Eyak fires indicted exec; more pressure likely on ANC firms

Supporters of Alaska Native Corporations moved quickly to distance themselves from bribery scandal involving an employee of an ANC company. But pressure on the set aside program likely will increase.

First, the company, Eyak Technology, fired its director of contracts, Harold Babb, who was indicted this week along with three others for an alleged scheme involving an Army Corps of Engineers contract.


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“Eyak and its shareholders will not tolerate this type of conduct by anyone employed by or associated with an Eyak company,” said Rod Worl, CEO of The Eyak Corporation and president of EyakTek said.

Native 8(a) Works, an advocacy group for ANCs, also moved to condemn the alleged criminal activity.

“At a time when Native corporations’ status as 8(a) contractors is constantly under attack, we hope that the alleged actions of one company will not contribute to further misconceptions about Native 8(a) contractors,” the organization said in a statement released late on Oct. 4.

“The alleged wrongdoing by a few individuals is exactly that—the actions of individuals,” the organization said.

Babb, along with Michael Alexander and Kerry Khan, both program managers at the Army Corps of Engineers, and Lee Khan, the son of Kerry, are accused of conspiring to hide the money from their bribery and fraud scheme through a series of financial transactions. EyakTek was the prime contractor for the Technology for Infrastructure, Geospatial, and Environmental Requirements (TIGER) contract of the U.S. Army Corps of Engineers.

“This indictment alleges one of the most brazen corruption schemes in the history of federal contracting,” said U.S. Attorney Ronald Machen when announcing the arrests.

The four men pleaded not guilty in federal court in Washington, D.C., on Oct. 4, according to reports today.

But as a result of the scandal, the ANC small-business set-aside program may feel more pressure from senators.

Sen. Claire McCaskill (D-Mo.), who has investigated the program and found loopholes, released a statement late on Oct. 4 about the indictment.

“For several years I’ve been crusading against the large loopholes in our contracting laws that allow waste, abuse, and—as these charges show—fraud,” said Sen. McCaskill, chairwoman of the Homeland Security and Governmental Affairs Committee’s Contracting Oversight Subcommittee.

She added that the ANCs need to compete, like other small businesses, for large contracts. Agencies should not have the option of awarding a sole-source contract of any size to an ANC through the 8(a) set-aside program.

“The Alaska Native Corporations should compete for these large contracts and further should not be allowed to ‘front’ for other corporations that are actually doing the work,” she said in her statement.

In the Justice Department’s indictment, officials cite an e-mail in which Babb notes how the small business set-aside program could get them around certain parts of the Federal Acquisition Regulation.

Babb wrote in an e-mail in July that, “With a SBA 8A award you bypass some of the FAR rules for advertising the [request for proposal] and qualifications to bid the RFP,” according to the indictment document.

About the Author

Matthew Weigelt is a freelance journalist who writes about acquisition and procurement.

Reader Comments

Fri, Nov 18, 2011

It isn't just the ANC's - the Native American tribes are also exploiting the system with unethical and illegal business practices. At least one tribe I'm familiar with acquires 8(a) companies based on an individual's status as disadvantaged, then fails to file the change in ownership and continues to operate under the entity's SDB status. There is major fraud in the ANC and Tribal programs; the companies break the general exclusion of affiliation by operating as a single entity in direct opposition to the implementing regulations. In addition to having financial resources not available to a truly disadvantaged firm: senior management works across multiple companies concurrently; and a central management company often provides administrative resources (accounting, HR, recruting, proposal writing, etc.); and large businesses are anxious to use a technically unqualified ANC or Tribal company as a front, with the large busines frequently performing a larger share of the work than permitted. If you take a hard look at the 8(a) program as a whole, you'll find even the SDBs are prone to fraud. Even for the ethical participants, the program as a whole fails in its primary purpose - to create new viable sources of supply to the Federal government. The 8(a) program should not simply be reformed with regard to ANCs, but should be abolished.

Wed, Oct 12, 2011 Frank Matt Tucson, AZ

How many more documented cases of ANC graft, corruption, bribery, extortion, very questionable business activities, criminal activity are we going to be reading about…just the very tip of the iceberg folks! Here is the joke of the week that ANCs are struggling small businesses…NOT they are billion dollar corporations period!

Fri, Oct 7, 2011 American Small Business League

Eyak did indeed get suspended last year. News clip at: http://www.washingtonpost.com/wp-dyn/content/article/2011/02/10/AR2011021007493.html My research is solid. ?hat about Nova Datacom? They're co-conspirators. I look at this stuff every day. They don't get a pass from the ASBL just because they are small.

Thu, Oct 6, 2011

Politics and big money as usual, with the real small business job generators or real small business growth being squashed by the big guys with the deep pockets. Nothing has really changed in the past decade or 2 - only the names have changed

Thu, Oct 6, 2011

This case has very little to do you ANCs. The COTRs could have/would have been able to do the same scheme with any contracts under their control. If they were signing the DD250s, they controlled the money flow, not the prime contractor or even the sub contractor. This case is more about internal government corruption. All the COTRs really needed was willing partner in the contracting community. This why the DOJ allowed Cho of NOVA DATACOM to do the wire tap on the COTRs, DOJ wanted the main players, those federal employees. All the ANC stuff is just a red herring, an exploitation for those that wish to stop the ANC 8(a) program, which is statutory not regulator in nature. So good luck with that in the Senate!

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