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2 Army Corps employees arrested on contracting fraud charges

Oct. 4, 2011 - 06:38PM   |  
By SARAH CHACKO   |   Comments
(Courtesy of Wikipedia)

Two Army Corps of Engineers employees were arrested Tuesday on charges that they took millions of dollars in fraudulent payments and planned to steer a $780 million contract to a favored company.

According to the indictment from a grand jury in the U.S. District Court for the District of Columbia, Army Corps of Engineers program manager Kerry Khan and program director Michael Alexander had conspired since 2007 with an official at Virginia-based EyakTek, an Alaska Native-owned small business, to funnel more than $45 million in payments to an unnamed EyakTek subcontractor.

EyakTek is the prime contractor of an indefinite-delivery, indefinite-quantity Army Corps of Engineers contract for information technology infrastructure and services. About $20 million in fraudulent expenses were built into the invoices, and payments on those expenses went to Khan, Alexander, Khan's son Lee, and EyakTek's contracts director Harold Babb.

The indictment also says that the men devised a similar scheme for a future IT contract worth up to $780 million by tailoring the statement of objectives and statement of work to favor EyakTek's subcontractor and to plant certain Army Corps of Engineers employees who would favor the subcontractor on the selection board.

All four men were indicted on one count of conspiracy to commit bribery and wire fraud, as well as one count of conspiracy to commit money laundering, according to a news release from U.S. Attorney for the District of Columbia. Kerry Khan and Alexander also were indicted on one count of receipt of a bribe by a public official, and Babb was indicted on one count of unlawful kickbacks.

If convicted of the charges, Kerry Khan and Alexander face a maximum of 40 years in prison. Babb faces up to 35 years, and Khan's son faces up to 25 years.

"This indictment alleges one of the most brazen corruption schemes in the history of federal contracting," U.S. Attorney Ronald Machen said in the release.

Investigators are still reviewing other aspects of the alleged misconduct, such as the involvement of the subcontractor, said Sheldon Shoemaker, special assistant to the Small Business Administration's inspector general.

The House Small Business Committee has scheduled a hearing Thursday to address problems with tracking pass-through contracts to subcontractors, such as the one used by EyakTek.

"The integrity of the federal procurement system needs to be protected, so that the public has confidence in government contracts and small businesses have every opportunity to compete," committee chairman Sam Graves, R-Mo., said in a statement. "One area we will continue to focus on is ensuring that law enforcement officials have all of the tools they need to investigate crimes like this and make sure contracting remains fair."

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