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, andthe 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‘+ Law enforcement should be able to access the information throughout their investigation, either by using subpoenas or through officials trained in proper utilization of the Financial Crimes Enforcement Network (FinCEN) database; and ‘© The definition of beneficial ownership must not allow loopholes that criminals can exploit. We appreciate your efforts to address this problem, and your recognition of the necessity of sharing this information with state and local law enforcement. If we can be of assistance, please do not hesitate to contact our offices. Sincerely, G bia y lite — Cynthia H. Coftfrian Colorado Attorney General California Attomey General Matthew P. Denn Delaware Attorney General umteh. Aug Russell A. Suzuki Hawaii Attomey General <—Jou Wife, Tom Miller Iowa Attorney General Beas 2. Brian Frosh Maryland Attorney General Lai Geter Lori Swanson Minnesota Attomey General ft W. Fo Robert W. Ferguson Washington Attomey General George Tepsen Connecticut Attorney General Kari A-Racine District of Columbia Attorney General Lisa Madigan / Illinois Attorney General fin 7 pt fet Mills Maine Attorney General ‘Massachusetts Attorney GeneralCBR). Gurbir S, Grewal New Jersey Attorney General Josh Stein ‘North Carolina Attorney General Yo Comte Ellen F, Rosenblum Oregon Attomey General Wanda Vétzquez Garved Puerto Rico Attomey General TA. e Vermont Attomey General Hector Balderas New Mexico Attorney General Merriam Edward Manibusan Northern Mariana Islands Attorney General JURE Josh Shapiro Pennsylvania Attomey General Peter F. Kilmartin 4 Rhode Island Attorney General MarQR. Horr. Mark R. Hering 6 Virginia Attorney General