Treasure Islands - Nicholas Shaxson [74]
“That sonofabitch yelled at me down the phone,” the investigator continued. “This is such an abuse of part of our legal culture. They fought [the U.S. government] every step of the way.”
The Clinton administration, to be fair, issued proposed regulations near the end of its second term that would provide OECD countries with information about their citizens’ U.S. bank deposits. U.S. banks, especially those with major deposits in Florida and Texas, lobbied hard against them. George W. Bush’s administration dropped them.26
The United States sells financial secrecy not just at the federal level but at the state level too. Delaware is the biggest state provider of offshore corporate secrecy, but Nevada and Wyoming are the most opaque: They allow bearer shares, a vehicle of choice for mobsters and drugs smugglers, and they are particularly lax on allowing company directors and other officers to be named, hiding the identities of the real owners. Nevada does not share tax or incorporation information with the federal government and does not require a corporation to report where it does business. The IRS has no way of knowing whether a Nevada corporation has filed a federal tax return. Arkansas, Oklahoma, and Oregon are also routinely used for fraud by eastern Europeans and Russians, and, as noted, Texas and Florida are havens for illicit Latin American wealth.
In the 1990s, the U.S. government gave millions in aid to help the former Soviet Union countries improve the security at their nuclear power plants. Much of it went missing. When the U.S. Department of Justice went looking for the money, investigators finally tracked it to anonymous shell companies in Pennsylvania and Delaware. Most cases involving financial market manipulations that the FBI has studied have involved U.S. shell companies from these states. The notorious “merchant of death” Viktor Bout, inspiration for the character played by Nicholas Cage in the Hollywood film Lord of War, alleged arms runner to the Taliban and other murderous organizations around the globe, operated through businesses in Texas, Delaware, and Florida.27
“US shell companies are attractive vehicles for those seeking to launder money, evade taxes, finance terrorism, or conduct other illicit activity anonymously,” said Republican Senator Norm Coleman, then chairman of the U.S. Senate Permanent Subcommittee on Investigations. “Competition among States to attract company filing revenue and franchise taxes has, in some instances, resulted in a race to the bottom.”28
A New York Times article from 1986 describes the antics of one Delaware lieutenant-general who flew to Taiwan, Hong Kong, China, Indonesia, Singapore, and the Philippines, clutching a pamphlet boasting that Delaware could “Protect You from Politics.”29 The official was, the article noted, “looking forward to a rich harvest of Hong Kong flight capital” after the British pullout in 1997. “You don’t have to tell us the details of your business; you don’t have to list who’s on your board or who’s holding office; and you don’t have to use your name and address—just use your Delaware agent’s.” For an extra $50, you could get this in 24 hours.
Today, an “aged shelf company” will help you pretend you have been trading for years, when in fact you’ve just started up. “It’s an effective means to create a perception of business stability,” one registered agent advertises. “Most people won’t ask…. There’s nothing wrong with immediate gratification, as long as it’s affordable!” Behind the secrecy, nobody can discover the deception. All this, and more, is yours for $299.
A limited liability corporation (LLC) might offer certified copies of the passports of that company’s directors. That looks reassuring, but even with genuine passport copies you are no closer to knowing who really owns the company or its assets: These directors are probably professional nominees who work for hundreds of such corporations. Typically