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Trail of fake Treasury bills lead to Mafia

June 19, 2009

Published on FT on July 18 2009

A summer afternoon, two “Japanese” men in their 50s on a slow train from Italy to Switzerland say they have  “nothing to declare” at the frontier point of  Chiasso. But in a false bottom of one of their suitcases,
Italian customs officers and Ministry of Finance police discover a staggering $134bn in US treasury bills.

Whether the men were really Japanese, as their passports declared, is not entirely clear, but Italian and US secret services working together soon conclude that the bills and accompanying bank documents are most probably counterfeit, the latest handiwork of the Italian Mafia.

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

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

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

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

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

Officials in Tokyo were  nonplussed.

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

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

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

Last month, Italian prosecutors revealed they had cracked a $1bn bond
scam run by the Sicilian Mafia, with the alleged aid of corrupt
officials in Venezuela’s central bank. Twenty people were arrested in
four countries.The fake bonds were to have been used as collateral to
open credit lines with banks,Reuters news agency reported. The
Venezuelan central bank denied the accusations.

Sicily’s Cosa Nostra mafia has been engaged in counterfeiting for at
least a century. The Napolitan Camorra are also experts in fakes of all
kinds.

In 2001 US and Philippine officials seized more than $2 trillion in fake
US federal reserve bonds in the southern Philippines.

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