WASHINGTON - In August, I led a bipartisan group of Senate colleagues in introducing a bill to combat terrorism, money laundering, tax evasion, and other wrongdoing aided by use of U.S. corporations with hidden owners.
This commonsense bill would stop our states from forming about 2 million new corporations each year for unidentified owners, and instead require those applying to form a new corporation to list the owners behind it so that, if misconduct later occurred, law enforcement could track down the wrongdoers.
The bill, which I introduced with Sens. Chuck Grassley, Dianne Feinstein and Tom Harkin, has the support of the Federal Law Enforcement Officers Association, the Fraternal Order of Police, the National Association of Assistant United States Attorneys, and the Society of Former Special Agents of the Federal Bureau of Investigation.
Law enforcement groups support our bill because right now in the United States it takes more information to get a driver s license or to open a bank account than to form a corporation. Our bill would change that by requiring any state that accepts crime-fighting grants from the Department of Justice to add one new question to their existing incorporation forms, asking applicants to identify the company s true owners.
That's it. One simple question. But it s an important one.
Why? To begin with, we know some terrorists and criminals use U.S. corporations to carry out their activities. Viktor Bout, an arms dealer who was found guilty in November 2011 of conspiring to kill U.S. nationals and selling weapons to a terrorist organization, used corporations around the world in his work, including a dozen formed in Texas, Delaware and Florida. It is unacceptable that Bout was able to set up corporations in three states and use them in illicit activities without ever being asked for his name.
In another case, a New York company called Assa Corp. owned a Manhattan skyscraper and in 2007 transferred about $4.5 million in rental payments to a bank in Iran. U.S. law enforcement officers tracking the funds had no idea who was behind that corporation until another government disclosed that it was owned by the Alavi Foundation, which had ties to the Iranian military. In other words, a New York corporation was being used to ship millions of dollars to Iran, a notorious supporter of terrorism.
U.S. corporations with hidden owners have also been involved in financial crimes. In 2011, a former Russian military officer, Victor Kaganov, pleaded guilty to operating an illegal money-transfer business from his home in Oregon and using Oregon shell corporations to wire more than $150 million around the world on behalf of Russian clients.
Shell corporations are also notorious for their role in health care fraud. One example involves an individual named Michel Huarte who formed 29 shell companies in several states including Florida, Louisiana and North Carolina and used them to make fraudulent health care claims, bilking Medicare out of more than $50 million.
In these and other cases, great law enforcement work eventually pierced the veil of corporate secrecy.
But that's not always what happens. In October 2004, the Homeland Security Dept. s division of Immigration and Customs Enforcement identified a Utah corporation that had engaged in $150 million in suspicious transactions. ICE found that the corporation had been formed in Utah and was owned by two Panamanian entities which, in turn, were owned by a group of Panamanian holding corporations, all located at the same Panama City office.
By 2005, ICE had located 800 U.S. corporations in nearly every state associated with the same shadowy group in Panama, but was unable to obtain the name of a single person who owned any one of the corporations. ICE had learned that the 800 corporations were associated with multiple U.S. investigations into tax fraud and other wrongdoing, but no one had been able to find the corporate owners. The trail went cold, and ICE closed the case.
Our bill would not only help law enforcement in such cases, it would bring the United States into compliance with international standards requiring countries to obtain beneficial ownership information for the corporations they form.
It would also make U.S. domestic practices consistent with U.S. foreign policy. The fact that we have corporate secrecy right here in our backyard contradicts U.S. efforts to end corporate secrecy offshore. All over the world, people are standing up and speaking out against shell corporations with hidden owners being used to commit wrongdoing. It is time Congress acted to ensure transparency? in the formation of U.S. corporations.
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Carl Levin is the senior U.S. senator from Michigan.