…the old Bill Cosby joke goes that God’s warning to Noah that the flood was coming was “Noah, how long can you tread water?”
Erik Prince must be wondering how long he can do so, because this ex-Navy SEAL is now officially up to his neck in the deluge.
The congressman leading an investigation into Blackwater said Monday that the embattled security company may have evaded tens of millions of dollars in federal taxes and was seeking to hide its tax practices.
Rep. Henry Waxman, a California Democrat, said that Blackwater has avoided paying Social Security, Medicare and unemployment taxes by treating its armed guards as independent contractors and not employees.
The other two large private security companies in Iraq, DynCorp and Triple Canopy, classify their guards as employees and pay the federal taxes that Blackwater has not, Waxman said.
The issue came to the attention of the IRS when a Blackwater guard working in Afghanistan complained that the company had classified him as an independent contractor. The IRS said Blackwater’s classification was “without merit” and ruled in March that the man was an employee.
They got Capone on tax charges. There’s also a certain piquant flavor to the irony that Blackwater has been growing fat off of tens of millions of taxpayer dollars…only to face a huge unpaid tax bill. No matter who’s in charge of the federal government, the IRS is the IRS.
Blackwater agreed to pay back wages and other compensation to the man, but on condition that he not talk to any politician or public official about the company.
“THE UTMOST PROTECTION AND NONDISCLOSURE OF CONFIDENTIAL INFORMATION IS OF CRITICAL IMPORTANCE AND IS THE ESSENCE OF THIS AGREEMENT,” the settlement agreement stated in capital letters. Waxman released it after obtaining it by subpoena from Blackwater.
“This nondisclosure agreement is abhorrent on its face,” Waxman wrote Monday to Blackwater founder Erik Prince. “It is deplorable that a company that depends on federal tax dollars for over 90 percent of its business would even contemplate forbidding an employee to report corporate wrongdoing to Congress and federal law enforcement officials.”
Blackwater issued a statement Monday saying that Waxman was incorrect about the tax issue and that the company was appealing the IRS ruling.
The company said the U.S. Small Business Administration has determined that Blackwater security contractors are not employees.
“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,” the statement concluded.
Blackwater says the Small Business Association is wrong about these upstanding, chamber of commerce style guys. They’re just like your local Rotary Club, only with rotary carbines and rotary aircraft. But the thing is that Blackwater’s paddling up this creek without a boat.
SBA spokeswoman Christine Mangi says that SBA did make such a determination — on November 2, 2006. But it was in reference to a dispute about who was a company employee on a project to provide services to Navy vessels in Guam, not Iraq. The ruling, she says, “was for this particular procurement,” not an SBA finding about Blackwater personnel in general, contrary to the suggestion of Blackwater’s response to Waxman.
Furthermore, Mangi explains, the IRS hardly has to defer to the SBA determination about who’s an independent contractor and who’s an employee. “Our findings are for the sole purposes of our small business contracting programs and, to the best of our knowledge, carry no legal weight outside of our programs,” she says.
Wouldn’t it indeed be fun to see Blackwater go down fighting the one fight that all the guns, bombs, and humvees could never help you with: splitting hairs with the IRS over millions in unpaid taxes.
Go ahead, I want to see the Blackwater training manual on that.
Meanwhile, ol Henry Waxman wants to take a look at DynCorp while he’s at it.
It’s not just Blackwater! Rep. Henry Waxman (D-CA) has another State Department security contractor in his sights — industry pioneer DynCorp, which, in addition to guarding diplomats in northern Iraq, has reaped over $1 billion from State since 2004 to help train the Iraqi police.
Corruption and mismanagement in the Iraqi police is an old story. The U.S.’s special inspector general for Iraq, Stuart Bowen, told Waxman’s House oversight committee earlier this year that DynCorp had significantly overbilled the State Department. But the extent of the misconduct is unknown: department officials have failed for months to provide documentation about the origins and terms of the contract to the committee, despite numerous promises. Making matters even fishier, State representatives told Waxman’s staff that a single official handles all DynCorp contracts with the department and has for a decade — far longer than is typical in agency-contractor relationships.
Waxman wrote to Secretary of State Condoleezza Rice today to remind her that the committee wants the documents on the DynCorp contract that the department promised it in May. There’s an urgency here: last month, a commission headed by Marine General James Jones found the Iraqi police in serious disarray.
As I have said, and many other have pointed out, the PMC problem is both endemic and systemic. Blackwater is only the public face of the much, much larger issue. I for one am glad to see that the scrutiny on Blackwater’s books is being extended to other PMC outfitters taking millions of our tax dollars to do what the military is too tied down in Iraq to do. This is what Bush’s invasion of Iraq on the cheap has gotten us. Don’t forget that for a moment, because companies like Blackwater are coming to protect a state near you.
There are signs that Blackwater USA, the private security firm that came under intense scrutiny after its employees killed 17 civilians in Iraq in September, is positioning itself for direct involvement in U.S. border security. The company is poised to construct a major new training facility in California, just eight miles from the U.S.-Mexico border. While contracts for U.S. war efforts overseas may no longer be a growth industry for the company, Blackwater executives have lobbied the U.S. government since at least 2005 to help train and even deploy manpower for patrolling America’s borders.
Blackwater is planning to build an 824-acre military-style training complex in Potrero, Calif., a rural hamlet 45 miles east of San Diego. The company’s proposal, which was approved last December by the Potrero Community Planning Group and has drawn protest from within the Potrero community, will turn a former chicken ranch into “Blackwater West,” the company’s second-largest facility in the country. It will include a multitude of weapons firing ranges, a tactical driving track, a helipad, a 33,000-square-foot urban simulation training area, an armory for storing guns and ammunition, and dorms and classrooms. And it will be located in the heart one of the most active regions in the United States for illegal border crossings.
While some residents of Potrero have welcomed the plan, others have raised fears about encroachment on protected lands and what they see as an intimidating force of mercenaries coming into their backyard. The specter of Blackwater West and the rising interest in privatizing border security have also alarmed Democratic Rep. Bob Filner, whose congressional district includes Potrero. Filner says he believes it’s a good possibility that Blackwater is positioning itself for border security contracts and is opposed to the new complex. “You have to be very wary of mercenary soldiers in a democracy, which is more fragile than people think,” Rep. Filner told Salon. “You don’t want armies around who will sell out to the highest bidder. We already have vigilantes on the border, the Minutemen, and this would just add to [the problem],” Filner said, referring to the Minuteman Project, a conservative group that has organized civilian posses to assist the U.S. Border Patrol in the past. Filner is backing legislation to block establishment of what he calls “mercenary training centers” anywhere in the U.S. outside of military bases. “The border is a sensitive area,” he said, “and if Blackwater operates the way they do in Iraq — shoot first and ask questions later — my constituents are at risk.”
This is the future of “corporate warfare” in America. Our military duties — waging war overseas and protecting our borders — are being farmed out to the private sector. It’s an army bought and paid for by the BushCo machine, and it’s coming to “protect” you and your family from “terrorists”.
The problem is it’s the “plenary executive” that determines who a “terrorist” is.
A spokesman for the U.S. Customs and Border Protection denied there are any specific plans to work directly with Blackwater. And Blackwater officials say the complex would be used only for training active-duty military and law enforcement officials, work for which the company has contracted with the U.S. government.
But statements and lobbying activity by Blackwater officials, and the location for the new complex, strongly suggest plans to get involved in border security, with potential contracts worth hundreds of millions of dollars. Moreover, Blackwater enjoys support from powerful Republican congressmen who advocate hard-line border policies, including calls for deploying private agents to beef up the ranks of the U.S. Border Patrol. Lawmakers supporting Blackwater include California Rep. and presidential candidate Duncan Hunter — who met last year with company officials seeking his advice on the proposal for Blackwater West — and Rep. Mike Rogers of Alabama, who is sponsoring a bill to allow private contractors such as Blackwater to help secure U.S. borders.
When questioned at a public hearing with the Potrero planning group on Sept. 13 about Blackwater West, Brian Bonfiglio, a Blackwater spokesman, said, “I don’t think there’s anyone in this room who wouldn’t like to see the border tightened up.” Blackwater currently had no contracts to help with border security, Bonfiglio said, but he emphasized that “we would entertain any approach from our government to help secure either border, absolutely.” Bonfiglio was responding to questions from Raymond Lutz, a local organizer who opposes the new complex. (Lutz recorded the exchange and posted video of it on Oct. 12 at CitizensOversight.org.) Lutz also asked Bonfiglio if Blackwater West would be used as a base for deployment of Border Patrol agents. “Actually, we’ve offered it up as a substation to Border Patrol and U.S. Customs right now,” Bonfiglio replied. “We’d love to see them there.”
Ramon Rivera, a spokesman for the U.S. Customs and Border Protection in Washington, denied Bonfiglio’s claim that the agency is entertaining an offer to use Blackwater West as a substation. “I think that’s just Blackwater trying to sell themselves,” Rivera said.
In fact, Blackwater has been selling itself for direct involvement in border security at least since May 2005, when the company’s then president, Gary Jackson, testified before a House subcommittee. Jackson’s testimony focused on Blackwater’s helping to train U.S. Border Patrol agents and included discussion of contracts theoretically worth $80 million to $200 million, for thousands of personnel. Asked by one lawmaker if his company saw a market opportunity in border security, Jackson replied: “I can put as many men together as you need, trained and on the borders.”
Gee that’s a comforting thought. And with our National Guard and Border Patrol so stretched out and unable to provide for the common defense, what happens to America when the Executive Branch of the Federal Government — that believes itself above any and all other laws — has its own private army on American soil, with no oversight from anyone?
We may all find out the answer to that question very soon. That’s the big ugly bloody iceberg that Blackwater is just the tip of.
