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Julie Arthurs, Contributed  (July 3, 2013)


*Scandal Across Borders: Verizon’s Bungled Tax Withholding Practices*


Sometimes a scandal breaks that is so controversial, it captures the

media’s attention for weeks at a time. This has happened most recently not

just once, but twice, with successive indignities becoming the buzz of

cable news shows: first the revelations that the IRS had singled out

specific conservative nonprofits for extra scrutiny, and immediately

afterward the shocking news that major telephone company Verizon had handed

over the private information of its customers to the government. Two major

predicaments affecting two different entities... or at least that’s how the

popular media has been framing the events. But in a strange twist of fate,

it seems that these two players (the IRS and Verizon) have been embroiled in a far bigger

scandal, one that transcends international borders and has come to affect many lives.

Fraud, embezzlement, perjury—all elements of a riveting story that has

failed to secure the media’s addled attention... until now.


*Uncovering Secrets*


The details of this fascinating tale have been outlined in the book

“Triangle Elements I: Following the Money Trail” by tax practitioner Ramon

Mejia Jr., with collaboration from public accountant Harry A. Davis.

Through five years of research and investigative accounting work, Mejia has

been able to uncover a scheme involving US-based, multinational

corporations that have manipulated accounting practices and duped federal

regulators in order to increase their own annual cash flow. As the secrets

being to unravel, the book becomes a warning to participants of retirement

plans, as well as a wakeup call to anyone who places too much trust in

their employers. When companies fail their workers by using questionable

tax-withholding practices to increase their own profit, it becomes hard to

know who you can really trust. At least, that’s the hard lesson several

Verizon employees have had to learn, countless others have yet to learn, or are

too scared.


*The Real Story*


Government regulations have been set in place throughout the world to keep

major companies accountable and to make sure proper, ethical practices are

met. Many businesses operate accordingly, following all proper guidelines

and respecting their employees while bringing in sizable profits. These

companies understand that “ethics and integrity are at the core of

sustainable long term success,” as recently mentioned in a Forbes.com article.

They pay their workers what is owed to them, and the only corporate gifts

they accept are business-centric baubles such as the ones found on

solo.co.uk. These are the types of corporations that attract (and then keep) the best

 workers and that consistently make “most desirable workplace” lists. And while one

 would expect giant conglomerates to lead by example when it comes to better business

practices, this isn’t always the case, as “Triangle Elements I: Following the Money Trail”

 has found out.


The main culprit in this tale of intrigue: Verizon Communications, one of

the world’s leading phone and Internet providers. Now, Verizon is a

US-based company, but it employs thousands of workers across 140 countires.

These employees are given Verizon-specific internal identification numbers,

and in some cases four or five different numbers which are used to track worker files

 within the company. However, several employees realized too late that these numbers

 served other, more illegal purposes.


As older foreign workers reached their last years of service with the

company (many of them having worked with Verizon for several decades), they

opted to take advantage of the retirement benefits offered through the

corporation. But to their surprise, these workers soon realized they’d been

shortchanged—by several thousand dollars. It seems Verizon had used the U.S. tax

withholding process system to take money under false pretense, disguising the

money taken as U.S. Social Security, Medicare and Income Taxes from employees

Verizon knew didn't have to pay because those employees never lived or worked in

America. Though Verizon has apologized more than once or twice in the past twelve

years, and continues to say it will remedy the situation, the employees affected have

not received a full reimbursement, some no reimbursement at all, and on top of that,

the company continues its shady practices.

Their means were simple: the foreign workers’ company IDs were submitted as

Social Security Numbers, allowing Verizon to illegally deduct from

paychecks without barely anyone noticing. And once this scheme was

uncovered and brought to the attention of corporate headquarters,

Verizon sent their foreign workers letters threatening to suspend pension, health and welfare

benefits unless they signed an affidavit asserting that the company IDs were in fact Social Security

Numbers—basically, coercing their workers to commit perjury on paper, and crossing into

extortion territory.


*Corporate Consequences*


Soon after these revelations came to light, a class action lawsuit was

filed against Verizon by workers who lost out thousands from their pension

due to the withholding scheme. And while a federal judge has twice

dismissed the lawsuit the case is under appeal.

With both Verizon and the IRS’s tax practices still on the media radar, it’ll be

important to note what implications can arise for these entities should the U.S.

Court of Appeals for the Seventh Circuit remand the case to the U.S. District Court,

where Verizon's accomplices and facilitators have taken refuge behind Internal 

Revenue Code-Sec. 7421 & 7422.

Will Verizon have to fork over the thousands of dollars it’s taken from unsuspecting workers?

Will the government interfere and bail out yet another seemingly too-big-to-fail corporation?

And of course, now that the shady dealings are brought into the open, will the

company change its practices? As the scheme unravels further, only time will tell.



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