The most recent hit comes via the “Pandora Papers,” a leak of nearly 12 million financial documents detailing where world leaders stash their assets. The documents were obtained by the International Consortium of Investigative Journalists and examined by the Washington Post.
The analysis found an increasing use of states like Delaware, and even more so South Dakota, by wealthy world leaders to store their assets because of favorable “protections and secrecy that rival or surpass those offered in overseas tax havens.” South Dakota was home to 81 trusts being used by world leaders, the report says. Another 37 were in Florida, and 33 were located in Delaware.
According to the International Consortium of Investigative Journalists’ report on the documents, a company incorporated in Delaware was used to hide the assets held by the Legion of Christ, “a wealthy Roman Catholic order disgraced by an international pedophilia scandal.”
While the Pandora Papers point more to South Dakota as a hub for international leaders to store money, the inclusion of Delaware in the report is just the latest instance of the First State’s corporate-friendliness getting the wrong kind of headlines.
“It looks like it’s a pandemic and it just never ends and there is no cure,” said Nick Wasileski. As president of the Delaware Coalition for Open Government, Wasileski has long fought for better ways to prevent wrongdoers from using Delaware’s corporate-friendliness as a cover for their misdeeds.
“This problem is not new, meaning within the last few years,” he said. “The first report that I could find … about the possibility of money laundering through Delaware business entities was a government accountability report that was written in 2000.”
For example, in 2018 the website Backpage.com was found to be a company in “good standing” with the State of Delaware, even after a federal indictment in Arizona charged seven of the company’s executives with facilitating prostitution, money laundering, and criminal conspiracy. The company’s CEO later pleaded guilty to money laundering and other charges, but because Backpage had paid its annual registration fee and maintained a registered agent in the state, it held on to its status as a Delaware LLC.
Wasileski is hopeful that new federal rules included with the National Defense Authorization Act late last year will reduce some of the secrecy surrounding the creation of these business entities.
“Maybe the Corporate Transparency Act that was passed a year ago, maybe when that takes effect and business entities have to disclose who their beneficial owners are, maybe that’ll have an effect. Maybe that would have a positive influence on stopping some of this,” Wasileski said.
Delaware Secretary of State Jeff Bullock’s office did not respond to requests for comment for this story, but Bullock’s comments accompanying his year-end report point to similar hopes for the Corporate Transparency Act.
“In Washington, after many years of advocating for a federal solution for a nationwide beneficial ownership policy, we now have what will provide law enforcement access to entity ownership information for the purpose of combating illicit financial activity,” Bullock said. “We continue to believe that a federal mechanism for the collection of this information is superior to a state-by-state structure that would inevitably prove inconsistent.”
