A new push by the international law enforcement community on the U.S. government to require disclosure of shell corporation ownership has new meaning in light of revelations that average citizens have more of their private dealing revealed than multi-billion corporations.
Indeed, as Americans wonder how and why the government needs to know so much about who they call, the same government seems disinterested in how many billions of unpaid taxes filters through shell corporation while our government looks the other way.
A new group of anticorruption activists led by British Prime Minister David Cameron is urging the Obama administration to approve requirements for shell corporations in the U.S. and elsewhere to disclose their “beneficial owners.”
Some 19 former prosecutors and activists sent President Obama a letter recently urging disclosure of these corporations which the prosecutors say are ways for “corrupt politicians, tax evaders and organized criminals” to “hide and launder stolen money.”
It seems to be a simple request, but one that has gone unanswered since about 2000 when Sen. Carl Levin of Michigan first proposed the legislation for the U.S. Congress to require states to disclose “beneficial owners” of corporations set up in their state. The legislation has failed three times since 2000.
The new push comes with it the promise of raising the issue at the upcoming G8 Economic Summit. The Obama administration would do well to endorse this kind of sensible disclosure.
Shell corporations are a cancerous sore on the legitimate world of commerce. Levin’s office reported that the Manhattan District Attorney’s Office recently announced cases where money flowing through New York banks were connected to the Iranian military.
In another case an Immigration and Customs Enforcement investigation was unable to proceed when it was tracking some 800 dummy corporations involved in hundreds of millions of dollars in suspect money transfers because the states where the corporations were registered did not require owners to be identified.
There are businesses in the business of setting up dummy corporations. Levin’s office pointed out advertisements where companies were selling the use of dummy corporations that had employer I.D. numbers and a “four year history.” These kind of businesses just invite fraud and abuse.
Other experts say the U.S. shell corporation law is allowing “bad guys” to use doing business in the U.S. as a show of “legitimacy”
Jack A Blum, chairman of the Tax Justice Network, said Delaware, Montana, Nevada and Wyoming at the states these shell target because they have the loosest corporation rules. Tens of thousands of the corporations have been set up, he said.
“We know the bad guys are selling the U.S. as a place to set up companies,” he told The New York Times.
There have been numerous bipartisan efforts for the last decade to incorporate some kind of requirement into state laws governing corporate registration. Levin sponsored these bills with people like former Sen. Norm Coleman of Minnesota and Sen. Charles Grassley of Iowa.
Reports were offered showing $14 billion to $18 billion of suspicious transactions going through U.S. shell corporations. The U.S. Department of Justice has fielded thousands of requests from our international partners for information on who owns corporations suspected in money laundering and other fraud. We cannot help them because we don’t know who owns thousands of these corporations set up in the U.S.
In 2008, Sen. Barack Obama co-sponsored Levin’s efforts. We think he should now embrace them again.
Setting up a corporation gives the owners limited liability. It’s a way the government gives rights to businesses and even helps reduce their risk by allowing for liability limits. That is a privilege. Those who would set up shell corporations to hide ownership abuse that privilege at the expense of others who must comply with the law.