Delaware Attorney General Matt Denn filed a complaint against Backpage.com, and three related companies, in an effort to dissolve its LLC status in the First State.
The attorney general announced his decision to do so in August after advocacy groups criticized Delaware’s LLC laws, which allowed Backpage to renew its LLC license despite a federal indictment accusing seven of the company’s executives of facilitating prostitution, money laundering and criminal conspiracy.
The company’s former CEO pleaded guilty to money laundering and conspiracy to facilitate prostitution. The federal government shut down Backpage.com due to the investigation.
“Delaware law has never permitted or condoned the use of business entities formed under its laws for unlawful or nefarious purposes, and thus Defendants’ guilty pleas are proof that Defendants, and their principals, have abused and misused not only Defendants’ powers and privileges, but their very existences, in perhaps the most reprehensible manner possible,” the complaint reads.
“Having abandoned the responsibilities that come with status as Delaware limited liability companies, Defendants must be forever denied the rights and privileges that also come with that status, and their certificates of formation must therefore be canceled.”
Delaware’s LLC laws allow the true owners of an LLC to remain shielded and serves as a major incentive for companies to set up in Delaware. The state has more than 800,000 LLCs, and last fiscal year received $273.8 million from taxes, penalties and interest from LLCs, the Delaware Department of State told WHYY in August.
The laws have been criticized by several advocacy groups who argue criminals use the laws to hide their nefarious activities.
The indictment against former Trump campaign chair Paul Manafort stated nine Delaware business entities were used in the international money laundering and tax fraud scheme he’s charged with running. Manafort was found guilty of tax fraud and other charges over the summer.
The Mexican drug lord known as “El Chapo” allegedly used a Delaware LLC for his drug money.
And there also were reports this year that President Donald Trump’s former attorney Michael Cohen used a Delaware LLC to pay porn star Stormy Daniels to stay silent about her relationship with the president.
Despite the criminal investigation against Backpage, the company was able to register for LLC renewal on June 28 with Delaware’s Division of Corporations, where it remains in “good standing.”
After advocates vocalized their distaste and WHYY published a story about the renewal, Denn’s office decided to take advantage of a new law signed by Gov. John Carney in July that gives the AG’s office the authority to seek dissolution of a limited liability company in a petition with Chancery Court, which handles business-related disputes.
You can read the official complaint from Denn below: