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An invitation to fraud
Following last week's release of an extensive investigation into
hidden campaign financing related to a tax credit law, ProwlingOwl.com is exposing previously unseen information. This information identifies LLC's acting as front entities claiming $236 million in investments, using the same program. Loopholes available in this program allow taking $2 in tax credits for every $1 claimed as an investment. Allowing these LLC's to take as much as $472 million in unearned tax credits in 2007 tax credits.
Below are links to copies of the first documents obtained from reliable sources revealing what was presented as the names of over 100 LLC's listed with the Oklahoma Tax Commission including the size of investments claimed under the Small Business and Rural Small Business components of the Capital Formation Incentive Act.
Links:
It is significant to notice, only the claimed investment amounts are listed and no tax credits amounts are shown demonstrating states officials making a greater effort to prevent the public from learning of this scheme already costing over $1 billion.
The documents list approximately 70 LLC's (i.e. investing entities) investing a total of $236 million in
16 Small and Rural Small business Capital companies (i.e. LLC's functioning as pass-through entities). These 16 LLC's then invested the same money in 36 other LLC's (i.e. target entities). In the process the pass-through LLC's
are authorize to take tax credits that can amount, in this case, to as much as $470 million.
A close examination of the list reveals identities and amount similarities between several investing and receiving entities, that raise several questions.
For example
Is the tax credit program simply being used in a money laundering scheme that passes money between to commonly owned LLC's, by way of a pass-through LLC. The pass-through entity performs
a financial paper shell game to claim tax credits.
Tax credits which can be sold providing, as much as, 200% in unearned windfall profits.
- Lawmakers left the program void of accountability and oversight, pre-authorizing certain entities to automatically take unlimited tax credits while avoiding any review or authorization process.
- Those using the program are free to violate the law any way necessary to taking the tax credits. All because
the law specifically prohibits the state from recapturing its losses. The possible worst punishment is to not
be allowed further participation in this program, while allowed to keep the ill-gotten $100's million.
Note: There is insufficient information in these documents to determine how much if any of the above is connected with other investment program known to be abusing the same tax credit incentive program. Other known programs include, but are not limited to
- $330 million in tax credits taken in third quarter 2006.
- $600 million in tax credits advertised in the Capital West Securities September 2007 letter soliciting $300 million from
investors.
- tax credits taken before the 2006 failed attempt to close the loophole, which would include the $66.3 million taken by Altus Ventures for the Quartz Mountain Aerospace project that ended up costing tax payers close to $1 million per job created.
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