March 10th, 2008 by Jesse LeeThis morning Chairman Henry Waxman of the Oversight Committee sent letters to the Internal Revenue Service (pdf), the Small Business Administration (pdf), and the Department of Labor (pdf) to request investigations into whether Blackwater has violated federal tax, small business, and labor laws through improper classification of security guards as “independent contractors” rather than “employees.”
On October 22, 2007, I wrote to Blackwater CEO Erik Prince raising concern that Blackwater evaded millions of dollars in federal tax payments through its improper classification of security guards as “independent contractors” rather than “employees.” My letter was based in part on a March 2007 Internal Revenue Service ruling, which concluded that Blackwater violated federal tax law by designating an armed guard as an independent contractor. Committee staff estimated that Blackwater failed to pay or withhold up to $50 million under its contract with the State Department.
Since then, the Committee’s investigation has revealed two other contexts in which Blackwater appears to have improperly exploited this “independent contractor” designation. First, despite the fact that Blackwater is one of the largest private military contractors, receiving nearly $1.25 billion in federal contracts since 2000, Blackwater has sought and received special preferences normally reserved for small businesses. As it did in the tax context, Blackwater claimed that its security guards were not “employees” for the purpose of counting the company’s total number of staff. As a result, Blackwater obtained small business contracts without competing with other qualified bidders that properly designated their guards as employees. The Committee staff has identified at least 100 small business set-aside contracts. worth over $144 million, that have been awarded to Blackwater since 2000.
In addition, Blackwater has refused to cooperate with an audit by the Department of Labor into Blackwater’s potentially discriminatory employment practices. The audit seeks to determine whether Blackwater has complied with affirmative action and anti-discrimination laws imposed on all federal contractors. Blackwater has argued that it is not bound by these laws since it classifies its security guards as “independent contractors” rather than “employees.” On this basis, Blackwater has refused to turn over documents requested by the Department of Labor, stalling the Department’s inquiry for the last six months.
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Show Chairman Waxman that you support his efforts by letting Congress know that you are fed up with Blackwater. Sign the petition asking the Congress to demand that the Department of State and the Department of Defense cancel all contracts with Blackwater Worldwide (formerly Blackwater USA )