How Are Shell Companies Used in Fraud Schemes?

How Are Shell Companies Used in Fraud Schemes?

A shell company is a business entity that has no significant assets, no ongoing business activities, offers no products or services, and typically has no employees and no physical presence other than a mailing address. Shell companies may be formed for the purpose of carrying out legitimate transactions, such as asset transfers or corporate mergers, acquisitions, or reorganizations. A shell company may be used to conceal the true identity of the real company operating through the shell.

Shell companies are not illegal by nature; however, shells can be used in a number of fraudulent schemes.

How Are Shell Companies Used in Fraud Schemes?

Shell company fraud schemes can range from thousands of dollars to millions of dollars in fraudulent dealings. A shell company fraud scheme may involve:

  • Within a company’s accounts payable accounting entries a shell company may be used to conceal bribery payments or to steal millions of dollars from the company.
  • A shell company may be used to shield identities, hide money, to launder money, or to conceal fraudulent conveyances.
  • A company’s employee may create a shell company for the purpose of misappropriating company assets. This type of scheme may involve fake vendors or fraudulent billings involving real vendors.
  • A shell company fraud scheme can involve false billing, including paying for goods or services that were never delivered or provided. A shell company fraud scheme may also provide the goods or services at a massive mark-up as the billing passing through the shell.
  • Often a shell company fraud scheme will have co-conspirators – multiple people, whether employees or third parties, working together to execute the scheme.

 

The perpetrators of a shell company fraud scheme may rent an office and hire employees to provide the illusion of a legitimate business entity.

White Collar Prosecution of Fraud

Law enforcement agencies and prosecutors know what red-flags to look for when investigating alleged fraud by a shell company. These sort of fraud schemes are prosecuted aggressively. If you are under investigation for, or have been charged with, fraud involving the use of a shell company then you need to hire a white collar criminal defense attorney immediately.

Here at Ashley D. Adams, PLC we zealously defend corporate entities, executives, and directors against allegations of misconduct. We have the experience and skill to aggressively and effectively represent your legal rights. Contact us or call now (480) 219-1366 to schedule a case evaluation.

We practice excellence, one client at a time.