DEPARTMENT OF JUSTICE
MATTHEW P. DENN {20 NORTH FRENCH STREET PHONE (202) 577-3400
‘ATTORNEY GENERAL \WILIINGTON, DELAWARE 19601 Fax 02) 577-2610
August 17, 2018
Mr. Nick Wasileski
President
Delaware Coalition for Open Government
1012 Kent Road
Wilmington, Delaware 19807
Dear Mr. Wasileski,
Thank you for your petition. It appears from reviewing the petition that the goal
of your organizations is to seek changes to Delaware's LLC statute. We would be happy
to participate in a review of Delaware's LLC statute to determine if any changes are
appropriate.
As you probably know, the Department of Justice (“DOJ”) helped to draft and
obtain passage of a bill last spring (S.B, 183) amending Delaware's domestic LLC statute
to give the state authority to dissolve domestic LLCs upon an appropriate showing of
proof. The General Assembly also passed legislation last June that afforded the
Department of State authority to issue regulations relating to some of the beneficial
ownership issues raised in your petition (H.B. 404), DOJ was one of 24 State and
Territorial Attorney General’s Offices to urge Congress last month to pass federal
legislation to require companies to disclose the identities of persons who control and
profit from the company at the time of incorporation (a copy of that letter is enclosed).
DOS is planning to use its new authority under $.B. 183 to ask that the Court of Chancery
dissolve one of the LLCs referred to in your letter, backpage.com. Because this first
filing under the new statute may impact how the courts handle future filings, and
because the federal government has already frozen the actual operations of
backpage.com, DOJ attorneys will be acting deliberately in preparing and filing the
dissolution petition.
Because the ultimate goal of your effort is a change to the Delaware Code, we
suggest that the appropriate vehicle for a review of the existing statute is a group
convened by the General Assembly. As indicated above, we would be happy to actively
participate in such a group. Among the issues that we would suggest such a group
investigate are the differences, if any, between Delaware’s LLC statute and those of other
states, the specific areas of impact from the perspective of local, state, and federal law
enforcement officials of LLCs and other business entities on law enforcement efforts, andthe feasibility of these issues being addressed at the federal level rather than the state
level in order to ensure a comprehensive solution,
‘This office and other prosecutors’ offices generally appoint independent counsel
only in instances where (a) there is an investigation that must occur involving a specific
target or person of interest, and (b) the prosecutor's office has an actual or apparent
conflict of some type with respect to that investigation. Since your request is focused on
changes to state law rather than asking our office to investigate any specific new matter,
much less one where DOJ would have a conflict of interest, it does not appear that there
is a basis for appointing an independent counsel.
A copy of this response is being sent to the President Pro Tem of the Delaware
State Senate and the Speaker of the Delaware House of Representatives, so that they can
take any follow-up action that they deem appropriate.
Sincerely,
be R. Goldstein
Chief Deputy Attorney General
Enclosure
CC: Sen. David B. McBride, President Pro Tem of the Delaware State Senate
Rep. Peter C. Schwartzkopf, Speaker of the Delaware House of Representatives‘The Honorable Jeb Hensarling ‘The Honorable Maxine Waters
Chairman, Financial Services Committee Ranking Member, Financial Services Committee
United States House of Representatives _ United States House of Representatives,
2129 Rayburn House Office Bldg. 4340 Thomas P. O'Neill Jr. Federal Office Bldg.
Washington, DC 20515 Washington, DC 20024
July 27, 2018
Dear Chairman Hensarling and Ranking Member Waters:
‘Thank you for your diligent work crafting legislation to improve corporate transparency by
requiring companies to disclose the identities of individuals who control and profit from the
company at the time of its incorporation. We write to express our support for this change, which
‘would prevent these individuals from using anonymous shell companies to evade accountability,
and to convey the importance of making this information available to state and local law
enforcement.
As you know, state attorneys general are the top law enforcement officers in our respective
states, We are leading efforts to protect residents of our states by addressing the opioid
epidemic, combating human trafficking and investigating and prosecuting other crimes.
During a hearing before the Senate Judiciary Committee on February 6, 2018, M. Kendall Day,
Acting Deputy Assistant Attorney General of the Criminal Division of the U.S. Department of
Justice noted: “One of the most effective ways to deter criminals and to stem the harms that flow
from their actions—including harm to American citizens and our financial system—is to follow
the criminals’ money, expose their activity, and prevent their networks from benefiting from the
enormous power of our economy and financial system. Identifying and disrupting illicit
financial networks not only assists in the prosecution of criminal activity of all kinds, but also
allows law enforcement to halt and dismantle criminal organizations and other bad actors before
they harm our citizens or our financial system.”"
‘The use of anonymous shell companies by those engaged in human trafficking, drug dealing, and
other crimes, allows criminals to launder and spend money attained through criminal activity
without accountability. Unfortunately, our investigations can stall when these companies are
used to hide the identity of the individual or individuals who control or profit from the company
‘We urge you to ensure that the legislation you adopt to address this important issue includes the
following components:
‘+ Information must be available to state and local law enforcement for their use in civil and
criminal investigations and states’ authority to enact and enforce state laws to ensure
corporate transparency and prevent wrongdoing must be maintained;
* Statement of M. Kendall Day, Acting Deputy Assistant Attorney General, Criminal Division, U.S. Department of
Justice, Before the Senate Judiciary Committee, February 6, 2018,
hntos://vww. judiciary senate gov/imo/media/doc/02-06-18420Day%20Testimony. pdt