According to records filed with the United States Department of Labor, a Nevada-based shell company founded by Gerry Rispone and his brother Eddie, the Republican Louisiana gubernatorial candidate facing incumbent Democrat John Bel Edwards in a runoff election next Saturday, controlled approximately $73 million in assets before the company, ISC Group Nevada LLC, “converted” to a newly-formed entity in Louisiana.
ISC Group Nevada LLC listed only the Rispone brothers as its registered members and relied on a so-called commercial resident agent service in Reno and then Carson City to ensure it would comply with Nevada state law requiring businesses list at least one state resident on registration documents. Nevada, like Delaware and Wyoming, is a well-known and controversial tax haven, and since 1991, the Silver State has experienced a dramatic escalation in the number of registered businesses established within its borders. However, the overwhelming majority of those businesses are essentially shell companies created so that their owners can avail themselves to a range of tax breaks for which they would otherwise not qualify.
Indeed, according to some, Nevada’s primary financial benefit in luring in companies that only exist on paper may merely be that it has increased revenue for the Secretary of State’s office. During the past four years, Nevada has consistently ranked as the worst state in the nation in both education and health care, despite the fact that its economy is widely claimed to be one of the nation’s best.
Four days ago on the Bayou Brief, I broke the story about Rispone’s Nevada company and revealed that he had “converted out” the company to a newly-formed Louisiana entity in early 2017, a year before launching his bid for governor. The existence of Rispone’s business in Nevada had never been reported previously by the state media. Indeed, I only uncovered the business’s listing after searching Rispone’s name on a proprietary online database that aggregates information pertaining to an individual’s professional associations and affiliations, including his or her membership in any companies registered to do business in the United States.
Because the entity is a privately-held family-owned business, information on its activities, however, is not readily available. Still, though, after receiving records from both the Louisiana and Nevada Secretaries of State, I was able to find iron-clad proof that Rispone had spun the Nevada company into ISC Group of Louisiana LLC.
Shortly after publication, an anonymous tipster provided the Bayou Brief with a link to a trove of public records that are available at no charge through the U.S. Department of Labor, and those documents shed considerable light on how Rispone used the company in Nevada and why he may have decided to move the business to Louisiana.
For at least 11 of the 15 years it was in Nevada, Rispone’s company appears to have been principally responsible for holding the investments his Baton Rouge-based construction firm had made under the rubric of a retirement fund for employees. The fund, which was established as a 401(k) plan, was principally comprised of a series of seven-figure investments in mutual, stock, and index funds. Later, they included a very basic company health insurance policy as well. (It is entirely possible that the Nevada company had always been responsible for holding the retirement fund, but the available records do not include anything prior to 2006).
Taken together, the records that are available indicate that Rispone had been squirreling away vast amounts of money in Nevada under the auspices of his company retirement fund. While retirement income is generally exempt from taxes in Nevada, the documents do not specify who has received disbursements from the fund or reveal anything about potential tax liability.
Notably, however, they still provide insight into Rispone’s business operations.
Year after year, the company claimed to have had hundreds more employees on its payroll at the end of the year than it had in the beginning, which is typical of most big construction firms.
What is interesting, though, is that unless an employee affirmatively opts-out of participating in the company’s retirement – or deferred compensation- plan, a 4% deduction is automatically made from their paycheck.
According to the rules that ISC established, employees may only be allowed to realize even a portion of that savings after their contributions have been at least partially vested, and the only way for that to occur is if they work for ISC for more than two consecutive years. Typically, these are considered best practices. But while many companies enforce similar guidelines, it isn’t difficult to understand why this could be especially problematic for employees of a construction firm, who often only work seasonally and are typically hired for a specific project.
Moreover, the most recent filing indicates that employees contributed $12.5 million to the fund, whereas their employer (i.e. Rispone’s company) only chipped in $834,000, a fairly pathetic proportion in “matching funds.” (The company only obligated itself to match 10% of the amount deducted from its employees’ paychecks; in other words, in most cases, that would amount to 10% of 4% or 0.4%).
In addition to readying for a gubernatorial campaign in Louisiana, there may be another reason Rispone decided to relocate the company from Nevada. Recently, he restructured the bulk of the fund into a Collective Investment Trust, and for reasons not entirely clear, he also received a provisional notice that the fund now qualified… as tax-exempt.
To read the documents online, click here and search for ISC Group Nevada. Although I consulted several people with professional expertise in retirement benefit planning, this is an especially convoluted area of the law, even for folks like me, who inexplicably decided to take an entire class in law school on ERISA.