Nobody home

How legal corporate secrecy harmed one Atlanta neighborhood

By Willoughby Mariano

Why a grown man would be slinking out from behind an abandoned house on a sunny Thursday afternoon was anyone’s guess until a woman stumbled after him from the brush.

“You still have to pay me!” she hollered and straightened a bra strap. The teens at a nearby house raised their phones to film them, and she grumbled about an act that is unmentionable in polite company.

The teens pointed and laughed as the couple scrambled into a pickup and drove off.

“I told you there were prostitutes,” one of the teens said to me. She didn’t mean to scold, but that’s what it felt like. I had spent a week trying to find whoever actually owned 1045 Ashby Grove and all I turned up was a hooker and john.

Commerce interruptus, courtesy of the home’s owner, a shell company listed as Ilimite LLC.

I started looking into Ilimite after a massive document leak known as the Panama Papers, which revealed how world leaders, Russian money launderers and others create shell companies in far-flung countries to hide their assets. What’s less well known is that in the U.S., there’s often no need to go overseas to do business in secret. Opening a type of business entity known as a limited liability company, or LLC, like Ilimite can do the trick.

With the support of business and government leaders, state legislatures across the nation have passed laws that make it harder for the public to identify the people behind LLCs — and who to blame when these companies do wrong. In New York, Miami and Los Angeles, the super-wealthy use LLCs to purchase posh homes for the purpose of dodging taxes, laundering money, or breaking building codes.

Closer to home, profiteers use LLCs to buy up derelict houses and dodge penalties when they’re deemed unsafe. It costs $100, payable to the Secretary of State, to start one in Georgia. No ID required, and no need to disclose a responsible party such as a CEO or partner. In 2015, 84,000 LLCs filed registrations in this state, up from about 57,000 10 years earlier.

"You can't put an LLC in jail. You need to have a person."

- Maj. Barry Shaw, head of Atlanta's code enforcement office


I had stopped by the west Atlanta house because I hoped my snooping would have made whoever was behind Ilimite nervous enough to fix it up. No such luck. The same condom wrapper from a week ago lay next to a mailbox post with no mailbox. The front door was still open, electrical sockets were still gouged out from the walls, and the same empty bottles of vodka lay on the living room floor.

You can be sentenced to jail for owning or operating place like this, although few have. (Buckhead speculator Rick Warren, sentenced for code violations last fall, is the exception, not the rule.)

There are many reasons why scofflaw owners escape consequences, but in the case of 1045 Ashby Grove and some 800 others pending before City of Atlanta code enforcement, it’s because police can’t find anyone to bust.

“You can’t put an LLC in jail. You need to have a person,” said police Maj. Barry Shaw, head of the city’s code enforcement office, when I visited their office behind Turner Field. I’m good at finding people, so I thought I’d hunt an owner down.

Code enforcement officers consider Ilimite to be a prime example of a deadbeat LLC. State and local records show that it was founded in Sept. 18, 2012, acquired 10 properties just days later, and was dissolved by the state in February because it had never paid any of its yearly $50 filing fees.

When Ilimite was last cited for code violations for the Ashby Grove house, no one bothered to show up in court, said code enforcement officer Rachel Davenport, one of the department’s team of five researchers. Over two years, she juggled a caseload of 15 to 20 cases a week as she repeatedly tried to track down Ilimite’s owners with public records, police databases and phone calls.

State corporate disclosure laws didn’t help. Each LLC is supposed to give the Georgia Secretary of State’s office a name and address for its registered agent, a person assigned to receive official notices for the business. This is a starting point for researchers, even though these agents often don’t have any other ties to the LLCs owners, and aren’t required to disclose who the owners are.

“You can ask, but that’s it,” Davenport said, and pointed to Ilimite’s entry with the Secretary of State:

Registered Agent Name: Agent Resigned
Physical Address: 1, Fulton, 1, GA, 1, USA

Its principal office was a Roswell building owned by yet another LLC. No one replied to recent notices sent there by code enforcement, Davenport said.

“It seems like part of the game — burying themselves in layers and never being found,” Shaw said.

Georgia limited liability companies are supposed to submit the name and address for their registered agents to the secretary of state. Ilimite LLC did not. | HANDOUT

A lead in Roswell

These layers may grow deeper. LLCs have long been allowed to own other LLCs, and now legislative changes proposed by Georgia’s Secretary of State will allow for an LLC to be a registered agent for another LLC. It’s possible to string LLC after LLC together in a daisy chain to nowhere.

“This is not what LLCs were intended for,” said Susan Pace Hamill, a University of Alabama law professor who advised legislators in several states as they drafted the first laws to create this kind of company.

At the time, only big businesses had the money to pay lawyers to avoid what’s known as double taxation, where owners are taxed on their profits on the company level and as individuals. Hamill supported LLCs because they gave this advantage to small businesses while shielding owners from being personally responsible for the debts of their companies.

But she grew disappointed as states joined what she sees as a race to the bottom to make it easier for owners to hide their identities. The Secretary of State’s office in Georgia does not verify addresses or identities submitted in company filings, and it does not impose sanctions for providing incorrect or misleading information.

“LLCs used to be pretty transparent. And the trend has been to chip away at that, which has resulted in what’s going on in Atlanta,” Hamill said.

I shared this with Ashview Heights resident Elizabeth Whitmore, who I caught on her day off as an IT consultant. The 25-year-old Clark Atlanta University graduate bought a home in the west Atlanta neighborhood three years ago because of its potential as an in-town property with easy access to downtown. On the east side, renovated Craftsman houses like the ones on Ashby Grove sell for $300,000 and up.

“Investing in the area made a lot of sense to me,” Whitmore told me when we met outside the Ashby Grove house, which is around the corner from her own. “Did I know what I was getting into? No. It’s a lot harder than I thought it would be.”

Whitmore and her neighbors have taken to working as volunteer sleuths, tracking down deadbeat owners through internet searches and other sources. She estimates that 75 percent of the blighted homes the team researches trace back to an LLC, some of them owning 10 or more properties. That’s often when the trail goes cold.

I mentioned my one lead — the Roswell address — and Whitmore rolled her eyes. Both of us have seen how investors from wealthier, whiter places run slums in Atlanta’s historically black neighborhoods. She wanted me to send the owner a message:

“We’re humans. We need compassion. Kids live here. They need to be safe. So fix it.”

“We’re humans. We need compassion. Kids live here. They need to be safe. So fix it.”
– Ashview Heights resident Elizabeth Whitmore to the unknown owner of 1045 Ashby Grove.


An office, but no company

The Roswell address was a 45-minute drive from Ashview Heights in a well-landscaped cluster of suburban office suites with pleasant views of the woods. I had no appointment, but real estate litigation attorney David J. Reed didn’t seem to mind. He told me he never owned Ilimite or visited 1045 Ashby Grove, but he did represent the company “years and years ago.”

Code enforcement citations had been arriving at his office for years, sometimes in his name, he said. At one point, he threatened to sue the city.

“It should not be possible to charge an individual for a crime committed by a company,” Reed told me. “An individual has a fundamental right not to be charged for something they did not do.”

I didn’t expect this. Most lawyers argue that their clients aren’t guilty. Reed was trying to convince me that no one was, and we were all better off for it.

“One of the great drivers of the U.S. economy is limited liability,” he said. “Why are we the most successful country in the world? Freedom, much more than other countries, and that encourages risk taking and rewards it.”

Attorney-client privilege barred him from disclosing Ilimite’s ownership, but in general, it’s hard for him to remember who owns any of the dozens of LLCs that he’s set up, he told me. Sometimes he registers them without meeting the owners, and if he’s in a pinch, he uses his office’s address as a placeholder for the company’s principal place of business.

I asked him to pass on a message to Ilimite.

“It’s not something I’d do,” he said. I thanked him for his time and left. If I was looking for someone to take responsibility for the house on Ashby Grove, I wouldn’t find him there.

“This is not what LLCs were intended for.”
–Susan Pace Hamill, a University of Alabama law professor, on how owners use these companies to remain anonymous.


A loan provides a clue

I can often count on property sale records to reveal the people behind a purchase, but no one signed on behalf of Ilimite when it acquired Ashby Grove.

What they did show is that this was not an ordinary home purchase. Ilimite got Ashby Grove and six other properties for free from a Smyrna company called Bristol Realty Partners, also an LLC. The man who signed for Bristol was a real estate agent named David H. Dick.

I reasoned Dick had to know who was behind Ilimite. Who gives houses for free to a stranger?

A little more digging bolstered my theory. Dick’s own YouTube video showed he was in the business of dealing with rundown houses. He was in “hard-money” lending, where private investors pool their money to loan to those who buy and renovate properties.

More importantly, records from 2010 showed Bristol had pooled Ashby Grove and seven other houses as collateral for a loan that was worth more than $1 million at the time. Dick was personally on the hook for it, and I could find no signs that it was paid off or forgiven.

My hunch was that Dick owned Bristol and Ilimite. Who takes on crumbling houses on a rough side of town that are tied up in $1 million in unpaid debts?

This theory had weaknesses. Dick disclosed in personal bankruptcy records filed in 2014 and 2015 that he was 100 percent owner of Bristol, but there was no mention of Ilimite. Still, University of Georgia law professor and real estate expert James C. Smith gave me reason to hope.

“It doesn’t seem at all like a market transaction between two different people who are really bargaining,” he said.

Fair enough. It was time to pay Dick a visit.

“I would find the owner and talk to them. Because it’s not me.”
- Businessman David H. Dick, on hazardous conditions at 1045 Ashby Grove.


Finally, a response

The address for Bristol was now an insurance office, and the man who answered the door said he’d been there for years. The home address Dick submitted in bankruptcy filings was a $500,000 house in a shaded cul-de-sac in northwest Atlanta, owned by yet another LLC.

The North Druid Hills Road office listed on the website of Dick’s lending business was actually a UPS store in a strip mall next to a Great Clips. Its “Suite 106” was a mailbox about the width of a pack of playing cards.

No one responded to any of my calls, notes or emails. Whitmore gave me a tip that someone in her volunteer group thought Dick had been in Ashview Heights to recruit real estate investors, but I could find no proof. The teens who filmed the hooker on Ashby Grove said they hadn’t seen anyone matching the man’s description.

Eleven days into my search, Dick finally picked up his phone. He didn’t want to talk about Ashby Grove.

“That was a long time ago. I had a lot a lot of houses but I don’t own it,” he told me, adding that he doesn’t know who owned Ilimite. When I replied that the $1 million loan made that hard to believe, his story began to shift.

“I had a friend say they will buy it and that’s what happened,” he said. So who was Ilimite?

“I don’t know.”

Dick also told me he was a lender, not an owner, for Ashby Grove. Then he said Bristol might have foreclosed on the loan and taken ownership of it. He added that he sold the house in 2011.

“There’s no ownership by David Dick. Bristol was a lender. And beyond that it was sold to another company that I have no affiliation with.”

Then: “I don’t recall if Bristol did own it.”

This was probably my only chance at getting answers from Dick and I was getting nowhere. I tried a new approach and told him about the hooker I found.

“That’s not good,” he said. “I would find the owner and talk to them. Because it’s not me.”

My chance was slipping away. I blurted out about Whitmore and her team of volunteers, and how she said people in Ashview Heights are humans and need compassion. I told Dick that kids live nearby and there’s a school a block away.

“I’m trying to be cooperative,” he said. He apologized, said he was busy and then got off the line.

Presentation by Kiersten Schmidt