Class Action Tax Misclassification filed against Xe, Formerly Blackwater

Scott Bloch blasts Blackwater on behalf of thousands of former employees who were mistreated and denied employee benefits, unemployment and other withholding based on a fraudulent misclassification as independent contractors.

Mercadante et al vs Xe Services, LLC et al

    Statement Concerning Filing of Class Action Tax  Misclassification Against Xe Services (formerly Blackwater) on
 Behalf of Personal Security Specialists for Loss of Benefits and Withholding

WASHINGTON, DC (June 7, 2011) –

Since 2007, Blackwater Industries, which has changed its name to Xe Services, has employed over 10,000 personal security specialists to perform operations in Iraq and Afghanistan under lucrative contracts with departments of the United States Government including the State Department and CIA.

While employing these individuals, many of whom are decorated veterans of the armed services including Special Forces, Army Rangers, Navy Seals, Blackwater sought to avoid millions of dollars in taxes, withholding, and payments of benefits to these employees by classifying them improperly as independent contractors.

Yesterday, Scott Bloch filed a class action lawsuit on behalf of four former security specialists, who were injured while working for Blackwater, in order to recover their payment of social security, unemployment insurance, and unpaid benefits and state and local withholding and unemployment insurance, and other unspecified damages.  The action is brought on their own behalf and thousands of others who have worked for Blackwater and its newly named Xe Services.

The action seeks $60,000,000 in damages and punitive damages, as well as additional amounts as proved for the class of specialists.

“These brave individuals who worked in support of Operation Iraqi Freedom and Afghani Enduring Freedom, deserve better than to be turned away without health insurance, pension benefits, unemployment benefits, and other withholding afforded to Blackwater’s other
employees,” said Scott Bloch.

According to the lawsuit, the United States treasury loses billions of dollars annually to misclassified employees.     Under the commonlaw and the IRS 20 questions put out in 1987 pursuant to a regulation, Blackwater was obliged to classify these individuals as employees if Blackwater had the right to control the employees’ actions, manner of performing duties,  hours, training, equipment, whether the duties of the employees go to a core function of the employer or are duties that are consider ancillary to the main purpose of the company, and other factors.

The lawsuit states that Blackwater provided their equipment, including weapons issued by the government, training, and control over employees’ duties, manner of performing their security  duties, operations they went on, protection details and other duties.

“These veterans were actually given diplomatic passports and classified as employees of Blackwater to the United States government in the contracts as they procured insurance required for employees, and also represented to the State Department that they were
employees,” said Bloch in a statement upon filing, “yet when it came to paying taxes, paying  their employer portion of social security and Medicare taxes that all Americans expect their employers to pay, they simply claimed they were independent contractors.”

The suit also states that one of the representative plaintiffs already had a determination from the IRS that Blackwater misclassified him as an independent contractor.  “The IRS already  determined in the case of one of my clients that he should have been classified as an
employee,“ said Bloch.  “Now thousands of people will have to file amended returns.   Thousands of people will likely be entitled to benefits they were denied due to the misclassification, including payment of their employer share of pension, health and disability
insurance premiums, and other plans that Blackwater filed with the government for its employees, promising it would not discriminate against those employees as they did here.”

In addition, claims the suit, the United States Congress previously held hearings under the Oversight and Government Reform committee, Rep. Henry Waxman, Chair, which determined that Blackwater and its related companies misclassified employees in order to avoid millions of dollars in taxes. In addition, the IRS prior to making the determination on the plaintiff in this suit, had ruled on behalf of other Blackwater security specialists, and related job titles, that Blackwater had misclassified these employees who performed services under contracts in Iraq and Afghanistan.

“Blackwater made hundreds of millions of dollars from taxpayers and hired thousands of former veterans of military service and police officers.  They also had in their ranks Federal Agents, such as current employees of the FBI on leave of absence. They were hired as security specialists in Iraq and Afghanistan,” said Bloch. “It is a grave injustice to them who were  mistreated and left without any health insurance or other benefits for their families, and left to fend for themselves in paying into Social Security and Medicare.  They laid down their lives to protect dignitaries and carry out duties in support of wars for America, and they deserve better than this. Many of these same men risked their lives to protect everyone from the President of the United States to U.S. Senators, Congressman, U.S. Diplomats, to Foreign Presidential & Diplomatic Figures in one of the most dangerous places on the planet.”

The case was filed in the United States District Court for the District of Columbia and covers individuals from all over the United States and some Americans living abroad, including all former and current Blackwater and Xe employees and so-called independent contractors.

Contact Scott J. Bloch, PA:
Scott Bloch, 202-496-1290

Law Offices of Scott J Bloch Website