KBR Uses Caymans Corp To Avoid Taxes in Iraq

Egads!! Kellogg, Brown & Root (KBR) saved hundreds of millions of dollars in payroll taxes by claiming that around 21,000 of their employees that were working in Iraq actually worked for a company based in the Cayman Islands. Does that help to put this "war" in a little sharper perspective?

We're not even going to mention the gang-rape of Houstonian Jamie Leigh Jones in Iraq by KBR employees, which has gone unpunished. Hey, it's war, man.

Top Iraq contractor skirts US taxes offshore

Shell companies in Cayman Islands allow KBR to avoid Medicare, Social Security deductions

By Farah Stockman Globe Staff / March 6, 2008

CAYMAN ISLANDS - Kellogg Brown & Root, the nation's top Iraq war contractor and until last year a subsidiary of Halliburton Corp., has avoided paying hundreds of millions of dollars in federal Medicare and Social Security taxes by hiring workers through shell companies based in this tropical tax haven.

More than 21,000 people working for KBR in Iraq - including about 10,500 Americans - are listed as employees of two companies that exist in a computer file on the fourth floor of a building on a palm-studded boulevard here in the Caribbean. Neither company has an office or phone number in the Cayman Islands.

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With an estimated $16 billion in contracts, KBR is by far the largest contractor in Iraq, with eight times the work of its nearest competitor. The no-bid contract it received in 2002 to rebuild Iraq's oil infrastructure and a multibillion-dollar contract to provide support services to troops have long drawn scrutiny because Vice President Dick Cheney was Halliburton's chief executive from 1995 until he joined the Republican ticket with President Bush in 2000.

The largest of the Cayman Islands shell companies - called Service Employees International Inc., which is now listed as having more than 20,000 workers in Iraq, according to KBR - was
created two years before Cheney became Halliburton's chief executive. But a second Cayman Islands company called Overseas Administrative Services, which now is listed as the employer of 1,020 mostly managerial workers in Iraq, was established two months after Cheney's appointment.

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In addition, the practice enables KBR to avoid paying unemployment taxes in Texas, where the company is registered, amounting to between $20 and $559 per American employee per year, depending on the company's rate of turnover.

As a result, workers hired through the Cayman Island companies cannot receive unemployment assistance should they lose their jobs.

In interviews with more than a dozen KBR workers registered through the Cayman Islands companies, most said they did not realize that they had been employed by a foreign firm until they arrived in Iraq and were told by their foremen, or until they returned home and applied for unemployment benefits.

"They never explained it to us," said Arthur Faust, 57, who got a job loading convoys in Iraq in 2004 after putting his resume on KBRcareers.com and going to orientation with KBR officials in Houston.

But there is one circumstance in which KBR does claim the workers as its own: when it comes to receiving the legal immunity extended to employers working in Iraq.

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KBR is now widely believed to be the largest private employer of foreigners in Iraq, and it hires twice as many workers through its Cayman Island subsidiaries as it does by direct hires. Service Employees International alone employs more than 20,000 truck drivers, electricians, accountants, and engineers, roughly half of whom are American, according to Browne, the KBR spokeswoman.

KBR declined to release salary information. But workers interviewed by the Globe who served in a range of jobs said they earned between $48,000 and $85,000 per year. If KBR's American workers averaged even as much as $63,000 per year, they and KBR would have owed more than $100 million per year in Social Security and Medicare taxes, split evenly between them. Over the course of the five-year war, their tax bill would have been more than $500 million.

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The contract that workers sign in Houston before traveling to Iraq commits workers to abide by KBR's code of ethics and dispute-resolution mechanisms but states that the agreement is with Service Employees International.

Some workers said they were told that Service Employees International was just KBR's payroll company. Others mistook the name as a reference to the well-known, large union, Service Employees International.

Henry Bunting, a Houston man who served as a procurement officer for a KBR project in Iraq in 2003, said he first found out that he was working for a foreign subsidiary when he looked closely at his paycheck.

"Their whole mindset was deceit," Bunting said. He said that he wrote to KBR several times asking for a W-2 form so he could file his taxes, but that KBR never responded.

David Boiles, a truck driver in Iraq from 2004 to 2006, said that he realized he was working for Service Employees International when he arrived in Iraq and his foreman told him he was not a KBR employee, despite the fact that his military-issued identification card said "KBR."

"At first, I didn't believe him," Boiles said.

Danny Langford, a Texas pipe-fitter who was sent to work in a water treatment plant in southern Iraq in July 2003, said he, too, initially believed that he was an employee of KBR.

much more here

In a normal world, this activity would be BIG news, it would be classified as war profiteering and punished. But maybe the old saw is true: all is fair in love and war, especially if you have a friend in the White House.