YOU’RE KIDDING… ANOTHER BEARER BONDS SCANDAL… IN ...

Just when you thought we were done with all those bearer bonds scandals and  that they were a thing of the past, or at least, being carefully covered up, they surface again, this time in Florida, according to this article shared by Ms. P.H.:

Billion-dollar bond that man tried to cash in Broward was fake, feds say

Now, if you're familiar with these bearer bond stories, you'll have noted a number of departures from the standard "pattern":

The bond, supposedly issued in 1934, appears to have been printed on an inkjet printer and seemed to contain a security thread – both technologies that did not exist until many years later, investigators said. The counterfeit bond also featured a photograph of Grover Cleveland, who was president in the 1880s and 1890s.

But perhaps the biggest clue was the eye-popping billion-dollar figure on the face of the bond. U.S. Secret Service Agent Charles Callahan told a judge Wednesday in federal court in Fort Lauderdale that the highest-valued bearer bond in that era was $10,000 and the highest-valued bond ever was a $1 million one issued in 1978.

Hugo Barrios Briceno, the 50-year-old Venezuelan man accused of trying to cash the counterfeit bond at a Fort Lauderdale financial business earlier this month, will remain locked up because he is a potential flight risk, U.S. Magistrate Judge Patrick Hunt ruled Wednesday. Barrios Briceno was arrested Aug. 16.

Note what we have in terms of the "bearer bonds pattern" according to the above paragraphs:

1)  a bond "issued" in 1934: this does fit the pattern which has been seen before, with the so-called 1934 "Morgenthau" bonds, allegedly issued by the US Federal Reserve System(not the US Treasury) to elements of the Khoumintang government of Chiang Kai-Shek in return for the fed's storage of Nationalist Chinese gold. Note what this means: for if these bonds ever surfaced, the US Treasury, since it did not issue them, can claim they are fake, and that it has no knowledge of them. Morgenthau was the then US Secretary of the Treasury under President Franklin Roosevelt. On the so-called 1934 "Morgenthau's", the signature of Secretary Morgenthau does appear to be the authentic signature such as it appeared on US currency at the time.

2) the "bond" was printed on an ink jet printer and contained a security thread: this both does and does not fit the pattern of previous bearer bond stories, for in some versions of other bearer bonds stories, the "bonds" appear to have been lithographed, and not printed with the intaglio method typical of official US currency and securities at that time. What is odd - genuinely odd - here is that the bond contained a "security thread," which raises the important question of why the counterfeiters of this bond went to all the trouble to procure paper with this feature. It can be done, of course, but doing so would  be bound to raise suspicion from any legitimate vendor. Perhaps such features are typical of  US (or other nations') bearer bonds and thus the counterfeiters had to reproduce it. There are other possibilities, of course, but we'll get to those in our high octane speculation.

3) The "bond" was issued with a picture of Grover Cleveland: This does fit the pattern of the bearer bonds, for in almost all versions of their occurrence, actual US currency issues were used as the "donor document" to create the "counterfeit" bonds, and since Grover Cleveland appeared on the one thousand dollar US Gold certificate, it is no problem to add a few extra zeros and create an entirely new denominated currency or security. Indeed, some people have already transformed the Cleveland one thousand dollar bill into a one million dollar bill (see Cleveland one million dollar bills). Indeed, we've seen bearer bonds with the pictures of George Washington and Woodrow Wilson, both borrowed from the US Currency issues bearing their likeness. The only president on a bearer bond who has never appeared on an issue of US currency was John F. Kennedy.

4) The highest denomination of bearer bond ca. 1934 was $10,000 and the highest ever denomination was $1000,000: this is where we run into trouble, for if I recall correctly, during the Italian bearer bonds scandal that apprehended two Japanese men carrying $134,500,000,000 in allegedly counterfeit bills, during this scandal, the US government denied that bonds of one billion dollars had ever been issued, but left the problem of $500,000,000 bearer bonds unsettled. Again, it is important to note that, as far as the Treasury is concerned, this is entirely true, since most bearer bonds - and especially the 1934 "Morgenthaus" - were allegedly issued by the Federal Reserve.

So what might we be looking at here?

Indulge my high octane speculation once again, for I think we're looking at something real, and perhaps even at a real bond. Note this unusual thing about the story:

Defense lawyer Alberto Quirantes said his client committed no crime and was tricked into repeatedly trying to cash the bond. He said Barrios Briceno believed the bond was genuine, based on advice from at least two people he thought were experts.

"Somebody duped him," Quirantes told the judge. "This is a complete shock to this man."

The prosecutor said the investigation began after a financial adviser in Fort Lauderdale reported Barrios Briceno, a Venezuelan resident who was visiting South Florida on a business visa, had contacted him about cashing the bond.

Barrios Briceno said the bond belonged to someone he knew in Bogota, Colombia, according to court records. He said he wanted to deposit $500 million from the bond into his bank account and open an investment account with the other $500 million from the bond, agents said.

The Secret Service arranged for an agent to pose undercover as a worker who would help the financial adviser to liquidate the bond at an Aug. 16 meeting, which was secretly audio- and video-recorded, authorities said.

Prosecutors said that the bond would have an equivalent value of 19 billion dollars in today's currency. They also said that a simple Google search would have shown Barrios Briceno that billion-dollar bonds are not legitimate.

If convicted, he could face as much as 15 ½ to 19 ½ years in federal prison, based on the face value of the counterfeit bond, prosecutors said.

According to the Secret Service, Barrios Briceno said that his contact in Colombia gave a loan to someone who provided the bond as collateral but never repaid the debt. The lender then asked Barrios Briceno to try to cash the bond, which he said he picked up from the lender's sister in late June at Miami International Airport.

Barrios Briceno told agents he had picked it up at the airport because he was concerned that customs officials would question him about it.

The defense said in court that Barrios Briceno went to Washington, D.C., in early August and met with someone who "verified" the bond was valid for a fee of about $30,000. Barrios Briceno also said he met separately with representatives from four major financial institutions and that one of them offered $180 million for the bond. The lawyer said nobody gave his client any reason to think the bond was counterfeit.
(emphasis added)

So what do we have? We have

1) A South American, Columbian businessman;

2) in the USA on a business visa;

3) who paid $30,000 in fees to "validate" the bond. Pause for a moment and consider what this means: it means that there are so many such bearers bonds, that this story is so regularly occurring, even if not reported, that the story now has "experts" validating bonds!

4) Barrios Briceno, the "accused" Columbian businessman, states that he had received offers from "four major financial institutions", one of which offered to buy the bond at a discount. If true (and I suspect it is), then why would any "major financial institution" buy a counterfeit bond that isn't worth the paper and ink it took to make it? And finally,

5) As indicated, Mr. Briceno faces a stiff prison sentence for attempting to pass the bond. But this isn't the problem, as anyone who has been following these weird bearer bonds stories knows; one can be arrested simply for possessing one and trying to make legitimate inquiry about it, not even attempting to cash or sell it.

If all of this seems a little draconian for a worthless piece of counterfeit securities denominated at such high values that even at sharp discount few could redeem it, that's because it is. Thus far I have suspected, and have been arguing, that such a bond represents a hidden system of finance, and that the bonds, while counterfeit, represent a real, though secret, exemplar. After all, one does not counterfeit a seven dollar bill, and then keep running the same scam over and over for a decade if not longer in the face of failure after failure to redeem  them, if there is no underlying reality.

But this story forces me to consider another possibility, one that I have also implied before: What if such bonds are real, and the peculiar methods of printing them are in fact an agreed upon sign of their authenticity in whatever community trades them? (Recall the Tanaka 57 Bonds in this regard). This raises the question of who or what community would trade in such Monopoly money? One answer is suggested by what the word "gold" stands for in some criminal financial circles: it stands for "drugs", and thus a "gold-backed bearer bond" could be collateralized by drugs, not  bullion. And if one is conducting an international drug trade with other drug cartels, one mechanism to track flows between groups would be precisely the issuance of "securities." Such a system would require the participation of some banks in the scheme to clear them. Would an innocent bystander be prosecuted to the hilt merely for possession of one? Most certainly, since this would tend to expose a massive and secret system. And of course, Columbia is home to some well-known drug cartels.

The bottom line here? The bearer bonds stories are not going away any time soon.

See you on the flip side...