To:  Senator Chuck Grassley

From:  Chris Grotbeck

 

  May 16, 2004

Chris L. Grotbeck, P.E.

Grommit13@hotmail.com

1111 Sen. Chuck Grassley

U.S. Senate Finance Committee Leader

135 Hart Senate Bldg.

Washington DC 20510-1501

(202) 224-3744

Re: Intel Corporation, Tax Evasion, IRS Incentive Reward System 

Dear Senator Grassley, 

For fourteen years, I worked as an engineer for Intel Corporation, designing, constructing, and maintaining semiconductor-manufacturing facilities in the United States, Asia, and Central America.  I had a prosperous career with Intel as one of the most senior engineers at the New Mexico site (Intel’s premier manufacturing facility) and was proud to have had a direct contribution to Intel’s tremendous success through the growth decade of the 1990’s.  My career, however, took a sudden turn for the worse in August 1999, when I undertook an assignment as the mechanical project leader for the construction of an Assembly and Test facility in Costa Rica. 

Early in the Costa Rica assignment, I encountered some irregularities in Intel’s expatriate tax policy.  I had questions about the legality of the way Intel had structured its tax payments with respect to employees working outside the United States.  When I began investigating the tax policy and questioning other expatriate employees and my management about the taxes, I was met with an aggressive, and suspiciously defensive resistance.  As it turns out, there was a $600,000,000 reason Intel did not want anyone questioning overseas tax payments.  Although I was “strongly encouraged” by the upper management (including the Asia Region and Americas Region managers) to stop investigating the tax situation any further, I continued blowing the whistle and questioning the policy through the remainder of my assignment in Costa Rica (which, incidentally, was completed successfully, ahead of schedule and under budget). 

After I returned to the US, in May 2000, I was given an unexpected poor performance review and was set up to be laid off.  An open-door investigation found no evidence to support the report of poor performance, so I was spared from being let go - for the time being.  Thereafter, my working environment became one of what is known in terms of employment law as “constructive discharge”.  In such a situation, an employee is essentially forced not to succeed, lending justification to a termination, or in the hope that the employee will become frustrated to the point of quitting.  That situation continued until August 2002, when I questioned another of Intel’s policies – that of intentionally hiding the emission of environmental pollutants thought to be causing severe health problems in residents of nearby communities.  A month after doing so, I was laid off.

I subsequently took the case of the expatriate tax situation to the NM Attorney General, State Securities, the FBI, and the IRS Criminal Investigations Division, among a handful of other agencies.  The IRS Criminal Investigations group invited me to act as an informant and to file Qui Tam with the IRS against Intel, which qualified me under the IRS Informant Claims for Reward Program to receive 15% of any unpaid taxes recovered as a result of the information I had given (up to a maximum of $10M).  The prospect of receiving a reward was encouraging.  Perhaps you can imagine the range of emotions I experienced when, after learning about the reward program, turning over boxes of evidence, and initiating an audit of Intel’s taxes, I received a letter from the IRS excluding me as a Qui Tam informant and then, a month later, discovered that the audit of the 1999/2000 taxes from Intel’s Overseas Assembly and Test facilities had uncovered $600,000,000 in evaded taxes! 

The fact that Intel had evaded paying such a tremendous sum of tax is all the more suspicious in the context of what was happening with the US economy and stock market at that time.  It is now apparent that a core group of US technology and energy corporations had been “cooking their books” and artificially inflating the prices of their stock, by various methods, during 1999 and the summer of 2000.  Some of these methods, as in the cases of Enron and WorldCom, obviously lay far outside the boundaries of acceptable legal and ethical practice.  As this select group of large corporations continued pumping up the paper value of their stock, and as the resulting investment frenzy coaxed individual investors to shift their savings and portfolios toward stocks, the market became saturated.  Then, in August 2000, a group of insiders and large mutual funds dumped millions of technology shares in a series of well-timed sales, reaping tremendous profits at the expense of the populace and driving the economy into a three-year recession.  In retrospect, it now appears to have been a very well-orchestrated conspiracy resulting in what could very well have been the largest transfer of wealth in history - from an entire population of investors to just a very few insiders.  Curiously, many of the same insiders had met with President-elect Bush in a series of secret meetings just prior to the August sell-off, including Ken Lay, of Enron, and Craig Barrett, president and CEO of Intel Corporation, among many other top US corporate executives.  More curious still were the large monetary contributions transferred to powerful political leaders by the same corporate executives and their families. 

On a recent trip to Washington DC, where I had meetings regarding the Intel situation with several groups, including Taxpayers Against Fraud, I learned that the IRS habitually excludes Informants from the Reward Incentive Program.  In an IRS briefing from November 20, 2003, the statistics indicate that only 1 in 10 informants submit a claim for reward.  Of those, approximately 1 in 10 actually receive a reward, and the majority of claims are rejected without even contacting the alleged violator.  A review of taxes, fines, penalties and interest recovered as a result of Informants’ information versus the total rewards paid shows that the reward rate was about 2% from 1992 to 1997 and increased to about 7% from 1998 to 2003 – well below the 15% that would be expected.  Of note was that the largest combined total amount recovered in any of those years was $598,605,110, recovered in 1994.  That makes Intel’s offshore tax evasion alone larger than the sum total of all recoveries for any of those prior years. 

Also when I was in Washington, DC, last month, you were speaking on the Hill about legislation you have proposed to solve the deficiencies in the IRS Informant Reward Incentive Program.  I support correcting this problem, especially in light of my own current situation.  Also, on behalf of all of the United States taxpayers, I support performing a thorough investigation of the Intel tax evasion and recovering the unpaid 1999 and 2000 taxes from the Costa Rica and Asia region Assembly and Test Facility projects.  The Intel case would be an excellent example to use in support of your legislation against tax fraud and for giving tax fraud whistleblowers incentive to act as informants.  We, the taxpayers and working citizens, appreciate you championing this issue.  We hope that you can use your influence to make a difference before it becomes a large public issue. 

Please feel free to contact me by email if you have any questions or would like copies of any of the extensive evidence I have, including voice recordings, regarding either Intel’s tax evasion cover-up or the IRS’ failure to pay informant rewards.

 

Thank you very much.

 

Sincerely, 

Chris L. Grotbeck, P.E.

Former Intel Sr. Mechanical Engineer

Grommit13@hotmail.com