Business Fraud Terminology

Xelebes · Sep 19, 2011

What is the name of the crime where one sets up many corporation names through friends and family to hide or make inextinguishable the actions of a corporation?

Say for example, boss of corporation A tells his buddy to set up corporation B and another buddy to set up corporation C, such that they all do a similar action but if one corporation falls under scrutiny over illegal activities, the others (B, C, D, E, . . .) can continue running while the Boss of A still oversees/profits from the operations.

My single course in business law and various accounting courses haven't taught me this terminology.

Edit: Thread title edited. Some confusion with regards to fraud (often illegal, sometimes not) and crime (always illegal.)

alleycat · Sep 19, 2011

A dummy corporation?

A front?

ironmikezero · Sep 19, 2011

Need more details... Generally speaking, in the US setting up a corporation in and of itself is not a crime. What matters is what the corporation does - or fails to do. Corps are essentially treated like individuals before the law. Different countries have different pertinent regulations and oversight bodies (think SEC).

If the creation of these corps is an overt act in furtherance of conspiracy to commit another crime (bank fraud, money laundering, stock/securities manipulation, etc.) then you'd have a criminal act under the US Code (18USC371, and subsequent violation under 18USC1341-1346, etc.).

It occurs to me that you might be thinking of a structured investment scam (e.g., Ponzi Scheme, etc.) that's essentially hidden behind a series of corporate fronts - it's still fraud, but on a larger scale.

www.sec.gov/answers/ponzi.htm

Georgina · Sep 20, 2011

Shell corporation, perhaps?

Cheers.

Xelebes · Sep 20, 2011

ironmikezero said:
It occurs to me that you might be thinking of a structured investment scam (e.g., Ponzi Scheme, etc.) that's essentially hidden behind a series of corporate fronts - it's still fraud, but on a larger scale.

www.sec.gov/answers/ponzi.htm

Close. It's more a company runs a prison/hospital/bordello/facility housing people but after a while it has many affiliates, and as one is shut down (getting sued of its ass for gross violations of human rights or false advertising) another two pop up. So while the owner may have to shut down Facility A, friends are operating facility B and C with the very same standards as Company A, using the same staff as Company A and so forth.

In this specific case, it more resembles a pyramid scheme than a ponzi scheme as the friends come from within facility A. But we are more concerned about the proliferating nature of the names attached to the theme of business. Legality is not so much an issue, as some jurisdictions (or most) seem to be okay with this tactic.

Business Fraud Terminology

Xelebes

Delerium ex Ennui

alleycat

Still around

ironmikezero

practical experience, FTW

Georgina

Sushi at midnight

Xelebes

Delerium ex Ennui