Major U.S. defense contractor Triple Canopy has just been implicated in the Panama Papers, a trove of 11.5 million leaked documents on offshore tax structures from the fourth largest law firm in the world.
Ignacio Balderas, the former CEO of Triple Canopy, in 2010 told a watchdog commission created by Congress that defense contracting companies are an important aid to the Pentagon because they provide extra accountability, Fusion reports. In other words, U.S.-owned companies involved in the contracting industry are far superior to foreign-owned companies, since the latter “avoid paying U.S. taxes, avoid U.S. criminal investigations and jurisdiction, and avoid having to appear before Congress.”
The only problem is that two weeks before Balderas’ testimony before the commission, Triple Canopy took over Edinburgh International, using a shell company Trifecta International Holdings to make the purchase. With this business structure intact, Triple Canopy had the ability to step around accountability measures that apply to U.S. companies, an analysis from Fusion reveals. Edinburgh International is based out of Dubai and runs several of its operations through shell companies in the British Virgin Islands.
Mossack Fonseca, the law firm which suffered the leak of 11.5 million documents, registered those companies. Police have since raided the law firm.
The State Department told Fusion that as long as offshore subsidiaries are “not involved in the performance of the WPS contract [Worldwide Protective Services],” there is really no issue. Private security companies are permitted to own or operate these subsidiaries and still gain federal government contracts.
Other commentators are not sure that the State Department’s response puts the issue to rest.
Charles Tiefer, a contracting expert at the University of Baltimore law school, told Fusion, “There’s no reason for them to do that, except for the same reason that people bank in Turks and Caicos, which is to take them out of the line of visibility of American domestic authorities, who can’t audit the doings of Caribbean island entities.”
Offshore companies are often used to conceal information on assets, minimize tax burdens and also to reduce liability in the event of lawsuits or other legal action.
Triple Canopy has been hit with a variety of issues over the years. Some allege Triple Canopy contractors fired on Iraqi civilians. The company has also been accused of purchasing weapons from the black market. In 2012, the Department of Justice sued the defense contractor for fraud, which consisted of using Ugandans who did not pass marksmanship requirements.
Still, the Department of Defense and State Department see fit to keep awarding Triple Canopy with additional contracts.
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