U.S. Army Suspends Miami Company Accused of Supplying Chinese Ammunition

The U.S. Army on Thursday suspended any further dealings with a munitions contractor that may have fraudulently sold million of dollars worth of Chinese-made ammunition to the U.S. Army to be used by Afghan forces fighting Al Qaeda and Taliban extremists.

AEY Inc., a Miami-based company, is facing allegations that it violated a U.S. Army contract agreement when it provided the old Chinese cartridges rather than the Hungarian-made ammunition it promised. Contracts for the ammunition signed between the U.S. military and AEY in January 2007 amount to more than $200 million.

FOX News obtained a letter from the Army Legal Service Division to Efraim Diveroli, president of AEY Inc., telling him that his company is temporarily suspended from "future contracting with any agency in the executive branch of the United States government."

The New York Times, which broke the story, reported that Diveroli is 22.

"The basis for the suspension is based on an allegation that on November 25, 2007, you provided the Army Sustainment Command, Rock Island, Illinois, with a Certificate of Conformance that you knew to be false or misleading. ...

"Specifically, this Certificate of Conformance states that all ammunition provided pursuant to Task Order 2 is in conformance with contract specifications and indicates that it was manufactured in Hungary between 1965 and 1975, when in fact the majority of the ammunition was manufactured in the People's Republic of China between 1962 and 1974," the letter reads.

The letter also states that the company's future is in jeopardy and hinges on the results of an investigation by the Army's Criminal Investigation Division.

Pentagon Spokesman Bryan Whitman said he has spoken with military leaders at the Combined Forces Command in Afghanistan and so far "there is no indication that this ammunition hasn't performed to the standard or has posed a safety risk."

But Whitman pointed to concerns about substandard packaging in which the ammunition arrived. As it turns out, that packaging may have been one of the first clues that this ammunition came from China.

According to an Army Legal Services memo, AEY began contracting for the Defense and State departments in 2004, and to date has been awarded more than 150 contracts.