Waxman Committee Urges Scrutiny of Blackwater’s Employment Practices

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Rep. Henry Waxman (D-Calif.) and the House Committee on Oversight and Government Reform are after Blackwater again, this time in relation to the private security firm’s compliance with federal tax, small business, and labor laws. Blackwater’s controversial practice of treating its employees as “independent contractors” first surfaced last October, shortly after company founder and CEO Erik Prince testified before Waxman’s committee to account for a Blackwater team’s involvement in an unauthorized shooting in a Baghdad traffic circle that killed 17 and wounded 24 others. Since then, Waxman’s staff has been looking into the applicable federal laws and has apparently concluded that Blackwater may be in violation.

Today, Waxman sent letters to Labor Secretary Elaine Chao (.pdf), IRS Acting Commissioner Linda Stiff (.pdf), and Small Business Administration Administrator Steven Preston (.pdf), urging the officials to probe Blackwater’s compliance with their respective agencies’ rules and regulations.

More after the jump . . .

Waxman’s staff also released a memorandum (.pdf), outlining the Committees’ concerns. An excerpt:

The evidence received by the Committee shows that Blackwater has taken inconsistent positions regarding whether its guards are employees or independent contractors. When the issue is whether Blackwater can be held liable for wrongful death of Blackwater guards, Blackwater argues that the guards are “employees” and can recover only through the workers’ compensation system. But when the issue is whether Blackwater must pay or withhold Social Security, Medicaid, and 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.”

The implications of Blackwater’s actions are significant. Committee staff have estimated that Blackwater has avoided paying or withholding up to $50 million in federal taxes by treating its guards as independent contractors rather than employees. It also appears that Blackwater has received more than $144 million in small business contracts that may not be justified and has evaded oversight by the Department of Labor.

For these reasons, I am sending letters today to the Internal Revenue Service, the Small Business Administration, and the Department of Labor. These letters ask the agencies to investigate whether Blackwater has complied with federal tax and other laws and to initiate enforcement action where appropriate.

Photo used under a Creative Commons license from James Gordon.

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