One Nevada company was mentioned in a federal indictment of FIFA officials. At least 10 Nevada-registered firms were owned by one of Thailand’s wealthiest families, and dozens more have ties to a corruption probe in Brazil, a USA Today analysis revealed last month.
They represent a sliver of the more than 1,000 companies created by M.F. Corporate Services, a Nevada entity that forms companies here and is linked to the Panamanian firm at the center of the largest data leak in history. That firm, Mossack Fonseca, reemerged in the news Monday when a group of investigative journalists with access to the documents, dubbed the Panama Papers, published a database of 200,000 offshore entities.
The database published on Monday showed 1,260 entities active in Nevada from the Panama Papers and a previous leak, though only a portion of those companies remain active.
For a variety of reasons — tax breaks, legal protection and assurances of secrecy — Nevada is a popular destination to incorporate a business. Wealthy individuals and executives, through agents like M.F. Corporate Services, can register a firm here without coming into the state.
Published by the International Consortium of Investigative Journalists, the database shows the Nevada firms connected to far-flung locations, from the Bahamas to the 2.6-square-mile territory of Gibraltar. Many have corporate addresses in the Seychelles, a 115-island nation in the Indian Ocean, according to the Nevada Secretary of State’s website.
While setting up an offshore company is not in and of itself a violation of law, many argue that these entities are used by wealthy individuals or organizations to engage in evading taxation, laundering and bribery.
In the wake of the Panama Paper leaks, these companies have come under increased scrutiny by leading economists and the Obama administration.
Wyoming, another state known for a loose incorporation regime, was the home to 37 offshore entities in the database. On Monday, a Wyoming legislative committee was scheduled to hear testimony on the issue.
It is unclear if similar action will be taken in Nevada and experts are skeptical that any sort of reform will be prompted at the state level. States with loose incorporation laws often benefit from the revenue that comes from registration fees, and they are often reluctant to forgo it.
Gov. Brian Sandoval has said through a spokesperson that he is concerned "that state law may have been broken or circumvented to further illegal activities.” The state's attorney general is also aware of the situation.
“We can neither confirm nor deny the existence of any investigation,” said a spokesperson at the attorney general’s office on Monday.
The Panama Papers, given first to a German newspaper, revealed the offshore holdings of world leaders and public figures. Revelations of offshore holdings led to the resignation of Iceland’s Prime Minister Sigmundur David Gunnlaugsson. They also tied offshore firms to Prime Minister David Cameron and associates of Russian President Vladimir Putin. Nevada is one of 21 jurisdictions where Mossack Fonseca, through M.F. Corporate Services, set up companies.
“What might be most surprising to some is what has been thought of as an international problem — a problem confined to a few beach island tax havens — is every bit as much of a problem in the states,” said Matthew Gardner, a director of the Institute on Taxation and Economic Policy.
M.F. Corporate Services did not respond to a voicemail Monday. According to the Nevada Secretary of State’s Office, which also did not respond to a request for comment, the company’s business license expires on May 31.
At least some of the Nevada corporations created by M.F. Corporate Services have ties to international investigations, according to USA Today, which analyzed the data last month. Cross Trading, a limited-liability company, was mentioned in a 47-count federal indictment charging nine FIFA officials and five corporate executives of racketeering, wire fraud and laundering.
The indictment alleges that Cross Trading was controlled by two Argentinian defendants and received a $5 million wire transfer as part of a bribery scheme, according to the court documents.
The USA Today report found connections to other international dealings:
• Forty-five of the Nevada corporations connected to Mossack Fonseca appear in documents of a Brazilian corruption investigation involving Petrobras, the state oil company.
• Several companies are connected to one of wealthiest families in Thailand, where the family owns hotels and real estate developments.
• More than 100 of the Nevada corporations in question appear in a 2014 Argentinian prosecutor report on its president’s financial dealings.
M.F. Corporate Services has long been linked to Argentina in a Las Vegas courthouse. A hedge fund, which received a $1.7 billion judgment against Argentina after the country defaulted on bonds, accused 123 firms formed by M.F. Corporate Services of laundering $65 million in Argentine money.
David Smith, a University of Virginia professor who has studied Nevada’s incorporation regime, said it’s unlikely the state would change its laws. While Nevada law protects executives from some lawsuits, they do allow for prosecution if a compnay engages in illicit activities.
"Nevada set up its laws to attract firms that didn’t have to do a lot of reporting,” Smith said, suggesting it was an effort to compete with Delaware, another incorporation-friendly state. “Certainly they are trying to attract firms that would not be your perfect, open company.”
“I can’t see a reason why the state would want to change,” he added.
In recent weeks and as a result of the release of the Panama Papers, President Barack Obama has pledged to take executive action to combat tax evasion and financial crimes. Obama urged Congress to do the same. The Panama Papers include dozens of Americans tied to financial crimes, several outlets reported on Monday.
Ahead of those reports Monday, 300 economists, including a Nobel Prize winner and a former top IMF official, called on countries to crack down on tax havens.
Gardner, who runs the nonprofit Institute on Taxation and Economic Policy in Washington, D.C., said U.S. states should move away from relying on loose incorporation laws as a source of revenue.
“It is a misguided and short-sighted strategy but a strategy nonetheless,” Gardner said. “It’s asking a lot for (states) to abandon that and pursue more sustainable strategies for economic growth.”
Before the database release on Monday, Mossack Fonseca had sent the International Consortium of Investigative Journalists a cease-and-desist letter asking that it not publish the records. The group went ahead with it, arguing that the database, which contains basic corporate information, was in the "public interest” and not a “data dump."
Mossack Fonseca said the documents came to light as a result of a hack.