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.
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
*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
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.