Treasury Department Announces Additional initial closing of
Legacy Securities Public Private Investment Fund

WASHINGTON -- The U.S. Department of the Treasury today announced that RLJ Western Asset Management, LP, has completed an initial closing of a Public-Private Investment Fund (PPIF) established under the Legacy Securities Public-Private Investment Program (PPIP).  RLJ Western Asset Management, LP, is a minority-owned partnership between The RLJ Companies, LLC and Western Asset Management.

To date, seven PPIFs have completed initial closings on approximately $4.09 billion of private sector equity capital which has been matched 100 percent by Treasury, representing $8.18 billion of total equity capital.  Treasury has also provided $8.18 billion of debt capital, representing $16.36 billion of total purchasing power for all PPIFs.

Treasury expects initial closings for the remaining two PPIFs to be announced soon.  Following an initial closing, each PPIF has the opportunity to conduct additional closings over the following six months to receive matching Treasury equity and debt financing, with a total Treasury equity and debt investment in all PPIFs equal to $30 billion ($40 billion including private investor capital).  Treasury will continue to provide updates as subsequent PPIF closings occur.

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Treasury Designates Bank Mellat Subsidiary and
Chairman Under Proliferation Authority

WASHINGTON – The U.S. Department of the Treasury today designated First East Export Bank (FEEB), a Bank Mellat subsidiary located in Malaysia, under Executive Order (E.O.) 13382 for being owned or controlled by Bank Mellat. Treasury also designated the Chairman of Bank Mellat, Ali Divandari, for acting on behalf of Bank Mellat. E.O. 13382 freezes the assets of designated proliferators of weapons of mass destruction and their supporters and prohibits U.S. persons from engaging in any transactions with them.

Iran's state-owned Bank Mellat has facilitated the movement of millions of dollars for Iran's nuclear program and was designated under E.O. 13382 in October 2007 for its role in providing financial services to the Atomic Energy Organization of Iran (AEOI) and Novin Energy Company (Novin).  Specifically, Bank Mellat has serviced and maintained AEOI bank accounts, mainly through Novin, which acted as AEOI's financial conduit.  On October 12, 2009, the United Kingdom also took financial action against Bank Mellat for its role in Iran's nuclear program. As Chairman of Bank Mellat, Ali Divandari plays a significant role in Bank Mellat's activities and decision-making processes.

"Today's action will help to protect the integrity of the U.S. financial system and ensure that banks and regulators around the world are aware that First East Export Bank is in fact an arm of Bank Mellat, an institution that has supported Iran's nuclear program in violation of UN Security Council resolutions," said Under Secretary for Terrorism and Financial Intelligence Stuart Levey.

AEOI and Novin were previously sanctioned by the U.S. government under E.O. 13382 and by the UN Security Council under Resolutions 1737 and 1747, respectively.  AEOI, which reports directly to the Iranian president, is the main Iranian government organization for research and development activities in the field of nuclear technology. Novin, an AEOI front company, has transferred millions of dollars on behalf of AEOI to entities associated with Iran's nuclear program.

Bank Mellat received a license from Malaysian financial authorities to establish FEEB in Labuan, Malaysia in late 2008, and the Malaysian government publicly listed FEEB as an official offshore bank in April 2009.  FEEB is the first overseas subsidiary of an Iranian bank to open for business since the Financial Action Task Force (FATF), the world's premier standard-setting body for combating money laundering and terrorist financing, called in February 2009 for all jurisdictions to impose countermeasures to protect against the risks posed by Iran to the international financial system.  FATF also advised jurisdictions at that time to take these risks into account when considering requests by Iranian financial institutions to open branches and subsidiaries.

Today's actions are consistent with United Nations Security Council Resolutions on Iran, including UNSCR 1803, which calls on Member States to exercise vigilance over activities between their financial institutions and all banks domiciled in Iran, and their branches and subsidiaries abroad, in order to avoid such activities contributing to the proliferation of sensitive nuclear activities, or to the development of nuclear weapon delivery systems.

Identifying Information

Entity:             First East Export Bank, P.L.C. Unit Level 10 (B1), Main Office Tower, Financial Park Labuan, Jalan Merdeka, 87000 WP Labuan, Malaysia; Business Registration Number LL06889 [NPWMD]

Individual:      Ali Divandari, c/o Bank Mellat, Tehran, Iran; DOB: 1 July 1967; POB Ghoochan, Khorasan, Iran; Nationality: Iranian [NPWMD]

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Treasury Removes Three Former Terrorist
Supporters from Specially Designated Nationals List

WASHINGTON – The U.S. Department of the Treasury's Office of Foreign Assets Control (OFAC) today removed Patricia Rosa Vinck, Barakaat International, and Barakaat International Foundation from its Specially Designated Nationals List, having found that Vinck and the two entities no longer present a significant threat of supporting terrorism.  Today's action was taken in conjunction with a removal of the three names from the United Nations' 1267 Sanctions Committee (U.N. 1267 Committee) Consolidated List of individuals and entities subject to U.N. sanctions measures. 

"The U.S. Government is actively supporting the comprehensive review underway at the U.N. 1267 Committee to ensure the efficacy, accuracy, and fairness of this vital sanctions regime," said OFAC Director Adam J. Szubin. "We are reviewing the evidentiary records for hundreds of listings – advocating for continued preventative sanctions against those who pose a significant threat of supporting terrorism and removal of those who do not." 

Vinck, Barakaat International, and Barakaat International Foundation were all designated by the Treasury Department under Executive Order 13224 and by the U.N. 1267 Committee.   The Treasury Department and the United Nations designated Vinck in January 2003 and the two Barakaat entities in November 2001.

Vinck is the wife of Nabil Abdul Salam Sayadi, who headed the Belgium office of the Global Relief Foundation (GRF), an organization designated in October 2002 by the United States and the United Nations for its support to al Qaida.  Vinck served as the secretary of GRF's Belgium office and facilitated GRF's activities.  Following U.S. and U.N. sanctions against her, Vinck ceased her activities on behalf of GRF.

The Barakaat organizations were part of a financial conglomerate operating in 40 countries around the world that facilitated the financing and operations of al Qaida and other terrorist organizations.  The U.S. and U.N. sanctions against these entities assisted the global effort to prevent them from routing funds to al Qaida and other terrorist groups, and the two organizations are no longer operating.  Other designated entities and individuals related to the Barakaat conglomerate remain on the U.S. and U.N. sanctions lists.

The U.N. 1267 Committee is currently implementing a number of procedural and other measures called for by U.N. Security Council Resolution 1822, adopted in June 2008, to improve the effectiveness and fairness of U.N. sanctions.  These measures include a comprehensive review of the approximately 500 names on the U.N. 1267 Committee's Consolidated List to be completed by June 2010.  The resolution also mandates the establishment and posting on the U.N. 1267 Committee's website of narrative summaries of reasons for the listing of all individuals and entities on the Consolidated List, and updates to the U.N. 1267 Committee's listing and delisting procedures.  The United States strongly supports and is participating vigorously in these efforts.

More information about the activities of the U.N. 1267 Committee, including the Consolidated List and corresponding narrative summaries, can be found on the U.N. 1267 Committee's website at www.un.org/sc/committees/1267.

Detailed information about Treasury's anti-terrorism sanctions program and the Specially Designated Nationals List are provided on OFAC's website at www.treas.gov/ofac.

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November 2, 2009
TG-341

Treasury Announces Marketable Borrowing Estimates

Washington, D.C. -- The U.S. Department of the Treasury today announced its current estimates of marketable borrowing for the October – December 2009 and the January – March 2010 quarters:

• During the October – December quarter, Treasury expects to issue $276 billion in net marketable debt, assuming an end-of-December cash balance of $85 billion, which includes $15 billion for the Supplementary Financing Program (SFP).  The borrowing estimate is $209 billion lower than announced in July 2009.  The decrease in borrowing is primarily related to cash balance adjustments related to the SFP, and lower outlays offset partially by lower receipts.
• During the January - March quarter, Treasury expects to issue $478 billion in net marketable debt, assuming an end-of-March cash balance of $45 billion, which includes $15 billion for the SFP.
• These estimates do not include any incremental borrowing needs that would result from a potential increase in issuance under the SFP.

During the July – September 2009 quarter, Treasury issued $393 billion in net marketable debt, finishing the quarter with a cash balance of $275 billion, of which $165 billion was attributable to the SFP.  In July, Treasury had estimated $406 billion in marketable borrowing for the quarter, assuming an end-of-September cash balance of $270 billion.  The decrease in borrowing was primarily a result of lower outlays.

Additional financing details relating to Treasury's Quarterly Refunding will be released at 9:00 a.m. on Wednesday, November 4.

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REPORTS

• Sources and Uses

Report on U.S. Portfolio Holdings of Foreign Securities at End-Year 2008

WASHINGTON – The findings from an annual survey of U.S. portfolio holdings of foreign securities at year-end 2008 were released today and posted on the Treasury web site at (http://www.treas.gov/tic/fpis.html).

The survey was undertaken jointly by the U.S. Department of the Treasury, the Federal Reserve Bank of New York and the Board of Governors of the Federal Reserve System. 

A complementary survey measuring foreign portfolio holdings of U.S. securities also is conducted annually.  Data from the most recent such survey, which reports on securities held on June 30, 2009, are currently being processed. Preliminary results are expected to be reported on February 26, 2010.

Overall Results

The survey measured the value of U.S. portfolio holdings at year-end 2008 of approximately $4.3 trillion, with $2.7 trillion held in foreign equities, $1.3 trillion in foreign long-term debt securities (original term-to-maturity in excess of one year), and $0.3 trillion held in foreign short-term debt securities.  The previous such survey, conducted as of year-end 2007, measured U.S. portfolio holdings of $7.2 trillion, with $5.2 trillion held in foreign equities, $1.6 trillion in foreign long-term debt securities and $0.4 trillion held in foreign short-term debt securities. The decrease in the value of U.S. portfolio holdings between the two surveys primarily reflects valuation changes in foreign equities during 2008.

U.S. portfolio holdings of foreign securities by country at the end of 2008 were the largest for the United Kingdom ($647 billion), followed by Japan ($403 billion) and Canada ($378 billion) (see Table 2). These three countries attracted one-third of the total U.S. portfolio investment. 

The surveys are part of an internationally-coordinated effort under the auspices of the International Monetary Fund (IMF) to improve the measurement of portfolio asset holdings.

Table 1.  U.S. holdings of foreign securities, by type of security, as of survey dates[1]

(Billions of dollars)

U.S. Portfolio Investment by Country

Table 2.  U.S. holdings of foreign securities, by country of issuer and type of security, for the countries attracting the most U.S. portfolio investment, as of December 31, 2008

(Billions of dollars, except as noted)

* Greater than zero, but less than $500 million

Treasury Awards $5 Billion to Encourage Private
Sector Investments in Local Communities

New Markets Tax Credit Program Includes $1.5 Billion
Awarded Under the Recovery Act

CHICAGO-- As part of the Obama Administration's efforts to revive local economies, Treasury Secretary Tim Geithner today visited a job training center in Chicago benefiting from private sector investments made through the New Markets Tax Credit (NMTC) program. As part of his visit, Geithner announced $5 billion in NMTC awards, including $1.5 billion made possible through the American Recovery and Reinvestment Act (Recovery Act), for more than 90 organizations in communities around the country.

"We must rebuild our economy on a firmer foundation, one that equips our workers with the skills and education they need to compete," said Secretary Geithner.  "We must make sure that the advantages of this new, stronger economy are broadly shared. Too often, communities are left behind by economic growth.  The Recovery Act and the New Markets Tax Credit program help break this vicious cycle to ensure the benefits of growth reaches all corners of the country."

In May 2009, Secretary Geithner announced an initial $1.5 billion for NMTC awards under the Recovery Act, making today's announcement the second round of Recovery Act funding for the program.  The NMTC program, established by Congress in December 2000, permits individual and corporate taxpayers to receive a credit against federal income taxes for making equity investments in investment vehicles known as Community Development Entities (CDEs). The investor receives a credit totaling 39 percent of the cost of the investment. CDEs must apply to the Treasury's Community Development Financial Institutions (CDFI) Fund, which administers the NMTC program, to compete for this allocation authority.  The organizations receiving awards have identified principal service areas that will cover nearly every state in the country, as well the District of Columbia and Puerto Rico and plan to invest in renewable energy projects, charter schools, health care facilities, manufacturing companies, and retail centers.

Secretary Geithner's announcement was made today at the Greater West Town Community Development Project (GWTP) which provides job training and placement services to local residents, and educational and career development services targeted to former Chicago public high school drop-outs.  Through financing provided by the Chicago Development Fund, a New Markets Tax Credit award recipient in Chicago, the GWTP will convert a vacant industrial building into a new job training and education facility. The GWTP projects the development will create 30 construction jobs and 35 permanent jobs for employees. Secretary Geithner was joined at the site by Donna J. Gambrell, Director of Treasury's CDFI Fund; Mayor Richard Daley; Congressman Danny Davis (IL-7); and Bill Leavy, Director of the GWTP.

Said Gambrell: "The New Markets Tax Credit Program is promoting private-sector investment in our nation's communities and is helping to stimulate economic growth, create jobs and bringing new opportunities to Americans most in need.  This innovative federal program is helping to finance numerous businesses and real estate projects across the country--projects that may not have been financed if not for New Markets Tax Credits."

Said Leavy: "The major reason we are able to build this new job training facility is because we received a New Markets Tax Credit award.  This innovative federal program is supporting the expansion of employment and educational opportunities so desperately needed in communities like ours."

To date, over $14 billion of private-sector capital has been invested through the NMTC Program into urban and rural communities throughout the country. Data reported through 2008 shows that $12.7 billion dollars of NMTC capital has been invested into approximately 2,000 businesses and real estate developments. A complete list of the organizations selected and additional information on the NMTC Program can be found on the CDFI Fund's web site at: www.cdfifund.gov.

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Administration Calls on Congress to Approve Key Housing Measures

Treasury Allocates $2.2 Billion in Bonds for Renewable Energy Development

Clean Renewable Energy Bonds Awarded to More Than 800 Recipients Nationally

WASHINGTON--As part of the Obama Administration's efforts to spur renewable energy production, the U.S. Department of Treasury today announced the allocation of $2.2 billion in Clean Renewable Energy Bonds (CREBs) for 805 recipients across the country.  Funded by the Energy Improvement and Extension Act of 2008 and the American Recovery and Reinvestment Act of 2009 (Recovery Act), these energy bonds help government agencies, public power providers, and cooperative electric companies obtain lower cost financing for clean energy development projects.

"The Recovery Act's innovative bond programs provide communities around the country with financing to jump start important development projects," said Treasury Deputy Secretary Neal Wolin. "Because of the Clean Renewable Energy Bonds awards announced today, energy developers will be able to access lower cost credit to help make the shift to clean renewable energy production, benefitting both our economy and our environment."

The Treasury Department allocates bond authority to governmental agencies, public power providers, and cooperative electric companies involved in clean renewable energy development and production. The application deadline for the new CREBs allocations was August 4, 2009, with recipients being announced today.  These bonds function as tax credit bonds which allow investors to receive federal tax credits in lieu of the payment of a portion of the interest on the bond.  For CREBs, the federal tax credits will cover 70 percent of the interest on the bonds.

A complete list of recipients receiving awards of bond authority to issue CREBs can be found here.

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Statement from Treasury Secretary Geithner on
House and Senate Introduction of
Foreign Account Tax Compliance Act of 2009

WASHINGTON – The U.S. Department of the Treasury today released the following statement from Secretary Tim Geithner on the introduction of the Foreign Account Tax Compliance Act of 2009:

"The legislation introduced today by Chairman Rangel and Chairman Baucus follows through on the Administration's commitment to combating offshore tax evasion and ensuring a level playing field.  For too long, individuals have taken advantage of the system by hiding money in accounts overseas, while millions of families and small businesses here at home pay the price.  This legislation will reduce the amount of taxes lost through the illegal use of hidden accounts and is the next step in making sure that everyone pays their fair share. 

"This legislation fits well into the Administration's dual-track strategy of improving our domestic tax laws while increasing global cooperation on tax information exchange to help narrow the tax gap and create the fairer tax system we need.  We have had great success recently in working with countries around the world to increase tax information exchange as part of the global effort to end offshore tax evasion.

"In addition to the leadership of Chairman Rangel and Chairman Baucus, I want to acknowledge the work of Senators Kerry and Levin and Representatives Neal and Doggett in support of a strong international tax enforcement agenda."

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October 23, 2009
TG-331

Treasury Surpasses $3 Billion in Recovery Act Funds for States to Provide Affordable Housing

California to Receive $284 Million in Payments in Lieu of Tax Credits;
To Date, 45 State Housing Agencies Receive Funds

WASHINGTON – As part of the Obama Administration's efforts to strengthen communities and ease pressures on the housing market, the U.S. Department of the Treasury today announced $284 million in American Recovery and Reinvestment Act (Recovery Act) funding to spur the development of affordable housing in California. To date, 45 state housing authorities have been awarded a total of $3.1 billion in payments in lieu of tax credits for affordable housing projects.

"This innovative Recovery Act program allows the federal government to partner with states to support local developers and helps ensure that housing developers can access the financing necessary to build affordable housing," said Treasury Deputy Secretary Neal Wolin. "We have worked quickly to make available more than $3 billion to state housing agencies, and we expect to see continued efforts at the state level, so that these funds can be delivered to the communities that need it most."

In May 2009, the Treasury Department launched an innovative program to provide payments in lieu of tax credits to state housing agencies to jump start the development or renovation of qualified affordable housing for families across the country.  Upon receiving notice of these allocations, state housing agencies manage a competitive process to disburse funds to qualified developers. This is an ongoing program open to additional state applications through 2010.

The following is a complete list of funds awarded to states under the program to date. For more information on the award to California, please contact Alice Scott, Public Affairs Director of the California Tax Credit Allocation Committee, ascott@treasurer.ca.gov, (916) 651-9411.

REPORTS

• Designated State Housing Credit Agency

Treasury Designates North Korean Bank and Banking Official
As Proliferators of Weapons of Mass destruction

WASHINGTON – The U.S. Department of the Treasury today designated Amroggang Development Bank (Amroggang) as a proliferator of weapons of mass destruction under Executive Order (E.O.) 13382 for being owned or controlled by North Korea's Tanchon Commercial Bank (Tanchon). Treasury also today designated Tanchon's President, Kim Tong Myong.  Tanchon, which is sanctioned by the United States under E.O. 13382 and the UN Security Council under Resolution (UNSCR) 1718 for its involvement in North Korea's proliferation activities, is a commercial bank based in Pyongyang, North Korea.  E.O. 13382 freezes the assets of designated proliferators of weapons of mass destruction and their supporters and prohibits U.S. persons from engaging in any transactions with them.

"As long as North Korea continues to try to evade sanctions and obscure its illicit proliferation transactions, we will take steps to combat that activity and protect the integrity of the international financial system," said Under Secretary for Terrorism and Financial Intelligence Stuart Levey.

Amroggang, which was established in 2006, is a Tanchon-related company managed by Tanchon officials.  Tanchon, the financial arm of the U.S. and UN-designated North Korean company Korea Mining Development Corporation (KOMID), plays a role in financing KOMID's sales of ballistic missiles and has also been involved in ballistic missile transactions from KOMID to Iran's Shahid Hemmat Industrial Group (SHIG), the U.S. and UN-designated Iranian organization responsible for developing liquid-fueled ballistic missiles. KOMID is North Korea's premiere arms dealer and main exporter of goods and equipment related to ballistic missiles and conventional weapons.

A North Korean individual Kim Tong Myong was also designated today for acting on behalf of Tanchon.  Kim Tong Myong has held various positions within Tanchon since at least 2002 and is currently Tanchon's President.  He has also played a role in managing Amroggang's affairs using the alias Kim Chin-so'k.

Identifying Information

Entity:             Amroggang Development Bank (a.k.a. Amnokkang Development Bank) Tongan-dong, Pyongyang, Democratic People's Republic of Korea [NPWMD]

Individual:      Kim Tong-myo'ng (a.k.a. Kim Tong Myong; a.k.a. Kim Chin-so'k; a.k.a. Kim Jin Sok) c/o Tanchon Commercial Bank, Saemul 1-Dong Pyongchon, District, Pyongyang, Democratic People's Republic of Korea; DOB 1964; Nationality: North Korean [NPWMD]

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The Special Master for TARP Executive Compensation Issues First Rulings

Today, the Special Master for TARP Executive Compensation Kenneth R. Feinberg released determinations on the compensation packages for the top executives at firms that received exceptional TARP assistance. Under the Emergency Economic Stabilization Act (EESA) as amended in 2009, the Special Master has a mandate to review all forms of compensation for five most senior executive officers and the next 20 most highly compensated employees at the seven firms that received exceptional TARP assistance (AIG, Citigroup, Bank of America, Chrysler, GM, GMAC and Chrysler Financial).

1.      Reforms Pay Practices for Top Executives to Align Compensation Practices With Long-Term Value Creation and Financial Stability:  The Special Master's rulings represent a fundamental transformation from the pay practices of the past.  These decisions will significantly alter the way that executives covered by the Special Master's decisions--including the senior executive officers and next 20 most highly compensated employees of each of the seven recipients of "exceptional" assistance under the TARP (AIG, Citigroup, Bank of America, Chrysler, GM, GMAC and Chrysler Financial)--are paid.

·         Rejects Cash Payments Based on Short-Term Performance, as required by statute: Traditionally, compensation for these employees has included large cash amounts, including significant cash bonuses.  These payments gave executives incentives to take short-term risks and little reason to protect the long-term the health of the company or financial stability.  After today's rulings, as required by statute and Treasury regulations, these executives will receive the overwhelming majority of their pay in company stock that may only be sold over the long term, aligning their interests with those of taxpayers and shareholders.

·         Restructures Existing "Guaranteed" Cash Payments into Stock Held For the Long Term: Under the pay practices of the past, several executives in this group were awarded cash "guarantees" in 2009.   Guaranteed minimum amounts give employees little downside risk in the event of poor performance--but upside when times are good.  The Special Master required these agreements to be restructured.  Under today's rulings, these amounts will be paid in company stock that must be held over the long term. 

·   Citigroup and Phibro: At Phibro, Citigroup's commodities trading unit, the Chief Executive Officer was to receive a significant cash bonus based on the short-term results of significant risk-taking.  The Special Master rejected this approach, and Citigroup agreed to sell Phibro to a company that has not received taxpayer funds.  Under today's ruling, nothing may be paid to the Phibro CEO until the sale is complete.

2.      Significantly Reduces Compensation Across the Board:  To break from the pay practices of the past, the Special Master has reduced compensation across the board--both in terms of cash and the total compensation executives will receive.

·        On Average, Cash Compensation Decreased by More Than 90 percent: The Special Master rejected cash payments based on short-term results that may prove illusory, and cash guarantees that separate pay from performance.   Overall, the Special Master reduced cash pay by more than 90 percent from 2008 levels--and, as required by Treasury regulations, cash bonuses may no longer be paid to any of these employees.

·        Approved cash salary generally limited to $500,000:  Consistent with the Administration's February 4 guidance on executive compensation at TARP recipients, the Special Master approved base salaries of $500,000 or less for more than 90 percent of the employees in this group.  Base salaries greater than $1 million were approved in just three cases: for the new CEO of AIG, as previously announced, and for two employees of Chrysler Financial, which will wind down its operations in the near term and cannot grant employees long-term incentives.

·        On Average, Total Compensation Decreased by More Than 50 percent:  Even including the value of stock that must be held for the long term, the Special Master reduced the total compensation packages for executives in this group to less than half of 2008 levels.

·        Exceptions Where Necessary to Retain Talent and Protect Taxpayer Interests: Although the Special Master's rulings generally emphasize decreases in both cash and total compensation across the seven companies, increases in compensation were permitted where shown to be necessary to retaining key talent critical to a company's long-term success--and, ultimately, ability to repay the taxpayer.

3.      Requires Salaries to be Paid in Company Stock Held Over the Long Term:  The Special Master's rulings fundamentally change the structure of compensation at these firms.  Rather than cash, today's rulings require that the majority of salaries be paid in stock that must be held for the long term--giving executives incentives to pursue long-term value creation and financial stability.

·        Stock is Immediately Vested, Requiring Executives to Put Their Own Funds at Stake: Rather than just cash, executives will earn base salaries in the form of vested stock in their companies.  In effect, the Special Master is requiring each executive to invest their base salary in the long-term future of the firm, alongside taxpayers.  These structures ensure that executives do not have incentives to take the excessive risks that contributed to the financial crisis.

·         Stock May Only Be Sold in One-Third Installments, Beginning in Two Years: Unlike the pay practices of the past, which allowed executives to sell stock in their companies immediately, the Special Master's rulings require stock to be held for the long term.  Stock received as salary may only be sold in one-third installments that will not begin until 2011, unless the taxpayer is repaid earlier.

4.       Require Incentive Compensation to be Paid in the Form of Long Term Restricted Stock – and to be Contingent on Performance and on TARP Repayment:  As the Secretary noted in his June 10 statement, incentive pay can be undermined by compensation practices that set the performance bar too low or simply reward rising tides.  The Special Master's rulings require that incentives be paid only if executives reach objective goals agreed upon in consultation with the Special Master--and only if TARP is repaid.

·        Requires Achievement of Goals Set in Consultation with the Special Master:  The Special Master's rulings permit these executives to receive incentive pay only if the executives attain objective, predetermined performance goals set in consultation with the Special Master.  Achievement of these goals must be certified by each company's compensation committee--which, under Treasury regulations, must be composed solely of directors fully independent from management.

·        Requires Three Years of Service, and TARP Repaid, Before Payment: To ensure that taxpayers continue to receive the benefits of the executives' talents, the Special Master's ruling requires that any incentive awards be paid only if the employee provides at least three years of service to the company after the award is made.  And, under Treasury regulations, the awards must be paid in the form of restricted stock that may not be paid unless the company repays its TARP obligations.

5.      Requires Immediate Reform of Practices Not Aligned With Shareholder Interests:  As the Secretary noted in his June 10 statement, in some cases golden parachutes and supplemental executive retirement plans have expanded beyond their original purpose, and may not enhance the long-term value of the firm or allow shareholders to easily ascertain the full value of the "walkaway" pay an executive will receive when departing the firm.  The Special Master's rulings place tough new restrictions on these payments--as well as perquisites and other personal benefits--for executives at companies that have received exceptional taxpayer assistance. 

·        Caps perquisites and "other" compensation: Several experts, including the Conference Board Task Force on Executive Compensation, have concluded that executives--and not companies--should generally cover the costs of personal expenses.  The Special Master's rulings generally cap these types of payments at $25,000, with limited exceptions for unusual circumstances that can be justified to the Special Master.

·        Additional limitations on "golden parachute" payments: Large "golden parachute" or severance payments often serve to enrich executives rather than provide reasonable compensation during unemployment, and often do not enhance the long-term value of a company.  Tough new Treasury regulations prohibit these payments to the senior executive officers and five most highly compensated employees at all companies that have received taxpayer assistance.  The Special Master's rulings go further, however, and prohibit companies from increasing the amount of any "golden parachute" payable to any of the top 20 most highly compensated executives during 2009.

·        Freezing supplemental executive retirement plans: Supplemental executive retirement benefits can provide substantial cash guarantees to departing executives, regardless of performance.  And, as the Secretary noted on June 10, these complex benefits can make it difficult for shareholders--and, in the case of exceptional assistance companies, taxpayers--to ascertain the full amount of pay an executive will receive upon retirement.  The Special Master's rulings conclude that that executives should provide for their retirements with wealth based on performance while they are employed, rather than being guaranteed substantial retirement benefits beyond those provided to everyday workers.  As a result, the Special Master's decisions prohibit additional accruals under supplemental executive pension programs and company credits to other non-qualified deferred compensation plans following the release of today's rulings.

###

LINKS

• Executive Compensation Determinations for Top TARP Recipients

October 22, 2009
TG-326

Treasury Designates Mexican Nationals,
Company as Specially Designated Narcotics Traffickers

WASHINGTON – The U.S. Department of the Treasury's Office of Foreign Assets Control (OFAC) today designated Mexican national Edgardo Leyva Escandon, five members of his financial network, and one Mexico-based company as Specially Designated Narcotics Traffickers for their ties to the Arellano Felix Organization (Tijuana Cartel), Francisco Javier Arellano Felix, or Tijuana Cartel member, Edgardo Leyva Escandon.   Pursuant to the Foreign Narcotics Kingpin Designation Act (Kingpin Act), today's designation freezes any assets the designees may have under U.S. jurisdiction and prohibits U.S. persons from conducting financial or commercial transactions with the designees.  

"We are taking this action to disrupt Edgardo Leyva Escandon's ability to access weapons and financial conduits on behalf of the Arellano Felix Organization," said OFAC Director Adam J. Szubin. "We will do everything in our power to support the determined counter-narcotics efforts of the Government of Mexico."

The Arellano Felix Organization was named a Tier I Kingpin by the President in June 2004. The principal of this Arellano Felix Organization cell is Edgardo Leyva Escandon, the organization's primary ammunition and firearms supplier, an assassin and a personal assistant to Francisco Javier Arellano Felix, also designated a Tier I Kingpin in June 2004.  According to a Southern District of California complaint, Leyva Escandon purchased cases of ammunition from multiple San Diego-based firearms merchants, acquiring thousands of rounds at a time.  During a July 22, 2006 search of Leyva Escandon's residence, the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) seized more than 450 rounds of assorted ammunition and conversion kits for the production of fully automatic Uzi machine guns.

In addition to ammunition trafficking, Leyva Escandon helped procure the Dock Holiday yacht, which was utilized by Francisco Javier Arellano Felix.  On August 14, 2006, the Drug Enforcement Administration (DEA), with assistance from the U.S. Coast Guard, arrested Francisco Javier Arellano Felix while he was on-board the Dock Holiday in international waters.

In addition to the ATF, Edgardo Leyva Escandon is wanted by the DEA and is the subject of a $2 million reward under the auspices of the State Department's Narcotics Rewards Program.

Also designated today are the following Edgardo Leyva Escandon financial operators: Aristoteles Alejandro Abaroa Preciado, Victor Manuel Abaroa Diaz, Victor Hussein Abaroa Preciado, Elia Yolanda Preciado Gamez and Rosa Yolanda Nabila Abaroa Preciado.  The designation also includes a maritime equipment supplier Tienda Marina Abaroa, based in Baja California Sur, Mexico. 

This action is part of ongoing efforts under the Kingpin Act to apply financial measures against significant foreign narcotics traffickers worldwide.  Internationally, more than 500 businesses and individuals associated with 82 drug kingpins have been designated pursuant to the Kingpin Act since June 2000.  Penalties for violations of the Kingpin Act range from civil penalties of up to $1.075 million per violation to more severe criminal penalties.  Criminal penalties for corporate officers may include up to 30 years in prison and fines up to $5 million.  Criminal fines for corporations may reach $10 million.  Other individuals face up to 10 years in prison and fines pursuant to Title 18 of the United States Code for criminal violations of the Kingpin Act.

Today's designation would not have been possible without key support from DEA's San Diego Field Division, Tijuana Resident Office and Mazatlan Resident Office; the ATF's San Diego Field Office; and the U.S. Attorney's Office for the Southern District of California.

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REPORTS

• Tjuana Cartel

October 19, 2009
TG-323

Administration Announces Initiative for State and Local Housing Finance Agencies

Programs Designed to Expand Resources for Working Families to Access Affordable Rental Housing and Home Ownership over Long Term at Little or No Expected Cost to the Taxpayer

To view the fact sheet, visit link.

WASHINGTON – As part of its comprehensive plan to stabilize the U.S. housing market, the Obama Administration today announced a new initiative for state and local housing finance agencies (HFAs) that will help support low mortgage rates and expand resources for low and middle income borrowers to purchase or rent homes that are affordable over the long term.  Following up on the intent to support HFAs first outlined in February under the Homeowner Affordability and Stability Plan, the Administration's initiative has two parts: a new bond purchase program to support new lending by HFAs and a temporary credit and liquidity program to improve the access of HFAs to liquidity for outstanding HFA bonds.

The HFA Initiative using authority provided to Treasury by the Housing and Economic Recovery Act of 2008 (HERA) will provide hundreds of thousands of affordable mortgages for working families and enable the development and rehabilitation of tens of thousands of affordable rental properties.  It will do this at little or no cost to the taxpayer because it is paid for by the HFAs themselves and, as a temporary program, it incentivizes HFAs to transition back to market sources of capital as quickly as possible.

"This initiative is critical to helping working families maintain access to affordable rental housing and homeownership in tough economic times," said Treasury Secretary Tim Geithner. "Through the years, many low and moderate income Americans have been well served by state and local HFAs, but the housing downturn has hit these organizations too. Through this initiative, the Administration aims to help HFAs jumpstart new lending to borrowers who might not otherwise be served and to better support the financing costs of their current programs – key components in stabilizing the housing market overall."

"Housing Finance Agencies are critical partners to helping American families through this tough economic time," Department of Housing and Urban Development (HUD) Secretary Shaun Donovan said. "Today's announcement makes clear this Administration's commitment to providing responsible homeownership opportunities, affordable rental homes and getting our housing market back on track."

"FHFA supports this initiative and the important role Fannie Mae and Freddie Mac will play in implementing it," said Federal Housing Finance Agency (FHFA) Acting Director Edward J. DeMarco. "The HFA program has been structured to be on commercially reasonable terms for the Enterprises, to be carried out by the Enterprises in a safe and sound manner, and to support market liquidity, stability, and affordable housing. I wish to thank FHFA, HUD, Enterprise and Treasury staff for their hard work and leadership in developing this program."

The Department of the Treasury and HUD, together with the FHFA, Fannie Mae, and Freddie Mac, have developed this initiative to maintain the viability of HFA lending programs and infrastructure.  The key parts of the new initiative are:

·         New Issue Bond Program (NIBP).  The NIBP will provide temporary financing for HFAs to issue new mortgage revenue bonds. Using authority under the Housing and Economic Recovery Act of 2008 (HERA), Treasury will purchase securities of Fannie Mae and Freddie Mac backed by these new mortgage revenue bonds. The program can support several hundred thousand new mortgages to first-time homebuyers this coming year, as well as refinancing opportunities to put at-risk but responsible and performing borrowers into more sustainable mortgages. The new bond issuance will also support development of tens of thousands of new rental housing units for working families. 

• Temporary Credit and Liquidity Program (TCLP).  Fannie Mae and Freddie Mac will provide replacement credit and liquidity facilities available to HFAs that will help reduce the costs of maintaining existing financing for the HFAs. The agreements will serve to help relieve financial strains experienced by HFAs and enable them to continue their important work.  Treasury will backstop the GSE replacement credit and liquidity facilities for the HFAs by purchasing an interest in them using HERA authority.

HFAs will pay a fee to have access to both programs under the HFA Initiative. These fees have been designed to cover expected costs to the Treasury Department and the taxpayer. The fee for the TCLP will also increase over time to encourage HFAs to find private alternatives as quickly as possible. The HFA Initiative has also been designed to include other features that minimize risk to the taxpayer, such as requiring HFAs that issue new bonds under this program to also prove their ability to issue bonds to private investors.

The initiative is designed to be temporary in nature and will be available for only a short window to help bridge the transition period as the HFAs resume their activities after experiencing a number of challenges in the course of the housing downturn. After today, each HFA that desires to participate will be asked to develop a program participation request in consultation with Treasury, Fannie Mae, and Freddie Mac, indicating its desired level of participation in either the new bond or liquidity program. These requests for new issuance should generally not exceed what the HFA would have received in allocation from Congress for a similar period through 2010 and will generally follow the allocation formula established for 2008 by HERA. If program demand is smaller than these guidelines would allow, the total program size will be capped at a lower amount. This bottom-up review is being used to prudently shepherd taxpayer resources, and the program will not be sized any larger than needed to meet specific demand.

Pricing under the program will reflect both the cost of any financing required by Treasury as well as a fee designed to cover any risk posed by the HFA. While there is risk that losses could exceed estimates, the fee schedule Treasury has adopted is designed to cover net losses under most stressed conditions and thus would minimize risk to the taxpayer.

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WHAT STATE AND LOCAL OFFICIALS ARE SAYING ABOUT THE INITIATIVE

"I am so pleased that the Treasury Department has responded to calls for assistance from Governors and Housing Finance Agencies across the country.  This initiative is critical to helping struggling Vermonters access affordable and sustainable housing.  It is also a welcome investment in the long-term viability of the Vermont Housing Finance Agency (VHFA).  My wife Dorothy and I had our first mortgage through VHFA, so we know first-hand what an invaluable resource it is for working Vermonters, especially in a recovering economy." – Republican Governor Jim Douglas of Vermont

"We are pleased that the federal government recognizes the critical role that HFAs play in the housing and economic recovery. HFAs have a proven track record of making prudent loans with sound underwriting standards. However, recent conditions in the capital markets have hindered the ability of HFAs to provide their customary loan products. This proposal allows HFAs to continue offering below-market rate financing to first-time homebuyers, and we are ready and well-positioned to immediately begin implementing these critical programs. In Virginia, this proposal allows VHDA to continue assisting first-time homebuyers, who we believe are the foundation for the housing and economic recovery." - Susan Dewey, Executive Director of the Virginia Housing Development Authority and National Council of State Housing Agencies (NCSHA) President

"This plan will help revive CalHFA lending programs and give California first time homebuyers a chance to take advantage of the highest affordability levels that have been seen in almost two decades." - Steve Spears, Acting Executive Director of California Housing Finance Agency

"This announcement is huge!  We truly appreciate the time the Administration committed to learning the HFA business over the last few months.  It is clear they understand the importance of our products to both the rental and homeownership markets. We are eager to access these liquidity and bond investment opportunities, as they will allow us to use Colorado's HERA bond cap to create a mortgage refinance program for borrowers who are having trouble with their current mortgages and also to finance rental developments serving low-income families, both of which will contribute to the Colorado's ongoing economic recovery." - Roy Alexander, Executive Director of the Colorado Housing and Finance Authority

"The Administration's Housing Bond purchase plan will allow us to serve thousands of additional families in Florida by offering much lower interest rates on mortgage loans. Combined with our state-funded down payment assistance, qualified first time homebuyers will be able to take advantage of historically low sales prices on homes in Florida. The addition of these new, qualified homebuyers will help reduce the huge inventory of homes that are on the market due to the foreclosure crisis and help to stabilize declining home values throughout the state. The current lack of liquidity in Florida alone jeopardizes the financial integrity of that state's housing Guarantee Fund, putting at risk 94 multifamily rental developments with 24,000 affordable units that have $740M of bonds outstanding.  Over the last 19 months, the lack of liquidity has cost the FHFC Guarantee Fund $16M in increased bond interest expense.  The Administration's plan to provide liquidity will provide significant help by offering a lower cost alternative." - Steve Auger, Florida Housing Finance Corporation

"The National Association of Local Housing Finance Agency (NALHFA) leaders and staff have been working with officials at the Treasury, Federal Housing Finance Agency, Fannie Mae, Freddie Mac and the Department of Housing and Urban Development for many months on the details of the housing bond purchase program and liquidity facility, providing expertise and draft documents. We are pleased that the program being announced today reflects NALHFA's fundamental principle that it accommodate the unique needs of local housing finance agencies (HFAs) across the country, such as delayed delivery of, and a premium bond structure for, single-family bonds. By Treasury's purchase of multifamily bonds local HFAs can respond to the critical need for affordable housing for the nation's renters, while the liquidity facility will provide needed credit support for existing variable rate bonds. Local HFAs have a strong track record in responsibly administering bond-funded ownership and rental housing programs that respond to local needs and are safe investments." - Patricia Braynon, Executive Director of Miami-Dade County, FL Housing Finance Authority

"Our HFA's inability to access the tax-exempt and liquidity markets during this last year for home financing capital has undercut a traditional segment of Idaho's home buying market.  In a time of significant market stress, the Treasury program will assist in bringing private investors back to this market.  This is not a problem we have created - our financial condition remains strong and our borrowers are making their mortgage payments.  The Treasury program is a much needed response to the dislocation of capital markets for first-time home buyers that our citizens have relied upon for years." - Gerald Hunter, President and Executive Director of Idaho Housing and Finance Association

"We commend the Administration and the Treasury Department.  Today's announcement recognizes the needs of low- and moderate-income first time homebuyers and the ability of housing finance agencies (HFAs) to meet those needs.  With Treasury's support, we'll be able to issue bonds and get back into the business of providing affordable, fixed rate mortgages to first time homebuyers who are qualified and ready.  Our families will now be able to take advantage of historically low interest rates and home prices to stabilize their own households and, ultimately, the national housing market.  Treasury's program will also allow us to raise money to finance multi-family housing for low-income families, a market desperately in need of a boost.  The program enhances our bond business, and we're thrilled to be able to continue to serve Montgomery County's low and middle income families." - Annie B. Alston, Executive Director of Housing Opportunities Commission of Montgomery County, MD

"We've reached that critical economic juncture where it's not enough just to have no bad news.  We need more affirmative good news.  The Administration has provided that today in this vote of confidence in the nation's HFAs, which provide a vital link to sustainable homeownership opportunity for people throughout the country." - Thomas R. Gleason, Executive Director of MassHousing

"We are highly impressed with the leadership shown by our federal partners on this very important initiative. This announcement paves the way for housing finance agencies around the country to help thousands of homebuyers unlock the door to their first home. This financing combined with other local resources will enable us to serve lower-income families who are presently shut-out of the homeownership market. We applaud the federal government's commitment to this much needed boost to the economy. It has been over two years since market conditions permitted local housing finance agencies (HFAs) to be able to access capital for the purpose of providing low-interest financing for homebuyers. It is our intention to hit the ground running and get resources on the streets for homebuyers to use in the very near future." - Mark Ulfers, Executive Director of Dakota County, MN Community Development Agency

"Housing Bond purchase and liquidity support means that we will be able to provide the much needed and highly demanded first-time homebuyer mortgage at a reasonable rate to our borrowers.  In addition, this liquidity support gives us the ability to provide rate locks for our multi-family development projects, that, to date have been difficult, if not impossible to provide.  This translates directly in the development of more housing for renters as well as providing the opportunity for NJ residents to reach the dream of homeownership, with an affordable, fixed rate, predictable mortgage!" - Marge Della Vecchia, Executive Director of New Jersey Housing and Mortgage Finance Agency

"In New York City, the New York City Housing Development Corporation ("HDC") is focused upon developing and preserving affordable multi-family housing.  To succeed in this effort, we need robust participation from the financial services industry.  During a time of economic volatility, a constrained lending environment has made our task even more challenging. This new initiative helps address some of the serious obstacles we've encountered in our efforts to finance affordable housing developments.  As a result, we're deeply appreciative of the efforts of the Department of Treasury, the Federal Housing Finance Agency, Fannie Mae and Freddie Mac as well as the Department of Housing and Urban Development, to structure a program that supports the ability of housing finance agencies (HFAs), state-wide and local, to address the substantial need for affordable single and multi-family mortgage financing.  We look forward to working with our federal and state partners across the country on this program that is good for New York City and great for the nation." - Marc Jahr, President of New York City Housing Development Corporation

"With the market upheaval, we've been unable to sell new mortgage bonds for a year. Despite all the ingenuity we can muster, we're now helping only about a quarter as many first-time buyers as normal. Treasury's help with liquidity support at this juncture will make a huge difference in our ability to continue to deliver safe, predictable, low cost mortgages to first-time buyers." - Bob Kucab, Executive Director of the North Carolina Housing Finance Agency

"The Administration's Plan will restore the economic advantage of tax-exempt financing, which will be passed on to our first-time homebuyers.  We will have the ability to help more borrowers and impact the lives of thousands of Ohio families by offering a product that provides flexibility, fits the economic circumstances of our customers, and promotes sustainable homeownership." - Doug Garver, Executive Director of Ohio Housing Finance Agency

"We are truly excited about the Treasury plan and partnering with the GSEs to carry it out.  This partnership will allow HFAs to provide affordable housing to many more people who need it, while supporting economic recovery.  In Pennsylvania, we expect this initiative to allow PHFA to provide the American Dream to approximately 12,000 to 15,000 Pennsylvanians who otherwise could not access the market." - Brian Hudson, Executive Director of the Pennsylvania Housing Finance Agency

"HFAs offer more than just extra financial assistance to homebuyers, they bring a commitment that the new homeowner will be able to live in their home for the life of the loan. Market conditions have hindered HFA ability to achieve this mission. The Administration's program will open this assistance and determination to tens of thousands of Rhode Island families." -  Richard Godfrey, Executive Director of Rhode Island Housing

"In Tennessee, we still have a lot of potential first-time buyers sitting on the fence.  If we can get those buyers into the market, and this plan will help us do that, we could jump start our entire housing market.  Even with conventional rates as low as they have been, it's still not enough for many working families to achieve sustainable homeownership.  This will go a long way towards changing that." - Ted Fellman, Executive Director of Tennessee Housing Development Agency

"While we still need to see many details, the Treasury Department's plan has the potential to get Fannie Mae, Freddie Mac, and the Federal Home Loan Banks back in the game and to help state and local housing finance agencies do what we do best, which is make the dream of homeownership happen for millions of Americans." - Michael Gerber, Executive Director of Texas Department of Housing & Community Affairs

"We are excited by the Treasury Department announcement. The bond purchase program and the liquidity facility are both needed to enable local and state housing finance agencies (HFAs) to continue to provide sustainable homeownership opportunities for American families as well as continuing our role in the financing and development of quality multi-family housing. This program reflects the efforts of NALHFA and others over many months and we are pleased this program addresses the unique needs of local HFAs presented during our discussions." - Jim Shaw, Executive Director of Capital Area Housing Finance Corporation, Austin, TX

"The Administration's plan to help our agency sell housing bonds will allow our Commission to serve twice as many first-time home buyers next year. This will add another $100 million to the state's economy and support a significant number of new jobs to help our recovery. It will be a great boost to our programs." - Kim Herman, Executive Director of Washington State Housing Finance Commission

"We are encouraged by the news of a Treasury Announcement. In Wisconsin, WHEDA's contribution to the housing market has been significant. Prior to last year when we suspended lending, WHEDA was lending as much as $10 million a week to first time homebuyers - homebuyers who were well-prepared, well-educated and who were getting a low interest, fixed rate. In working with WHEDA, many homeowners had access to thousands of dollars of down payment grants and loans. Finally, mortgages from Housing Finance Agencies perform very well. We're proud at WHEDA of a foreclosure rate that's less than one percent." - Antonio Riley, Executive Director of Wisconsin Housing and Economic Development Authority

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REPORTS

• Fact Sheet

Treasury Releases Semi-Annual Report to Congress
on International Economic and Exchange Rate Policies

WASHINGTON –The U.S. Department of the Treasury today released the Semi-Annual Report to Congress on International Economic and Exchange Rate Policies, as required under Sections 3004 and 3005 of the Omnibus Trade and Competitiveness Act of 1988.  The report covers the period from January 2009 through June 2009, but where available and appropriate, information through early October 2009 is included.  The report, along with past reports, can be found at http://www.treasury.gov/offices/international-affairs/economic-exchange-rates/.

The report describes U.S. economic developments as well as international economic, financial, and exchange rate developments during the first half of 2009.  In particular, it focuses on the policy actions that major U.S. trading partners – representing more than 80 percent of U.S. international trade – have taken to lay the foundation for economic recovery.

During the period under consideration, virtually every country and economic area described in the report put in place additional monetary and fiscal measures to bolster demand.  These forceful actions worked, and the report shows that financial conditions in the United States and around the world have improved dramatically and signs of an economic recovery have begun to emerge. Global current account imbalances have fallen sharply during the crisis from a peak of 5.9 percent of world GDP to an IMF-estimated 3.6 percent in 2009. The U.S. current account deficit has fallen from a peak of 6.5 percent of GDP in the fourth quarter of 2005 to 2.9 percent of GDP in the second quarter of 2009. 

As noted in the report, Treasury has concluded that no major trading partner of the United States met the standards identified in Section 3004 of the Act during the most recent reporting period. 

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Treasury Designates al-Qa’ida Member

WASHINGTON, DC--The U.S. Department of the Treasury today designated German national Bekkay Harrach, an al-Qa'ida member believed to be currently located in the Afghanistan-Pakistan border area, for acting for or on behalf of al-Qa'ida.  Today's action, pursuant to Executive Order 13224, freezes any assets Bekkay Harrach has under U.S. jurisdiction, and U.S. persons are prohibited from engaging in any transactions with Harrach.

"Harrach's activities are a stark reminder that al-Qa'ida continues to attempt to terrorize the German people and others involved in the fight against terrorism," said OFAC Director Adam J. Szubin.  "The international community must redouble its efforts to use all tools – including the United Nations' powerful sanctions – to thwart al-Qa'ida's objectives."

According to investigations by the German Federal Public Prosecutor, there is reason to believe that Bekkay Harrach has been a member of al-Qa'ida since March 2007, during which time he received military training at an al-Qa'ida camp.  In addition, he has made threats regarding terrorist activities and suicide attacks that were distributed in Germany via the al-Qa'ida media office.

Bekkay Harrach was added to the UN 1267 Sanctions Committee's Consolidated List of individuals and entities associated with al-Qa'ida, Usama bin Laden, and the Taliban in May 2009.  Inclusion on the 1267 Committee's list triggers international obligations on all member countries, requiring them to freeze the funds and other assets of listed individuals and entities and to apply other sanctions, including a travel ban and an arms embargo. 

Additional information on Bekkay Harrach is provided in the public statement of the case supporting his inclusion on the 1267 Committee's Consolidated list and is available at http://www.un.org/News/Press/docs/2009/sc9667.doc.htm.

Identifying Information:

HARRACH, Bekkay
AKA:   
Al Hafidh Abu Talha der Deutsche (the German)
Nationality:   
German
DOB:   
September 4, 1977
POB:   
Berkane, Morocco
German Passport:   
5208116575
Issued: Bonn  
Expiring: September 7, 2013
German Federal Identity Card: 
5209243072  
Issued: Bonn  
Expiring: September 7, 2013
Driver's License:  
J17001W6Z12  
Issued: Bonn
Other Information:  
Believed to be in the Afghanistan/Pakistan border area

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October 14, 2009
TG-318

Treasury Designates Three Leaders of the Kongra-Gel as Significant Foreign Narcotics Traffickers

"We will continue to aggressively track and expose the Kongra-Gel's financial network to disrupt its trafficking activities," said OFAC Director Adam J. Szubin.

Active in southeastern Turkey and northwestern Iraq, and supported by some of Europe's Kurdish community, the Kongra-Gel was designated as a significant foreign narcotics trafficker for its more than two decades-long participation in drug trafficking.  The drug trade is one of the Kongra-Gel's most lucrative criminal activities.  Nearly 300 individuals connected to the Kongra-Gel were arrested on drug trafficking charges from the mid-1980s through the early 1990s, more than half of them in Germany.  Such activity continues to this day; in 2007 and 2008, Turkish law enforcement seized a number of drug shipments and drug labs that belonged to the Kongra-Gel.  The Kongra-Gel has also relied extensively on taxing drug shipments that move through its territory.  Kongra-Gel has units on the borders of areas it controls to collect money from drug traffickers and a number of Turkish drug smugglers are reported to have given money to the organization.

Today's designation, supported by the Drug Enforcement Administration, is part of ongoing efforts under the Kingpin Act to apply financial measures against significant foreign narcotics traffickers worldwide.  Internationally, more than 500 businesses and individuals associated with 82 drug kingpins have been designated pursuant to the Kingpin Act since June 2000.

Penalties for violations of the Kingpin Act range from civil penalties of up to $1.075 million per violation to more severe criminal penalties.  Criminal penalties for corporate officers may include up to 30 years in prison and fines up to $5 million.  Criminal fines for corporations may reach $10 million.  Other individuals face up to 10 years in prison and fines pursuant to Title 18 of the United States Code for criminal violations of the Kingpin Act.

REPORTS

• Kongra-Gel leadership