‘Panama Papers’ may help Grassley’s transparency legislation

CEDAR RAPIDS - The 'Panama Papers” -- leaked documents from a Panama-based law firm that sets up anonymous shell companies for clients - may provide a spark for legislation Sen. Chuck Grassley says will increase corporate transparency.

'Transparency brings accountability. You get back to something that's pretty basic to everything I do in government,” said Grassley, chairman of the Senate Judiciary Committee. Along with Rhode Island Democratic Sen. Sheldon Whitehouse he is co-sponsoring the Incorporation Transparency and Law Enforcement Assistance Act that would ensure the disclosure of beneficial owners in the United States.

The 'Panama Papers,” the result of an investigation by the International Consortium of Investigative Journalists and more than 100 news outlets, illustrate the use of shell corporations by wealthy individuals, politicians and businesses to hide legal financial activities.

'The tool is used to avoid, well, I don't know whether it would be just taxes or a lot of things other than taxes,” Grassley said. 'Who knows about the underworld being involved, money laundering and I don't know how many other things.”

When Iowa Citizen Action Network in Des Moines hosted a two-day seminar on the subject, it attracted representatives of the faith community, small business and law enforcement. Much of their concern was the use of shell companies in human and drug trafficking, said Sue Dinsdale, ICAN executive director.

'I've been working on this for the past couple of years,” Dinsdale said. 'It never gets a lot of traction because it's not real exciting. But the ‘Panama Papers' got people thinking and brought this to the forefront.”

Part of the problem is that people think about it as something that happens somewhere else, Dinsdale said. According to an academic study, it's easier to set up an untraceable shell corporation in the United States than any country other than Kenya.

'It's easier for corporations to incorporate and have shadow corporations than to get a library card in a lot of places,” Dinsdale said.

Some of the stiffest opposition to his legislation has come from the business associations that argue that 'maybe people ought to be able to do business without you knowing who you're doing business with,” Grassley said. 'I'm not sure I can accept that.”

Neither does he accept the argument by secretaries of state that the changes required by his proposed legislation will be costly.

'All they have to do is rewrite a form,” he said. 'What we're after is pretty simple. If you set up a corporation we ought to know who's running the corporation.”

The information Grassley is after currently is available through the Treasury Department, according to Iowa Secretary of State Paul Pate, the co-chairman of the National Association of Secretaries of State. He suspects the problem is that 'Congress is frustrated with the IRS and doesn't have a lot of confidence in it.”

Because states have different incorporation processes and tax laws, Pate said the federal legislation would be costly to states and businesses.

'We're trying to streamline government and this will be more red tape,” Pate said.

'We share the same goal - integrity,” Pate said. 'There's no way we want anyone to be able to hide behind a corporate veil. (The information) is there if we use what's already been collected. We need to learn to share.”

Grassley admits the prospects for his legislation are not good this year, but said if there's no action he will try again when the new Congress convenes in January.