Congressman: Blackwater Evaded Federal Income Taxes
The congressman leading an investigation into Blackwater said Monday that the embattled security company may have evaded tens of millions of dollars in federal taxes and was seeking to hide its tax practices.
Rep. Henry Waxman, a California Democrat, said that Blackwater has avoided paying Social Security, Medicare and unemployment taxes by treating its armed guards as independent contractors and not employees.
The other two large private security companies in Iraq, DynCorp and Triple Canopy, classify their guards as employees and pay the federal taxes that Blackwater has not, Waxman said.
The issue came to the attention of the IRS when a Blackwater guard working in Afghanistan complained that the company had classified him as an independent contractor. The IRS said Blackwater’s classification was “without merit” and ruled in March that the man was an employee.
Blackwater agreed to pay back wages and other compensation to the man, but on condition that he not talk to any politician or public official about the company.
“THE UTMOST PROTECTION AND NONDISCLOSURE OF CONFIDENTIAL INFORMATION IS OF CRITICAL IMPORTANCE AND IS THE ESSENCE OF THIS AGREEMENT,” the settlement agreement stated in capital letters. Waxman released it after obtaining it by subpoena from Blackwater.
“This nondisclosure agreement is abhorrent on its face,” Waxman wrote Monday to Blackwater founder Erik Prince. “It is deplorable that a company that depends on federal tax dollars for over 90 percent of its business would even contemplate forbidding an employee to report corporate wrongdoing to Congress and federal law enforcement officials.”
Blackwater issued a statement Monday saying that Waxman was incorrect about the tax issue and that the company was appealing the IRS ruling.
The company said the U.S. Small Business Administration has determined that Blackwater security contractors are not employees.
“It is unfortunate that the Chairman has relied upon a one-sided description of the issue to color public perception without all the facts being presented,” the statement concluded.
Blackwater, based in Moyock, N.C., deploys about 1,000 contractors to protect the U.S. ambassador and other diplomats in Iraq. It has had federal contracts worth more than $1 billion since 2001.
Waxman, chairman of the House Oversight and Government Reform Committee, has been investigating Blackwater since 2004. The scrutiny intensified after a Sept. 16 shooting in Baghdad in which Blackwater contractors killed up to 17 civilians in a crowded square.
The Iraqi government has demanded that Blackwater leave Iraq and that the shooters be tried in a Baghdad court. The State Department has signaled that it will not renew Blackwater’s contract when it expires.
Blackwater has been working in Iraq since 2003. Waxman’s staff looked at the most recent State Department contract and estimated that between May 2006 and March 2007, Blackwater avoided paying $15.5 million in Social Security and Medicare taxes and $500,000 in unemployment taxes.
William Turnier, a professor of tax law at the University of North Carolina law school in Chapel Hill, said employees, by definition, are subject to the control of their employers, who decide when and how work must be done.
Independent contractors, on the other hand, provide their own tools, decide when to start and finish work, and determine how to proceed with their work. The classic example of an independent contractor is a house painter, who negotiates a price, brings his own tools and truck, and decides how to do his job each day.
Turnier was skeptical that Blackwater security guards would meet this definition.
“These guys must go out when Blackwater tells them to,” Turnier said.
“They’re following strict orders, and I don’t think they are supplying their own guns or vehicles.”
(Neff reports for the Raleigh News & Observer)
© McClatchy Newspapers 2007
There should be a law that disallows corporations from bidding on government contracts that owe taxes. They should be permanently barred from bidding on contracts if they are evading taxes.
Watch the progress of this story, as the Bush administration will probably step in to protect Blackwater. This is yet another sickening case of Bush crony-ism. The owner of Blackwater is a long time Bush contributor and family friend. Y’all know that in Texas politics, that means favoritism.
We won World War II without private contractors, therefore we don’t need yet another Bush supporter corporation grabbing at taxpayer money, especially if they are not taxpayers themselves. If they don’t pay taxes, they are not US citizens. Maybe its time for Blackwater to move to Dubai like Halliburton.
So Henry, what are you going to do? Send Erik Prince another letter he can use for target practice or as a bird cage liner? Are you going to threaten to hit him over the head with a rolled up newspaper or magazine? Yeah, that ought to stop him!
Better yet, strip them of their weapons and run the bastards through the streets of civilians ready to tear them to pieces. I’d pay money to see that!
It really doesn’t matter. Later on this year, when W disbans Congress (after they officially make him “President for Life”) Eric Prince will be in charge of the Praetorian Guard. Patriots like him shouldn’t have to pay taxes. God bless America.
Al Capone evaded Federal Income taxes but he killed far fewer innocent people than this ‘Prince’ of a fellow.
Most non-disclosure agreements should be illegal in this country, but corporate tyranny reigns, we all know this. The whole thing is political filth at it’s worst. Waxman is looking closer at the 2008 elections, then Blackwater. They may need to pay a few fines, (business formalities). Tom Davis is on Blackwater’s payroll, so it’s been a free ride with zero accountability, the classic mafia model.
If (big) business is war and war is good for (big) business, then (big) business can’t be good for people.
Hey, if Blackwater can evade taxes, so can we!
Let’s all stop paying our federal income taxes. Oh, good. At least now we know it’s perfectly acceptable.
Remember what Leona Helmsley said: “Only the little people pay taxes.”
[Blackwater] said the U.S. Small Business Administration has determined that Blackwater security contractors are not employees.
Small business? SBA Act defines small business’ as “one that is independently owned and operated and which is not dominant in its field of operation.” The law specifies a maximum of 1,500 employees or $32.5M/yr income or $165M in assets (depending on the business, it is often considerably less than this). Blackwater have made $1B since 2001 in Govt contracts alone, so clearly exceed the $32.5M/yr criteria.
I wonder who is on the take at US SBA?
Its all so Republican.
Avoid paying the taxes that fund the no-bid contracts that suck the tax payers dry, while claiming they are “protecting America”.
Hollywood, we need a movie about this nightmare 7 year fascist reign that is being brought to us courtesy of the religious right and corporatism.
“When fascism comes to America, it will be cloaked in a flag, and carrying a cross”.
14 markers of Fascism
1. Powerful and Continuing Nationalism - Fascist regimes tend to make constant use of patriotic mottos, slogans, symbols, songs, and other paraphernalia. Flags are seen everywhere, as are flag symbols on clothing and in public displays.
2. Disdain for the Recognition of Human Rights - Because of fear of enemies and the need for security, the people in fascist regimes are persuaded that human rights can be ignored in certain cases because of “need.” The people tend to look the other way or even approve of torture, summary executions, assassinations, long incarcerations of prisoners, etc.
3. Identification of Enemies/Scapegoats as a Unifying Cause - The people are rallied into a unifying patriotic frenzy over the need to eliminate a perceived common threat or foe: racial , ethnic or religious minorities; liberals; communists; socialists, terrorists, etc.
4. Supremacy of the Military - Even when there are widespread
domestic problems, the military is given a disproportionate amount of government funding, and the domestic agenda is neglected. Soldiers and military service are glamorized.
5. Rampant Sexism - The governments of fascist nations tend to be almost exclusively male-dominated. Under fascist regimes, traditional gender roles are made more rigid. Divorce, abortion and homosexuality are suppressed and the state is represented as the ultimate guardian of the family institution.
6. Controlled Mass Media - Sometimes to media is directly controlled by the government, but in other cases, the media is indirectly controlled by government regulation, or sympathetic media spokespeople and executives. Censorship, especially in war time, is very common.
7. Obsession with National Security - Fear is used as a motivational tool by the government over the masses.
8. Religion and Government are Intertwined - Governments in fascist nations tend to use the most common religion in the nation as a tool to manipulate public opinion. Religious rhetoric and terminology is common from government leaders, even when the major tenets of the religion are diametrically opposed to the government’s policies or actions.
9. Corporate Power is Protected - The industrial and business aristocracy of a fascist nation often are the ones who put the government leaders into power, creating a mutually beneficial business/government relationship and power elite.
10. Labor Power is Suppressed - Because the organizing power of labor is the only real threat to a fascist government, labor unions are either eliminated entirely, or are severely suppressed.
11. Disdain for Intellectuals and the Arts - Fascist nations tend to promote and tolerate open hostility to higher education, and academia. It is not uncommon for professors and other academics to be censored or even arrested. Free expression in the arts and letters is openly attacked.
12. Obsession with Crime and Punishment - Under fascist regimes, the police are given almost limitless power to enforce laws. The people are often willing to overlook police abuses and even forego civil liberties in the name of patriotism. There is often a national police force with virtually unlimited power in fascist nations.
13. Rampant Cronyism and Corruption - Fascist regimes almost always are governed by groups of friends and associates who appoint each other to government positions and use governmental power and authority to protect their friends from accountability. It is not uncommon in fascist regimes for national resources and even treasures to be appropriated or even outright stolen by government leaders.
14. Fraudulent Elections - Sometimes elections in fascist nations are a complete sham. Other times elections are manipulated by smear campaigns against or even assassination of opposition candidates, use of legislation to control voting numbers or political district boundaries, and manipulation of the media. Fascist nations also typically use their judiciaries to manipulate or control elections.
This country is run by thieves and criminals, they support each other.
The laws are only to protect them. No one questions the ‘rule of law’.
Blackwater is only the latest slowly exposed to the public–partially.
How can we expect more from the system that promotes “Disaster Capitalism” (N. Klein’s latest book ).
I don’t know what to make of this story.
The IRS doesn’t lose any money, because employees classified as “independent contractors” are required to pay what would be the employer’s share of the social security and medicate tax out of their own pockets.
Ther real scandal is the widespread practice of employers classifiying of employees in low wage jobs as as “independent contractors” in order to shift the tax burden from themselves to the employee. It saves them a tidy 7.3% on the payroll…
The company said the U.S. Small Business Administration has determined that Blackwater security contractors are not employees.
Blackwater “contractors” are employees because they take orders from a hierarchy and do not supply their own equipment. Hierarchy creates dependence in the employee, erodes personal discipline, and thereby creates the need for social welfare, hence the rule that such hierarchical organizations pay the social welfare taxes. It’s too bad that big government liberals continue to push for social welfare when the root of the problem is in the corporate hierarchy.
It’s very likely that the U.S. Small Business Administration is infiltrated by corporate cronies. This is unfortunate. The SBA should be progressively harnessed to redirect all big business subsidies to small businesses. Productivity peaks for smaller sized businesses. Big busnesses destroy more than they produce. This is one of the basic arguments for localism - which is spreading like wildfire.
Thanks jjpeter. I sent the 14 Markers of fascism to all my fascist friends. Sort of like a pebble hitting a tank.
It’s time to OUTLAW mercenaries that report to shareholders and do not enforce or abide by the Constitution or, report to any legal US authority governed by We the People.
Bush needs to leave office and he needs to take his liars and thieves with him, he really does! People need to wake-up to this man!
Bush and Co = Organized Crime.
ruthru, lol. i’m with you.
greatbear, better yet, permanent sleep.
Blackwater complains that Waxman is relying on a one-sided argument, since the IRS has said that Blackwater personnel are employees, yet the SBA has said they’re contractors.
Maybe Waxman’s reliance is based on the simple fact that, for purposes of paying payroll taxes, the SBA has nothing to say in the matter. Perhaps Prince can get the USPS, the US Olympic Committee, US Airways, and a note from his mother, all saying that his mercenaries are contractors. Doesn’t matter one iota. If the IRS, or the courts, say they’re employees, then they’re employees. Period.
Prosecute, shut them down, Eric Prince straight to jail…unless he conveniently “dies” like Ken Lay, who is living comfortably somewhere.
jjpeter October 23rd, 2007 2:23 pm
Excellent post…
Plus, the fact that they call them “contractors” limits Prince’s liability when they go around murdering innocent civilians…Everything in Iraq is subcontracts on top of subcontracts — that is why there is no accountability.
Hey, give Henry some credit, okay? Blanket cynicism about all sitting members of Congress is a kind of cop-out. Our country needs us to support members of Congress who are working for accountability. Henry Waxman is among the best in that regard and we should support our “troops” in Congress who are fighting for us and for the constitution.
We shouldn’t be surprised. Remember that Halliburton, under Dick Cheney’s leadership, set up offshore corporations to dodge taxes and illegally do business with Saddam Hussain. Its spinoff, KBR, is currently the all-time champ war profiteer, and Cheney’s stock options are skyrocketing in value as a direct result. The Bush family’s interests in military contractors has also proven wildly profitable. And the Beltway Burros who were so loudly braying about paltry sums in the Whitewater, cattle futures and Buddhist Temple affairs, are strangely silent or irrationally defensive now. If ever there were grounds for the impeachment, removal, indictment, conviction and incarceration of a president, vice president and cabinet officers, it is now.
This is certainly not the least bit surprising. Isn’t it about time we find out how many other hogs at the trough are doing the same thing?
There is clearly only one law that the Bush/Cheney and Eric Prince CABAL believe in and that is the law of the loaded gun. Please note that several troublesome political opponents of the Bush regime have died in very convienent small plane crashes. These are much easier to arrange if you have a private intelligence operation working for you. Also not that Democrats in Congress were sent Antrhax on Sept. 11th from a source within government labs. The anthrax arrived just in time to shut congress down just as they were asking why Bush was so incompetent.
Is there any doubt left that the pResident and his allies are the worlds greatest criminals?
Live by the sword, die by the sword.
We can only hope.
Revolution is nigh!
http://wartaxboycott.org/
“Rep. Henry Waxman, a California Democrat, said that Blackwater has avoided paying Social Security, Medicare and unemployment taxes by treating its armed guards as independent contractors and not employees.”
Whose fault is that? Didn’t the government, when they hired Blackwater as an independent contractor make it clear in the contract that they would be responsible for paying FICA taxes?
Have you checked-in with Halliburton employees yet? They could be taking a free ride along with Blackwater.
How wonderful for shareholders!