The U.S. Federal Reserve Bank and the Bank of England paid for the hostages in Iran according to the book Revelation$

The story I’m about to recount may seem hard to believe.

The story unravels in the heart of what’s commonly called the “Financial Planet,” the “Global Village”, but perhaps best called the “Financial Village.” In this seemingly impenetrable universe, information circulates at almost unreal speed. Its language is coded, decipherable only by insiders, and the rules are rarely written or communicable. Many of us outside this microcosm behave as if the speculations, mergers, and massive moving of funds at lightning speed have no concrete bearing on our lives. What most of us know is that bankers and brokers buy and sell securities. They let us know from time to time that all’s well. They have their own press, their own television shows, their specialized books, their stock market index and plenty of myths in the making.

To start off, a man from Luxembourg’s financial inner circle will serve as our guide.

I met Ernest Backes four years ago in a small office belonging to the Luxembourg Butcher’s Union. His old Ford Scorpio was parked in the lot outside. “So he drives a Ford Scorpio” was my first observation. The mileage counter read 300 000 kilometers. “That’s one solid Scorpio,” was the second thing that came to my mind. Backes was, I saw, an enigma, one with certain problematic traits. This Rosport sparkling water drinker spoke like a book. “You’re going to have to filter through what this one says,” I told myself. But I was wrong. What I’ve now understood leaves me gaping at the enormity of the situation.

Ernest Backes was born in 1946 in Trier, Germany where Karl Marx was also born. The similarities between the two men don’t stop here. Both are heavy set, bearded and likely to attack the interests of capitalism. Marx is obviously better known than Backes. But Backes is alive which, for our purposes, is an advantage. He’s alive, lucid and in possession of an excellent memory.

What follows is the story of an association of international banks located principally in England and in Luxembourg but also in France, Germany, Belgium, Spain, Italy, the Netherlands, Switzerland, the United States and in a number of tax havens. Originally only a hundred or so of these banks were involved in the creation of this interbank cooperative. Recently, we’ve discovered a list of accounts revealing that the “cooperative” enlists more than two thousand banks representing more than one hundred countries and uses more than fifteen thousand listed accounts of which only half officially exist.

We’ll come back to these figures and to the unusual practice of carrying out international financial transactions without the actual presence of the parties concerned. Among the users of this system are bankers, investment firm managers, wealthy individuals looking for tax exemptions, policemen, heads of military secret services, CEOs of multinational corporations and the “men of straw” of offshore companies.

The pages that follow demonstrate that a system of concealment regarding bank operations was put into effect and backed by bank directors, financial managers, corporate managers and influential politicians. The system is perfectly organized, user friendly and still in operation.

The reasons for concealing international banking transactions are numerous. While a certain degree of dissimulation to maintain confidentiality in business transactions may be benign, concealment might also be used to cover up covert operations such as money laundering, insider trading, corruption and tax evasion. Hidden from the eyes of the market, tax departments, competitors and intelligence services, these transactions may be legal or barely legal.

They can also be entirely illegal.

We are calling into question this system’s users as well as its managers and administrators, both European or American, who make it possible for clients to transfer securities and funds covertly, and who themselves, have used the system to do the same.

This fraud could very well add up - if we had the means of calculating retroactively - to hundreds of billions of dollars. But never mind the colossal figures: what’s important here is to explain how a formerly healthy system, conceived to facilitate international banking transactions, has been put to other purposes.

Because these international transactions go undeclared, the system causes governments to lose significant tax revenue. Its other victims include millions of stock holders completely unaware of these practices and, of course, tax payers who end up, when all is said and done, footing the bill. We believe that this scandal is planetary though its source is possible to locate. One of the structures that we hold responsible for concealing and facilitating these practices has its headquarters and most of its offices in Luxembourg- City.

It should be mentioned that one of the important minds behind the conception of this project died a mysterious death in Corsica in 1983. His name was Gérard Soisson.

It should be mentioned that another man behind the initial project was Ernest Backes. For eighteen years he kept quiet, undoubtedly hoping that one day the story we are about to tell would be brought out into the open.

Only two international clearing houses liquidate the large majority of the Financial Planet’s international transactions.

Luxembourg, a small, quiet country in the heart of Europe known for its legendary discretion is home to two hundred and seventeen listed banks. Luxembourg with its royal family and its politicians getting ready for the European Union. Luxembourg and the unfailing American support it has benefited from since 1945. Luxembourg collapsing under the weight of dollars, euros, francs, yens, marks, and florins. Luxembourg and its 430 000 inhabitants. Luxembourg where in 1999, 554 billion dollars were invested in the stockmarket - four hundred times more than in the Bahamas, fifty times more than in the Channel Islands, twenty five times more than the Cayman Islands, six times more than in Bermuda, two times more than in Singapore, more than in Hong Kong... Most of Luxembourg’s citizens are unaware of what we’re revealing here, though unaware doesn’t necessarily mean “dupe.” It’s possible to ignore the details.

The financial structure we’re questioning has, since September 1999, gone by the name of Clearstream. Formerly it was called Cedel, an acronym meaning the central delivery office for transferable securities. Cedel was founded on September 28th 1970 in Luxembourg as one of two international clearing houses.

The other is called Euroclear and has its headquarters in Brussels.

We’re accustomed to saying and thinking that money, particularly the virtual money of bank computers, has no memory and moves at the speed of light from one account to another, from one fiscal haven to another. Without a trace of its trajectory.

This is false.

A majority of these incessant transactions are recorded in the accounting archives of these clearing houses. The difficulty resides in reading and interpreting the documents.

We are dealing with complete abstraction: money as such has not existed for some time.

But back to Ernest. At the time, I had just left the French newspaper Liberation, where I had worked for twelve years. I had also written a book relating my investigations in the heart of politico-financial affairs. Due to the nature of the book, its publication provoked the inevitable responses from paranoid conspiracy theorists and individuals victimized by the court system. I was contacted by a young man from Luxembourg, the son of the liberal parliament member René Mart, nephew of the former Minister of the Economy, Marcel Mart, and cousin of RTL television news reporter Caroline Mart. Marco Mart, as he is called, was stripped clean by one of the largest banks in Luxembourg, the International Bank. He has since been involved in a long, drawn-out court battle with the bank. Betrayed by his lawyers, abandoned by the public prosecutor, and cut off from his family since the death of his father, Marco Mart was helped by a mysterious consultant whose identity he kept from me. This silence piqued my curiosity. Who was this mystery man lurking in the shadows?

My questions concerning this “consultant” went unanswered until the Geneva Appeal when, for the first time on a political scale, the hypocrisy of tax havens was put under fire. Ernest Backes must have enjoyed this moment. In his first letter to me, he referred to himself as Sancho Panza and to me as Don Quixote: “I know this is a matter of windmills and I’m going to prove it,” he wrote. What he meant is that we would most likely battle in vain that that the battle was worth fighting.

We began writing each other, sending each other documents and clippings from the press. He was involved in investigations carried out by a number of different parties: the police, tax departments and magistrates of Luxembourg’s neighboring countries looking for information and using his knowledge of the banking sector. I contacted Marco Mart again for a film I was involved in and was finally introduced to his mysterious consultant.

Ernest Backes spoke a great deal but refused to be filmed. Later, he changed his mind and agreed to reveal himself before the camera. This was his first step towards coming out into the public after keeping a low profile for so many years.

Ernest managed a butchers’ cooperative. This job, I understood later, was both a cover and a means of earning a living. For someone who had been a mastermind behind the conception of one of the world’s two international bank clearing systems, the step down must have been dramatic. But Ernest didn’t let on to any bitter feelings. His Scorpio, the last vestige of the time when he still worked in the banking sector, remained parked below the building, worn with the years. He spent a great deal of time and energy explaining to me what I was just beginning to make out. He fed me bits and pieces of the puzzle, a disturbing puzzle and left me to assemble it myself.

I found him interesting but muddled, eccentric but overly cautious, generous in his explanations but cold in how he related facts and very defensive whenever I questioned his way of seeing and analyzing the situation. His manner of speaking was often rough and impassioned and he seemed to have ambiguous feelings toward his country. Although ready to attack the schemes of a number of implicated directors, he was loathe to battle head on, fearing that he would be met with incomprehension. He also feared stirring up the kind of trouble that gets dangerous.

In Luxembourg, silence and a polite smile are virtues.

In Luxembourg, the political parties in power since World War II – the Social Christians, the Liberals, the Socialists – have always maintained close ties with finance institutions. It’s not uncommon to find their representatives on the boards of directors of numerous banks.

In Luxembourg, judges are discreet. Very discreet. And the “finance police” are few in number. Too few.

In Luxembourg, banks are considered friends whose right to privacy requires protection from prying questions. And the Catholic Church watches over this tranquil and prosperous little world.

Early on in our correspondence, I noticed a character trait that become increasingly pronounced as our work together progressed. Ernest Backes’ mind works by association with one idea leading to another, suddenly more significant than the previous one. He constantly tells stories within stories. Spending a day with him is exhausting. In the evening, I was left to reconstruct the information, tiding it and putting it back together like a Russian doll.

The idea of dropping the whole project often crossed my mind.

Ernest spoke a good deal about clearing houses. This was the first time I had heard this term which has no equivalent in French. Ernest would say : “Today, the major international transfers between international banking institutions no longer go from bank to bank. Cash no longer exists. The transactions are performed on the basis of faxmoney.”

The idea is fundamental: money no longer exists. Or rather, the idea of money still exists but not as it formerly did. The term “money” no longer refers to what it did before the invention of microchips and clearing systems. Financial transactions between bankers, buyers and sellers pass through an electronic system founded, Ernest explained in the film, “on the mutual trust of those involved.”

It would seem then, that money has become immaterial. The wealthy are of course concerned with how to transfer their wealth into securities such as mutual funds, stocks, bonds etc. Securities, however, are as immaterial as the funds they represent and exist less and less on paper. Bought and sold everyday through clearing companies, millions of securities have a virtual existence.

How are these exchanges recorded ? Who guarantees the creditworthiness of both parties? What form of proof is there of the sales? Even if securities hop borders, some trace of their transfer has to exist. This intuition fueled my investigation.

From there, I quickly began to see with Ernest’s help, the logic behind clearing houses: to keep track of transactions and earn profits as quickly as possible, preferably without being seen doing so. Once the profits have been made , the next step is to invest them as rapidly as possible, and again, without being seen doing so. If possible.

Speeding up transactions and keeping the nature and amounts of these transfers as concealed as possible are the two obsessions of managers in the clearing business. Yet it is also essential to keep track of these transactions, preferably in a safe but largely inaccessible place.

To get an idea of the sums at stake, note that the current value standard begins at a trillion dollars or euros. The directors add, when they register your surprise, that there are “twelve zeros.” For example, in 2000, Clearstream claimed to have 10 trillion euros in its accounts. In other words, 10 000 billion euros worth of securities are kept in the Clearstream system annually- around forty-seven times France’s national budget. Its competitor Euroclear, reported 7 000 billion euros. In both cases, these clearing companies reported that they handle around 150 million transactions each year. If we look at the number of securities merely passing through their respective networks, the figures (from 1999) are even more remarkable : Euroclear reported around 45 000 billion euros worth of capital transited through its system; Cedel reported just slightly less.

Beyond these figures and this terminology, the word to keep in mind is “trust.” As with any financial exchange, buyers must put their trust in sellers. And vice versa. The clearing company is a space where trust between both parties has been established. Often the parties involved in the transaction never meet.

The entire system is completely abstract: money no longer exists in its usual form, the securities bought and sold are increasingly immaterial and even their profits, except for rare occasions, are virtually administered. But there’s a problem here: how can you put your hands on something virtual? This is where the clearing company steps in. The clearing process guarantees both parties’ creditworthiness and keeps concrete track of the transactions which take place.

Bankers use the term clearing, explaining that they make a kind of “settlement on delivery.” Their business can be likened to a pizza delivery service if, of course, you replace pizzas by securities, and the delivery boy’s scooter by the modem.

Clearing companies are the solicitors of the new world, and like solicitors, they appreciate confidentiality, sometimes to the point of being secretive. Their practices and strategies are kept as far as possible from public view, from people like you and me. They spend a considerable amount of money buttering up the financial press. With journalists outside the financial spheres, it’s a bit more complicated, though it’s also true that few of them have bothered investigating this milieu until now. Clearing enthusiasts hate questions (especially straight forward ones) and the curious men and women who ask them.

I was surprised to find that Euroclear, which owns one of the most beautiful sky scrapers in Brussels - a sixteen story glass building holding 1,300 employees – displays no distinguishing feature on its facade, not even a name on a doorbell. The only ostensible sign of the company’s presence is a clock counting down time until the Euro comes into effect. This clock bears the company’s acronym but is stationed some fifty meters from the building. The reason behind this anonymity was explained to me by a Euroclear employee. The group feels the need to protect itself from anti-globalization militant groups. Clearing companies know perfectly well just how central and instrumental they are to the globalization process.

On the other hand, Clearstream, its Luxembourg-based competitor, shows off its new name on the facade of one of the most beautiful homes in one of Luxembourg’s most up-scale neighborhoods. Here displays of wealth are perfectly acceptable and any fear of anti-globalization demonstrations or violence is readily dismissed. Such things simply don’t happen anymore... I first thought the name Clearstream suggested the idea of “clarity” but the firm’s employees ironically insisted on a slightly different interpretation. According to them, Clearstream meant the “stream that cleans. “

It took some time for me to accept the idea that Ernest Backes would be the man to get me inside the back offices of the Financial Village. If in financial terms, the stock market is referred to as the front office, the clearing company clearly functions as the “back office.”

This 100 kilo salad eater, who all too often weighs down his stories with seemingly banal details, possesses a treasure, a key to the secrets surrounding the figures and codes of the Global Village where being the first to obtain information is a form of power. Ernest Backes, now retired, has a way of relating information that is circuitous at best. He’ll mix a story about the Italian mafia with another about the mysterious activities of secret societies like the Bilderberg group or the Trilatérale Commission. He’ll come up with a scoop on odd characters such as a very influential arms seller named Harry whom everyone supposedly knows about, and connect seemingly unconnected facts, people and events at lightning speed. No doubt about it. Ernest is difficult to manage.

Having been one of the clearing house’s main men, Backes knew the system inside and out. Because of this, his convictions carried particular weight. At a certain point in his professional life, he understood that there was a blind spot making concealment possible. And he saw that nobody else saw which must have been a peculiar feeling.

The clearing house accelerates and records transactions. It also conceals.

But let’s go back several decades. When an insurance agent in Chicago wanted to sell part of his company’s capital to a Greek shipowner, how did he do it? He would go to his bank, let’s say the Bank of New York, and ask his banker to sell the shares. The latter then would hop on a plane to Athens where he would meet with the shipowner’s banker, say at the ABN Amro Bank. The initial purpose of the clearing company was to save time, hence money. There was no longer any need to travel overseas as a central organization guaranteed the viability of the transaction. The basic idea was to bring together bankers from different countries and create a trustworthy entity that would record and endorse bank transactions. Unlike a stock exchange which handles different parts of a transaction, the clearing company would be an essentially passive infrastructure. The shares wouldn’t move around; only the names of their owners would change. The clearing company would handle recording all transfers and endorse modifications.

There are fifteen national clearing organizations in Europe today. Generally unknown to banking clientele, national clearing offices limit their dealings to clearing operations within one country.

As for clearing houses which handle transfers of international capital, there are only two. One, Euroclear, has 1,350 employees, of which 1,300 are in Brussels and the fifty others spread out among ten or so branches throughout the world. Cedel, the other, has its headquarters in Luxembourg and 1,700 employees throughout the world, of which half work in buildings located in central Luxembourg and on the Kirchberg plateau outside the city in the “European” business center. Cedel’s other agencies are in London, Tokyo, New York, Hong Kong, Dubaï and Mexico. It’s clear that the majority of international financial transfers go through Cedel or Euroclear. They are obliged to pass through these agencies and records of them are kept in coded documents.

What we’re talking about here are securities. Even if Euroclear and Cedel transfer money, their specialty remains what bankers call “transferable shares.” These two companies have a near monopoly on international bond exchange. Bond commerce allows clients to borrow and loan money without their names appearing anywhere other than in the bank’s internal documents. Bonds are the preferred financial product of money launderers and clients with a large mix of liquid assets. Cedel and Euroclear also exchange numerous stocks, mutual funds, gold certificates and cash.

While we were making the film, Ernest Backes commented that “Money, whether you invest it in the Bahamas, in Liechtenstein, in Paris, in Francfort or in Luxembourg, circulates in the system. At a given time it can leave the international financial networks and be invested in industry. The question is how much money today actually leaves the big international networks and is invested in industry?”

He added : “If you wanted to mobilize a workers’ union today against what could be called “big capital”, who are you going to attack? A hundred years ago when the first unions began, you could go after the Thyssens and Krupps and the big French industrialists, because everyone knew who they were. Today, if you want to wage battle against “big capital” you have to go after shareholders or mutual fund holders in Vanuatu....”

Backes’ words inspired me to figure out exactly how these international bank networks function, how they fill the seemingly bottomless accounts of banks set up in fiscal havens and how money flows through them and disappears. The Madrid based magistrate, Baltasar Garzón, uses an image to symbolize the battle between judges and white collar criminals. He explains that magistrates are like mammoths after leopards. “When the mammoth gets to the leopard’s hiding place, the leopard is already far away, laughing at the slow giant.” The inability of judges to act quickly is due to the absence of a common judicial space. And thanks to the clearing system, the “leopards” move at lightning speed.

We are going to show how, due to the corruption of the clearing system, fraud is made possible at the international level. And we will see why this happens almost imperceptibly. We will delve into a world where “parallel finance” networks are commonplace. We will see that public authorities remain ignorant of these financial transactions of which we now have clear proof.

In the beginning, I wanted to the get the job done too quickly. My attempt to introduce Ernest Backes to the judges who had signed the Geneva Appeal backfired. Even with Jean de Maillard, a specialist in the field, our meeting was rocky. As they saw it, Ernest Backes no longer worked in Luxembourg’s financial circle, moreover, his explanations seemed far too “convoluted” to merit serious consideration. On the other hand, Ernest was surprised to find how little the magistrates knew about the world of finance, especially as they were hailed by the press as prominent figures in the fight against organized crime. Though they were all seeking ways to fight organized crime efficiently, most of them had never heard of the clearing system.

Now as I finish the first chapter, I don’t know if the book will be published. For over a year, numerous and unforeseen obstacles have come in the way of my finishing the book. Implicated as a judicial collaborator in various affairs, Ernest didn’t want to “give everything away,” and preferred to confide certain revelations exclusively to the judges. What made him decide to speak up? His initial difficulties making himself understood by the court system. And my insistence as well.

There were those who thought I was allowing myself to be manipulated. Ernest, some claimed, was an operator, a compulsive liar stringing me along. At the very beginning of our dealings, this idea had occurred to me. But after getting to know the man, and witnessing his evidence first hand, I was convinced he was up front. Undoubtedly Ernest would have preferred to keep a low profile and not get mixed up in the affair.

Throughout our work together, we were extremely cautions: we rarely spoke on the telephone and were careful with our e-mail correspondence. To the rest of the world, we were writing some kind of vague book on the history of Luxembourg. In the beginning, I worked with reports of taped interviews, but Ernest’s stories make up an important part of the book, shaping its overall narrative and demonstration. We saw a good deal of each other over the first six months of 2000. Subsequently, we met less frequently. I then took the next step and confronted the actual “characters” in Ernest’s stories, namely the bankers and technicians involved in the clearing process.

We had our clashes. Ernest complained I was slow to catch on and I was frustrated by how he would hold back from certain recriminations or try to protect his country’s reputation. For years, Ernest had kept everything he knew about the clearing system to himself. Stepping out from the shadows was a painful process for him at times, yet as the book progressed, he began to see its impact. It was with Backes’ help that I discovered this as yet unexplored world with both excitement and trepidation.

The pressures were tremendous. I would never have guessed how difficult it would be to investigate the clearing milieu. Those I met with all had one thing in common: fear. Some feared for their reputation, others for their jobs. And again others for their lives. Some spoke up only to beg me later not to quote them. Others made appointments with me but didn’t show up. Many clearly lied to me.

I often had the feeling that I was becoming an immobile explorer, surfing from one fiscal haven to another, from Japanese banks to investment firms in Singapore, following the underground networks of faxmoney smugglers.

One of the first unpleasant remarks made by Ernest Backes during one of our interviews was aimed at the French press: “You make me think of a lot of other French journalists. You’re like bees that gather the nectar and then forget to make the honey.” I didn’t quite see what he meant.