Dem: Blackwater Dodged Millions in Taxes

October 22, 2007 1:29 PM

Justin Rood Reports:

Demblackwater_mn A controversial U.S. private security company under intense scrutiny for its aggressive use of force has a new problem: an allegation it illegally avoided paying millions of dollars in taxes.

In a letter to Blackwater security firm president Erik Prince, Rep. Henry Waxman, D-Calif., charged that the company illegally dodged "millions" in payroll taxes by misclassifying its security guards as "independent contractors" rather than employees.

That way, Blackwater guards were responsible for paying their own Medicare, Social Security and unemployment taxes -- an "illegal scheme," according to Waxman, chairman of the House Committee on Oversight and Government Reform. If the firm had classified its armed guards as employees, which Waxman says it was required to do, it would have been responsible for covering those taxes.

Since May 2006, the company should have paid more than $16 million in taxes and withheld another $16 million from guards' paychecks, Waxman said.

The company disagreed. 

"The Chairman's contention is incorrect," Blackwater spokesperson Anne Tyrrell said in an e-mailed statement. "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."

As evidence of Blackwater's apparent wrongdoing, Waxman pointed to an IRS ruling from March that Blackwater's classification of a guard employee as a contractor was "without merit." While that ruling came in the case of an individual Blackwater guard, the agency warned that the ruling could be expanded to cover other Blackwater personnel, according to Waxman.

In her statement, Blackwater's Tyrrell noted that the company has appealed the IRS decision, and cited a different ruling, by the U.S. Small Business Association, which she said found that "Blackwater security contractors are not employees."

Blackwater is one of three private security firms operating on behalf of the U.S. government in Iraq, but the only one to classify its guards as independent contractors, Waxman said. With more than 920 personnel in Iraq and over $1 billion in work with the U.S. government since 2001, Blackwater is the largest private security firm operating in that country on behalf of the United States.

In recent weeks, the company has been called to answer for repeated aggressive acts by its guards that have left Iraqi civilians dead and wounded. The FBI is investigating the firm, and the Iraqi government has attempted to ban it from operating in its country. The company has said its personnel have acted properly, and that it welcomes the FBI investigation.

If Waxman's allegations are true, they could be embarrassing to others besides Blackwater. Its founder, Erik Prince, has reportedly given more than $225,000 to Republican groups and candidates. Prince's vice chairman, former CIA and State Department official Cofer Black, is a senior adviser to the presidential campaign of Mitt Romney, former Republican governor of Massachusetts.

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October 22, 2007 | Permalink | User Comments (20)

User Comments

Dear Mr. Waxman,
Is it possible that you could be directing your attention at something that you yourself should be investigating within your own closet? Understand clearly sir, that your whimsical investigations only further the resolve of the common enemy to destroy us as a nation from within, by taking petty and childish investigations such as yours and using it against us to drum up support and public opinion against those who, ironically, are protecting you from being assassinated and your family from being raped and killed. My advice to you sir as a former Spec Ops Operator, is to belt up until you have been put into the picture clearly and concisely, and in addition, get your worthless hide over to Iraq and see what the civilian population is doing to support our men on the ground. When you have done all of the above, then come back and testify before your pompous over fed lackeys about investigations. Mr. Prince and his operators have done what no other people have dared to do in the course of our military history, and that is to get up and fight a war and stand in the breach while whining little brats like you stay at home and grovel over being paid enough to feed your fat arses. Belt up I say, and let the real men get on with their mission to deliver a nation which has suffered so much for so little.

Posted by: Fred Corbin | Oct 23, 2007 1:11:07 AM

After seven years of Republican corruption, lying, incompetence, and failure...it's ABOUT TIME somebody cleaned up the slimy snakepit. The vast majority of Americans agree: Waxman is an American patriot and hero. Only the anti-American dead-enders who defend Bush Jr and his corrupt Republicans don't like him...but that's okay. They hate EVERYBODY.

Posted by: wilder5121 | Oct 23, 2007 1:41:14 AM

Blackwater is a bunch of liers ,thieves.and murder's .bullies .and I hope they get procuted for embezzlement!! and I'm sure if the investigstion goes on they will eventually get caught!

Posted by: Jeanette | Oct 23, 2007 6:00:49 PM

To another "sir":
No one is above the law.

The problem Blackwater has is not with the person of Representative Waxman, it is with the law. And I commend him for enforcing it.

Posted by: swokm | Oct 23, 2007 7:48:07 PM

I wonder if they hire hispanics? If there from Michigan I think not most in Michigan jobs do not hire Mexican Americans. Nor do they want them in the school systems in some area's or rent to them. I am not talking about illegals I'm talking because I'm an American an my state sentor Debbie Stebnow proves it because they never make sure the hispanics Americans get jobs. Like NY does great they not prejudice in Mew York as I see them in Michigan these past years.

Posted by: Gloria | Oct 24, 2007 1:35:59 AM

Debbie Stebnow state senator of Mich sent me an email she had her nerve adter avoiding me after weeks not sure why but she told me we are not going to give our jobs away. I'm an Mex AMerican and for years she never carried if I had a job or not.

Posted by: Gloria | Oct 24, 2007 1:38:12 AM

It never ceases to amaze me how venomous most of the Libs are when commenting on almost anything. You Libs are being consumed with hate of Pres. Bush, and you do not seem to get it that he will be out of office soon. Please, lighten up, you will kill yourselves with the all consuming hatred. You do not appear to be bothered that Rep. Waxman continues to slander whomever he wished from his protected position in congress. That is the worst kind of political skulduggery, but typical of Liberals. That is sad, very sad, but true!

Posted by: TheOldTrooper | Oct 24, 2007 11:25:54 AM

Mr. Corbin's comment shows that he is an elitist. He apparently believes that only a few people deserve freedom, and that some Americans whom he dislikes should close their eyes, shut their mouths, sit down, and do as their "superiors" say. Mr. Corbin is undoubtedly not a kind of guy to mess with, but Congressman Waxman and I do not rely on Blackwater to keep our women
from being raped. Mr. Corbin is also insultingly mistaken in his belief that no American fighting men before Erik Prince have "stood in the breech". One
of the horrors of war is the erosion of fighting men's moral fiber from "standing in the door"in harm's way. Over time it gets easier to justify
preemption rather than calculated risk, because in the absence of any obvious benefit from one's own death, self-preservation is the first conservative principle. A "mad minute" was not meant to lower your profile, but it eliminated the distraction of water buffaloes, tigers, and monkeys. Mr. Corbin is a civilian now, and if his company's rules of engagement say to shoot first, they are wrong and illegal. Even uniformed police and military are ordered not to shoot unless they have a dangerous target. Maybe subcontractors who work overseas for GWB's State Department don't have to pay income taxes, but Congressman Waxman has much more to say about that than Mr. Corbin.

Posted by: Michael E. Maus | Oct 24, 2007 12:58:49 PM

Corbin,
You're insane. The only reason we needed blackwater to support America in this illegal war in the first place is because the "coalition of the willing" was a joke. Blackwater does not serve the American people AT ALL, nor does it serve the US constitution, which you were sworn to protect as a US special ops. It answers only to the almighty dollar. Blackwater is NOT protecting me and my family from rape and murder, that's simply ludicrous. Only a complete moron would buy that line of neo-con crap. If Blackwater agents and Erik Prince believed so firmly in the principles this nation was founded on, THEY WOULD ALL RE-ENLIST AND DO IT FOR GOD AND COUNTRY, NOT BETTER PAY!!!
The corporatization of military support is shameful, it shows that this nations government is in way over it's head and has spread our military way too thin.
We can't have privately funded operatives running around a war zone without having to answer to any authority. It make me sick to my stomach when I hear stories from our vets about how Blackwater agents treat enlisted men (and officers) like second class soldiers, as if they were somehow above our US military men. Obviously your time as a spec op has dimished your capacity to have any sympathy for your fellow man, be he American or Arab. Furthermore, investigating Blackwater's finances couldn't possibly "further the resolve of the enemy" because BLACKWATER DOES NOT REPRESENT THE AMERICAN PEOPLE NOR DOES THE WHITE HOUSE. So if they "lose" this illegal war, I say it serves them right for dragging the American people throught the mud in the quest for American EMPIRE, something WE, THE PEOPLE never asked for. I'm tired of folks like you telling the American people that we have to let the government lead us, when the US constitution you were sworn to prtect tells us exactly the opposite, that WE, THE PEOPLE are to lead the government.
If Prince is dodging taxes, I say make him and his gestapo outfit pay the price. If the US military can't do it, sir, the it shouldn't be done in our name. period.

Posted by: Not a liberal | Oct 24, 2007 1:52:21 PM

BLACKWATER IS NOT FIGHTING NO WAR IN IRAQ, LETS GET THIS CLEAR. THEY ARE A BUNCH OF THUGS,SPIES, WEAPONS SMUGGLERS FOR THE BENEFIT OF THEIR HANDLERS, THE TERRORIST STATE OF ISRAEL , NOTHING MORE. THEY ARE OWNED BY ISRAEL AND PAID BY THE UNITED STATES...

Posted by: WILLIAM | Oct 24, 2007 5:55:07 PM

Why is this such a scandal, when no one paid any attention when Palestinian terrorists killed American security personnel hired by the State Department... in GAZA four years ago? To this day, those murders have not been investigated, or if they have, the State Dept. is keeping any revelations to itself. HR 2293, which would require the Secretary of State to report to Congress on the case, has been stuck in committee for months now.

Posted by: Yael | Oct 24, 2007 9:12:19 PM

Gloria, what are you trying to say? Are you saying that Michigan doesn't want MA's in the school system? If so, thats evident by your posts. Other than that, I really don't understand what you wrote. Mr. Fred Corbin thank you for protecting me from rape and murder.....NOT! Blackwaters own actions draw up public opinion against them. Not the investigation into weather they paid there fair share of taxes. I also believe that the men and women of the previous wars WWI,WWII,Korea and others have done what no other people have dared to do in the course of our military history, and that is to get up and fight a war and stand in the breach.

Posted by: getoverit | Oct 24, 2007 9:45:10 PM

Black Water, an American supported Terrorist Organisation. This company is proof the war on Terrorisim is a joke, and the American Tax payer is being forced to pay and support Terrorism in their name.

Posted by: Adeeb N. | Oct 26, 2007 4:57:17 PM

While emotion and politics are fine, the question of employee versus independent contractor is a vexing one at best, and its been vexing for a long time. Comman law is the basis of the decison making process, an analysis that is far to long for here.

Though there could be facts that have not been reported, it does seem, based on common law and the current Federal Statutes and case law in the Federal Courts and Tax courts that Blackwater is liable for several different employments tax assessments. In the end though, numerous attorneys and accountants will be well compensated to disagree with Mr. Waxman and the IRS.

Then there is the IRS 20 Factor Test –
The IRS test often is termed the “right-to-control test” because each factor is designed to evaluate who controls how work is performed. Under IRS rules and common-law doctrine, independent contractors control the manner and means by which contracted services, products, or results are achieved. The more control a company exercises over how, when, where, and by whom work is performed, the more likely the workers are employees, not independent contractors.

****END****

Posted by: Code Jockey | Apr 4, 2008 11:28:30 PM

I think a few of you who are "not a liberal"...need to step up to the plate...put your money where your gaping mouth is...and have a walk into the fire if you blieve so strongly that BW is not doing it right. The statement that vets are treated like second class citizens is a joke. Check the dashboards of their HMMV's and see whose number is posted there...BW tactical support because BW tactical assets have pulled them out of more crap than you could even imagine. If you are mad that BW contractors are making more than you...go spend your time in the military, pay your debt to society and then go contract and get paid what you finally deserve to be paid. "Not a liberal"...I just wonder how much a year you make...doing a very small sliver of the work that a BW contractor does...or must be ready to do. "Re-enlist" you say..."for god and country"...95% of them already did you schmuck...not isn't it your turn. Your comments are a joke sir...and so you are I am afraid. I am speaking from first hand experience...are you???

Posted by: J.R. | Apr 5, 2008 3:05:01 PM

jeepers creepers............this blog has certainly polarized many people as to the wrongs,rights,and plain ol' oopsy's of our men in arms WHATEVER that may be defined as...independent or militarily........and blasting each other over the causesation or outcome can not be a house building expedition. As a matter of fact it is quite seemingly more like a bulldozer. Running over everyone and anything in its path.... I SAY SHUT THE HELL UP PEOPLE AND GET A FRIGGIN GRIP ON REALITY!!! REALITY#1 the world trade center (2) buidlings are gone!!! REALITY #2 AL-QAEDA HAS SWORN DEATH UNTO AMERICA AND ITS CITIZENS....ARE U AWAKE YET??? REALITY #3 THIS COUNTYRY IS AT WAR!!!FOR GOOD OR FOR BAD WE THE PEOPLE DETERMINE THE OUTCOME BY OUR VERY PANDERING TO THE LIBERALS WHO CRY AND WHINE ABOUT ALL THE CRAP GOIN ON....I AM A LIBERAL BUT THIS MAKES ME ILL... GET BEHIND YOUR SOLDIERS AND SUPPORT THEM ONE AND ALL..NOT FROM YOUR DESKTOP OR FROM YOUR HEART BUT REACH TO THE PLACE EVERYONE DOES NOT WANT TO YOUR pocket book and wallets!!!! FOR THE ENEMY HAS MADE IT SO U THE PEOPLE PAY FOR THEIR WAR AND THE OIL PRESIDENT IS RIGHT ALONG WITH THEM IN THE PANDERING TO OIL EXECUTIVES IN HIS HOME STATE... I AM VERY SORRY MR PRESIDENT BUT THIS IS THE WAY I FEEL!!! WHILE WE THE LAME,BLIND,CRIPPLED,AND CRAZY ARE LEFT MUCH TO FEND FOR OURSELVES IN YOUR WORLD MR PRESIDENTAS WELL AS THE SUFFERING OF THE GI'S THAT U SEND HOME HURT AND DENY BENEFITS TO!!!!! NOW AFTER MY BRIEF MOMENT OF INSANITY I WOULD LIKE VERY MUCH TO SAY THAT IF THE AMERICAN PEOPLE DO NOT STOP THE OUTSOURCING OF OUR JOBS AND THE SHUT DOWN OF OUR FACTORIES HOW WILL WE THE PEOPLE BE ABLE TO DEFEND OURSELVES WHEN THE FIGHT COMES TO OUR DOOR MR PRESIDENT BECAUSE NOW THAT ALL THE FACTORY JOBS ARE IN CHINA AND MEXICO AND THE AMERICAN STEEL INDUSTRY THAT ONCE WAS THE ENVY OF THE WORLD IS NOW BUT A MERE SHADOW OF ITSELF LITERALLY....SHUTDOWN.!!!! SO WHILE YOU ALL MEANDER ABOUT MOANING ABOUT WHO SHOT WHOM TAKE A REALITY CHECK (REFERENCED ABOVE^^^) THEN LET ME KNOW WHAT U THINK

Posted by: Joshua | May 27, 2008 6:00:15 PM

Bush promised no draft (since the draft might have forced some of the privileged into actually doing something in the name of their country.) On the other hand, despite the courage our soldiers have shown, I want to say that they are not fighting this war for ME. This war is not protecting our women from rape---In fact, our women who are trying to help fight it, are being raped by our own soldiers and officers. This war has made my life, and the lives of millions of other Americans, more difficult; it has brought shame to America--and used our tax money to do it. Because of this war, we cannot afford the very most essential maintenance that our own country needs (infrastructure like roads and bridges, electrical grid, schools, etc.) or that our people are doing without (medical care, a decent education, etc.) In other developed nations, these things are considered the right of all citizens. In America, they're called "liberal" programs, programs that apparently are superficial when compared to the honor of attacking a foreign nation based on a bunch of right-wing extremist lies. To keep Bush's promise about no draft, we have BlackWater, the mercenaries who value nothing and no one except their own pay (absurdly higher than that of soldiers)and their own worthless hides.

Posted by: Holly Helmstetter | May 27, 2008 11:22:26 PM

Why do we need Blackwater?? It's just another way of spending our peoples money. Anything Bush does is a joke. Why don't we send Blackwater to our Mexican boarders?

Posted by: Rick Musselman | May 28, 2008 2:35:18 PM

Blackwater is nothing more than a mercenary army that is the muscle of the GOP. They will probably be used when the traitors in the White House decide that they need to declare martial law and arrest Congress before crowning the "unitary executive" as king. Scary, but why couldn't that happen?

Posted by: bob | May 29, 2008 10:04:42 PM

I come from a big family of military/police/homeland security and all i have seen is them standing up for and smashing the system constantly,not to mention they have been pushed aside&denied help from the very country they fought to protect for fear of having to take responsibility for the harm they encountered from there mistakes,and yet they still carry this us&them mentality, we need to consolidate our forces into a more controlled single organization without adding the bumbling idiocy of privately funded meat heads amped up on steroids and money (1/3 of the officers and military I've had the pleasure of meeting should be considered rabid)and what about the depleted uranium over 300 tons have been sprayed across much of the land we are fighting in?

Posted by: Jay | Jun 23, 2008 7:13:47 PM

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