Henry Waxman: Blackwater May Have Engaged in Tax Evasion

House Oversight and Government Reform Committee chairman Henry Waxman asserted today that Blackwater USA “may have engaged in significant tax evasion.”

In a letter to Blackwater Chairman Erik Prince, panel Chairman Henry Waxman (D-Calif.) noted that the IRS earlier this year ruled that the company “violated federal tax laws by treating an armed guard as an ‘independent contractor,’ ” Waxman said. “The implication of this ruling is that Blackwater may have avoided paying millions of dollars in Social Security, Medicare, unemployment and related taxes for which it is legally responsible.”

The lawmaker noted that the issue came up when Prince testified before his panel earlier this month. At the time, Prince said that guards like the “flexibility” of the independent contractor status and that it is a “model that works.” The IRS ruling was not mentioned and Waxman said there is “evidence that Blackwater has tried to conceal the IRS ruling and the evasion of taxes from Congress and law enforcement officials.”

The lawmaker stated that his panel has found out that “Blackwater required this employee to sign a non-disclosure agreement before it agreed to pay the back pay and other compensation that he was owed. The terms of this agreement explicitly prohibited the guard from disclosing any information about Blackwater to ‘any politician’ or ‘public official.’ ”

Waxman charges that “it now appears that Blackwater used this illegal scheme to avoid millions of dollars in taxes and then prevented the security guard who discovered the tax evasion from contacting members of Congress or law enforcement officials.”

The Hill reports that Henry Waxman is “calling on Prince to provide the committee with documents regarding the issue, including all communications between the government and Blackwater with regard to the classification of the company’s employees, non-disclosure agreements and documents related to the security guard who requested the IRS ruling.”

The panel also set up a tipline to allow people with knowledge of Blackwater’s potential tax evasion to come forward.

No one could be reached at Blackwater for comment. In an odd related news piece, the N.Y. Times reports that Blackwater in the midst of investigations is softening their logo from “macho” to “corporate.”

Watch Blackwater for dummeez (h/t GottaLaff at Cliff Schecter):

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2 Responses to Henry Waxman: Blackwater May Have Engaged in Tax Evasion

  1. Darrell Prows says:

    This is big! I mean assuming that Blackwater is really dumb enough to try using the “independent contractor” route. They literally don’t have a leg to stand on (barring, of course, a special exemption in some law some place).

    The essence of I.C. is lack of authority for the “employer” to closely direct the activites of the individual. I.C.’s are also mostly supposed to supply their own tools and equipment. That would mean that every one of the mercs on the Blackwater payroll in Iraq basically could and should be roaming around as one man gangs.

    The tax implications of this are enormous, but the policy implications are actually staggering. Almost nothing is supposed to be more regulated than an army, and almost nothing is supposed to be less regulated than an Independent contractor.

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