr. Bahari’s case might be of limited interest save for one thing: the regime denying him his most basic rights is an aspiring nuclear power. If Iran can so easily become a totalitarian caricature, imprisoning journalists and mostly peaceful protesters, what else is it capable of?...(more)


Also from the Times:

September 9, 2009
Editorial

Free Maziar Bahari

President Mahmoud Ahmadinejad of Iran is preparing to come to the United Nations this month where he will enjoy the freedom to speak his mind. Back home, far too many people are denied their basic rights and are deprived of their freedom. Since fraudulent presidential elections in June, and a harsh government crackdown that followed, at least 100 people, including politicians, lawyers and journalists have been jailed.

There are horrifying reports of prisoners being raped and tortured. Show trials, complete with obviously coerced confessions, have only reminded the Iranian people, and the world, of the government’s illegitimacy.

Among those unjustly detained is Maziar Bahari, a respected documentary filmmaker and correspondent for Newsweek who has been in prison since June 21. A native Iranian who is now a Canadian citizen, Mr. Bahari has not been officially charged and has not been allowed to see a lawyer. Yet he was forced to confess that he and others took part in a “velvet coup” engineered by the West to oust Mr. Ahmadinejad. Such charges are blatantly false. ... (more)


And, earlier, from Newsweek:

Bahari in Line for Spanish Prize

NEWSWEEK correspondent imprisoned in Iran is in contention for the prestigious Asturias Award.

Sep 7, 2009 | Updated: 9:56 p.m. ET Sep 7, 2009

Maziar Bahari, the documentary filmmaker and NEWSWEEK correspondent imprisoned in Iran for the last 11 weeks, is a leading contender for the Prince of Asturias Award for Concord, one of the world's most prestigious honors....

Bahari's nomination has been given public support by Nobel laureate Bishop Desmond Tutu of South Africa and former U.S. secretary of state Madeleine Albright.

The Asturias jury, which begins deliberations on Wednesday and will make its decision public on Thursday, is charged with giving the award to the candidate "whose work has made an exemplary and outstanding contribution to mutual understanding and peaceful coexistence amongst men, to the struggle against injustice, poverty, disease or ignorance, to the defense of freedom, or whose work has widened the horizons of knowledge or has been outstanding in protecting and preserving Mankind's heritage."

Before the 42-year-old Bahari was jailed in the tumultuous aftermath of Iran's elections in June, he had spent most of his career producing films that addressed precisely such concerns not only in his native Iran but also in Iraq, Africa, Europe, and Canada, where he is a naturalized citizen.

Since he was arrested at his 83-year-old mother's apartment in Tehran just after dawn on June 21, Bahari has not been allowed to see a lawyer, but has twice been pushed in front of government cameras to "confess" that he might "inadvertently" have undermined the security of the state.

What he did in fact was to work openly and with full accreditation by the Iranian government, reporting for NEWSWEEK and in his film work about the hopes and fears, courage and confusion of the Iranian people at a turning point in their nation's history. No specific charges have been made public against him, and his alleged crimes appear to consist of nothing more than reporting for foreign publications and networks. In fact, the Iranian government of President Mahmoud Ahmadinejad welcomed such coverage--until hundreds of thousands of people poured into the streets of Iran's cities to protest against the alleged fraud that reelected it.

The injustice of Bahari's incarceration, taken as emblematic of the repression faced by millions of Iranians and by those who insist on freedom of expression everywhere in the world, is a factor that may be taken under consideration by the Asturias jury. But his work also speaks for itself.

One of Bahari's first widely distributed movies was The Voyage of the Saint Louis, about a ship full of Jewish refugees from Europe on the eve of World War II that was turned away from the United States only to return its passengers to Europe, where many eventually died in the Holocaust. Another of his projects explored the role of music and especially of drums to heal the wounds of ethnic strife in Burundi. Among Bahari's films shot in Iran, one of the most striking is Mohammad and the Matchmaker, a documentary that follows the surprising twists and turns in the life of a former heroin addict who is HIV-positive and looking for a wife.

It's just such work that led the Harvard Film Archive to praise Bahari as representative of "a new generation of young Iranian filmmakers," one who looks inside contemporary Iranian culture to "reveal the human element behind the headlines and capture cultural truths through the lens of individual experience."... (more)

[In the end, the City of Berlin won this year's award, 20 years after the fall of the Wall. But Maziar was a contender until late the final night of judging.]

(BN) Dubai's Broken Deals at Istithmar Reveal Sovereign Wealth Gone Haywire

Follow-up to my story from late last year:
Newsweek International Cover: Is Dubai's Party Over? 6 December 2008
The glitzy fa├žade shows some cracks.



This from today's Bloomberg News, sent from my iPhone.

Dubai's Trail of Dud Deals Shows Sovereign Wealth Gone Awry

Sept. 14 (Bloomberg) -- Dubai investment firm Istithmar World may be the first sovereign wealth fund to liquidate after a $27 billion spending spree financed largely with borrowed money, people briefed on the matter said.

Unlike government-controlled funds in Kuwait and Abu Dhabi, flush with cash from oil production, or in China, backed by export earnings, Istithmar fueled purchases such as the takeover of Barneys New York by borrowing as much as 90 percent of the money, the people said. Istithmar's parent, Dubai World, tapped Middle Eastern and European banks including Barclays Plc, Royal Bank of Scotland Group Plc and Deutsche Bank AG, leaving those three with combined debt holdings of at least $1.5 billion, the people said.

"Dubai sovereign wealth funds are leveraged like private equity funds," said Rachel Ziemba, a senior analyst covering sovereign wealth funds at Roubini Global Economics, a New York- based economic research firm. "Istithmar belongs to a parent company with a significant amount of debt coming due."

Istithmar contributed about $2.5 billion of its own cash to back $27 billion of purchases since 2003, the people said, speaking anonymously because the strategy was private. It used so-called non-recourse bank loans, backed by specific assets, to finance about 75 percent of its acquisitions, one of the people said. The rest was funded with a mixture of its own cash and money borrowed from banks on a term-loan basis that was backed by Istithmar or Dubai World, the person said.

W, Mandarin Oriental

Istithmar's deals were part of Dubai ruler Sheikh Mohammed bin Rashid Al Maktoum's attempt to raise the Arabian Peninsula emirate's profile as he tried to vault it into the top ranks of the world's financial centers.

Under Chief Executive Officer David Jackson, the former Lehman Brothers Holdings Inc. executive who has led the fund since 2006, and his predecessor, Muneef Tarmoom, Istithmar roamed the world to target high-end businesses. The fund bought a stake in Perella Weinberg Partners, the boutique advisory firm run by Joseph Perella, and two of Manhattan's most exclusive hotels, the W Union Square and the Mandarin Oriental at the Time Warner Center. It acquired the Queen Elizabeth 2, the Cunard Line flagship for more than three decades, with plans to convert it into a hotel to be moored beside the emirate's Palm Island.

Istithmar also bought stakes in Cirque du Soleil, the Montreal-based company known for staging extravagantly acrobatic circus-like performances around the world, and Yacht Haven Grande, a marina complex in the Caribbean catering to so-called mega- yachts.

Some Soured Deals

"The government wanted to put Dubai in the same league as London and New York," said Victoria Barbary, a senior analyst in London at Monitor Group, a consulting firm based in Cambridge, Mass. "When times were good, the government was happy to have Jackson and his team making headlines around the world."

Many of the deals have soured.

Barneys is in talks with creditors about a restructuring or bankruptcy. Loehmann's Holdings Inc., a discount retailer with more than 60 stores that was acquired by Istithmar in 2006, had its junk- rated debt rating cut three notches last week by Standard & Poor's, based on "poor" operating performance.

Shares of GLG Partners Inc., a hedge fund with offices in New York and London in which Istithmar bought a 3 percent stake, have lost more than 61 percent of their value since the deal was announced in June 2007.

In November of 2007, Istithmar sold an office tower at 280 Park Avenue, home to the headquarters of the National Football League, for $1.28 billion. It had bought the tower for $1.18 billion 17 months earlier, public records show.

'Top of Market'

"They realized they had defined the top of the market," said Peter Slatin, editorial director at Real Capital Analytics Inc., a New York research firm that tracks commercial property sales.

The deals have forced Istithmar to halt investments and threaten to unseat Jackson, the CEO, people familiar with the situation said last week. Co-Chief Investment Officers John Amato and Felix Herlihy are leaving, according to Istithmar.

Now, Dubai World is in talks with its creditor banks to restructure at least $12 billion in debt, a person close to the talks said, speaking anonymously because the negotiations are private. Istithmar or its assets will probably be sold to help its parent repay the debt, the person said. Nakheel PJSC, the Dubai World unit behind a series of palm-shaped, man-made islands on the emirate's coast, has a $3.52 billion Islamic bond due in December. Islamic bonds adhere to a prohibition against receiving or paying interest.

Istithmar is 'Key'

Dubai World last week said Jackson had its "full support," adding that Istithmar "will continue to be a key subsidiary into the future." Sheikh Mohammed also said last week that he wasn't concerned about the emirate's ability to repay at least $4.52 billion of debt this year.

"I assure you we are all right, the U.A.E. is all right, and we are not worried," Sheikh Mohammed said to reporters at his Zabeel palace in Dubai. The government must repay a $1 billion Islamic bond maturing in November in addition to the Nakheel bond due in December.

George Dalton, general counsel at Dubai World, referred requests for comment to spokespeople for the group, who didn't reply yesterday.

Besides Istithmar and Dubai World debt held by Deutsche Bank, Barclays and RBS, much of what remains is held by lenders based in the Middle East, the people said. Spokespeople for the three banks declined to comment yesterday.

MGM Mirage Investment

The investment strategy of the funds was flawed, according to Chris Turner, the 45-year-old British risk manager who was hired in 2007 as director of risk management at Istithmar's real estate unit.

"At least half the $10 billion I was involved with at Istithmar was poorly invested and completely un-hedged," Turner said in an interview yesterday. Turner, who now lives in Europe, says he left Istithmar last year and was accused of embezzlement. He denies those claims and said he is prepared to fight the charges in court.

One example of risky investing, according to Turner, came in 2007, when Dubai World bought about $5.5 billion of MGM Mirage stock at between $82 and $95 without any hedge. The stock now trades at about $12.

"The attitude there was: We're a private equity firm and as such we don't need to hedge our investments because we understand the inherent risks and believe in our decisions," Turner said.

'More Careful Now'

Refinancing Dubai's debt became more difficult with the onset of the global credit crisis as lending froze. It has about $80 billion of outstanding corporate and government debt, according a report by Moody's in February. That almost matches the emirate's $82 billion gross domestic product in 2008, the report said.

"We'll be more careful now," Sheikh Mohammed told reporters in Dubai on Sept. 9. "The crisis came for everyone, not just Dubai. People had to fight."

Abu Dhabi, the wealthiest member of the U.A.E. with more than 85 percent of the federation's total oil output capacity, helped provide Dubai with a $10 billion bailout in February. Dubai home prices plummeted 47 percent in the second quarter from a year earlier, the steepest drop of any market, according to Knight Frank LLC.

"Abu Dhabi is now and will continue calling the shots in Dubai," said Rochdi Younsi, head of Middle East research at Eurasia Group, a New York-based political-risk consulting firm, who expects additional bailouts from Abu Dhabi. "They're making serious demands that Dubai keep only its viable arms and consolidate or shut down overleveraged ones like Istithmar."

Istithmar and Dubai World are being advised on their debt restructuring proposals by at least one outside consulting firm, people familiar with the matter said.

"It's critical that Dubai downplay any restructuring of Istithmar as business-as-usual," Younsi said. "They've put way too much money and resources to let their reputation collapse."

To contact the reporters on this story: Jonathan Keehner in New York at jkeehner@bloomberg.net Serena Saitto in New York at ssaitto@bloomberg.net .

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(BN) Iran Gains Military Technology From U.S. Suppliers Via Malaysia Middlemen

Bloomberg News, sent from my iPhone.

Iran Gains U.S. Military Technology Through Malaysia Middlemen

Sept. 14 (Bloomberg) -- Iran increasingly is obtaining U.S. military equipment and technology through shipments to Malaysian middlemen that illegally circumvent trade restrictions, according to American officials and analysts.

The U.S. has charged, convicted or sentenced defendants in at least six cases involving Malaysia since August 2008. The shipments have included parts for bombers and items sent to firms linked to Iran's nuclear and ballistic missile program, according to court papers. More Malaysia shipments are under investigation, according to a law enforcement official who spoke on condition of anonymity.

The shipments illustrate how difficult it is for U.S. law enforcement to keep military secrets and equipment from reaching Iran, a country the U.S. accuses of developing nuclear weapons and sponsoring terrorism. The U.S. bans most trade with Iran.

Middlemen also have operated out of the United Arab Emirates city of Dubai. Shipments through Malaysia increased after the U.A.E. cracked down on exports more than a year ago, said Steven Pelak, the principal deputy chief of the Justice Department's counterespionage section in Washington.

"We've seen a lot more being now diverted through Malaysia in particular," Pelak said in an interview. "We have seen Iranian front companies there and we've seen an increase there since there's been a tightening in Dubai."

Military goods also have been illegally shipped to China, which has been trying to obtain missile, imaging, semiconductor and submarine technology from the U.S., according to a Defense Department report this year. Espionage allegations against China are "unwarranted," said Wang Baodong, a spokesman for the country's embassy in Washington.

Shopping List

The Iranian government creates a shopping list of items it wants and gives it to middlemen who seek the products in the U.S. and elsewhere, said Pelak.

When one country that is home to intermediaries cracks down, the shipments move elsewhere, said David Albright, president of the Institute for Science and International Security in Washington and a former Iraqi weapons inspector.

The activity in Malaysia "poses a threat," Albright said in an interview. "It allows Iran to improve its military capabilities, nuclear capabilities."

In a case unsealed last year, the Justice Department alleged that electronics were illegally sent from the U.S. to Iran through Dubai and Malaysia. Some of those electronics are the same type found in roadside bombs in Iraq.

U.S. Supplier

Shipments to Malaysia have increased, Albright said, because "it's harder to do it from Dubai. You're trying to get a U.S. supplier to send it to a false end user."

The U.S. broke off diplomatic relations with Iran in 1980 after militant Iranian students occupied the American embassy in Tehran in 1979.

Malaysian Prime Minister Najib Razak declined to comment, according to an aide. Afdal Hashim, a spokesman for the Malaysian embassy in Washington, didn't respond to phone calls or an e-mail.

The U.S. companies that supply middlemen typically are closely held sole proprietorships, said Pelak.

In 2007, the U.S. brought charges against a larger company, defense contractor ITT Corp., based in White Plains, New York, for allowing the transfer to China of night-vision technology. The company agreed to pay $100 million and plead guilty to two criminal charges.

Military Items

The U.S. announced a crackdown in 2007 of illegal exports of restricted military technology and "dual-use" equipment with military and commercial applications.

The multiagency effort resulted in criminal charges against more than 145 defendants in the fiscal year that ended Sept. 30, a 32 percent increase from the year before. Nearly half of the 2008 cases involved munitions or other restricted items headed for Iran or China, according to the Justice Department.

Authorities increased enforcement after concluding other countries were taking advantage of the U.S. to develop their own militaries and compete economically, said David Szady, who retired as an assistant director of the counterintelligence division of the Federal Bureau of Investigation in 2006. The FBI trained agents to better detect illegal exports of sensitive materials, he said in an interview.

Evertop Services

In a March criminal complaint, the U.S. said Iranian national Majid Kakavand oversaw an international network that purchased thousands of military and commercial items from U.S. companies and illegally sent them to Iran via Malaysia.

Recipients included two Iranian military firms that the U.S. says are linked to Iran's nuclear and ballistic missile programs, according to court papers.

Kakavand allegedly used a company in Malaysia called Evertop Services Sdn Bhd to purchase products for Iran from U.S. and European companies, according to court papers. Among the items were capacitors, spectrometers, resistors and airborne antennae. It's unclear whether Evertop is still operating. The company couldn't be located.

Kakavand concealed from the U.S. companies that the products were going to Iran, according to court papers. He was arrested in March in France. The U.S. is seeking his extradition.

The U.S. ambassador to Malaysia, James Keith, said in a February speech in Washington that Malaysia should create a strong system to control exports. A proposed law has been pending since 2004, he said.

"One reason this has become an increasingly urgent priority is trade diversion to Iran by entities who seek to exploit the Malaysian system," Keith said, according to the prepared text of his speech. "Malaysia has more to contribute to international mechanisms to manage the flow of sensitive technology, including nuclear and missile-related equipment."

To contact the reporter on this story: Justin Blum in Washington at jblum4@bloomberg.net

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Sunday, September 06, 2009

In Harm's Way: The Post-9/11 Diplomat

From the Newsweek issue dated 14 September 2009:

By Ryan Crocker

The 8 a.m. US Airways shuttle from Washington to New York City took off pretty much on time. The mid-September sky was clear, the air still, and most of the flight was perfectly uneventful. My State Department colleague David Pearce and I read the papers and looked over our notes as the plane began its descent toward LaGuardia.

"Look!" somebody said, and a rumble of alarmed voices spread through the cabin. One of the towers of the World Trade Center was on fire, and smoke churned over the upper stories like a thunderhead over lower Manhattan. We craned our necks to see through one window, then another as our plane banked and made its approach to the runway. Then, just as we landed, we saw in the distant skyline the second tower erupt in flames. Cell phones rang out, and random, frightened voices tried to make sense of what was happening.

For a diplomat, I have seen a lot of violence in my career. I survived the 1983 U.S. Embassy bombing in Beirut that was, until that day in September 2001, among the most infamous attacks on Americans in the history of terrorism. David is as experienced in the Middle East as anyone we have at State. But you didn't need our expertise to know, when that plane hit the second tower, that this was the work of terrorists.... (more)

Khatami on Iran's Lost Chance

"We believe they destroyed in this election the biggest opportunity that had come about for the Islamic establishment and the country," Khatami said in a meeting with university professors in Tehran, the ILNA news agency reported.

He said: "We are opposed to the interpretation of religion by those who in the name of confronting Western liberalism want to drive people by force on to the path they regard as prosperous using a fascist or totalitarian approach."


By Reza Derakhshi and Fredrik Dahl

TEHRAN, Sept 6 (Reuters) - A leading Iranian reformer accused hardliners of a "fascist or totalitarian" approach, as President Mahmoud Ahmadinejad's new cabinet prepared to hold its first meeting on Sunday after his disputed re-election in June.

The hard-hitting comment by former President Mohammad Khatami was a further sign of the moderate opposition's intention to keep up protests over an election it says was rigged.

It came three days after parliament approved most of Ahmadinejad's government ministers in a move that bolstered his position after nearly three months of political turmoil in the world's fifth-largest oil exporter.

The reshuffled government was due to meet for the first time on Sunday evening in the northeastern city of Mashhad, site of Shi'ite Iran's holiest shrine.

The presidential poll, which was followed by huge opposition demonstrations, plunged Iran into its deepest internal crisis since the 1979 Islamic revolution and exposed deepening rifts within its ruling clerical and political elites.... (more)

Tuesday, September 01, 2009

From Foreign Policy:

Ted Kennedy's World

The late senator will be remembered mostly for contributions to domestic issues such as health care and education, but here are five areas where the Lion defined the U.S. foreign-policy debate.

BY JOSHUA KEATING | AUGUST 26, 2009

IRAQ

Alex Wong/Getty Images

Words: "There is clearly a threat from Iraq, and there is clearly a danger, but the administration has not made a convincing case that we face such an imminent threat to our national security that a unilateral, pre-emptive American strike and an immediate war are necessary. Nor has the administration laid out the cost in blood and treasure of this operation. With all the talk of war, the administration has not explicitly acknowledged, let alone explained to the American people, the immense postwar commitment that will be required to create a stable Iraq.” —The Johns Hopkins University School of Advanced International Studies, Washington, Sept. 27, 2002 ... (more)

W.H. Auden: "September 1, 1939"

(From "One Poet's Notes" by Edward Byrne)

On the 70th anniversary of the invasion of Poland by Germany and the opening of World War II, perhaps today presents the perfect time to revisit W.H. Auden’s famous poem, “September 1, 1939,” written in the immediate aftermath of those events. The piece appeared in The New Republic in October of 1939, and it was included in Auden’s 1940 collection of poetry, Another Time, published by Random House. Although this poem has been a favorite of many readers ever since, it received particular renewed attention in the days after September 11 in 2001, and not just for the uncanny superficial similarities in lines like the following: “The unmentionable odour of death / Offends the September night.”

However, we also know Auden became disenchanted with his own poem soon after its publication. Auden attempted editing the work from the very start, omitting a couple of stanzas even before its publication and later changing one of the poem’s most memorable lines, which Auden concluded displayed “dishonesty”: “We must love one another or die” became “We must love one another and die.” Auden eventually revised the poem by deleting the stanza containing that line. Finally, still unhappy with the language, he tried to limit reprinting of the poem altogether by refusing almost all requests for its inclusion in anthologies.

One reason for Auden’s change of heart about this poem could be a personal shift in political perspective on his part as he moved from England to the United States and drifted away from his earlier stance as one sympathetic to socialism, adopting more concern for religion as well. The poem also attracted criticism from some readers for what they perceived as too easy an explanation for horrible actions, if not an excuse for evil behavior, in lines such as the following: “Those to whom evil is done / Do evil in return.”

Nevertheless, as evidenced by the work’s enduring stature seventy years after its composition despite Auden’s attempts to erase it from his body of work, and as witnessed in the poem’s recent popularity after 9/11, most readers have responded well to the poetry, even if many apparently seem to misread some of its elements. As Adam Gopnik has written in The New Yorker (“The Double Man”: September 23, 2002): “‘September 1, 1939,’ far from being a call to renewed conscience after a period of drift, is actually a call to irony and apolitical retreat, a call not to answer any call. But, past a certain point, poets can’t be misread, not by an entire time, no more than an entire family can misread a father: the homecoming noises in the hallway are the man; the accumulated impression is the poet. What matters is the sound he makes. Auden’s emotional tone is our tone, even if his meanings are not always our meanings.”

SEPTEMBER 1, 1939

I sit in one of the dives
On Fifty-second Street
Uncertain and afraid
As the clever hopes expire
Of a low dishonest decade:
Waves of anger and fear
Circulate over the bright
And darkened lands of the earth,
Obsessing our private lives;
The unmentionable odour of death
Offends the September night....(more)

The Real Winner of Afghanistan's Election

Meet Mohammad Qasim Fahim, the unsavory Tajik warlord whose grip on Afghanistan just got a whole lot tighter.

BY HILLARY MANN LEVERETT | AUGUST 31, 2009

The real winner of Afghanistan's presidential election will not be Hamid Karzai or his main rival, Abdullah Abdullah. It's a man named Mohammad Qasim Fahim. He is Afghanistan's senior-most military commander, with the lifetime rank of marshal, and was Karzai's running mate during the campaign. Whether Karzai or one of his opponents wins, Fahim will hold and exercise extraordinary influence over the country's military and security apparatus -- more so than the elected president.

This means the real loser of Afghanistan's presidential election -- besides the Afghan people -- will be the United States' long-standing ambition to train and equip enough Afghan forces to allow for an eventual withdrawal of the U.S. military. Building up the Afghan military and police is at the heart of Gen. Stanley McChrystal's latest assessment for Washington of what needs to be done in Afghanistan. But McChrystal's forces will be training Afghan soldiers and police to work for Fahim: a human-rights-abusing, drug-trafficking warlord who might also have had a role in al Qaeda's assassination of his political godfather, Tajik warlord Ahmad Shah Massoud, on Sept. 9, 2001 -- an operation widely viewed in retrospect as a precursor to the terrorist attacks in the United States two days later.... (more)

Iran to offer new nuclear package to West
Tue, 01 Sep 2009 11:46:55 GMT


Iran - a signatory to the nuclear Non-Proliferation Treaty (NPT) -- says it will not relinquish its nuclear rights under Western pressure.
Iran has prepared an updated nuclear package and is ready to hold talks with the world powers on its nuclear program, Press TV has learned.

The package will be offered to the veto-wielding members of the United Nations Security Council -- Britain, China, France, Russia and the United States plus Germany (P5+1).

The six world powers will meet in the German city of Frankfurt on Wednesday to discuss Iran's nuclear issue.

Confirming the report, Iran's top nuclear negotiator Saeed Jalili told reporters on Tuesday that the Tehran government has updated its proposed nuclear package in view of last year's global developments, including the economic downturn and the Georgian crisis.

Jalili, who also heads Iran's Supreme National Security Council, added that the Islamic Republic is ready to cooperate with Western countries to 'remove common concerns [about its nuclear program] in international arena'. ... (more)

Reappraising U.S. Withdrawal from Iraqi Cities

Interviewee:
Jane Arraf, Baghdad Correspondent, Christian Science Monitor
Interviewer:
Bernard Gwertzman, Consulting Editor, CFR.org

August 25, 2009

FULLNAMEOFINTERVIEWEEVeteran reporter Jane Arraf says in an interview from Baghdad that the massive truck bombings on August 19 in the capital have shaken the Iraqi people and government. She says the repercussions will be lasting. U.S. authorities, Arraf says, may have to take a new look at the policy of leaving security under Iraqi control in urban centers. She says that the bombings may make it more difficult to continue the reconciliation policy of bringing Shiites and Sunnis closer. "Iraq is a really complicated place to begin with but this attack, and its repercussions, could really threaten stability," Arraf says.

In recent days there were truck bombings in the center of Baghdad, killing many people. There have been a lot of recriminations as to who was responsible--al-Qaeda, the Baathist party. On the other hand it's the start of Ramadan, which is usually the time when people try to get together late at night to celebrate. What is the mood like in Baghdad right now? I assume it's very hot?

It's actually about 120 degrees and there are many, many people who don't have air conditioning and still have electricity only an hour or two per day. It is pretty brutal, which is why not a lot usually happens during Ramadan when it falls in the summer. The bombings occurred last Wednesday and they were really incredibly devastating. We're talking about suicide truck bomb attacks on two of the symbols of Iraqi sovereignty, at the heart of Iraqi statehood, the finance ministry and the foreign ministry. At the foreign ministry, where I went just after the bombing, and where over the weekend I talked to some of the survivors and the Iraqi foreign minister, Hoshyar Zebari, we saw a truly devastating site. These were the worst attacks in more than a year and half, but it's really the repercussions that will have as major an impact as the bombings themselves.

What kind of repercussions?

On the security level, it has cast light on what really, truly does appear to be systemic failure of the Iraqi security apparatus. We're talking about the ability of whoever was behind this to put together two huge truck bombs--these were four-ton trucks. The one that hit the foreign ministry was packed with two tons of explosives and they were allowed to drive through the streets on roads where you're not supposed to drive any trucks in daylight hours. That says something about what the government believes is negligence, if not collaboration, by some of the security forces. They've arrested eleven security commaders for investigation.

The foreign ministry is protected by the pesh merga, the military arm of the Kurds. Each ministry here was given to a specific political party or political faction as part of the way that the country was set up when the United States was in charge. The foreign minister is Kurdish and the pesh merga control the foreign ministry. According to the foreign minister, there hasn't been a security breach within the building in six years. When the Baghdad government and higher authorities decided that things were safe enough, they [dismantled] some of the blast walls and some of the checkpoints, [but] they didn't actually consult with the foreign ministry. And that's part of the reason why this truck bomb was able to barrel down that road. That in itself was a huge breach. In July in towns throughout the north, some of them in disputed areas, there were horrendous bombings at Shiite mosques and other soft targets. Some people believe that this is all connected, that those security breaches should have been examined. Part of this, of course, is the fact that the United States had a different role here after June 30 when it pulled out of the cities, which means the United States doesn't really have a visibility, they can't do the same intelligence gathering, which really means they can't play as much of a role as they did before June 30...(more)

The Drug Story / War Story in Afghanistan

THE TALIBAN'S DRUG DEALERS

An interview with Antonio Maria Costa of the UNODC in the current issue of Newsweek International (dated September 7, 2009)

After spending hundreds of millions of dollars trying to eradicate the fields of poppies that produce opium in Afghanistan, the U.S. suddenly announced in June that, in the words of special AfPak envoy Richard Holbrooke, "eradication is a waste of money." Instead, NATO and Afghan forces are trying to focus on the nexus between the opium trade and Taliban financing. Nobody has watched these developments more closely than Antonio Maria Costa, head of the Vienna-based U.N. Office on Drugs and Crime. A frequent visitor to Afghanistan himself, he also has a staff of some 360 locals "crisscrossing the country," tracking the growth and sale of narcotics. In a series of interviews with NEWSWEEK's Christopher Dickey before the recent election in Afghanistan, Costa talked about the surprising drug story behind the war story there. Excerpts:

Why give up on poppy eradication?
Last year the Afghan government eradicated 5,000 hectares of about 159,000 that were cultivated. More than 70 military and militia men were killed, and a couple of hundred million dollars were spent—tens of thousands of dollars per hectare—to destroy 3 percent of the crop. Eradication is supposed to have a double function: first, to reduce cultivation; and, second, to deter farmers from planting. But nobody is deterred by a 3 percent risk. The money would be better spent on development assistance like hospitals and schools.

You've suggested Afghanistan produces much more opium than the world actually consumes.
Oh, yes. Since 2005 the Afghans have cultivated almost twice world demand. The bottom should have fallen out of the opium market. But it hasn't. Prices are back down to where they were a decade ago, but they should be much lower considering the amount of opium being produced. That suggests that a lot of opium is not reaching the market. We have been wondering where it is. Now, in a number of military operations in the southern provinces, NATO troops have found huge amounts, which is evidence that the Taliban have been sitting on huge stockpiles. I can report—and this is breaking news—that opium cultivation and production fell for the second year in a row in 2009. But again this year, supply exceeds demand. Someone is hoarding 10,000 tons of opium—enough to satisfy two years of world heroin addiction, or three years of morphine prescription. Where and why? We don't know. But it's strange and potentially dangerous. ... (MORE)