WASHINGTON (AP) _ The Army has suspended a Miami Beach company from government contract work for reportedly providing Chinese-made ammunition to the Afghanistan army, in violation of its contract and U.S. law.

AEY Inc., a firm with just eight employees, is under criminal investigation for reportedly claiming that the munitions were made in Hungary, according to documents obtained Thursday by The Associated Press.

Also, there have been ongoing complaints from the U.S. military in Afghanistan that the ammunition arrived there poorly packaged, including instances in which they found loose cartridges in brown paper bags.

Pentagon spokesman Bryan Whitman said there have been no reports that the ammunition was unsafe or failed to work properly. But he says some of it may not have been used because of concerns that it was not packaged well.

In a letter Tuesday, the Army told company owner Efraim Diveroli that the investigation could lead to AEY being barred from any U.S. government work.

Diveroli's attorney, Hy Shapiro, said Thursday he had not seen the Army's letter yet and declined further comment until he had. No one answered the door at the Miami Beach apartment listed as Diveroli's in Florida state records.

A Miami-Dade jail spokeswoman, Janelle Hall, confirmed that Diveroli was arrested by Miami Beach police for driving under the influence on March 5. He posted $1,000 bail. The Miami Herald first reported the arrest.

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, worth in excess of $200 million.

The key contract was awarded in 2007, and was for various types of ammunition for the Afghan National Army and the Afghan National Police. It included munitions for machine guns, assault rifles, shotguns and pistols.

After questions arose about the origin of the munitions, U.S. Army investigators in January reviewed shipments at an Afghan Army weapons depot. Stamps on munitions in 14 containers showed that the ammunition was manufactured in factories in China, the memo said.

According to the contract, based on federal law, companies doing business with the U.S. government cannot buy any munitions directly or indirectly from a Chinese military company, or any entity that is part of China's defense industrial base.

In addition to providing the munitions, the small, fledgling company also at times sold a variety of other products to the Pentagon and State Department, including weapons, grenades, grenade launchers, rockets and clothing.

While the inspections at the Afghan depot were in January, the Army did not invoke the suspension until this week, just as the issue was becoming public.

The ammunition problems were first reported Thursday by The New York Times.

Associated Press writer Jennifer Kay contributed to this report from Miami Beach.

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