Pandora Papers: Legislators Debate Strengthening Wyo Laws To Prevent Stashing of Foreign Billions

Wyoming lawmakers on Thursday discussed strengthening laws that would help prevent the state from being a haven for illicit activity. A Russian billionaire hid a private jet and lands through a LLC & trust in Wyoming.

Clair McFarland

April 29, 20229 min read

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(Cowboy State Daily Staff)

When crafting laws to keep shady operatives from stashing their money in Wyoming, lawmakers should be careful not to chase off honest businesses, according to state Treasurer Curt Meier.  

With some federal officials looking for ways to force some businesses to provide more information about themselves, Meier told the Legislature’s Revenue Committee on Thursday the state must proceed carefully with any proposed changes in its own business rules.

“If the federal government gets too involved in regulating LLCs (limited liability companies) and any other corporate structure,” said Meier, “they’re going to find a way to tax it. We’ve got to be careful what we support.”  

Wyoming has been the focus of national news stories in recent months for its business-friendly policies, which allow companies and trusts to form in the state with fewer restrictions than those imposed in many other states, opening the door to the creation of trusts that could be used to hide billions of dollars.

As an example, an investigation by the International Consortium of Journalists revealed that Russian billionaire Igor Makarov used Wyoming to house, secretly, millions of dollars in assets including real estate and a 13-seat private jet held through an LLC and trust in Wyoming.
Trusts in Wyoming manage about $31.5 billion in funds. 

Couple that with the lack of an income tax in Wyoming, and the state has proven an attractive place to put money or manage property. The state also benefits from revenue from business filings: the 2022 fiscal year is expected to yield about $7.5 million in new LLC filing fees. 

Redefining ‘Bank’

Following the 2021 leak of the “Pandora Papers” — an exhaustive dossier of offshore filings used to hide the money and assets of billionaires, world leaders, celebrities and politicians — members of Congress have introduced a bill that would vastly expand the legal definition of banks.  

Financial institutions, or banks, are subject to federal know-your-customer and anti-laundering laws. Under the proposed Enablers Act, introduced in the U.S. House in October, the definition of “financial institution” would expand to include financial advisers, art and antiques traders, attorneys or financial notaries, some providers of trusts, public accountants, public relations fronts for anonymous businesspeople, and third-party payment services.   

Meier told the legislative Joint Revenue Committee on Thursday that more federal rules will lead to more federal taxes.  

He added he feared an earlier federal law, the Corporate Transparency Act, though touted as an anti-terrorism and anti-money laundering effort, would breed “intrusion into our daily lives,” another layer of “bureaucracy,” and a rigid dossier of nearly “everybody’s” personal information.  

Meier said Wyoming needs to be able to identify its business operatives and to have discoverable data on them to ferret out “bad actors.” But he said he would not support a public exposure of all business identity data of the kind collected by banks, because people have a right to privacy.  

“If you have a corporation that’s almost like you’re the king of that corporation, (like) you’re the king of your house,” said Meier.  

Meier proposed the secretary of state’s office be required to compare its data on business holders, routinely, against federal lists of money launderers, terrorists, other “bad actors” and their aliases – then turn the results of that cross-check over to law enforcement.  

‘This Isn’t Secrecy’ 

Speakers at Revenue Committee took differing stances on the Pandora Papers.  

Chris Reimer, a Jackson attorney and law partner, said large shady business fronts are the exception in Wyoming, not the rule, and he feared that burdening all of the state’s companies with tax and oversight laws would drive beneficial and law-abiding businesses to other states.   

He referenced an October story in the Guardian concluding that 81 of the trusts identified by the Pandora Papers as being used to hide wealth were held in South Dakota, whereas two were held in Wyoming.  

Reimer, who repeatedly criticized Washington Post stories describing Wyoming as a “tax haven,” discouraged lawmakers from “making reactionary changes based on sensationalized reporting.” 

“It seems to me the question is whether Wyoming should abandon a favorable and very privacy-centric (system),” he said. “And this isn’t secrecy. This is an interest in privacy; in not having others see our business. There’s nothing wrong with that, it’s a very human emotion and very human thought. Do we want to trade that for regulation oversight or taxation?” 

Registered Agents 

A Washington Post story published April 5 focused on Wyoming “registered agents” or people serving as required business representatives for companies they may know very little about.

“One agent,” wrote the Post reporter, “represents more than 250 companies – dozens linked to foreign owners – from a beige camper parked at a barren crossroads north of Cheyenne.”  

Reimer said these kinds of registered agents and the “shell companies” they front are on their way out of the system.  

“The so-called ‘secret shell company’ you’ll see referred to in the Pandora Paper-type articles,” said Reimer, “is a thing of the past.” 

“It’s over,” because of the Corporate Transparency Act, he said.

Reimer did not respond to an email Friday morning asking whether the new act would pursue identities behinds trusts that hold LLCs. State leaders in the past have been stymied by anonymous companies registered to trusts, not individuals. 

The Corporate Transparency Act is a federal law that passed in 2020 which will require corporations and limited liability companies — LLCs — to disclose ownership information directly to the Financial Crimes Enforcement Network of the U.S. Treasury Department. The database is not running yet.  

“Every single corporation or LLC filed in Wyoming, or any state in the nation,” Reimer said, “(will) have to tell the federal government the full legal name, birthday, current street address, and tax ID number of each beneficial owner of any corporation or LLC ever filed.”  

Though accessible to federal bureaucrats and enforcers, the registry will not be public.   

Cowboy Cocktail 

Reimer also referenced the term “Cowboy Cocktail,” an LLC or corporation owned by a trust rather than an individual, specifically a domestic asset protection trust, in which the maker of the trust can also be its beneficiary.  

“Although I would never call it the ‘Cowboy Cocktail,’” Reimer said, “this is a standard procedure for any client who wants to hold an asset that is particularly dangerous from a litigation perspective.” 

For example, he said, a house across from a bar in Laramie is owned by an LLC, which is in turn registered to a trust – because of activities that could occur near that house due to its location.  

Reimer said the notion that Cowboy Cocktails are used as tax shelters is “ridiculous” because banks – and therefore federal anti-laundering laws – still are involved in the money transfers of those setups. 

Reimer also noted that state taxes, such as California’s income tax, can be dodged by filing in Wyoming, where there is no income tax, but federal taxes cannot.  

“Cowboy Cocktail” holders, though not exempt from federal taxes, may still enjoy anonymity. 

$31.5 Billion in Wyo Trusts

Conversely, an official with a money transparency activist group based in Washington D.C. disagreed with Reimer, saying that Wyoming’s laws make it a haven for illicit activity.  

“Wyoming has attracted and protected capital from people who undermine our security,” said Ryan Gurule, policy director for the Financial Accountability and Corporate Transparency coalition. 

“Secrecy under Wyoming laws appeals to oligarchs,” like Makarov, he said.   

Gurule asked rhetorically whether Makarov’s stash had yielded “measurable economic gains for local communities,” and added that Wyoming’s generous business laws “inadvertently contributed to this problem.”  

Gurule suggested reforms to boost business and trust transparency and raise identity-disclosure thresholds required to establish companies.   

Trusts in all states are, traditionally, private.  

Gurule noted that while there are federal checks on banking operations, foreign operatives with their wealth in trusts can “entirely circumvent, in some cases” the U.S. banking system – to the detriment of both Wyoming’s profitability and U.S. national security.  

“This legislative body, just like Congress, has an important role to play in ensuring Wyoming and U.S. financial systems are not inviting for bad actors,” said Gurule.  

A Wyoming-based lobbyist agreed with Gurule. 

Jennifer Lowe, Equality State Policy Center executive director, said Wyoming should legislate the business-transparency issue because its reputation is at stake.  

“A negative light has been shone on the state and some of the practices we have here,” said Lowe. “This is just one leak, the Pandora Papers. Who knows what’s really out there?”  

Mixed Reception 

Joint Revenue Committee members had a mixed reaction to the opposing testimonies.  

Committee Co-Chair Sen. Cale Case, R-Lander, said he was open to suggestions from both sides and hoped to “move forward” in some way. 

Rep. Patrick Sweeney, R-Casper, said he suspected that national news stories had painted Wyoming with “broad strokes.” But he said he was also aware that not all assets can be “monetized” and therefore not all values go through the banks.  

Rep. Mike Yin, D-Jackson, repeatedly expressed concern over whether Wyoming is a magnet for foreign nationals trying to hide their money from their home countries.  

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Clair McFarland

Crime and Courts Reporter