Colorado Attorney General Phil Weiser speaks during a press conference at the Colorado Bar Association in Denver on Jan. 9, 2024. (Photo by Hyoung Chang/The Denver Post)
A man who allegedly took advantage of Colorado’s discounted business filing fees by creating nearly 16,000 fake LLCs and selling them has settled a lawsuit that the state filed.
Marcio Andrade, who has defended his actions, agreed Wednesday to pay $75,000 to the government and to dissolve the companies that he created only on paper. The settlement is far less than the $766,000 that the state would have sought at a November trial.
“The defendant in this case is being held accountable for his conduct,” Colorado Attorney General Phil Weiser said in a statement, “and my office will continue to pursue those who attempt to defraud the state and harm consumers with false business filings.”
Andrade’s settlement makes clear that he “expressly denies any liability or wrongdoing.”
“Mr. Andrade did not make any fraudulent business filings, as set forth in his answer” to the lawsuit, his lawyer David Japha said by email Wednesday. “There was a clerical error and a misunderstanding with the state that has thankfully now been resolved.”
In May of last year, the Colorado Secretary of State’s Office noticed a strange flurry of new business filings from computers in Venezuela. The office put a hold on filings and alerted police. Investigators determined that Andrade, who has a history of financial trickery, was registering phony LLCs to a nondescript townhouse in Northglenn without its owner’s knowledge.
Marcio Andrade (Wholesale Shelf Corporations)
The alleged fraud occurred at an auspicious time for Andrade and an inauspicious time for taxpayers. The Secretary of State’s Office had cut the cost of new LLC filings from $50 to $1 beginning in July 2022 and ending in May 2023, when the program ran out of money. By shifting the fees from companies to the government, it cost taxpayers $8.4 million.
Andrade is a seller of so-called “shelf companies,” which are LLCs that are created on paper, sit unused for several years, and are then sold. Because they have existed for years, the companies often have an easier time attracting investors, customers and credit.
“Every single one of the corporate entities that Mr. Andrade has incorporated will ultimately be transferred to an entrepreneur who will use it for legitimate revenue-generating activities that will benefit both the Colorado government and the Colorado economy,” an anonymous person who referred to themself as Andrade’s assistant told BusinessDen last fall.
Andrade “has not engaged in any illegal activities” and the 15,828 companies he started “are entirely legitimate,” they claimed. In an April court filing, his lawyers said that he “simply availed” himself “of a procedure initiated by the Colorado Secretary of State without limit.”
“We are certain that this misunderstanding will be resolved with the Colorado Attorney General,” the assistant said, “as Mr. Andrade has always acted in good faith and with the clear intention of bringing businesses to invest, operate and create jobs in Colorado.”
State officials see it differently. By taking advantage of the $1 filing fees, Andrade “received $766,262 in benefits…appropriated from the state treasury,” Deputy Secretary of State Christopher Beall wrote in an affidavit last September. On Wednesday, Weiser called shelf companies “dangerous tools in the hands of bad actors” seeking to deceive.
Andrade has been known to anti-fraud enforcers for years. In 2019, the Federal Trade Commission accused him and several of his companies of promising to repair people’s bad credit, taking millions of dollars in fees, and then not helping them.
As part of a settlement with the FTC in 2020, Andrade and others agreed to turn over $9.6 million and to stop running fraudulent credit service companies, records show.
