Either last year or early this year (it's not clear from the letter), a former Blackwater guard sought to determine whether the tax code designates him a Blackwater employee, which would entitle him to compensation for the money he spent paying his own taxes in 2005. The company received the IRS arbitration in March: the services rendered by the ex-guard for the company in Iraq qualified him as an employee. That would explain why the non-Blackwater private guards in Iraq on the same State Department contract, working for DynCorp and Triple Canopy, work as full-time employees of their companies, which take care of their tax liability. -- TPMMuckracker.com
It already looks like they will have to pay all those back taxes, which will bankrupt Blackwater. If they can find that they set up the structure to have contractors instead of employee's then it's tax evasion. Even if they just were talking about "avoiding" taxes then its tax fraud In which case Hauptsturmführer Prince is going to the big house, for a long time.