UPDATE 1-U.S. Treasury says bonds seized in Italy are fakes

Fri Jun 19, 2009 5:39pm EDT

(Updates with details on bonds, U.S. Secret Service comment)

By David Lawder

WASHINGTON, June 19 (Reuters) - A purported $134 billion in U.S. government bearer bond certificates seized by police near the Italian-Swiss border are fake, the U.S. Treasury said on Friday.

"Based on the photograph we've seen online, they are clearly fake. And not even good fakes," said Stephen Meyerhardt, a spokesman for the Treasury's Bureau of the Public Debt.

He added that there is only $105 million in Treasury bearer bond securities outstanding, so the $134 billion amount seized far exceeds the universe of outstanding securites.

The Treasury's determination confirmed the suspicions of Italy's Guardia di Finanza, or tax police, who seized the bond documents in early June from two Japanese nationals at the Chiasso rail station in northern Italy, close to the border with Switzerland.

The bonds comprised 249 "Federal Reserve" bonds of $500 million nominal value each and 10 "Bond Kennedy" with a $1 billion nominal value, the tax police said June 4 in a statement.

A senior tax police officer said Italian authorities also were checking whether the two travelers' Japanese documents are genuine.

In the last two years, Italian authorities have seized some $800 million of U.S. bonds in the Como area in northern Italy.

Meyerhardt said U.S. government investigators believe that the seized bond forgeries were made using commercial photo enhancement software to alter the image of a $100 bill to increase the amount into millions or billions and add what appear to be interest coupons.

Another U.S. official said the seized bonds were purported to be issued during the Kennedy administration in the early 1960s, but the certificates showed a picture of a space shuttle on it -- a spacecraft that first flew in 1981. Some of the bonds were purportedly issued in a $500 billion denomination that never existed.

The official, who spoke on background because he was not authorized to discuss specifics of the case, said that scam artists, rather than trying to exchange fake bearer bonds directly for cash, will sometimes try to use them as fraudulent collateral for loans.

The Treasury frequently uncovers scams involving bearer and other securities issued in the 1930s and 1940s. Images of some of these counterfeit bonds appear on a Treasury website aimed at combating fraud, here .

The U.S. Secret Service, which polices counterfeiting of U.S. currency, is assisting Italian authorities in tracing the source of the fake bonds, said Ed Donovan, a spokesman for the agency.

The forgery determination came a day after the Treasury warned U.S. banks against the potential for increased currency counterfeiting activity and large cash transactions by North Korea in an effort to evade U.N. sanctions aimed at cutting off financing for Pyongyang's nuclear weapons and missile programs. (Editing by Dan Grebler)

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