Bill would put limits on secrecy

Democratic presidential candidate Barack Obama and two other senators introduced a bill Thursday that would require states to obtain ownership records for corporations and make those available to law enforcement.

The Incorporation Transparency and Law Enforcement Assistance Act would allow states to withhold ownership records from the public. But law enforcement agencies would be able to obtain the records through subpoena or summons.

The measure is designed to help the government investigate money laundering and income tax evasion. But it would limit the secrecy that companies incorporating or establishing limited liability have enjoyed in Nevada.

"It's unacceptable for American companies to be used by criminals and terrorists as shields for tax evasion, terror financing and financial crimes," Obama said in a statement.

Sen. Carl Levin, D-Mich., chairman of the Senate Permanent Subcommittee on Investigations, and Sen. Norm Coleman, R-Minn., the subcommittee's ranking minority member, also sponsored the bill.

The subcommittee questioned Nevada and Delaware officials during a hearing in late 2006 about the secrecy granted to corporate owners by those two states.

The National Association of Secretaries of State approved a model measure that would require states to gather ownership information although those records could be limited to the name of another corporation or a nominee for the owners.

Since then, the Nevada Legislature has enacted a law that allows law enforcement agencies to request the names of a business's corporate owners. If the corporation fails to provide the information within 72 hours, the corporation is voided.

Nevada Secretary of State Ross Miller said he is proud of the Nevada law, which has become a model for other states to follow.

Miller acknowledged that a fraudulent corporation might fail to respond to a request for ownership records, but he said criminals couldn't be expected to provide accurate ownership information when they file for incorporation, either.

Requiring his office to verify ownership for 315,000 business entities would be too burdensome, he said.

The federal bill sponsors complained that lack of corporate ownership records in Nevada blocked an investigation recently. Immigration and Customs Enforcement said during the 2006 hearings that it found a Nevada-based corporation with 3,700 suspicious wire transfers for $81 million over two years. The case wasn't prosecuted, because federal agents were unable to identify the corporation's owners.

Eric Witkoski, chief of the attorney general's Bureau of Consumer Protection, said corporate ownership information could be useful in investigating scams. His bureau has had difficulty locating owners of businesses that cheated consumers with fraudulent offers.

Dennis Meservy, a certified public accountant and certified fraud investigator, agreed but said the proposed bill raises concerns about privacy, government intrusion and what will happen to revenues the state collects from corporations established here. Incorporation fees generate $90 million in annual revenue for Nevada.

"I'm not certain that it's the right thing for America, certainly (not) Nevada," Meservy said.

Martin Lobel, a Washington, D.C., tax law expert, criticized the measure for failing to make corporate ownership information available to the public.

"Transparency is required to make the free market work," Lobel said. "It will make the market work as opposed to regulation, the dead, heavy hand of government regulation."

Contact reporter John G. Edwards at jedwards@reviewjournal.com or 702-383-0420.