Theft Through Paperwork: SOS Filings and Business Fraud

For the past several years, and for as little as $150, you too could own the business of your dreams. Of course, you’ll need to steal it and, if you’re caught, it’s a felony violation. However, the possibility of arrest for a category-C felony hasn’t deterred criminals who contact Nevada’s Secretary of State’s (SOS) for nefarious reasons. Would-be business thieves, through a simple filing process, can change the ownership and officer information of Nevada-registered businesses, for just a small fee in many cases. From there, criminals can change a business’ name, sell property or even borrow against the good credit of a company.

It’s a huge issue that has recently come to light. Filing can be changed either online, through the SOS’ “Silver Flume” program, which was instituted by former Secretary Ross Miller in 2012, or via paperwork submitted to the office. According to an article published by the Las Vegas Review Journal last month, the SOS received as many as 173 complaints about fake filings from 2015 to 2017, but only in one case did they find fraud. In 35 other cases, the secretary’s office corrected records or ended investigations when they didn’t receive a response to inquiries from possible scammers. And, another 46 complaints were dismissed because the victim knew the potential fraudster.

I reached out to Secretary of State Barbra Cegavske to find out what her office is doing to combat fraud. An official statement sent to the Review Journal in response to the articles published on this topic indicated that, while the Secretary of State takes the filing of false or forged documents very seriously, the agency’s function is, “mainly ministerial, similar to that of a county clerk or recorder.” The statement added that office has no statutory authority to “verify the validity of information contained in the filings or the identity of those filing at the time of the filing.”

When asked for what, specifically, Cegavske would be doing to fix this issue, her agency responded with the following:

“The Secretary of State is in the midst of a 2-plus-year project to replace and modernize its aging commercial recordings systems.  In addition to updating to new technology, we are enhancing the notification and monitoring capabilities where customers can elect to receive electronic notifications when a change is made to an entity on file with our office.  Customers will also be able to order online copies of records so they may immediately review documents filed. We will continue to work with the Nevada Registered Agents Association, the Business Law Section of the State Bar Association, legislators and other interested parties to identify further system and process enhancements that benefit Nevada businesses and minimize (prevent) fraudulent filings.”

In the past, legislators have been reluctant to give the SOS too much investigatory power because many feel it can be a barrier to commerce. While we want to ensure that Nevada remains business-friendly we also must protect those businesses from theft so simple, a child could easily do it.

CALL TO ACTION: This is a huge issue that must be addressed immediately. Reach out to your legislators and demand that they find a balance between pro-business needs and protecting those same businesses. For those concerned about fraud for their own business, the SOS has some advice: opt-in the email notifications and make sure you’re actually receiving them, regularly check your business’ activity through the website and file a complaint if anything is suspicious.

2 Chronicles 7:14 (NKJV) “If my people who are called by My name will humble themselves, and pray and seek My face, and turn from their wicked ways, then I will hear from heaven, and will forgive their sin and heal their land.”

Sources

Weak safeguards make Nevada companies easy targets for fraud

Nevada lawmakers react to secretary of state’s weak business safeguards

Statement by Barbara Cegavske, Secretary of State

Originally Published

https://www.nevadabusiness.com/2018/07/theft-through-paperwork-sos-filings-and-business-fraud/

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