Senator wants probe of Blackwater's tax practices

By Kevin Drawbaugh

WASHINGTON (Reuters) - U.S. Sen. John Kerry vowed on Thursday to press for further investigation of the tax practices of Blackwater USA, the private security firm already under scrutiny over killings of Iraqi civilians.

"Blackwater is hiding behind the Bush administration to explain why they bilked the taxpayers out of millions of dollars," said the Massachusetts Democrat in a statement. "I intend to get to the bottom of this."

Blackwater, which employs about 1,000 people in Iraq, has been under a spotlight since some of its security guards were involved in the shooting deaths of at least 17 Iraqis in Baghdad last month in an incident that enraged the Iraqi government.

The company was accused on Monday of "significant tax evasion" by Rep. Henry Waxman, chairman of the House of Representatives Oversight and Government Reform Committee.

The California Democrat said Blackwater failed to withhold contributions from employees or pay to the government millions of dollars in mandatory Social Security retirement funds. He also alleged that it failed to make required payments for medical and unemployment benefits and related taxes.

In a letter to Blackwater Chairman Erik Prince -- a former Navy SEAL who founded the company in 1997 -- Waxman raised questions about the treatment of Blackwater personnel in Iraq and Afghanistan as contractors rather than employees.

Blackwater responded by saying that Waxman was "incorrect" in asserting that the deployed personnel should be treated as employees for tax purposes. The Blackwater statement said:

"The U.S. Small Business Administration (SBA) has determined in an official finding applying 'the criteria used by the IRS for federal income tax purpose,' that 'Blackwater security contractors are not employees.'"