Seven plead guilty in Navy contracting fraud


Seven plead guilty in Navy contracting fraud

By Greg Moran, Jeanette Steel
March 29, 2012

— Seven people, including four civilian employees at North Island Naval Air Station in Coronado, pleaded guilty Wednesday in federal court to participating in a bribery and fraud scheme that went on for seven years.

The U.S. Attorney’s Office said the four Navy employees netted more than $1 million in personal benefits, which came in the form of cash, store gift cards, expensive toys such as bicycles and model airplane engines and home remodeling projects that included new cabinetry.

“This was not $1 million worth of tchotchkes,” Assistant U.S. Attorney Robert Huie said. “This was liquid assets like cash, flat screen TVs and the like.”

Also pleading guilty were three defense contractors who hid the payments by submitting more than $6 million in bogus invoices to the Navy under existing contracts they had. The invoices contained a markup of 25 percent, prosecutors said.

That meant the Navy was unwittingly paying for the personal gifts to the North Island employees, plus a markup on the gifts to the defense contractors.

The Navy employees who pleaded guilty before U.S. Magistrate Judge Bernard Skomal were Donald Vangundy, 54, of Chula Vista; Kiet Luc, 53, of San Diego; David Lindsay, 57, of San Diego; and Brian Delaney, 55, of La Mesa.

All worked at the “E2/C2” aircraft program at the base’s Fleet Readiness Center.

The three defense contractors who entered pleas were Michael Graven, 43, of Carlsbad, owner of X & D Supply in Carlsbad; John Newman, 51, of Poway, a sales manager and former owner of a company in Poway that prosecutors identified only as “Company A”; and Paul Grubiss, 39, now of Wickliffe. Ohio, a former sales manager at a second Poway contractor that also was not identified.

The U.S. Attorney’s Office said the fraud led to the Navy paying Newman’s employer $3.31 million, X & D $2.26 million and Grubiss’ employer $1 million.

Authorities would not say why two of the companies were not named, though Huie said the investigation is ongoing.

All seven appeared before Skomal and answered basic questions about their guilty pleas, most in calm but subdued tones. They will remain free on $20,000 bond each until sentencing on July 2.

All pleaded guilty to conspiracy to commit wire fraud. Vangundy and Grubiss also pleaded guilty to conspiracy to commit bribery. Vangundy, Luc and Graven also pleaded guilty to filing false tax returns or aiding and assisting in filing a false return.

Lindsay and Delaney retired from their jobs, Vangundy resigned and the Navy is in the process of removing Luc, who was suspended, from federal service.

Delaney was the highest situated of the four, serving three or four levels below the center’s military commanding officer. In middle management, he was a deputy program manager and had worked there for 37 years.

Lindsay, a supervisor, worked under him and had been an employee for 38 years.

Vangundy was an engineering technician and 31-year worker. Luc worked on the aircraft floor for seven years and was the lowest-ranking member of the group.

U.S. Attorney Laura Duffy said the probe began from citizen complaints made following the high-profile indictment in 2009 of six people involved in a kickback and bribery scheme at the Space and Naval Systems Command in San Diego, known as SPAWAR.

In the wake of that scandal, the government set up a hotline for citizens to phone in tips about corruption. One call in August 2009 launched the investigation that led to the guilty pleas Wednesday, Huie said.

The tip line — (877) NO BRIBE, or (877) 662-7423 — still operates, Duffy said.

Vangundy supervised tool replacement and purchases for all Fleet Readiness Center programs, according to court documents.

According to the indictment, Lindsay got $20,000 in labor and appliances for a home remodeling project, and Delaney got $50,000 in labor and materials for his home remodel.

The investigation, dubbed “Country Store,” involved FBI, Internal Revenue Service and military investigators.

Fleet Readiness Center Southwest spokesman Michael Furlano said the Navy has put new controls in place to combat against future fraud at the center.

Any purchases have to go through an executive steering committee made up of the commanding officer, executive officer and senior management. Also, managers will get mandatory training on ethics, fiscal law, contracts and procurement fraud, Furlano said.

He said the Navy also is conducting an internal investigation of the center’s operations, which wasn’t possible during the U.S. attorney’s legal action.

Furlano called the situation unfortunate, especially as it involved such longtime employees.

“They took advantage of their positions. We have 4,200 employees at the command, and we’re talking about four that did wrong and in turn make the command look poor,” he said. “The vast majority of our people are dedicated, hard-working family people. Most of them are former military.”

The center performs maintenance on military aircraft. The workforce includes 3,200 civilians and about 1,000 uniformed service members.

Ex-DoD official sentenced in Ga. for bribery


Ex-DoD official sentenced in Ga. for bribery

By Greg Bluestein
Associated Press
March 28, 2012

ATLANTA — A Department of Defense official said Wednesday he long resisted the call of corruption while on assignment in Afghanistan before he finally relented and took a cash-stuffed backpack as a bribe. He was made to pay for his crime when a judge sentenced him to 20 months in prison as his family members wept quietly.

Desi Deandre Wade is an Army veteran who was the Defense Department’s top firefighting official in Afghanistan when he was arrested at an August conference in Atlanta moments after taking a bag crammed with $95,000 in cash. He pleaded guilty to taking the bribe to influence a contract, saying Wednesday he wanted to return home to Georgia with enough money to leave behind a three-year stint in Afghanistan.

“It was a one-time deal. I thought if I did that, I could walk away from Afghanistan,” Wade said in an emotional and occasionally rambling statement. “I had seen enough.”

Prosecutors urged the judge to make an example out of Wade for his behavior.

“He shook them down. It was money and greed that led to this,” said prosecutor Robert McBurney. “He stopped serving the country and started serving himself.”

Wade, who is 40, became the department’s Chief of Fire and Emergency Services in Afghanistan after years of working as a firefighter. He said he prevented millions of dollars in fire damage in that role, but that the job took a toll on him. While he was away, his relationship with his three children grew strained and he separated from his wife.

He also suffered from mental issues stemming from the stress of living and working in a war-torn nation. The trauma hit home when he saw a fellow firefighter die in a rocket attack, he said, and he eventually succumbed to the desire for quick cash.

“Those environments are ripe with corruption. It was as synonymous as the rocket attacks,” he said. “People were always saying, ‘Hey, can you help me?’ People have been offering bribes.”

Investigators first began to monitor him in July when they got a tip from an Afghanistan-based contractor. They say he received an initial $4,000 bribe in Afghanistan to influence a maintenance contract for a firm there, and later proposed steering a $4.5 million contract to the same company in exchange for a payoff. He told the contractor he’d feed him quotes from rivals to ensure him he would be the lowest bidder, prosecutors said.

The contractor and Wade arranged to meet at a hotel room in Atlanta during the Fire-Rescue International Conference, and after some bartering Wade agreed to take a $95,000 payment in exchange for his help, authorities said. Wade took about two steps outside the hotel room when he was swarmed by federal agents.

Wade was apologetic at the hearing and tried to make the best out of his bad situation. He said he was a “workaholic” who might never have returned to his family if he hadn’t landed in legal trouble.

“I truly apologize for hurting my family and myself,” he said. “It’s going to take a long time to recover, but I’m going to do it.”

Small Business Advocates Uneasy About Romney's Super PAC

Press Release

Small Business Advocates Uneasy About Romney's Super PAC

American Small Business League
March 27, 2012

The pro-Mitt Romney super PAC, Restore Our Future, has raised concerns among small business government contractors. Restore Our Future reportedly accepts contributions directly from large government contractors, which is in direct violation of a federal law that bans companies with federal contracts from making political expenditures.

“Large contractors should not be able to fund Mitt Romney’s campaign,” said American Small Business League (ASBL) President Lloyd Chapman. “Large companies want every single dollar the government spends, and allowing them to contribute directly to a candidate’s campaign is the same as allowing them to bribe their way into lucrative contracts.”

Government contractors have contributed a total of $890,000 toward Mitt Romney’s campaign, including $750,000 donated by Oxbow Carbon, a large company founded by billionaire William Koch. Oxbow Carbon contracts with the government to sell coal to the Tennessee Valley Authority, a federally owned corporation created by Congress.

Mr. Romney is already indebted to the large government contractors that are funding his campaign. The ASBL worries that if he is elected president, small businesses will not have a voice in Washington. Large companies already have several advantages over small companies, including lobbying power and vast financial resources. This imbalance has led to major problems for small business government contractors, including hundreds of billions of dollars in small business contracts being diverted large companies.

The federal government has a statutory goal of awarding at least 23 percent of government contract dollars to small businesses. However, since 2003 a series of federal investigations have found that, because of fraud, abuse, loopholes and lack of oversight of government contracting, large companies receive billions of dollars annually in small business contracts. The most recent data released by the Obama administration indicates that during FY 2011, Apple Inc., Chevron, General Electric, Bank of America, Lockheed Martin and many other large companies received government contracts meant for small businesses.

“These aren’t campaign contributions; they are bribes,” said Chapman. “If Mr. Romney is elected, you can bet that federal policy that allows Fortune 500 firms to win small business contracts will be extended.”

SOURCE: American Small Business League


How the New York Times Co. Became a Small Business


How the New York Times Co. Became a Small Business

By Robb Mandelbaum
NY Times
March 15, 2012

Perhaps for as long as the federal government has reported which of its contracts have been awarded to small businesses, critics have charged that many of those contracts have actually gone to large companies — often very large companies.

Recently, the American Small Business League, perhaps the loudest of those critics, tried to outline the scope of diversion. The association issued a report that studied the 100 companies that won the most federal small-business contract dollars in 2011 and found that at least 72 of them either had too many employees or too much revenue to be  eligible for government assistance to small business. (S.B.A. size standards vary by industry and sector, but generally a company must have fewer than 500 employees or less than $7 million to be considered small.)

The federal government, the world’s largest buyer of goods and service, is obliged by law to try to direct 23 percent of its purchases to small businesses, though there are no penalties for failure. The government hasn’t reached that goal in years, and while recording a deal with a bigger business as a small-business contract — whether by mistake or by fraud — does not necessarily mean that a small company has been denied an opportunity, it does exaggerate the government’s contracting achievement. In the view of Elliott Rosenfeld, of the league, said that in turn undermined the case for stronger enforcement of contracting rules. And by inflating an agency’s sense of achievement, it could weaken the agency’s drive to award more contracts to small businesses.

S.B.A. officials, for their part, insist the league’s analysis is premature. This summer, the S.B.A. will release its own report on the government’s contracting efforts in 2011, said a spokeswoman, Hayley Meadvin, after spending months reviewing the records. “By the time we release our fiscal year report, we have corrected these mistakes,” she said. “We spend a lot time making sure our data is as clean as can be.”

Moreover, the league has been prone to sweeping accusations. The group called this latest report, for instance, “strong evidence that large companies are the fraudulent recipients of the majority of federal small-business contracts every year.” But even if improperly coded contracts are as pervasive as the association claims, is it necessarily the result of fraud?

The Agenda decided to look at one large company, mentioned incidentally in the report, that won small business contracts in 2011, to try to find out: The New York Times Company. The Times was not among the league’s list of 100; it was identified as one of 55 well-known corporations that received small-business contracts last year when it sold $56,821 worth of newspapers to the United States Military Academy at West Point, N.Y. — 500 daily subscriptions for the 28 weeks school is in session, according to Carol D’Andrea, The Times’s circulation manager for sales to schools and colleges.

In the government’s record of the West Point transaction, known as a contact action report, The Times is described as having $3 billion in revenue — and 10 employees. (Both figures were wrong: in 2011, the company’s revenue was $2.3 billion and the work force totaled 7,273 employees, according to the most recent annual report.) In a field labeled “Contracting Officer’s Business Size Selection,” the document describes The Times as a “small business.” Under government size standards, newspaper publishers must have fewer than 500 employees to be considered small.

Our inquiry began with a call to West Point. The contracting officer who approved the deal, Kathleen Judson, said in a brief interview that she had not designated The New York Times as a small business. “The only way that could have happened is that it must have been prepopulated,” she said. “Sometimes the fields come through on the contract action report prepropulated. I know The New York Times is a large company.”

Here’s where it starts to get complicated — and government officials contacted by The Agenda offered little help in clearing up the confusion. S.B.A. officials spoke authoritatively about the agency’s efforts to correct contracting records, but referred our questions about how those records are created to the General Services Administration, which oversees the procurement infrastructure used across the government. The G.S.A.’s deputy press secretary, Adam Elkington, initially sent us to the Army for answers, then later promised to find us a colleague who could answer basic contracting questions. (He never did.) A spokesman for West Point, Frank DeMaro, wrote down our questions but did not answer them. Eventually, Daniel Elkins, a spokesman for the Army’s Mission and Installation Contracting Command at Fort Sam Houston, in Texas, fielded some of our queries.

This is what we know: every entity selling to the government must sign up with the G.S.A.’s Central Contractor Registration with a unique identification number, known as a DUNS number, from Dun & Bradstreet. The vendor supplies its annual revenue and employee headcount for the entire organization, which the S.B.A. uses to determine whether the entity is a small business. What complicates things is that companies must register each legal division, or any office with a separate location or address separately. The New York Times currently has at least three active contractor registrations. One of these was set up by Ms. D’Andrea and her colleagues in The Times’s Education Sales department in order, she said, to sell the subscriptions to West Point.

The Times is not identified as a small business in the Education Sales department’s registration. It turns out, though, that West Point did not use this registration to pay The Times. Instead, the contract refers to the DUNS number used by another registered Times Company entity, this one made by the TimesCenter, an event hall at the company’s headquarters on Eighth Avenue. In that registration, The Times did identify itself as a small business.

A Times Company spokeswoman, Eileen Murphy, said by e-mail that the employees who initially registered the TimesCenter were no longer employed there. But, she said, when the TimesCenter first opened, “it was operated as an independent business, separate from The New York Times Company. It is possible that the small-business designation was one that fit at the time, but again, we do not know for sure.” Ms. Murphy said she did not know whether the TimesCenter was independently owned at the time or just operated as if it were. Today, she said, it is operated as part of The New York Times. Nor could she say whether, or why, a Times employee entered the inaccurate revenue and headcount figures.

At West Point, neither Ms. Judson or Mr. DeMaro have explained why Ms. Judson used the registration from the TimesCenter rather than the one from the Education Sales department. (In an e-mail, the Army’s Mr. Elkins said “multiple actions between the N.Y. Times registration of DUNS numbers and contracting officer actions makes it difficult to identify the exact sequence of events.”) But Ms. Meadvin of the S.B.A. disputed the claim that the business size field was automatically filled in, saying, “to our knowledge” it is “the only field that is manually entered.” Mr. Elkington of the G.S.A. did not respond to our request seeking clarification.

In any event, government contracting officers like Ms. Judson are not supposed to rely on information from the Central Contractor Registration to determine whether a business is small — the registration record says as much at the very top. Instead, they are obligated to verify size, or any other claims a company makes, with a separate database known as the Online Representations and Certifications Application, or ORCA — which imports size information from the Central Contractor Registration. (Filling out this form, Ms. D’Andrea said, “is worse than filling out your taxes. Just the password is 16 digits and you can’t have repeating letters and numbers.”)

However, while the Education Sales department submitted an ORCA form — and did not claim small-business status — the TimesCenter, the entity on the contract, never did complete the form. According to Mr. Elkins of the Army, “Before the contracts were awarded, the contracting officer observed that there were no Online Representations and Certifications Application records for The New York Times.” The officer then tried to verify The Times’s size, Mr. Elkins said, by turning to yet another database, the Dynamic Small Business Search maintained by the S.B.A., “using the DUNS that was initially provided by The N.Y. Times.” But, said Mr. Elkins, “this procedure was improper and led to the miscoded award; the Army should have asked for this information from the N.Y. Times, rather than relying upon the D.S.B. search engine.”

But if a record for a Times entity existed in the Dynamic Small Business database last year, it is gone now, and this explanation raises additional questions. Which DUNS number did The Times provide to the Army — the one that ended up on the contract, from the TimesCenter, or one from the education sales department? Moreover, if Ms. Judson knew The Times was in fact a large business, why would she conduct a Dynamic Small Business search in the first place? Finally, the actions described here suggest Ms. Judson did in fact have to manually enter the vendor’s business size in the contract, as the S.B.A. has maintained. (Mr. Elkins has not responded to requests for further explanation.)

As it happens, three other federal agencies have used the TimesCenter registration as the basis for contracts in recent years — apparently erroneously, since these agencies were buying newspaper ads, not renting out an event space — and in most of those contract action reports, The Times is described as “other than small.” And yet, for one contract with the Securities and Exchange Commission, The Times was again deemed a small business. The contract officer in that instance referred the Agenda to the S.E.C. press office to set up an interview, which a spokesman has thus far declined to do.

And that’s as far as we have been able to get. We still can’t say with certainty how The Times ended up with a small-business contract. What we did find was a record-keeping system so complex that it invites confusion and error from all parties. “We hear from our small-business members that navigating the federal marketplace is extremely confusing and complex,” said Molly Brogan, a spokeswoman for the National Small Business Association, an advocacy group based in Washington. “Perhaps some level of simplification — along with enhanced oversight and repercussions for those that knowingly miscode a large business as small — would alleviate some of these issues.”

Things may improve this year, when the G.S.A. is to merge the two separate contractor databases into one as part of a bigger move to consolidate all of the different systems — nine of them! — that constitute the government’s “Integrated Acquisition Environment.” According to Ms. Meadvin, the S.B.A. believes that eventually the system will operate the way the people at West Point seem to believe it already does: business size representations from ORCA will be among the data automatically entered into the contract action report.

But for now, small-business advocates bemoan a system that allows everyone involved to evade responsibility for their actions. “The ‘pass the blame’ game you’ve seen from the S.B.A. and the Army is highly indicative of a lack of accountability by the federal employees whose duty it is to ensure that the contracting process is handled professionally and fairly,” said Mr. Rosenfeld of the league. “The erroneous entry into C.C.R. by The Times is also an example of how a large company’s negligence can contribute to the problem.

“Contract error and mismanagement amounts to tens of billions of dollars’ worth of contracts a year being diverted away from small business,” he added. “With such faulty standards of oversight, accountability and transparency, we wonder how easy it must be to hide fraud in the federal contracting process.”

Former Business Executive Pleads Guilty to Federal Charges in Alleged $28 Million Bribery and Kickback Scheme


Former Business Executive Pleads Guilty to Federal Charges in Alleged $28 Million Bribery and Kickback Scheme

Scam Involved Steering of Government Contracts, Payments to Former Managers at U.S. Army Corps of Engineers

By U.S. Attorney
Federal Bureau of Investigation Washington Field Office
March 13, 2012

U.S. Attorney's OfficeMarch 13, 2012 District of Columbia(202) 514-7566WASHINGTON—Harold F. Babb, 60, the former director of contracts at Eyak Technology LLC (EyakTek), pled guilty today to federal charges of bribery and unlawful kickbacks for his role in a scheme that allegedly involved more than $28 million in bribes and kickback payments and the planned steering of a government contract that potentially was worth about $1 billion.The plea was announced by U.S. attorney Ronald C. Machen Jr.; James W. McJunkin, assistant director in Ccharge of the FBI's Washington Field Office; Eric Hylton, acting special agent in charge of the Washington Field Office of the Internal Revenue Service-Criminal Investigation (IRS-CI); Peggy E. Gustafson, inspector general for the Small Business Administration (SBA); Robert E. Craig, special agent in charge of the Mid-Atlantic Field Office of the Defense Criminal Investigative Service (DCIS); and Major General David E. Quantock, the commanding general of the U.S. Army Criminal Investigation Command (CID).Babb, formerly of Sterling, Virginia, pled guilty before the Honorable Emmet G. Sullivan in the U.S. District Court for the District of Columbia. A sentencing date has not been set. The bribery charge carries a statutory maximum of 15 years in prison and the unlawful kickbacks charge carries up to 10 years of incarceration. The charges also carry potential fines, an order of restitution, and forfeiture of a money judgment for $689,342, including more than $200,000 in cash and bank account funds and the value of properties in Sterling and Virginia Beach, Virginia and a 2007 Porsche.The guilty plea is the latest example of law enforcement's commitment to rooting out public corruption as well as fraud involving government contracts. Since 2010, the U.S. Attorney's Office for the District of Columbia has secured convictions against more than 80 people on public corruption charges, including more than three dozen federal and local government employees.As part of his plea agreement, Babb agreed to cooperate in the government's ongoing investigation into contracts involving, among others, the U.S. Army Corps of Engineers.***"As our investigation has continued, we have identified millions of dollars more in bribes," said U.S. Attorney Machen. "With today's plea, another government contractor has accepted responsibility for corrupting the federal procurement process with bribes and kickbacks. He faces significant prison time for his role in this scheme, and will forfeit to the government cash, properties, and a Porsche that he bought with his ill-gotten gains. Unethical contractors should understand that their attempts to fleece the taxpayer will not only carry harsh financial penalties but also real prison time as well.""Today's plea, in one of the largest procurement fraud cases in history, demonstrates that those who engage in bribes and kickbacks will be held accountable for their actions," said Assistant Director in Charge McJunkin. "Together with our law enforcement partners, the FBI will continue to ensure those who commit fraud and corruption are brought to justice.""Today's plea hearing is a reminder that individuals who scheme to defraud the U.S. government and violate the public's trust will be brought to justice, said Acting IRS Special Agent in Charge Eric Hylton. "Steering business to favored individuals in exchange for kickbacks and using bribes to secure government contracts will not be tolerated. The IRS Criminal Investigation Division will continue to work with the U.S. Attorney's Office and other law enforcement agencies to punish corrupt behavior wherever we find it.""The brazen and corrupt actions by the defendants in this case, who bribed government officials to obtain set-aside contracts and share in the illicit proceeds, harms legitimate small businesses seeking to do business with the government," said Inspector General Gustafson. "The evidence demonstrates Harold Babb's participation was an integral part of this scheme. The SBA OIG appreciates the leadership of the U.S. Attorney's Office and the support of the FBI and our interagency partners in bringing forth this plea agreement.""The illegal manipulation of contracts and subcontracts to facilitate bribes and kickbacks that circumvent the military contracting process costs the taxpayer and warfighter alike," said Special Agent in Charge Craig. "DCIS continues to work alongside its federal law enforcement partners in innovative ways to further detect and deter fraud, and bring those to justice that criminally exploit the contracting process.""As this case illustrates, Army CID's Major Procurement Fraud Unit will aggressively pursue anyone who attempts to defraud the U.S. government," said Major General Quantock. "Army CID, along with our federal law enforcement partners, are committed to ensuring that these conspirators are held accountable for their illegal activities."***According to a statement of offense signed by Babb, he was the director of contracts at Eyak Technology (EyakTek), an Alaska Native-owned small business with an office in Dulles, Virginia, from 2006 until the time of his arrest in October 2011. He admitted participating in a scheme that involved the U.S. Army Corps of Engineers and two contracts: the Technology for Infrastructure, Geospatial, and Environmental Requirements (TIGER) contract and the Contingency Operations Readiness Engineering & Support (CORES) contract.The TIGER contract was used by authorized federal government agencies and departments to purchase products and services. The CORES contract was a planned contract, envisioned as an alternative or potential replacement to the TIGER contract.In his guilty plea, Babb admitted to carrying out the scheme with others. They included Kerry F. Khan and Michael A. Alexander, who at the time were program managers with the Army Corps of Engineers; Alex N. Cho, the former chief technology officer of Nova Datacom, LLC, a provider of information assurance and security services to federal agencies and commercial companies, and James Edward Miller, who owned and controlled Big Surf Construction Management LLC.The bribery charge stems from Babb's payments and promises to Khan in return for Khan's approval on contracts and subcontracts awarded through the Army Corps of Engineers to EyakTek and Big Surf Construction Management. All told, Babb pled guilty to providing, offering, and promising more than $7 million, directly and indirectly, to Khan.The kickback charge stems from Babb's dealings with Cho and Nova Datacom. Babb pled guilty to soliciting, accepting, and attempting to accept more than $1 million in kickbacks from Cho and Nova Datacom in return for giving the company preferential treatment on subcontracts.***Activities Involving the TIGER ContractAccording to the statement of offense, starting in 2008, Babb and Khan agreed to work together in a plan in which the Army Corps of Engineers would pay millions of dollars for equipment and services that never actually would be provided.EyakTek was the prime contractor for the TIGER contract and entered into agreements with subcontractors that included Nova Datacom, Big Surf Construction Management, and Ananke LLC, a company that was controlled by Khan.In or about 2008, Khan introduced Babb to Cho. Babb agreed to accept kickbacks—money, gifts, and things of value—from Cho as compensation for Babb providing favorable treatment to Nova Datacom on subcontracts. From 2008 until October 2011, Cho offered and made more than $1 million in payments, directly and indirectly, to Babb. These included cash and checks of more than $344,000, airline tickets worth about $100,000, a future offer to pay Babb $600,000, and a promise of future employment for Babb at Nova Datacom.From May 2007 through October 2011, the Army Corps of Engineers awarded contracts and sub-contracts to Nova Datacom totaling more than $45 million.Also in or about 2008, Babb and Khan agreed to use Big Surf Construction Management and Ananke to obtain subcontracts from EyakTek. Khan did not intend for either Big Surf or Ananke to provide any equipment or services pursuant to the contracts. Instead, according to the statement of offense, Babb and Khan agreed to submit fictitious orders to the Army Corps of Engineers and EyakTek through Big Surf and to distribute the proceeds obtained amongst themselves and Big Surf's Miller.Babb intended these payments to benefit Khan, in part, in exchange for Khan using his official position to direct the government orders to Big Surf and EyakTek.The statement of offense identifies three subcontracts awarded and paid by EyakTek to Big Surf, totaling more than $8 million. Of this money, Big Surf channeled more than $3.6 million from the first two subcontracts to Ananke. According to the statement of offense, Babb directed Miller to pay another $2.9 million, from the third subcontract, to Ananke. However, Miller allegedly reneged on the plan and Big Surf kept the money. As a result, a fourth intended subcontract, worth about $1.9 million, was cancelled.During the scheme, Babb received a number of benefits from Big Surf, including nearly $270,000 used for a property in Virginia Beach, Virginia; $66,000 for a 2007 Porsche; and $9,000 for the purchase of a 2005 Hyundai.***Activities Involving the CORES ContractAccording to the statement of offense, Babb, Khan, Alexander, and Cho agreed to work together to steer the award of the CORES contract to Nova Datacom. Cho promised Babb future employment and other benefits for his agreement to help steer the award to Nova Datacom, and Babb acted as an intermediary to offer things of value to an unnamed contracting officer with the Army Corps of Engineers.By the end of September 2011, the unnamed contracting officer and Babb agreed to move ahead on a five-year CORES contract for a total amount of $790 million. They agreed that, after the contract was awarded to Nova Datacom, the contracting officer would seek an additional 25 percent increase in the award, for a total potential award of nearly $1 billion.This scheme was thwarted by the arrests of Babb and the others last fall.***Khan, 54, formerly of Alexandria, Virginia; Khan's son, Lee Khan, 31, formerly of Fairfax, Virginia; and Alexander, 56, formerly of Woodbridge, were indicted along with Babb in September 2011 on one count of conspiracy to commit bribery and wire fraud and aiding and abetting and causing an illegal act to be done, as well as one count of conspiracy to commit money laundering. Khan and Alexander also were indicted on one count of receipt of a bribe by a public official, and Babb was indicted on one count of unlawful kickbacks. Khan and his son have pleaded not guilty to all charges in the case and are awaiting trial. Khan, Lee Khan, Babb, and Alexander have been in custody since their arrests in October.Alexander pled guilty in February 2012 to federal charges of bribery and conspiracy to commit money laundering. Cho, 40, of Great Falls, Virginia, pled guilty in September 2011 to one count of conspiracy to commit bribery, money laundering, and wire fraud, and to defraud the United States, and one count of bribery.Another former Nova Datacom employee, Theodoros Hallas, 40, of Potomac, Maryland, the company's former Executive Vice President, pled guilty in October 2011 to one count of conspiracy to commit wire fraud. Another businessman, Robert L. McKinney, 51, the president of Alpha Technology Group, one of the companies involved in the contracting scam, pled guilty in February 2012 to bribery. No sentencing dates have been set for any of the defendants.Miller, 64, formerly of Virginia Beach, the owner of Big Surf, was charged in a criminal information on March 12, 2012 with conspiracy to commit money laundering. The filing of an information is merely a formal charge that a defendant has committed a violation of criminal laws and is not evidence of guilt. Every defendant is presumed innocent until, and unless, proven guilty.The indictment returned last September against the Khans, Alexander, and Babb included allegations involving more than $20 million in offers and payments of bribes and kickback payments related to Nova Datacom. However, that did not include bribes and kickback payments related to other contractors, such as Big Surf and Alpha Technology Group, which were uncovered in the investigation. The case now involves in excess of $28 million in alleged offers and payments of bribes and kickback payments.To date, the United States has seized for forfeiture or recovered approximately $7.2 million in bank account funds, cash, and repayments; 16 real properties; five luxury cars; and multiple pieces of fine jewelry.***In announcing the plea, U.S. Attorney Machen, Assistant Director McJunkin, Acting Special Agent in Charge Hylton, Inspector General Gustafson, Special Agent in Charge Craig, and Major General Quantock thanked those who investigated the case from the FBI's Washington Field Office; the Washington Field Office of the Internal Revenue Service-Criminal Investigation; the Office of the Inspector General for the Small Business Administration; the Department of Defense's Defense Criminal Investigative Service; the Defense Contract Audit Agency; and the Army Criminal Investigation Command. They also expressed thanks to the U.S. Marshals Service for its assistance on the forfeiture matter.They also praised the efforts of those who worked on the case from the U.S. Attorney's Office, including Assistant U.S. Attorneys Michael K. Atkinson and Bryan Seeley of the Fraud and Public Corruption Section and Assistant U.S. Attorney Anthony Saler of the Asset Forfeiture and Money Laundering Section. Finally, they expressed thanks for assistance provided by former Special Assistant U.S. Attorney Christopher Dana; Forensic Accountant Maria Boodoo; Paralegal Specialists Tasha Harris, Shanna Hays, Taryn McLaughlin, Sarah Reis, Christopher Samson, and Nicole Wattelet, and Legal Assistants Jared Forney and Krishawn Graham.