Four accused in major government kickback scheme

Reuters News
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Posted: Oct 04, 2011 5:23 PM
Four accused in major government kickback scheme

WASHINGTON (Reuters) - Four men, including two U.S. Army Corps of Engineers employees, were arrested on Tuesday on charges they carried out an elaborate kickback scheme to line their pockets and plotted to steer a $780 million government contract to their favored bidder.

The government employees, Kerry Khan and Michael Alexander, were arrested along with Khan's son Lee, who ran a consulting business, and Harold Babb, the director of contracts at EyakTek, which had a $1 billion-plus Corps contract.

"This indictment alleges one of the most brazen corruption schemes in the history of federal contracting," Ronald Machen, U.S. Attorney for the District of Columbia, said in a statement.

The elder Khan, Alexander and Babb are charged with directing inflated quotes and invoices to EyakTek and an unnamed subcontractor, to the tune of $20 million, most of which was later paid to them, according to the indictment.

Khan was accused of using the money to buy luxury cars, high-end liquor and undertake home improvements. In one instance, he and his son funneled $383,000 to a family member who threatened to blow the whistle on their scheme, the prosecutors said.

Alexander was accused of receiving a $21,000 Cartier watch and first-class airline tickets, among other valuable items. The younger Khan ran a consulting business with his father and took part in the scheme, according to prosecutors.

They all pleaded not guilty to the charges and were held pending a detention hearing slated for Thursday.

The group was also accused of conspiring to steer another government contract worth up to $780 million to the other unnamed company, including trying to tailor the contract details to favor that company and conspiring to place employees who would award the deal to the company.

The four men were all charged with conspiracy to commit bribery and wire fraud, and aiding, abetting and causing an illegal act. Kerry Khan and Alexander were also indicted for receiving a bribe as public officials.

(Reporting by Jeremy Pelofsky in Washington, editing by Todd Eastham)