In 2012 CNBC visited an enterprising, then 65-year-old man who lived in a truck stop town just outside Reno, Nevada. Robert Harris was a former bartender who helped people avoid taxes. Harris lives in a sandstone-colored stucco house with a green lawn, a cutout in a neighborhood of near-identical homes. It is also the listed address of some 2,400 shell corporations.
Harris wasn’t a prying man — and that was his business model. For $174, he would set up a company –– licensed and legal in Nevada –– that a person could move money through without a link to his or her real identity.
“I don’t do any investigative work on the people,” Harris told CNBC. Sure, he told the TV network, he might raise alarm if he knew a venal official or terrorist had used his service to launder money. But, he added, that was only “if I knew. That’s the thing. If I know.”
Nevada showed up prominently in the Panama Papers, the recent leak of 11 million documents from the law firm Mossack Fonseca (MF), the Panamanian firm that specializes in shell corporations. In one story, reported by the International Consortium of Investigative Journalists, MF fought a court order filed in the U.S. District Court in Las Vegas that would link it to a subsidiary based in the city. The Panamanian firm didn’t want that, because that subsidiary was being investigated for helping create 123 shell companies used to steal millions of dollars from government contracts in Argentina. The subsidiary, backed by Nevada’s strong secrecy laws, offered nearly the same services as Robert Harris — albeit on a much more international scale.
Places like the Cayman Islands, Switzerland, and the British Virgin Islands, have traditionally been where the wealthy send their money to avoid taxes, but this has been changing, perhaps most dramatically since 2007. In an op-ed in the Las Vegas Review Journal, after learning of his state’s ties to the Panama Papers on Monday, columnist John L. Smith wrote:
It shouldn’t be surprising if nefarious characters or the family members of corrupt politicians are found to have been hiding behind shell corporations crafted in Nevada. It’s what we do.
The secrecy provided under the state’s laws of incorporation is no accident. It’s a revenue source.
There’s nothing illegal about opening a corporation in Nevada. The state offers tax benefits. It also removes much of the liability from the owner in case of a lawsuit. States such as Wyoming, South Dakota, and Delaware offer much the same benefits of incorporation as Nevada. Indeed,a 2012 report in The New York Times noted that companies including American Airlines, Apple, Coca-Cola, Ford, JPMorgan Chase, and Walmart, were all incorporated in Delaware, largely because of the tax breaks the state offers.
Then, in 2007, came revelations that Americans had cheated the U.S. government out of billions of tax dollars by concealing them overseas — mostly in Switzerland, which led Congress to pass the Foreign Account Tax Compliance Act, a law that forced foreign banks operating in the U.S. to disclose their dealings with U.S. clients. That same year, 2007, the Nevada secretary of state’s website asked, “Why incorporate in Nevada?” The answer: “Minimal reporting and disclosing requirements. Stockholders are not public record.”
Nevada loosened its corporation laws in 1991, according to the Las Vegas Sun, hoping to make it a “Delaware of the West” and attract corporations with its low taxes and high secrecy. It made tens of millions of dollars. In 2006 alone, the Las Vegas Sun reported the state took in $87 million. One of the companies that made its way there was Rothschild Wealth Management & Trust, a firm with a storied history that was looking to move after the crackdown on Swiss banks. It chose Reno.
An article in Bloomberg Businessweek in January highlighted the ease and appeal of Nevada for a firm like Rothschild. In the article, a lawyer for Rothschild & Co. gave a presentation in San Francisco on how to avoid paying taxes. In it, he presented a hypothetical using a man named Wang, “who is from the People’s Republic of China, concerned that information about his wealth could be shared with Chinese authorities.”
Putting his assets into a Nevada LLC, in turn owned by a Nevada trust, would generate no U.S. tax returns, Penney wrote. Any forms the IRS would receive would result in “no meaningful information to exchange under” agreements between Hong Kong and the U.S., according to Penney’s PowerPoint presentation reviewed by Bloomberg.
It’s easy to create an LLC, hide money in it or even launder cash through it. A reporter with Fusion created her own LLC in Delaware, without any ID. Journalist Ken Silverstein did the same in Delaware, in 15 minutes over the phone for $292. He asked a friend to sign for the company, which he called Medellín Cartel Successor Entity, but neither he nor his friend appeared on the paperwork. And to make sure he was doubly protected, Silverstein flew to Las Vegas (though the trip was unnecessary) and set up another company, linked to his first LLC, but once-removed. At that point, he wrote, he “was positioned to go into business as a drug trafficker or arms trader or dictator’s bagman.”
And if all of that sounds like too much hassle, there’s always Robert Harris, who still operates his company, NBI, out of his Nevada ranch home on Wedge Lane. I spoke with Harris on the phone Tuesday. He was a bit apprehensive to talk with the media, because he said the CNBC report four years ago made him look like he was a millionaire, or a deviant catering to foreign millionaires and criminals. In truth, he said he earns a little more than $50,000 each year creating LLCs. He is now 70, and most of his business is domestic –– usually someone in Indiana, or Illinois, or wherever, who dreams up a business and wants to take advantage of Nevada’s zero corporate income tax. And yes, he still has a laissez-faire view of people’s privacy.
“If you want to incorporate, fine. You pay the fee,” he said. “Nevada doesn’t investigate, so why should I?”
Harris hasn’t changed his prices, and he still offers basic setup for the rock-bottom price of $174. Although if a client is really looking for that Nevada-based facade, Harris says he will open and host a phone line linked to the corporation at his home. That package is $949. Just click “add to cart.”
Source: http://www.msn.com
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