The plan was straightforward but effective: A tight team of savvy contractors and government employees allegedly inflated invoices by $20 million, approved them and split the proceeds.
And they lived large — on the taxpayers’ dollar. Porsches, real estate, flat-screen televisions and Cartier watches: The men bought it all with impunity, prosecutors say.
Millions of dollars in kickbacks were allegedly paid to federal contractors and U.S. Army Corps of Engineers contracting officers.
The Crime Scene
When it became clear that the contract was running out, a second scheme was hatched, authorities say, but it all ended with the early October arrests of four men, including two government employees, on bribery and money-laundering charges.
Recently unsealed court records, a lengthy indictment and interviews with key players provide a rare window into an audacious four-year swindle that prosecutors have called “one of the most brazen” in federal contracting history. The crime went undetected by regulators until federal authorities came across it while investigating an unrelated fraud.
Those charged in the case — Harold F. Babb, 60, a contractor; Kerry F. Khan, 53, and Michael A. Alexander, 55, Army Corps of Engineers program managers; and Khan’s 30-year-old son, Lee — were arrested Oct. 4. They are in jail pending trial at the request of prosecutors who consider them flight risks. All four have pleaded not guilty.
Attorneys for the Khans and Alexander declined to comment. Babb’s attorney, Jeffrey Jacobovitz, said his client denies the allegations.
On Dec. 19, it became public that another key figure — a subcontractor who would become a key FBI informant, even recording meetings and payoffs, according to court papers — had pleaded guilty in the scam. That man, Young N. Cho, 40, of Great Falls, has been detained since early November.
According to court records, Cho, the chief technology officer of a Chantilly-based information technology company, Nova Datacom, and Kerry Khan met in July 2007 and soon launched their first scam. Khan awarded Nova Datacom a contract, and Cho paid the program manager a “portion of the profit” made by his company on that order, prosecutors say.
Within a few months, Khan directed Cho to another Army Corps contract, one worth $1 billion. Called the Technology for Infrastructure, Geospatial and Environmental Requirements, or TIGER, the contract was designed for speed and convenience. It allowed the Army Corps and other government agencies to buy computers, software and information technology services without competitive bidding.
Khan then introduced Cho to Alexander, a Army Corps co-worker, and Babb, the contracting director at EyakTek, a firm with offices in Dulles and Anchorage. Classified as an Alaska native-owned company, or ANC, EyakTek could take advantage of its special status under federal law to obtain contracts of unlimited size without competition.
EyakTek also happened to be the prime contractor on TIGER, and Babb quickly ensured that it began using Nova Datacom as a subcontractor, according to authorities.
EyakTek representatives have declined interview requests. In a statement, President Rod Worl said the company was cooperating with authorities. Babb’s “alleged conduct in no way reflects the operations or corporate culture of The Eyak Corporation or any of our subsidiary companies,” Worl said.
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