Tackling the Opioid Epidemic through Corporate Transparency

By Waiyan Tse

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Ending Anonymous Shell Companies Will Enable Us to Follow the Money Driving the Illicit Opioid Trade

Opioids are killing more Americans than ever before.

On average, 78 people die from opioid overdose everyday. From 1999 to 2014, more than 165,000 lives were lost due to overdoses related to prescription opioids. This crisis is being described as “one of the worst public health epidemics” in U.S. history.

The prevalence of opioid abuse is pushing families apart, tearing at the fabric of our communities, and killing our loved ones. So what or who is to blame for this prevalence? What is allowing opiates to be transported into the heart of our communities? There are a number of reasons, but a recent report published by Fair Share Education Fund reveals one of the less-discussed—yet systemic—drivers of opioid abuse: anonymous shell companies.

Titled Anonymity Overdose, the report reveals the major role played by the secrecy in our corporate formation process.

Companies are formed at the state-level, and, currently, no state collects beneficial ownership information—that is, the real person who owns, controls, and benefits from the company—when a company is formed.  This opacity is a major benefit for those who have illicit motives. Secrecy allows terrorists, human traffickers, and—in this case—drug dealers to create anonymous shell companies to avoid detection and prosecution.

“U.S. shell companies [have] the dubious distinction of being the only money laundering method where secrecy is provided by a government entity…This is simply unacceptable.”

-Adam Szubin, Acting Under Secretary for Terrorism and Financial Intelligence of the U.S. Treasury.

Anonymity Overdose provides 10 case studies where shell companies played a key role in opioid trafficking and related money laundering. The cases involve anything from fake gold miners and a former USC athlete to investment bankers and a peruvian airline owner. All, however, have one thing in common: using anonymous shell companies as tools to traffic opioids undetected.

In one case, Kingsley Lyare Osemwengie and his associates used call girls and couriers to transport oxycodone (an opioid pain medication) and launder their money through an anonymous shell company named High Profit Investments LLC, which is incorporated in Nevada, one of the most notorious secrecy jurisdictions in the world.  Their drug trafficking network expanded across 13 states, including Massachusetts, Nevada, Texas, Florida, Georgia, Utah, Colorado, New York, Washington, Alaska, Pennsylvania and Oregon.

Shell companies make it too easy for criminals to launder money and avoid detection. Some are even happy to teach others just how easy it could be for them.  Pavel Sosa Medina and Amado Vazquez Jr. unwittingly taught undercover IRS agents how to launder around half a million dollars of drug money.  The two created a step-by-step plan that involved using anonymous shell companies in Florida and Kentucky.  Fortunately, these two were caught, but if our laws continue to make it as simple as it is, many more will learn how to remain undetected.

In these cases, shell companies weren’t just an essential tool for money-laundering—but in the manufacturing and trafficking phases as well. For example, in one case, two people from Ohio, Addonise Wells and Mario Freeman, were accused of leading a large scale heroin trafficking ring using an anonymous front company to transport the drugs.

In another case, the Sanchez-Paredes family, who allegedly have been operating a Peru-based drug trafficking organization since the early 1980s, expanded their illegal “family business” to Florida. The two anonymous mining companies that the family owns, CIA Minera Aurifera Santa Rosa SA (“Comarsa”) and CIA Minera San Simon (“San Simon”), which claim to be mining gold… but are believed to be manufacturing cocaine.

In the few examples in the report, investigators succeeded in untangling the hidden networks behind anonymous shell companies; however, they only represent a minority of cases. The majority of the time, law enforcement is forced to abandon their investigation when it leads them to an anonymous company.  Our laws protect criminals by allowing them to set up these companies anonymously and prevent investigators from ever being able to connect them with the company.

As anonymous shell companies continue to fuel the opioid epidemic and create obstacles for investigators, congress has been slow to respond. However, there is a bill that would make sure that our laws protect our communities and not drug dealers. The ‘Incorporation Transparency and Law Enforcement Assistance Act’ , a bipartisan bill in both the House and Senate, would give law enforcement the tools they need to find and prosecute the drug traffickers behind these companies contributing to the epidemic.

As we mark Prescription Opioid and Heroin Epidemic Awareness Week, it’s time for our policymakers to act.

Waiyan Tse is an advocacy intern with the FACT Coalition.