Financial Transparency Coalition

“The Great Rip Off” shows range of crimes hidden by companies set up in U.S. 

Owners of anonymous companies registered in U.S. states are ripping off innocent people and businesses across America, says a new report by Global Witness. Drawing on 22 cases involving anonymous companies from 27 states, The Great Rip Off shows how fraudsters, mobsters, money-launderers, tax-evaders and corrupt politicians are able to use anonymously-owned American companies to cover their tracks and evade the authorities.

“We looked at all sorts of crimes across the U.S. and found two things in common. They were all carried out by anonymous owners of American companies, and the authorities are spending lots of time and money trying to stop them. These untraceable companies are the getaway cars for criminals – and it’s time to take away the keys,” said Charmian Gooch, Global Witness Director.

The report shows how weak U.S. laws enabled criminals to set up American companies with anonymous owners to rip us all off.

Stealing from the young, the old and the faithful

• An Ohio school district employee used a web of fake companies to abuse his position and bill for millions of dollars’ worth of services that school kids never received;
• Texas lawyers used sham companies from Delaware and Nevada to trick elderly people into investing their life savings in worthless enterprises;
• Con artists, nicknamed the “Three Hebrew Boys” tricked churchgoers and military personnel into investing millions in a South Carolina company that turned out to be a Ponzi scheme.

Enabling drug trafficking, modern slavery and sanctions-busting

• The biggest of Mexico’s drug cartels used an anonymous Oklahoma company in a scheme to launder millions of dollars of drug money into the United States;
• A Moldovan gang used anonymous companies from Kansas, Missouri and Ohio to trick victims from overseas in a $6 million dollar human trafficking scheme;
• The Iranian government used an anonymous New York company to conceal its ownership of a 5^th Avenue skyscraper, in direct breach of sanctions.

Bilking investors, taxpayers and voters 

• A Russian crime boss described by the FBI as the “most dangerous mobster in the world” allegedly set up a network of anonymous companies stretching from Eastern Pennsylvania to the United Kingdom to cheat the stock market and steal over $150 million from investors in the United States and overseas;
• Convicted fraudsters set up ghost companies in South Dakota to swindle aspiring American entrepreneurs out of their capital by offering high return investments in imaginary biofuel projects;
• A Louisiana Congressman used anonymous companies from Delaware and Louisiana to take almost half a million dollars in bribes.

This problem is harming the interests of ordinary Americans, and yet America is one of the easiest places in the world to set up an anonymously-owned company. In many states, you need less identification to set up a company than you do to get a library card.

“Companies exist for a good reason, to limit liability for investors and encourage entrepreneurs. But this sound principle is being abused by people who have no interest in legitimate business, but in ripping off ordinary people,” said Gooch.

To fix the problem, Global Witness is calling for public registries of the real, living, breathing human behind the company, so businesses know who they are dealing with and law enforcement can stop many crimes at the source. Gooch, and the campaign, were awarded this year’s TED Prize and she has just been named as one of Bloomberg Markets’ 50 Most Influential.

“This is an issue whose time has come. Change is already happening – the UK is taking concrete steps, and we expect to see movement in the EU soon. But the U.S. is lagging behind – which is bad news because this is where so many of the world’s anonymous companies are set up. The report we’ve released today shows how much damage this is doing to U.S. interests and security,” said Gooch.

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For interviews and sound clips please contact: Oliver Courtney (New York), +44 7912 517147, ocourtney@globalwitness.org, Stefanie Ostfeld (New York), +1 202 577 5858, sostfeld@globalwitness.org, Mark Hays (Washington DC) +1 508 414 1722, mhays@globalwitness.org

NOTES:

1. The World Bank found that the U.S. was the favorite destination for corrupt politicians from around the world to set up companies to move or hide dirty money, and that this is “especially concerning given the huge number of legal entities formed each year [in the U.S.] – around ten times more than in all 41 tax haven jurisdictions combined.” Puppet Masters, a report by the Stolen Asset Recovery Initiative (of the World Bank) and UNODC, https://star.worldbank.org/star/publication/puppet-masters.
2. Academics carried out a mystery shopping exercise on 3,000+ company service providers worldwide. They posed (on email) as someone that looked like a corruption or terrorist financing risk. The study showed how little time it took to find a U.S. corporate service provider willing to set up a company with anonymous owners for these inquiries. In fact, out of 60 countries sampled worldwide, only Kenya makes it easier than the U.S. to set up a company without disclosing who the owners are. Global Shell Games: Testing Money Launderers’ and Terrorist Financiers’ Access to Shell Companies, a study by Michael Findley, Daniel Nielson, & Jason Sharman, http://www.griffith.edu.au/__data/assets/pdf_file/0008/454625/Oct2012-Global-Shell-Games.Media-Summary.10Oct12.pdf.