Shady business in Cheyenne

Great investigative reporting by Reuters produced a look at a "business-incorporation specialist" based in Cheyenne, Wyoming.

A Reuters investigation has found the house at 2710 Thomes Avenue serves as a little Cayman Island on the Great Plains. It is the headquarters for Wyoming Corporate Services, a business-incorporation specialist that establishes firms which can be used as "shell" companies, paper entities able to hide assets.

If desired, WCS can provide "shelf" companies with a long enough track record of blameless corporate activity to satisfy bankers and others who would subject newly minted companies to greater scrutiny. WCS can also arrange for many of its clients' activities to be hidden by attorney-client privilege.

There are a few legitimate uses for shell companies, but as with anything designed to conceal information from prying eyes, there's a lot more motivation to use them to protect shady and illegal enterprises. The article traces a couple of WCS's clients to illustrate. Pavlo Lazarenko, formerly the prime minister of the Ukraine, is accused of using WCS-created shell companies to hide money stolen from the Ukrainian government. Ira N. Rubin allegedly trafficked in bogus credit cards and hid illegal payments to online poker sites.

It says a great deal about the U.S. that while we fear and loathe the secrecy of other nations that allows money to be laundered by criminal organizations into legitimate enterprises, or to be funneled from supposedly legitimate charities to terrorist groups, we have done nothing to prevent corporate shell games from flourishing in the territorial U.S. WCS is hardly alone, nor is Cheyenne.

The incorporation industry, overseen by officials in the 50 states, has few rules. Convicted felons can operate firms which create companies, and buy them with no background checks.

No states license mass incorporators, and only a few require them to formally register with state authorities. None collect the names and addresses of "beneficial owners," the individuals with a controlling interest in corporations, according to a 2009 report by the National Association of Secretaries of State, a group for state officials overseeing incorporation. Wyoming and Nevada allow the real owners of corporations to hide behind "nominee" officers and directors with no direct role in the business, often executives of the mass incorporator.

Federal legislation to make corporate ownership more transparent has been opposed, successfully, by critics who cite high compliance costs to businesses and who claim the legislation would infringe on states' rights. In short, the opposition is rooted in people who dislike the federal government and who want maximum freedom for corporations. The same people, curiously enough, who brought us the dysfunction of the George W. Bush years. Imagine that.