Father and son plead guilty in multimillion-dollar federal bribery scheme

May 18, 2012

A former program manager for the Army Corps of Engineers and his son pleaded guilty Thursday to federal charges in a scheme that paid out more than $30 million worth of bribes and kickbacks as payments for steering multimillion dollar government contracts, federal prosecutors said.

Kerry F. Khan, 54, of Alexandria, pleaded before Judge Emmet G. Sullivan in the U.S. District Court in the District to charges of bribery and conspiracy to commit money laundering, officials said in a statement.

“Today, the ringleader of the largest bribery and bid-steering scheme in the history of federal contracting accepted responsibility for his crimes,” U.S. Attorney for the District Ronald Machen said in the statement. “For his shocking abuse of his position of power, Kerry Khan faces more than two decades in prison.”

Kahn’s son, Lee A. Kahn, 31, of Fairfax also pleaded guilty to a charge of conspiracy to commit money laundering. The elder Khan worked for the Army Corps of Engineers from 1994 until he was arrested by federal authorities in October 2011. His position gave him authority to place orders for products and services through federal contracts, and he also certified that work orders were completed, officials said.

The father and son were among four men arrested in October on charges of conspiring to commit bribery and wire fraud. Authorities accused the men of inflating invoices during a four-year period and then collecting tens of millions of dollars for themselves and co-conspirators.

Prosecutors said Kerry Khan signed a statement of offense that said that in or around 2006, he and colleagues agreed to work together to obtain government contracts for corrupt contractors who would reward them with bribes. Authorities said their investigation continues, but they have found eight people to have have been part of this scheme.

Among others, Kerry Khan and Michael A. Alexander, also an Army Corps of Engineers program manager, worked with Harold F. Babb, a contractor, on their plot to use a company called EyakTek as a vehicle for channeling contracts awarded by the Army Corps of Engineers. EyakTek then hired subcontractors that submitted fraudulently inflated estimates or prices for equipment and services, authorities said.

The subcontractors kicked back a significant portion of the excess funds to Kerry Khan and Alexander as bribes for keeping the money flowing their way, officials said.

Prosecutors said Khan and his son admitted to establishing multiple corporations and shell companies to hide the money and purchase real estate, including several houses and condos. Lee Khan managed the portfolio of properties and automobiles purchased using the bribe money, by leasing the homes to tenants or selling vehicles, officials said.

A sentencing date has not been set for either man. Kerry Khan faces a maximum 15-year sentence for the bribery charge and up to 20 years in prison for the conspiracy charge. Babb and Alexander pleaded guilty to federal charges earlier this year.

The men will remain held through the sentencing, officials said.

Clarence Williams is the night police reporter for The Washington Post and has spent the better part of 13 years standing next to crime scene tape, riding in police cars or waking officials in the middle of night to gather information about breaking news in and around Washington.
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