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Offshore Companies Make $1B In Deals With US

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Offshore Cos. Make $1B in Deals With U.S.

Mon May 26, 1:04 PM ET Add Business - AP to My Yahoo!

By JONATHAN D. SALANT, Associated Press Writer

WASHINGTON - Companies that reduced their U.S. tax bill by incorporating overseas did $1 billion worth of business with the federal government last year, an Associated Press computer analysis of federal contracts showed.

The Bermuda-based consulting company Accenture Ltd., a spinoff of the former Big Five accounting firm Arthur Andersen, was the biggest federal customer. It received $662 million in contracts between Oct. 1, 2001, and Sept. 30, 2002, mostly from the Transportation Security Administration.

The engineering firm Foster Wheeler Ltd. received $293.2 million. Ingersoll-Rand Co. Ltd., which boasts that its equipment helped carve Mount Rushmore, received $7.6 million.

During the federal fiscal year that ended in September 2001, companies with offshore headquarters received $846 million in federal contracts, according to the House Ways and Means Committee's Democratic staff.

"It's outrageous that we would do business with these folks," said Rep. Richard Neal, D-Mass., who has introduced legislation to continue taxing companies that move their headquarters overseas. "They are shirking their citizenship."

The process is known as corporate inversion: A company moves its headquarters — sometimes nothing more than a post office box — to a low-tax enclave such as Bermuda or the Cayman Islands while leaving its operations and employees in the United States.

The Senate twice has passed legislation to prevent the new Homeland Security Department from doing business with companies that relocate overseas, but both times the provision was removed from the final bill by House Republican leaders.

Jonathan Grella, a spokesman for House Majority Leader Tom DeLay, R-Texas, said the issue should be addressed as part of an overhaul of the tax system. Republicans have blamed high U.S. taxes for the problem.

Corporations that have moved overseas spent $5 million to lobby Congress and the federal agencies and donated $1.2 million to campaigns in 2001 and 2002, according to an AP analysis of data from Political Money Line, an Internet site.

To fight legislation restricting their ability to move offshore, the companies have assembled an all-star team of lobbyists, including former Sens. Slade Gorton, R-Wash., and Dennis DeConcini, D-Ariz.; former House Ways and Means Committee Chairman Bill Archer, R-Texas; and former House Appropriations Committee Chairman Bob Livingston, R-La., according to disclosure forms filed with the House and Senate.

Company officials said the tax breaks that result from moving their headquarters overseas keep them competitive.

"We felt that American companies, based upon the tax laws that are written today, are clearly put at an economic disadvantage to foreign companies," said Victoria Guennewig, a spokeswoman for Cooper Industries Ltd., a company that makes electrical products and tools. It moved from Houston to Bermuda in 2002 and received $3.6 million in government contracts last year.

Lawmakers estimate corporations that have moved to low-tax countries cost the U.S. treasury $4 billion a year.

"People should be screaming to the rafters about the hypocrisy involved in corporations moving offshore and then coming back to the taxpayers for a handout in the form of government contracts," said Charlie Cray, director of the campaign for corporate reform at Citizen Works, an advocacy group affiliated with consumer advocate Ralph Nader.

Ingersoll-Rand spokesman Paul Dickard said preventing companies such as his from seeking government contracts would hurt the company's 26,000 U.S. workers.

"They're not necessarily hurting the company as much as they're hurting U.S.-based employees," Dickard said. "That would be unfortunate."

One of the Homeland Security Department's agencies, the Transportation Security Administration, gave Accenture a contract of close to $515 million to handle human resources for the agency's employees, including administering health insurance, life insurance and retirement benefits.

Accenture, which began as the consulting arm of Chicago-based Andersen Worldwide, said the company shouldn't be included on a list of corporate expatriates because it never was a U.S.-based corporation.

But House Democratic lawmakers and others who want to change the law disagree.

"They are a spinoff of Arthur Andersen," said Robert Borosage, co-chairman of the Campaign for America's Future, a liberal research and advocacy group. "Their contracting is significantly done with American companies. If they want to get contracts with the federal government, they ought to pay taxes."


The bills are H.R. 737 and S. 384

On the Net:

Rep. Richard Neal: http://www.house.gov/neal

Campaign for America's Future: http://www.ourfuture.org

Citizen Works: http://www.citzenworks.org

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Tax Havens: Are You With Us Or Against Us?

Filed March 12, 2003

As President Bush's vaunted "coalition of the willing" continues to shrivel -- who's left, Bulgaria, Latvia, and Tony Blair? -- the coalition of those Americans willing to challenge his obsession with invading Iraq continues to grow.

Galvanized by this growing army for peace, many of the leaders of the antiwar movement are now searching for ways to build on the renewed commitment to dissent and direct the newly mobilized energy toward protesting the president's equally misguided policies here at home.

And no issue is more emblematic of this administration's perverted domestic priorities than its scandalous refusal, in a time of soaring deficits, to stop corporations and wealthy individuals from cheating the public out of billions of dollars a year by either reincorporating offshore or simply hiding their profits in offshore subsidiaries. While our young men and women are ready to lay down their lives on the sands of Iraq, these companies are allowed to avoid paying their fair share by hightailing it to the sands of Bermuda.

"We get e-mails all the time," Wes Boyd, cofounder of MoveOn.org, told me, "from MoveOn members who rightly worry about the special interests lining up at the trough while we're not looking. And they're very ready to take them on. Nothing makes people angrier than the sense that some morality-impaired businesses are buying favors from Congress and the White House, while the rest of us are being asked to sacrifice."

Boyd's group has been at the heart of the antiwar movement. With over 1.2 million members, MoveOn.org has become the Internet hub for political activists all across the country. It was responsible for, among many other things, the hugely successful "virtual march" on Washington, a lot of the newspaper and TV anti-war advertising, and a petition with a million signatures collected within five days and delivered to the UN Security Council.

"Off-shore tax havens," says Boyd, "are the financial equivalent of desertion under fire. And these corporate deserters are protected by politicians in Washington ostensibly elected to serve the public interest. This really gets people steamed."

This accounting sleight-of-hand is no small matter: It's depriving the U.S. Treasury of around $70 billion a year. Even more galling, these companies are being rewarded for ripping off taxpayers with massive federal contracts. Scandal-tainted Tyco, for instance, pocketed $1 billion in public money in 2001 while evading $400 million in taxes by opening up a P.O. Box in sunny Bermuda.

And it's not like we can't use the money.

In Oregon, dead-broke public schools are being forced to shut down a month early; in Illinois, child care for welfare families is being cut in half; and nationwide, over a million poor Americans are facing the loss of their publicly funded medical benefits. Even the president's signature No Child Left Behind Act has been slashed -- his new budget allocates it $6.2 billion less than was originally called for, transforming it into the "A Few Million Children But Hopefully Not Yours Left Behind Act."

Every populist movement needs a catalytic issue and a crystallizing response that come to symbolize the greater struggle at hand. Think of Rosa Parks refusing to move to the back of the bus or the Greensboro Four taking a seat at that Whites Only Woolworth's lunch counter.

The revolt against antipatriotic tax havens may be the spark that ignites a far-ranging movement for basic fairness and economic justice. What could be more unfair, after all, than asking hard-working Americans to dig deeper into their wallets, retirement funds, and savings accounts so corporate execs rolling in an overflowing wallow of tax-free profits won't have to?

It should be a political no-brainer, an issue that transcends right-left divisions. And, indeed, politicians from both parties -- including Sens. Evan Bayh, Charles Grassley, Max Baucus, Harry Reid, and Carl Levin and Rep. Richard Neal -- have introduced or are preparing to introduce legislation that would crack down on offshore tax evaders. Even President Bush is on record saying: "We ought to look at people who are trying to avoid U.S. taxes as a problem… American companies ought to pay taxes and be good citizens." Yes, gee, they ought to. If only there was some public body that could, say, pass a law and force them to do it.

Yet for all the public posturing, behind closed doors our leaders continue to protect their corporate sponsors, allowing profits to trump patriotism -- even in this time of war.

"I now have 120 co-sponsors for my bill," Rep. Neal, author of the Corporate Patriot Enforcement Act, told me, "and I know that I would have at least 300 members supporting it if only we could bring it to the House floor for a vote. But the Republican leadership won't even let it out of committee."

The main roadblock to Neal's bill is House Majority Leader Tom DeLay, a politician who never hesitates to drape himself in the flag, but who is now actively protecting companies and tycoons that are selling their countries short in a time of war.

Demanding that DeLay bring Neal's bill to a vote would be a good first step for the anti-tax haven movement. It would take only one phone call from the president, which he's, apparently, unwilling to make. So concerned citizens should do it for him and inundate DeLay's office with phone calls, faxes, and emails. And if that doesn't work, then the same people who filled the streets of cities all across America to protest the war might want to see if they can squeeze into the Majority Leader's office.

Meanwhile, in the Senate, Democrats should attach an anti-corporate tax cheat rider to every single piece of legislation and force Republicans to vote on it ad nauseum until the House leadership relents.

As for the White House, Bush, and especially Vice President Cheney -- who was CEO when Halliburton increased its offshore subsidiaries from nine to 44 -- are a lost cause. Their conversion will only come about at the deathbed of the tax shelters.

For a case study in how our leaders manage to get away with allowing the public interest to be shipped offshore, look no further than an amendment initially introduced by the late Sen. Paul Wellstone and now championed by his fellow Minnesotan Sen. Mark Dayton.

Twice the measure -- a red, white, and blue slam-dunk banning government contracts for corporate expatriates -- was resoundingly approved in public. And twice the measure was gutted in the shadowy realm of behind-the-scenes conference committee negotiations.

The reason for this legislative skullduggery is obvious: no one wants to publicly defend the indefensible. Those daring to try risk looking as moronic as former Congressman-turned-corporate-flack Bob Livingston did when claiming that his client, Accenture, didn't move offshore to avoid taxes, but only because the company's American and European partners couldn't agree on where to set up shop. "So they picked a nice island, Bermuda," asserted lobbyist Livingston while miraculously resisting the urge to burst out laughing.

Of course, this lame "we didn't do it for the money" explanation is the same one the White House offered up last August when it came to light that companies connected to President Bush and Vice President Cheney had created shell companies in offshore tax havens. The truth is, when corporations move offshore, the biggest beneficiaries are almost always the companies' CEOs, whose pay is tied to profits. Think of them as turncoat Robin Hoods in Bermuda shorts: they steal billions from the rest of us, then keep the lion's share for themselves. Chew on that while you're cutting the IRS that check next month.

Reeling from the most severe state fiscal crisis since the Great Depression -- it's a toss-up whether 47 states will be able to balance their books next year -- state officials across America are also taking up the anti-tax haven charge. North Carolina has already passed legislation banning government contracts for expatriated companies. Similar bills are currently pending in Massachusetts, Pennsylvania, and California -- where treasurer Phil Angelides is refusing to invest any of the state's money in companies incorporated in tax havens.

Now it's up to us.

With our national April 15 date with the taxman fast approaching, the time is ripe for a popular uprising that will hold our representatives accountable for their refusal to pull the plug on offshore tax cheats. We need to force them to come out of the shadows and go on record one way or another. As the president likes to say about the UN, "It's time for people to show their cards, let the world know where they stand."

Let's have a straight up or down vote: Are you in favor of allowing corporations to continue bilking American taxpayers -- even while we are facing severe budget cuts and our soldiers are ready to make the ultimate sacrifice in Iraq?

To paraphrase a certain wartime president: When it comes to everyone paying his fair share, you're either with us or you're against us.

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