22 February 2016

So Not a Surprise

Transparency International is a NGO whose mission is to name and shame corruption.

The state Delaware was just named one of the most corrupt organizations on earth:
Normally, when one of our 50 states gets singled out by an international body of some consequence, you would hope it would be good news and something that the locals would brag about. But that’s not likely to be the case with Delaware’s recognition by Transparency International this month as one of the world’s best examples of “grand corruption.” The dubious distinction comes in recognition of the state’s laissez faire corporate registration system, which critics say provides corporations, fraudsters and wealthy individuals secrecy and asset protection that puts it on a footing with notorious tax havens like the Cayman Islands.

Transparency International’s selection of the top nine “grand corruption” winners was based on both internal deliberations by the non-governmental organization, most famous for its global ranking of the world’s nations for corruption, and the votes of 170,000 people around the world. Other “winners” include Brazilian oil giant Petrobras, enmeshed in an octopus like $2 billion dollar scandal that has shaken the sitting government; as well as FIFA, former leaders of the Ukraine, Panama and Tunisia, and Lebanon’s entire political system.

In the statement announcing the “dirty nine,” Transparency International said all the nominees were central to an “abuse of high level power that benefits the few at the expense of the many, and causes serious and widespread harm to individuals and society” in a way “that often goes unpunished” yet “concerns millions of victims around the world.”

Delaware’s over the top pro-business Chancery Court, its statutory trust provisions, non-existent taxes, as well as its extremely user friendly limited-liability-corporation registration process, has drawn in more than 60 percent of Fortune 500 companies and over half of America’s publicly traded companies. Back in 2012, the New York Times reported that Delaware had more registered corporations than it had residents, roughly one million compared to fewer than 900,000 people.


Worth noting: Delaware’s functioning as America’s home-away-from-home sanctuary for all business, big and small, brings in $1.1 billion dollars a year in revenue to the state coffers, roughly a quarter of the state’s annual budget.

“This is Delaware’s industry,” says William Black, professor of Economics and the Law at the University of Missouri and Kentucky. “They sell corporate leaders protection from compliance from fiduciary obligations and the provisions of law like anti-money laundering statutes.”

Boosters of Delaware say that the major reason businesses choose Delaware is their business savvy Chancery Court, which has been sorting out commercial equity issues since the 1790s and today has jurisdiction over suits in which the massive universe of Delaware entities are named as defendants.

Black — who as a federal bank regulator blew the whistle on the role of Congress in the Keating 5 (McCain, Glenn et al) savings and loan scandal — says Delaware’s Chancery Court is at the heart of the problem, noting it has enforced trusts between parties in a way that “allows you to eliminate the fiduciary duty of standard of care for shareholders and eviscerates the fiduciary duty of loyalty through their court decisions.”
I am not sure how the US can engage in sanctions against one of its own states, but if Delaware were a foreign nation, sanctions would be well justified.


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