weather icon Clear

Article about secrecy laws paints Nevada in unflattering terms

For years, Nevada's slippery and esoteric laws of incorporation have been a dirty little secret that's fed the state's coffers at the cost of its reputation.

The statutes frustrated law enforcement investigations, and the press has rarely written about them. Legislators such as former state Sen. Dina Titus tried to focus on the issue with mixed results.

While law enforcement and regulators on the local, state and federal levels were seldom willing to point fingers at the Silver State, our statutes have attracted business operators on both sides of the law to incorporate on paper here. While that has added to the state revenues, it also has given us a reputation as a wiseguy paradise where the true ownership of businesses has been easy to conceal.

In July, I told you the story of William S. Reed, Richard Neiswonger and Wendell Waite, who used Nevada's reputation for secrecy to market lucrative sales pitches for their "Bulletproof Asset Protection" program. The trio's fraud cost consumers $19 million.

Now Reuters, with its international platform, has focused on the state with an investigative piece this week titled "Special report: Nevada's big bet on secrecy." The article paints the state in most unflattering terms. Those paid to market Nevada as a friendly atmosphere for legitimate business at a time of high unemployment should read the article twice -- and cringe.

It not only tells the story of Neiswonger & Co. but also details the use of Nevada's laws by Wayne Andre McMiniment and Aaron S. Young.

"Nevada has spawned a thriving industry of consultants who aid companies seeking to avoid liability and disclosure, at a time when Washington is calling on other nations to enforce greater transparency of financial flow," the article states.

Suffice to say, the Nevada Development Authority won't be using it for its next marketing pitch.

The article portrays Secretary of State Ross Miller as a staunch advocate of the status quo. It doesn't help that his office's website hangs out this shingle for secrecy: "Piercing the corporate veil in Nevada requires the presence of 'fraud' or 'manifest injustice.' "

Ironically, Miller is easily the most aggressive secretary of state we've had in years. He recently embraced the newly created Corporate Ownership Fraud Task Force, whose participants include SOS Special Liaison Tera Ames, a secretary of state special liaison, IRS Special Agent in Charge Paul Camacho and Chief Deputy Attorney General John P. Kelleher.

"We certainly respect the laws of this state, including the corporate ownership laws; however we do not respect law breakers," Camacho said recently. "This task force effort significantly adds to our arsenal of weapons to fight financial fraud."

The goal of the task force is to "investigate registered Nevada business entities that are suspected of being involved in illegal activities including tax evasion, money laundering, securities violations, and the marketing of shell or shelf companies for fraudulent and/or deceptive purposes," according to a recent news release.

While the Reuters report would indicate that action is long overdue, Miller defends the state's laws. He knows they helped generate $108 million last year at a time Nevada's revenues were flagging.

"Contrary to some criticism relating to Nevada, we have not seen much evidence of Nevada's business statutes either enabling criminal activity or posing a barrier to criminal investigations," Miller said in his task force announcement.

"In the very rare instances when we've been contacted by law enforcement, our statutes have given us the opportunity to provide them with information and be a resource rather than an obstacle. But we have in fact seen some individuals and entities falsely promoting Nevada as a safe haven for criminal activity. Some of these marketing campaigns are promoting illegal activity and we intend to work through the task force to bring them to justice."

From the look of things, there's plenty of work ahead for the new task force.

Now that Nevada's corporate secrecy laws are no longer a dirty little secret, there's an opportunity to shine a little light in some very dark places.

John L. Smith's column appears Sunday, Tuesday, and Friday. Email him at Smith@reviewjournal.com or call 702-383-0295. He also blogs at lvrj.com/blogs/smith.

Don't miss the big stories. Like us on Facebook.
Police break up pro-Palestinian camp on Michigan campus

The campus encampment was set up on April 22, near the end of the school year and just before families began arriving for spring commencement.