Executive pleads guilty in contracting fraud case

Friday, March 9, 2012, Vol. 36, No. 10

WASHINGTON (AP) — A former executive on Tuesday admitted his role in a $28 million bribery scheme involving the awarding of government contracts and is cooperating with prosecutors in their investigation.

Harold F. Babb, 60, pleaded guilty in federal court in Washington to bribery and unlawful kickbacks. Babb was arrested in October along with three other men, including two employees of the U.S. Army Corps of Engineers. Prosecutors said their investigation has unmasked one of the largest and most brazen government procurement frauds in history.

"It took me a while to come to terms (with), but I am guilty," Babb, who has been in custody since his arrest, told a federal judge before entering his plea.

The fraud involved contracts steered to favored subcontractors for kickbacks, contracts awarded through bribery and the submission of phony and inflated invoices for payment, prosecutors said. The illicit proceeds of the scheme were split among multiple defendants and used to purchase clothing, real estate, cars, fine jewelry and other luxuries, authorities said.

Babb admitted to soliciting and accepting more than $1 million in kickbacks from Alex N. Cho, the chief technology officer for Nova Datacom, in exchange for giving the subcontractor preferential treatment. The gifts included cash and checks, airline tickets and the promise of a future job for Babb at the company, prosecutors said. Babb also admitted to paying, offering and promising more than $7 million in bribes in return for approval on Army Corps of Engineers contracts and subcontracts, authorities said.

A bribery conviction carries a possible sentence of up to 15 years in prison. The unlawful kickbacks charge can carry up to 10 years, though Babb is likely to get a reduced sentence because of his guilty plea and cooperation.

"Mr. Babb decided to accept responsibility and cooperate with the government and move on his with his life," his lawyer, Jeffrey Jacobovitz, said after the plea hearing.

At the time of his arrest, Babb was director of contracts for Eyak Technology. It is the subsidiary of an Alaska Native Corporation with operations in Virginia and the prime contractor for a lucrative contract with the Army Corps of Engineers. EyakTek, in turn, had multiple subcontractors, including Nova Datacom and Big Surf Construction Management.

Babb was arrested along with two former Army Corps of Engineers employees, Kerry F. Khan and Michael A. Alexander, and Khan's son, Lee Khan. Alexander pleaded guilty last month to bribery and conspiracy. Khan and his son are awaiting trial. Prosecutors initially described the scheme as totaling $20 million, but they say the scope of the fraud has increased to $28 million as new bribes and kickback payments have been discovered.

Since the initial arrests, prosecutors also have revealed charges against a handful of other men associated with subcontractors, including Cho, who pleaded guilty last September to money laundering, conspiracy and other charges. Prosecutors on Tuesday announced charges against an additional defendant associated with a subcontractor.