From The Recorder

BUFFALO, Wyo. — The U.S. government has publicly and privately pressured countries that act as offshore havens for hiding money, while this barren, sparsely populated state offers the same secrecy.

The Cowboy State isn’t as notorious as the Cayman Islands for cloaking millions. But, like Nevada and Delaware, this unlikely haven offers the same anonymity the federal government has been trying to end abroad. America and Americans are part of the offshore problem.

A massive leak of documents from the global law firm Mossack Fonseca & Co., which has offices in Wyoming and Nevada, exposes how two Western U.S. states are tied to foreign scandals, and how middlemen in far-flung places are taking advantage of the anonymity they provide.

Through this law firm, Wyoming, a state that has twice as many head of cattle as it has people, and Nevada, a state known to embrace a gamble, are tied to a scandal that threatens the government in Brazil, and to Russian middlemen who establish paper-thin companies called shells for the wealthy. Wyoming? Wyoming had 128,000 active business entities at the end of 2015, roughly one entity per every 4.5 residents in a state.

U.S. law allows foreigners to create shell companies that have no revenue or actual business activity in the United States. It’s akin to what foreign offshore tax havens offer Americans, some of whom use them as a tax dodge, or worse.

“There is no question that the United States serves as one of the biggest tax havens in the world for people outside the United States,” said Daniel Reeves, now a consultant after retiring three years ago from the Internal Revenue Service, where he helped create its offshore compliance program.

Wyoming and its competitors do not distinguish between foreigners and Americans who open businesses. Anonymity is a selling point.

State officials prefer the word “privacy,” and say they do insist that a living, breathing contact is required for every entity created.

Because of that, said Deputy Secretary of State Karen Wheeler, Wyoming statutes “don’t ask for information such as, ‘Are you from a foreign country?’”

Nevada shell company Murray Holdings LLC existed with little notice until it became a centerpiece in Brazil’s political crisis, which now threatens to overshadow this summer’s Olympic Games. Prosecutors there allege the Nevada firm had no assets or business in the United States, yet was used to hide embezzled funds from Brazil’s state oil company, which was then funneled into luxury real estate. Murray Holdings is found in a trove of Mossack Fonseca documents analyzed by McClatchy that shows how foreign nationals establish U.S. shell companies to camouflage assets or money abroad.

Having tax haven states is at odds with the U.S. multiyear crackdown on Swiss banks that hide American money. It also stands out against “name and shame” efforts by the State Department, which lists money-laundering centers such as the Cayman Islands when it publishes an annual narcotics-control report.

Open doors, dirty floors
Here’s how Nevada and Wyoming fit into scandal in faraway Brazil. Former President Luiz Inacio Lula da Silva was hauled in for questioning by that country’s Federal Police on March 4 as part of an investigation into money stolen from state-owned oil giant Petroleo Brasileiro SA, or Petrobras.

Prosecutors told judges that stolen money first flowed through shell companies in Nevada and was then used to anonymously buy seaside real estate in Guaruja, a resort town in the state of Sao Paulo where the former president has a condo.

Mossack Fonseca’s Brazil office, raided by that country’s police in January, describes itself as merely an agent that files paperwork for clients.

But the secret documents show how closely the law firm’s Brazil office worked with headquarters and MF Corporate Services (Nevada) Ltd. to accommodate a little-known middleman named Ademir Auada. He opened at least 19 offshore companies with Mossack Fonseca, including Murray Holdings LLC, and was arrested by Brazilian police in January and questioned for five days.

Murray Holdings was registered on behalf of Auada, who as a client of the Panamanian law firm was acting on behalf of others. The structures Auada established in his U.S. shell companies for Brazilians then served as a model when Mossack Fonseca’s Nevada operations later expanded into Wyoming in 2012, the Panama Papers show.

Who knows what?

Banks have for a decade faced ever stricter know-your-customer rules. Not so for people who register companies for a fee.

“I never deal with any of the people,” said Greg Goddard, a partner in the law firm Goddard & Vogel in the northern Wyoming town of Buffalo, population 4,585.

His address is listed on a document for A Street Solutions, a Russian company that creates shells in Wyoming for Russian customers. It’s run by Vladimir Koltoun, and on paper he occupies Suite 100 at Goddard’s small law office. There is no such suite. It’s a mail drop.

A Street Solutions lists, in the Panama Papers, a home address in Moscow and another in the Russian banking haven of Cyprus. It also lists addresses in Cheyenne, Buffalo and its newest address is in Sheridan, near the Montana border, with registered agent Wyoming Corporate Office. It’s an empty building under repair, housing two solitary desks.

The manager there spoke on condition that her name not be used, and confirmed she has no idea who the Russians’ end-customers are.

“We don’t know. We don’t verify that,” she said.

Who does?

“Perhaps the Better Business Bureau, or Dun & Bradstreet?” she responded with a shrug.

Reached by phone in Moscow, Koltoun said in broken English that “international businessmen” are owners of the U.S. shell companies he creates.

Layers of the onion
Mossack Fonseca lists a Cheyenne address for its Wyoming office, but the address actually belongs to AAA Corporate Services. It’s another registered agent. Manager Linda Grayson incorporates businesses on behalf of M.F. Corporate Services Wyoming LLC, collecting a small fee for registering a competitor’s business.

“It’s money, so who cares,” she shrugs.

Because neither federal nor state law requires it, registered agents don’t much care about the ultimate owners of a company. It’s not their job.

“Who actually owns the company? I have no idea,” admits Angelica Espinosa of WyomingRegisteredAgent.com.

She added, “They can even order it online. So sometimes we’re not involved at all.”

Registered agents in Wyoming must be present during working hours lest a court order is served. It costs about $100 to file for incorporation as a limited liability company in Wyoming, another $50 for a required annual report.

In response to criticism, Wyoming and Delaware tightened their laws to require that registered agents such as Mossack Fonseca keep records of a contact person for the companies.

But neither state wants to verify the IDs of people opening companies.

“I mean, I know what the Delaware driver’s license looks like, but I frankly don’t know what the other 49 (state) driver’s licenses look like,” said Richard Geisenberger, head of Delaware’s Division of Corporations. “I don’t even know what a passport from Nigeria looks like.”

IMAGE: A sign for M.F. Corporate Services (Nevada) Limited is shown outside a business complex, located at 5858 S. Pecos Rd., Suite 100 in Las Vegas, Nev. McClatchy/TNS photo

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