Seven Small Oregon Business Owners Lose Plea to Block a Federal Law ‘Violating’ their Constitutional Rights

An attempt by seven small business owners to block the enforcement of a federal law passed in 2021 to combat financing of terrorism, money laundering and tax evasion was rejected by a federal judge in Portland on Friday.

U.S. District Judge Michael H. Simon denied the motion for a preliminary injunction brought by the business owners who argued that the Corporate Transparency Act violated their constitutional rights with its requirements to report sensitive personal identifying information.

The act requires businesses to file ‘beneficial ownership’ information about the owners, officers, and others with a controlling interest with the U.S. Treasury’s Financial crimes Enforcement Network (FinCEN).

‘Beneficial owner’ is defined as someone which directly or indirectly ‘exercises substantial control over the entity,’ or who owns or controls at least 25% of ownership interests.

Noncompliance Penalties Include Imprisonment

Compliance, which came into effect on January 1, 2024, requires a company to report the legal name, date of birth, residential or business address, and identification ‘from an acceptable identification document’ such as a passport or driver’s license of all beneficial owners. Noncompliance penalties are substantial fines and imprisonment.

Federal Act can Enforce Drug Laws Against Marijuana and Psilocybin Business Owners

Appearing at a hearing earlier this month for the small business owners, attorney Thomas R. Rask III said the federal act could enforce federal drug laws against Oregonians who owned marijuana or psilocybin businesses, or to pursue the deportation of people in the country illegally, but who are allowed to register and operate businesses in terms of Oregon law.

Furthermore, Rask argued that the Commerce Clause did not give the government the authority to force people to reveal personal identifying information because of their association with a company.

The seven small business owners are Lindsay Berschauer, Gerald Earl Cummings II, Katerina Eyre, Michael Firestone, Tayler Hayward, Lisa Ledson, and Thomas Reilly.

Defending the regulation, Assistant U.E. Attorney Michael J. Jeter said the act did not authorize the government ‘to rifle through one’s papers, to conduct any type of search’ or to ‘authorize surveillance of an individual.’

Judge Says Act Does Not Exceed Constitutional Authority

District Judge Simon found in favor of the act, saying it did not exceed the constitutional authority of Congress. Furthermore, the judge pointed out that none of the seven plaintiffs are associated with the cannabis industry, neither are they undocumented business owners.

The judge said the reporting requirements discouraged the use of shell companies ‘to disguise and move illicit funds,’ and would curtail money laundering by helping national security, intelligence and law enforcement agencies.

The judge also rejected the plaintiffs’ Fifth Amendment plea, saying it can only be invoked in the face of ‘real and appreciable danger of self-incrimination.’