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John L. Smith On The Fertile Ground That Nevada Provides For Scammers

Nevada’s reputation as a business-friendly environment for corporate filings not only generates millions in fees annually for the state coffers but has cemented the state's reputation as a place that’s also popular with controversial businesses and outright scammers. 

  

State of Nevada contributor John L. Smith has tracked operators of Ponzi schemes and phony investment operators for years in the state, and he joins us to talk about a few recent news stories that leave him wondering if more bad news isn’t on the way. 

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“One of the things that gives Nevada the positive reputation is also what comes back to haunt in a bit,” he said.

Smith said Nevada laws allow companies that are not based here to easily file incorporation and limited liability paperwork in the state. 

The laws also protect corporations. He said they make it difficult to "pierce the corporate veil" in lawsuits. Plaintiffs can't go after personal assets as they can in other states. 

“[It] has enabled some people to more or less disguise the ownership of the company in question,” Smith said, “There are a lot of things that make Nevada attractive, but they’re also attractive to scammers.”

Smith said the New York Yankees of this type of scam was the Mosseck-Fonseca Company. He said their offices in Nevada were nearly empty but they managed to take out hundreds of corporation filings. 

“Those corporate filings were used, in part, according to authorities, to mask money movement internationally to places that are considered tax havens, islands, offshore accounts, acting for clients from all over the globe and it all filtered through Nevada corporations,” he said.

Despite a growing list of examples of how Nevada's laws make it easier to scam people, Smith is not confident that state lawmakers will actually reform those any time soon. 

“I do think there’s room to improve what the state does," he said, "It is certainly legal what Nevada does but it puts it in the outlier category among other sttes that have more transparency when it comes corporate filings and limited liability corporations.”

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“If you can bet on Frances McDormand in New Jersey, you ought to be able to bet on her in Nevada,” Smith said.

McDormand and her film "Nomadland" won the Academy Award for best actress and best picture, respectively, but Nevada still doesn't allow betting on the Oscars.

Other states allow it, but not the state that is known for betting. Smith wonders when Nevada will decide to change that.  

Guests

John L. Smith, contributor

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