Nevada’s Big Bet
What happens in Nevada, stays in Nevada. Literally. Especially when it comes to Nevada shell companies.
That’s the gist of our latest special report in the SHELL GAMES series, “Nevada’s big bet on secrecy.”
The story takes a close look at how changes to Nevada’s incorporation laws a decade ago have made it a haven for U.S. shell companies, as well as a hub for current executives of mass-incorporators who previously went to prison, in large part for using Nevada shell companies for illegal activities.
The state’s liberal incorporation laws – which allow for nominee officers and directors and a higher degree of liability protection than any other state – are a magnet for questionable corporate behavior, it appears.
“Nevada’s Big Bet on Secrecy” had some immediate impact: Ross Miller, Nevada’s Secretary of State, said in August that he planned to introduce a bill which would bar former felons from running mass-incorporators. In September, his office announced a new Corporate Ownership Fraud Task Force, in collaboration with the Internal Revenue Service and the Nevada Attorney General’s office, based in part on data contained in questions posed by Reuters.
The data are sure to raise eye-brows. Reuters found four former felons who run or until recently ran three mass-incorporators in the state which have formed or represented more than 14,000 companies. Over 3,000 of those firms have been the subject of state and federal tax liens and civil judgements, or have been named in federal civil and criminal litigation.
We also detailed a March study by two professors at the University of Virginia which shows that Nevada had the nation’s highest rate of financial restatements and fraud allegations or investigations involving publicly-traded companies on average each year between 2000 and 2008.
What’s more the state is home to almost half of all publicly-traded shell companies tracked by financial consultancy Private Raise. Public shells have drawn fire for helping foreign firms access a backdoor to trading on U.S. stock exchanges, with less scrutiny from regulators and investors.
Nevada’s reputation – via its gambling hub Las Vegas — for being an anything-goes oasis extends to the world of opaque corporate ownership, too
Read the story in multimedia PDF format here.
Here are the previous stories in the series:
A little house of secrets: http://link.reuters.com/wug23s
China’s shortcut to Wall St: http://link.reuters.com/sep93s
Bonds that turned to dust: http://link.reuters.com/vep93s
And some video from Nevada: