Security Contractor Blackwater Being Investigated For Tax Evasion? March 16, 2008Posted by Aaron Walter in Uncategorized.
Tags: Blackwater, Private security, Taxes
For more, see the March 12 post from the “Ataxingmatter’ Blog
House chairman asks agencies to probe Blackwater
In an October 2007 letter to Blackwater Chief Executive Officer Erik Prince, Waxman questioned whether the designation of guards as independent contractors constituted a “significant tax evasion.” He noted one case in which Blackwater “sought to conceal the IRS ruling by entering into a nondisclosure agreement with the security guard who was the subject of the ruling, prohibiting him from sharing it with ‘any politician’ or ‘public official.’ “In defending the designation of employees as independent contractors, Blackwater said that its security guards are “in no way directly supervised or controlled by Blackwater,” according to the committee. But the panel’s statement said that in television interviews and in prior legal arguments, Blackwater officials argued the opposite.
For instance, after four wrongful death suits by families of contractor employees who died in Fallujah were brought against the company, Fred F. Fielding, then Blackwater’s legal counsel and now counsel to President Bush, “argued that the guards could not recover from Blackwater because they were ’employees’ limited to only recovering workers’ compensation,” Waxman’s statement said.
Blackwater ultimately steered the lawsuit into private arbitration, according to a May 2007 Associated Press report.
In 2006, SBA issued a ruling stating that Blackwater qualified as a small business based on the fact that the company classified fewer than 1,500 of its workers as employees while 1,000 others were designated as independent contractors. Five months later, the IRS “ruled that Blackwater’s ‘independent contractor’ designation was without merit,” Waxman wrote.
His committee said it reviewed more than 20,000 documents, held hearings, and heard testimony from six State Department officials who have said that Blackwater treats its independent contractors as employees, particularly when coordinating field operations in Iraq.
Waxman added that Blackwater’s contracts with its security guards state that “for purposes of the Defense Base Act, Blackwater shall be the statutory employer of the contractor.”
View the entire article in context at:http://www.govexec.com/dailyfed/0308/031108v1.htm