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Nonprofit begins $1m battle against secrecy with shot at US

Convicted criminals and arms traffickers are among the shady characters using US-based shell companies for dirty business.

The Great Rip Off

With lofty ambitions and $1 million to spend, Global Witness, a nonprofit group, has taken aim at its first target in its effort to stamp out corporate secrecy around the globe.  And that target is the United States.     

Last March, nonprofit organization Global Witness was awarded a $1 million TED prize to help in its campaign to end shadowy anonymous companies and promote corporate transparency. Now the Washington and London-based group is beginning to spend that money, and one of its first projects is a report that shows in great detail all the ways that the U.S. makes it easy for anyone – no questions asked, no real names required – to set up a corporation and begin to do business.

The Great Rip-Off: Anonymous Company Owners and the Threat to American Interests is piece of advocacy journalism that is entertaining and shocking at the same time. It is entertaining in that it chronicles the adventures of rogues, Ponzi schemers, rip-off artists, kleptocrats and out-and-out thieves. It is shocking in that these activities are facilitated by lax incorporation laws at a state level that allow shady characters to set up shop almost anywhere in America.  And no one is the wiser.  

Little new ground is broken in this report. Instead, its power comes from the sheer number of examples it has compiled and the outrageous nature of many of their crimes. Many of those cited in the report are currently in jail, and used shell corporations as part of the activities that got them on the wrong side of the law.

The report cites various studies showing that, from a sample of 60 countries, it is easier to set up an anonymous corporation in the U.S. than anywhere else, with the exception of Kenya, and that ten times more corporations are set up in the U.S. than 41 tax haven jurisdictions combined. 

“It is very easy to set up an anonymous company in America, regardless of what you want to use it for,’’ the report said. The reason is that the laws regarding business incorporation vary from state to state – some more lax and some more strict – and con artists and the like take advantage these gaps in regulation.

The report then, in colorful detail, outlined some of those using American shell companies: A New York shell corporation hid the fact that a Fifth Avenue skyscraper was owned by the government of Iran, in violation of anti-terrorism sanctions. An Armenian organized crime network used fake healthcare clinics to submit $100 million in fake Medicare claims and funneled the money through shell companies in various states. Ponzi-schemers, now in prison, who called themselves “Three Hebrew Boys” used shell companies in an $82 million scam that took money from church-going elderly and poor and used it to buy fancy cars, a private jet and stadium skybox seats. 

Nicodemo Scarfo and Salvatore Pelullo, convicted organized criminals, used shell corporations to cover up multi-million dollar crimes and launder the proceeds. Money was then used to buy cars, guns and a yacht named “Priceless.” Then there is Viktor Bout, a global arms trafficker featured in the Hollywood movie “Lord of War,” who is now sitting in prison on terrorism charges. He conducted his global arms trade using shell corporations in Delaware, Florida and Texas. Former Louisiana Congressman William J. Jefferson is now in prison. He is best known for having kept $90,000 in his freezer and used shell corporations in Delaware and Louisiana to hide his bribes. 

When Global Witness received the $1 million prize, it said it would use the money to help bring about an end to shell corporations and offshore havens. At that time, Charmain Gooch, chairman of Global Witness said the prize would be used “to make it impossible for criminals and corrupt dictators to hide behind anonymous shell corporations.”

This report, both entertaining and enlightening, is a first step in that direction. 

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