Stealing Corporate Identities and Maine’s New Online Corporate Fraud Monitoring Service

 

By: Rudman Winchell Attorney Jonathan P. Bench

People go to great lengths to protect and monitor their individual identities, but corporate identities are more difficult to protect. Creative thieves who could otherwise spend their intellectual capital contributing to the economy instead prefer to siphon from company coffers by committing fraud. Corporate fraud is in some regards easier to commit than other types of fraud because a company does not have a face; it has many potential faces because so much of what we do today is conducted via the internet or another electronic medium rather than in person. However, because a company (using the term broadly to encompass all business entities) does not have an identification card in the same way individuals do, anyone with authentic-looking paperwork can assume any existing role in a company or even create an entirely new role. A talented criminal can impersonate an authorized person with relative ease. Even a closely held company with one owner and no employees can become a victim of corporate fraud when, for example, a $300,000 line of credit is opened in the company’s name without the owner’s knowledge.

Recently, Maine became the second state, after Utah, to implement an Online Corporate Fraud Monitoring service. Maine has nearly 80,000 registered entities in the state. The Maine Secretary of State is the gatekeeper for statutorily required filings, but the gates are generally wide open as long as you file the correct document, check the boxes where required, and sign on the dotted line. A company’s foundational authorizing documents include the articles of incorporation or certificate of formation, amended or restated articles of incorporation or certificate of formation, articles of merger and many others, including an application for revival of a dissolved company. Each of these documents is a potential avenue for corporate fraud. The Secretary of State ensures registered entities file required documents, but the Secretary of State will not verify whether the president’s signature is identical to that on last year’s annual report or whether the newly filed statement of authority authorizes individuals who are associated with the company (click here for my previous posting on statements of authority for an LLC).

Maine’s Online Corporate Fraud Monitoring Service is designed to provide an added layer of security whereby Maine business owners and registered agents will be notified automatically by email of any corporate action filed that involves their company or any number of companies they want monitored, for a $35 annual fee per entity. Concerned business owners can instead take it upon themselves to check the Secretary of State’s website manually, for example, every week or two, to make sure nothing unauthorized has been filed in the company name. This is less expensive than enrolling in the State’s automatic monitoring service but more time-intensive. Also, in reality many business owners might grow tired of checking every couple of weeks and then just forget to do it altogether. In the right instances, the Online Corporate Fraud Monitoring Service thus provides a relatively inexpensive, automatic early warning mechanism against corporate fraud that allows business owners to devote more time to running their businesses. For additional information and advice, consult with one of our Rudman Winchell attorneys.

For more information on corporate identity theft: http://www.businessidtheft.org/Education/BusinessIDTheftScams/tabid/86/Default.aspx

For the list of potential document filings for a corporation:

http://www.maine.gov/sos/cec/corp/corp.html

For the list of potential document filings for a limited liability company:

http://www.maine.gov/sos/cec/corp/llc.html