"The Oversight Committee is conducting an investigation into government contractors that use foreign subsidiaries to compensate workers under contracts with the United States
government, especially in Iraq and Afghanistan," begins the letter Chairman Waxman sent to the Director of Government Affairs at KBR, Inc.

It is important to note that this is just an investigation, at this point.  It remains to be determined if any laws have been infringed.  I certainly give KBR the benefit of the doubt, in that they would not have engaged in this course of action if they thought it was illegal.  However, I also keep in mind that we have seen that those in leadership positions at large and respected companies are not always themselves respectable and honest people.  And certainly H.R. 4881 would not have come into existence if government contractors were as above board as we'd like them to be.

KBR has two subsidiaries in the Cayman Islands, Service Employees International, Inc. and Overseas Administrative Services, or SEII and OAS respectively.  In a briefing before the Committee on Oversight and Government Reform, the Committee learned that "the primary purpose of this arrangement is to reduce KBR's tax obligations. As [your representatives] also stated, no KBR, SEII, or OAS employees perform any significant work in the Cayman Islands."  All this certainly has the hallmarks of an arrangement that might be suspect.

Whether or not KBR was justified in pursuing this course of action, which is to say that if no laws were broken, it is inevitable that steps will soon be taken to introduce legislation that will close this option to contractors.  Amongst the information requested by the Committee are:

"A description ofthe number of United States and foreign nationals paid by SEll and OAS between January 1,2002, and the present, to perform services pursuant to the contracts
responsive to question 3 above; the location where the workers performed the work; the categories ofjobs these workers performed; the number of U.S. national personnel who worked within each job category; and the average compensation (in U.S. dollars) paid to U.S. national personnel working within each job category."

At the very least the information the Committee wants to see will be used to determine how much the government lost in potential tax dollars in the given time frame.  The intention of the Contracting and Tax Accountability Act, to force government contractors to become more honest with their taxes, looks to be well on its way to being realized.  This can only be good news.  Especially those who make their profits from government monies should be expected to pay their dues to the government as well.


 

Sincerely,