Defense Base Act Compensation Blog

The Modern Day DBA Casualty

North Carolina to get new State Lab. Hope it isn’t a public health hazard.

Posted by defensebaseactcomp on February 17, 2010

Cross Posted from Effect Measure

Congratulations, North Carolina. You are getting brand new $52 million facility for your State Public Health Laboratory and Office of the Chief Medical Examiner, each in separate wings of a 220,000 square foot facility in Raleigh. Sounds great. But if you work there you might want to shower at home and bring bottled water. And better check your benefits. Because the company that got the contract is non other than Kellogg Brown & Root (KBR), until recently a Halliburton subsidiary and notorious Iraq contractor under investigation for shoddy electrical work resulting in the electrocution deaths of 18 US soldiers while showering (the company’s defense? it wasn’t required to follow US electrical codes in Iraq); and exposing workers in a water injection plant to carcinogenic agents. Oh, and the benefits?

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.

The Defense Department has known since at least 2004 that KBR was avoiding taxes by declaring its American workers as employees of Cayman Islands shell companies, and officials said the move allowed KBR to perform the work more cheaply, saving Defense dollars. (Farah Stockman, Boston Globe)

It’s not just unemployment benefits:

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.But when he allegedly got ill from chemicals at the plant and was terminated that fall, he said, his application for unemployment compensation was rejected because he worked for a foreign company. (Boston Globe)

This is the company owned by the company formerly headed by then VP Dick Cheney that got a secret 2002 contract to reconstruct Iraq’s oil production after a US invasion that hadn’t yet happened. None of KBR’s competitors uses off-shore shell companies to get a bidding advantage by avoiding taxes, but since the contract was no-bid and secret that may not be relevant. But when the Boston Globe went looking for the address of the KBR subsidiary in the Caymans allegedly employing all those US citizens working in Iraq, what they found was some business offices housing Trident Trust, a registered agent that collects $1000 a year to forward mail as act as KBR’s representative. The Globe estimates the arrangement has cost US taxpayers $500 million in Social Security and Medicare revenues.

So as a foreign company, KBR didn’t have to pay the taxes. Sleezy but apparently within the law, which protects foreign companies. But then there’s this:

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.In one previously unreported case, a group of Service Employees International workers accused KBR of knowingly exposing them to cancer-causing chemicals at an Iraqi water treatment plant. Under the Defense Base Act of 1941, a federal workers compensation law, employers working with the military have immunity in most cases from such employee lawsuits.

So congratulations, North Carolina taxpayers. You got yourself one helluva contractor there. Yes, indeed. One hell of a contractor. You might want to check the fine print, though.

The onging saga of the contractor from hell

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