Own a Business? Be Vigilant, Thieves are Lurking

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Las Vegas Sun
By Abigail GoldmanNevada’s corporate filing practices part of problem

Richard M. Krawczyk is an expert in idle corporations, dusty businesses sitting on shelves in the secretary of state’s office, maturing like fine wine, waiting for someone to want them.

For a living, Krawczyk — his clients call him “Dr. Richard” because of his Ph.D. in business — teaches people how to acquire these “shelf corporations.” Entrepreneurs want companies that are aged because they look good in the banks’ eyes, and therefore, theoretically, are eligible for larger lines of credit. If you google “business credit expert,” Krawczyk’s is the first name that comes up. His is also the second, third and fourth names.

He’s the wrong person to steal a shelf corporation from.

Corporate identity theft — stealing a business out from under its owner — is the criminal cousin of classic identity theft. There are endless variations, but many involve stealing someone’s company by filing bogus paperwork.

In Nevada, where we woo people to incorporate in our lax-tax, minimal-disclosure state, the problem is probably worse than elsewhere. The Nevada secretary of state’s office doesn’t track corporate identity theft, but with so many businesses incorporated here, it only makes sense more would be stolen here as well, spokesman Bob Walsh said.

Nevada has more than 320,000 corporate filings, second only to Delaware in sheer number, Walsh said. He called our state’s corporate filings a “big pool.”

And the bigger the pool, the more scum it grows.

In 2006, Nevada was one of three states a congressional subcommittee criticized for lax corporate filing practices, arguing that the Silver State could be a haven for crime, money laundering and even terrorism, all because it’s easy for a corporation to hide its principals.

Here’s what happened to Krawczyk: The Las Vegas businessman was doing a routine check of his more than 30 Nevada corporations, making sure his registrations were up to date and squared away — the mark of a man who makes a living instructing people on how to take care of their corporations.

But when he went to look for one of his shelf corporations, a three-year-old entity called “Corporate Business Services Inc.,” he couldn’t find it anywhere.

He called the secretary of state and was informed that his company had been renamed “Challenger Biz Services Inc.” The list of corporate officers had also been changed. Instead of Krawczyk as president, it listed a California man named Ralph Rogue.

Krawczyk called Rogue, who told him he bought the shelf corporation from a company in San Ramon, Calif., called “Corporate Credit Association of America Inc.,” for the asking price of $10,000.

So what happened? As it turns out, it’s easy to change a corporation’s information — who its president is, who manages it, where it’s located. All you have to do, really, is file some paperwork, either through the mail or online or by fax. The secretary of state is not in the business of overseeing who files what, or sniffing out scam artists, Walsh said. The office just collects the records.

“We are essentially a big filing cabinet,” he said. “People can reach in and file things there, and people can reach in and take things out.”

So while Krawczyk wasn’t looking, someone stole his company from under his nose. A simple switch-a-roo put a new name on the thing, and it was sold to somebody else. Krawczyk is all too familiar with this scam, being on the legitimate side of the same business for 15 years. He just never thought it would happen to him.

Krawczyk offered Corporate Credit Association of America a deal: Pay me $25,000, and I’ll go away quietly. His stolen company is worth something in the neighborhood of $12,000, Krawczyk says, adding that a business owner could obtain anywhere from $50,000 to $100,000 in credit through the shelf corporation.

The California company didn’t want to cough up the cash. Instead, Krawczyk says, he was told it bought his company from yet someone else, and was unaware it was stolen.

Krawczyk doesn’t buy the story and is now suing the company for unspecified damages.

Corporate Credit Association of America representatives did not return calls for comment. The closest the California company has come to a rebuttal has been online, in response to a posting on RipoffReport.com, a Web site where consumers self-report sham businesses. Someone with the screen name “fraud_alert” called the company “known corporate identity thieves.”

The company responded, using the screen name “Peace Maker,” by calling Krawczyk’s accusation a publicity stunt. “First of all sir, we would like proof to be provided that our company did any wrong doings!,” the Internet posting reads. “We would like to thank you for thinking to take the time to make up a false statements about our company … Please provide us with proof or facts to substantiate these allegations please sir!”

Krawczyk insists the Nevada secretary of state is able to track the changes back to their sources, back to the very computers that submitted the new information. Moreover, he says, the day after he called the company to complain, his corporate information and name were restored to exactly what they were before the theft. If Corporate Credit Association of America really got his company from someone else, Krawczyk says, then how would it have all that old information at its fingertips?

Ralph Rogue told Krawczyk Corporate Credit Association of America is refusing to refund his $10,000. In fact, Rogue told Krawczyk, he bought six shelf companies from Corporate Credit Association of America and now fears they are all bogus. He didn’t return calls for comment.

Walsh, the secretary of state’s office’s spokesman, said he could not comment Krawczyk’s case, but Tracy Coenen, a Chicago-based forensic accountant and expert on corporate fraud, said part of the problem is that government agencies and laws have not kept up with technology. If all it takes is a computer to change a corporation’s owner, perhaps it’s gotten too easy, Coenen said.

The Nevada secretary of state’s office is working on new regulations that will focus on bogus business filings. In legislative hearings on Assembly Bill 25, Secretary of State Records Division Deputy Scott Anderson told Nevada politicians that victims of false filings are left to their own devices when it comes to legal recourse.

“We send them to their attorneys, or they try to figure it out on their own — how they might remedy some case of fraud in the filing of documents against their entity,” Anderson said.

With the new laws, which passed unanimously in the Senate, Nevada could follow the lead of other states, Anderson said, and set up a “sort of administrative procedure, including … an administrative hearing process, that we might be able to offer our customers in certain circumstances without having to send them through a costly and lengthy legal process.”

The proposed regulations are still stuck in hearings and workshops.

In the meantime, it’s up to corporations’ owners to keep tabs on their latest filings, to be proactive as possible, instead of reactive, as corporate identity theft becomes more common, Coenen said.

Coenen has never heard of a case like Krawczyk’s, but acknowledged “it might be pretty easy to get away with.”

Unless, of course, you steal that shelf company from the self-described “guru of business credit,” a meticulous man who calls the thieves rookies and vows revenge.

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