CHEYENNE — Haven’t we been here before?
Why can’t the Legislature do more to lift the corporate veil on the identity of Limited Liability Companies — LLCs — who choose to register here?
Or why can’t the state do a better job of enforcing the laws it has?
Wyoming was in the spotlight yet again recently for its weak business laws that made the state a beacon for new limited liability companies — LLCs.
The new study said the state now beats Delaware to become first in the national in per capital corporate registrations.
Decades earlier Wyoming opened up the law to invite these companies to register in Wyoming. The move was a way to get more money for the state. We would be like Delaware. To lure these companies, the state offered them secrecy and low fees.
It has been a lucrative operation.
Trust companies in Wyoming manage at least $31.5 billion in assets according to a recent story by Leo Wolfson of Cowboy State Daily.
A couple of years ago, the contribution of these companies was $7.5 million in revenue from $100 filing fees and annual fees according to a legislative interim revenue committee meeting report.
The interim committee that year bounced its study of LLC laws to a second committee. Its rejection of further study was understandable. During a public hearing only one person called for reform and he was not from Wyoming
State Treasurer Curt Meier testified that the Legislature should leave the corporate structure of LLCs alone, given that they have helped small businesses.
The message from legislative committee members was that Wyoming LLCs provide a global market for Wyoming investments and are a asset as the state moves into a new post-minerals economic structure.
In short, Wyoming LLC’s are enormously popular and we don’t want to discourage the business..
Yet every so often, some national outfit conducts a study that exposes how weak these laws are, and suggests that — hey — maybe some fraud is going on here.
The first one that raised public interest was in 2011 when Reuters published a story about the ‘“Little House on the Prairie” and Wyoming laws that allowed phantom shell companies to be licensed in the state.
The “Little House” turned out to be a drop box for a phantom LLC — it was an small empty house located a few blocks from the Capitol Building in Cheyenne.
At that time the companies were allowed to register here without having a physical presence in the state.
Then Secretary of State Max Maxfield responded by promising reform. He offered three bills for the Legislature.that would increase oversight of the financial activities of these entities.
In 2013, Maxfield succesfully proposed a bill to give his office more power over the LCCs.
It authorizes the secretary to issue cease and desist orders if a company or its registered agent fails to pay license fees or penalties or files a document containing fraudulent statements.
The fuss died down.
But apparently the new laws did not help or else they were not being enforced.
Because, in 2022 the Washington Post post ran a story about Wyoming’s “cowboy cocktail” state laws that allow an LLC instead of a named person to be controller of a trust.
This cocktail consisted of a Wyoming trust “and layers of private companies with concealed ownership” that allowed the world’s rich people to move and spend money with concealed ownership and weak regulation, the Post article said.
One local critic of Wyoming secrecy laws was federal judge Scott W. Skavdahl. of Casper
In an October 2022 opinion he scolded the Legislature for the lack of transparency of LLCs.
The civil case involved a contest over a land purchase filed by a Netherlands based firm against an investment and real estate Wyoming firm with a LLC registered in Sheridan.
The court had ruled that the LLC defaulted on the $5 million lawsuit by not responding to a court order.
Wyoming law, the judge wrote, does not require the identification or registration of any members or managers of an LLC.
“Enabling anonymity of Wyoming LLCs creates an absolute nightmare for federal courts in sorting out the questions of whether they have jurisdiction.” Skavdahl wrote.
In a footnote, the judge referred to the Post stories and the “boundless flexibility” of Wyoming’s 2010 Limited Liability Co. Act.
So that law may be the place to start for a new group that is trying to get a grasp on the problems and for Secretary of State Chuck Gray who is pushing for reform.
I commend Gray for tackling this very difficult and important topic and hope he continues instead of spending so much time trying to make voting harder for Wyoming citizens.
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Contact Joan Barron at 307-632-2534 or jmbarron@bresnan.net
