Four men from the American state of Virginia, including two long time employees of the United States Army Corps of Engineers, were arrested on charges stemming from an indictment that accuses them of taking part in a conspiracy involving more than $20 million in bribes and kickback
payments and the planned steering of a $780 million government contract to a favoured contractor.
The defendants include Kerry Khan, his son, Lee Khan, Michael Alexander and Harold Babb.
Both Kerry Khan and Michael Alexander were employed by the US Army Corps of Engineers – a federal agency and army command.
Harold Babb was a director of contracts for a company that did business with the US government.
All four men were taken into custody on charges contained in an indictment in the US District Court for the District of Columbia.
According to the indictment, Mr Khan and Mr Alexander helped funnel more than US $45 million in payments to a favoured company through a federal government contract they oversaw, with plans to steer hundreds of millions more to the business.
Approximately US$20 million in fraudulent expenses were built into the invoices, and proceeds went to all four defendants
The indictment details the four men’s schemes to defraud two major federal contracts.
The Technology for Instrastructure, Geospatial, and Environmental Requirements (TIGER) contract is what is known as an Indefinite Delivery/Indefinite Quantity contract.
Authorised agencies and departments are not required to obtain three separate bids or to compare the TIGER contract to another contract before submitting an invoice for products and services through the TIGER contract.
The current TIGER contract is a five-year contract running from October, 2009 through 30 September, 2014.
Over the term, the total award of orders placed against the TIGER contract is authorised to exceed US$1 billion.
The Contingency Operations Readiness Engineering and Support (CORES) contract is a planned contract that is envisioned as an alternative or potential replacement to the TIGER contract.
As planned, the CORES contract would be a five-year contract with an award potential for all contracts placed under it of up to US$780 million.
According to the indictment, Mr Kerry Khan and Mr Alexander used their official positions at the US Army Corps of Engineers and Mr Babb used his official position at EyakTek, to direct orders through the TIGER contract to a Virginia-based company identified in the indictment as “Company A.”
With Mr Kerry Khan’s knowledge and direction, that company’s chief technology officer, an unidentified co-conspirator, submitted fraudulently inflated quotes for work.
Mr Kerry Khan then caused the U.S. Army Corps of Engineers to approve and remit payment to EyakTek for these fraudulently inflated invoices. After subtracting its profit margin, EyakTek paid the remainder to “Company A.”
The chief technology officer then caused “Company A” to pay part of this money for the benefit of Mr Kerry Khan, his son, Mr Alexander and Mr Babb.
In addition, Mr Kerry Khan and Mr Alexander caused the Army Corps of Engineers to award contracts directly to “Company A.”
Once again, the chief technology officer submitted fraudulent paperwork for inflated costs.
Mr Kerry Khan then caused the US Army Corps of Engineers to pay “Company A,” and the chief technology officer in turn caused “Company A” to pay a portion of the money for the benefit of Mr Kerry Khan, his son, and Mr Alexander.
In this manner, from 2007 to the present, the chief technology officer caused invoices to be submitted to the US Army Corps of Engineers, directly and through EyakTek, for total costs of more than $45 million.
As directed by Mr Khan, Mr Alexander and Mr Babb, the chief technology officer caused “Company A” to fraudulently inflate its quotes and invoices by about US$20 million.
The chief technology officer promised and paid the inflated amounts directly and indirectly to Mr Khan, his son, Mr Alexander and Mr Babb.
The indictment alleges that the chief technology officer of “Company A” promised and made payments directly and indirectly to Mr Kerry Khan in excess of US$18 million.
Among other things, Mr Khan received cash, checks and wire transfers in excess of US$5 million; home improvements and renovations for multiple properties; luxury cars for himself, his son and other family members; furnishings, including flat-screen televisions and computer equipment, high-end liquor, and other items.
Some of this money also went to Mr Lee Khan and a second family member for employment with “Company A.”
The promised payments for Mr Kerry Khan included, among others, future payments of US$2 million each to three shell companies controlled by him.
The payments to Mr Kerry Khan came in large amounts, including a Mr $1.2 million wire transfer from “Company A” to a Mr Khan-controlled entity in August 2008 and a check for US$3.3 million from “Company A” to a Mr Khan-controlled entity in February 2010. According to the indictment, Mr Kerry
Khan and his son together channelled US$383000 in September, 2011 to another family member who had threatened to alert law enforcement authorities to the existence of the scheme.
The indictment alleges that the chief technology officer of “Company A” promised and made payments directly and indirectly to Alexander in excess of US$1 million. Among other things, Mr Alexander received more than US$185000 in cash and checks, a US$21000 Cartier watch, first-class airline tickets, and other items. The promises called for Mr Alexander to secure future employment at “Company A.”
In addition, the chief technology officer of “Company A” provided about US$1 million for the purchase of a coffee shop for an associate of Mr Alexander’s in South Korea.
According to the indictment, the chief technology officer of “Company A” promised and made payments directly and indirectly to Mr Babb in excess of US$700,000. Among other things, he received cash and checks, first-class airline tickets and promised future employment at the firm.
As for the CORES contract, the indictment alleges that Mr Kerry Khan, Mr Alexander and Mr Babb worked with the chief technology officer and others at “Company A” to devise a scheme to steer the award of the CORES contract to “Company A.”
The intent was to use this contract as a way for “Company A” to funnel money and other things of value directly and indirectly to Mr Khan, Mr Alexander, Mr Babb and others.
Mr Kerry Khan, Mr Babb, the chief technology officer, and others at “Company A” worked on a statement of objectives and work for the CORES contract with the intent of tailoring it to fit “Company A” and interfere with the fairness of the bidding process.
Mr Kerry Khan, Mr Alexander and Mr Babb also planned to install certain employees from the US Army Corps of Engineers to serve on the selection board to insure that “Company A” was awarded the valuable CORES contract.
All four defendants were indicted on one count of conspiracy to commit bribery and wire fraud and aiding and abetting and causing an illegal act to be done, as well as one count of conspiracy to commit money laundering.
Mr Kerry Khan and Mr Alexander also were indicted on one count of receipt of a bribe by a public official, and Mr Babb was indicted on one count of unlawful kickbacks.
If convicted of the charges, Mr Khan and Mr Alexander face a maximum of 40 years in prison. Mr Babb faces up to 35 years and Mr Lee Khan faces a sentence of up to 25 years.
The United States has obtained warrants to seize funds in 29 bank accounts and to seize three luxury vehicles and seven high-end watches.
In addition, the indictment includes a forfeiture allegation against 16 real properties financed in whole or in part with proceeds of the crimes.
The US has begun the process of securing forfeiture of those 16 properties, which include 14 properties in Virginia, one in West Virginia, and one in Florida.
The indictment also provides the defendants notice that, if convicted, the United States will seek forfeiture of all proceeds of the charged offenses.
US Attorney Machen said the indictment alleges one of the” most brazen corruption schemes” in the history of federal contracting.
The indictment also provides the defendants notice that, if convicted, the United States will seek forfeiture of all proceeds of the charged offenses.
US Attorney Machen said the indictment alleges one of the” most brazen corruption schemes” in the history of federal contracting.
This case was investigated by the FBI’s Washington Field Office; the Office of the Inspector General for the Small Business Administration; the
Department of Defence’s Defence Criminal Investigative Service; the Defence Contract Audit Agency; the Washington Field Office of the Internal Revenue Service-Criminal Investigation, and the Army Criminal Investigation Command.
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