Arrests at EyakTek

By Libby Casey

An executive of Alaska Native Corporation EyakTek was arrested yesterday for his alleged role in a major $20-million bribery and kickback scheme.  Harold Babb was director of contracts for Eyak Tek, or Eyak Technology L-L-C, which operates under the Alaska Native Corporation umbrella.

The top prosecutor for Washington D-C, U-S Attorney Ronald Machen called the case “one of the most brazen federal procurement scandals in our nation’s history.”  Harold Babb is accused of conspiring with three other men, two of whom worked for the U-S Army Corps of Engineers.

Prosecutors say Army Corps employees Kerry Khan and Michael Alexander used a federal contract to funnel more than $45-million in payments to a company prosecutors did not name and only called “Company A” in the indictment.  The Corps employees were allegedly aiming bigger and planning to steer a huge contract worth more than 700 million dollars to the business.

They’re accused of padding invoices by $20-million, which went to them, Kahn’s son Lee and the EyakTek employee Harold Babb.  Prosecutors say “Company A” submitted fraudulent and inflated invoices to EyakTek, and the work was certified as completed.

The four allegedly used the illegal money to buy more than a dozen properties, sports cars, airline tickets and luxury items like expensive watches.

U-S Attorney Ronald Machen  called the scheme staggering in scope and said, “I think this surprised us all.”

Tuesday’s arrests came after a major investigation by the F-B-I, the I-R-S, and others including the Inspector General’s office of the Small Business Administration, which administers Alaska Native Corporation contracts.  The S-B-A’s Inspector General Peggy Gustafson commented on the case.

The arrest today and effective dismantlement of the group responsible for perpetuating this fraud against the American tax payer is a direct result of the perseverance, hard work, and dedication of our OIG criminal investigators and their partners to rooting out fraud, waste and abuse.

The four men pleaded not guilty in federal court  Tuesday afternoon.

They wore street clothes but had their feet shackled.  U-S Magistrate Deborah Robinson will hold a hearing tomorrow to decide if they should be detained pending trial… prosecutors argued they’re a flight risk and say the Khans threatened a potential government witness.  If convicted the four face sentences up to 25 to 40 years in jail.

Officials say the case is in the jurisdiction of D-C because the Army Corps of Engineers is based there.

EyakTek is a subsidiary of the Eyak Corporation, which fired Harold Babb yesterday when it got news of his arrest.  Eyak Corporation C-E-O and President of EyakTek Rod Worl released a statement saying they’re cooperating with the feds but he would not comment on the substance of the charges.

The case may put extra scrutiny on Alaska Native Corporations, which have faced criticism for the advantages they get in scoring government contracts through the Small Business Administration’s 8-A program.  One of the loudest critics, Senator Claire McCaskill of Missouri, released a written statement “congratulating” government auditors on the arrests.  She said the criminal charges are testimony to the problems with the large no bid contracts Alaska Native Corporations get.

The pro-Native Corporation group Native 8-A Works put out its own statement condemning illegal activity and cautioning against linking the charges in this case to the broader category of Native owned companies.


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