WASHINGTON (AP) — Two Army Corps of Engineers employees and two other men charged in a $20 million bribery, money laundering and kickback scheme will remain in jail, a federal magistrate ruled Thursday, as prosecutors argued the defendants posed flight risks because they could face decades-long prison sentences.
The four men were arrested Tuesday in what federal prosecutors call one of the largest federal contracting scams in the nation's history. The indictment, unsealed Tuesday, has prompted calls for investigation from several members of Congress who want to know why the alleged scam went undetected and whether better controls are needed.
The defendants are accused in a plot to steer government contracts to an information technology subcontractor in exchange for kickbacks that paid for real estate, sports cars, fancy watches and clothing and first-class airline tickets. The four appeared in U.S. District Court Thursday in orange prison jumpsuits, but did not address the judge.
Kerry F. Khan, an Army Corps of Engineers program manager with authority to certify work orders and order products and services through agency contracts, waived his right to a detention hearing and agreed to remain locked up. U.S. Magistrate Judge Deborah Robinson ordered detained Khan's son, Lee A. Khan, and another Army Corps employee, Michael A. Alexander. A fourth defendant, Harold F. Babb, was remaining in jail pending additional arguments on Tuesday.
Prosecutors say the case against the four men is overwhelming and argued that they had the assets and incentives to flee. Alexander had traveled abroad at least 23 times in the last decade, including 19 trips to South Korea, where prosecutors say he had a mistress. Federal agents searching his home on Tuesday found $180,000 in cash, said prosecutor Michael Atkinson. Since the investigation is continuing and involves other "corrupt government contractors," Atkinson said, there are government witnesses with incentive to help Alexander flee.
Alexander's lawyer, Christopher Davis, argued that his client's wife was ill with cancer and that the government had plenty of ways to ensure Alexander's future court appearances and to insulate him from government witnesses.
"She needs him, and I don't think the United States needs him in the D.C. jail as much as she needs him right now," Davis said.
Lee Khan, prosecutors say, poses a risk to the community because he was recorded threatening to kill his brother — who was imprisoned in a felony drug trafficking case — after his brother threatened to snitch on his family if he didn't get a portion of the profits. He was ultimately paid nearly $400,000.
"If Mr. Lee Khan is a threat to a family member, his own brother, it's reasonable for the court to conclude that he would be a similar threat to other government witnesses," Atkinson said.
Khan's lawyer, Edward Sussman, called the threat a "quick reaction to a volatile situation" and said there was no indication any step was taken to carry out the treat.
Prosecutors say Babb, who had been director of contractors for Eyak Technology LLC, tried to conceal the scheme by transferring $2 million of the proceeds to the Bahamas and $218,000 to Panama. He also had $10,000 in his home, prosecutors say.
Eyak Technology is a subsidiary of an Alaska Native Corporation with Virginia operations. It was the prime contractor for a five-year, $1 billion contract administered by the Army Corps of Engineers. The indictment says the chief technology officer of a subcontractor on that contract — identified in the indictment only as Company A — submitted phony and inflated quotes for its services to EyakTek, which passed on the invoices to the government. The extra $20 million was funneled back to the four defendants.
EyakTek says it has cooperated with the investigation.