Alaska contracting scandal sparks call for House probe

Reuters News
Posted: Oct 05, 2011 11:39 PM
Alaska contracting scandal sparks call for House probe

By Yereth Rosen

ANCHORAGE, Alaska (Reuters) - A key lawmaker urged Congress on Wednesday to probe whether a program aimed at awarding no-bid federal contracts to Native-owned corporations in Alaska was especially vulnerable to fraud and abuse.

U.S. Congressman Ed Markey, ranking Democrat on the House Natural Resources Committee, called for the inquiry a day after a Native-owned company executive and three others were charged in an elaborate bribery-kickback scheme that steered a $780 million contract to a favored recipient.

The U.S. attorney for the District of Columbia, where the four men were arrested, called it "one of the most brazen corruption schemes in the history of federal contracting."

The case "raises questions about whether there are adequate controls in place to prevent fraud and abuse ... and protect U.S. taxpayers and Alaska Native shareholders," Markey wrote in a letter to committee Chairman Doc Hastings seeking a hearing.

The defendants, two of them U.S. Army Corps of Engineers managers, were accused in an indictment unsealed on Tuesday of falsifying invoices at Eyak Technology LLC to obtain $20 million in cash, luxury cars, watches, airline tickets and other illegal benefits for themselves.

EyakTek, which had a $1 billion-plus Army Corps contract, is a unit of the Eyak Corp., an Alaska Native corporation owned by the indigenous people of eastern Prince William Sound.

The company has actively participated in the federal Small Business Administration program that allows noncompetitive government contracts to be awarded to minority-owned firms.

Alaska Native corporations have been big players in the program, typically forging joint ventures with non-Native corporate partners outside of Alaska.

But there is controversy about the large sums of federal dollars spent on the contracts and involvement of non-Native partners. Critics say the program is fraught with waste and abuse and provides few benefits to individual Alaska Natives, many living in impoverished rural villages.

Supporters say the program provides Native corporations with opportunities for economic stability and diversification.

EyakTek's contracting director, Harold Babb, one of the four men arrested, has been fired, and the company was cooperating with federal prosecutors, the firm said.

The Alaska Native corporations were created under the 1971 Alaska Native Land Claims Settlement Act. The corporations are intended to provide economic benefit to Alaska's indigenous people as compensation for the loss of traditional lands.

(Editing by Steve Gorman and Cynthia Johnston)