It is easier to form a corporation in the United States than it is to get a library card or driver’s license. Current law allows people or existing corporations to create new companies without requiring any information about the human owners of the businesses. A powerful new report by Global Witness details the threats these anonymous companies pose.
“The Great Rip Off” provides 22 detailed case studies to highlight the threats to American interests posed by anonymous company ownership. These include: jeopardizing national security, exploiting taxpayers, conning the poor and disabled, destabilizing legitimate businesses, taking advantage of developing nations, and influencing political elections by routing campaign contributions through anonymous shell companies that hide the donor's identity.
The scams examined in the report range from instances of shell companies selling fake parts to the Pentagon, to funneling Mexican drug money into the United States, to defrauding Medicare of more than $100 million by creating medical clinics that only exist on paper. Almost as outrageous as the crimes is the fact that state governments have turned a blind eye to the issue in the interest of luring companies to their state.
The World Bank ranked the U.S. as “the favorite destination for corrupt politicians from around the world to set up companies to move or hide dirty money.”
Delaware has more companies that incorporated in the state than it has residents in part because it demands no information about the actual owners of new companies. The demand to incorporate in Delaware is so high that a quarter of the state’s total revenue came from taxes and fees on absentee corporate residents in 2011.
The rest of the world has taken notice. The World Bank ranked the U.S. as “the favorite destination for corrupt politicians from around the world to set up companies to move or hide dirty money.” One reason for this dubious distinction is the immense secrecy that surrounds shell corporations.
Jennifer Shaksky, former Senior Counsel to the Deputy Attorney General of the Department of Justice, hints at the scope of the problem in recalling a seminar she attended:
The audience—including investigators from nine federal law enforcement agencies and prosecutors from a variety of districts and offices—was attending a financial investigation seminar […] The instructor, who was lecturing on U.S. shell companies, asked the members of the audience to raise their hand if they had ever reached a dead end in one of their investigations because of a U.S. shell company. Nearly every person in the room raised his or her hand.
Congressional action requiring all American companies to release information about their ultimate owners is urgently needed. The White House could also take immediate action to require companies receiving contracts, grants, and loans from the federal government to disclose their real owners. This would provide information on contractor and grantee ownership while preventing fraud and corruption.
Only by making information about the true human owners of shell corporations public can our nation stop the crimes they have been committing against us.
To read or listen to the complete Global Witness report, click here.
For Further Reading:
Support Those Who Support Us: Let Your Dollar Be Your Vote for Responsible Corporate Taxpayers, The Fine Print, 9/15/2014
House Majority’s Last-Ditch Effort to Undermine Public Protections, Award Corporate Giveaways, The Fine Print, 9/15/2014
Election Transparency Threatened by Lack of Resources for Key Agency, The Fine Print, 8/22/2014
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