A leading congressman today asked three federal agencies to investigate the conduct of Blackwater, the private military contractor based in North Carolina.
U.S. Rep. Henry Waxman said Blackwater may be violating tax, small businesss and labor laws, and he requested investigations from the Internal Revenue Service, the Small Business Administration and the Department of Labor, reports Joseph Neff.
Blackwater's director of public affairs, Anne E. Tyrrell, called Waxman's claims "completely without merit."
Waxman repeated the complaint he first aired in October, that Blackwater has evaded tens of millions of dollars in federal taxes by treating its security guards, pilots and support staff as independent contractors instead of employees.
Since then, Waxman said, his investigators have reviewed 20,000 documents and interviewed former Blackwater personnel and officials at the State Department, which hired Blackwater to protect its diplomats in Iraq and worldwide.
Companies must withhold Medicare and Social Security taxes for employees, but not independent contractors. Blackwater may have failed to pay or withhold up to $50 million dollars in taxes.
Read more after the jump.
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The independent contractor designation also helped Blackwater win at least $144 million in contracts set aside for small businesses. If Blackwater counted its overseas personnel as employees, it would not be eligible for small business designation, Waxman said.
Blackwater has not been consistent in classifying its workers.
While fighting a lawsuit from the families of four Blackwater workers killed in a massacre in Fallujah in 2004, the company's outside counsel, Fred Fielding, argued that its guards were employees. Fielding is now White House counsel for President Bush.
"When the issue is whether Blackwater can be held liable for the wrongful death of Blackwater guards, Blackwater argues that the guards are "employees" and can recover only through the workers compensation system," Waxman wrote. "But when the issue is whether Blackwater must pay or withhold Social Security, Medicaid or other taxes for the guards, whether Blackwater is eligible for small business preferences in contracting, or whether Blackwater must comply with anti-discrimination rules, Blackwater calls these same guards "independent contractors."
Two other companies provide security services for the State Department, Dyncorps and Triple Canopy. Both treat their security guards as employees.
The California Democrat also cited Blackwater for failing to cooperate with the U.S. Department of Labor, which has requested the company's affirmative action plans. Such plans are required for all federal contractors.
Waxman, who chairs the House Committee on Oversight and Government Reform, has been investigating Blackwater since November 2004.
Tyrrell, of Blackwater, said the company had correctly classified the workers.
"Blackwater's classification of its personnel is accurate, and Blackwater has always been forthcoming about this aspect of its business with its customer, the U.S. government," she said in the statement. "Blackwater looks forward to continuing its cooperation with all inquiries that may result from these letters. The company regrets the chairman’s decision to publicly air misleading information."
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