Levin, Grassley take aim at shell corporations

Two prominent senators, one from each party, have introduced legislation aimed at battling shell companies.

The measure from Sens. Carl Levin (D-Mich.) and Chuck Grassley (R-Iowa) would force states to make sure they have up-to-date information on corporations and limited liability companies, a move they say would help law enforcement agencies fight a host of crimes.

“Our states don’t require anyone to name the owners of the corporations being formed under their laws, practically inviting people to misuse our corporations,” Levin, chairman of the Senate’s Investigations subcommittee, said in a statement. “A single State can’t solve the problem on its own, because if one State starts requiring names, people seeking to use corporations for nefarious purposes can switch to another State with weaker requirements.”

The legislation, which is now being introduced for the third consecutive Congress, would also require companies bidding on federal contracts to give similar information to the federal government, and install penalties for those who lie about their owners’ information. Grassley and Levin, in their release on the measure, say it would help in the fight against people like Viktor Bout, an accused arms dealer who had shell companies in several U.S. states.

“Prosecutors of financial crimes follow the money,” added Grassley, the ranking Republican on the Judiciary Committee, in a statement of his own. “It’s hard for them to do that when the owners of shell corporations are able to hide their identities so easily. Setting consequences for submitting false ownership information would help law enforcement by imposing a hardship on the Ponzi schemers, money launderers and tax cheats who use shell corporations to conceal their fraud.”

The measure has the backing of police groups and some liberal tax organizations.