Afghan subcontractors reportedly stiffed of nearly $70M by US firms

June 19, 2013: Helicopters take off from Bagram military base, 31 miles north of Kabul, in Afghanistan. (AP/Ahmad Jamshid)

U.S. firms in Afghanistan have failed to pay local subcontractors, causing hundreds of complaints regarding nearly $70 million owed to workers, including one who “threatened to set himself on fire” in front of a U.S. Embassy in protest, according to a report

The “serious” problem was outlined in a letter released Thursday by Special Inspector General for Afghanistan Reconstruction (SIGAR) John Sopko to Defense Secretary Chuck Hagel, Secretary of State John Kerry and several others. It revealed that the unit has received 753 complaints as of October 2012 and opened 52 investigators regarding nonpayment issues, reflecting $69 million in funds owed.  Other federal agencies, including the State Department, also reported receiving 44 similar complaints in the last six years.

One Afghan subcontractor who was working on a construction project for the U.S. Army Corp of Engineers in Helmand province pleaded with SIGAR officials for payment, claiming that workers needed to be paid to provide for their families.

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“This same subcontractor threatened to set himself on fire in front of the U.S. embassy in protest of nonpayment,” the letter reads. “SIGAR reported both the allegation and threat to the U.S. Army Corp of Engineers and to the U.S. Embassy Kabul for action.”

Other examples detailed in Sopko’s letter include an Afghan security company employee who reportedly threatened the firm’s management “at gunpoint” while at the worksite. Managers later reported that assault rifles, ammunition and uniforms were missing following the incident.

“According to the employee, the incident was directly attributable to the prime contractor’s failure to pay,” the letter reads.

Employees of U.S. contractors have also reportedly received death and kidnapping threats by subcontractors who alleged they have not been paid. In one example, after the contractor offered mediation and arbitration to solve the dispute, the subcontractor threatened to use a suicide bomb to blow up himself and the prime contractor’s offices. In another examples, a prime contractor told SIGAR officials that a subcontractor threatened to blow up a compound of U.S. contractors and government agencies and another subcontractor threatened to kill an attorney for the prime contractor over nonpayment.

“In addition to investigating allegations of procurement fraud, SIGAR is looking into allegations that subcontractors have attempted to use the Afghan Attorney General’s Office to extort payment from prime contractors,” the letter continues. “Some Afghan subcontractors have allegedly turned to the Afghan Attorney General’s office to seek arrest warrants against employees of prime contractors who have allegedly not paid them.”

As a result, U.S. contractors in Afghanistan are becoming less willing to work with Afghan subcontractors and also raises questions about contractors seeking more funds from the federal government than they are entitled to receive.

“SIGAR has opened a number of investigations involving such allegations including, for example, a case involving a prime contractor who allegedly owes 33 subcontractors over $13 million,” the letter continues.

Sopko recommended that the U.S. government consider suspending or removing contractors who fail to make appropriate and timely payments to subcontractors.

Direct aid and subcontracting work from the United States and other countries around the world have powered Afghanistan’s economy since the U.S. military campaign began there following the Sept. 11, 2001 terror attacks. According to a 2011 report, the Senate Foreign Relations Committee estimated that 97 percent of Afghanistan’s economy was dependent on foreign aid.