The greatest financial secrecy tool the world has ever invented isn’t something you can hold. It’s not something you can see, or touch, or peer into, trying to ascertain what exactly it contains. It is, in a very real sense, something of a fiction: it exists solely on paper, and solely to conceal the names of the people, and the sources of their money, for whom it was created.
It’s called an “anonymous shell company.” Like regular companies, these anonymous shell companies can be registered quickly: a few phone calls, a bit of paperwork, and a new company can be had in a short period of time. On paper, it’s often difficult to tell the difference between the founding of a legitimate company and the founding of an anonymous shell company. But where a regular company will soon begin building out its enterprise—hiring employees, creating its brand, selling its products and services—these anonymous shell companies almost never serve any legitimate purpose. Instead, they’ve done arguably more damage, caused more bloodshed, and obscured more dirty money than anything the world has ever known, all while cloaking more illicit and ill-gotten assets than we’ll ever know about. And they’re something the U.S. has been creating, and selling, for decades.
For instance, in 1986, the Wall Street Journal featured a full-page advertisement aimed at readers in East Asia. The splash page featured a smiling photo of S. B. Woo, a lieutenant governor of Delaware—a small American state tucked between New York and Washington, D.C., on the country’s Eastern Seaboard, a jurisdiction smaller than places like Kuwait or Israel. Woo had a simple question for the readers: “Are you thinking of investing in the USA?” One suggestion, in all caps for emphasis, declared: “WHY NOT DO AS THE AMERICANS DO!”
The advertisement served as an effective launching pad for the lieutenant governor’s tour through much of Asia. Alongside Michael Harkins, Delaware’s secretary of state, Woo visited businessmen, potential investors, and high-ranking officials alike. Touring Taiwan and China, Indonesia and the Philippines, Woo and Harkins had one goal in mind: to draw as much attention, and as much money, as they could to Delaware—a state few outside the U.S. had ever heard of, or had much reason to.
In the meetings they’d set up, Woo highlighted why those deep pocketed officials and businessmen they met with should consider Delaware for all of their anonymous financial needs. The meetings raised few eyebrows; at the time, there were hardly any concerns about these kinds of companies. Instead, they were part of a far broader campaign of American outreach, searching out new markets to help spread the gospel of American capitalism—markets that Delaware wanted a piece of. Woo’s travels took him farther than any Delaware official had ever been in an official capacity. He struck up a relationship with the Chinese ambassador and built up ties with regional exporters, as well as the wealthy Hong Kongers who would later funnel their wealth out of the island territory following its 1997 reunification with China.
During all of these talks, one of Woo’s favorite props was, according to New York Times coverage of the trip, a “bilingual pamphlet.” Despite the fact that it “resembled something dreamed up by the National Lampoon back in the days when it was funny,” it carried a simple promise to those in the turbulent region: “We Protect You From Politics.”
The pamphlet pointed specifically to something that few of the businessmen and politicos they met with likely knew about. Woo and others had dubbed it an anonymous shell company—and it would allow all those they met with, and all of the millions of dollars those people controlled, to effectively disappear, if the need should ever arise. On their face, there was nothing corrupt, and certainly not illegal, about these anonymous shell companies. The state of Delaware—known for being one of America’s original 13 colonies and not much else—had made them perfectly legal. And plenty of officials from American states similarly visited foreign environs on investment trips, especially toward the end of the 1980s and early 1990s. In that sense, the visit from the Delaware officials was no different.
But this anonymous shell company product perked more than a few ears. A month after the Wall Street Journal ad ran, Filipino protesters ousted the gluttonously corrupt Ferdinand and Imelda Marcos, revealing to the world the details of Ferdinand’s financial crimes. (They also helped reveal things like Imelda’s sprawling shoe collection, which ran into thousands of pairs.) New Filipino authorities and long-suffering Filipino investigators began the process of tracking down the Marcoses’ looted wealth in order to reclaim what rightfully belonged to the Filipino people. Doing so would also ensure that the couple couldn’t enjoy any of their illegitimate assets after they were ousted from power.
As such, Woo’s audience in these nondemocratic countries, skittish about potentially being overthrown or watching their financial lifelines dry up, was receptive. They were eager to hear more about these magical get-away-free tools—these anonymous shell companies—that this small, distant state was selling. As they read the pamphlet, Woo’s interlocutors learned just what these anonymous shell companies could do. By purchasing one of these anonymous shell companies in Delaware, they could enjoy all of the legal protections those in Delaware already enjoyed. “[I]n the event of an emergency in your home country, such as insurrection or invasion by a hostile power,” the pamphlet read, “your company can temporarily or permanently move its domicile and be protected by the laws of The State of Delaware.” Of course, as Woo pointed out, the officials and businessmen he met with didn’t need to wait for an insurrection or invasion; they could start purchasing and setting up these anonymous shell companies as soon as they liked.
The campaign worked: Woo and Harkins ended up signing rafts of new clients excited by American financial protections. Delaware made some $1 million from their trip—a remarkable sum, considering that setting up one of these anonymous shell companies in the state can run as little as about $100. But $1 million was just the beginning, and a sign of things to come. It was clear, as the New York Times reported that year, that thanks to these anonymous shell companies, Woo and Harkins had hit on “a way of making everybody rich” in the state—and that more would soon be flocking to “happy Delaware.”
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Excerpted from AMERICAN KLEPTOCRACY: How the U.S. Created the World’s Greatest Money Laundering Scheme in History by Casey Michel. Copyright © 2021 by the author and reprinted by permission of St. Martin’s Publishing Group.
