The Delaware Coalition for Open Government and seven other Delaware organizations submitted a resolution to Delaware’s congressional delegation March 11.
The resolution is urging them to sponsor federal legislation to establish a definitive national database of beneficial ownership of corporations and limited liability companies to assist law enforcement in combating criminal activity.
"The majority of corporations and limited liability companies (legal entities) conduct legitimate business activities that provide services and products. LLCs also are used for the purchase and ownership of real estate holdings. Unfortunately, crimes such as money laundering, embezzlement and narcotics and human trafficking have been conducted by some legal entities. These crimes are enabled by the secrecy of beneficial ownership,” according to the coalition.
“In most states, including Delaware, beneficial owners of corporations and limited liability companies are not required to furnish their identities when registering at a state’s Division of Corporations. The secrecy of both domestic and foreign beneficial ownership, which results as a consequence of this gaping loophole in corporate statutes, enables bad actors to commit crimes, hinders law-enforcement investigations and impedes accountability for illegal actions,” according to the coalition.
“The enormity of criminal activity and the damage to society cannot be ignored. States’ reputations, the lives of citizens and the health of states’ economies are adversely affected by the illicit activity of nefarious legal entities. We no longer can afford the comfort zone of corporate indifference,” according to the coalition.
“Corporate transparency is essential if the sinister problem of the secrecy of beneficial ownership is to be resolved. The current practice of state-by-state legislation is not the answer. The problem must be addressed through federal legislation. Delaware’s congressional delegation must act to maintain Delaware’s preeminence as the gold standard of corporate law. We no longer can afford the comfort zone of federal indifference,” according to the coalition.
“Federal legislation will establish a national standard of compliance and send a strong message around the world that crimes enabled by the secrecy of corporate beneficial ownership are not tolerated by the U.S. And it will offer the added benefit of protecting Delaware’s corporate brand and corporate tax revenue stream from states with laxer laws. We no longer can afford the comfort zone of state indifference,” according to the coalition.
“In 2018, Delaware Secretary of State Jeffrey W. Bullock and then-Attorney General Matt P. Denn, in letters to the U.S. House of Representatives Committee on Financial Services, supported federal legislation for a national database of beneficial ownership of corporations and limited liability companies to assist law enforcement in combating criminal activity,” according to the coalition.
“To protect U.S. citizens from domestic and foreign criminal activity, it is necessary that Sen. Carper, Sen. Coons and Rep. Blunt Rochester support the positions of Secretary of State Bullock and former Attorney General Denn by sponsoring federal legislation to establish a national database of beneficial ownership to assist law enforcement. Each day of inaction enables bad actors in their pursuit of ill-gotten gains and crimes against humanity. We no longer can afford the comfort zone of political indifference,” according to the coalition.
“This resolution, sent to Delaware’s Congressional Delegation, is the second of two DelCOG initiatives to address the misuse of limited liability companies as fronts to commit crimes. In early August 2018, DelCOG’s first initiative was a Petition to Delaware’s then-Attorney General Matt Denn to appoint an Independent Counsel to investigate the abuses enabled by the Delaware Limited Liability Company Act,” according to the coalition.
“In a letter of reply, dated Aug. 17, 2018, Aaron R. Goldstein, AG Denn’s Chief Deputy Attorney General, passed the torch to the president pro tem of the Delaware Senate and to the speaker of the Delaware House of Representatives, ‘so that they can take any follow-up action that they deem appropriate.’ To our knowledge, Delawareans have yet to receive a response,” according to the coalition.
“Inaction by elected officials on the petition and the resolution, as well as the hope that the problem will go away, is not a solution. DelCOG and other good-government organizations are concerned that the prevailing comfort zone of indifference is not in the best interests of Delaware and its citizens,” according to the coalition.
Signatories to the Resolution to Support Federal Legislation by Establishing a Definitive National Database of Beneficial Ownership of Corporations and Limited Liability Companies to Assist Law Enforcement in Combating Criminal Activity were Delaware Coalition for Open Government; Civic League for New Castle County; American Promise Delaware; Pacem in Terris; Delaware Get Money Out; NAACP Delaware State Conference; Delaware Press Association; and the Social Justice Committee of the Unitarian Universalist Fellowship of Newark.