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ASG says Whitehorn contract was “mutual mistake”

The American Samoa Government claims Whitehorn Construction Inc. (WCI) has “unclean hands” in their response to the WCI lawsuit against the government, which lawsuit claims ASG failed to uphold its legal and regulatory responsibilities by failing to ensure the validity of the bonds.


The lawsuit was filed before the Administrative Law Judge when the government moved to terminate its contract with WCI.


ASG moved to terminate the contract after the government found out the bonds issued were fake or bogus. The issue of the bonds came to light when an official with Chubb Group of Insurance Companies contacted the local DPW and AG’s offices, informing them the agent or broker though which WCI posted their bond did not work for Chubb. WCI had been awarded the contract to fix the Airport Road.


WCI says, in their appeal, the issue concerning the bond was out of WCI’s control and not the fault of WCI and in response ASG says this particular allegation is vague, ambiguous, incomplete and unintelligible and ASG would require to speculate the meaning of offending issue and bonding issue which ASG declines to do.


In their appeal filed against ASG, the ASG Office of Procurement and Chief Procurement Officer Tiaotalaga J.E Kruse, WCI notes that — to their knowledge — the bond documents were legitimate and valid and WCI reasonably believed the broker was an authorized agent of the surety underwriter.


WCI lawfully procured the bonds and paid the full value of the bonds pursuant to acceptable industry standards, and prior to finalizing the contract WCI forwarded the bonds to the office of Procurement for review and comment, said the appeal.


WCI believed the bonds had also been submitted to the Attorney General’s office for final approval, and after ASG purportedly vetted the bonds the contract was finalized. “Had ASG vetted the bonds and determined the bonds be invalid, then ASG should not have issued the NTP (Notice to Proceed)" says WCI.


However in response ASG says that they were “improperly made to believe at the time, that WCI had satisfactorily met all bid and contract requirements.”


In addition, ASG claims WCI stopped working on the airport road at the discretion of ASG, however that stoppage of such work was for failure to cure a breach of the contract within the specified amount of time.


WCI claims they are the victims of an elaborate scheme of fraudulent bonds, and they have been working with the federal criminal authorities to identify and prosecute offending individuals. They have also worked with the insurance companies to bring civil actions in federal court against the perpetrators of the fraud scheme.


Although the bonds were later identified to be invalid, WCI procured the bond per contractual requirements outlined in the bid documents, and "the invalidity of the bond was not grounds to terminate the contract for default," says the appeal, which further states that termination for default occurs if the contractor refuses or fails to proceed with the work, however, WCI did not fail or refuse to do the work.


But, the government claims WCI has failed to state a claim upon which relief can be granted; that WCI has unclean hands; and, they failed to mitigate damages.


ASG says their actions were legal and in full compliance with contract terms and all applicable laws while WCI obtained ASG’s consent through fraud, deceit or misrepresentation and the formation of the contract was based on a mutual mistake between WCI and ASG.


Samoa News would like to point out that the ASG defense documents also state, “The formation of the contract was based on a unilateral mistake of ASG.” 


ASG points out the contract is “unlawful” and that the ALJ does not have jurisdiction over this claim.