The Weird Connection Between The Panama Papers & Wyoming That Will Leave You Pretty Annoyed
So far, the general consensus around the world is that when it comes to the Panama Papers, the U.S. seems to have gotten off pretty easy. Only 441 of the 214,488 companies disclosed in the leak have immediate linkages to the United States. This one connection between Wyoming and the Panama Papers, however, is pretty much guaranteed to leave you pretty annoyed.
Due to a 2010 adjustment to the law, it is now virtually impossible to transfer money made through illegal activities out of the country. However, that hasn't stopped state laws from relaxing. Wyoming, Nevada, and Delaware are among the U.S. states that have become known in accounting and legal communities as so-called "safe havens" — jurisdictions where maintaining client confidentiality is given higher emphasis.
Prompted by news of the leak, auditors from the Wyoming Secretary of State's office completed an audit of Mossack Fonseca Wyoming, LLC. They found 24 LLC companies associated with Mossack Fonseca that happened to be headquartered in the state. According to the local Powell Tribune newspaper, Wyoming Secretary of State Ed Murray said the audit uncovered Mossack Fonseca wasn't in compliance with providing the state all legally required information. The same article says that Mossack Fonseca complied shortly thereafter.
As it says in a prospectus on Wyoming still available on the web, Mossack Fonseca touts that an LLC in Wyoming "may be formed with a single member which can help avoid U.S. federal income tax reporting requirements," as long as basically no business is conducted within the United States. The same document states that ownership of a company "is confidential and under State law may only be obtained by court order," but also includes these two clever tidbits: "Managers and Members can be either corporate entities or natural persons" and that there is "no requirement to file with the Secretary of State the name of the Manager or Member."
All it takes is a few internet searches to figure out how to set up a secret shell corporation (say, for your cat). Any accounting professional would probably be able to figure out with relative ease how to set up a company in a jurisdiction where the United States has no authority to compel the release of information, therefore allowing someone to incorporate a shell company in the State of Wyoming with an anonymous foreign corporate owner — for any kind of reason, legal or less than legal. It all depends on the kind of layering and secrecy used.
There are definitely legitimate reasons for people like expats, military families, or international professionals to set up companies in this fashion to manage certain kinds of business transactions. But when leaders responsible for making tax legislation and representing the interests of the people are making shell companies, it becomes suspicious and even more so when the names of wealthy executives with past ties to financial crimes start popping up. Who would have thought that the hack of a Panamanian business could have ramifications for the Wyoming Democratic caucus, but this is 2016 and stranger things have happened.