A Rouge's Gallery: A Novel

By Robert Lockwood

Nikos Rallis is the definitive high-risk investor, whose avarice entraps even the most savvy members of the international business community. He fluidly skirts legal barriers in Monaco, Switzerland, and the United States. His roguish pixie dust suffocates astute targets with outrageous promises of reward. Savvy women front his schemes, captivated only slightly by his charms but much more by the opportunity to share his gains. Perched in his Alpine headquarters, the obsessive secrecy of Switzerland and strategic purpose of Chinese foreign investment become veiled money-laundering tools for his exploitation of a defense contract in Washingtons easy-money climate. Ultimately, his chilling gallery of plundered emotions produces a fatal result that even his legendary diligence never anticipated.

• Language: English
• Publisher: Xlibris US
• Release date: Sep 18, 2014
• ISBN: 9781499068986

Robert Lockwood

Robert Lockwood, a reformed Washington lobbyist, represented many Fortune 500 companies and institutions on matters of taxation, international trade, and defense.

Book preview

A ROUGE’S

GALLERY

A

NOVEL

BY

ROBERT LOCKWOOD

Copyright © 2014 by Robert Lockwood.

Library of Congress Control Number:     2014916382

ISBN:          Hardcover          978-1-4990-6896-2

                   Softcover            978-1-4990-6897-9

                   eBook                  978-1-4990-6898-6

All rights reserved. No part of this book may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying, recording, or by any information storage and retrieval system, without permission in writing from the copyright owner.

This is a work of fiction. Names, characters, places and incidents either are the product of the author’s imagination or are used fictitiously, and any resemblance to any actual persons, living or dead, events, or locales is entirely coincidental.

Any people depicted in stock imagery provided by Thinkstock are models, and such images are being used for illustrative purposes only.

Certain stock imagery © Thinkstock.

Rev. date: 09/11/2014

Xlibris LLC

1-888-795-4274

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Contents

ALPHABETICAL CAST OF CHARACTERS

CHAPTER 1 —ZHONGNANHAI: GARDEN OF GREED

CHAPTER 2 —DECEPTION AS AN ART FORM

CHAPTER 3 —THE WATCHFUL SWISS

CHAPTER 4 —SEEKING ALTERNATIVES

CHAPTER 5 —SORROWS UNSUPPRESSED

CHAPTER 6 —TIMELESS ENCOUNTERS

CHAPTER 7 —GETTING DOWN TO BUSINESS

CHAPTER 8 —TIMES GONE BY: AULD LANG SYNE GONE SOUR

CHAPTER 9 —WHITE HOUSE’S WIDE SWATH

CHAPTER 10 —A FEW LOOSE ENDS

CHAPTER 11 —POWER PLAYS

CHAPTER 12 —NO HOLIDAY FROM DURESS

CHAPTER 13 —PALLIATIVES ALL AROUND

CHAPTER 14 —FILLING IN THE BLANKS

CHAPTER 15 —SKIES WITH MANY EYES

CHAPTER 16 —THE GAME PLANS MULTIPLY

CHAPTER 17 —REMORSE AND REVELATION

CHAPTER 18 —AGELESS POLITICAL CONUNDRA

CHAPTER 19 —SCAPEGOATING

CHAPTER 20 —A LA CARTE

CHAPTER 21 —ROULETTE

CHAPTER 22 —THE BUCK NEVER STOPS

CHAPTER 23 —ZERO SUM GAMING

CHAPTER 24 —NOT ALL ENDS WELL

BOOKS

BY

ROBERT LOCKWOOD

NONFICTION

French Nuclear Energy

Military Unions

Legislative Analysis

FICTION

A Culture of Deception

Political Ducks: Lucky, Lame and Dead

Au Revoir, Israel

Sweet Revenge

A Dragon Defanged

Artful Murder in the Hamptons

A Rogue’s Gallery

Jacob’s Prophecy (in progress)

ALPHABETICAL CAST OF CHARACTERS

CHAPTER 1

ZHONGNANHAI: GARDEN OF GREED

China’s first vice premier of the People’s Council of State, Yuan Hu, felt the back of his neck fold inward as he pushed his face closer to the large Lenovo LED monitor on his computer. It was a report from the foreign ministry. It opened with an article from the French newspaper Nice-Matin that read:

Tragedy on the Corniche near Eze

September 14, 2013 (Nice) … A speeding car failed to navigate the turn at Villefranche-sur-Mer late yesterday afternoon, crashing through the guardrails and down the 65-meter cliff to the sea. Police investigators on the scene said only that there were no survivors and that the car, which exploded when hitting the rocks at the cliff’s base, was owned by a seasonal resident at Cap Ferrat, Mr. Zach ben Meier. It is not certain at this moment if either Mr. ben Meier or any other identifiable person was in the car.

Ben Meier is a well-known Israeli-French art dealer with galleries in Paris and Montreux, Switzerland. He is believed to have rented the historic Chateau St. Jean on Cap Ferrat on a more or less permanent basis but was seldom in residence there. The police have been unable to contact him.

There were no witnesses but vacationers at a nearby spa reported hearing screeching wheels before the sounds of the car hitting the stone guardrails then exploding.

The report had been tidily collated from information provided by the always vigilant Chinese consulates in Nice, France, New York City, and the embassies in Paris and Washington. The sources listed were two New York dailies and several blogs regarding a police investigation of a massive art fraud involving the works of French post-impressionist painter Henri Lambert.

The ministry’s intelligence team is always reliable. Damn that Han Kai; what in hell happened? he asked himself, his face slightly reddening from the pulsating rise of his notoriously visceral blood pressure. It was Thursday, September 19, 2013, and 6:00 a.m. in Beijing. He looked out over the so-called Central Sea, a large lake within the imperial garden housing the central headquarters of the Chinese Communist Party, as well as the state council office that he occupied. It was still dark, but Han Kai, like himself, was always at work early. Outside, there was enough ambient light to see the glorious Pavilion of the Water and Cloud. Why do we concern ourselves with decadent Western art when the classical Chinese garden has inspired us for three thousand years? he mused. The Zhongnanhai garden was a cosmography of earthly serenity as seen through the haughty lens of Chinese culture. He settled down, pulling back from the computer screen. The Chinese ruling elite disliked surprises, like the flawed art deal that prejudiced their interests, especially at the personal financial level.

Yuan Hu fidgeted somewhat annoyingly with his phone’s keypad, finding the right button. As expected, Han Kai, director general of the Shensi Equity Group, answered his private line in haste, having seen Yuan’s name on the phone’s monitor screen.

Zaoshang hao, zunjìng de fu zongli (Good morning, Honored Vice Premier), Han Kai said, respectfully using highly formalized language despite their close friendship.

Kai, I am reading the reports from the foreign ministry. The art deal; what went wrong? Why have you not kept me informed? Yuan asked, his adenoidal voice grating on Han Kai’s ear.

My deep apologies, Hu, he stammered, using Yuan Hu’s first name. I have been dealing with the Greek. He has not yet given me the full story. Further, I was hoping there was no change in the compensation arrangement. He has always been reliable in the past. Han Kai knew full well what was really on Yuan Hu’s mind.

"But the report concludes that the Lambert paintings were fakes; were we cheated? What happened to our money, including our shares? Yuan Hu asked impatiently and emphatically. Out of habit, he put his right forefinger on his pulse to check his heartbeat. Surely the Greek knew he’d be out of what, five million US dollars, if he deceived us?" Yuan added. I have to slow down, my pulse is up, the hypochondriac thought almost coincidentally.

The funds were never paid, Honored Vice Premier. He delivered the paintings to us. They are at the Shanghai Museum, Han Kai answered abjectly.

Kai, Yuan Hu hesitated, "we have not been paid," he said, again with unmistakable reference to the personal interests at stake. He was sweating now, more from the effort to control his normally explosive reactions to the shoddy work of a minion than from simple frustration.

It is always my highest priority, Hu. It is for that reason I have been awaiting the Greek’s explanation, Han Kai answered with abject humility.

The council members will not like that; I need not go into detail, Yuan Hu added. When will the Greek give you the full story?

He’s overdue, Hu, and I will call him immediately, Han Kai replied.

Well, do something, and damn fast. We all have personal obligations, you know; children in expensive schools overseas, wives who spend like their lives will end tomorrow, and big creditors everywhere, especially in London, Paris, and New York. The Party could be badly embarrassed. I am depending entirely on you, he added with barely controlled but ritualistic drama that underlined that evident conclusiveness that often used to threaten subordinates.

Of course, I will work something out.

They hung up.

Han Kai was shaken as he looked at his watch, realizing: it’s one-thirty in the morning in Bern; Niko and Ruth will be sleeping. The hell with them, my neck is on the chopping block.

He called Switzerland. The phone rang in the Bern residence of Ruth Maurer, former president of the Swiss Federal Council. Since the death of her husband a year and a half earlier, and her departure from the Swiss presidency when her term ended last year, she had coupled herself both professionally and romantically with Nikos Rallis. Together they operated Strasse Equity Fund, a major foreign investment entity for the placement and management of a part of the immense Sovereign Investment Fund of the People’s Republic of China. The Chinese fund was valued at $750 billion. Its revenue derived largely from foreign exchange earnings during twenty years of a strongly favorable trade balance and disbursed toward widely scattered but carefully selected investment targets. All investments abroad promoted Chinese domestic and foreign policy, national security, and other strategic interests. Rallis’s Swiss firm, Strasse Equity, had served the Chinese well. The close relationship between Nikos Rallis and Han Kai was built on trust, and a highly successful investment track record. For that reason, it seemed natural that Han Kai would seek Rallis’s counsel in securing a highly credible representation of Western art for the grand art festival of the Shanghai Art Museum, scheduled to begin in January 2014.

Rallis was a Greek national who lived in Switzerland where he had extensive business holdings. He had befriended an Israeli-French art dealer, Zach ben Meier, who was raised in the US where his father represented the Israeli leather goods industry. He returned to Israel after graduating from a yeshiva high school in Chicago, making aliyah, which allowed any Jew the right of return. Following distinguished service in the Israeli Defense Forces during the Yom Kippur War, he went to France and studied art history at the Sorbonne. Ultimately, he acquired an art gallery with offices in Paris and Montreux, Switzerland. It was ben Meier on whom Rallis had depended to acquire the best impressionist and postimpressionist art available for the museum’s festival.

–

Han Kai’s call woke both Rallis and Maurer from the restful slumber that comes early, when the slow wave cycles of the brain induce a deep sleep. They reacted groggily, the sleep inertia discordant with the body’s circadian rhythms.

What—what is it? Niko, can you get that, please? Maurer groaned.

Yes—yes, I’ll get it, Rallis said, pulling himself up and reaching his right arm over to the phone. He glanced at the receiver’s monitor with clouded eyes. Seeing Han Kai’s name, he jolted up, his heart racing. The posterior ulnar artery at the crook of his right arm was visibly pulsating. Immediately he knew the call’s purpose; it made him mawkishly nauseous.

Hello—Kai, how are you? he stammered.

Sorry to call so late. Yuan Hu, the executive vice premier, just spoke to me. He had a full report from the foreign ministry, information collected from the diplomatic posts in France and the US. The state council members, they want their money, Niko, Han Kai said, speaking quickly in English.

Rallis was on his feet; Maurer turned on the light. She tried to straighten her face, always sensitive to the ten-year difference in their ages. At fifty-five she continued as a rather attractive, trim woman who took good care of her entire body. She stared at Rallis, his back to her as he ran his right hand through his dark hair. His brow was damp with glistening sweat as he listened to the Chinese caller. He turned toward Ruth, opening his hand and rolling his eyes as gestures of uncertainty, and finally speaking.

"Kai, there is no money. I was never paid," he replied.

I told Yuan Hu that, of course. These men are engineers, they don’t understand business. To them the intent of a deal is a finished deal. They expected—and expect—their share of the commission. To them that comes to eighty million, 5 percent of the 1.6-billion-dollar deal. He suggested that the fraud story in the ministry’s report was inconsequential even though I did tell him that the monies were never disbursed to you from the sovereign fund. When I mentioned that you were completely reliable and that I was awaiting your explanation before giving him the full story, he simply agreed saying that you wouldn’t cheat yourself out of your five-million-dollar commission, which he knows is the same amount due me if the sale had been consummated. Han Kai’s voice was firm; Rallis knew immediately what Han Kai would say next.

"Somehow, Niko, some way, you must contrive a transaction to raise the seventy million they want. That’s seven million for each of the ten members. Yuan warned me, and not very subtly, that much was at risk since all ten are Communist party leaders as well, as you know. They have big debts, many of them overseas," Han Kai said, speaking with more and more deliberation.

I, I don’t have any workable ideas at the moment; I’m sorry. I’ll ponder it and come up with something, Rallis said, now sweating even more profusely. Looking at Ruth, seated upright in bed, he added, I might be able to find the monies in our sovereign fund transactions.

Ruth shook her head vigorously, angrily grimacing and shaking her finger at him, her face hardening and lips pouted as she mouthed the words No, no, no!

Han Kai continued to speak. Unfortunately, Niko. I am quite certain that there will be changes in our relationship with Strasse Equity. Yuan has great influence over the Chinese Investment Corporation, the chairman of which I report to. The chairman is responsible to Yuan; he is appointed by the premier but only with Yuan’s recommendation. He will do what Yuan Hu directs and Yuan is highly unlikely to continue placing our funds with Strasse. Therefore, the sooner you find a way out of this, the better for all of us. He was now admonishing Rallis, subtly suggesting that every transaction with Rallis carries a commission for them both.

But, but I thought your company, Shensi Equity Group, decided which foreign equity firm manages your sovereign funds, Rallis said, sitting down heavily in a nearby chair, avoiding eye contact with the agitated Ruth.

Niko, Shensi is a state-owned enterprise with only an image of being a private equity fund. It was created that way to serve as a conduit through which Chinese sovereign funds could be directed. I’m sure you knew that, he asserted.

Yes, of course; I guess I also assumed that you had more discretionary authority, Rallis replied nervously.

Only in the eyes of the unknowing world, Niko, my friend. There was a pause, then Han asked, When will you get back to me?

We’ll work on it over the weekend, I’ll call you Monday, Rallis said, eager to end the call and talk to the fidgeting Ruth.

I will pass that on to Yuan, but please. I like our business relationship. We’ve had some great successes in the past. Don’t drop the ball, Niko. Hear from you then, Han Kai said, hanging up without even awaiting the courtesy of Rallis’s reply.

–

What followed was a calamitous moment in the short history of Rallis’s involvement with Maurer.

What are you doing? Ruth said in a controlled scream. Have you gone mad? The Chinese funds are the bedrock of Strasse’s survival at this moment. We’re heavily indebted to the Swiss government, which wants their Strasse bailouts repaid. The Greek government’s subsidy to your shipping business and that Santorini resort scheme has disappeared along with the rest of the country’s treasury. The Lambert trust will almost certainly drop me as their trustee after this art fiasco. She got up, her well-tailored Chinese silken, shadowlike lingerie pajamas, designed by Holmes and Yang, flushing out the slightest creases and wrinkles as she raised herself. They contrasted sharply with her angered mood and facial contortions.

If you hadn’t gotten mixed up with that zany ben Meier, we wouldn’t be in this mess, she shouted, using both hands to adjust her tufted hair as she paced the room.

Rallis was unmoved by her histrionics. He was a man of many women, and Ruth was but another of-the-moment convenience but one that had endured somewhat longer than usual. He had long planned his exit strategy from their relationship, but the time was never quite right, nor was the current crisis. He still needed her. As former president of the Swiss confederation, she became his business partner at Strasse, bringing in business from the Swiss treasury’s own overseas investment fund. She was the trustee and beneficiary of a Swiss trust benefitting from revenues of the Lambert family foundation, which was singularly owned and controlled by Morris Lambert, the son of the famed impressionist artist, Henri Lambert. And as a former law professor and president, she navigated Rallis through the many labyrinthine regulations and laws that tightly harnessed business enterprise in Switzerland.

No, take it easy. This is not quite the time. But I’ve been right all along. Still, I can’t depend on her trust or her loyalty to me, Rallis thought. He would be conciliatory.

He walked over and embraced her, saying, Look, we’ve been in tight pinches before. We managed Jurgen’s sudden death, he started, referring to her husband who had died in her arms on the greasy floor of a parking garage in Bern after a violent argument between the two. Afterward, Rallis openly became the president’s consort, as the media in Switzerland and the rest of Europe had labeled him.

Then the US Securities and Exchange Commission probe; after that the Brazilian money-laundering deal. We worked it out, Ruth; we’re a team and a damn good one, and we’ll manage this crisis. We need to reason our way through this; we can’t afford to let our emotions entrap us.

Ruth softened in his embrace; she liked the comforting warmth of his body against her. She believed, for the moment at least, he was right. All relationships have their trials; and nettlesome issues with their high-risk equity fund were to be expected.

I overreacted, sorry. We’ve been under unbearable stress since the Chinese art deal collapsed. This investigation, ben Meier; it’s gotten to me. I had no idea what a scoundrel he was. He died horribly but he deserved it, she said, but thinking, Why is Niko involved in so many of these scandalous situations? I love him; he’s been so good to me. But I must safeguard my reputation; I’m Swiss, in a small country where reputation means everything.

They kissed, but the tenderness of their romantic surge, that past ecstasy, was not quite the same in the minds of them both.

–

On Saturday evening, September 21, Ruth and Niko were finishing dinner, seated on the terrace of the residence that she and husband Jurgens had occupied early in her political career. As president, she had moved into the presidential mansion. Jurgens welcomed the freedom; he had his own private and separate life. Ruth had chosen a political path, caring little for her two children as well, both raised by Jurgens and a series of nannies.

At 1,700 feet above sea level in mid-September, the weather in Bern had begun its short autumn. Over the course of the month, highs of 80° Fahrenheit days would shift to the low seventies by midmonth with evenings as low as 60°. It was one of those cool evenings on the terrace of the chaletlike house in the Bern-Alstadt section of the federal district. The night was clear, the River Aare easily visible as it coursed its way along the horseshoe around the old city below.

You owe Han Kai an answer, Monday morning latest, Niko; I’m sure you haven’t forgotten, Ruth said, sipping after-dinner Veuve Cliquot champagne. It was close to eight o’clock but still light enough to see each other’s face.

Not at all, while I was at the office, I looked over the files on ben Meier. I think I have something, he said, having just driven back from a short two-day stay at Strasse’s main office in the heights above Montreux on Lake Geneva’s Swiss Riviera.

That’s encouraging; is the idea ripe enough to discuss? But tell me first, who gives orders to Han Kai in Beijing? she asked.

You’ll recall the time we visited Kai in Beijing, he started.

Yes, an amazingly Western fellow. His mannerisms as American as yours, she said laughingly.

In fact, our common American education is what bonded us. My twelve years in the States, boarding school at Loomis, Trinity College, and the Wharton School at Penn. Han Kai was educated at Cal-Berkeley, seven years in the Bay area. He later picked up his Ph.D. at the Shanghai University of Finance and Education, very much the Harvard Business School of China. In the mid-1990s he represented China at the International Finance Corporation in the World Bank Group in Washington. He headed the group’s IFC asset management division. He’s quite an expert on trade and structured financing. And very savvy on the way US private markets operate, Rallis explained.

Why does he use us, Strasse; why not a US company? she asked.

For the reason I gave a second ago: too much government regulation, he replied.

More than in Switzerland? she asked half laughingly.

Probably not, he said joining her chuckling. "It’s just very different. Han Kai and I discussed this very same question many times. The US banking system is too political and too liable to media disclosures. The US financial sector has almost nine hundred registered lobbyists in Washington, many if not most former congressional staff or members. The state of US banking laws is chaotic. This creates such uncertainty in the minds of money movers. They won’t take the usual risks that go with their jobs. Often they do nothing. A case in point is the Dodd-Frank Act intended to better control mortgage securitization. It’s been four years since the law was enacted and only 40 percent of the regulations needed to implement it have been written. Worse, the White House keeps allowing exceptions for privileged groups and even deferring compliance for some. Congress, the White House, and the bureaucracy face fierce opposition from lobbyists on just about everything they propose.

Businesses can’t operate in that type of fog. As I suggested a second ago, banks won’t lend because they don’t know what share of a high-risk loan they’d have to keep in reserve, for example. Businesses are reluctant to hire and expand for fear that tighter money will weaken their markets. And the lobbyists keep pounding for yet more preferential treatment. All this occurs largely out of sight, mostly in the offices of key senators and other members of congress. The media get leaks from disappointed bidders for congressional favors, however, and the disclosures slow things down, again and again, Rallis explained with clear cynicism in his voice.

Ruth understood the problem from a different perspective. Admittedly, our lobbying is much more discrete and limited to a very few who have real access. As a member of the Swiss federal assembly and chair of our finance committee, I felt these pressures. But our system is different: the real power resides at the canton level, like the state level in the US. It was the cantonal parliamentarians that got much of my attention, she added.

But Swiss federal law establishes a benchmark, for secrecy, for example, does it not? Rallis asked.

Of course, that’s exactly what I taught at Fribourg, she said, referring to law faculty at the University of Fribourg, situated in the canton with the same name. "I organized the master’s of law degree program for cross-cultural business practices, which was presented in English. Half my students were foreign, mostly German, French, English, and American. There were a few Chinese and Koreans then and now. Except for the Americans, the others were totally confused by the federalist legal systems.

But back to my original question, who tells Han Kai what to do? she asked again.

He’s a ‘princeling,’ these are the first- and now second-generation descendants from the so-called Great Revolutionary Leader.

You mean Mao Tse-tung, I assume, Ruth interjected.

And his Red Guards, which were the phalanx of the revolution. Their message was simple: the real proletariat are rural and not urban, and that’s where he focused his program. But even Mao was not above hypocrisy. He dispatched students, scholars, intellectuals, and other folks who substituted words for deeds to the countryside. But he made an exception for Tsinghua University and its middle school in Beijing. After all, that’s where the elite sent their own kids. As long as they shared Mao’s ideological DNA and organized Red Guard units they could be designated as worthy revolutionaries, Rallis said to their joint laughter.

My point is, he continued, that this same subtle aristocracy forms the core of Chinese leadership today. Every major political leader and virtually all of the top managers of the many state-owned enterprises, the ‘SOES,’ as they call them, have princeling legacies. Han Kai himself is the son of a Red Guard leader. Yuan Hu’s father, Yuan Shen, was one of the best known revolutionaries. In 1966, he rounded up eleven million Red Guard members to march before Mao in Tiananmen Square. Yuan Hu, the premier, and Han Kai are all formed in the same ideological and historic mold that assures mutual loyalties. Those loyalties are strengthened by their easy access to wealth. The state starves interest rates on the bank deposits of ordinary citizens, then lends the money to the SOES. The princeling managers skim off outrageous amounts for themselves, then investing in fatuous projects. Look at all the overgrowth in China, whole cities with new but unoccupied office towers and even condominiums.

But that’s how all aristocracies begin and then operate, especially in European history, Ruth added, sipping the remaining drops from her champagne flute.

It’s not much different; it doesn’t seem to work too well in the US. Teddy and Franklin Roosevelt were cousins; the Bush and Kennedy families have run out of serious successors; the Clintons seem to be grooming Chelsea who, amusingly, has already acquired a fortune from work in the hated private equity sector, along with one of those so-called distance-learning doctorates from Oxford. Seems she never even spent a semester in at the school. In the US they call them mail-order degrees, he added to their joint laughter.

Getting back to China, don’t they have so-called kickback laws? Ruth asked.

You mean foreign investors, like ourselves, returning some of our earned fees to the folks who hired us? Rallis replied with a question.

Précisément, she answered, in French for emphasis.

To my knowledge, there are no formal kickback laws. But that doesn’t keep people on the outs from being prosecuted for trying to buy influence. Is it any different from Switzerland? he asked Ruth.

Only by degree, she laughed. Of course we prosecute those who bribe officials. But our laws are more silent on kickbacks, which we tend to treat as a form of commission.

The US does allow legal kickbacks; these are various types of finder fees or payments to persons who bring in private business. The US Anti-Kickback Act of 1986, as I recall, was initially adapted to government contracting. In fact Nixon’s vice president, Spiro Agnew, resigned from office after he acknowledged taking kickbacks related to public construction contracts as governor of Maryland. This was not a pleasant day for a famed ‘son of Greece,’ he laughed.

It’s the US kickback laws that irritate us the most in Switzerland. At this moment, Novartis, headquartered in Basle, has been charged by the US justice department with providing a beneficial kickback to American doctors who publicly urged the use of certain Novartis pharmaceuticals. I have no real objection to the charges if they’re true. Misleading information on healthcare matters is much more serious. But the distinction between paying a promotional fee, or commission, and demanding a return of part of that fee as a condition for the business arrangement can be troublesome. The United Nations attempted to deal with the issue in its 1975 declaration against corruption and bribery in international commercial transactions. It was too vague to make sense and the remedies unenforceable at that level, she explained.

So how does Switzerland manage the distinctions? Rallis asked.

"Most of these problems are settled in the cantonal courts. The International Soccer League, headquartered in the Zug Canton, for example, has disclosed that kickbacks were made to persons who had taken legal action against the ISA, encouraging them to drop their cases. The Zug cantonal courts are still considering the evidence.

But your question reaches to the sensitive area of the Swiss banking-secrecy laws. Much of the wrongfully gained monies, like illegal kickbacks, seems to find its way into our banking system. That’s where we get in trouble with the IRS, she explained.

Even when the kickbacks are legal? he asked.

Yes, and that’s one of the principal irritations. There is a section of the US Internal Revenue Code, section 162, I seem to recall from my teaching days, that makes them taxable. If that’s the case, the IRS demands are legitimate, but they run afoul of our secrecy laws. We demand evidence of intent to conceal and avoid taxes, something the IRS is rarely able to provide. So we battle with them, Ruth added.

When you’re using your secrecy laws to deny the IRS access to the evidence they need to prosecute, aren’t you abetting the wrongdoing? Rallis asked with a chuckle.

We’re a very different culture, she replied with a bit of mimicked embarrassment, then adding, that’s why we’ve settled most of the disputes. Our banks have paid huge fines, and the federal assembly is amending some of the secrecy laws.

Rallis couldn’t resist the last word. Putting his empty champagne flute on the table, he said, looking up at her with what she detected as more than an innocent twinkle, So I guess we’re all not much different than the scoundrels at Zhongnanhai, a reference to the headquarters of the Chinese Communist Party and the ruling state council.

Ruth forced a smile, thinking. I am