Case of $134-billion T-bond bust fuels conspiracy theories

For your entertainment, Bloomberg News columnist William Pesek lets his imagination run wild about the strange case of two Japanese men who were allegedly trying to smuggle $134 billion in U.S. Treasury bonds into Switzerland last week:

Two Japanese men are detained in Italy after allegedly attempting to take $134 billion worth of U.S. bonds over the border into Switzerland. Details are maddeningly sketchy, so naturally the global rumor mill is kicking into high gear.

Are these would-be smugglers agents of Kim Jong Il stashing North Korea’s cash in a Swiss vault? Bagmen for Nigerian Internet scammers? Was the money meant for terrorists looking to buy nuclear warheads? Is Japan dumping its dollars secretly? Are the bonds real or counterfeit?

The case has received little play in mainstream media, which Pesek presumes is because it’s so surreal. And, probably, because the assumption is that the bonds are phony. But the Italian authorities seem to have released few details so far.

I think the original story was carried by a service called AsiaNews, which I’ve never heard of. Go here for the original and here for the service’s follow-up. The Seeking Alpha website has a story here. Glenn Beck on Fox News also has picked up on this.

As you’re reading, keep in mind that actual facts on the story are in short supply.

Still, even assuming this is just a counterfeiting case, the total involved (if it’s accurate) is mind-boggling. This is manna from heaven for conspiracy theorists.

Note, though, that Bloomberg goes a little over the top with the headline on Pesek's column, suggesting that "Suitcase With $134 Billion Puts Dollar on Edge." The dollar may have plenty of things weighing on it lately, but this probably isn’t one of them.

-- Tom Petruno

 

Comments

[diaz]

bonds are real, Japan dumping it, buy gold, petruno is an idiot

[Tom Petruno]

@diaz: Please share with the rest of us the source for your statements that 1) the bonds are real and 2) Japan was trying to dump them.

Tom Petruno

[Mark @ News Corpse]

Can someone tell me how you put $134 billion worth of Treasury bonds into a suitcase? If each one was worth $1 million, you would have to stuff 134,000 of them into the suitcase. That's a pretty big suitcase.

[Bob Green, Frasier Foods]

"Can someone tell me how you put $134 billion worth of Treasury bonds into a suitcase? If each one was worth $1 million, you would have to stuff 134,000 of them into the suitcase. That's a pretty big suitcase."

The bonds were reportedy worth $500 Million or 1 Billion apiece.

[JJ]

There are Kenedy Bonds worth 500 Million dollars, Tim.

[Andrej]

I have been following this story since it broke and it have bene very frustrated by the lack of coverage in the press.

Whether the bonds are real or fake it is a huge story.With all the pressure the dollar is currently under this kind of thing has very big implications.

Why has it not been covered by a US news organizations?This very brief LA Times blog is the only thing I have seen in the US media. After all these are US bonds!

If the story itself is not a hoax, this is a huge lapse on the part of tour press. I guess they are too busy covering Susan Boyle.

[Al]

"I think the original story was carried by a service called AsiaNews, which I’ve never heard of." simple google search reveals its origin. “Pontificio Istituto Missioni Estere”, Via G. Carini 32/D, Rome, Italy. You're welcome.

[Paolo]

Hey, this money is mine, can I get it back please?

[Pietro Cambi/Crisis]

Hello.
Well, I have the dubious luck to have been the first to propagate this strange news to the web via my well known blog (at least here in Italy), Crisis what Crisis.
From the other Italian bloggers the news arrived in the international mainstram and from there to asia knews etc etc.
First of all: it is NOT an Oax or, as we italians say a "bufala".
It is plain truth and a HUGE plot, for a LE-Carre' Style spy story, for sure.
You could find tne news on the site of the guardia di finanza in italy.
But we, of Crisis have done more. We first checked it.
My co-blogger the italian journalist Debora Billi had a short interview with the frontier-police Chief who caught the two people.
He confirmed ALL the story, said that the 10 "kennedy bonds", issued in 1934, where probably false but he was not shure about the other 249 500 millions bonds. The teo japanese weere realised because he was NOT convinced that the titles were false and in italy you are only fined for illegally exporting valuable goods. the jail is only if you have FALSE titles.
Now as now in Italy there is a COMPLETE cover-up of this piece of news.
Main Media had a shor notice about that hte day it happened and then...silence.
This only beeing..Quite strange, given the peculiar status of media in Italy...you know what i mean.
It would be nice, by the way, to know if President Obama and President Berlusconi have talken about the issue or not...

[Matt]

The story was NOT broke by Asianews. It was broke by AFP which is the oldest news agency in the world. And if they faked the story, that is pretty darn newsworthy on its own. So why hasn't anyone at the LA Times picked up the phone and done any journalism?

[Jimmy Clark]

Pretty interesting story though. Two guys carrying 249 pieces of paper between the two of them look "suspicious" so they are detained and they happen to look at the bottom of the briefcase.. The other interesting piece is if these are fake -- who would buy them? All governments would do the due diligence and require insurance on them. I would think what would amount to one of the best/biggest counterfeiting operations in the world would have thought that through if they are in fact counterfeit. Weird that these things can be verified overnight but it has been 10 days & they still have not been arrested. Sounds like a gov't dumping bonds because they don't believe in the strength of the dollar..

[Curtis]

One thing that is definitely needed if you are to craft a well done forgery of a billion dollar bill is...a real one.

If these were forgeries, and if they were extremely well crafted forgeries, then a creditor government would have to be behind the forgeries.

It's unlikely that you could borrow a billion dollar bill from a government and bring it home with you so that you can make some counterfeits.

Furthermore, I would expect that it could be determined precisely which original bonds were counterfeited as they each would likely have their own individual design characteristics as a security feature. We would know which nation was in possession of the particular counterfeited bill from which these counterfeits were crafted.

[GMartine]

The Kennedy bonds are 1 billion dollars not 500 million. They had 10 of them and 249 500 million dollar bonds.

Japan could of tried to smuggle these bonds in order to dump them without letting the public know. This would be to keep the bond market stable since Japan already owns so much of them. Also, sometimes banks will keep bonds on reserve to show auditers they have sufficient funds in their vault. Corrupt banks may shift the bonds around during audits to prove their solvency to auditers. So these men could have been trying to transfer these bonds to other banks under the radar as to prove the solvency of some unnamed Japanese banks.

The author of the article is wrong when he states "The dollar may have plenty of things weighing on it lately, but this probably isn’t one of them."

He is right about the dollar having alot of things weighing against it but this can be disastrous for the next treasury auction because other countries may lose confidence in the bonds since they may be being dumped or counterfeited.

The Italian authorities are expected to determine this week if the bonds are real or not.

[H. Craig Bradley]

Who is the buyer?

[Mike in Austin]

Even if they were Kennedy Bonds, and they were $500 Million Dollar bonds... that's a couple reams worth of bonds. That would fit in a "Pulp Fiction" type briefcase

As our Treasury, we surely are a little more careful with $500 Million Dollar bonds, then just to put a serial number on them, and tell the recipient "don't lose it...?"

We should be quick to say whether the bond numbers match and to who?

The Chinese counterfeit MIG jets from Russia. Surely, they can counterfeit anything else they want. Maybe it's a check with $130,000,000,000.00 signed by Tim Geitner. I just photoshopped one up if you're interested...

I think the DEA should confiscate them as drug money.

[JM]

Diaz, unless you can verify your remarks, you are the idiot.

[Aaron]

I'm betting these bonds are fake. Further, this is a meme-planting operation. Think about it. If these bonds exist out there, off the books, the US does not want to have anybody calling them in right now (since they might be bearer bonds). Better plant a few stories of fakes, in case anyone tries to cash in before the dollar tanks. That's an easy way to default on your debt - state that a large tranche of debt is "forged". I have read reports (Weisenthal) that the two people involved were released, which makes me think they had some serious connections.

The Italians desperately want these debt instruments to be real, because they have a huge incentive - they'll get to keep 40% by law. So of course the Italians are going to claim they're real.

[George W]

Well Petruno, I am very happy that you have applied all of your splendid journalistic talents on this story.

Years ago, journalists actually (gasp!!) did some REAL probing - they might, say, call up the Italian police or other law enforcement officials, they might even call up officials within the Treasury department, etc.. Instead, the current batch of "journalists" merely look at some of the other articles that were written, and casually dismiss them as cranks.

Bravo, Petruno!

Keep up the good snooping, pal - you're journalisting up a storm.

[phul ovit]

has any mentioned an Illuminati connection? What about the Vatican? Could it be the Nazi pope funding a new crusade? what about payment for a mob hit like JFK? maybe Japan nationalists are buying an H-bomb from Russia and looking for a little payback..

if not, let me be the first. mere counterfeit bonds seems so..plausible. bor-ring.

[no i am not serious]

[Dan]

So if they are REAL then:
a. some gov't is selling them out of dollar fears
b. some gov't is shuffling them around to prove solvency at multiple banks
c. some other institution has "black book" debt illegally issued by the US and was transporting them around

If they are FAKE then:
a. someone is stupid enough to think they could sell $130billion without the buyer verifying the authenticity
b. as alluded above - the US is doing this to in some way discourage others from cashing them in.

Or they are real but will be claimed as fakes so the US doesn't have to pay.

It sure would be nice to see the passports of the Japanese gentlemen to see where exactly they had been lately. This is quite a good mystery.

[blofeld]

Why does one not suspect the obvious? Money laundering.
If these bonds were real, and if they had managed to get them across the border into a Swiss bank, the funds become highly fungible and impossible to trace.

[Tom Petruno]

@George W: As you may know, one purpose of a blog is to share what others have written, and, by sharing, to see what other information might be flushed out.
Just FYI, I do have a call into Treasury, and I’m trying to find out what our Times correspondents in Europe might know about the case.

Tom Petruno

[Preston Moritz]

I belive this will be the story that breaks the Media's back so to speak. For years you have raced to headlines with little regard for fact or discretion. You have a call into treasury, good work, lol. If they don't call you back you can always write about Palin and Letterman or Michelle's arms, or perhaps you should write another article on Pres. O swatting the fly?

[Sebastian]

Let's consider the possibilities while trying to avoid becoming conspiracy theorists.

a) Are they fake?
Would any criminal start with such a high quantity? No.
It would draw incredible scrutiny. Who would buy? Who could?
The buyer would become the US's fourth largest creditor: larger than the UK but less than Russia.

Is it easy to know what they look like in order to fake them? No.

Is it easy to check if they are real? Yes.

So your chances of success are incredibly low. A crook might forge a $1 million bond perhaps, but not the GDP of a small country. You just don't think that's a good idea unless you are too stupid to be able to forge the bonds.

IF these are fake who is suspect No1? North Korea, they have a history of faking dollars.

b) Are these a US government con to put people off selling bonds, as Aaron suggested?
The logic would be: don't sell your US bonds secretly because the Italian police will catch you out doing something legal? I don't see the logic. Hiding a piece of paper in a briefcase isn't that hard. Secret business negotiations are nothing unusual. Avoiding Italy isn't hard. However, the most important reason is this: it isn't at all in the interests of the US government to suggest that other governments may want to dispose of their dollars!

c) Why the virtual media blackout?
Do you request a media blackout if they are fake? An audacious, if stupid financial crime, makes excellent copy... so the media obviously want this story (eg. remember Roberto Calvi hanging under Blackfriars Bridge in London)
The US government wouldn't benefit from a blackout on a crime: that would run the risk of fanning the flames of a conspiracy theory. Even though they won't like the idea of people dumping the dollar in the media that is already there (Giselle Bunchen for example). This story would not be suppressed if it were a straightforward crime.

d) Is there any scenario under which a crime story might be suppressed?
If this is the work of North Korea, a government hooked on creating scandals and demanding aid payoffs to cut it out, perhaps. You might want to wrap their knuckles in private rather than embarrass them in public: especially since they are threatening nuclear retaliation: "If the US and its followers infringe upon our republic's sovereignty even a bit, our military and people will launch a one hundred- or one thousand-fold retaliation with merciless military strike," said a commentary published by North Korea's state news agency KCNA.

e) If they are real who would benefit?
Any US creditor nation might be trying to sell dollars before they fall any further in value, if they could get away with it without the market spotting the transaction. So that's China, Russia or Japan...not sure about the dollar reserves of Germany or South Korea.

f) If they are fake who would benefit? North Korea. Even Iran wouldn't do this, they are paid in dollars.

f) Real or fake who is damaged by this? US creditors who will see their dollar holdings devalued by market jitters.
The US would benefit by lowering the value of their debt but not in such a way that confidence in the dollar is so undermined that they cannot sell dollars without raising interest rates and stalling the economy. The US wants a slow fall in the dollar, not a Brazilian style currency run and a need for a new one. This sort of story causes the jitters.

Conclusion:
My guess is that this is really a creditor trying to jump the gun on dollar depreciation or it's North Korea up to no good.

What it certainly isn't is nothing.

[martscan]

For chrissakes, its a joke! Like most of the responders here.

[JS]

Diaz, George W - in a sea of idiotic comments, yours rise to the top. Go back to watching YouPorn, and leave the discussion to the adults.

[Tom Petruno]

There's an update, with Treasury's response.

Go here:

http://latimesblogs.latimes.com/money_co/2009/06/speculation-about-the-italian-smuggling-case-involving-134-billion-in-purported-us-treasury-bonds-may-have-been-fun-while.html

[pete]

Ever hear of the scam about "secret" medium-term notes programs that are available to governments, the World Bank and super-wealthy families in which the notes are "rolled" to create profits from the trades? The key to that scam is that the target has to provide (typically a minimum of $500M USD) funds in an account that can be used as collateral securing lines of credit or loans (which are promptly drawn down before the scammer scrams).

If just one of the con-artists running these scams were able to convince a central banker to place their funds in a Swiss bank for these rolling programs, the result might be something like this.

Also, where is the owner of these bonds? If they are real, SOMEONE will come to claim them...if not, then I will.
:)

PS -- Remember when Don Johnson was caught under equally mysterious circumstances trying to enter Switzerland with the paltry sum of $8 billion USD? Whatever happened to him? Where did those funds come from?

[JJ]

Haa, now I know why the previous generation of US$ bills wear out and fade so quickly! They were all fakes??????

[JJ]

This can also be the Iranians(they tried this before big time), Russia and or China........

[Susan]

Why is there so little "mainstream"reporting on this event? I would like to know the entire story. It's news worthy no matter what the facts are.

[Max]

Do not forget that Obama administration has a quite cold relationship with european leaders, imagine with Berlusconi quite racist government, but just after this fact an unexpected visit has been quickly set...

[Phil]

There may be another possibility. What if the bonds are counterfeit and they were meant to be found by the Italian authorities? Anyone that was short the dollar would have a great windfall. Away follow the money.

Say a large currency trader was short the dollar and long on other currencies, he or they would make a lot of money if they knew that this event was going to happen. It is not like he hasn't done this before to other governments, ie the British pound. The two Japanese guys would make it appear that the Japanese government was dumping dollars covertly. They may have not known about the bonds in their suitcases.

The US dollar would be discredited and the Japanese government would appear to be responsible. The whole story about the Italian mafia is just a cover story. The unidentified boogy man did it, PLEASE !!!

Questions:

Who are these Japanese guys and how did they get these bonds or the suitcases that held the bonds?

Were the Italian authorities tipped off?

What currency traders made a whole butt load of money?

Were there any abnormally large positions against the dollar?

[Dave P.]

***How to tell that the "Kennedy Bond" is a fake***

You can see a picture of it at http://images.turnerradionetwork.com/OneBillionDollarKennedyBond.jpg

Look at the font used to print the phrase "Washington, D.C." It's a very modern-looking font. I'm pretty sure it's Arial (a font designed in 1982). Or maybe it's Helvetica (developed in 1957). Regardless, any bond purportedly printed in 1934 would not use such a font.

One detail that the counterfeiters *did* get right was the signature of Henry Morgenthau, Jr., who was Secretary of the Treasury in 1934. (They probably obtained his signature from Wikipedia: http://upload.wikimedia.org/wikipedia/commons/9/9b/Henry_Morgenthau_Jr_sig.jpg )

Can anyone explain why these have been called "Kennedy bonds"? They bear the image of Grover Cleveland. John F. Kennedy was only 17 years old in 1934. (His father, Joe, was Chairman of the Securities and Exchange Commission in 1934, but what does that have to do with issuing Federal Reserve Noes?)

[Brad]

Ok... this is really strange. I just bought a wedge of Parmesan and when I opened the package there was a $500 Million Kennedy bond inside.

I am not making this up!

Written on the bond was the following: "This bond property of Dragon Family. You steal secret Gold Coin. We get bond instead."

Does anyone know how I can contact the Dragon Family to give them their bond back? I've hear they are really difficult to locate.

[REAL6]

The bonds are real. WHy would the Treasury say they are fake so fast and not release the 2 Japanese men's name? Very fishy. One of the men that was detained is called Tuneo Yamauchi. He is brother-in-law of Mr. Toshirou Muto, former deputy Governor of Bank of Japan.

From a blog in Japanese:

http://yamaji.iza.ne.jp/blog/entry/1091276/

Also i think this:

Could Obama & Japan’s Interior Minister Kunio Hatoyama be involved plus the internationa bankers 'Which they are"?

http://wasatchecon.wordpress.com/200...ng-tarp-funds/

The WSJ reported on March 30 that Treasury Has $134.5 Billion Left in
TARP…”The Treasury Department said it has about $134.5 billion left in
its financial-rescue fund, giving the Obama administration a cushion
as it implements expensive programs aimed at unlocking credit markets
and boosting ailing industries”….

And this is what these 2 Japanese business men had in a suitcase...

Hmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmm.

[SeanSilverSpear]

SECRET BAILOUT MONEY
KEY POINT: 134.5 billion of US tax payer's TARP money the same amount found in suitcase. The odds of this being a coincidence is astronomical if not impossible. (This was the reason to transport the bonds secretly) If Americans knew there money was being used to prop up Japan there would be a political earthquake.

KEY POINT: Japan has the second largest economy in the world with huge ties to US economy and it has been tanking badly. Thus it was in US interest to prop it up with bailout money.

KEY POINT: Why they got caught. Probably a mixture of Hubris and ineptitude.

KEY POINT: I believe the bonds were real, all the more reason to prove them fake with smoke and mirror stories about their authenticity.

FINAL POINT: No need for wild conspiracy theories, just apply OCCAM'S Razor, Two Japanese business men caught with 134.5 billion dollars of TARP money headed for a Swiss bank= Secret US Bailout money for Japan.

[CHUCKtheFED]

It is an interesting story.
I like the "meme" aspect.
And I am surprised to see no mention of the "Financial Stabilization Board" aspect of the new powers for Central Banks, and specifically with regard to the Federal Reserve. The dollar is changing before our eyes as if it were sitting in H.G. Welles' time machine. It went from a denomination of value, to a certificate of debt in my lifetime. And along with every dollar, and bond ISSUED, is also the interest NOT issued, and so must be extracted from the system by means of bankruptcy.
So far, there is NO Congressional oversight for the FSB. None. It will be a panel to make decisions internationally, about money, with no elected officials taking part. (a lot of old Goldman Sacks 2006 guys though.. if you need an Italy connection)
This will evolve into another "disaster that I have a solution for" scenario, that we must all act on "right now".
Mark my words...

[Joe]

Diaz,

You should share your sources for these statements:

1) the bonds are real
2) Japan was trying to dump them
3) Petroni is an idiot

If you don't have a way to confirm, then do not assert