Inspector General Faults SBA in 4 of 5 Findings, But Waxman Spins It to Blame Blackwater

The Inspector General of the Small Business Administration (SBA) has faulted the SBA in four out of five findings concerning Blackwater Worldwide.

Congressman Henry Waxman (D-Cal.) is alleging "waste, fraud and abuse" on his committee website, which contains a headline today worded to imply that the SBA has a major problem with Blackwater.

Blackwater is certain to take the blame in the headlines soon to be generated from the Waxman statement. Waxman generated the complaint to the SBA in March.

However, a look at the SBA Inspector General memorandum shows that of the five "findings," the government agency itself appears to be at fault in four of them.

In Finding 1, Blackwater and an affiliated company "may have" won contracts that were set-asides for small businesses, even though the company no longer qualified as a small business. It's pretty subjective and inconclusive, because of Blackwater's use of contractors versus employees in key areas to support the troops.

In Findings 2-5, the Inspector General blames the SBA itself - not Blackwater. Take a look at the original document and see for yourself: http://oversight.house.gov/documents/20080728141224.pdf.

Waxman spins the issue in a memorandum dated today, July 28, and titled: "SBA IG Finds Blackwater May Have Misrepresented Small Business Status." That's the gist of his complaint - he doesn't make an issue of the IG's four allegations against the SBA itself.

At the core of this argument is whether Blackwater can call its contractors "contractors," or whether it must designate them as "employees." The SBA IG report is littered with weasel words like "could have" and "potential," not daring to issue any definitive finding at all.

Waxman, as part of his work helping trial lawyers who stand to make millions from suing Blackwater, complained to the SBA, saying that the company shouldn't be allowed to call its contractors "contractors," but instead should call them "employees" so they can be taxed. Big Labor doesn't like how the law allows contractors either, because they can't be unionized and forced to pay dues to the union political machine.

The trial lawyers and labor unions are among the biggest campaign contributors to the very partisan Waxman's political party.

(Follow-on added at 5:08 PM: This blog broke the story of the SBA IG report. The first news report appearing on Google News was a McClatchy story written by Joseph Neff of the Raleigh News & Observer - the folks who gave the world the phony "news" about the Duke lacrosse team - posted at 4:27 PM. Standish posted the story first at 3:36 PM eastern time.)