The 2 US states that are home to thousands of foreign shell firms
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Mossack Fonseca, the focus of the Panama Papers leak, is far from the only company mass-producing shell companies in secrecy-friendly states like Wyoming, Nevada and Delaware.
A USA TODAY examination of the limited records that are available — some states are making corporate records increasingly invisible — shows that Mossack Fonseca registered less than 2% of the Nevada “companies” that are linked to addresses outside the United States. A similar review of Wyoming’s more secretive records shows that just 24 of more than 2,000 foreign-based businesses registered since 1990 were created by Mossack Fonseca’s Wyoming branch.
The states have become willing partners in the lucrative front-company business that generates millions of dollars in revenue for the government.
Indeed, the review of corporate-registration data shows there are more than 50 firms in Nevada that have registered as many or more different companies than Mossack Fonseca, and many with bundles of businesses tracing back to shared addresses in places from Panama to islands off the European coast.
The motive for U.S. states appears to be simple: mountains of cash.
In Delaware, which does not levy sales or personal property taxes, revenue from the state’s Division of Corporations totaled $928 million in 2014 — nearly 30% of the state’s overall tax revenue. Almost 90% came from the taxes charged for registering new companies.
In Nevada, records show more than 20,000 companies with foreign addresses have registered in the state since 1975. More than half were registered in the last decade as state lawmakers expanded corporate secrecy protections in a transparent bid to draw revenue from new registrations.
The Nevada secretary of State’s Office earned $138 million from commercial recordings, which includes new business filings, in 2014. A decade earlier in 2004, that figure was just above $45 million. Nevada’s overall state revenue in 2014 was $17 billion.
And, in Wyoming, the state’s secretary of State took in $31 million in revenue in 2013-14 fiscal year from its business division, which includes corporation filing fees. Overall revenue in the state’s annual budget totals about $7 billion.
JUST ONE OF MANY
What set apart Mossack Fonseca is the blinding spotlight of a document leak that generated headlines around the world. The massive leak of documents highlighted how the Panamanian law firm had helped the world’s rich and powerful, including government officials, celebrities and people at the center of international corruption cases, hide their financial assets and dealings.
While many foreign-linked business entities are formed for legitimate purposes, USA TODAY’s review of Wyoming and Nevada business records suggests Mossack Fonseca’s U.S.-backed affiliates represent a narrow snapshot within a much broader landscape of overseas shell companies operating from the two states.
“If you think that there’s one law firm that’s orchestrating this around the world that’s crazy,” said David Brunori, research professor of Public Policy and Public Administration at George Washington University.
Other registered agents in Nevada tied primarily to overseas addresses include Nevada Commercial Registered Agents LC, which is connected to more than 200 businesses formed in Nevada since 2000 — all but six of which trace back to the same post office box in Panama.
Nevada business records list the officer of the companies tied to that Panamanian post office box as David Batrick. USA TODAY found Batrick not in Panama, but at an office in Nevada. Answering the phone near Lake Tahoe, Batrick said his operation should not be confused with shell company operations like Mossack Fonseca’s.
“Nevada Commercial Registered Agents has nothing to do with anything like that type of activity,” he said. “We are not aware of any clients that do anything like that.”
Nevertheless, a website tied to Batrick’s firm, Nevada123.com, advertises its services using the secrecy-friendly business laws of Nevada, Panama, and St. Kitts and Nevis, among other jurisdictions. “We believe in Liberty and the Right to conduct your personal and business affairs privately and confidentially behind the ‘veil’ of a Corporation or Limited Liability Company,” the website states.
Batrick declined to disclose his country of residence or citizenship, but said it was not Panama or the United States.
“Currently you’ve called Nevada. I happen to be here,” he said. “But I do not spend a lot of time in Nevada, nor am I a Nevada or a U.S. resident.”
Nevada business records link Nevada Commercial Registered Agents LC to Corporate Global Management LLC, which in turn shares the same post office box on the 36-square-mile Caribbean island of Nevis, with Morning Star Holdings LLC. In a pamphlet on its website, Morning Star Holdings advertises that for businesses incorporated through Nevis, “ownership information is confidential.”
Ernie Dover, managing director of Morning Star Holdings, declined to discuss the relationship between Morning Star and Corporate Global Management LLC or answer any other questions when reached by USA TODAY at his Nevis telephone number.
MONEY LAUNDERING OFFICERS
Other firms which have specialized in registering foreign companies in Nevada include Okiebisu International Inc., based in Nishinomiya, Japan. Okiebisu has registered 52 business entities in the state since 2013.
On its website, Okiebisu International advertises its services helping facilitate corporation registrations in select states in the U.S., noting that American corporations are not subject to Japan’s Companies Act, which would require companies to disclose their owners.
Though the patterns are similar, it is impossible to discern exactly what purpose the companies serve. While many corporate entities tied to Mossack Fonseca have drawn attention for alleged connections to ethically and legally questionable activities, some shell companies are set up for legitimate business or personal privacy reasons.
Even among registered agents in Nevada which work primarily with domestic corporations and have established reputations, there has been evidence that clients may have misused the shelter provided by the state’s corporate secrecy protections.
Michael Doyle and Belinda Lanyon, residents of the self-governing English Channel island of Sark who were convicted of money laundering, used Nevada to open at least a dozen corporations between 1998 and 2007. The couple were found guilty of carrying out regulated activities without a license, according to the Guernsey Police financial crimes unit records, as well as perversion of justice in connection with the alleged dumping of documents that could have been evidence.
Doyle and Lanyon registered companies with names ranging from “Trans Europe Bancorp LLC” to “The Company of Experimental Techniques of Woodworking LLC,” records show. All of the couple’s corporations have had their licenses revoked within the last three years, according to state records.
Records show Doyle and Lanyon registered their companies through State Agent and Transfer Service Inc., a registered agent service based at the address of a former wedding chapel in Carson City, one block from Nevada’s Capitol grounds.
State Agent and Transfer Syndicate Inc., is the 11th most-prolific registered agent in Nevada, the analysis shows. It has served as the registered agent for more than 13,000 companies.
Jed Block, president of State Agent and Transfer Syndicate Inc. and a former candidate for the Nevada state assembly, said registered agents in the state are not required or expected to research the backgrounds of individuals seeking to register corporations.
“Our main focus is filing and retrieval,” he said. “We don’t police, nor do we give legal advice…We’re solely a document filing and retrieval service.”
Block said the companies connected to Doyle and Lanyon were registered by a third party, and he had no contact with them.
“That came to us from another company,” Block said of the Doyle and Lanyon business. “So basically what we did for that company is we probably filed articles of organization with the secretary of state, retrieved them, and then sent them off to our contact.”
But after describing the arms-length transaction with the Sark couple, Block added that If Nevada has a reputation for offering corporations a place to operate in secret, it is “very much undeserved.”
RACE TO THE BOTTOM
While federal agencies have long chided small island nations for helping hide the assets of American companies and individuals, advocacy organizations have long scolded the United States for doing the same. The Financial Secrecy Index, published by the London-based Tax Justice Network, ranks the United States third behind Switzerland and Hong Kong in its ranking of global tax havens. Panama ranks 13th.
The U.S. differs from other nations in that each state has its own laws governing corporations, the Tax Justice Network said in a 2015 report. As a result, “several states have engaged in a race to the bottom to outbid one other in offering ever more egregious secrecy facilities.”
Those states include Nevada and Wyoming, where Mossack Fonseca acted as a “registered agent,” which is a person or entity authorized to receive legal papers on behalf of a corporation, whose true owners may be anonymous.
Nevada and Wyoming, along with Delaware, are the United States’ most well-established havens of corporate secrecy, drawing in millions of dollars in revenue every year by registering companies behind a thick veil of corporate secrecy. A Delaware statute exempting bulk business data from the state’s freedom of information law makes any comprehensive analysis virtually impossible in that state.
Wyoming Secretary of State Ed Murray announced following the Panama Papers release that an investigation had been launched and had found that M.F. Corporate Services LLC “failed to maintain the required statutory information for performing the duties of a registered agent under Wyoming law,” but has provided the missing information. Agency spokesman Will Dinneen said the investigation is ongoing and would not disclose what information was missing.
Nevada Gov. Brian Sandoval also said the state would begin an investigation in related to the Panama Papers. Nevada secretary of State’s office spokeswoman Kaitlin Barker declined to answer questions about the exact nature or scope of the investigation there.
FEDS TAKING INTEREST
Federal officials are also exploring reforms in the wake of the Panama Papers disclosures.
On May 5, Treasury Secretary Jack Lew wrote to House Speaker Paul Ryan, urging Congressional measures that would require businesses registered in the United States to disclose the person actually owns them — referred to as the “beneficial owners.”
“Criminals are currently able to misuse companies to hide this beneficial owner, significantly weakening our ability to fight financial crime,” Lew wrote. “This problem can only be resolved with congressional action.”
Last month, U.S. Sen. Ron Wyden, D-Ore., requested an array of documents from the Nevada and Wyoming secretaries of state as part of a Senate Finance Committee investigation into the registration and state oversight of Mossack Fonseca-linked companies in those states and the implications.
“We need to better understand what these companies are up to,” Wyden said. “As shell companies can be abused for tax evasion, government fraud and terrorist financing, Congress needs to work with the states and the administration to investigate the issue and take any necessary action.”
At the state level, reforms face resistance from officials because states have become accustomed to increasing the increasing revenue streams from registration fees When Nevada lawmakers began to debate changes to further loosen the state’s corporation registration laws in 2001, many lawmakers were outraged. The legislation implemented protections for directors and officers of companies against legal liability.
“Make no mistake these subtle changes are significant,” then-state Sen. Bob Coffin told his colleagues in 2001, according to legislative transcripts. “Scoundrels can move here.” Another senator said the changes were equivalent to hanging up a sign saying “Sleaze balls and rip-off artists welcome here.”
While there have been recent efforts to close corporate secrecy loopholes former in Nevada, few actions have been done to lessen the state’s reputation as a haven for corporate secrecy.
In 2013 testimony before the state Senate, Nevada Secretary of State Ross Miller begged lawmakers to consider changes that would give officials more oversight over who can register corporations in the state.
“My Labrador Jack, if he were a natural person, could be a commercial registered agent if he had $75,” Miller said, “because he has a Nevada address and is capable of fetching the paper.”
The 2 US states that are home to thousands of foreign shell firms