The Lever reported on lawmaker's latest preferential treatment offered to the greed and leverage boys:
As of Jan. 1, small businesses must report who owns and controls the company to financial regulators or face stiff penalties. The disclosure is required under a new anti-money laundering law designed to curb tax fraud and terrorism financing.
But while mom-and-pop cafes and hardware store owners are now busy filling out the disclosure paperwork, many investment vehicles flagged by law enforcement agencies are exempted from those same disclosure rules after Wall Street firms spent millions lobbying on the matter.
Early versions of what became the Corporate Transparency Act did not include the special carve-out. But the final legislation had a line exempting pooled investment vehicles. That means venture capital funds, hedge funds and private equity funds are not required to report their ownership information, even though the FBI has said such opaque entities are among those used in criminal money laundering.The government’s new rules requiring companies to disclose their “beneficial owners” — people who have substantial, although sometimes obscured, control over the business — are aimed at tracking bad actors who use shell companies to shield their identities and unlawful gains.
The Justice Department settled with Vista Equity's Robert Smith for using shell to companies to shield his identity and hide $200 million in his commission of tax fraud.
Smith admits that he knowingly and intentionally used the Excelsior Trust and Flash Holdings and their associated foreign bank accounts in the British Virgin Islands and Switzerland to conceal from the IRS, and the U.S. Treasury Department, income earned and distributed to Flash Holdings from private equity funds. As a result of the overall scheme, Smith willfully did not report to the IRS over $200 million of partnership income. Smith also failed to report his ownership of his foreign bank accounts in BVI and Switzerland as required by law.
Over the years, Smith used millions of this unreported income to acquire and make improvements to real estate used for his personal benefit. Smith admits that, in 2005, he used approximately $2.5 million in untaxed funds to purchase and renovate a vacation home in Sonoma, California. In 2010, Smith again used untaxed funds to purchase two ski properties and a piece of commercial property in France. In 2011 and 2012, Smith used approximately $13 million of untaxed funds to build and make improvement to a residence in Colorado and to fund charitable activities at the property.
The American Investment Council (AIC), the private equity lobby, bragged that it “worked with Members of Congress and their staffs to help craft these exemptions.” That is the language of penetration. It turned the Corporate Transparency Act into the PEU Opacity Boondoggle.
Their logic for a PEU exemption? Criminals don't think long term. Smith's hidden private equity income went toward vacation homes, ski properties, commercial properties and residence improvements, all long term uses.
Is the AIC protecting legendary PEU founders like Robert Smith and their limited partners? If you have nothing to hide, you have nothing to hide.....
The AIC was once called the Private Equity Growth Capital Council. It didn't roll off the tongue very well so I suggested they use Private Equity Capital Knowledge Executed Responsibly (PECKER). They never took me up on that.
Update 1-24-24: Billionaire Joe Lewis admitted to sharing insider information with friends and employees and pled guilty to three counts of securities fraud. Lewis said he knew what he was doing was wrong and feels embarrassed.
