The shelf company, one weird trick Paul Manafort allegedly used
As the jurors in former Trump campaign chairman Paul Manafort’s bank and tax fraud trial deliberated Thursday, they asked the judge to answer four questions. Among them: the definition of “shelf company,” a term that arose in relation to allegations that Manafort hid payments he received from Ukrainian political operations.
A takeoff on “shell companies,” meaning companies largely used simply to hold and store assets, “shelf companies” are often designed to add an additional layer of indirection. They’re corporations that have been created by specialized lawyers years before they actually do anything of substance. That means that when investigators or potential business partners look into their histories, they see what looks to be a long-established company. That appearance of age can boost the company’s credibility and obscure the date when the company actually became active, which may reveal clues about its operations.
In actuality, the companies often sit dormant “on the shelf” doing nothing but filing rote paperwork until they’re placed under de facto control of new anonymous owners.
In Manafort’s case, the campaign consultant is alleged to have used shelf companies set up in Cyprus with names like Leviathan Ltd. and Peranova Ltd. to receive foreign payments in a relatively anonymous manner. Prosecutors say he never mentioned the companies to his tax preparers, Roll Call reports. On Thursday, when jurors in Manafort’s trial asked about shelf companies, the judge told them they needed to rely on their collective memory to answer that and other questions about evidence, the Washington Post reported.
Like a fine wine
When it comes to shelf companies, “the older they are, the more expensive, like Scotch whisky,” Reuters wrote in a 2011 exposé on the clandestine, secrecy-focused technique. In some cases, the aged corporations could be picked to match the age of a pre-existing but unincorporated business, suggests an incorporation service called Companies Incorporated.
“For example, let’s suppose you have been in the plumbing field for 12 years,” explains Companies Inc. “Your attorney and accountant recommend that you incorporate for liability protection and tax savings. So, you acquire a 12-year-old aged corporation that corresponds with amount of time you have been in business. This way, when you advertise that you have been in business for a dozen years, if a potential customer looks up your company, they will see that your corporation filing date will correspond with the amount of time you have actually conducted business.”
Another incorporations firm, called Wyoming Corporate Services, offers “aged shelf companies” for sale with names like Crowdsourcing LLC, Go Viral LLC, Organic Blockchain LLC, and Unpredictable Adventures LLC. Some, like Life’s Little Pleasures Inc. and Fresh Start Therapy Inc., have been on the shelf for more than a decade, according to the company.
To review some of the offerings from WholesaleShelfCorporations.com, potential customers must digitally sign a confidentiality and non-disparagement agreement. “To protect the Privacy of our Aged Corporations and avoid our Inventory from being indexed by Search Engines, please provide your Contact Information,” its website says.