Friday, June 25, 2010

Delaware fights against U.S. transparency

Citizens for Tax Justice in the United States has a short but important article how Senator Thomas Carper of Delaware is trying to throw a spanner into the machinery of new legislation to increase transparency in the U.S. financial system - one of the factors that led us to rank the United States in first place in our Financial Secrecy Index.

For those who need reminding, Senator Carl Levin gave an example of the kind of thing that Senator Carper wants to encourage:

"In July 2009, Romania filed a formal request with the United States for the names of [Bout's] company’s owners and other information. But it is unlikely that the United States can supply the names since, as this Committee has heard before, our 50 states are forming nearly 2 million companies each year and, in virtually all cases, doing so without obtaining the names of the people who will control or benefit from those companies. The end result is that a U.S. company may be associated with an alleged arms trafficker and supporter of terrorism, but we are stymied in finding out, in part because our States allow corporations with hidden owners."

Shame on Senator Carper. Delaware has been behaving like this for a century. William Cary, a former chairman of the Securities and Exchanges Commission, said in a landmark article about Delaware in 1974:

“Necessary high standards of conduct cannot be maintained by courts shackled to public policy based upon the production of revenue, pride in being ‘number one,’ and the creation of a ‘favorable climate’ for new incorporations.”

How true. And how little things change. As an endnote: Delaware has rightly received a vast amount of criticism for its appalling legislation. In terms of raw outrageous secrecy, however, it probably isn't even the worst state in the U.S. That prize probably goes to Wyoming or Nevada. More on that later.


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