TURNING and turning in the widening gyre
The falcon cannot hear the falconer;
Things fall apart; the centre cannot hold;
Mere anarchy is loosed upon the world,
The blood-dimmed tide is loosed, and everywhere
The ceremony of innocence is drowned;
The best lack all conviction, while the worst
Are full of passionate intensity.
The Second Coming  W.B. Yeats

The Voice of the White House

The Forgotten Dead

May 7, 2008

by Brian Harring

May 8, 2008 Two soldiers died May 7 in the Sabari District, Afghanistan, of wounds suffered when their vehicle encountered an improvised explosive device: Spc. Jeremy R. Gullett, 22, of Greenup, Ky., who was assigned to the 4th Battalion, 320th Field Artillery Regiment, 4th Brigade Combat Team, 101st Airborne Division (Air Assault), Fort Campbell, Ky. Staff Sgt. Kevin C. Roberts, 25, of Farmington, N. M., who was assigned to 2nd Battalion, 506th Infantry Regiment, 4th Brigade Combat Team, 101st Airborne Division (Air Assault), Fort Campbell, Ky.  Four Marines died May 2 in Al Anbar province, Iraq , supporting combat operations: Lance Cpl. Casey L. Casanova, 22, of McComb , Miss. Cpl. Miguel A. Guzman, 21, of Norwalk , Calif. Lance Cpl. James F. Kimple, 21, of Carroll , Ohio Sgt. Glen E. Martinez, 31, of Boulder , Colo.

May 5, 2008 Soldier Pvt. Corey L. Hicks, 22, of Glendale , Ariz. , died May 2 in Baghdad , Iraq , of wounds suffered when his vehicle encountered an improvised explosive device.

May 4, 2008 Soldier Spc. Jeffrey F. Nichols, 21, of Granite Shoals, Texas , died May 1 in Baghdad from wounds suffered when his vehicle encountered an improvised explosive device.

May 3, 2008  Soldier Sgt. 1st Class Lawrence D. Ezell, 30, of Portland, Texas, died April 30 in Baghdad of wounds suffered when an improvised explosive device detonated near his unit during combat operations. Soldier Sgt. Jerry L. DeLoach, 45, of Jackson , Ga. , died July 7, 2007 , at Fort Knox , Ky. He had been medically evacuated from theater, and died of a non-combat related injury.  Soldier Staff Sgt. Chad A. Caldwell , 24, of Spokane , Wash. , died April 30 in Mosul , Iraq , of injuries sustained while conducting dismounted combat operations.

May 2, 2008   Two soldiers April 30 in Baghdad , Iraq , from wounds suffered when their vehicle encountered an improvised explosive device: Cpt. Andrew. R. Pearson, 32, of Billings , Mont. Spc. Ronald J. Tucker, 21, of Fountain, Colo.

May 1, 2008    Soldier Staff Sgt. Bryan E. Bolander, 26, of Bakersfield , Calif. , died April 29 in Baghdad from wounds suffered when his vehicle struck an improvised explosive device.  Marine Sgt. Merlin German, 22 of Manhattan , N.Y. , died April 11 at Brooke Army Medical Center , San Antonio , Texas , from wounds he suffered while conducting combat operations in Al Anbar province, Iraq , on Feb. 22, 2005 . He was medically retired Sept. 28, 2007 , as a result of his injuries. Soldier Staff Sgt. Clay A. Craig, 22, of Mesquite , Texas , died April 29 in Baghdad , Iraq , from wounds suffered when he received small arms fire during combat operations.

April 30, 2008   Three soldiers died April 28 in Baghdad , Iraq , of wounds suffered when enemy forces attacked their forward operating base with indirect fire: Pfc. Adam L. Marion, 26, of Mount Airy , N.C. Sgt. Marcus C. Mathes, 26, of Zephyrhills , Fla.    Sgt. Mark A. Stone, 22, of Buchanan Dam, Texas . Soldier Pfc. William T. Dix, 32, of Culver City , Calif. , died April 27 at Camp Buehring , Kuwait , of injuries suffered in a non-combat related incident.  Soldier Sgt. 1st Class David L. McDowell, 30, of Ramona , Calif. , died April 29 in Bastion , Afghanistan , of wounds suffered when enemy forces attacked using small arms fire.  Airman Senior Airman Jonathan A. V. Yelner, 24, of Lafayette , Calif. , died April 29 near Bagram , Afghanistan , of wounds suffered when his vehicle encountered an improvised explosive device.

SECRECY NEWS

from the FAS Project on Government Secrecy

Volume 2008, Issue No. 43

May 6, 2008

INTEL COMMUNITY MOVES TOWARDS PERFORMANCE-BASED PAY

The Director of National Intelligence last week issued several new Intelligence Community Directives (ICDs) that implement new community-wide personnel practices, including a performance-based compensation policy that rewards superior job performance.

The new payment policy "links performance-based pay increases and bonuses to individual accomplishments, demonstrated competencies, and contributions to organizational results."

"Higher performance and greater contribution to mission should result in proportionally higher rewards for similarly-situated employees."

The new payment and personnel policies, part of DNI J. Michael McConnell's 100-day and 500-day plans, are intended to modernize the business practices of U.S. intelligence agencies and, implicitly, to make government service somewhat more competitive with intelligence contractors in the private sector.

The new personnel policies will also replace the standard government personnel grading system known as the General Schedule (GS) for all intelligence agency employees, except that senior officials at the GS-15 or higher grade are exempted.

The new IC Directives, all dated April 28, 2008 , were released under the Freedom of Information Act. They include:

ICD 650, National Intelligence Civilian Compensation Program: Guiding Principles and Framework

ICD 652, Occupational Structure for the Intelligence Community Civilian Workforce

ICD 654, Performance-Based Pay for the Intelligence Community Civilian Workforce

ICD 656, Performance Management System Requirements for Intelligence Community Senior Civilian Officers

Copies of these and other IC Directives are available here:

http://www.fas.org/irp/dni/icd/index.html

PENTAGON DETAILS OSD RECORDS MANAGEMENT

The Office of the Secretary of Defense (OSD) generates some of the most sensitive and most consequential records in the U.S. Government, along with an enormous volume of ephemeral material. Managing this endless flow of records efficiently and effectively is a challenge.

Close students of OSD records management policy will find useful reference data in two new Pentagon volumes.

General records maintenance policies are spelled out in "Office of the Secretary of Defense (OSD) Records Management Program – Administrative Procedures," Administrative Instruction 15, change 1, April 18, 2008:

http://www.fas.org/irp/doddir/dod/ai15v1.pdf

Records schedules approved by the National Archives for the disposition of all OSD component records are compiled in "Office of the Secretary of Defense (OSD) Records Management Program -- Records Disposition Schedules," Administrative Instruction 15, volume 2, April 18, 2008:

http://www.fas.org/irp/doddir/dod/ai15v2.pdf

CRS ON CHINA 'S "SOFT POWER"

China 's foreign policy goals and actions in Asia , Africa and Latin America are assessed in a new report to Congress from the Congressional Research Service.

"The study opens with an overview section discussing China's presumed foreign policy goals, the attractions and limitations of China's 'soft power,' and the implications and options for the United States. The memorandum proceeds to an analysis of China 's relations with countries in Latin America and the Caribbean , the Southwest Pacific, Japan and South Korea , Central Asia , Southeast Asia , and Sub-Saharan Africa."

The study was released by Senator Joseph Biden, chairman of the Senate Foreign Relations Committee.

"It is my hope that this study will inform debate about China and help point the way toward policies that will not only respond to those Chinese actions that are at odds with U.S. interests, but will also build on the many common interests created by China's enhanced integration with the international community," Sen. Biden wrote in a foreword.

See " China 's Foreign Policy and 'Soft Power' in South America , Asia , and Africa ," April 2008:

http://www.fas.org/irp/congress/2008_rpt/crs-china.pdf

DEA'S USE OF INTELLIGENCE ANALYSTS

"The number of DEA intelligence analysts has grown from 11 since the DEA's inception in 1973 to 710 stationed around the world as of March 15, 2008," according to a new report from the Justice Department Inspector General (IG) on the Drug Enforcement Administration (DEA) as an intelligence agency.

The new report provides the most detailed public account available of DEA's intelligence function and its role as one of the sixteen member agencies in the U.S. intelligence community.

The IG report noted a generally favorable evaluation of DEA intelligence, except for significant delays in publication of time-sensitive intelligence information.

"The DEA Chief of Intelligence told us that when reports officers receive information related to terrorism, weapons, or a foreign country's military, the cable must be prepared and disseminated to the intelligence community within 24 to 48 hours of receipt. Of the 4,500 cables prepared since June 2004, we tested 81 cables for timeliness of dissemination. Our testing showed that cables are transmitted on average 34 days from the date the original information was received by the DEA."

See "The Drug Enforcement Administration's Use of Intelligence Analysts," Audit Report 08-23, Department of Justice Office of the Inspector General, May 2008:

http://www.fas.org/irp/agency/doj/oig/dea-intel.pdf

Some of those who idly speculate about nominees to cabinet positions in the next Administration have mentioned Justice Department Inspector General Glenn A. Fine, who is widely respected for his independence, as a possible future Attorney General.

Congress sees US soldier suicides cover up

US lawmakers accuse Veterans' office of covering up American soldier suicides post Iraq invasion.

May 7, 2008

by Karin Zeitvogel

Middle East Online

WASHINGTON - US lawmakers accused the Department of Veterans Affairs (VA) on Tuesday of being out of control and of covering up the high suicide rate among Iraq and Afghanistan war veterans.

"The VA healthcare system has been pushed to the edge in dealing with the mental health care needs of our veterans," Bob Filner, chairman of the House of Representatives' Committee of Veterans' Affairs, told a packed congressional hearing about the issue of suicides among veterans.

The hearing came five months after a first round of testimonials on the same topic, and weeks after a series of internal VA emails about suicides among veterans were brought to light by a documentary on US network television.

In one of the emails, sent in February, Dr Ira Katz, deputy chief patient care services officer for mental health at the VA, wrote: "Shh! Our suicide prevention coordinators are identifying about 1,000 suicide attempts per month among the veterans we see."

He added: "Is this something we should address ourselves in some sort of release before someone stumbles on it?"

The figure was at odds with the 144 known suicides among veterans from 2001, when the US launched its war against terror by bombing Afghanistan , through the end of 2005, which Katz had cited in his December testimony, Filner said.

"The emails ... seem to indicate they were trying to manipulate the data instead of sharing the data," Filner said. "If we hadn't called this hearing, we probably still wouldn't know the figures."

"What we see is a pattern that reveals a culture of bureaucracy," he told the VA officials at the hearing.

"The pattern is deny, deny, deny and when that fails, it's cover up, cover up, cover up -- there is clear evidence of a bureaucratic cover-up here."

In his testimony for the VA, Katz apologized for the "poor tone" of the email, sent in February.

But neither he nor Secretary of Veteran Affairs James Peake, who also addressed the hearing, admitted any wrongdoing.

"VA has long subjected its own data, that of the Department of Defense, and data from nationally accepted statistical sources to careful and painstaking analysis to obtain the truth about veterans' suicide," Peake told the panel.

"On February 13, 2008 , an internal email ... suggested 1,000 veterans a month under VA care were being reported as attempting suicide."

Identifying him only by title, Peake told the hearing that Katz said in the email that "he was concerned about disclosing the information" and the data was not shared with outside sources "because of his concerns."

Filner accused the VA of being unhelpful, opaque and out of control.

"If you have a document showing 1,000 suicide attempts per month, we have some real difficult issues. But you never passed us that information and you never asked us to help you, saying you had it under control," he said.

"You don't have it under control."

"The data reflects a symptom of a major problem with our veterans. Suicide is the ultimate, tragic symptom of the problem, but PTSD (post-traumatic stress disorder), depression, homelessness, marital difficulties, domestic violence are also symptoms," he said.

A study published last month by the Rand Corporation, which Filner cited during the hearing, showed that of the 1.6 million US soldiers who have been deployed in Iraq and Afghanistan , 18-20 percent -- or around 300,000 -- show PTSD, depression or both.

A separate study issued last month by the American Psychiatric Association showed that a mere 10 percent of veterans have sought treatment for mental health concerns.

Peake told reporters he would not seek the resignations of Katz or another VA doctor, Michael Kussman, who had also played down the mental health crisis among US veterans.

He described both as "outstanding public servants with long histories of service to veterans."

Political Counterfeiting

North Korea and the Supernote Enigma

May 7, 2008

by Gregory Elich

Korea Policy Institute

North Korea , it is often said, is a criminal state. One of the more persistent stories supporting that allegation is that the North Koreans are counterfeiting U.S. currency. Through repetition, the claim has taken on an aura of proven fact. This in turn has been cited as justification for everything from imposing punitive measures against North Korea to suggesting that the nation cannot be trusted as a partner in nuclear negotiations.

The evidence against North Korea is widely regarded as convincing. "The North Koreans have denied that they are engaged in the distribution and manufacture of counterfeits," says Daniel Glaser of the U.S. Treasury Department, "but the evidence is overwhelming that they are. There's no question of North Korea 's involvement."¹ There is no denying that North Korean citizens have been caught passing counterfeit currency in Europe and Asia , and some defectors from the Democratic People's Republic of Korea (DPRK — the formal name for North Korea ) claim to have first-hand knowledge of state-run counterfeiting operations. In Western media reports the case is treated as proven. Yet the closer one examines the matter, the murkier the picture becomes.

Counterfeit currency attributed to North Korea raises deep concern due to its extremely high quality. Dubbed supernotes, their production process closely matches that of the genuine article, and the engraving is so fine it rivals that of the U.S. Bureau of Engraving and Printing.²

Unlike most of the world's counterfeit currency, which is printed on offset presses or through digital processes, supernotes are printed on an intaglio press. The Bureau of Engraving and Printing uses Giori intaglio presses for the engraved portions of its bank notes, and an offset press for the background colors. Supernotes use the same technology. An intaglio press operates by applying ink on its plates and then wiping them clean, leaving ink only in the engraved lines. The plate is then pressed against the paper, depositing the ink in ridges. The result is raised printing that ordinary counterfeits can't duplicate. Supernotes have the same look and feel as U.S. currency.

North Korea purchased an intaglio press from the Swiss firm Giori in the mid-1970s.³ This fact is regarded as an indication that the nation has the technology available to print supernotes. Yet there have been significant advances in the field since the time of its purchase. Because certain auxiliary equipment is lacking, the model owned by the DPRK is considered by experts to be incapable of achieving the level of quality seen on supernotes. Not long after purchasing the Giori, North Korea defaulted on its loan after having made just two payments. For that reason, as well as due to U.S. pressure, Giori ceased shipping spare parts to North Korea many years ago, and according to one expert the North Korean printing press now stands idle.⁴

One striking feature of supernotes is the composition of the paper. Throughout the world, currency is printed on cotton-based paper. But U.S. currency is different, being composed of a mix of 75 percent cotton pulp and 25 percent linen. Supernote counterfeits rely on the same unique combination. To produce secure paper like that used in U.S. currency requires advanced technology and the cost far surpasses that of manufacturing regular paper. The price of even a small plant can exceed $100 million. To remain profitable, a paper plant would have to produce more than four thousand metric tons of such banknote paper a year. But the quantity of supernotes seen in circulation so far has required only a tiny fraction of that total. It would seem, then, that the only option for North Korea would be to procure its paper from an existing plant outside of its borders. This would be no easy matter. The paper used in U.S. currency is produced on a Fourdrinier machine at a plant located in the state of Georgia . This machine uses longer pulp fibers than the short pulp fibers used by the rest of the world relying on cylinder mold methods.⁵

Former director of the Bureau of Engraving and Printing Thomas Ferguson comments on the quality of the paper in supernotes. "They're not simulating the paper features by printing on the paper. They are not using somebody else's paper or bleaching the ink off of genuine notes. Someone specifically made paper, which is a pretty big commitment."⁶

Remarkably, supernote paper even incorporates colored microfibers, a thin security thread marked " USA 100" in microprint, and a multi-tone watermark. These features can only be produced through the use of sophisticated technology at substantial cost. One expert who conducted a chemical and physical analysis of supernotes discovered that the cotton originated in the southern region of the U.S. — precisely where the Bureau of Engraving and Printing gets its cotton. Southern U.S. cotton is available on the world market, but this would make it traceable to some extent. The expert conducting the analysis is said to have been warned by "interested parties" not to make the results public. The implication was that these parties worked for the U.S. government.⁷

One of the special features of U.S. currency is the use of optically variable ink (OVI) manufactured by the Swiss firm Société Industrielle et Commerciale de Produits Amon (SICPA). This organization is the sole source for OVI. On the U.S. $100 bill, this color shifting ink is employed on the number in the lower right hand corner. Turning the bill one way, the number appears bronze green. Turned another, it appears black. Supernotes duplicate the same color shift.⁸ This particular color combination is reserved for the exclusive use of the U.S. Bureau of Engraving and Printing and is manufactured at only one location in the world. A joint venture was established between SICPA and the California-based OCLI laboratory to manufacture this combination of OVI ink. Bronze-green and black OVI is mixed at the SICPA plant in Virginia , which serves only the U.S. market. The rest of the world gets its supply of OVI from SICPA's main plant in Switzerland .⁹

North Korea was at one time a client of SICPA. Each nation is assigned a unique color combination. The DPRK's combination was green and magenta, which Treasury official Daniel Glazer asserts can be manipulated to appear similar to the U.S. combination.¹⁰ Yet a forensic laboratory has found that the security ink used in supernotes is not similar. It matches U.S. currency.¹¹ Furthermore, it is probable that North Korea has long ago exhausted its limited supply of OVI. SICPA spokeswoman Sarah Van Horn points out, "We ceased all OVI deliveries in early 2001, and later that year all security ink supplies." Severing trade with North Korea came at the request of U.S. officials, long before the Bush Administration publicly accused North Korea of manufacturing and distributing supernotes.¹²

One South Korean specialist on the DPRK says that interviews with defectors convinced him of the existence of a state-run counterfeiting operation, and that the intent was to fund covert operations and wage economic warfare against the U.S. ¹³ But the stories defectors tell do not always hold up. In some cases, defectors report hearsay — what they have heard from others. Other times, defectors appear to have first-hand knowledge, such as the two who talked to BBC News.¹⁴ Yet North Korean defectors, eager to please their new hosts, have been noted for a tendency to tell stories that turn out to be dubious. As Raphael Perle, an analyst for the Congressional Research Service, points out, "A lot of defectors or refugees give us information, but they tell us anything we want to know. You have to question the reliability of what they say."¹⁵

A North Korean defector who claimed that he had helped design the supernote went into hiding after being accused of being paid to lie about the matter. When asked whose picture was on the $100 bill and what building was depicted on its backside, he said he did not know. A U.S.-based activist interviewed the man, intending to have him testify before Congress, but the activist came to the conclusion that his stories were implausible. "He lost credibility with me. I found him mentally unstable." The activist said that many defectors tell stories that they think journalists and intelligence agencies want to hear. "He was expecting money." Defectors "think the U.S. government will give them hundreds of thousands of dollars." Another defector who initially claimed to be involved in the decision to print supernotes later admitted he had not seen the operation, nor did he learn any details of how it was being done.¹⁶

The 2004 U.S. indictment of Sean Garland, leader of the Irish Worker's Party and Official Republican Army, on charges of distributing supernotes is considered the centerpiece of the evidence against North Korea . "In or about October 1997," the indictment reads, Garland met North Korean officials in Poland "to arrange for the purchase of a quantity of supernotes." Then for the next three years, Garland is said to have distributed the counterfeit currency in Ireland and Great Britain . As leader of the Irish Worker's Party, he often travelled abroad for "ostensibly legitimate business and personal reasons." But, the indictment reads, in his travels he met with North Koreans who were involved in the "transportation and sale of supernotes." Garland also visited Russia , where he is alleged to have purchased more supernotes, although the transactions did not complete until a later time in Belarus . Six codefendants were indicted along with Garland , one of whom was said to have informed law enforcement officials of the location in Moscow of $70,000 in supernotes "that he had obtained from the Sean Garland supernote organization."¹⁷

In 2002, three of Garland 's codefendants were jailed in Great Britain , as a result of an investigation into the activities of a large-scale counterfeiting ring. Garland himself was not arrested until three years later, and then only in response to the U.S. indictment. Released on bail, he eluded extradition to the U.S. by going to Ireland .

The most striking thing about the indictment is its vagueness. No North Korean is identified, and meetings with North Koreans are mentioned without any actual transaction being described. Sean Garland himself states, "I have no associate named Corcoran [one of the codefendants] nor have I any associates in jail in Britain ."¹⁸ The impression one gets is that Garland was indicted because of his political and business contacts with North Koreans, and that tying him to an actually existing counterfeiting ring would make for a persuasive sounding case against North Korea . In contrast to the lack of anything definite concerning Garland , the indictment is more detailed when describing the activities of the codefendants. Garland writes that "neither myself or my legal team have had as yet received any information from the U.S. authorities to set out the nature of the allegations against me." As for the indictment, "No evidence is offered of any crime or wrongdoing," and Garland "strenuously" denied the allegations.¹⁹ Having political and business contacts with North Koreans does not in itself indicate involvement in the supernote trade.

Counterfeiting allegations against North Korea provided the pretext for harsh economic measures. As the September 2005 six-party nuclear disarmament negotiations were taking place in Beijing , Stuart Levey, under secretary for terrorism and financial intelligence in the Department of the Treasury, issued a press release designating Macao-based Banco Delta Asia as a "primary money-laundering concern." The bank, Levey reported, "has been a willing pawn for the North Korean government to engage in corrupt financial activities." By providing financial services to the DPRK for over twenty years, it "has facilitated many of that regime's criminal activities, including circulating counterfeit U.S. currency." ²⁰ In a matter of days, U.S. financial institutions were instructed to sever relations with Banco Delta Asia. By December of the same year, the Treasury Department had issued an advisory in which it warned that the DPRK "may be seeking banking services elsewhere" following the action taken against the Macao bank. U.S. financial institutions were told to "take reasonable steps to guard against the abuse of their financial services by North Korea ." Tellingly, it added, "We encourage financial institutions worldwide to take similar precautions."²¹

U.S. intelligence officials knew Banco Delta Asia was one of the primary means for North Korea to conduct normal foreign commerce. The effect of the Treasury Department's announcement was immediate. In the six-day gap between the announcement and the bank's closing, panicked depositors had withdrawn $132 million, more than a third of the bank's total funds.²² Banco Delta Asia was quick to deny the charge, saying that its business relations with North Korea were entirely legitimate and commercial, but the Macao Monetary Authority assumed management of the bank and froze all of North Korea's accounts.²³

The action against Banco Delta Asia deprived North Korea of a portion of its foreign trade. More importantly, it also served as a means of magnifying the effect of sanctions. By blacklisting Banco Delta Asia, the U.S. set off a chain reaction, and the campaign soon took on global significance. The U.S. Treasury Department sent warning letters to banks around the world, resulting in a wave of banks shutting down North Korean accounts. International financial institutions feared U.S. retaliation, and felt it prudent to close North Korean accounts rather than risk being blocked from access to the U.S. financial system. A blacklisting would in effect mean being driven out of business. Stuart Levey observed with satisfaction that sanctions and U.S. threats had succeeded in applying "huge pressure" on the DPRK, and that this had led to a "snowballing avalanche effect." U.S. actions undermined the prospect of a peaceful settlement of the nuclear issue. "Squeeze them," a senior Bush Administration official said, "but keep the negotiations going." Talks, the official continued, would serve as nothing more than a means for accepting North Korea 's capitulation. A second U.S. official described the goal of talks as a "surrender mechanism." Even before the signing of the September 19, 2005 nuclear disarmament agreement, the U.S. had already decided "to move toward more confrontational measures," claimed a former Bush Administration official.²⁴

Daedong Credit Bank, a majority foreign-owned joint venture bank operating in Pyongyang and primarily serving importers, was immediately affected by the U.S. action, as it had several million dollars in Banco Delta Asia. As general manager of Daedong Credit Bank, Nigel Cowie was in a position to witness the effect of the Treasury Department's letters. "We have heard from foreign customers conducting legitimate business here, who have been told by their bankers overseas to stop receiving remittances from the DPRK, otherwise their accounts will be closed." To illustrate the lengths to which U.S. officials were prepared to go, Cowie described an operation that involved his own firm, from which, he said, "you can draw your own conclusions." An account was opened with a Mongolian bank. Arrangements were made for legal cash transactions. But when the Daedong Credit Bank's couriers arrived in Mongolia , they were detained by Mongolian intelligence officials, and their money confiscated. Accusations were made that the couriers were transporting counterfeit currency from North Korea . A leak to the news media from an unidentified source led to reports charging that "North Korean diplomats" had been arrested for smuggling counterfeit currency. After two weeks, the Mongolian "intelligence officials in a meeting with us finally conceded that all the notes were genuine; the cash was released." In the final meeting, Mongolian intelligence officials "appeared rather embarrassed that they had been given incorrect information." It was the U.S. that had provided that information and set in motion what was in effect harassment by proxy.²⁵

U.S. actions had widespread repercussions. "For our part," Cowie explains, "we are only conducting legitimate business, but have nonetheless been seriously affected by these measures. A large amount of our and our customers' money ­ not just in USD, but in all currencies ­ has effectively been seized, with no indication of when they'll give it back to us." The fate of Banco Delta Asia served as an object lesson, as did the freezing of Daedong Credit Bank's $7 million deposits at Banco Delta Asia. "Banks with any kind of U.S. ties are just terrified to have anything to do with any North Korean bank," Cowie said. After the majority interest in Daedong Credit Bank was purchased by British-owned Koryo Bank, the new owner, Colin McAskill, asked U.S. officials to examine the bank's records in order to prove that its funds were legitimate and should be unfrozen. "They've had it much too much their own way without anyone questioning what they are putting out," he said.²⁶

Warning letters to banks were often followed by personal visits from U.S. officials. Bankers and American officials said that the messages contained a mix of implicit threats and explicit actions. Unsurprisingly, it was not long before nearly all of North Korea 's accounts in foreign banks were closed. The DPRK's international trade was being choked. Quite often, no pretense was even being made that the actions were related to illegal transactions. U.S. officials were openly pressing financial institutions to sever all economic relations with the DPRK. "The U.S. government is urging financial institutions around the world to think carefully about the risks of doing any North Korea-related business," Levey said. By September 2006, the U.S. had sent official dispatches to each UN member state, detailing plans for harsher economic sanctions. The planned measures were so strong that several European nations expressed concern, and it was said that the plans aimed at nothing less than a total blockade on all North Korean trade and financial transactions.²⁷

Selig Harrison, director of the Asia Program at the Center for International Policy, visited the DPRK and reported on what he saw. "I found instances in North Korea authenticated by foreign businessmen and foreign embassies in which legitimate imports of industrial equipment for light industries making consumer goods have been blocked. The North Koreans understandably see this as a regime change policy designed to bring about the collapse of their regime through economic pressure."²⁸

The U.S. also imposed sanctions on several North Korean import-export firms, on the unsubstantiated charge that they were involved in the arms trade. Yet more sanctions were then announced, this time against several Indian and Russian firms doing business with the DPRK, along with several North Korean companies.²⁹

Russian Ambassador to South Korea Gleb Ivashentsov called for the U.S. to offer proof to back its accusation of counterfeiting. "The side that raises the suspicions should present evidence," he said. " Russia has not received any concrete evidence. There is rumor-level talk on the issue."³⁰ Chinese Foreign Ministry spokesman Liu Jianchao was equally skeptical, saying that his nation knew nothing of North Korean counterfeit currency flowing into China .³¹

On December 16, 2005 , U.S. officials finally briefed a number of nations on the evidence against North Korea . But South Korean officials noted afterwards that all they heard was a lot of circumstantial evidence but no concrete information.³² At the request of the Bush Administration, a conference was organized by Interpol and held in Lyon , France , in July 2006. There the U.S. Secret Service presented its case to more than sixty international bankers, police officials, and banknote producers. No evidence was offered on that occasion either, and the attitude was that the audience should accept the Secret Service's assertions on faith alone. "I can't remember if I was laughing or asleep," remarked one attendee afterwards.³³ A survey of the participants taken at the end of the conference showed that not one person had been fully convinced of the U.S. position.³⁴

U.S. Treasury officials also met with a North Korean delegation in New York in March 2006, but provided no information to back the charge. DPRK delegation head Ri Gun remarked afterwards, "There was no evidence. There were neither comments nor discussion" relating to evidence. During the meeting, Ri Gun proposed creating a joint U.S.-DPRK consultative body to "exchange information on financial crimes and prepare countermeasures." The North Koreans said they would respond to evidence of counterfeiting and arrest those who were involved and seize the equipment. "Both sides can have a dialogue at the consultative body through which they can build trust. It would have a very positive impact on addressing the nuclear issue on the Korean peninsula," Ri said. The delegation also suggested that a North Korean settlement account be opened at a U.S. financial institution and placed under U.S. supervision, so as to allay suspicions. The North Korean offers were ignored.³⁵ In a conciliatory move, the DPRK enacted a law nearly a year later that banned transactions based on illegal activities, including counterfeiting.³⁶

It took a year and a half, but when the U.S. Treasury Department completed its investigation into the matter, it decided to finalize the rule prohibiting U.S. financial institutions from dealing with Banco Delta Asia. The Department determined that not only were its earlier allegations accurate, but that the bank had also engaged in "additional illicit financial conduct."³⁷ Stanley Au, the founder of Banco Delta Asia, responded that his bank did not knowingly do wrong. "We have sent evidence to prove our innocence to the U.S. government several times."³⁸ Au charged that the Treasury Department had acted unfairly in punishing his bank without offering any evidence.³⁹ Because the bank was a small family-owned firm, it lacked the most recent advanced technology for screening cash for counterfeits. Therefore, as a matter of routine the bank sent all large deposits to HSBC in New York to be analyzed before the amounts would be credited to accounts.⁴⁰

In the aftermath of the Treasury Department's initial accusations, the Macao government hired the accounting firm Ernst & Young to investigate operations at Banco Delta Asia. In its final report, Ernst & Young indicated that there was room for improvement in some procedures. But "the procedures in place at the Bank for handling large value (wholesale) deposits of U.S. currency notes ensured that, to a material degree, the Bank did not introduce counterfeit U.S. currency notes into circulation over the relevant period." For smaller deposits, the accounting firm found that Banco Delta Asia was using a counterfeit banknote scanning machine, as well as doing manual checking. "To this end the Bank passed most U.S. currency notes to HSBC for validation. NK entities were not given value for their deposits of currency until after HSBC had confirmed the deposit to be genuine." Ernst & Young found that in relation to the total value of U.S. currency sent to HSBC for checking, "the value of counterfeit notes detected was minor. Once detected the counterfeit notes were withdrawn from circulation."⁴¹

It appears that the Treasury Department's charges against Banco Delta Asia were motivated strictly by political considerations. Certainly the charges were found to have had no connection to reality. No doubt this is why U.S. officials failed to furnish any evidence to back their accusations. Banco Delta Asia was chosen to serve as an example to other financial institutions dealing with the DPRK. As former State Department official David Asher put it, "We decided to kill the chicken to scare the monkey."⁴² By targeting one of North Korea 's primary external financial partners, the Bush Administration had succeeded in shutting off much of that nation's foreign trade. That the charge lacked substance was of no import. It had served the purpose of furthering political aims, as had the Bush Administration's earlier claims about Iraqi chemical, biological and nuclear weapons programs. In both cases, media saturation ensured that the lies would be firmly implanted as truth in the minds of the American public.

The freezing of North Korea 's funds at Banco Delta Asia violated the recently signed nuclear disarmament agreement and halted its implementation. North Korea justifiably insisted that its funds be released before it would proceed with its obligations under the agreement. In time, the issue became enough of a political embarrassment that the Bush Administration was compelled to relent. North Korea got its money back, believing that this would enable it to regain its limited toehold in the international financial system. But the damage was done. Banco Delta Asia remained blacklisted and most banks continued to be wary of doing business with the DPRK, not wanting to risk U.S. retribution.