Three of the four men accused of participating in what federal prosecutors have called one of the most brazen contracting scams in U.S. government history will be held without bond ahead of a trial.
The fourth man’s status will be decided at a hearing next week.
The men — two program managers with the Army Corps of Engineers, a son of one of them and the contracting director of a Dulles-based firm — were arrested Tuesday and accused of stealing about $20 million in a long-running kickback scandal.
The two Corps employees, Kerry Khan, 53, of Alexandria, Michael A. Alexander, 55, of Woodbridge, Khan’s 30-year-old son Lee and Harold F. Babb, 60, the contracting director, are charged with conspiring to commit bribery, money laundering and wire fraud. All four pleaded not guilty.
In a Thursday morning hearing in the District’s federal court before Magistrate Judge Deborah A. Robinson, Lee Khan and Alexander were ordered held without bond. Kerry Khan had previously consented to detention.
Babb will be held ahead of a hearing, scheduled for Tuesday, because his attorney Jeffrey Jacobovitz requesting more time to prepare.
Prosecutors said in court papers and during a brief hearing on Tuesday that the men should be detained because they might flee in the face of “overwhelming” evidence that includes secretly recorded conversations and a trove of incriminating e-mails.
The men also face stiff prison terms if convicted and have access to lots of cash. In searches on Tuesday of their homes, authorities found nearly $200,000, court papers show. The men also have international connections, prosecutors have said, which might make fleeing easier.
In court papers and at a the Tuesday hearing, prosecutors said that Khan and his son are “dangerous” and might seek to harm a witness in the case — one of Khan’s other children who is being held in jail on an unrelated drug charge.
In court papers, prosecutors wrote that one of Khan’s other sons blackmailed his father — threatening to tell authorities about the scam unless he received money. Despite the Khans giving him about $400,000, Lee Khan was still nervous his brother might cooperate with authorities.
“If anything like that happens,” Lee Khan told his father, ”you are losing a son because I will kill that (expletive) myself. That’s all there is to it. ... If I have to find somebody locked up to (expletive) to shank him, he’s going down.”
Prosecutors say the scam lasted for four years, ending with the arrests. Starting in 2007, prosecutors said, the men worked out a sophisticated scam that took advantage of lax oversight of certain contracts at the Army Corps. Babb worked for EyakTek, a company with offices in Dulles and Anchorage that could take advantage of its status as an Alaskan native-owned corporation to obtain contracts of unlimited size without competition.
Babb, Khan and Alexander then ensured that a sub-contractor, identified in court papers only as “Company A,” got work to perform information technology services. A key player in the scam, identified in court papers as Company A’s chief technology officer, or “Co-Conspirator 1,” then submitted inflated invoices either to EyakTek, which passed them along to the government, or directly to the Army Corps, prosecutors wrote in court papers.
In this way, the four men inflated $25 million in invoices by about $20 million over a four year period, according to authorities. At the time of their arrests, they had their sights set on another federal contract worth about $780 million, prosecutors said.
It is clear from court papers that “Co-Conspirator 1” played a key role in helping crack the alleged scam by providing information to federal agents and wearing recording devices.
Sources familiar with the case have identified “co-conspirator 1” as Alex Cho, chief technology officer and founder of Nova Datacom, which is “Company A.” Cho has been charged in the scandal but his case remains under seal, according to sources.
Cho has not returned phone messages seeking comment. The man identified by sources as his lawyer, Steve McCool, refused to comment on any aspect of the case when approached on Wednesday by a reporter.
This item has been updated.