House panel votes to block Accenture's U.S. Visit pact

The House Appropriations Committee voted today to prevent Accenture Ltd. from holding the systems integration contract for the Homeland Security Department's multibillion-dollar virtual border system because it is based in Bermuda and is a tax exile.

The panel cleared an amendment to the DHS' fiscal 2005 appropriations bill offered by Rep. Rosa DeLauro (D-Conn.) that would bar companies that use loopholes to avoid paying federal taxes from holding homeland security contracts.

An Accenture spokesman denied that the company, based in Hamilton, Bermuda, is a tax exile and noted that many steps remain before the provision becomes law.

The draft legislation must first be approved by the full House and Senate and receive presidential approval before it becomes law. DeLauro's amendment reportedly passed on 35 to 16 vote.

The department stood by its decision. "Based on our review of the bid by DHS legal counsel, all bidders were U.S. companies under law and therefore qualified to bid on the contract," said Kimberley Weissman, DHS spokeswoman.

DeLauro backed a similar amendment to the Homeland Security Act of 2002.

When DHS announced that it had awarded Accenture the contract for the U.S. Visitor and Immigrant Status Indicator System June 1, department officials rejected charges that Accenture is a tax exile.

Border and Transportation Directorate undersecretary Asa Hutchinson and U.S. Visit program manager Jim Williams told reporters at a press conference that the Accenture unit that received the contract is based in the U.S. and pays U.S. taxes.

Also on June 1, DeLauro issued a statement that she was "deeply disappointed that the Department of Homeland Security has awarded $10 billion of the taxpayers money to a company that refuses to pay its own federal taxes. Accenture, and other companies like it, have used loopholes in the tax system to shirk their duties to the United States, by incorporating, on paper, in other countries like Bermuda."

Jim McAvoy, Accenture's corporate communications and issue management director, said, "It is early in the process and we are going to continue to monitor it."

Accenture never has been a U.S. company, he said. Andersen Consulting was formed in 1989 as part of Andersen Worldwide, a Swiss-based cooperative organization.

Arthur Andersen was the other part of the cooperative. In 2001, after an acrimonious fight, Andersen Consulting organization finally severed its ties from Andersen Worldwide.

"Despite what some of our critics say, Accenture did not undertake a 'U.S. corporate inversion,'" McAvoy said.

"Accenture LLP is our U.S. entity and that is the organization that won the contract," he said.

"As a global company, we pay, and have always paid, our fair share of taxes in each of the countries in which we generate income, including the United States. We pay U.S. taxes on income generated by our U.S. operations," he said.

"Preventing successful companies from bidding on government contracts just because they are not incorporated in the U.S. rejects the free market principles of the federal procurement system," McAvoy said.

DHS officials have said that the U.S. Visit contract likely will not reach its $10 billion cap.

Accenture bested Computer Sciences Corp. of El Segundo, Calif., and Lockheed Martin Corp. of Bethesda, Md., in the U.S. Visit contract competition.

Nick Wakeman of Washington Technology magazine contributed to this story.