Reuters Investigates

Wyoming Secretary of State talks back

On Tuesday, a Reuters Special Report called “A Little House of Secrets on the Great Plains ” explored the questionable – and sometimes illegal practices – of several businesses incorporated at a single-family home in Cheyenne, Wyoming. The 1,700-sq. ft, brick house is the address of a business incorporation specialist called Wyoming Corporate Services, which has set up more than 2,000 companies there, according to incorporation records.

The article launched a Reuters series which will explore the extent and impact of corporate secrecy in the U.S., which stands in stark contrast to its call for greater transparency in global transactions to lift the veil on shadowy money flows.

In an interview published Wednesday by the Wyoming Tribune Eagle, the local newspaper in Cheyenne, Wyoming Secretary of State Max Maxfield defended the state’s business incorporation laws, while acknowledging they can still be improved.

Maxfield said legislation enacted in 2009 had allowed the state to “dissolve 7,000 phony or fraudulent shell” companies, according to the story, and banned companies from operating in the state without a physical presence. Reuters cited the change in Wyoming law in its Special Report. Maxfield added that “many of the troublesome companies registered to the 2710 Thomes Ave. address were dissolved in recent years,” according to the Wyoming Tribune Eagle.

In a May interview with Reuters, officials from the Wyoming Secretary of State’s office said Wyoming Corporate Services, which operates from 2710 Thomes Avenue, complies with state law. They did not indicate any firms at that address had been dissolved. Reuters requested an interview with Maxfield during its reporting, but officials said he was not available.

Reuters found that firms registered at 2710 Thomes Avenue have been involved in selling knock-off parts to the U.S. Department of Defense, processing payments for consumer scams and illegal online gambling operations, and allegedly hold assets controlled by a jailed former prime minister of Ukraine. On its web site, Wyoming Corporate Services advertises that companies it incorporates can be used as a “fall guy, a good friend, a servant or a decoy.”

Maxfield told the Wyoming Tribune Eagle that he would support new legislation that would give the state power to issue “cease and desist” orders against companies when it cannot dissolve them. He was not immediately available for comment on Thursday.

Intrigue in China’s U.S. Treasury buying

A Reuters exclusive today describes a method China used recently to hide some of its U.S. Treasury purchases – “US caught China buying more Treasuries than disclosed.”

Treasury officials said they were simply modernizing outdated procedures two years ago when they revamped the rules for participating in government bond auctions.

The real reason for the change, a Reuters investigation has found, was more serious: The Treasury concluded that China was buying much more in U.S. debt than was being disclosed, potentially in violation of auction rules, and it wanted to bring those purchases into the open – all without ruffling feathers in Beijing.

Stephen Culp, Reuters graphics editor, came up with a handy visual explanation for the practice that allowed China to mask billions of dollars worth of U.S. debt purchases at auctions. China placed its bids informally through primary dealers, who then placed their bids at Treasury auctions without naming China as a customer. The Treasury outlawed the practice in June, 2009, but kept the reason for the rule-change under wraps.

Read the story in PDF format here.

Secrecy Inc in the USA

Reuters is launching today a series of articles exploring the extent and impact of corporate secrecy in the U.S.

Part one, a special report by Brian Grow and Kelly Carr, focuses on a little house in Cheyenne, Wyoming that is home to more than 2,000 companies.

The building isn’t a shimmering skyscraper filled with A-list corporations. It’s a 1,700-square-foot brick house with a manicured lawn. All the activity at this house is part of a little-noticed industry in the United States: the mass production of paper businesses.

The pervasiveness of corporate secrecy on America’s shores stands in stark contrast to Washington’s call on the rest of the world to beef up disclosure. A Reuters investigation shows how some clients of mass incorporators are abusing the system.

As the story says:

During a debate in 2008, presidential candidate Barack Obama singled out Ugland House in the Cayman Islands, reportedly home to some 12,000 offshore corporations, as “either the biggest building or the biggest tax scam on record.”

Yet on U.S. soil, similar activity is perfectly legal. 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.

Do you want the NSA to be the cyber-police?

Today’s special report looks at what the U.S. government is and is not doing to fight cyber attacks. Read it in multimedia PDF format here.

It seems every day brings news of another data breach, from defense firms to banks and even the U.S. Senate.

Among the questions raised in the report is about the role of the National Security Agency, the Pentagon’s top secret intelligence outfit.

A central conundrum is that the Pentagon’s National Security Agency, which specializes in electronic eavesdropping, has personnel with the best cyber skills, but has been until recently mostly shut out of protecting domestic networks. That’s due to the highly classified nature of the NSA’s work, and fears that it will stray into domestic spying.

Another complicating factor: the 1878 Posse Comitatus Act, which generally bars federal military personnel from acting in a law-enforcement capacity within the United States, except where expressly authorized by Congress.

“NSA has a long history in cyber security, on both the offensive and the defensive sides. It has great resources and expertise. But it makes privacy advocates nervous,” said Stewart Baker, a former DHS official now at the law firm Steptoe and Johnson LLP.

Should the NSA take the lead? What about the privacy of American citizens? Tell us what you think.

No room at the Inn … but maybe a job in the Outback

By Rebekah Kebede

You wouldn’t think you’d have to make hotel reservations months ahead of time in Karratha, a small, dusty town on the edge of the Outback  a 16-hour drive from  Perth, the nearest city. But with Australia’s commodities boom, Karratha is bursting at the seams and nowhere is it more apparent than when trying to find a place to stay.

(Above photo: A kangaroo stands atop iron ore rocks outside the remote outback town of Karattha in Western Australia. Reuters/Daniel Munoz)

About two weeks ahead of my trip up to Karratha, to do a special report on Australia’s hunt for foreign labour, all hotel rooms within a 60-km radius were fully booked and after more than 20 calls, the travel agent was still coming up empty.

A few more desperate calls turned up a couple of rooms in a town called Roebourne, about 30 minutes away from Karratha at the Ieramugadu Inn, an old motel, which like many others in the area, had become worker accommodations as Karratha struggles to house the influx of labour into town. The bill came to over $200 a night—just shy of what it costs to book a room with a view of the Opera House in Sydney.  The amenities at the Ieramugadu were somewhat different: a complimentary can of bug repellent, tin-foil covered windows to keep out the light for those on night shift, and a view of a truck parking lot through a hole in the tin foil.

Nuclear power in scary places

Today’s special report “After Japan, what’s the next nuclear weak link?” takes a look at developing countries’ plans for nuclear power. Read the story in PDF format here.

Andrew Neff of IHS Global Insight sums up the issue in this section:

If in a modern, stable democracy, there could be apparently lax regulatory oversight, failure of infrastructure, and a slow response to a crisis from authorities, then it begs the question of how others would handle a similar situation. 

“If Japan can’t cope with the implications of a disaster like this,” said Andrew Neff, a senior energy analyst at economic analysis and market intelligence group IHS Global Insight, “then in some ways I think it’s a legitimate exercise to question whether other less-developed countries could cope.”

The nuclear power industry is booming, with countries like China, Russia and India leading the way in building new plants, as this graphic shows:

Of course, Three Mile Island and Fukishima show that having a developed economy and democracy is no guarantee of safety in the nuclear field, but the prospect of nuclear technology in the hands of corrupt or authoritarian governments has some experts worried.

Monterrey’s drug war madness cripples model city

Robin Emmott has been covering the drug wars in Mexico for the past four-and-a-half years, based in the north industrial city of Monterrey. Robin’s special report “If Monterrey falls, Mexico falls” examines the sharp rise in violence in recent years and how the country’s richest city is dealing with it. (Read the story in multimedia PDF format here.)

Here’s what Robin had to say about working on the story:

“Don’t worry about the violence,” the elderly priest said to the congregation in a middle class suburb of Monterrey last month. “Get out there and live your lives. When it’s your time to die, God will decide,” he said in his Sunday sermon as the distinctly bemused churchgoers looked up at him from the pews.

I didn’t know whether to laugh or cry when a close friend who was at church that day told me the anecdote.

It is a sign of just how desperate things have become in Monterrey, the prosperous Mexican city near the Texan border that until four years ago was proud of itself as a Latin American success story.

Today, residents are often too fearful to go out and enjoy themselves at restaurants and bars at night, and there’s a self-imposed curfew to avoid being caught up, albeit randomly, in the firefights and grenade attacks raging across the city.

When I started my posting covering the U.S.-Mexico border in early 2007, Monterrey was still a great place to live. Although there were 55 drug war deaths in 2006, it still felt safe. The city was in the midst of hosting a huge cultural festival with performers, musicians and thinkers from around the world. It was like Barcelona meets San Antonio, in the very best sense.