State lawmakers are running into opposition from the Markell Administration after advocating for more transparency when businesses incorporate in Delaware and across the nation.
In a letter drafted by Rep. John Kowalko (D-Newark South) July 24, the bipartisan group of legislators asked the state’s congressional delegation to support the Incorporation Transparency and Law Enforcement Assistance Act (ITLEAA), a measure that’s been floated since 2007.
It would require entities to name their primary owners when incorporating in each state. That information would be subject to a subpoena or summons from law enforcement agencies.
Secretary of State Jeff Bullock sent an email July 10 to Rep. Paul Baumbach (D-Newark), urging him not to sign on to the letter.
“For Delaware to “go it alone” and support this kind of legislation sends the wrong message to the 1,050,000 legal entities incorporated in Delaware that contribute $1.4 billion in annual state revenues,” wrote Bullock.
He continued that the congressional delegation and the Markell Administration oppose ITLEAA “…because of the cumbersome, inefficient, expensive and, ultimately, ineffective approach taken by the legislation that places all the responsibilities on states least able to cope with the new mandates the law would impose.
Instead, Bullock says the Obama Administration is working to have federal officials collect ownership information and make it easier for the Treasury Department to share that information.
Baumbach responded, saying he’d prefer a single, federal-level system.
“However, failing to come up with such a solution for over seven years justifies frustration and the exertion of additional pressure.”
“I do feel that if we can come up with a stronger, you know, a solution which is going to make this more fluid, yes, I’d support that,” said Kowalko, but he says the federal bill is a stepping-stone.
He says he takes exception to the secretary trying to dissuade supporters, saying the ITLEAA wouldn’t hurt Delaware’s reputation as business friendly.
“It’s not just to have exposure that they should be willing to do anyway and I think it’s absolutely disingenuous of the Secretary of State to say that somehow we’re going to endanger Delaware’s standing with the corporate world,” said Kowalko.
The letter signed by 31 legislators asserts that the majority of businesses are law abiding, but “…some individuals take advantage of our laws by creating and using anonymous shell companies to facilitate money laundering, terrorist financing, drug smuggling, arms trafficking, anonymous campaign contributions, tax evasion, and other criminal activity.”
It does acknowledge that the First State shouldn’t spearhead an effort alone, noting that a federal solution would ensure “Delaware does not lose any competitive advantage” to other states.
The Delaware Chapter of Americans for Democratic Action will hold a forum Wednesday regarding anonymous companies, with Bullock’s deputy, Rick Geisenberger on the panel.