Whitehorn says lawsuit is about expired permit
The most recent correspondence between the American Samoa Government and Whitehorn Construction Inc. (WCI) reveals that ASG allowed WCI to proceed with work on the Airport Road (at the time) although the land use permit had expired, and this is the focus of WCI’s offer to resolve the lawsuit with the government for payment of over $1.6million — not the lack of a bond issue.
ASG and WCI are now set to battle before the Administrative Law Judge on the termination of WCI’s contract, which came after the government found out the bonds issued for the Airport Road project 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 Attorney General’s offices, informing them the agent or broker though which WCI had posted their bond did not work for Chubb.
Sharron Rancourt, in a Feb. 5, 2014 letter to Attorney General Talauega Eleasalo Ale, says that despite many verbal assurances by ASG that they wish to settle the matter in good faith, they have not.
Rancourt stated that while the bonding issue may be construed as a mutual mistake, the most important and glaring issue is that of the expired land use permit.
“This issue is solely attributed to ASG. ASG breached the contract and allowed Whitehorn to mobilize and incur significant expenses when ASG knew that the project and Whitehorn could not proceed without such a permit.”
“ASG’s failure to settle and/or counter-offer on this major breach issue alone calls into question whether the ASG is serious about settlement.”
ASG’S REJECTION OF WCI OFFER
Last year ASG rejected the move by WCI for a settlement of $1.6million.
The rejection focused on WCI’s failure “to meet the most basic of requirements to be a general contractor in federally-funded projects; securing a valid bond!”, according to a letter Talauega, then a deputy AG, sent to Rancourt, dated Nov. 27, 2014.
According to Talauega, Whitehorn’s contract was “terminated for ‘default’.
He outlined what the government assumed would happen if the $1.6Mil was paid to WCI — “your client would agree to waive and indemnify ASG from any and all existing or future challenges or claims which may arise from the termination of the contract.” He also noted in his letter that “your client also seeks conversion of the termination of contract from termination for default to termination for convenience.”
Talauega then called WCI’s offer a “complete non-starter” which was “hereby rejected.”
Instead, he wrote, that “ASG is willing to settle this matter as follows:
1 ASG will confer the termination from default to convenience;
2 Whitehorn will release and waive all claims it may have against ASG arising out of this matter;
3 ASG will release and waive all claims it may have against Whitehorn arising out of this matter.”
In discussion of the government’s offer, Talauega said, “The impact of this termination on your client’s business will no doubt be extensive. But the fact remains… Because your client failed to produce a valid bond, it breached the contract. ASG had every right to terminate the contract for cause.”
The then deputy AG wrote, “To resolve this matter ASG has indicated a willingness to change the basis of its termination from ‘default’ to ‘convenience’.”
He noted ASG was aware that such a change “would be invaluable to your client” as WCI “would be barred from bidding or participating in federally funded projects for a number of years, which may ultimately affect WCI’s ability to remain in business.
“A termination for convenience, on the other hand, allows your client to continue bidding and working on federally funded projects,” Talauega said.
“ASG is willing to make this concession, not because it’s concerned about the strength of its case, but because it has a sincere hope that your client would be successful in this market and hopefully provide ASG with another contractor option for future road projects.”
According to Talauega, “ASG remains firm that it handled the administration of this contract in accordance with the law and gave your client a more than reasonable opportunity to correct its breach once discovered.”