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Shell Game

Rob Rogers
© Rob Rogers

One of the things I find strange about the whole Panama Papers scandal is that shell corporations are not actually illegal, and there are legitimate legal reasons for setting them up. In fact, when one of the companies I started years ago was bought by another company, the merger involved two shell companies, and there was absolutely nothing nefarious or immoral about it.

Yes, shell companies can be used for bad things, but demanding that someone resign because their name is connected with a shell company is like arresting someone for drugs because they own a couple of boxes of ziplock bags. It is ok if you investigate that person to see if indeed they broke any laws, but just being connected with a shell company is not illegal or immoral.

Shell Corporations



  1. westomoon wrote:

    My guess is that all the flap is because this puts a face on the abstract stories of the Great Theft of the past 30 years — the migration of all wealth from the lowly to the richer-and-richer. For many people, this is probably the first time those reports have actually seemed real.

    Use of off-shore tax havens is not for the modestly affluent — so we all know that the names in the Panama Papers both got rich and got greedy about their wealth. This could have an interesting synergy with Bernie Sanders’ message.

    Sunday, April 10, 2016 at 10:11 am | Permalink
  2. HMM wrote:

    Is it the only way to perform legitimate actions?

    I would disagree with some of these, I have a hard time seeing your example of “To Keep Your Brand Strong” or “Hide Assets from a Future Ex” as legitimate. And, even though I might agree with “To Protect Trade Secrets”, as much as those companies are working to uncover all of our secrets, I see that as a bit ironic.

    Sunday, April 10, 2016 at 11:22 am | Permalink
  3. Iron Knee wrote:

    Westomoon, I see your point about the people named in the Panama Papers probably being both rich and greedy, but as far as I know that is not a crime (although it might be a qualification for running for the Republican nominee for president). And if people are using offshore shell corporations to do things that are either illegal or just immoral, Congress should (and can) do something about that. Which was the whole point of the cartoon. What hedge fund manager needs an offshore shell company when they get away with only paying capital gains taxes on their income?

    HMM, yes, shell companies are the ONLY way to perform many legit (and necessary) actions. There are plenty of laws or regulations that could be used to make it much harder to do illegal things, but Congress doesn’t act. Just like there are many things that Congress could do to stop the migration of wealth that Westomoon is pointing out. For example, fixing the capital gains tax I just mentioned. The problem is that the rich (through the media they own) have somehow convinced people to vote against their own self interest. For example, the way the UK reduced their horrible income inequality was by increasing the inheritance tax, but here in the US we vote for people who want to abolish it. I even know liberals who have bought into the whole “it’s a death tax” or “it is double taxation” arguments. We seem to be so easily brainwashed.

    Sunday, April 10, 2016 at 12:49 pm | Permalink
  4. ThatGuy wrote:

    Something doesn’t need to be illegal to warrant resignation, though. It could just be shitty enough behavior that people get fed up with whatever a leader is doing. To take it out of the shell corporation example, the former CEO of Mozilla donated to anti-LGBT organizations. This is perfectly legal, but it’s also sufficiently reprehensible that it cost them their job.

    We won’t see much fallout from the Panama Papers here, though, since the US doesn’t restrict the use of shell corporations the same way as other developed or more principled countries do. Apparently to include China and Russia…

    Sunday, April 10, 2016 at 4:00 pm | Permalink
  5. Iron Knee wrote:

    That’s what I meant by including things that are immoral. Brendan Eich did something that was contrary to the morals of the company (Mozilla) he was supposed to represent, so he resigned.

    Again, there are perfectly innocent and legitimate purposes for shell companies. Just because someone’s name is somehow associated with a shell company is not enough reason to conclude they are guilty of anything.

    I’m not saying we should ignore the Panama Papers. We should investigate everyone mentioned in them. But let’s consider them innocent until we find something that is illegal, immoral, or “shitty enough behavior” to “get fed up with”.

    Sunday, April 10, 2016 at 4:13 pm | Permalink
  6. ThatGuy wrote:

    IK, I hear you. I just think that continuum of uses for shell corporations is overly rosy. I’d say the only strongly “green” uses of them (at least as listed above) to be securing trade secrets and avoiding kidnapping, and even those have downsides in terms of public interest in transparency. Put simply, it seems the vast majority of things (again, as listed) you can do through a shell corporation warrant a level of scrutiny that the system itself is designed to prevent.

    To your subsequent point, Congress should absolutely act to make the legitimate uses of shell corporations legal/possible without the middle man. But to pile on to the comic, I don’t think they’ll face significant pressure to do so since Americans by and large didn’t need to off-shore their off-shoring to Panama. Thanks in large part to our legislature’s deference to systems that benefit the wealthy.

    Monday, April 11, 2016 at 12:07 pm | Permalink