Six business entities created in Delaware by a former campaign manager for President Donald Trump have been dissolved in a ruling by the state’s Court of Chancery.
Delaware Attorney General Kathy Jennings sought the action against four limited liability corporations and two other corporations owned by Paul Manafort and Richard Gates, who once was deputy Trump campaign manager under Manafort.
Manafort and Gates were accused of using the companies to launder $75 million from the Ukrainian government to help Manafort and Gates in tax fraud and other crimes.
“This is another victory for the integrity of Delaware’s corporate brand,” Jennings said in a statement. “Paul Manafort and Richard Gates violated Delaware law and abused the corporate franchise to commit federal tax fraud. Dissolving their LLCs and corporations ensures that they can never again be used in such schemes.”
In a separate case stemming from Robert Mueller’s investigation of Trump, Manafort was sentenced to seven and a half years in prison in March 2019 on charges including filing false tax returns, bank fraud and failing to disclose a foreign bank account. He was also ordered to pay $24.8 million in restitution and a $50,000 fine. Gates pleaded guilty to conspiracy against the United States and for making a false statement to the Special Counsel’s Office. He cooperated with federal prosecutors in their case against Manafort and was sentenced to 45 days in jail.
Delaware has long been known for its corporate-friendly regulations that allow owners of limited liability companies to remain anonymous. That protection, along with the state’s highly respected Court of Chancery to resolve business disputes, has led to the creation of more than 800,000 LLCs from which the state gets more than $200 million in taxes, penalties and interest.
But in recent years, state lawmakers have taken steps to weed out some LLCs using Delaware’s business-friendly laws for nefarious purposes. In 2018, the founder of Backpage.com pleaded guilty to money laundering and conspiracy to facilitate prostitution. Despite that, Backpage was able to renew its license in Delaware.
Mexican drug lord “El Chapo” has also been accused of using a Delaware LLC to hide his drug money. And former Trump lawyer Michael Cohen allegedly used his Delaware LLCs to coordinate a $130,000 payment from Trump to adult film actress Stephanie Clifford, who uses the stage name Stormy Daniels.
Starting in 2019, Delaware launched more stringent requirements for agents setting up an LLC. The “Know Your Customer” rules, which stem from legislation passed in the General Assembly, require agents to regularly vet the LLC to ensure they’re not associated with individuals or agencies sanctioned by the federal government or banned from doing business in the U.S.
Those rules have led the AG’s office to seek to dissolve other entities including an LLC believed to be connected to the “Cartel of the Suns,” an organization of high-level members of the Venezuelan armed forces smuggling cocaine into Mexico and the U.S. for the Revolutionary Armed Forces of Colombia.
“We will continue to enforce all regulations governing Delaware LLCs and corporations and ensure that nobody — no matter his connections — is above the law,” Jennings said.
The state Department of Justice said neither Manafort nor Gates cooperated in the case against the LLCs. Neither of them responded to the state’s complaint over the course of more than a year.
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