Coutts is one of the
most prestigious private banks in the world. (Logo courtesy Coutts
In December of 1998, during the period when Dillon Read cashed out of Cornell Corrections
and $59 billion went missing from HUD, Time Magazine published an article,
Just Hide Me the Money by S.C. Gwynne with reporting by Adam Zagorin about
the October 1998 Citicorp and Travelers merger and the world of offshore banking:
Citibank's private-banking unit holds more than $100 billion, which makes
it about the same size as the entire bank was in 1982. These funds are in turn part
of a $17 trillion global pool of money belonging to what bankers euphemistically call
'high- net-worth-individuals' — a pool that generates more than $150 billion
a year in banking revenue. The numbers are impressive when you consider that except
at a few sleepy British and Swiss institutions, the private-banking industry didnt
exist until the 1980s. Citibank predicted early this year that it would reach $1 trillion
— that's trillion with a T — in private-banking assets by the year 2010.
And it faces some 4,000 competitors, from global dreadnoughts like Switzerland's UBS
[AUTHORS NOTE: the bank that bought Swiss Bank Corporation after Swiss Bank
Corporation bought Dillon Read] to secretive banks in the tiny principality of Andorra
to brokerages in Miami and accountancy firms in the Channel Islands."
One of the offshore Dillon funds that invested in Cornell Corrections was Concord
Partners Japan Limited. Its officers and directors, as listed in Exhibit D to Dillon's
April l997 13-D filing with the SEC, include an impressive array of Japanese business
leaders and a non-person, Amerex, S.A, which lists a Coutts private bank address in
the Bahamas as its address. This Dillon fund provides a link between the privatization
of prisons, offshore funds and arguably the most prestigious private bank in the world.
With the anticipation of profits as prisons stocks increased in value and went public,
an all-too-familiar impersonal financial mechanism was now in place that created yet
another incentive system with global reach, to drive the financial returns of investors
up by driving down the Popsicle Index of faceless people and communities, far removed.
According to Wikipedia online encyclopedia:
Coutts has its headquarters at 440 Strand, London, with branches throughout
the UK and the rest of the world. It is a private bank, which means its clients are
by invitation only and have liquid assets in excess of £500,000 (AUTHOR'S NOTE:
approximately $860,000 U.S. dollars) or an investment portfolio of over £1,000,000.
[AUTHOR'S NOTE: approximately $1.72 million U.S. dollars] The bank is most famously
known in the UK as the banker of Her Majesty Queen Elizabeth II. A Coutts Automated
Teller Machine is installed in the basement of Buckingham Palace for use by the Royal
Coutts is known as the "Queen's Bank" to many by virtue of
it being reputed to be the bankers to the British Royal Family. Within the UK it is
the largest Private Bank
Historically Coutts was an upper crust clearing bank
to the landed gentry, but today they are seen as wealth managers willing to accept
a wider class of clientele, including top sportsmen, lottery winners, football stars,
businessmen, chief executives, and pop singers. You don't have to be "Posh"
to get in, but if you are, it helps.
As well as being the Queen's banker, Coutts is also known as a bank for the
rich and famous of British society. In 1999 it became known that Her Majesty Queen
Elizabeth, the Queen Mother had a £6 million [AUTHOR'S NOTE: approximately $10
million U.S. dollars] overdraft with the bank. Sarah, Duchess of York also had a large
overdraft with the bank worth around £8 million [AUTHOR'S NOTE: approximately
$13.8 million U.S. dollars], which was subsequently paid off.
Her Majesty Queen Elizabeth
(Photo courtesy Memorial
University of Newfoundland)
So, lets say I am a customer of a private bank such as Coutts. Lets
say through Coutts I have an interest in an offshore fund with private prison investments.
The more people who are rounded up and put into prison, the more valuable my investment
becomes. If laws are passed for mandatory sentences, the more valuable my investment
becomes. If politicians and political appointees push through more prison contracts
for private companies, the more valuable my investments become. The more enforcement
staff and arrests, the more valuable my investments become yet again.
I can of course borrow on the increased value of my portfolio without ever having
to sell my investment, so I can watch my investment grow, receive distributions based
on profitability and still enjoy the liquidity it provides. In fact, given the wonders
of modern banking, I can turn my investment into ready cash with my ATM card, just
as the personal staff for the British Royal Family presumably can through the Coutts
ATM machine in the basement of Buckingham palace. Indeed, the transatlantic slave
trade never dreamed of financial leverage, engineering and liquidity this pervasive,
instantaneous or socially respectable.
But perhaps this should all make us pause for a moment and think. If the housing
bubble turned our homes into ATM machines and in turn induced many of us to take on
debt beyond our means, will the privatization of our prison system provide incentives
for those profiting from such investments to support policies that make us even more
of a target in the future?
Catherine's letter to the NY Times about the perverse
incentive systems and "tapeworm" economics of prison stocks before she knew
that Dillon had banked and cashed out of Cornell:
Thank you for Tim Egan’s article on prisons. It was an excellent summary
of the growth in the US prison population over the last two decades. A welcome follow
up might be an exploration on how the money works on prisons ... 
Recently, I called the Washington, D.C. criminal attorney who represented The Hamilton
Securities Group with respect to the criminal investigation until 1998. I asked him
if DOJ had managed to frame me, where would it have sent me to prison? He said the
order would have gone from the court to the Federal Bureau of Prisons at DOJ, and
that it would have had the discretion to send me to the prison of its choice. Hence,
it was possible that I would have been incarcerated in a Cornell Corrections prison.
How ironic would that have been? I now have the satisfaction of knowing that at the
cost to me of millions in litigation and investigation expenses over a ten year period,
I may have denied my old partners and colleagues at Dillon Read and their domestic
and offshore investors another $11,000 in stock profit approximately 44% (Dillon's
percent ownership) of the increased value in Cornell Corrections stock from another
bed being occupied by yours truly.