Delaware groups seek federal database in effort to monitor sketchy LLCs

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The Delaware Coalition for Open Government (DelCOG) and other Delaware organizations submitted a Resolution to Delaware’s Congressional Delegation urging them to sponsor federal legislation to establish a national database of ownership of corporations and limited liability companies in assistinglaw enforcement.

“ Unfortunately, heinous crimes, such as money laundering, embezzlement, and narcotics and human trafficking, have been conducted by some legal entities. These crimes are enabled by the secrecy of beneficial ownership,” the coalition stated.

The coalition’s statement continued, “In most states, including Delaware, beneficial owners of corporations and limited liability companies are not required to furnish their identities when registering at a state’s Division of Corporations. The secrecy of both domestic and foreign beneficial ownership, which results as a consequence of this gaping loophole in corporate statutes, enables bad actors to commit crimes, hinders law-enforcement investigations, and impedes accountability for illegal actions.”

Delaware LLCs have been in the news over the years, due to ties with drug kingpins and other criminal organizations. That has led to calls for the state to demand more disclosure.

The coalition says federal legislation is needed to address the issue. Delaware has long claimed that the issue needs to be addressed at the federal level. Tightening disclosure here would simply shift more incorporations to other states, they argue. Incorporations are a sizable source of revenue for the state.

The database approach earlier had the support of Delaware Secretary of State Jeffrey W. Bullock and then-Attorney General Matt P. Denn.

In August 2018, DelCOG’s first initiative was a Petition to Denn to appoint an Independent Counsel to investigate abuses related to the Delaware Limited Liability Company Act. No action has been taken.

“Inaction by elected officials on the petition and the resolution, as well as the hope that the problem will go away, is not a solution. DelCOG and other good-government organizations are concerned that the prevailing comfort zone of indifference is not in the best interests of Delaware and its citizens,” the coalition stated.

The resolution was signed by the Delaware Coalition for Open Government, Civic League for New Castle County American Promise Delaware, Pacem in Terris, Delaware Get Money Out, NAACP Delaware State Conference, Delaware Press Association and the Social Justice Committee of the Unitarian Universalist Fellowship of Newark.

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