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So What, Really, Is the Problem?

September 27, 2011

Reuters has published yet another article  on the ills of corporate-transparency, this time in the state of Nevada.  The authors are using some pretty sloppy logic to make a social point, rather than simply reporting the news.  For example: “the presence of former felons in the business of creating businesses is an extreme example of vulnerability in corporate America.”  Does this mean that if any industry has former felons in it, it is at risk somehow?  If we discover that someone who works for Reuters was convicted of a felony, does that cast doubt on their reporting?  What if it was only a minor traffic conviction?  Where do we draw the line?  Part of the American philosophy  includes permitting people to get on with their lives, rather than continuing to punish them, once they have paid their debt to society.  Here is an excellent article on hiring ex-felons.

The article does, of necessity, admit that this is a minor problem.  It says “most Nevada companies are above-board.  And so are most shell companies.”  But apparently, when a state offers incentives for incorporating there, that attracts some unscrupulous types in addition to the legitimate businesses.  Who knew?  Reuters actually makes the point, in this article, that there are some excellent reasons for wanting privacy, or using shell corporations.  The problem, which they can’t seem to grasp, is that any system which allows the freedom to conduct legitimate business will also be vulnerable to abuse.  But that is the cost of a free society; everyone may act as they please, but some may choose to act against society’s interests.  When that happens, the law punishes them.  But if we criminalize all behavior, we eliminate the good along with the bad.

The thrust of this article seems to be that dishonest people who have been punished for abusing the system may continue to abuse the system even after they are punished.  But the system itself is just fine.  This is
actually a success story, showing that current law enforcement efforts are making serious headway against those who would use shell companies and other legitimate business tools for tax evasion or other criminal  enterprises.  Maybe, instead of trying to over-regulate States’ activities, we just need harsher sentences for parole violators.

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