Reuters Investigates

Nevada’s Big Bet

By Brian Grow

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.

Diplomacy Inc

By Ben Berkovitz

Diplomacy is a complex thing, and it gets even more complicated when diplomats are trying to act as salesmen.

A series of State Department cables, obtained by WikiLeaks and provided to Reuters by a third party, demonstrates just how intertwined American political and commercial interests really are. (See special report “Weapons, frozen chicken, and the art of diplomacy“)

Sometimes it takes an illustration, like this one, to explain just how these sorts of deals work. One conversation leads to another, which leads to the mention of someone’s interest, which gets passed up a chain of command – and all of a sudden, perhaps unexpectedly, someone gets what they wanted. It may seem simple but it rarely is – some of the transactions mentioned in the cables played out over the course of years, and in some cases they still have not been finalized. (There are examples where the flowchart would take up two computer screens just to summarize.)

(For a multimedia PDF version of the special report, click here)

A peek inside our layer

We stepped into the new new Media Universe for our report on Augmented Reality, creating our own app which will alert anyone using it (iPhone or Android-phones only so far) when they are near one of the new movers and shakers of the business. It wasn’t so hard — you can see how we did it here.

But for anyone who just wants an overview, here’s the contents of the layer we made and published through Hoppala (on a Firefox browser) and AR browser firm Layar. It’s our take on the movers and shakers in the AR industry, mainly linking to Twitter feeds, and Tarmo Virki is happy to learn of any updates. These entries are unadorned:

Company: Int13 What it does: mobile gaming firm ARDefender game for iPhone, bada  Weblink: http://twitter.com/#!/Int13

Parrot creator of AR.Drone plastic and foam-made helicopter controlled by iPhone, iPad or iPod Touch http://ardrone.parrot.com/parrot-ar-drone/usa/ar-games

Forrester research firm sees AR as disruptive technology http://twitter.com/#!/Forrester%20Research

Total Immersion founded 1999, an AR pioneer makes AR apps for many industries strategic alliance with Adobe http://twitter.com/#!/totalimmersion

Hoppala AR technology provider makes easy-to-use Layar tools

How to make friends and influence people

White House correspondent Caren Bohan’s special report out today examines President Barack Obama’s testy relationship with the business community.

After Tuesday’s election, Obama was faced with the prospect of legislative gridlock. Republicans pushed Democrats decisively from power in the House of Representatives and strengthened their ranks in the Senate as voters vented frustration over the economy.

Now that the election is over, one idea that could gain traction is a payroll tax holiday to give consumers and businesses some extra cash. Obama had considered proposing it before the election but rejected it because of its cost. There is some openness at the White House to it now but much would depend on whether it seemed likely to gain bipartisan support.

Obama aides say they were frustrated that the economic package the administration offered in September — including tax breaks for companies and beefed-up infrastructure spending — received little to no backing from Republicans in Congress. They hope to enlist business support in reviving these ideas.

The question is whether the divided congress can achieve anything. Tell us what you think. Could they at least agree on a payroll tax holiday?

For a multimedia PDF version of the special report, “White House to business: why can’t we be friends?” click here.

Inside the Pirates’ Web

Reuters trade correspondent in Washington Doug Palmer had an unusual assignment: buy a fake Louis Vuitton handbag on the Internet, and take it to a LVMH store for a comparison test, before handing it over to U.S. authorities.

    What was startling was how easy it was to find websites selling a dazzling array of stuff online. This is the new face of piracy and its costing businesses billions.   No need to skulk around back alleys or some pirate’s rental van to browse through footwear, watches, DVDs and whatnot. Just pick out your LV shoulder tote from a virtual catalog on a website based in China. It looks and feels like the real thing at a fraction of the price.

Counterfeit goods ranging from shoes to software seized by the U.S. government  on display at the National Intellectual Property Rights Coordination Center in northern Virginia, October 7, 2010.  REUTERS/Jason Reed  

    The bulk of these goods comes from China. The workshop of the world is also the sweatshop oif the world when it comes to making fake goods.

    Reuters Shanghai correspondent Melanie Lee and a photographer accompanied a private investigator to grubby neighbourhoods around Guangzhou to find the leather workshops that make these fake bags. She saw mothers and daughters through the windows working the leather, and young toughs outside serving as lookouts. Chinese authorities occasionally do raid these places, which are often run by triad gangs. Photographer Tyrone Siu stealthily took photos with his iPhone.

 Melanie and her PI then followed the trail of the fake handbags to an illegal market a few miles away. The Baiyun wholesale market, occupying a space equivalent to five football fields, is the biggest market for leather goods in the world. Much of the merchandise is counterfeit.

    The market is occasionally raided — including the day they went. But the shopkeepers are used to it. It’s like the Whack a Mole game. As fast as you can hammer down one operation, another one pops up somewhere else.

Mongolia’s El Dorado stirs shareholder battle

In Mongolia’s South Gobi desert lies Oyu Tolgoi, touted as having the world’s largest untapped copper and gold deposits. Little wonder then that this “El Dorado” has become a boardroom battleground between the relatively unknown Ivanhoe Mines and its biggest shareholder, the giant Australian mining company, Rio Tinto.  

Our attempts to get near this mine or elicit any comment from Ivanhoe were about as fruitless as the Spanish conquistadors attempts to find the legendary “El Dorado”, or “Lost City of Gold” in the 16th century. Twice Ivanhoe stopped our reporters from visiting the mine with delegations from the investment community, saying reporters were not  allowed to mingle with bankers on visits to the mine. We don’t know why that would be. We mingle with them pretty often in other contexts and usually find each other’s company amusing and mutually informative.

Perhaps that’s the point of Ivanhoe’s policy. The company and its executive chairman, Robert Friedland, do not seem to trust the media much. They maintain a robust website,   http://www.ivanhoemines.com/s/The_Facts.asp., that pretty much takes issue with every story written about them. Friedland is legendary in the business for spinning a story and trying to control the narrative.

Friedland has lived a colourful and adventurous life. Perhaps he admired in his youth the swashbuckling medieval hero of Sir Walter Scott’s novel, Ivanhoe, a noble in the disguise of the “black knight” who fights alongside Robin Hood, and so named his company after him. 

Friedland has had a Midas touch when it comes to monetising mining assets over the years in a business where exploration is fraught with risk. In that sense. he calls to mind the original El Dorado, or “Golden One”. This was the name given to the kings of the Muisica tribe in what is now Colombia, when they were undergoing an initiation rite for taking the throne: they covered themselves in gold dust before diving into lake Guatavita. 

In time, the Muisica towns and their treasures fell to the conquistadores, who never did find the “lost city”. Friedland can only hope that his efforts to foil Rio Tinto’s efforts to take over Ivanhoe on the cheap will fare better than the Muisica’s attempts to fend off the Spanish. He may need a Robin Hood or a “white knight”, however, to come to his rescue.

(Photo: Ivanhoe Executive Chairman Robert Friedland  (right) points out features of the control room at the Oyu Tolgoi gold and copper mine in Mongolia to the country’s prime minister, Sukhbaatar Batbold (centre). REUTERS/company)

This is going to hurt

In Britain, the coalition government is readying its “comprehensive spending review” later this month. Rather than get caught up in chasing which government departments or bodies will be cut, two of our reporters focused on a single council – in this case, the City of Birmingham, which happens to be the biggest local authority in Europe – and explored what it’s doing to prepare for the change ahead.

For a lot of people, the most visible sign of cuts in Britain will be at a local level, as services are pulled back and jobs are lost. In the leadup to the spending review details,  lobbyists in London have been doing great business. Check out their tactics for survival – although if you’re worried about your government contract but haven’t done anything about it, you’re probably already too late.

Morbid money-spinners

If the life settlements market seems ghoulish, here’s a British scandal which isn’t doing the image of the business any favours. It’s one of the worst the country’s seen.

Around 30,000 mainly elderly investors in the UK put their money into a company called Keydata, hoping to make a little extra cash to fund their own retirement with the promise of a healthy return.

What they were buying sounded kosher, even if it did depend on how fast their wealthy American counterparts were dying. Of course, the investors may not have known that.

As is so often the case with these things, the projections were a little optimistic. And then some other irregularities blew up. Around 100 million pounds went missing, one of the business’s partners dropped dead in Singapore and the investment company was shut down by the regulators, leaving British pensioners like Tony and Pam Tobin out of pocket.  The Serious Fraud Office is investigating.

Undeterred, the other key character behind Keydata is determined to fight the regulators’ decision.  ”I am someone who can make the impossible possible,” he tells us.

Whatever happened to the stiff upper lip?