Omran said during the performance of the subcontract, it encountered numerous delays due to bad weather, DynCorp’s failure to provide materials and changes in the work, none of which were its responsibility.

Despite requesting and obtaining some time extensions from DynCorp, the contractor later informed Omran that it was withholding 10 percent of the agreed upon progress payments and said it would decide on subcontract completion and whether to apply the cut to the assessment of liquidated damages, the suit says.

“DynCorp took such action despite having knowledge of justifiable delays that entitled Omran to time extensions,” the complaint said, adding that one subcontract with DynCorp did not even contain a provision for the assessment of liquidated damages.

The contractor also improperly billed Omran for a number of back charges — costs purportedly sustained by DynCorp for work that was the responsibility of Omran — many of which were time-barred, and didn’t provide Omran with opportunities to address the issues as was required under the subcontracts, according to the suit.

In April 2011, DynCorp said it was closing out the subcontracts, levying $12,627 in back charges and $489,300 in liquidated damages, and stated that it would pay Omran only $218,500, the suit says. Omran balked and refused to sign DynCorp’s release, after which DynCorp dropped its liquidated damages demand to $171,604, but without explanation increased the back charges to $207,062, Omran alleges.

DynCorp ultimately paid Omran $335,106 over a half a million less than what Omran says it is owed. The suit alleges breach of contract, unjust enrichment and violation of the Federal Prompt Payment Act. Representatives for DynCorp could not be immediately reached for comment. The suit is the latest in a barrage of complaints from Afghan businesses over nonpayments by U.S. contractors.

In a June report, a watchdog warned that the disputes over U.S. contractors’ payments to their Afghan subcontractors have become a “serious problem.”

Of the 753 complaints that the Special Inspector General for Afghanistan Reconstruction has received on its investigations hotline since 2009, 183 complaints have revolved around subcontractor nonpayment issues, leading SIGAR to open 52 investigations related to $69 million in alleged nonpayment.

The nonpayments have lead to death threats, work stoppages and strikes, as well as allegations of questionable intervention by the Afghan government, SIGAR reported. In addition to eroding support for U.S. and coalition forces, the disputes threaten to kill off the fledgling businesses that the U.S. is hoping to support and make U.S. contractors less willing to deal with Afghan companies, according to the report.

SIGAR recommended that to crack down on nonpayment, U.S. agencies should leverage False Claims Act litigation and suspension and debarment. www.law360.com

This is the first time the U.S. government has attempted to freeze and then seize funds held by an Afghan contractor in an Afghanistan bank, and was the direct result of SIGAR’s investigation. The funds were in Hikmatullah’s accounts in Afghanistan International Bank (AIB), but have since been transferred to other banks outside Afghanistan.

Key Facts from the Case 

SIGAR Investigation Uncovered Scheme to Allegedly Defraud the U.S.:

• Beginning as early as November 2010, and continuing until at least March 2012, Hikmatullah allegedly conspired to obtain illegal payments for transportation of U.S. military supplies.
• Hikmatullah allegedly obtained contracts, through fraudulent means, covering at least 5,421 transportation missions, valued at $77,920,605, to resupply the United States.
• Hikmatullah allegedly paid bribes and kickbacks, and manipulated contract bids, in order to obtain these contracts.

Timeline of Events:

• On November 7, 2012 a U.S. judge issued seizure warrants for more than $77 million held in bank accounts at AIB. These seizure warrants were sent to Afghanistan pursuant to the United Nationals Convention Against Corruption, as a mutual legal assistance request.
• In addition to the seizure warrants, arrest warrants in rem were filed in November, 2012, and received by Afghanistan on December 31, 2012, with a request to freeze the accounts.
• In response to the U.S. request, on or about January 28, 2013, AIB froze two defendant bank accounts at the direction of the Afghan Attorney General’s Office.
• On March 25, 2013, Hikmatullah transferred money out of the AIB accounts to accounts at Bank Alfalah and Emirates NBD Bank in the United Arab Emirates.
• On or about April 4, 2013, the United States learned that the freeze on the AIB accounts had been lifted. Subsequently, the Acting Attorney General of Afghanistan informed the United States that Afghanistan would not comply with the U.S. mutual legal assistance request.
• On May 3, 2013 the United States filed an amended verified complaint for forfeiture of the assets transferred out of AIB bank, and on May 8, 2013, the U.S. District Court, District of Columbia, issued arrest warrants in rem against those funds in the interbank accounts.
• In May, 2013, SIGAR investigators served the arrest warrants on eight banks in New York having interbank accounts with foreign banks to which Hikmatullah had transferred funds.
• To date, SIGAR has moved $10.1 million from the Hikmatullah accounts.
• SIGAR and the Justice Department continue to pursue the rest of the money.

Court Documents: U.S. District Court of the District of Columbia, Case No. 12-cv-01905 (RWR)