Members of the Main Street Alliance National Executive Committee and the National Action Committee penned the following letter today to Congress asking for their support on an Act aimed at increasing incorporation transparency and reducing the use and resulting harm caused by anonymous shell companies.
September 27, 2016
Dear Member of Congress,
As national leaders of the Main Street Alliance, the following businesses owners write to urge you to support the Incorporation Transparency and Law Enforcement Assistance Act (S.2489/H.R. 4450). The Main Street Alliance is a national network of small businesses who engage on important public policy issues that work for business owners, their employees, and the communities they serve. This bill, which would help curb tax evasion, corruption, and fraud facilitated by anonymous shell companies, is central to this mission.
The Incorporation Transparency and Law Enforcement Assistance Act would require the owners of companies to put their own name on an incorporation form. This simple act is critically important to those of us who have seen or experienced the harm resulting from anonymous shell companies. Anonymously-owned companies or those whose owners are hidden, fuel corruption, and corruption distorts markets. Shell companies win contracts on the basis of false promises, rather than legitimate competitive advantage. Consider the following:
- One couple created a string of anonymously owned companies and won U.S. government contracts by submitting extremely low bids. They then subcontracted to other businesses for the actual goods and services. The couple received the fees from the government but never paid the subcontractors. They shut down their anonymous company and set up new ones, frustrating law enforcement investigations and creating new opportunities to repeat the scam. (1)
- A U.S defense contractor used his position to secure more than $1.1 million worth of contracts for a Tennessee-based company that he secretly owned, but his wife ran under her maiden name to hide their conflict of interest. (2)
- Anonymous companies are used by patent trolls to file lawsuits, costing the companies they target $80 billion per year in lost profits and legal costs. These lawsuits serve to squash innovation and harm fragile start-ups. (3)
Sadly, these are just a few of the countless examples of the harm caused by anonymous companies and the consequences for small business. Whether losing out on an initial contract or finding themselves on the fraudulent end of a commercial transaction, small businesses cannot be expected to compete with the ever-changing scams perpetrated by the owners of anonymous companies.
Requiring secretive businesses to come out from the shadows will benefit small businesses in several ways. It will reduce conflicts of interest and cronyism in contracting, as well as curb false billing of contractors and fraudulent certification for small, disadvantaged, veteran, or disability-owned businesses. Furthermore, ownership information will help prevent those who previously defrauded taxpayers from establishing a new sham operation and winning new contracts. And speaking for those businesses who honestly pay their taxes, it will make it harder for bad corporate actors to gain advantage through tax evasion.
In short, transparency levels the playing field so that businesses will engage in open competition based on product or service quality, organizational efficiencies, and talent. That is a market in which we can compete.
Congress should quickly pass S. 2489/H.R. 4450 to end the corrupt practices associated with anonymous companies and support a healthier environment for small business. Further, we ask that you ensure any additional bill on incorporation transparency include a robust standard for beneficial ownership and make available this information to both law enforcement agencies and financial institutions.
Main Street Alliance Executive Committee Members
David Borris, Hel's Kitchen Catering Northbrook, Illinois
Melanie Collins, Melanie’s Home Childcare Falmouth, Maine
Kelly Conklin, Foley-Waite and Associates Bloomfield, New Jersey
Jim Houser, Hawthorne Auto Clinic Portland, Oregon
Reshonda Young, Popcorn Heaven Waterloo, Iowa
Main Street Alliance National Action Committee Members
Paul Heroux, Handyman Orlando, Florida
Andy Lytle, Receptor Sound & Lighting Orlando, Florida
Sumner Richards IV, S. Fernald's Country Store & Deli Damariscotta, Maine
Frank Brown, Minuteman Press Minneapolis, Minnesota
Todd Mikkelson, Sprayrack Minneapolis, Minnesota
Samia Bahsoun, Capwave Technologies Ashbury Park, New Jersey
Tony Sandkamp, Sandkamp Woodworks LLC Jersey City, New Jersey
Amy Collins, New Shelves Pittsford, New York
Jayson Waits, Bloomtastic Florist Columbus, Ohio
Molly Dullea, General Denver Hotel Wilmington, Ohio
Rosalind McCallard, Snackrilege Portland, Oregon
Maurice Rahming, O’Neill Construction Group Portland, Oregon
Caleb Magoon, Power Play Sports & Waterbury Sports Morrisville, Vermont
Matthew Birong, 3 Squares Cafe Vergennes, Vermont
Download a PDF of the letter HERE
1 FBI, Conspirator Sentenced to Prison in $2.3 Million Government Contract Fraud Scheme,
http://www.fbi.gov/baltimore/press-releases/2014/conspirator-sentenced-to-prison-in-2.3-million-government-contract-fraud-scheme; US DOJ Press Release, Clinton Woman Pleads Guilty In $2.3 Million Government Contract Fraud Scheme, http://www.justice.gov/usao/md/news/2013/CLINTONWOMANPLEADSGUILTYIN2.3MILLION.html
2 United States Attorney’s Office Eastern District of Virginia, Former employee of defense contractor and wife sentenced for conspiring to obtain millions in fraudulent scheme involving vehicle parts for Afghan National Army, February 14, 2014, available athttps://www.justice.gov/usao-edva/pr/former-employee-defense-contractor-and-wife-sentenced-conspiring-obtain-millions.
3 James Bessen, Jennifer Ford, & Michael J. Meurer, “The Private and Social Costs of Patent Trolls,” Regulation 26, 2012.