May 23, 2008
Offshore Shell Companies for Defense Contractors Targeted
Offshore shell companies used by defense contractors to skirt Social Security and Medicare taxes for employees may get whacked in the future by new legislation sent to the White House Thursday. The practice is especially popular with contractors doing business in Iraq and Afghanistan -- including KBR, which has "avoided hundreds of millions of dollars in payroll taxes for 10,000 American employees in Iraq by hiring them through shell companies based in the Cayman Islands."
KBR has the single-biggest contract with the U.S. government, worth $27 billion, for troop support. It also has two Cayman subsidiaries, Overseas Administrative Services and Service Employees International, that employ U.S. citizens to work in Iraq, according to a letter to KBR from Rep. Henry Waxman, chairman of the House Oversight and Government Reform Committee.Here's the story: Senate OK's bill barring contractors from avoiding tax
Here's my take from four years ago: Iraq Contractor Accused of Offshore Shell Game
One study, made public in February, finds that 59 of the 100 largest federal contractors in 2001 reported having subsidiaries in approximately 39 countries identified as tax havens. Such countries, including the Cayman Islands and Cyprus, levy negligible taxes on corporate income and provide privacy laws that shield businesses from international scrutiny.Many of the federal contractors named by GAO also hold multi-million dollar contracts in Iraq, including Fluor, Foster Wheeler (which is incorporated in Bermuda), Computer Associates International, Bearing Point, Harris, and others. (A separate GAO report released in August found that such companies enjoy a substantial competitive edge in winning contract awards over government contractors without such offshore operations.)
Houston-based Halliburton, the largest contractor in Iraq, holds billions of dollars in reconstruction and logistics contracts. It operated 17 subsidiaries in tax haven nations as of 2001, according to GAO.
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May 22, 2008
US to compensate family of 12 Nepalese killed in Iraq
A dozen low-wage workers from Nepal forced to work in Iraq and then beheaded four years ago by ruthless killers finally get their just compensation under US law. (Full story below the fold.)
Continue reading " US to compensate family of 12 Nepalese killed in Iraq"
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May 15, 2008
Get Out with a 'Planned' Withdrawal
A conversation with retired British Army General, Michael Rose about his book Washington's War: From Independence to Iraq.
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May 14, 2008
Insurance Fraud in Iraq
It may be the biggest, most pervasive fraud taking place among US-funded contractors in Iraq.
Two contractors are now under criminal investigation for failing to obtain required insurance but charging for it anyway, according to the Associated Press. There may be many more soon to bear the same scrutiny:
The investigation of two companies located in Tikrit -- Sakar al-Fahal and al-Jubori -- led the Army Corps of Engineers to scour its records for evidence of fraud by other contractors hired with billions of U.S. dollars to help rebuild Iraqi infrastructure devastated by the war, the documents reveal.
Under federal law, all contractors doing work overseas for U.S. government agencies are required to insure their civilian employees, many of whom are handling dangerous jobs in hostile areas. The medical and disability insurance is called Defense Base Act coverage, a reference to the federal law mandating it. The State Department and US AID have their own in-house program, but other contractors must go to much more expensive private insurers.
According to the General Accountability Office, Defense contractors were paying up to $21 in workers' compensation premiums for each $100 in workers' salary, compared with as little as $2 in insurance costs for contractors employed by the State Department. The contractors' insurance premiums are borne by the government, which also pays the workers' claims if an injury or death is directly caused by a "war-risk hazard."
That has spawned a long, festering multi-billion-dollar problem and it has grown like a tumor in Iraq where contractors equal the numbers of US troops. As USA Today reported three years ago:
The Defense Department wants to overhaul a controversial $5.5 billion workers' compensation insurance program for its civilian contractors overseas after discovering that it is paying up to 10 times more for the insurance than other government agencies while leaving taxpayers exposed to large uncovered claims.
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Pile On: More Allegations of Cover Up at State
Another claim of cover up at the State Department comes from former State Department officials on Monday who told Senate Democrats that the department shut them up on findings of widespread corruption within the Iraqi ministries.
"The Department of State's actual policies not only contradicted the anti-corruption mission but indirectly contributed to and has allowed corruption to fester at the highest levels of the Iraqi government," said Arthur Brennan, who served as director of the State Department's Office of Accountability and Transparency at the U.S. Embassy in Baghdad.
Delivering his statement to the Senate Democratic Policy Committee, the long-time Republican and former New Hampshire judge added:
"The embassy effort against corruption, including its new centerpiece, the now defunct Office of Accountability and Transparency, was little more than 'window dressing."Although Brennan only served in Baghdad a few months, his claims carry more weight because he is not the first to claim that fraud has been overlooked by the State Department. The State Department's former inspector general, Howard Krongard, resigned last November after being accused of thwarting numerous fraud investigations stemming from contracts in Iraq.
Even more curious is the predicament of Radhi Hamza al-Radhi, the former head of the Iraqi Commission on Public Integrity, who testified before Congress about rampant corruption in Iraq. The Iraqi Judge said that nearly four dozen of his staff members were killed while working for him. Radhi is now seeking asylum, but apparently, the State Department has been dragging its feet.
Notes TPMMuckraker:
One of the former officials testified that "a senior State Department official had ordered agency employees not to give al Radhi references or contact him" for help with his asylum.
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May 10, 2008
Back in the News
Blackwater's security contract is up and running in Iraq despite last September's shooting that left at least 17 Iraqis dead at a Baghdad intersection:
The State Department has just renewed its contract to provide security for American diplomats in Iraq for at least another year. Threats by the Iraqi government to strip Western contractors of their immunity from Iraqi law have gone nowhere. No charges have been brought in the United States against any Blackwater guard in the September shooting, either, and the F.B.I. agents in Baghdad charged with investigating whether Blackwater guards have committed any crimes under United States law are sometimes protected as they travel through Baghdad by Blackwater guards.
So reports The New York Times.
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May 08, 2008
Harassment Charges must be 'Independently Investigated'
The Times puts pressure on KBR for allegedly harassing Iraqi women employees:
It is also all too probable, unfortunately, that the men whom they accused of demanding sex in return for pay rises and promotion behaved as men in similar circumstances have behaved before -- boorishly, aggressively and confident that they would not be found out.
Here's the editorial: Scandal in Baghdad
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May 07, 2008
Targeting Contractor Tax Havens
Sen. Byron Dorgan, D-N.D., announced plans to offer an amendment to the fiscal 2008 emergency Defense Department supplemental to restrict any of the supplemental funds from going to firms that set up offshore subsidiaries to avoid paying U.S. taxes.
Havens have been a long cherished business practice by US-funded contractors.
Farah Stockman with The Boston Globe again began fanning the flames on the use of tax havens last month, triggering the attention of Henry Waxman's oversight congressional committee: Top Iraq contractor skirts US taxes offshore.
She followed up last week with Shell firms shielded US contractor from taxes.
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May 01, 2008
Jury Deadlocked over Contract Bribe
How did this happen? A jury in Rock Island Illinois said they were deadlocked on the Bush Administration’s prosecution of a former middle-level sub-contractor for KBR that the federal government has targeted for more than three years.
The story first surfaced here: Subcontractors Hit Halliburton with Multiple Lawsuits
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