The News Journal | by Margie Fishman
Nine Delaware corporations and limited liability companies helped former Trump campaign chairman Paul Manafort and former Trump campaign official Rick Gates shield from U.S. authorities millions of dollars in payments from the Ukraine, according to a federal grand jury indictment released Monday.
Of the 17 domestic business entities implicated in the scheme, the largest number were domiciled in Delaware, Justice Department Special Counsel Robert Mueller found.
The latest revelations of Delaware LLCs linked to financial fraud have emboldened open government advocates, such as State Rep. John Kowalko, to renew calls for more rigorous state review of LLCs before they are allowed to set up shop here.
These are not “made in Delaware” companies, Kowalko, a Newark Democrat said Tuesday. “We can endanger the legitimacy of the LLC itself if we allow [them] to go uninvestigated.”
Secretary of State Jeffrey Bullock has no plans to change course on the LLC approval process or shut down Manafort’s and Gates’ Delaware business interests, department spokesman Doug Denison said this week.
The 31-page indictment made no mention of the Trump campaign or of Trump himself. Rather, it focused on Manafort’s and Gates’ duties as political consultants and lobbyists working with the Ukrainian government from 2006 to 2015. Those jobs generated tens of millions of dollars hidden from U.S. tax collectors in a number of foreign companies and bank accounts, Mueller alleged, supporting the men’s extravagant lifestyles.
Manafort and Gates were charged with 12 counts related to money laundering, tax evasion and foreign lobbying. Both pleaded not guilty to all charges.
According to Delaware records, three of their business entities— Global Sites LLC, Jemina LLC and Smythson LLC — were voluntarily dissolved in 2013 and 2014. In March of 2014, the state voided Davis Manafort Inc. after it failed to file annual reports and pay taxes, Denison said.
DMP, a corporation listed in the indictment as being located in Delaware, is not on file with the Secretary of State, he said.
The remaining four entities are listed as active and in good standing with the state. Delaware does not require the people behind LLCs to disclose their involvement publicly. Instead, they hire registered agents to serve as a contact for correspondence.
“It’s not in our power to just cancel a company because of something that’s been reported or brought into a criminal proceeding,” Denison explained. “We cancel entities when federal law enforcement authorities direct us to do so.”
Nick Wasileski, president of the Delaware Coalition for Open Government, thinks the state should be more proactive in rooting out corruption.
“DelCOG does not have a problem with limited liability companies,” Wasileski said, noting that they promote business and protect owners’ assets. “But this thing has been hijacked by money launderers and drug traffickers as fronts to commit crime.”
Wasileski’s group was instrumental in shepherding House Bill 57, sponsored by Kowalko, Rep. Kim Williams, D-Newport, and Sen. Bruce Ennis, D-Smyrna.
The legislation would prevent any individual, groups or business entities flagged as a security threat by federal agents from operating in Delaware. The bill also requires that the state’s registered company agents and the Secretary of State screen applicants against a federal sanctions list, which includes terrorists and drug traffickers. The list is maintained and updated by the Office of Foreign Assets Control under the U.S. Department of Treasury.
In June, the House Judiciary Committee tabled Kowalko’s bill in a 6-3 vote. At the time, Rep. Melanie George Smith, D-Bear, an attorney with the Wilmington law firm of Richards, Layton & Finger, said she couldn’t support it because the language had not been vetted by a group of corporate lawyers with the Delaware State Bar Association who review all proposed legislation dealing with corporations.
Smith, who works as a pro bono coordinator for her firm, did not return a phone call Tuesday. Richards, Layton & Finger runs an LLC division, which advertises itself on its website as “Delaware’s largest and most active alternative entities practice.”
Smith has a conflict of interest and should abstain from voting on the issue, Kowalko said.
Calling his bill a “very significantly diluted” version of what he initially proposed, Kowalko acknowledged that the legislation, if passed, would have no effect on Delaware business entities associated with Manafort and Gates, since they don’t appear on the federal sanctions list.
State records show that the companies were registered with various Delaware agents in Dover and Wilmington, including The Corporation Trust Center at 1209 N. Orange St. in the Brandywine neighborhood of Wilmington.
That address is also home to Apple, American Airlines, Walmart, companies registered by Hillary Clinton and Donald Trump and about 285,000 other business entities — more than any other known address in the world, according to a report last year by The Guardian.
For more than a decade, Delaware LLCs have been linked to high-profile financial crimes. Delaware entities have appeared in connection with Russian arms dealer Viktor Bout, Mexican drug lord Joaquin “el Chapo” Guzman and former lobbyist Jack Abramoff.
Last year, a Chilean airline agreed to pay U.S. agencies $22 million in penalties for bribing union bosses. To conceal the payment, officials from LAN Airlines first transferred the money to their subsidiary, a Delaware-registered limited liability company called Atlantic Aviation Investments LLC, according to the U.S. Securities and Exchange Commission. LAN also owned three other Delaware limited liability companies, the SEC found.
That same year, eight Delaware LLCs were named by federal prosecutors in connection with a scheme to embezzle hundreds of millions of dollars from the Malaysian government with the help of a Hollywood producer behind the film “The Wolf of Wall Street.”
Multiple research studies by academics and nonprofit groups have singled out Delaware for enabling tax evasion and other nefarious activities. Roughly a quarter of the state budget comes from fees paid by companies; Delaware counts more than 1 million registered businesses.
In conducting his own research earlier this year, Wasileski found that two Delaware LLCs in good standing — 200G PSA Holdings and Agusta Grand I — were listed on the federal sanctions list as being associated with foreign narcotics trafficking kingpins.
In February, the Office of Foreign Assets Control sanctioned Venezuelan Vice President Tarek El Aissami, saying he “played a significant role in international narcotics trafficking,” along with his “frontman” Samark Jose Lopez Bello. Bello was associated with five U.S. companies blocked by federal regulators, including two formed in Delaware with offices in Florida.
Wasileski said he alerted federal agents in the spring that Delaware still showed 200G PSA Holdings as active. Wasileski then reached out to Denison at the Secretary of State.
In a June 1 phone call, Wasileski said, Denison said both business entities were no longer permitted to operate in Delaware, after consulting with federal officials. That same day, both entities had their status changed to “cease good standing” on the Secretary of State website.
Denison said this week that federal investigators, not Wasileski, alerted his office that the LLCs were on the sanctions list. The entities ceased operating in Delaware as of February, he said, but the website wasn’t updated until June 1 when they missed their tax payment.
In the future, Denison said, the Secretary of State could review its process for updating public information.
In the meantime, Bullock’s office and members of the Delaware Bar have balked at toughening the LLC approval process, explaining that it would be cost-prohibitive and result in application processing delays.
Wasileski says he doesn’t mind if the state loses business as long as criminals go elsewhere.
“One of the Secretary of State’s responsibilities is to protect the public,” he said. “If they won’t advance this bill with narcotics trafficking, what’s it going to take?”
Delaware corporations and LLCs appearing the Manafort/Gates indictment:
Bade LLC, created in January 2012. Active and in good standing.
Davis Manafort International LLC, created in March 2007. Active and in good standing.
Davis Manafort, Inc., created in October 1999. Inactive in Delaware.
*DMI, created in June 2011. This company was listed in the indictment as a Delaware entity but the Secretary of State has no record of it.
Global Sites LLC, created in July 2008. Inactive in Delaware.
Jemina LLC, created in July 2008. Inactive in Delaware.
Jupiter Holdings Management LLC, created in January 2011. Active and in good standing.
LOAV Ltd., created in April 1992. Active and in good standing.
Smythson LLC (also known as Symthson LLC), created in July 2008. Inactive in Delaware.