Blackwater accused of tax dodge
WASHINGTON - The Democratic chairman of a House watchdog committee said yesterday that Blackwater USA violated tax laws and may have defrauded the government of millions of dollars, a charge the embattled security firm said is groundless.
Representative Henry Waxman, who chairs the Committee on Oversight and Government Reform, released a March letter from the Internal Revenue Service that states the company's classification of a security guard as an independent contractor, instead of company personnel, was "without merit."
Under US law, companies must pay Social Security and other federal taxes on their employees. But unlike other security companies operating in Iraq, Blackwater says the guards it trains, equips, and deploys to Iraq and elsewhere are independent contractors hired directly by the federal government.
"By classifying its armed guards and other personnel as independent contractors instead of employees, Blackwater has apparently evaded withholding and paying these taxes," Waxman, Democrat of California, wrote in a letter to Blackwater chief Erik Prince.
Waxman's charge comes as the company is struggling to salvage its reputation after a string of security events involving its guards, including a September shooting that left 17 Iraqis dead.
US and Iraqi officials are negotiating Baghdad's demand that Blackwater be expelled from the country within six months, and American diplomats appear to be working on how to fill the security gap if the company is phased out.
Blackwater spokeswoman Anne Tyrrell said in an e-mail to the Associated Press that the company has appealed the IRS ruling and that no final determination has been made. Further, she said, the US Small Business Administration has told the company that Blackwater security guards do not have to be classified as company 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," Tyrrell said.
An IRS spokeswoman declined to comment on the case, as is custom to protect privacy.
Waxman has been investigating Blackwater's business dealings for weeks, including whether the State Department unfairly awarded Blackwater a noncompetitive contract, and if its guards took control of two Iraqi military aircraft without permission.
According to the House Democrat, the IRS finding was the result of an inquiry filed by a Blackwater guard. The guard later agreed not to discuss the matter with anyone, including politicians or public officials, in exchange for receiving compensation owed to him by Blackwater, Waxman said.
