Report: Blackwater Cost Government Millions by Saying Their Employees Weren't Their Employees

Super-private security firm Blackwater has managed to stay out of the headlines for the last couple of months. But that might be about to change.

House oversight committee chairman Henry Waxman (D-Calif.) released a memorandum this afternoon to committee  members that Blackwater is evading  tax and employment laws by deceptively labeling its armed guard employees as "independent contractors." In March 2007, the committee found that Blackwater had cost the IRS $50 million by improperly labeling its employees. Today’s report found the following:

- Blackwater has received $1.25 billion in federal contracts since 2000. Despite this haul, they have asked for- and gotten- special privileges for the government as a "small business." The State Dept. has awarded Blackwater $144 million in small business set asides since 2000. The reason is that when armed employees are counted as independent contractors their staff is considered small enough for the designation.

- For six months now, Blackwater has not cooperated with a Department of Labor inquiry into whether they are using discriminatory practices in hiring armed guards. Again, Blackwater has said that they don’t need to follow affirmative actions and anti-discrimination laws because they are hiring contractors not employees.

The next step in these developing scandals could be messy and complicated. But the point Waxman’s memorandum makes is clear: the IRS has determined the armed guards are, in fact, employees. So the latest evidence fuels the suspicion that Blackwater is playing by its own rules and costing the government millions in the process.

Comments

[American Small Business League]

Here is another one, why was GTSI listed a small business for this multi-million dollar award "Adobe Acrobat Software Maintenance Renew"?

http://www.fedspending.org/fpds/fpds.php?reptype=r&database=fpds&record_id=8109177&detail=3&datype=T&sortby=i

Did you know the former Clinton appointee Steven Kelman, who was the Administrator of the Office of Federal Procurement Policy from 1993 to 1997, went to work for GTSI after he left. That is the same GTSI has been found to abuse Federal Small business contracting. (NYT - http://www.nytimes.com/2006/07/06/business/06sba.html).

To this day GTSI continues to receive small business contracts. Federal small business contracting fraud cost US small business billions of dollars per year.

Since Mr. Kelman's departure from the Clinton administration he has issued interesting public statements opposing reform in federal contract bundling. Keep in mind he is Professor of Public Management Harvard's Kennedy School, a registered lobbyist and works for GTSI.

In 2002, Mr. Kelman stated, "The percentage of prime contract business going to small businesses is higher than it was in 1993 (before procurement reform), by several percentage points. In general, I don't see much evidence in the data that (the system) is broken." (http://goliath.ecnext.com/coms2/summary_0199-1957417_ITM)

Additional resources

Pogo blog
http://pogoblog.typepad.com/pogo/2007/04/gutting_governm.html

Kelman background
http://www.fcw.com/columnists

NYT blog
http://blog.washingtonpost.com/government-inc/2007/07/procurement_debate_goes_feline_1.html

GTSI Kelman Bio
http://investor.gtsi.com/phoenix.zhtml?c=116604&p=irol-govBio&ID=58294

Senator Kerry's comments on contracting
http://www.businessweek.com/smallbiz/content/jul2006/sb20060726_786902.htm