Afghan Subcontractor Loses Bid to Free Funds

(CN) - A military subcontractor accused of defrauding the government out of $77.9 million failed to persuade a federal judge to release the funds seized in its accounts.

The U.S. Justice Department sued Afghanistan-based contractor Hikmat Shadman Logistics Services Co., its alter egos and principals in November 2012, claiming the contractor bribed at least two people to secure transportation contracts at fraudulently inflated prices.

In its complaint, the government identified two accounts into which the proceeds for these contracts were deposited: one ultimately contained $70.9 million; the other had $6.9 million.

The Justice Department explained that it pays contractors and subcontractors to resupply military forces operating in Afghanistan through the North Atlantic Treaty Organization.

In October 2007, NATO contracted with non-party TOIFOR Global Life Support Systems, a Hungarian firm located at Kandahar Airfield, Afghanistan, to serve as the sole prime contractor for this effort.

TOIFOR was then expected to put "transportation movement requests" or "TMRs" up for bid and then hire Afghan-owned businesses to transport fuel, food, water and other supplies by truck to various locations throughout the country.

Hikmat Shadman served as a TOIFOR subcontractor between November 2010 and March 2012.

However, the contractor's principal, Hikmatullah Shadman, "bribed and paid 'kickbacks' to Henry Omonobi-Newton, the TOIFOR operations manager at Kandahar Airfield, and his successor in that position, Paul Hele," according to the government's lawsuit.

To bolster this charge, the government pointed to information provided by several unidentified confidential sources who claim they acted as intermediaries for these payments, passing envelops stuffed with $100 bills -- and, in some cases, stacks of bills -- between the alleged conspirators.

In return, Omonobi-Newton and Hele inflated and manipulated bids and awarded them to Hikmatullah, the government said.

On Nov. 7, 2012, U.S. Magistrate Judge Alan Kay issued a seizure warrant, under seal, for each account. The seizure warrants were then transmitted to Afghanistan for enforcement.

The contractor and its principals responded to the allegations on Aug. 27, 2013, filing a verified claim and interest in the seized millions. They later filed a request for injunctive relief, claiming they needed the money to continue their legitimate business.

They also sought an order barring the U.S. government from transferring the funds outside the court's jurisdiction, and from "harassing or threatening" witnesses in the still-pending proceedings.

Finally, they wanted the government to "gather, segregate and preserve" evidence, and to identify any funds that may have been transferred outside U.S. control.

Last Wednesday, U.S. District Judge Richard Roberts in Washington, D.C., denied their motion for preliminary injunction, saying the claimants failed to show how a preliminary injunction is needed to prevent the destruction of their business.

"While releasing the defendant funds may affect the functioning of their business, the claimants have already failed to demonstrate that they are entitled to this relief," Roberts wrote. "Their remaining request for an injunction against the government to protect potential witnesses and evidence is devoid of factual support for how it will prevent the destruction of the claimants' business."

The judge then proceeded point by point, explaining that in each instance, the claimants failed to provide evidence to back their assertions.

"At best, the claimants have provided some factual support for their assertion that the government has not disclosed all of the information in its possession in its complaint or motions ... However, the claimants have not shown either how the non-disclosure is relevant to their request for a preliminary injunction or how it will cause irreparable injury," Roberts added. "If anything, this information goes to the merits of the government's forfeiture action. Any injury that the claimants may suffer from the government's non-disclosure can be remedied through the normal course of litigation, if the action proceeds to an adjudication on the merits."

Roberts concluded: "Because the claimants have failed to demonstrate that they will suffer an irreparable harm or that the relief they seek is warranted by other relevant factors, they are not entitled to a preliminary injunction."

Subscribe to Closing Arguments

Sign up for new weekly newsletter Closing Arguments to get the latest about ongoing trials, major litigation and hot cases and rulings in courthouses around the U.S. and the world.

Email *

Submit