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Posted at 12:48 PM ET, 10/04/2011

Four arrested in government bribery and contracting scam

Four people were arrested Tuesday in a complex contracting scam involving the Army Corps of Engineers, authorities said.

Charged in the District’s federal court with conspiracy, bribery and unlawful kickback were two Army Corps contracting officers, Kerry F. Khan of Alexandria, and Michael A. Alexander of Woodbridge.

Facing the same charges are Khan’s son, Lee, of Fairfax County, and Harold F. Babb, of Sterling, director of contracts for EyakTek, an Alaska Native Corporation with an office in Dulles, Va.

Federal law enforcement officials said the scam involved delivered and promised kickbacks of about $20 million on what they described as substantial contracts for critical technology services.

Ronald C. Machen Jr., the District’s U.S. Attorney, said in a brief interview outside of his office Tuesday that “as alleged, this is one of the most brazen federal contracting scandals in our nation’s history.”

Machen and other officials are scheduled to address the case at a 2 p.m. press conference at his offices.

According to federal officials, the alleged scam worked like this: EyakTek obtained contracts with the Army Corps of Engineers to provide technology-related work and services. Starting in 2007, Khan, Alexander and Babb began directing orders for technology work to a sub-contractor, a company based in Chantilly, federal officials said.

The chief technology officer for that company, which was not identified by authorities, then submitted inflated fraudulently inflated quotes to EyakTek for its work; EyakTek then passed along those bills to the Army Corps, officials said.

The contracting officers and Babb referred to the inflated work as ”overhead,” according to the officials. That “overhead” was then paid out to Kerry Khan, Lee Khan, Alexander and Babb, the officials said.

The unidentified company fraudulently inflated its invoices by about $20 million. The total invoices submitted were worth about $45 million, officials said.

For their help in the scam, the contracting officers received millions of dollars in kickbacks, officials said. They also received flat screen televisions, luxury cars for themselves and relatives, high-end watches and liquor. Babb garnered about $700,000 for his role in the conspiracy, the officials said.

EyakTek came under intense scrutiny last year after the Washington Post published an investigation into the company’s contracting practices, which appear to be unrelated to Tuesday’s arrests.

This item has been updated since it was first published.

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