Half of the “Myths” about Google are just that, Myths. People who can’t get good rankings tend to blame Google and make up reasons instead of blaming themselves. It’s the old sun orbits the earth phenominon, just because it looks like the sun is orbiting the earth, doesn’t mean it really does.
I haven’t heard of any affiliates getting arrested by the U.S. government for just being affiliates, but don’t believe all private registration companies will protect you from the government if you do something illegal either. If you get private registration from a U.S. company like GoDaddy or someone else like them based in the U.S. and the goverment comes knocking on their door for any reason, they would give your name out immediately.