By Zachary A. Goldfarb
Washington Post Staff Writer
Friday, May 16, 2008
A federal jury this week ordered DynCorp International, a government contractor based in Falls Church, to pay more than $15 million to a former minority-owned subcontractor, finding that DynCorp breached its contract and racially discriminated against the firm.
The legal spat started in October 2006, when Worldwide Network Services, a District telecommunications company run by two African Americans, filed suit after DynCorp ended a relationship with it to provide services in Iraq and Afghanistan. In WWNS's place, DynCorp selected a company not owned by minorities. Both DynCorp and the other company hired many of WWNS's employees.
WWNS said it was left with millions of dollars in outstanding invoices and nearly collapsed in the aftermath. It also alleged in court filings that DynCorp forced the company off the contract as part of a pattern of racial discrimination, listing several examples, including the use of a slur to describe a WWNS employee.
"I felt devastated," said Reginald Bailey Sr., one of the two African American stakeholders who own a majority of the company. "It completely destroyed the company's operations, in a financial sense and in an employee sense."
In a statement, DynCorp said it did "not engage in or tolerate discrimination in any form and rigorously follows the highest standards of business ethics," citing work with hundreds of small, minority and disadvantaged businesses.
The company said a contract with WWNS was not renewed because of the subcontractor's poor performance, which drew complaints from the U.S. government.
On Wednesday, an eight-person jury in the U.S. District Court for the Eastern District of Virginia ruled against DynCorp on several counts. DynCorp countersued and prevailed on one count.
The jury awarded WWNS $5 million plus interest in compensatory damages and $10 million in punitive damages. The judge, Gerald Lee, had already ordered DynCorp to pay $2 million based on an earlier ruling. WWNS will pay $175,000 to DynCorp under the finding against it.
DynCorp said it would appeal and "pursue this matter vigorously" until it was "fully vindicated."
"We are extremely disappointed and strongly disagree with the verdict in this contractual dispute," the company said.
DynCorp had asked for the case to be dismissed, but the judge allowed it to proceed, recounting several allegations in his order, including this episode of alleged racial discrimination:
In October 2006, one of DynCorp's top executives hosted a company party. It was a few months after the relationship between DynCorp and WWNS had soured, and WWNS was collapsing. At the party, a mocking letter purporting to be from the black president of WWNS was read in Ebonics, according to the order. Also, a T-shirt was distributed with the imprint "I brought down WWNS and all I got was this lousy T-shirt," according to the order.
One person at the party, a DynCorp employee who was laid off in December 2006, later testified about the details of the letter. Other employees at the party said they couldn't recall the letter.
"DynCorp International has made a thorough investigation of allegations of misconduct, but has found no case of actual racial discrimination," spokesman Douglas Ebner said by e-mail. "In any case, the alleged misconduct has no relation to the corporate decision not to renew a contract option with WWNS."
In 1993, when Walter Gray founded WWNS, it was a small shop providing technology services to area businesses. In 2003, it became a subcontractor to DynCorp, and its revenue grew from $500,000 to $50 million a year.
Some of the revenue came from DynCorp's work in Iraq. DynCorp won a State Department contract training the civilian police force in Iraq and a smaller contract providing diplomatic security. WWNS was selected to provide telecommunications support on those contracts.
Over time, WWNS claimed in its suit, its employees were increasingly subjected to racial epithets, banned from meetings and in some cases forced to leave Iraq. The lawsuit claimed that DynCorp used WWNS's status as a small, minority-owned firm to help win the deals before the relationship soured.
In summer 2006, DynCorp decided not to renew its contract. Ebner said his firm received three letters, two in January 2006 and one in June 2006, from the State Department specifically citing its WWNS-supported technical equipment. The letters were submitted as evidence during the trial, Ebner said.
WWNS, in its filings, cited DynCorp's positive evaluations of its work.
After ending the relationship with WWNS, DynCorp hired EDO, which is not minority-owned, to replace WWNS. EDO, which was originally named in the suit, and WWNS settled separately.
Gray and Bailey, who have spent the past year and a half pursuing the lawsuit, said they hoped to use proceeds from the case to rebuild their company.