U.S. Sen. Kerry seeks info on Blackwater affiliate for helicopter supply services.

Reuters (2007-11-02)

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More Info: Blackwater

By Kevin Drawbaugh

WASHINGTON (Reuters) - U.S. Sen. John Kerry on Thursday asked the Bush administration for more information on how an affiliate of private security firm Blackwater USA was chosen as a small business to carry out federal contract work.

The Massachusetts Democrat asked Small Business Administration Administrator Steven Preston about the 2006 selection of Presidential Airways, a Blackwater affiliate, for helicopter supply services to U.S. Navy vessels in Guam.

"There are plenty of unanswered questions about how Blackwater may have abused contracting loopholes, and whether the SBA made the appropriate decision on the size of the firm," said Kerry, who chairs the Senate small business committee.

"The Bush administration has outsourced much of our national security to private contractors. I want to know how we got to this point, hold people accountable, and make sure we're not sitting here again next year," Kerry said in a statement.

Blackwater has been under a spotlight since some of its security guards were involved in the shooting deaths of at least 17 Iraqis in Baghdad in September. The incident enraged the Iraqi government and is under investigation.

The Guam contract with Presidential Airways came under congressional scrutiny after Rep. Henry Waxman accused North Carolina-based Blackwater of "significant tax evasion."

The California Democrat charged that the privately held company failed to withhold employee contributions or pay to the government millions of dollars in Social Security retirement funds, as well as medical and unemployment benefits.

Blackwater disputed Waxman's allegation and said the company treats deployed personnel in Iraq and Afghanistan for tax purposes as "independent contractors," not employees. Blackwater has about 1,000 people in Iraq alone.

The company said its tax policy was reached with outside advice and was "reinforced" by an SBA finding.

SBA documents obtained by Reuters show the federal agency determined on Nov. 2, 2006, that "Blackwater security contractors are not employees." The agency has since told Kerry that it was evaluating Presidential eligibility for the SBA contract but was not offering tax guidance.

Three small helicopter companies filed a protest over the selection of Presidential Airways for the Guam sealift job. They argued that Presidential, as part of the Blackwater organization, was too big to qualify for the job under SBA size standards. The SBA said Presidential was small enough because more than 1,000 of Blackwater's workers were independent contractors and not employees.

Kerry asked Preston to explain by Nov. 9 how the SBA finding was reached.

An SBA spokeswoman could not immediately be reached for comment.