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Show DAILY Thursday, May ft 2008 HERALD All An island tax haven for U.S. defense contractor Richafdj.ardner THE . ASSOCIATED PRESS WASHINGTON WHen" the Pentagon announced that an obscure California company had won a lucrative military contract, no one mentioned any plans for a Caribbean outpost a tropical shell the company quickly created that allowed it to duck millions in taxes and deflect U.S. lawsuits, It's legal, at least for now. Contractors large and small have been heading offshore to shield piles of taxpayer dollars, according to an Associated Press investigation, but irate lawmakers are thundering that they'll put an end to it. Almost a decade ago, a few months after winning the deal that has totaled more than $2 billion, Combat Support Associates established its subsidiary in the Cayman Islands, a British territory and tax haven. The subsidiary, CSA Ltd.,' now employs about 2,000 American citizens in Kuwait, where they support U.S. forces moving in and out of Iraq. Yet as a foreign corporation doing work outside the United States, CSA Ltd. does not pay Social Security and Medicare taxes for these workers. Also, company officials maintain that the subsidiary is outside the jurisdiction of U.S. courts, so federal labor rules and antidiscrimination laws don't apply either. In fact, there's scant evidence that CSA Ltd. exists at least physically. There's no r By 201 8, about $846 million would be collected, if Congress passes a law requiring foreign subsidiaries of U.S. government contractors to pay employment taxes. 0 - f . i A O J wf 600 $5': IXf , ' $338 400 I . IS.. , $175 . f jf 200 $'4 M 2008 '10 SOURCE: '12 '14 Joint Commitiee '18 '16 AP on Taxation third-countr- JOANNA Press LEWISAssociated Close Brothers has its offices in Harbour Place in George Town, Grand Cayman. The investment house, records show, serves as a shallow footprint in the Caymans for the subsidiary of Combat Support Associates, CSA Ltd. listed office address or phone number in the Cayman Islands. Records show the corporation is registered with Close Brothers, an investment house that serves as its shallow footprint in the Caymans. Close Brothers operates out you go investigate that." Indeed, the House Oversight and Government Reform Committee has asked 15 Defense and StateTJejrartmentcpntrac-tor- s for mfoHnaUoliliBout any policy. "If everybody avoided their responsibility, where foreign entities they may have in tax friendly countries. would we be?' The Joint Committee on TaxThe request followed a meetation estimates that shutting ing with representatives from KBR Inc., which had over $6 the employment tax loophole would bring in about $846 milbillion in government contracts in 2006 alpne. According to the lion in revenue over 10 years. That figure could be higher, committee, KBR has two subsidiaries in the Cayman Islands lawmakers say, since it's unclear how widespread use of that are used to reduce the the opening is. company's tax payments. The panel is trying to deter"People are constantly looking for ways to jilt the system," mine how much these contractors earn, how much they pay says Rep. Brad Ellsworth, their U.S. workers holding one of the authors of overseas jobs and how much in the measure. "Where there's smoke, there could be fire, and taxes goes unpaid. Back in the U.S., the House of Representatives passed tax legislation a few weeks ago that would treat foreign subsidiaries of U.S. govern-men-t contractors as American employers. That means they would have to pay the taxes that finance Social Security of a office building across the street and Medicare programs. The from the docks used by cruise Senate is now considering the legislation. ships visiting this island paradise. There's no sign of CSA "Companies that avoid this Ltd., however. responsibility undermine the "We can't make any comcountry," says John Kerry, chairman of the Senments in regards to our clients," ate subcommittee on social Close Brothers director Roger Priaulx said by telephone. security, pensions and family five-stor- j completed this year, but that has been postponed to 2013 because of other needs, including a multiyear redesign of the way Army brigades the main fighting units are equipped and organized for FORT CAMPBELL, Ky. Spc. Loren Dauterman, who trained at Fort McCoy in Wisconsin last month with the National Guard, found something good to say about the falling-apafloors and ceilings in her 1 - quarters. war. - ; rt At Fort Stewart, the combination of a new combat brigade and ongoing construction has some soldiers sleeping and eating in large trailers until new barracks are built. Brig. Gen. Dennis Rogers, who is responsible for maintaining Army housing, said last Veek that besides poor physical condition, the old barracks offer too little privacy to meet the expectations of today's s Barely. "It is better than sleeping out in the woods," Dauterman said last week, "but not a whole lot ED FRAWLEY of Charlie Company perches on a sink as he tries to unclog the drain in a flooded bathroom in barracks where Charlie Company was housed at Fort Bragg, N.C., about 12 hours after the company landed back in the tour in Afghanistan. United States from their ing danger to their health and safety." Still, military leaders concede the housing situation as a whole is deplorable despite the recent years to make room millions spent over the decades for the flood of recruits and to gut, retrofit and renovate brigades. Army Secretary Pete Geren the old structures. In 1994, the Army launched said Wednesday at Fort Bragg a barracks modernization prothat the Army has appropriated $248 million in emergency gram to replace all its oldest funds to fix problems found housing. The plan was to be during inspections of 148,000 rooms at bases worldwide over the past two weeks. "We ordered a look at literally every single room," Geren said. "We didn't find any loom Townhomes Salem In i :Sanner , A()Br $70 Epson 5 372-348- 1 r 3 3 -- i S ':-- ,. f liiii "i. Treat mom to a specracular Mother's Day Brunch in the Foundry Grill. This new menu is even more fabulous than you remember with crab legs, Spit Roasted Prime Rib, BBQ Pork Ribs, Pesto Crusted Halibut and so much more. f55 oo per person (2750 5-- 11 ages 4 and under eatfree 10am-6p- Reservations recommended. m Please call yirww'-'- ' w' rsr H O; SOLATUDE Packages valid April - June 7, 2008 I" . 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"He said it was depressing," the father said, "because you work all day and then you have to go back to these barracks." An unidentified soldier like Fort Campbell and Fort Stewart, Ga., report pumping more than $100 million into barracks improvements in - -- THE ASSOCIATED PRESS RUHR WILLIAMS. little-know- $800 million Kristin M. Hall LJSE AE-CO.- Cumulative employment Army OKs $248M in barracks repairs, but housing still aging better." Thousands of soldiers at Fort McCoy, Fort Campbell and elsewhere are assigned to barracks built for the GIs who fought World War II and the Korean War. The buildings are showing their age, and the soldiers are getting fed up. After a soldier's father posted a video on YouTube last monthishowing the dilapidated barracks for paratroopers at Fort'jBragg, N.C., Defense Secretary Robert Gates called those conditions appalling and ordered base commanders to ensure that their troops have proper quarters. The commanders have their work cut out for them. A spot check by Associated Press reporters over the past week found many barracks plagued by recurring problems with mold, mildew and their plumbing and wiring. In many cases, the cramped, wooden units were scheduled for destruction, but Army leaders facing space and economic constraints from the war in Iraq have again filled the old barracks. Major installations It can be hard to keep track of company names. One of the businesses on Jhe committee's list is Government Services of Fort Worth, Texas. In 1998, n AECOM and two other Research companies and Analysis Maintenance of El Paso, Texas, and Space Mark Inc. of Alaska set up Combat Support Associates as a privately held joint venture. Then CSA set up CSA Ltd. in the Caymans. Gary Lewi, a spokesman for Combat Support Associates, said CSA Ltd.'s nearly 2,000 U.S. employees in Kuwait are roughly 30 percent of the company's work force there. The rest are Kuwaitis and nationals, who are usually less expensive to recruit and retain. 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