Protecting your company from corporate identity thieves
A business owner in Las Vegas found out the hard way that it's relatively easy for thieves to make off with your corporation. Richard Krawczyk owns many "shelf corporations." They're business entities registered with the state but not actively operating. He sells these corporations after they've been registered for a few years. Entrepreneurs like buying them and putting their new business operations under the names because the registration of the corporation years earlier makes the business looked "aged," and therefore better in the eyes of lenders.
But recently one of Krawczyk's corporations was hijacked. In a case of corporate identity theft, his company "Corporate Business Services Inc." had its name changed to "Challenger Biz Services Inc." and the president changed to a California man named Ralph Rogue. Rogue says he bought the shelf corporation from a company called "Corporate Credit Association of America Inc." for $10,000, and didn't know that the corporation was essentially stolen.
And the corporate identity theft was really that easy. This middleman sold a corporation he didn't really own, and Rogue became the new owner through a bogus filing with the state of Nevada. And it appears he didn't know that the theft was occurring.
This kind of scam apparently wouldn't be hard in most any state. The states are really just keepers of data on corporations, and when changes are filed, they're not typically verified. Someone could change your registration information without your consent and you'd be none the wiser.
Many government agencies have not kept up with changes in technology, making scams like this easier to carry out. They haven't acknowledged increased risks and the ease of perpetrating them in this digital age.
What does that mean for you the business owner? You have to take responsibility for monitoring your business registration as well as your business credit. Everyone talks about personal credit histories, but often people forget that companies have credit profiles as well. Keep tabs on your data to make sure no one has stolen your company's name right out from under you, and that no one has obtained a loan or a credit card in your company's name.
Tracy L. Coenen, CPA, MBA, CFE performs fraud examinations and financial investigations for her company Sequence Inc. Forensic Accounting, and is the author of Essentials of Corporate Fraud.