4 arrested in alleged bribery case

WASHINGTON (AP) — Two employees of the U.S. Army Corps of Engineers and two others were arrested Tuesday in a $20 million bribery and kickback case prosecutors say helped pay for the purchase of more than a dozen properties, Rolex and Cartier watches, fancy sports cars and hotel accommodations, first-class airline tickets and a trove of other personal luxuries.

Prosecutors say the case may be one of the largest procurement fraud schemes in the nation’s history.

An indictment unsealed Tuesday includes charges of bribery, conspiracy and unlawful kickbacks. The two Army Corps employees, Kerry F. Khan, a program manager, and Michael A. Alexander, a program director, received kickbacks in exchange for directing government contracts to a subcontractor specializing in software encryption devices and other information technology, prosecutors say. The men had the authority either to order products and services through government contracts or to secure funding for projects.

Also charged are Khan’s son, Lee A. Khan, who prosecutors say controlled a consulting company with his father and also benefited from the scheme, and Harold F. Babb, the director of contracts for Eyak Technology LLC, a subsidiary of an Alaska native corporation with Virginia operations that did business with the government and was the prime contractor for a five-year, $1 billion contract administered by the Army Corps of Engineers.

The scheme, which authorities say spanned roughly four years, involved phony and inflated invoices for government contracts and millions of dollars in kickbacks that were funneled through a network of shell companies in the United States and around the world.

U.S. Attorney Ronald Machen, the top prosecutor in the District of Columbia, said at a news conference the indictment alleges “one of the most brazen federal procurement scandals in our nation’s history.”

“This scheme was staggering in scope,” he later said. “I think it surprised

all of us.”

All four defendants appeared in federal court for an arraignment a few hours after their arrest. They wore street clothes but with their feet shackled so they could only take tiny steps into the courtroom. Their attorneys entered pleas of not guilty on their behalf but said they hadn’t even had time to closely read the 42-page indictment.

Prosecutors say Khan and Alexander received the kickbacks in exchange for causing the government to award contracts to a Virginia-based subcontractor identified in the indictment only as Company A and as a subcontractor for EyakTek. The company’s chief technology officer, who was also not named in the indictment but is described as a co-conspirator, submitted fraudulent and inflated invoices to the Army Corps of Engineers, either directly or through EyakTek, and the work was certified as completed.

The money, approximately $20 million in inflated expenses, was then funneled back to the four defendants, prosecutors said.

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