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Wednesday, June 02, 2004 - Page updated at 12:00 A.M.
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Accenture wins huge Homeland Security deal

By Ryan J. Donmoyer
Bloomberg News

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WASHINGTON — The Department of Homeland Security awarded a contract worth as much as $10 billion to a group led by Accenture, angering lawmakers who say the company gained a competitive advantage by incorporating in Bermuda to avoid income taxes.

Hamilton, Bermuda-based Accenture won the right to develop a system to track visitors to the United States, beating out U.S.-based competitors such as Computer Sciences (in a bid that included Boeing) and Lockheed Martin for the 10-year contract.

Accenture lobbied last year against a proposed ban on awarding federal contracts to companies that relocate to cut their U.S. taxes.

Democratic Reps. Richard Neal, Rosa DeLauro and Lloyd Doggett and Republican Sen. Olympia Snowe, who had sought the ban, said they were disappointed by the contract award.

"The American taxpayers are paying $10 billion for passport inspection to a company that has turned down its own U.S. passport," said Neal, a Massachusetts congressman. "This is simply outrageous."

Jim McAvoy, an Accenture spokesman, said the contracting authority was awarded to its U.S.-based subsidiary Accenture LLP, which he said employs 25,000 people in the U.S. and pays U.S. taxes on income generated in the country.

He said the team led by the company includes more than 30 subcontractors that employ a combined 330,000 people in the United States.

In winning the contract yesterday, Accenture will be the "prime integrator" for U.S.-Visit, or U.S. Visitor and Immigrant Status Indicator Technology.

The program will create a system to link about 20 government databases. It will collect information on when visitors enter the U.S., their movements in the country and when they leave.

U.S.-Visit began at 115 airports and 14 seaports on Jan. 5, requiring foreigners have their fingerprints scanned and photographs taken.

The program will be expanded to the 50 busiest land border crossings by the end of this year.
 
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The Homeland Security Department saw no conflict in awarding the contract to a Bermuda-based company, Undersecretary of Border and Transportation Security Asa Hutchinson said at a news conference.

"Legal counsel looked at this and determined that all three bidders met all the legal requirements," Hutchinson said.

Companies that leave the U.S. with the sole intention of reducing their U.S. tax bill will cost the U.S. $5 billion in lost revenue during the next decade, according to the congressional Joint Committee on Taxation, which estimates the effects of tax legislation.

A ban on that practice, called a "corporate inversion," is pending in a rewrite of corporate tax rules that passed the Senate in May and will be debated this month in the House.

Companies such as Accenture say they must consider moving to low-tax countries to compete with lower-taxed foreign rivals.

An early version of the Homeland Security funding bill would have banned companies that have moved, including Accenture, Foster Wheeler and other companies like Tyco and Ingersoll-Rand from getting government work.

The bill was changed to apply the ban only to companies that move after it was signed into law.

"People were surprised that Accenture got the bid because they are headquartered in Bermuda," said David Garrity, director of research at Caris in New York who doesn't own shares in the company.

"If you were going to get a large government contract like US-Visit, how could it go to a non-U.S. domiciled company?"

"I have serious concerns about that," said Snowe, a Maine Republican. "They moved offshore to avoid taxes and now they are benefiting and reaping the rewards."

Federal procurement records show Accenture in 2002 had federal contracts worth about $450 million, of which $250 million were related to military or homeland-security functions.

The company reported profit of $498.24 million last year and paid a total $255.22 million in taxes to U.S., state and foreign governments, according to its financial statements.

Its U.S. tax bill has declined even as its income from U.S. sources increased. Accenture earned $566.9 million in the U.S. in 2003, up from $247.3 million in 2002.

Since 2001, the company has reduced its U.S. tax liability to $143 million from $382.7 million.

Outside the U.S., Accenture earned $1 billion in 2003, up from $820 million in 2002.

"U.S.-Visit really describes the business strategy of these companies," Doggett, a Texas Democrat who serves on the House Ways and Means Committee, said in an e-mailed statement.

"Our security is undermined by corporations that devise ways to avoid paying their share of the cost of keeping our homeland secure," Doggett said.

Copyright © 2004 The Seattle Times Company

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