... every time a "good-for-business" or "help-for-the-little-guy" policy gets put in place, it's almost a sure bet that one of it's main functions to be a smoke screen.
It's dressed up to sound all fair-minded and helpful, but the probability is high that it's being done to put large chunks of cash in the pockets of a buncha dog-ass rich fucks who have used coin-operated politicians to grease the skids for them.
And if it actually does help somebody get going on a new food truck or a bookkeeping service - well, that just gives it an air of legitimacy, and the plutocrats figure they'll get around to fucking those people too eventually, so hey - win win, right?
And the kicker: By the time the "small fry fraud" starts to show up, the big guys will have had their day - laundered the money they needed to launder, or hidden the assets they needed to hide from the IRS, or whatever.
They can find cover for their own shit behind the petty fraudsters, cluck their tongues, and mutter the usual mantra: "See what happens when you try to do something nice for people? The government should just stay out of the way".
More than 15,500 business filings in Colorado deemed fraudulent were made by one guy
The Attorney General’s Office said the filings linked to one Northglenn address were made when filing fees were reduced to $1, at a cost of $765,919 to taxpayers. There could be more.
The number of new companies created in Colorado in the past two years may not have set all-time records after all, after officials discovered more than 15,500 fraudulent business filings last year by a man who used a stranger’s home address.
The Colorado Attorney General’s Office on Wednesday filed a consent judgment in Denver District Court to settle allegations against defendant Marcio Garcia Andrade for violating the Colorado Consumer Protection Act. Andrade, who doesn’t live in Colorado, was accused of filing the new business formations between February 2022 and August 2023 that were linked to a Northglenn townhome address “without the knowledge or consent of the homeowner and resident,” according to the AG’s lawsuit.
The settlement means that Andrade, who denied all allegations, is barred from filing new business registrations that don’t comply with the law. He also must dissolve the 15,660 businesses created at false addresses and pay $75,000 in penalties. Failure to do so means the AG could pursue further penalties.
“The defendant in this case is being held accountable for his conduct, and my office will continue to pursue those who attempt to defraud the state and harm consumers with false business filings,” Attorney General Phil Weiser said in a statement.
David Curt Japha, the Denver attorney representing Andrade, said his client “did not make any fraudulent business filings,” and offered Andrade’s response to the AG’s lawsuit.
In a legal filing, Andrade used a registered agent located at the same Northglenn address “since November 7, 2016” and was “not made aware of the registered agent’s change of address and had a good faith belief that they had the consent of the owner or occupant,” of the home.
“Mr. Andrade had a contract with a registered agent who resided at the address listed on the filings. However, the agent moved without informing Mr. Andrade before the filings were made. The Attorney General’s press release is not accurate and is itself deceptive,” Japha said in an email.
Andrade’s associate, Rick Steenbock at Jumpstart Incorporations Inc., named in the original complaint, was dismissed from the lawsuit.
Registering a business that has no assets or isn’t active isn’t illegal. Such so-called “shell companies” fueled the tech company trend of SPACs, or special purpose acquisition companies, to help startups go public without the usual public offering rigamarole.
But creating a business using false information can lead to all sorts of mayhem because it gives legitimacy and a public record, according to the AG’s office. It provides a credible Colorado presence for the owner to get a loan, bank account, patents and trademarks. Companies can disguise ownership, conduct real estate transactions anonymously and hide assets.
“Fraudulent business filings are dangerous tools in the hands of bad actors. The veneer of legitimacy provided by a registered corporation can be used to deceive consumers into transacting with, including extending credit to, a business that has supplied false information. And if a business filing is fraudulent, a consumer may be unable to contact the business with concerns — or legal process,” said the AG’s complaint.
But as an extra kick in the pants to the state’s business-friendly filing system, Andrade paid less than usual to start the new businesses. In May 2023, someone at the Secretary of State’s office noticed the unusual number of filings linked to the same address, just as a popular discount was about to be depleted. The discount reduced business filing fees to $1, from $50, and was part of a year-long investment approved by lawmakers to help small businesses recover from the pandemic. About 9% of the $8.4 million in taxpayer funds set aside to cover filing costs allegedly benefited Andrade and Steenbock, for a total of $765,919 in credits, according to the lawsuit.
The AG’s office said 15,433 of Andrade’s business filings were made during the fee discount period.
Weiser said his office didn’t pursue recovering the credits because it wasn’t cash that ended up in Andrade’s pocket. His team had to weigh the time and costs to go to trial for a civil case.
“Our clear conclusion is that there was fraud in terms of the registration of these businesses and all I can say is they agreed with the conclusion that they need to pay 75 grand and they have to dissolve these entities and if they didn’t feel comfortable with that settlement, they could have proceeded to let this case be litigated,” Weiser said. “Our goal was to stop this fraud and this practice and hold this individual accountable.”
Both men have had run-ins with federal authorities. In June 2019, a federal court froze the assets of Grand Teton Professionals, a Wyoming LLC behind an alleged credit-repair scheme that “bilked consumers out of at least $6.2 million, according to the Federal Trade Commission. Andrade was named as a defendant, as was Atomium Corps., a Colorado company where Steenbock was president.
The Colorado AG’s lawsuit said Andrade didn’t have a primary residence in the state, making him ineligible to be a registered agent here. Steenbock has a Parker address. Andrade is also linked to Wholesale Shelf Corp., which profits by selling “shelf corporations” or registered businesses with no activity that are resold so someone new can skip the regular business-startup process. On Tuesday, Wholesale Shelf had nearly a dozen Colorado shelf corporations listed for sale for $10,349 to $15,974. Many had the same Northglenn address.
After noticing the link to the same Northglenn address on May 10, 2023, the Secretary of State’s Office also linked Andrade and Steenbock to the filings using data logs of foreign IP addresses, as well as the same payment method.
Local economists and the Secretary of State had credited the temporary fee discount for the rise in new business filings during the period the fee was in effect. Filings hit record highs each quarter before the funding ran out. First quarter 2023 reached an all-time quarterly record of nearly 56,000 new companies. Previously, new business filings rarely rose above 40,000 a quarter, as seen in the chart below.
But there’s a good chance that some of the data could be rolled back. The Secretary of State’s Office, however, declined to comment on the latest case and did not share details of how fraud has impacted past quarters.
“I don’t think it really means anything for the real economy because a new entity filing is a prelude to activity,” said Brian Lewandowski, executive director of the Business Research Division at the University of Colorado Boulder’s Leeds School of Business. “However, if fraudulent activity is in excess of normal, then the series loses some predictive power as a leading indicator of the real economy.”
Why there’s fraudulent business filings
Authorities have been aware of business fraud for years. In 2022, the Secretary of State’s Office supported Senate Bill 34, which created a process for victims of business identity theft to complain about fraud and have complaints investigated by the attorney general. If determined fraudulent by a judge, the secretary of state must mark the business record as “fraudulent or unauthorized.”
The office’s Fraudulent Business Filings Working Group met for about five months in late 2022 and early 2023 to hash out guardrails later adopted into law.
During a session in December 2022, working group member Greg Wertsch, a Denver-based special agent with Department of Homeland Security’s Homeland Security Investigations, shared examples of how shell companies move assets to avoid paying taxes. Sometimes, it’s legal like in Delaware, where many companies choose to incorporate due to low business taxes.
But worse than evading taxes are the scammers behind shell companies that decimate victims financially (like pig-butchering scams that use flattery to romance the lonely and get them to transfer over their life savings) or cause physical harm. Wertsch said he had a counterfeit Specialized bike helmet that would break into 1,000 pieces if he jumped on it.
“This is the kind of stuff that these shells are importing into our country and that our parents and friends are buying on the internet thinking they have real products. It is a real issue to real families in our state,” Wertsch said. “Counterfeit medications we’ve seized, we have airplane parts, car parts, airbags, safety gear and so much more is being imported by these shells.”
He pulled up a list of more than 80 companies registered in Colorado with “United Nations” in their name.
“I talked to the United Nations. None of these entities are part of the United Nations. None! Yet all of these entities are here. Why do you think that is? Why do you think people are incorporating the Children’s Fund United Nations here in Colorado? You think they might be taking money from people who think they’re donating to the U.N. Children’s Fund, which might be a real thing?” he said, pointing to the United Nations fraud alert page. “It’s likely.”
In a local case, Wertsch said a young woman had difficulties selling her townhouse because pallets of bathroom products — including giant boxes holding toilets, bathtubs and appliances — would arrive daily at her home. They were customer returns sent back to the company’s corporate address.
“This woman’s house was the corporate address for this company,” Wertsch said. “Doing more investigation, there’s a lot of fraud involved with this company (and) many, many companies registered the exact same address within minutes of this company being registered here in Colorado. … This is an example of a Colorado illicit shell that has no place in our state, should not be allowed to be registered. We should not be collecting money from them.”
Business fraud complaints growing
Since then, some changes were made to business filings in Colorado. Victims can now file a complaint with the Secretary of State’s Office if a business used their name or address to register or changed an existing business information without the owner’s consent. Law enforcement can also file a complaint directly with the office, which wasn’t allowed before the new law.
As of Aug. 20, the agency said 2,208 reports of fraudulent businesses have been filed and 1,004 were referred to the Attorney General’s Office for investigation, said Jack Todd, a spokesperson for the secretary of state. Another 816 cases were resolved and the business records updated. Approximately 286 were rejected because they fell out of the office’s scope, 42 were pending an initial review and nine had no violation or evidence of fraud.
“If the subsequent investigation determines that there is evidence of fraud, the Secretary of State’s Office then redacts victim information and flags the record in our business database as suspected fraudulent activity,” Todd said in an email.
Rules went into effect Aug. 7 that prohibit registered agents from using a P.O. Box as their address. Businesses that dissolved or are late in their paperwork also can’t easily refile after a certain number of years unless they show proof of ID and an affidavit.
Some of the rules have yet to begin, such as requiring registered agents to have a Colorado driver’s license or state identification card. That doesn’t go into effect until July 1, 2025.
But without the law, the AG’s office says it couldn’t as easily pursue action to shut down fraudulent businesses or pursue penalties, unless it used the Consumer Protection Act. With the beefed-up law, law enforcement agencies can now file a complaint about fraudulent businesses directly with the state department instead of relying solely on victims.
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