Cracking the Puzzle of Corporate Anonymity (The Recorder)

A number of investigative techniques can bring even the most ingeniously opaque arrangements into the light.

Michael Cohen almost pulled it off. As Donald Trump’s personal attorney, Cohen went to great lengths to mask the source of a $130,000 payment to the adult film actress known as Stormy Daniels. Pseudonyms were reportedly used for Trump and Daniels in a settlement agreement, and Cohen routed the funds for the payment through a limited liability corporation he formed in Delaware, a state famous for its business-friendly laws and the latitude it grants corporate officers in concealing their identities. Cohen’s efforts might very well have succeeded if not for one critical mistake.

He signed his own name on the LLC’s certifcate of formation.

Cohen’s signature made it relatively easy for reporters from the Wall Street Journal to break the blockbuster story of the payment. After they likely received a tip identifying the LLC, they simply pulled its incorporation documents and connected the dots. But puzzling through corporate structures to reveal the individuals and responsible parties behind companies can often be a much tougher task.

For attorneys confronted with a multitude of affliates, subsidiaries and other information, just figuring out who to sue—or, on the defense side, who exactly is suing their clients—can often seem like an impossibly complex endeavor. Like the Wall Street Journal reporters, they might obtain the name of a corporation, only to discover that its principals are concealed behind legally permitted anonymity. Under Delaware law, Michael Cohen could have hired a third party to sign as the “authorized person” for his LLC. This added level of secrecy may have kept Stormy Daniels from becoming a household name.

A number of investigative techniques can bring even the most ingeniously opaque arrangements into the light. Court records are often a good place to start, as litigation naming a company or its principals will usually contain salient details about them and related parties. Private databases that collect corporate records are another valuable resource. Company officers may have used their addresses when creating other companies, or their lawyers, accountants or registered agents may have done so. These past activities can often trace a path to related corporations, and the formation documents of those entities may not be as carefully crafted to obscure the identities of their officers. A high net-worth individual I was hired to investigate initially showed no apparent assets or related businesses. Looking through property records, I discovered that he had once sold a house to a trust. I searched for other companies that were members of the trust and, sure enough, they were all clearly connected to him. We had located his missing assets.

Phone numbers, email addresses and web domain ownership records are also useful search items for information, and can field evidence of overlaps between what appear at first glance to be completely unrelated corporations and the people behind them. My firm was hired to look into a medical device company that, like the individual above, had no apparent assets. We found a second company 100 miles away that had been incorporated using the same phone number by the girlfriend of the original incorporator. It legally owned all of the assets. As this example shows, people who do business together often share other aspects of their lives, as well. Scouring social media or news reports can turn up evidence of these connections. Business partners may have attended the same schools. They may serve on the same boards. Perhaps they have been photographed together at a social event or a group outing.

Even with the trove of public information available online, shoe-leather research can still be the best way to generate leads and to confirm any suspected ties between individuals and corporations. This might entail cultivating knowledgeable sources or, when needed, conducting discreet surveillance of key players or locations. At times, the only way to lift the veil of anonymity is to establish enough of a connection between the parties to obtain a subpoena for their records once a lawsuit has begun.

People attempting to legally shield their activities behind corporate facades can apply many of these techniques in reverse, especially in havens of anonymity like Delaware. By minimizing the amount of data available in the public domain and limiting real world contact between the parties involved, it is possible to construct seemingly unsolvable webs of related entities that obscure the parties ultimately responsible for them. There is no guarantee of absolute privacy, however. As Michael Cohen discovered, a single slip-up is often all it takes to spill carefully guarded secrets.

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Bruce Gerstman founded Waterfront Intelligence after nine years of conducting nearly every kind of investigation as an investigator with global consulting firm Kroll Associates. He previously conducted investigations as a newspaper reporter, covering
legal affairs, crime and the courts for The Contra Costa Times.

Reprinted with permission from the 4/10/2018 edition of the Recorder © 2017 ALM Media Properties, LLC. All rights reserved. Further duplication without permission is prohibited, contact 877-257-3382 or [email protected].