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Defense Firms Owe $3B In Taxes

Records reviewed by congressional investigators showed that more than 27,000 defense contractors owe a total of $3 billion in unpaid taxes. The investigators selected 34 businesses and 13 individuals for further audit and investigation.

Among those contractors studied in detail, investigators found:

  • A contractor who sells and installs office furniture at military installations was paid $38,000 by the Pentagon while owing over $150,000 in taxes. The owners used the business to pay personal expenses, such as a home mortgage and credit cards. One owner is a retired military officer.
  • A researcher was awarded an $800,000 contract in 2002 while over $700,000 behind in tax payments. The owner has more than $1 million in loans for cars, real estate and recreational activities and owns a high-performance airplane.
  • A business that provides janitorial services at military installations received contracts totaling nearly $12 million from 1998 through 2001. The business owed over $800,000 in taxes and is linked to potential check fraud.
  • A construction service company that maintains and repairs housing on military bases was paid $2.4 million in 2002 while owing over $1 million in taxes. The business also owes the Defense Department tens of thousands of dollars because of an overpayment in early 2000.
  • An information technology company that provides personnel support has multiple Defense Department contracts valued up to $13 million while owing nearly $1 million in taxes. It received payments from three other federal agencies and may be involved in money laundering activities.
  • An individual who provides musicians for religious services has not filed an income tax return since 1997. The Pentagon paid the individual $217,000 in 2002.
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