Bloomberg News

Second Army Corps Official Pleads in Bribe Conspiracy

May 17, 2012

A former U.S. Army Corps of Engineers contracting official, Kerry Khan, pleaded guilty to his role as ringleader in what prosecutors called the largest bribery scheme ever uncovered in federal contracting.

Khan, formerly of Alexandria, Virginia, admitted today to U.S. District Judge Emmet G. Sullivan in Washington that he took bribes and conspired to launder money in connection with the $20 million kickback and false-billing scheme tied to federal technology contracts. His son, Lee Khan, pleaded guilty to the same money-laundering charge.

“I wish to enter a plea of guilty because I am guilty, sir,” Khan told the court after Assistant U.S. Attorney Michael Atkinson outlined a plan of fictitious and inflated contracts and bribery that garnered Khan almost $12 million.

He admitted he was owed another $14 million from contractors at the time of his arrest. In addition, Khan received gifts including BMW cars, Rolex watches and flat screen television sets for setting up the corrupt contracts, Atkinson said. The inflated or fictitious amounts were referred to as “overhead,” Atkinson said.

Khan was ordered to forfeit about $11 million including $1.4 million in cash and 13 properties in Virginia, Florida and West Virginia bought with proceeds of the crime.

Ringleader’s Responsibility

“Today the ringleader of the largest bribery and bid- steering scheme in the history of federal contracting accepted responsibility for his crimes,” U.S. Attorney Ronald Machen in Washington said in a statement. “For his shocking abuse of his position of power, Kerry Khan faces more than two decades in prison.”

Six others, including another former Army Corps official, had already pleaded guilty.

The maximum sentence for the bribery count is 15 years in prison and the maximum sentence for the count of conspiracy to commit money laundering is 20 years. Sullivan set sentencing for Aug. 15.

In February, former Army Corps contracting official Michael A. Alexander admitted to taking bribes and conspiring with Kerry Khan to launder money.

Alexander said he and Kerry Khan funneled more than $45 million through a contract he managed.

The scheme took advantage of a five-year contract with the Army Corps under the so-called TIGER program, according to an indictment unsealed on Oct. 4.

Homeland Security

Government agencies, including Homeland Security, NASA and the Coast Guard, use the TIGER contract to acquire information- technology services and physical and infrastructure security.

The 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.

Prosecutors said those involved in the scheme were planning to expand the bribery operation under a contract called CORES.

The award potential for contracts placed under CORES was almost $1 billion, they said.

The case is U.S. v. Khan, 1:11-cr-00276, U.S. District Court, District of Columbia (Washington).

To contact the reporter on this story: Sara Forden in Washington at sforden@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net.


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