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.)
Kantipur Report
KATHMANDU, May 22 - The assassination of 12 Nepalese hostages by Iraqi insurgents in 2004 still haunts the whole country, particularly the families of the deceased.
While the government has provided no strong support to the bereaved families, the US Administrative Law Court for the Department of Labour has ordered the monthly payment of 233 US dollars in compensation to each spouse and set of parents of the murdered 12 Nepalese hostages with an additional 75 dollars for men who had children.
On March 25 and April 16, the Court also confirmed that a US subcontractor had employed the 12 Nepalese who were killed in Iraq in August 2004.
Lead Attorney for the Nepali victims Matthew Handley said, “This has been a hard fight and difficult case but justice prevailed at the end of the day”.
The compensation owed by employers to all labourers working for U.S. contractors and guaranteed by U.S. law was never provided to the families of these men since the Jordanian company Daoud & Partner, which was a subcontractor to US company Kellogg, Brown and Root, had been denying that it employed the 12 Nepalese labourers.
After months of investigation, Matthew was successful in proving the truth with the help of a Nepali worker who was in the same caravan as the 12 Nepalese, but was left behind at the check point. This person apparently returned to Nepal after completing his job successfully at the US base with a copy of the work contract that clearly stated Daoud and Partners was his employer.
Brutally murdered Sanjay Kumar Thapa, Lalan Singh, Budhan Sah and Manoj Thakur of Dhanusha, Rajendra Shrestha of Udaypur, 19-year old Ramesh Khadka and six others were actually promised hotel jobs in Amman, Jordan.
Lead Attorney for the Nepali victims Matthew is scheduled to visit Nepal from June 7-21 to distribute the initial payments (compensations) to the families of the 12 innocent Nepalese labourers killed in Iraq.
An Islamist group called the Army of Ansar al-Sunna took the Nepalese workers hostage as they entered Iraq around August 20 in 2004 and announced “We have carried out the sentence of God against 12 Nepalis who came from their country to fight the Muslims and to serve the Jews and the Christians . . . believing in Buddha as their God”.
Nepal itself saw protests followed by riots for almost a week after a video was posted on a website showing an Iraqi militant beheading one of the men with a knife and shooting 11 other in the back lying face down.
Protest demonstrations were staged flaying Iraq and calling for strong action against the agent responsible for sending the Nepalis to Iraq in the capital and other districts.
At least two people were killed in rioting in the capital on the first day of the protests on September 1, 2004. Dozens of others were injured.
The government then headed by Prime Minister Sher Bahadur Deuba had announced immediate compensation of Rs 1 million to the families of the dead hostages, but there have been no confirmations on the amount being received by the victims’ families.
Despite the government’s repeated call for not to travel to Iraq for employment, lure of large salaries and fraud manpower agents have landed hundreds of Nepalese in Iraq.
How this became possible
The following article, apparently emailed to almost all media outlets in Nepal, explains how the families of the 12 Nepali workers killed by the Iraqi militants in 2004 finally got some sort of justice in the form financial compensation by the US-based company which had employed them.
Nepali Victims Win In US Labor Court:
By Rajendra C. Thakuri
Many will recall that in August 2004 twelve Nepali laborers working for a U.S. subcontractor in Iraq were kidnapped and brutally murdered by Iraqi insurgents. Nearly 4 years after the horrific death of their beloved ones at the hands of Iraqi thugs, there is better news for some of these families coming out of the US Administrative Law Court for the Department of Labor, here in the United States. On March 25 and April 16, 2008, Administrative Law Judge Larry W. Price has decided the following:
1. The twelve Nepali men who were killed in Iraq were employed by a U.S. subcontractor.
2. The spouses, children and parents of these men were entitled to death benefits.
3. The amount of compensation is equal to $223/month for each spouse and set of parents, with an additional $75/month for men who had children.
Bottom line: The above mentioned victims will receive $223 dollars a month as long as they live. Since some of the victims widows were only 19 at the time of their husband’s death, they will potentially see over $150,000 compensation in their lifetime. “This has been a hard fought and difficult case but justice prevailed at the end of the day” Says lead attorney for the Nepali victims Matthew Handley (Matt). So the story began.
Matt and I have been next door neighbors here in Washington DC for the last three and half years. He and his wife Nabina lived and worked in Nepal as Peace Corps volunteers in the 90’s and understand first hand the plight of hard working Nepalis from every walk of life. One summer day, last year, we were catching up with our stories and experiences being in both countries, while enjoying a cold one to beat the Washington DC summer heat. Matt says that he and his firm (Cohen, Milstein, Hausfeld & Toll, P.L.L.C.) were pursuing the case of 12 Nepali men that were murdered in Iraq in 2004. Matt detailed the facts about which many of us are already aware -- that the day when these men were killed was one of the worst one day killings of foreign Nationals in Iraq since the war started in March of 2003.
Nepal is known as a country that exports labor to various countries but does not have specific laws regarding labor rights once the workers leave for foreign countries. In the case of the twelve people that were brutally murdered at the hands of those Iraqi thugs, many did not know they were traveling to Iraq, and instead were promised a hotel job in Amman, Jordan. A deceptive way of recruiting innocent Nepali folks, many of the men would likely have opted out of going to Iraq if they knew that was where they were headed -- or at least would have had a choice, rather than being duped.
All of us who saw those gory videos of those innocent people being killed were outraged and even ransacked the office of the agency that sent those folks to their ultimate death. Some of us poured money and gifts for the families of those victims and moved on with our daily life. But the fact remained, that the compensation owed by employers to all laborers working for U.S. contractors and guaranteed by U.S. law was never provided to the families of these men. Matt saw that the company which employed these men – a Jordanian company named Daoud & Partner that was a subcontractor to KBR (Kellogg, Brown and Root, subsidiary of Halliburton) had avoided its obligation to these men’s families and needed to be held accountable.
Matt says that soon after reading an article “Pipeline to Peril” by Cam Simpson of the Chicago Tribune. (http://www.chicagotribune.com/news/nationworld/chi-nepal-specialpackage,0,7162366.special) in October of 2005, he convinced his firm to pursue this case, and went on to work hard to prove that KBR’s subsidiary, Daoud & Partners, was the responsible employer of these men. “The only way we could win this case was to prove that Daoud and Partners was both a subcontractor of KBR and that it actually employed these men in Iraq – a fact that Daoud denied. Matt brought these case under the Defense Base Act (The Defense Base Act (DBA), 42 U.S.C. § 1651–1654), which is an extension of the federal workers’ compensation program that covers longshoremen and harbor workers, the Longshore and Harbor Workers' Compensation Act 33 U.S.C. § 901–950. The DBA covers persons employed at United States defense bases overseas. The DBA is designed to provide medical treatment and compensation to employees of defense contractors injured in the scope and course of employment.
Since there was no proper paper work to prove that Daoud and Partners was the employer of the men, and since the men’s passports and other documents were held by the employer, Daoud and Partners and their lawyers flat out denied any responsibility for the death of these workers. Matt’s firm was hitting a brick wall in pursuing Daoud and Partners since Daoud did not appear to have any formal office and local folks in Amman, Jordan were not cooperating. After going through many months of investigation and feeling like they were peeling an onion with no end in sight, Matt’s firm got a lucky break of finding a Nepali worker who was in the same caravan as the twelve men who were killed, but who was left behind at the check point. This person actually made it to the US base at which he was supposed to work and, after completing his job successfully, made it back to Nepal with a copy of the work contract that clearly stated that Daoud and Partners was his employer.
Finally, after proving to the judge that the families were dependant on their dead loved ones and working with the opposing counsel to establish the right compensation for these families, the judge ordered the above payment.
Matt will be travelling to Nepal from June 7-21 to distribute the initial payments to the survivors of the victims. “We look forward to be in Nepal once again and enjoy the beauty of the country and the warmth of Nepali people and above all meet these families face to face,” Matt concluded.
Although delayed, some amount of justice has been served, due in part to the conscience of one person whose love for Nepal has not once wavered since that first day he volunteered for the Peace Corps. And while this case has been settled, will Nepali folks working throughout the world be equally protected if something unfortunate befalls them?
(The author can be reached at rcthakuri@gmail.com. Rajendra Thakuri is a Washington DC, based entrepreneur.)
Posted on: 2008-05-22 01:48:23 (Server Time)
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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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