U.S. Army Corps Bribe Suspect Agrees to Plead Guilty in Kickback Scheme

The former director of contracts for Eyak Technology LLC, Harold Babb, will plead guilty to bribery as part of a $20 million false billing scheme targeting the U.S. Army Corps of Engineers, prosecutors said.

The U.S. attorney’s office in Washington, in a federal court filing today, said Babb will admit to one charge of bribery and one charge of unlawful kickbacks. Prosecutors asked U.S. District Judge Emmet Sullivan to schedule a plea hearing for March 13, according to the filing.

“We have reached a tentative agreement,” Babb’s lawyer, Jeffrey Jacobovitz, said in an interview. “We are still working out the details.

Babb was one of four people charged in a case that prosecutors called one of the “most brazen” frauds in federal contracting history. In January, a U.S. Army Corps contracting official, Michael A. Alexander, admitted to taking bribes and conspiring to launder money.

Alexander said he and a colleague, Kerry Khan, funneled more than $45 million through a contract he managed, which resulted in $20 million of kickbacks generated by overbilling. Khan’s son was also charged.

‘Domino Effect’

Jacobovitz said that generally when one co-defendant pleads guilty “it creates a domino effect.”

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 company qualifies for preferential treatment through a program that reserves some contracts for small companies owned by disadvantaged minorities.

Eyak Technology LLC’s so-called Indefinite Delivery, Indefinite Quantity, or IDIQ, contract with the Army Corps allowed Babb to steer work to a subcontractor who would inflate invoices, prosecutors alleged.

Many agencies have used IDIQ contracts as a way to speed up the process by awarding the contract to one business that essentially acts as a “management agent” and doles out orders for products and services for the government, said Bunny Greenhouse, a former civilian head of contracting for the Army Corps.

Bill Miller, a spokesman for U.S. Attorney Ronald Machen, didn’t immediately respond to a telephone message seeking comment on the filing. Melissa Zelinger, a spokeswoman for Eyak, didn’t immediately respond to a telephone message and an e-mail seeking comment on the proposed guilty plea.

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: Tom Schoenberg in Washington at tschoenberg@bloomberg.net.

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

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