Corrupt Delaware LLC’s In Legal Crosshairs?
Maybe, just maybe, the answer is yes.
I got this press release from Mat Marshall of the Delaware Department of Justice yesterday:
Backpage.com to Lose Delaware LLC Formations
Under a Delaware Court of Chancery consent judgment issued Tuesday, four limited liability companies (LLCs) linked to the website Backpage will relinquish their Delaware certificates of formation. The judgment calls for the companies to lose their certificates of formation following a request by the Delaware Department of Justice and negotiation with the company, which has ceased to operate. Backpage pleaded guilty to crimes related to promoting human trafficking, and has agreed to forfeit its assets to the United States government.
The judgment means Backpage.com, LLC, Website Technologies, LLC, Posting Solutions, LLC, and Amstel River Holdings, LLC will have their certificates of formation cancelled 31 days after the current federal criminal charges against the company are resolved. The Department of Justice requested cancellation of the certificates to occur a month after the conclusion of the criminal case against the company based on a request from the U.S. Attorney for the District of Arizona, which is prosecuting Backpage and the other three LLCs and their principals, that the cancellation not take effect until after the criminal cases and related third party claims are resolved.
The Delaware Department of Justice’s November 2018 complaint, filed under then-Attorney General Matt Denn, asked for the cancellation and alleged the four entities “were deeply involved in the criminal activities that were part and parcel of the ownership and operation of the notorious sex trafficking website Backpage” and cited numerous criminal guilty pleas by the entities themselves and one of the principals involved in the entities. The petition was filed under a state law signed in July 2018 authorizing the Attorney General to petition the Court of Chancery to cancel a Delaware LLC’s certificate of formation.
“Delaware law now allows for the Attorney General’s office to petition for the cancellation of a company’s formation due to ‘abuse or misuse of its limited liability company powers, privileges or existence,’” Attorney General Kathy Jennings said. “In this first use of that power with regard to LLCs, DOJ and the Court have set a precedent for using that power to address a company whose formation was largely used to promote criminal activity.”
State Solicitor Aaron Goldstein and Deputy Attorney General Christian Douglas Wright handled the matter for the Department of Justice. The Court of Chancery judgment is attached.
The two money grafs have been highlighted. The bottom line is that a 2018 Delaware law authorizes the Attorney General to petition the Court of Chancery to cancel a Delaware LLC’s certificate of formation.
Let’s highlight a portion of Kathleen Jennings quote now:
“In this first use of that power with regard to LLCs, DOJ and the Court have set a precedent for using that power to address a company whose formation was largely used to promote criminal activity.”
By that standard, forming shell LLC’s to launder illicit drug and/or weapons money or forming shell corporations to illegally move around foreign cash to donate to political candidates would seem to qualify, at least to me.
And Jennings at least implied that this likely would not be the last time that the AG’s office would seek this remedy.
Stay tuned for further developments. This looks promising.
BTW, I’m pretty sure that this was the bill that gave this authority to the AG:
http://legis.delaware.gov/BillDetail?legislationId=26551
and that this was the language from the synopsis that describes the granting of this authority:
“Section 5. Section 11 of this Act amends Section 284 to clarify that the Attorney General has the exclusive authority to move for the revocation or forfeiture of a charter of a corporation pursuant to Section 284. As amended, Section 284 also clarifies that, in light of electronic filing, the Attorney General may file a complaint seeking revocation or forfeiture in the Court of Chancery without regard to county. Section 284 is also amended to provide expressly that the Court of Chancery has the power to appoint a trustee to administer and wind up the affairs of a corporation whose charter has been revoked or forfeited pursuant to Section 284. Section 6.
But what about the lost jobs?! I mean job. Won’t someone think of the poor clerk who works at 1209 North Orange Street?
No, clerks routinely get the shit end of the stick, but this is promising. And unexpected, hope this is the beginning and not just an isolated incident of an incredibly guilty party losing their charter.
http://gregoryjdeangelo.com/workingpapers/Craigslist5.0.pdf
I’m so glad we decided to push sex workers back onto the street and under the control of pimps
I have mixed feelings about that myself. I assume you and I agree that prostitution shouldn’t be illegal in the first place. From that point of view I feel like there are plenty of truly evil LLCs that should have been targeted instead of Backpage. But it’s hard to deny that Backpage also funneled resources into the hands of human sex traffickers and fueled demand. So how does one separate the two in lieu of some major effort to legalize prostitution and enforce some sort of regulation on it as a legitimate industry? That doesn’t seem likely here anytime soon.
Sex trafficking will exist as long as prostitution is illegal, there’s no getting around that.
Even if you assume that 100% of the sex workers on backpage were sex trafficked, the decision to go after backpage resulted in essentially every other website banning sw ads, leading to most non trafficked SWers going back underground. Denn’s decision to go after these websites has and will continue to lead to deaths in the most vulnerable communities
Denn didn’t take down Backpage. That already had happened.
Denn went after the LLC’s that had facilitated Backpage’s illegalities, AFTER Backpage had already taken the hit.
BTW, this is a discussion worth having. I’d welcome your views on what I wrote about SB 142 over on today’s Post-Game/Pre-Game post.
I’m assuming you were asking for DL’s views, not mine. And I want to hear them as well. But I want to be careful not to conflate too many issues unless there is a need for them to be conflated. I realize that both dancers and prostitutes are considered to be sex workers. Correct? But it’s my understanding only dancers can claim protection under the First Amendment. So Backpage being taken down really doesn’t have anything to do with SB 142 unless I’m missing something (entirely possible).
And thank you for pointing out that Denn didn’t take down Backpage. I believe the feds did? But I wasn’t making a distinction between that action and the legal action to go after the LLCs after the fact, so I appreciate that. But that still leaves me in the dark about which actions are harmful to sex workers and which aren’t? And which actions are in ANY way effective at taking the air out of the sex trafficking industry and which aren’t? In other words I have the same question I always seem to have which is what SHOULD we be doing instead? I’m all ears.
I hope my questions aren’t being construed as support for draconian measures that harm sex workers. For the record, I’m on board with sex work as a legitimate occupation – I just don’t have the legs for it. And I’m opposed to human trafficking of any kind but I don’t like how easy it is for that stance to be used conveniently by politicians who want to attach it to sex work to win support.
I was asking for both of your views, and anyone else’s, for that matter.
My issue with Backpage was that it turned out that it was a serious enabler of sex trafficking, so I was not at all sorry to see it shut down.
And you’re right, the First Amendment protects dancers. Which goes to my issue with SB 142. If a bill is going to expressly prohibit an ‘adult establishment’, meaning in Delaware some sort of exotic dance club, from being located in a building where an adult establishment was previously located, I think that’s a de facto violation of dancers’ First Amendment rights. Where are these places gonna go?
Especially since we’ve passed all sorts of requirements prohibiting locations near schools, churches, or residential communities. And the laws in Delaware are very strict on what can’t go on in those establishments.
Here’s the one area where I disagree with you, and I’ll take an excerpt from your post:
“…but I don’t like how easy it is for that stance to be used conveniently by politicians who want to attach it to sex work to win support.”
In Delaware, the most blatant examples of sex trafficking can be found in the so-called Oriental massage parlors that were a staple on Backpage. Back when Delaware was considering enactment of one of the best trafficking packages in the country, I came across, and posted, some articles about how these girls are moved around from state to state and location to location; how they are completely dependent on their pimps; how they were lured here with false promises and/or coercion. THAT’s why Backpage had to be shut down.
Hey, I’m in favor of legalized and regulated prostitution. Needless to say, Delaware will not be in the forefront of that vanguard.
I think we MAY be saying the same thing. But I want to make sure I’m not in left field. So I gather we agree that sex workers should be permitted to charge people for sex as legitimate work. And I can tell we agree that no one should be abducted and/or coerced into selling their body under duress or out of manufactured desperation. But it seems to me that the latter has much more uniform opposition than the former. So if you are someone who is opposed to all forms of prostitution, doesn’t it seem awfully convenient to use outrage over the issue of human trafficking to shut down what was clearly documented to be the safest and most effective market for willing prostitutes to offer their services as well?
It’s my understanding that is exactly what happened with Backpage and the downstream effect to other sites – Human trafficking still exists and patrons of massage parlors will still find them. However, prostitutes who were able to stay safe(r) and able make better money via the web lost that safety and market access. I was saying that I wish we could do away with one without doing away with both. Not throw the baby out with the bathwater so to speak.
Is that what you disagreed with?
I guess you have to understand the context of the time period. Delaware had put together a really good package of laws to address sex trafficking, and we were trying to get them passed. A friend of mine from work was very active in helping girls and some adult women who had been victimized by the trafficking. She alerted me to the ads on Backpage, and became a helpful resource. There must have been at the time, at least twenty or more active Oriental massage parlors in Delaware, and the ads all touted, with pictures, just how young these girls were.
From that point on, I saw Backpage as part of the problem.
That’s the context from where I’m coming.
I believe that prostitution should be safe and legal. And perhaps Backpage offered some of that. But it/they were deeply involved in facilitating sex trafficking. And they were getting paid for those ads.
I think that, in Delaware, the environment is very inhospitable to safe sex work. And, yes, it goes on. That’s an issue I wish the General Assembly would address with at least some sensitivity.