Army Corps Bribe Case Includes Alleged Threat to Kill Witness
October 07, 2011, 12:24 AM EDTBy Tom Schoenberg
Oct. 7 (Bloomberg) -- Prosecutors probing an alleged $20 million bribery scheme involving two U.S. Army Corps of Engineers officials said they have evidence of threats to kill a possible witness and $1 million sent to South Korea to support a mistress’s coffee shop.
Assistant U.S. Attorney Michael Atkinson made the allegations yesterday in federal court in Washington while arguing that two of the defendants in the case should stay in jail pending trial. U.S. Magistrate Judge Deborah Robinson ruled that Michael A. Alexander, an Army Corps contracting official, and Lee Khan, the son of another official, should be held.
Alexander “has the resources and the motive to get out of this country and never come back,” said Atkinson, noting that he had a mistress in South Korea who might be inclined to help him flee. Robinson ruled that the detention of Lee Khan, who prosecutors said threatened on a wiretap to kill his brother if he cooperated with law enforcement, was to “ensure the safety of the community.”
Two other defendants, Kerry F. Khan, Lee’s father, and Harold Babb, will remain in jail after asking for a delay in decisions on their detention, Robinson said. Babb is the director of contracts for Eyak Technology LLC in Dulles, Virginia.
Indictment Charges
An indictment unsealed Oct. 4 accuses Alexander, 53, of Woodbridge, Virginia, and Kerry Khan, 55, Alexandria, Virginia, of funneling more than $45 million through a contract they were in charge of to a company that kicked back $20 million generated by overbilling. The four pleaded not guilty.
The scheme took advantage of a five-year contract with the Army Corps under the TIGER program, the indictment alleged. Government agencies, including Homeland Security, NASA and the Coast Guard, use the TIGER contract to acquire information- technology services and physical and infrastructure security.
Eyak Technology is a unit of Anchorage, Alaska-based Eyak Corp., which has received more than $1.9 billion in government contracts since the fiscal year that began October 2001, according to data compiled by Bloomberg Government.
The alleged scheme was made possible by Kerry Khan’s position as a program director in the Army Corps’s directorate of operations, which administers the TIGER contract, prosecutors said. He had authority to place orders through TIGER that don’t require competitive bidding, according to the indictment.
EyakTek was the prime contractor, subcontracting many orders from the Army Corps.
‘Company A’
Khan, Alexander and Babb allegedly directed the orders to a Virginia-based company identified in the indictment as “Company A,” whose chief technology officer, an unindicted co- conspirator, submitted the fraudulently inflated invoices.
At the same time, the defendants conspired to steer as much as $780 million in future contracts for CORES, a planned replacement for TIGER, to “Company A,” prosecutors said.
All four defendants were charged with one count of conspiracy to commit bribery and wire fraud, as well as one count of conspiracy to commit money laundering.
Kerry Khan and Alexander also were accused of one count of receipt of a bribe by a public official, and Babb was indicted on one count of unlawful kickbacks. If convicted, Kerry Khan and Alexander face as many as 40 years in prison. Babb faces as long as 35 years, and Lee Khan faces a sentence of up to 25 years, according to prosecutors.
Wiretap Recordings
Prosecutors said yesterday that the evidence includes video and wiretap recordings, e-mail messages and bank records. One video described in court involves Alexander accepting a bribe in the parking lot adjacent to the FBI’s Washington Field Office.
Atkinson said Lee Khan paid $383,000 to his brother, who was in prison, to dissuade him from informing authorities of the bribe scheme. Atkinson described an Aug. 29 wiretapped call in which Lee Khan told his father he would “kill” his brother if he cooperated.
“It is reasonable for the court to conclude that he would be a threat to other witnesses,” Atkinson said.
Lee Kahn has three drug-related convictions and was on court-ordered supervision during the course of the alleged bribery scheme, Atkinson said.
Alexander’s lawyer, Christopher Davis, argued that his client should remain free to take care of his wife who is undergoing chemotherapy for Leukemia.
Atkinson then brought up the alleged South Korean mistress and Alexander’s financial backing of her.
“This female would have some motive to reciprocate that kindness,” Atkinson said.
The case is U.S. v. Khan, 1:11-cr-00276, U.S. District Court, District of Columbia (Washington).
--Editors: Peter Blumberg, Fred Strasser
To contact the reporter on this story: Tom Schoenberg in Washington at tschoenberg@bloomberg.net.
To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net.
