Henry Sez: Erik Prince, You Owe the Feds $48 Million
Congressman Waxman gets pretty aggressive in his latest letter to Erik Prince, CEO of Blackwater. He basically accuses Blackwater of evading taxes by treating its employees as independent contractors, rather than employees.
I have received documents which suggest that Blackwater may have engaged in significant tax evasion. According to an IRS ruling in March 2007, Blackwater violated federal tax laws by treating an armed guard as an "independent contractor." 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.
What I like best, though, is that Henry had Oversight calculate how much Blackwater likely owes in back taxes, just on its State Department contract.
Blackwater was awarded its current State Department contract in May 2006. Under the contract, Blackwater has maintained a force of between 459 and 582 security guqlds in Iraq who were paid between $660 and $738 per day and typically worked 180 days ayear." My staff estimates that between May 2006, when the contract began, and March 2007, when Blackwater received the IRS ruling, Blackwater would have avoided withholding and paying approximately the following amounts if it treated these security guards as independent contractors instead of as employees: $15.5 million in Social Security and Medicare taxes," $15.8 million in federal income tax withholding, and $500,000 in unemployment taxes.
One unanswered question is whether Blackwater has continued to avoid withholding and paying Social Security, Medicare, and unemployment taxes and federal income tax withholding for its employees since Blackwater received the IRS ruling in March 2007. One former Blackwater security guard has informed my staff that Blackwater did not withhold and pay these taxes at least through May 2007. If Blackwater has continued this illegal practice, my staff estimates that Blackwater would have evaded an additional $18 million in taxes from April 2007 through September 2007 under the State Department contract alone.
Waxman goes on to insinuate that Blackwater attempted to keep this information from "politicians and public officials" like Waxman–using a non-disclosure agreement to hide illegal behavior.
I wonder why Prince and Blackwater never noticed, or had pointed out to them by their lawyers, the Microsoft contractor case. It’s extremely relevant here.
Didn’t I hear Erik Prince testifying that he has huge expenses for the work Blackwater does in Iraq like supplying equipment, vehicles, and on and on? Wouldn’t a private contractor be using their own vehicle, tools, etc?
as I recall, the Small Business Administration isn’t the final determining body as far as the IRS is concerned
blackwater is entitled to attempt any tax dodge it wants to try
but the IRS don’t give a shit what the SBA says
for cases like this, we generally use the United States Tax Code
if Eric Prince is wrong in his faith in a SBA ruling, then mr prince can go serve his time just like other famous tax cheaters
Al Capone comes to mind …
ew –
My question for you or the lawyers out there:
What happens to this guy who signed the non-disclosure form if Mr. Henry slaps a subpoena on him and puts him under oath?
Nothing like being between Iraq and a hard place.
Waccamaw – A non-disclosure agreement between private individuals or corporations such as Blackwater and its employee/independent contractor cannot provide a reasonable excuse to refuse to comply with a subpoena, although Blackwater could try and sue the employee/independent contractor if s/he provided more information than was expressly sought in the subpoena. And the employee/independent contractor could assert a 5th Amendment privilege if the questions asked by Congress could incriminate him. I suspect that given Blackwater’s line of business and the type of people it employs, this particular employee/independent contractor would be extremely loathe to be forthcoming about anything to the Committee, regardless of the wording of any non-disclosure agreement.
To expand on Ishmael just a bit; such a provision would be declared void and unenforceable as a matter of public policy. There is actually quite a bit of law out there on stuff like this; so much so, in fact, that it is somewhat amazing that a supposed high dollar operation like Blackwater would attempt this crap. It can’t work if challenged, and is per se evidence of obstruction and deceit.
Blackwater defrauds US citizens – social security and medicare – of tax revenue. How patriotic.
You don’t have to be in business for more than two minutes to know the difference between a contractor and an employee under federal law. It may be that Blackwater was more interested in avoiding corporate liability for the actions of its armed employees rather actually defrauding SS and medicare for a mere $48 million. Nonetheless, without Waxman Prince Erik would be $48 million richer in ill begotten gains.
Ishmael & bmaz –
Thanks much for the feedback!
Looking forward to a follow-up from ew if anything further comes of Mr. Henry’s letter. Likely passing close to Moyock in the next several weeks but don’t think I’ll make an effort to see what the exterior of bw looks like. *g*
bmaz:
Those â€agreements†are common in 3rd world countries like Florida (a â€right to work stateâ€). You wouldn’t believe the crap you have to sign just to get a job.
Erik Prince in jail as a tax cheat – how very Republican of him. Just think of all the others we’ll get this way.
He’s just the kind of guy who needs to learn how to clean a latrine with his tongue.
How ironic that Eric Prince,family values guy,solid upstanding citizen,should try and use laws to keep from paying taxes. Love that trickle down economics it has worked so well for those no bid contractors,trickling down from the taxpayer to the Government to the corporations to the government officals…must have run out of money before it got to us peons. No tax money for those hard working parents with KIDS.
darn, the small business administration says mr prince is wrong
that didn’t take long
so we got eric prince and al capone
good patriotic amurikans there
But guys, think how much more they would have charged if they had to pay taxes!
Again, the Progressives are trying to find someone to hang for Iraq, and they are going after American Businessmen.
Again, the Progressives are assuming they are going to prevail even in some kind of tortured (deliberate choice of words) IRS/Legal swamp.
Again, …, I predict failure.
21st century schizoid SS